Thank you very much.
Thank you, members of the House of Commons Standing Committee on Transport, Infrastructure and Communities, for extending the invitation to me and my fellow colleagues in academia to speak to you today on the state of airline competition in Canada.
My comments on the subject come from close to 50 years of either working in the bowels of the industry or teaching managers around the world the dos and don’ts of how to best achieve respectable financial and operating performance in the industry. It might be said that I've observed the highs and lows of Canada's evolution with deregulation, starting in 1985 with our infamous freedom to move white paper; in 1987, the Canada Transportation Act; privatizing Air Canada; and many more, including, of course, the evolution of many commercial air carriers in Canada.
The state of airline competition in Canada has evolved significantly in recent times, exemplified in the eyes of the Canadian air traveller by the reduction in the operations of numerous operators that have branded themselves as either low-cost or ultra-low-cost carriers. Is that measure of activity really the right proxy we should be using to determine whether or not we are a hot spot for aviation competition? I asked that question rhetorically in a recent article in The Hill Times: Is there a crisis in Canadian civil aviation? The answer should be, no, there is no crisis. The industry is just going through what has been characterized as its usual bumps in the road—bumps in airline evolution.
Carriers have been launching themselves with great fanfare, with lower airfares introduced, to the glee of Canadian air travellers. There are great expectations being created for expansion to bring air service and lower fares to both the primary and secondary markets. Even greater benefits of multiple new carriers with similar strategies were launched. That's great news for Canadians who are, by nature, lovers of low airfares.
However bright the honeymoon phase, and within relatively short order, the competitive reality is that Canadian commercial operations affect the financial viability of these Canadian upstarts. The number of Canadian air travel markets in which these operators traditionally operate has been the same where Canada's established duopolies operate. Very few new Canadian metro centres have had the benefit of this increased competition. Very few metro centres in Canada have multiple airports and have the ability to support multiple carriers trying to build frequency. New carriers have built up presence on top of existing services, and price competition could only limit competitive response for so long.
As traditional carriers reacted to this competition and reduced fares along the way, new carriers needed to reduce fares consistently to maintain their competitive gap. The race to the bottom is on. We all know how this story ends. It's ended there time and time again since the early 1990s.
The federal government of the late Honourable Brian Mulroney, in the tenure of the late Honourable Don Mazankowski, had great ideals for the evolution of the Canadian airline industry—as enshrined in the Canada Transportation Act for many years—wherein competition and market forces both within and among the various modes of transportation are the prime agents in providing viable and effective transportation services. Unfortunately, the paucity of domestic air travel markets has made these ideals very difficult to obtain.
Canadian air travellers need a better set of measures of effectiveness when it comes to evaluating the state of airline competition in Canada. That starts off with a better set of attainable, realistic and viable opportunities.
Thank you very much.