Canadian airline market on path to consolidation, raising risk of higher fares
After entertaining new entrants for a number of years, Canada’s airline market is as soon as once more on the trail to consolidation, elevating the probability of upper fares and fewer flight choices.
Since May, newer low-cost carriers Swoop and Lynx Air have disappeared from the skies and WestJet has scooped up Sunwing Airlines.
The latter two alone made up 37 per cent of seat capability on direct flights to solar locations and 72 per cent from Western Canada final 12 months, in keeping with an October report from the Competition Bureau. It stated eliminating the rivalry between WestJet and Sunwing would possible suppress competitors across the sale of trip packages.
Some consultants warn that the shrinking airline tally might imply much less service and better costs, significantly within the West and smaller markets throughout the nation.
High airport rents, safety charges and gas taxes increase the baseline price of flying, making it more durable for finances airways to coax budget-conscious Canadians on board.
“The high fees certainly make it more challenging for the discount carriers,” stated University of Manitoba transport institute director Barry Prentice.
The market’s decades-long domination by Air Canada and WestJet may also stifle competitors, some business gamers argue.
Air Canada and WestJet command 79 per cent of home site visitors as of this month versus 74 per cent a 12 months earlier, statistics from aviation information agency Cirium present.
“The natural behaviour of the duopoly is to use their power to squeeze the pricing out of the smaller players,” stated Flair Airlines CEO Stephen Jones.
“There is no interest by the big carriers in having low-cost carriers succeed, and they’ll use the tools that they’ve got in the toolkit to try and bring carriers like Lynx to an end,” he claimed.
In late 2018, the Competition Bureau opened an investigation into predatory pricing ways allegedly deployed by WestJet and its then subsidiary Swoop on some routes flown by Flair, which had launched the earlier 12 months.
The regulator wound down its probe roughly 5 years later with out taking additional steps. The choice got here regardless of then interim competitors commissioner Matthew Boswell accusing WestJet and Swoop in 2018 of “engaging in … predatory pricing by significantly decreasing the prices of their passenger tickets to a level that appears to be below their avoidable costs.”
Lynx, which launched its first flight in April 2022 and shut down final month, stated in courtroom filings that rising prices, airports fees and “a competitive aviation landscape have proved disastrous” to producing adequate income.
Other elements pose a problem to younger upstarts trying to broaden, reasonably than consolidate, Canada’s aviation skyscape.
An absence of massive, secondary airports in massive cities may also power smaller airways to bid for the higher-priced slots at Toronto’s Pearson and Montreal’s Trudeau airports. Executives have lengthy complained about quantities charged for gate and touchdown charges in addition to federal company bills akin to safety screening and air navigation.
Meanwhile, the age-old downside of an unlimited, sparsely populated geography creates distinctive challenges for all carriers in Canada, however particularly these struggling to get off the bottom.
In the U.S., older low cost carriers akin to Southwest Airlines and JetBlue have supplied point-to-point providers between bigger cities and markets over comparatively brief distances. The purpose is to squeeze extra income out of every aircraft with a number of journeys per day and decrease gas prices, with prospects capable of endure the tight quarters as a result of faster journeys.
In Canada, nevertheless, the variety of sizable city areas is way smaller, with main gamers already current within the extra profitable ones.
