National Post

Open Canada’s air travel market

- David Clement Financial Post David Clement is the North American Affairs Manager at the Consumer Choice Center.

The war between Canadian consumers and Air Canada drags on, with the airline still refusing to issue refunds for cancelled flights departing from Canada. To make matters worse, Transport Minister Marc Garneau says the Trudeau government will not force airlines to issue refunds.

Getting your money back when a business doesn’t provide a service is pretty basic fair play. In an environmen­t in which no one knows when plane travel will be back to normal, a voucher for a future trip is a poor substitute for cash. If you are one of the 14 per cent of Canadians without a job and struggling to pay your bills, a voucher is a real slap in the face, while a refund could go a long way in helping you stay afloat. It’s hard to understand why the government is letting the airline stick it to consumers this way.

If Air Canada is incapable of doing what’s right, that’s just one more reason to rethink how we regulate the domestic airline industry. The easiest way to shake things up would be to change our approach regarding internatio­nal ownership. As it stands, airlines that fly domestic routes in Canada need to be majority-owned by Canadian citizens, which means internatio­nal investors cannot account for more than 49 per cent of company ownership. Canada should follow Chile’s lead, eliminatin­g ownership requiremen­ts altogether and allowing for internatio­nal carriers to fly domestic routes.

This would be a huge benefit to consumers, as it would put much-needed downward pressure on travel prices in Canada. Based on aggregate data from internatio­nal travel booking company, Canada ranks 65th globally in terms of flight affordabil­ity. Our cost per 100 kilometres travelled is 2.1 times higher than in the united States, 2.8 times higher than in New Zealand and 3.6 times higher than in Portugal.

When it comes to air travel, Canadian consumers need more competitio­n. Permitting internatio­nal carriers to better optimize their routes by including additional Canadian cities would be a great step forward. For example, why shouldn’t British Airways be allowed to sell seats from Vancouver to Toronto while en route to London? Or American Airlines from halifax to Calgary, while en route to Seattle? Or Air France from Calgary to Montreal, en route to Paris? Why not, indeed? It would save us all a lot of money.

Critics will argue that more competitio­n will decrease Air Canada’s ability to connect our smaller towns and cities. But considerin­g Air Canada has just announced the indefinite suspension of 30 small-market domestic routes, it’s a moot point. Air Canada’s decision shows exactly why now is the time to open the market up to more competitio­n.

If internatio­nal discount carriers think they can make those routes profitable, let’s make it legal for them to try. If a Canadian airline wants to attract internatio­nal investment to expand its ability to fly domestic routes, it should be able to do so without arbitrary ownership limits. Air Canada may not be able to fly those routes and make a profit, but that doesn’t mean other airlines couldn’t. We should let them try.

No doubt some people believe the current turmoil is a reason to re-nationaliz­e Air Canada and bring it back under government control. That is a terrible idea — for taxpayers and travellers alike. Both in Canada and internatio­nally the airline industry has shown itself to be extremely volatile. In the past 20 years alone, the sector was devastated by 9/11, dealt another blow by SARS and didn’t see its stock prices recover to pre-9/11 levels until 2014.

COVID-19 highlights this volatility, as the pandemic has caused airline stock prices to fall at a rate never seen before. A nationaliz­ed airline would not be immune to those shocks, which would then force taxpayers to foot the bill every time a crisis erupted. For a country with high and rising public debt, taking on a hugely risky public investment wouldn’t just be misguided, it would be reckless.

On the consumer side, the idea of a nationaliz­ed airline isn’t worth celebratin­g, either. For decades, the government has consistent­ly failed to deliver the mail on time. Putting it in charge of getting you to your connecting flight is a recipe for widespread travel disaster.

With Canadian airline companies failing consumers, now is the perfect time to open up Canada’s airline market by eliminatin­g ownership restrictio­ns. Consumers would have more choice and more routes as a result of eliminatin­g ownership restrictio­ns. When we do travel again, the experience should be as consumer-friendly as possible. More competitio­n is the only way to ensure that.

now is the Perfect time to open up Canada’s airline market by eliminatin­g ownership restrictio­ns.

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