Thank you, Chair.
Chair and honourable members, my name is John Lawford. I'm the executive director and general counsel at the Public Interest Advocacy Centre. With me today is PIAC's articling student Myka Kollmann.
I will start by quoting a PIAC report on airline competition in Canada: “Today, in Canada, it is difficult to choose what is likely to be less inefficient: a regulated duopoly or an unregulated one.” Just so you know, those words were written in 1989—plus ça change.
There was and is currently a problem with concentration in the Canadian market, but this market is now also segmented into regional route markets. WestJet claims to have returned to its roots as a low-cost carrier and has retreated to a hub in western Canada, while allowing Air Canada mostly free rein in eastern Canada. While this appears to leave room for regionally based competition, or even national or regional ultra-low-cost carrier entry in either the WestJet or the Air Canada zone of influence, we see that the ULCCs are failing.
The pandemic has upset all the airlines' apple carts. Only now are we seeing the staffing, routes, passenger demand and financing start to return to 2019 levels. However, it is the structural and regulatory elements of the Canadian market that determined the effects of such events as the pandemic and before, such as the 737 Max groundings in 2019.
The market structure remains one dominated by Air Canada as a national airline; WestJet, once again a large regional, although with Sunwing vacation routes now; a central Canada regional, Porter, with national aspirations; and one international vacation carrier, Air Transat, which is only here because the EU, not the minister, said it should not be sold to Air Canada. ULCCs are entering and exiting within two to three years despite planned nationwide operations. The latest three are failing, are refinancing, or have failed.
Why is that? Barriers to entry are too high in Canada. No support is given to entrants. The predictable defensive strategies available to major airlines, such as route-matching and predatory pricing, were not something that competition law, until now, could police effectively. All mergers have been approved by the Minister of Transport, leading to concentration. At a higher level, there is no home for airline competition regulation, no stated government air policy in general, and no statement of how such policy goals as small-market service and cost, consumer choice, pricing reductions, service quality and safety, etc. could be met by competition.
However, new tools are available to the sector. They include improvements to the Competition Act and studies on competition, including that announced today and those from other countries, in particular Australia.
Myka.