House of Commons committee looks into airline competition

by Canadian Shipper

A House of Commons committee has begun hearings into the airline industry, which has greatly changed since Air Canada’s acquisition of Canadian Airlines last year.

Canada’s Competition Commissioner, Konrad von Finckenstein, sees a problem with Air Canada’s dominance and says the country’s small airlines face many difficulties in trying to compete against the world’s 10th largest airline, reports the Financial Post.

“Air Canada has virtually no effective competition for business travellers, and most local and regional markets remain monopolies,” von Finckenstein told the transport committee.

Von Finckenstein also expressed concern that David Collenette, the Minister of Transport, was not doing more to increase the climate of competition in the country, although he acknowledged that the Minister had voiced satisfaction that some domestic airlines have sprung up to challenge Air Canada.

“I understand he’s in a wait-and-see mode. We have argued from day one that we felt these changes should be made as soon as possible because, given the dominance of Air Canada, competing against them under the present circumstances is an extremely onerous task,” said von Finckenstein.

“We’ve seen a remarkable job by Air Canada. We didn’t go through all this pain in order to have Air Canada take it on the chin,” said Collenette.

Collenette also said that von Finckenstein’s call to let foreign carriers offer some competition could see them skim off the most profitable routes and hurt Canadian carriers.

“We can have our cake and eat it too. We can have competition and it can be Canadian,” he said.

Calin Rovinescu, Air Canada’s executive vice-president of corporate development and strategy, also shot down the Commissioner’s concerns at the hearing.

“This game is about being competitive, not artificially protecting competitors who may have had half-baked business plans or aspirations to launch and simply expect that someone is going to provide a living for them. The difficult situation here is that the regulator is heading in a different direction than the government of Canada. We shouldn’t lose sight of the fact that the Competition Bureau is meant to protect competition not competitors, I think that sometimes gets lost in the shuffle here,” he said.

Mr. von Finckenstein told the committee Canada will not likely be able to support a second viable carrier while Air Canada holds some 85% of the market (as measured by domestic passenger revenue). Mr. von Finckenstein told the committee the failure of CanJet and Royal Airlines, bought up by Canada 3000, on top of the collapse of Roots Air, are a major indication of this problem.

“While entry into the scheduled domestic market may be possible, there are serious doubts about the ability of such firms to remain as sustainable competitors in the face of Air Canada’s dominance,” he said.

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