Canadian airline market on path to consolidation, raising risk of higher fares

After entertaining new entrants for several years, Canada's airline market is once again on the path to consolidation, raising the likelihood of higher fares and fewer flight options. Since May, newer low-cost carriers Swoop and Lynx Air have disappeared from the skies and WestJet has scooped up Sunwing Airlines. The latter two alone made up 37% of seat capacity on direct flights to sun destinations and 72% from Western Canada last year, according to an October report from the Competition Bureau. It said eliminating the rivalry between WestJet and Sunwing would likely suppress competition around the sale of vacation packages. Some experts warn that the shrinking airline tally could mean less service and higher prices, particularly in the West and smaller markets across the country. High airport rents, security fees and fuel taxes raise the baseline cost of flying, making it harder for budget airlines to coax budget-conscious Canadians on board. “The high fees certainly make it more challenging for the discount carriers,” said University of Manitoba transport institute director Barry Prentice. The market's decades-long domination by Air Canada and WestJet can also stifle competition, some industry players argue. Air Canada and WestJet command 79% of domestic traffic as of this month versus 74% a year earlier, statistics from aviation data firm Cirium show. “The natural behaviour of the duopoly is to use their power to squeeze the pricing out of the smaller players,” said Flair Airlines CEO Stephen Jones. “There is no interest by the big carriers in having low-cost carriers succeed, and they'll use the tools that they've got in the toolkit to try and bring carriers like Lynx to an end,” he claimed.<br/>