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Canada’s airline industry doesn’t need more competition. It needs a public alternative

Simply increasing market competition likely won’t deliver the service improvements many are demanding of the transport sector

Canadian PoliticsCanadian BusinessSocialism

Air Canada Boeing 737-8 Max aircraft parked at the Marana Pinal Airpark, Tucson, Arizona. Photo from Flickr.

Federal NDP leader Jagmeet Singh’s recent statement that increasing competition in Canada’s airline industry would improve services has raised eyebrows amongst Canadian progressives, not least because New Democrat supporters have historically supported public, rather than private, solutions to Canada’s endemic transportation problems.

Singh’s comments were made in reference to two recent events: the mass stranding of holiday travelers in Mexico by Sunwing Airlines, and announcements by both Sunwing and Air Canada that they will suspend direct service to Calgary from Regina and Saskatoon starting January 16. Liberal MP Peter Schiefke, chair of the House of Commons transport committee, has called on Sunwing, as well as Via Rail, to explain why both left hundreds of travelers stranded over the holidays. In Via Rail’s case, passengers were marooned on trains for upwards of 12 hours.

Increased competition seems like a plausible solution to improve service and potentially lower prices. Assuming there are no extenuating factors—like disruptions to global supply chains or major spikes in the price of oil—healthy competition helps provide consumers with a wide variety of options, and this can keep prices relatively stable.

Air transport is a bit of a different animal, however, and simply increasing competition likely won’t deliver the service improvements Singh hopes for.

To begin with, there’s plenty of competition in the transport sector in the United States, but this hasn’t always been beneficial to travelers. Alcohol, meals, and checked baggage used to be complimentary, but these have virtually disappeared from all airlines.

Moreover, despite increased competition, airlines were flying fewer flights even before the pandemic, resulting in planes that were much closer to 100 percent full, rather than nearly full, something that was once far more common. Across the board, airlines have increasingly reduced the amount of space between seats to increase each plane’s passenger load. Despite a competitive North American airline market, there’s no carrier that has resisted these trends to provide more space to passengers⁠—and neither has had any noticeable effect on lowering airplane ticket prices, particularly on flights to ‘non-hub’ destinations. While ticket prices for popular routes—like Montréal to Toronto or Calgary to Vancouver—may be more stable, the cost of a flight from Regina to Québec City has likely been increasing steadily for years. On top of all this, despite falling fuel prices, airline tickets are actually at their highest level in five years.

Even though the American airline industry is considerably more competitive than Canada’s, the benefits of this competition aren’t being felt by passengers. It’s unlikely increasing competition in the Canadian airline industry would produce different results.

Moreover, the arguably more competitive US market wasn’t immune to major service disruptions in the last few weeks. This too may be a consequence of deregulation to increase competition.

In the era before airline deregulation in the US the majority of airlines offered direct flights. In order to increase profitability, this system was then changed to the now dominant ‘hub and spoke’ model, wherein the majority of flights connect at a few major hubs, rather than bringing passengers directly to their final destinations. This is as much a problem in Canada as it is the US.

One of the major problems with this system is that a disruption to service at one hub—due to inclement weather, security problems, or a strike—can have a cascading domino effect across the entirety of North American airspace.

It is highly unlikely that increasing the number of airlines operating within this model would improve the passenger experience, as they would be negatively impacted in much the same way. It is also unclear if any new airlines would ‘compete’ by offering point-to-point service as an alternative. Outside of flights between hubs, most direct routes in Canada will never be as profitable as routes on the hub and spoke system, so it is hard to imagine any new airline with a business model based on ‘underperforming’ routes abandoned by other airlines.

In the US, a pre-pandemic trend suggested that low-cost carriers had begun picking up point-to-point service on routes that were either abandoned or poorly served by dominant legacy airlines. That said, the Regina airport is hoping WestJet might pick up the slack left by Air Canada and Sunwing’s abandonment of Saskatchewan. Travelers now seeking to fly from Regina to Calgary on Air Canada will have to transit through the airline’s hub in Vancouver.

The mass cancellation of Sunwing flights that stranded so many Canadian travelers in Mexico was caused by winter storms that disrupted air travel across North America, but it should be noted that there were in fact other options for travelers (some booked new flights on Air Canada). The problem wasn’t a lack of competition, but rather that an airline poorly handled a major disruption to service. Sunwing dropped the ball by not adequately communicating with its customers and providing insufficient services to those who were stranded. Insisting on minimum standards for emergency management for major passenger transport companies, be they airlines or railways, is something that requires a stricter ‘passenger bill of rights.’ Competition has no bearing on this, and it should be mentioned that at least two Canadian airlines, including Air Canada, opposed the effort.

Canada is the second largest country in the world, though it is only the world’s 38th most populous. Ninety percent of the population lives within 100 kilometres of the American border, and 50 percent lives between Québec City and Windsor. Air travel is the most effective way of getting around much of the country, but offering comprehensive national service isn’t profitable from a strictly profit-driven perspective. Rather than manage the expectation of profit by airlines, passengers have been asked to manage—and consistently lower—their expectations regarding service.

If we want better service and a better overall quality of experience, we need transportation companies to adopt basic customer experience standards and abide by them. But for-profit enterprises will not do this on their own accord—there’s simply no incentive.

Similarly, if we want to ensure comprehensive transport access to all parts of the country, or if we want to develop low-to-no carbon alternatives to air travel (like a national high-speed electric rail network), this too demands government leadership that prioritizes the needs of the citizenry first and foremost. There are no private sector solutions that will eliminate highly-profitable, though highly-polluting, short-haul air travel routes between major cities in favour of zero-emission rail travel (a plan recently introduced by France).

Accomplishing these and other transport and transit related goals is only possible with state-run enterprises whose goal would be meeting and exceeding the wants and needs of Canadian travelers, rather than returning healthy profits to shareholders.

It is for many of these reasons that Canada had a state-owned railway, and then a state-owned airline, for most of the 20th century. Ironically, concerns about ‘too much’ competition from American rail and air carriers helped motivate the government to create and run publicly-owned alternatives. The privatization of Air Canada and Canadian National, beginning in the 1980s, almost immediately led to reductions in service and the collapse of competitors. Deregulation of the railway industry in the mid-1980s—ostensibly to increase profitability and competition—led almost immediately to PEI and Newfoundland losing all railway service.

You can provide healthy profits to the shareholders of a small number of transport companies in Canada, or you can provide comprehensive service to all corners of the country, but history has demonstrated you can’t do both. Whether Canadians have the right to inexpensive and efficient, publicly-funded transport options across Canada, and whether they have the right to expect a decent quality of service and experience, are two parts to the same fundamental question.

Increased competition has the appearance of being a solution, but not without first establishing clearly articulated minimum standards for service. Free market competition won’t get us there, since the profit margin is fundamentally at odds with improving service, quality, and accessibility. Once this is accomplished, the best competitor to the private sector would be a public alternative, one that would put these minimum standards into practice. In both cases, government needs to serve the interests of the people, and the people need to use government to secure the improvements to service they desire.

Taylor C. Noakes is an independent journalist and public historian from Montréal. In addition to writing regularly for Canadian Dimension, he contributes to the Toronto Star, Jacobin, Cult MTL, The Maple, DeSmog, and the Montréal Review of Books, among others. He holds an MA in Public History from Duquesne University and has worked on the restoration of playwright August Wilson’s childhood home. He is also a frequent contributor to the Canadian Encyclopedia, and once debated several Canadian prime ministers at once on matters of foreign policy.

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