Competition Bureau Airline Market Study - Implications for Airports

On June 19, 2025, the Competition Bureau of Canada (CCB) released a market study into Canada’s airline industry. The report, focused on increasing competition in the sector, proposes several key recommendations which the CCB suggests will to lower costs, improve services, and give Canadian travelers more choice.

Although airlines naturally take center stage in the report, the CCB’s recommendations place significant focus on airports and highlighting their critical role in shaping competitive dynamics in air travel. The study breaks down its airport-related recommendations into three central themes:

1.      The Relationship between Major & Secondary Airports

Canada’s air travel is dominated by four airports: Toronto Pearson, Vancouver, Calgary, and Montreal-Trudeau. Together, they account for over 55% of domestic passenger traffic. While geography and climate make air travel especially challenging in Canada, the CCB alleges that this heavy concentration poses a serious hurdle for new entrants.

To open up competition, the CCB recommends:

• Eliminating exclusivity clauses on international flights that restrict competition.

• Expanding regular Canadian Air Transport Security Authority (CATSA) services to secondary airports.

• Adopting a technology-neutral approach to aircraft restrictions.

Exclusivity clauses and related restrictions are agreements between major airports and airlines that prohibit international flights at nearby secondary airports. It is alleged that these restrictions prevent secondary airports from launching competitive services and limit their market impact. According to the CCB, removing these restrictions would enable secondary airports to better respond to market opportunities and expand options for passengers, workers, and airlines.

The CCB suggests that this is not the only advantage for major market players. CATSA’s security screening mandate is limited to designated airports, and this makes non-designated airports less able to offer scheduled passenger services. The CCB recommends expanding the list of designated airports should be reviewed and updated. Airports with growing or potentially important passenger traffic could be put on a priority list to be designated.

Lastly, the CCB noted that certain secondary airports, notably Billy Bishop in Toronto City, face undue restrictions on their operations originally designed to manage its impact on the local community, especially when it comes to noise and the environment. The CCB warns that overly rigid rules such as these may slow the adoption of new technology and recommends a shift from equipment-based standards to outcome-focused requirements, allowing airports to manage noise and environmental impacts with greater flexibility and innovation.

2.      International Ownership & Participation

As with many countries, only Canadian airlines can operate point-to-point domestic flights within Canada. To be considered a “Canadian airline”, current (2018) regulations require no more than 49% of the voting share to be held by foreign investors, with no individual foreign investor holding more than a 25% stake.

This contrasts with other examples cited by the CCB, including Australia, New Zealand and Brazil, all of which, notwithstanding national security concerns, allow for 100% foreign ownership of solely domestic airlines.

As the CCB notes, access for Canadian airlines to overseas markets is often dependent on reciprocal access in both markets. They also suggest that a relaxation of foreign competition restrictions would allow for easier access to capital for new and existing air carriers.

In that light, the CCB presents the following recommendations

• Increasing the single investor foreign ownership limit for Canadian airlines to 49%

• Allowing up to 100% foreign ownership for domestic-only Canadian carriers

• Working with other countries to remove foreign competition restrictions in international agreements.

On the last point, the CCB argues that the long-term goal should be to (reciprocally) entirely remove foreign ownership restrictions on airlines and ease domestic service prohibitions by renegotiating bilateral and multilateral air service agreements.

3.      Northern Airports

One of the key challenges identified in the CCB report are the “economic realities” of Canada’s most northern airports and the airlines that service them. These markets, while relatively small, are lifelines for remote communities which may not have other means of transportation available.

Key Areas of Focus for Northern Airports:

• Bespoke Regulatory Requirements

• Business Model & Capital Investments

• Incorporation into broader Canadian air transport network

The CCB highlights concerns with a one-size-fits-all regulatory model that overlooks the distinct needs of northern airports. They note that rules designed for southern operations often cause unintended problems in the north, citing flight and duty time limits and the Air Passenger Protection Regulations (APPR’s) as examples. In response, CCB urges the adoption of regulations tailored specifically to northern conditions.

Another critical challenge to expansion of competitive services in the north are facilities and capital investments. The CCB found that there are not enough open-access essential facilities at northern airports, such as hangars, warehouses, and de-icing facilities. This creates extra costs and barriers for airlines seeking to enter or expand services.

They recommend that airport authorities develop important facilities and make them available to all airlines. They suggest airport authorities may consider acquiring these assets from existing airlines. In support of that goal, they also recommended that government funding target airport authorities rather than individual airlines for infrastructure development. According to the CCB, direct payments to airlines only cement monopolistic tendencies in the already sparsely served North. In addition, when funding infrastructure that the airline owns, they recommend governments should consider requiring non-discriminatory open access to that publicly funded facility.

Lastly, the CCB recommends that the government promote interlining agreements for smaller and regional carriers to increase single-ticket connection options, develop regional markets and support the growth of smaller airlines. They argue this would allow these smaller competitors to broaden their connection options and make travel on these airlines less expensive and more convenient for passengers.

Implications

Although the recommendations in this market study are not yet formal policy, they signal clear priorities for regulators moving forward. For larger airports, this may mean preparing for increased regulatory scrutiny and potential mandates to enhance competition. In contrast, smaller and regional airports, particularly those in northern communities, could benefit from regulatory efforts aimed at improving their competitiveness, adapting business models, and addressing unique local challenges through tailored policy support.

Relaxing and aligning foreign ownership rules with international norms, as suggested by the Competition Bureau, could also broaden the range of carriers operating in Canada, increase interest from global airlines, and provide Canadian carriers with greater access to international markets. At the same time, there are concerns that such changes could weaken the domestic aerospace industry and further impact service to underserved communities.

Disclaimer: This post is for general information only and isn’t legal advice. For advice about your situation, please consult a qualified lawyer at Avra Law.