Watchdog: Let Foreign Airlines Take On Air Canada and WestJet

Canada’s Competition Bureau says the country’s airline industry is still far too concentrated, with high prices and limited options for travellers — especially in remote and northern areas. A new report released Wednesday argues that better competition could bring cheaper fares and better service, and outlines steps Ottawa should take to get there.

The report, titled Cleared for take-off: Elevating airline competition, says that while a few new airlines have entered the market in recent years, Air Canada and WestJet still dominate most major airports (which doesn’t take a genius to figure out). Together, they handle between 50% and 75% of domestic air traffic, depending on the region. The Bureau warns that smaller competitors are still fragile and face major barriers to growth.

To improve the situation, the Bureau says governments need to treat competition as a priority when setting aviation policy, including during merger reviews. It also suggests relaxing rules around foreign ownership so that new players with international backing can enter the market more easily. For Canada’s North, the report calls for more tailored regulations to improve access for isolated communities.

The Bureau says Canada should allow up to 100% foreign ownership for domestic-only Canadian airlines, while also increase single-investor foreign ownership to 49% as well. These moves would increase competition and drive growth.

The Bureau points to evidence that adding even one new competitor on a route can bring average fares down by around nine per cent. “With the right policy changes, governments can create the conditions for new airlines to grow and compete – and give Canadians access to more affordable, reliable options for flights,” said Commissioner of Competition Matthew Boswell.

Our airline industry has gone through repeated waves of consolidation and churn. After deregulation and Air Canada’s privatization in the 1980s and 1990s, only two major players—Air Canada and Canadian Airlines—remained. WestJet entered in 1996, but consolidation continued, with Air Canada acquiring Canadian Airlines by 2001.

In the 2000s and 2010s, a number of low-cost carriers like JetsGo, CanJet, Porter, and Flair entered the market, though many quickly exited. More recently, startups like Lynx Air and Canada Jetlines launched around 2021–2022, but both shut down by 2024. Swoop, a WestJet’s budget airline, also folded back into its parent company in 2023. Despite several attempts to challenge the duopoly, most new entrants have failed to last.

Earlier this year, a satisfaction study of airlines ranked Air Canada and WestJet near the bottom.

The report is based on a market study launched in July 2024, which included consultations with over 120 industry stakeholders and more than 1,500 Canadians. Officials also conducted fieldwork in Iqaluit to get a closer look at the challenges northern travellers face.

While the Bureau doesn’t make policy, it says the recommendations in the report offer a clear path forward for improving competition in Canada’s airline sector—and helping bring prices down for Canadians who rely on air travel.

If foreign competition was going to enter the airline industry in Canada, expect a push back similar to what Rogers, Telus and Bell did when there was a threat of Verizon entering the country, through acquiring WIND Mobile (which is Freedom Mobile today).