In a twist that people like me who have been advocating for more consumer airline freedom find rare and exciting, it seems that the Canadian Competition Bureau has admitted it is necessary to allow more foreign investment in domestic Canadian airlines that fly within the country.
This will seem like a no-brainer to anyone paying attention to this policy issue. It is interesting, however, that the domestic airline regime is so bad that even a government regulator has to admit to it. As David Clement apontou during the pandemic, the federal government continues to over-regulate the domestic airline industry. And as I further elaborated, airlines that fly domestic routes in Canada have to be majority-owned by Canadian citizens, which crowds out foreign investors.
It is possible that the federal government is tired of having airlines beg them for handouts rather than trying to secure foreign investment, or charge more for their flights. The fact that there are these domestic investment rules also means existing international carriers can’t fly domestic routes, which additionally forces less competition. Basic economics will tell you that when you are forced not to have competition in an industry, what follows is the punishment of consumers who dare to want to fly within their own country. Do you want to go visit your grandmother who has retired in Vancouver from your home base of Ottawa? Well, that’s too bad if you don’t want to fork over the same amount of money you would spend if you wanted to take her on a cruise.
More international competition means airlines will be fighting for Canadians’ business, which leads to better service and cheaper ticket prices. It also allows Canadian companies to become more competitive in Canada and the United States. And, just like any other industry, if they can’t give the customer what they want, they have to change or shut down. Instead, Canadian consumers have to just be happy with what they can get because of misguided rules on foreign ownership. More competition might even open up the gate to having ultra low cost airlines come back to markets like Ottawa, and even the creation of new low cost airlines that can secure foreign investment and serve the domestic Canadian market. The sky is the limit when airlines are allowed to fully compete.
The more that Canada’s federal entities recommend backing off of economic nationalism, the better. In the current economic crisis, as well as the unfolding international crisis, Canadians need as much economic relief as possible. Since trade with the United States includes never-ending tariffs and tariff threats, allowing Canadians a break in other aspects of their finances is essential in keeping both the economy alive but also contributing to the economic well-being of Canadians.
The Consumer Choice Center’s Government Affairs Manager Zoltan Kesz just published an article in which he states: “Economic nationalism is populism in a cheaply produced patriotic costume. It’s politically popular, but flimsy, and struggles with a short shelf life. History has repeatedly proven that protectionism punishes consumers first, politicians last, and it’s true whether you’re in Europe, Latin America, or the United States.” I would add Canada to that list. It is heartening that the Canadian government seems to be understanding that finally when it comes to the airline industry. Now, we need them to act so that Canadians can finally afford to fly within their own country rather than spend the same amount on a vacation to the Caribbean.
