Kudos to the Competition Bureau’s Sheridan Scott for recommending, in a January submission to the federal Competition Policy Review Panel, that Canadian skies be opened to foreign carriers. Her reasoning? The economic argument for protecting domestic carriers from foreign competition is no longer compelling.
Sure, Scott’s submission states the obvious — but what’s obviously right has for too long been unstated. Air Canada, together with its subsidiary Jazz, controls an estimated 60% of the market in domestic air travel. Over the years, most of its competitors have gone to ground. Jetsgo closed operations in 2005; CanJet died in 2006; Harmony stopped its scheduled routes last year. Result? On some routes, particularly in the East, travellers are served by two or, often, just one carrier.
Affordable air travel is vital to the economy. The best way to ensure this over the long term is a regulatory regime that encourages new market entrants and allows them to compete on a level playing field. In 1987, the Canada Transportation Act decreed non-Canadians could own only 25% of any air carriers operating within the domestic marketplace. This was to protect fledgling Canadian companies from aggressive international competition. But clearly, airlines enjoying oligopolistic market conditions require no such protection.
Scott is calling for ownership limits to be liberalized, and for foreign carriers to be allowed to operate routes within the Canadian market. She has recommended this be implemented unilaterally — which raised the eyebrows of industry insiders, who tend to see any such move as giving up economic rights for nothing in return. But the naysayers are forgetting the interests of an important constituency: consumers.
The same policy problem extends to other domestic sectors, notably telecommunication, financial services and media. Similarly protected by ownership restrictions, companies in dominant positions have commanded impressive market share for years. Meanwhile, Canadians pay more than the average American for cellphone services; they pay more for trading stocks, for mutual funds and for other financial instruments; because of governmental fiat, they do not have access to all the media content they otherwise would have. On competition policy, it’s time for government to extrapolate Scott’s advice on aviation to industries everywhere — and give the Canadian consumer a break.