MONTREAL — Whether you're catching a flight, opening a new bank account or picking up groceries, a small group of big names takes up most of the market share. Competition Ltd. is a Canadian Press series that explores what this means for products — and prices — in the country.
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On a cold, cloudy Thursday night in February, Donovan Onishenko arrived at the Calgary airport on a delayed flight from Atlanta and rushed to catch his connection to Saskatoon. With the airplane still at the gate, he said WestJet ticket agents told him the flight was full and about to depart without him.
“When I was told the next flight was six days away, I asked what I was supposed to do, and was told that I would have to wait until then, with no mention of assistance,” said Onishenko.
“No hotel rooms or meals, no transportation or luggage allowance.”
He and two others found there were no rental cars available either, but one of them had a friend willing to lend theirs.
“So we borrowed the vehicle, fuelled up, grabbed some food and drove all night, arriving in Saskatoon about 7 a.m. on Friday, Feb. 24. At this point I had been awake for over 24 hours,” he said.
"The one problem is that not many airlines fly into Saskatoon any more.”
Indeed, only one now works his route.
As recently as October, Air Canada and WestJet Airlines Ltd. were flying a combined 540 flights between Calgary and Saskatoon each month, according to aviation data firm Cirium.
Now, WestJet is the only carrier offering commercial flights between the largest cities in Alberta and Saskatchewan. It operated 345 flights between the two airports in February, 36 per cent fewer than when the airlines shared the route. Meanwhile, the route’s average fare went up 45 per cent over the last four years.
Fewer flight options from Saskatoon serves as a microcosm for the situation in numerous smaller cities across the country.
WestJet wouldn't comment on Onishenko's specific case without a reservation number, and said it is continuing to adjust its schedule to focus on enhanced non-stop connectivity from Eastern to Western Canada, sun and leisure destinations and increased regional connectivity in Western Canada.
While a spate of upstart airlines has made domestic plane travel cheaper than ever overall — particularly in the busiest corridors — passengers face higher prices and scarcer trip options in many regions and on international routes. And it's unclear how many entrants will survive in the long run.
Duncan Dee, Air Canada’s former chief operating officer, said routes like Vancouver-Toronto enjoy robust competition, with five airlines offering the trip compared with two a few years ago.
“It's the largest transcontinental city pair in the country in terms of number of travellers. So the fact that you've got new entrants in that market isn't surprising,” he said. Budget carriers Flair Airlines, Lynx Air – launched last year – and WestJet subsidiary Swoop are all relative newcomers.
“What is very peculiar in Canada is what’s happening in regional markets, where competition is probably going to be much more constrained outside the large regional centres.”
That's owing partly to the retirement of smaller aircraft, as airlines try to pack in as many passengers as possible per flight, Dee said.
But the sparser flight boards at many airports also stem from a de facto division of the country by the two main players: Air Canada and WestJet, which shared nearly two-thirds of the domestic market in 2022, according to Cirium.
Since last fall, Calgary-based WestJet has cut routes in Ontario, Quebec and Atlantic Canada to refocus on its home turf out west. It has also cut flights on some more heavily travelled corridors, including roughly 80 per cent of its trips between Toronto and Montreal compared to 2019 levels, Cirium data shows.
Montreal-based Air Canada has mirrored this move, remaining in Central and Eastern Canada while scaling back in the west. It also scrapped 26 regional routes east of Winnipeg in June 2020, with only two resuming since.
Ultra-low-cost airlines hope to open the gate on already popular corridors to a new demographic, as well as revive withered spoke-to hub routes.
“Montreal and Quebec in particular are underserved by low cost carriers and full service carriers on a per-capita basis,” said Lynx CEO Merren McArthur in an interview.
But low-cost carriers can only cover so many routes with their modest capacity. Flair and Lynx have fleets of 19 and six planes, respectively.
Overall, the battle for leisure passengers has driven down fares, in spite of inflation, according to Montreal-based travel data firm Hopper Inc.
However, a sample of regional routes reveals pricier tickets on most of them, with flight numbers far below 2019 levels.
The Ottawa-Fredericton route saw average fares for one-way trips rise 106 per cent to US$186 between January 2019 and January 2023, according to Cirium. Over the same period, monthly flights fell 60 per cent after Air Canada pulled out, leaving just Porter to ply the corridor.
Halifax-Montreal prices rose 69 per cent after WestJet dropped the route — and even after Flair picked it up — with monthly flight numbers down to 290 from 506. Regina-Winnipeg fares jumped 39 per cent after Air Canada left the route to WestJet, with flight activity down by two-thirds.
Meanwhile, international travel remains as short on competition as ever, with pricey implications.
Since 2019, roundtrip airfares rose 32 per cent to Europe, 27 per cent to South America and 14 per cent to the United States, according to Hopper. Fares to Asia currently average $1,475, a jump of 97 per cent from four years ago.
One-way fares for Toronto-London and Toronto-Paris trips last July averaged US$389 and US$431, respectively — five and eight per cent higher than New York-London and New York-Paris routes, which have more carriers working them — according to Cirium.
Antitrust concerns around competition were the key factor that scuppered Air Canada’s attempt to acquire tour operator Transat A.T. Inc. in 2021.
Flair, Lynx and Porter are all scrambling to expand as they serve more domestic routes and sun destinations. But experts question how long Canada can host such intense domestic competition before an airline goes belly up – or follows the merger trend that saw WestJet acquire Sunwing Airlines in a deal approved by Ottawa last month.
“How long can they basically keep going with their pricing and the customer service issues that they’re having in the marketplace? You need some very deep pockets,” said John Gradek, who teaches at McGill University's aviation management program.
Flair was late on several plane leasing payments earlier this year, triggering the seizure of four Boeing 737 Max jetliners by a lessor. CEO Stephen Jones has brushed off the temporary arrears as commonplace and their business as solid.
Lynx’s McArthur told The Canadian Press the carrier’s profit margins are sustainable.
“It's been tough for Canadian ultra-low-cost airlines, because the ultra-low-cost airlines work when the planes are in the air — a lot," said TD Cowen analyst Helane Becker, citing the age-old conundrum of a vast, sparsely populated geography that creates unique challenges for companies operating in Canada.
"There just aren't that many people in every market within Canada."
This report by The Canadian Press was first published April 10, 2023.
Companies in this story: (TSX:AC, TSX:TRZ)
Christopher Reynolds, The Canadian Press
