From Simple Flying – link to source story – Thanks to CW
by Andrew Curran | December 23, 2021
Despite the travel downturn disruptions, analysts expect the Canadian airline industry to grow by over 50% in the next two decades, resulting in an additional 40 million people taking to the skies. Canada is a substantial market but is dominated by two carriers that new airlines can find hard to crack.
New airlines take on Canada’s two big carriers
Several new airlines are trying to break that traditional two-airline model. In recent years, Flair Airlines and Porter Airlines have entered the fray. Next year, Lynx (formerly Enerjet) plans to begin scheduled passenger flights. That’s in addition to incumbents Air Canada and WestJet starting up their own low-cost offshoots.
But will these new players significantly impact the Canadian airline market? Mark Satov, a Canadian strategy consultant and media commentator, thinks not.
“Would I be investing in any of these new low-cost carriers? Absolutely not,” he told Yahoo’s Editor Edition’s Alicja Siekierska. “I think Air Canada and WestJet will let them have their fun until they decide they don’t want to.”
With leisure travelers one of the first passenger markets to begin rebounding, Air Canada has recently launched or resumed flights to several holiday and sun destinations – “the places Air Canada would really rather not do,” says Mr Satov and usually left to the low-cost carriers like Flair.
Predatory pricing or just fair game?
What potentially makes life difficult for competitors is that Air Canada can decide to fly in, engage in a little predatory pricing, and force competitors out of the market
“In a lot of other sectors of the economy, when competitors engage in predatory pricing – not just to gain market share but to drive competitors out, governments will step in.
“We don’t seem to do that in Canada. Why? We don’t have governments with courage, and we believe that strong airlines are really important for the economy. Air Canada can do what it wants. WestJet was caught on some predatory pricing – but you get caught, and you do it again.”
It’s not just the ability to compete on price that locks in an advantage for the two incumbent Canadian airlines; they also hold significant slots at key Canadian airports.
Mark Satov agrees the new competition is good news for consumers in the short term because ticket prices are falling on certain routes. But he thinks Canada’s financial and regulatory rules cause significant structural issues for new airlines, especially low-cost carriers, that undermine their long-term viability.
Porter Airlines cut some slack – it’s in with a competitive chance
But Mr Satov says Porter Airlines is an exception. Porter chases business travel rather than low-yielding leisure travelers. They base themselves out of Billy Bishop Airport in Toronto, where they are a major customer.
“For a lot of people, Porter is a viable alternative for business travel because they fly business routes. You can fly from Montreal to Toronto, which is one of the most profitable routes in North America. I think they can be viable.”
But overall Mark Satov isn’t bullish on any of these new airlines making a dent in the Canadian airline market because of the competitive power of the two big airlines. With one-ninth the population of neighboring United States, he says it’s understandable why only a few airlines in Canada can prosper.
“Maybe it’s rational we only let two survive – because there is only so much volume.”
Canadian Aviation News 
You must be logged in to post a comment.