Prepared by: University of Manitoba, Transport Institute
August 29, 2015
This study is a qualitative and quantitative assessment of the impacts of foreign ownership limits for Canadian air carriers on air service provision in Canada. The report reviews available literature, analyzes international examples, and estimates a set of empirical models to test whether a change in Canada’s restriction on foreign ownership of airlines would affect competition among airlines. The Canada Transport Act requires Canadian airlines to be at least 75% owned and “controlled in fact” by Canadians (as defined by the Act). Countries such as the United States have similar restrictions, others (e.g. Australia, New Zealand) have fully deregulated domestic markets but retained some restrictions on carriers operating international services. The international comparison and econometric modeling all yielded mixed results. The differences in the sizes of the countries and their markets and proximity to competitors make it difficult to directly compare Canada to European Union member states, Australia and New Zealand. Meanwhile the evidence of a relationship where the lack of restrictions generally supports more intense competition was not particularly robust and varied depending on the control variables included in the models.