“Given the small size of the Canadian market and the critical importance of hub-and-spoke networks, there will never be room for many airlines in Canada's airline industry,” opines Fred Lazar in an op-ed in the Financial Post.
Lazar, associate professor of economics at York University’s Schulich School of Business, is responding to public and media concerns about decreasing competition and the likelihood of higher airfares following WestJet’s acquisition of Sunwing and integration of that airline as well as its own budget airline, Swoop.
He predicts that more competition would be counter-productive in the unique Canadian air market. “More total airline capacity likely would outstrip demand and reduce load factors. Lower load factors mean higher costs per revenue passenger as the fixed costs per flight are spread over fewer passengers. Thus, either fares would increase further, or one or more airlines would fail, or both,” he says.
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