BUSINESS
05/26/2018 13:16 EDT | Updated 05/26/2018 13:16 EDT

Canadian Airfares Are In Free Fall, Thanks To Growing Competition

That’s even despite rising fuel costs.

Air Canada planes at Toronto's Pearson International Airport, Wed. July 20, 2016. Airfares in many Canadian cities have dropped sharply, according to data compiled by airfares site Kayak.com.
NurPhoto via Getty Images
Air Canada planes at Toronto's Pearson International Airport, Wed. July 20, 2016. Airfares in many Canadian cities have dropped sharply, according to data compiled by airfares site Kayak.com.

If there's one thing Canada is not known for, it's cheap airfares. So it might come as a surprise to many that airline ticket prices have dropped sharply at numerous airports across Canada.

According to numbers crunched by Kayak.com, which compiles data from hundreds of travel sites, advertised airfares for travel this summer are 7 per cent lower nationwide than they were last summer.

In some cities, prices have fallen much more dramatically. Airfares out of Edmonton are down by 40 per cent in a year, to a median of $485. Prices in Winnipeg fell 30 per cent, also to a median of $485.

Airfares in Canada have seen little inflation, overall, for years. According to Statistics Canada, prices in the third quarter of 2017 (the most recent period for which data is available) were 0.1 per cent higher than a year earlier, but still slightly lower than they were two and three years before that.

Much of this has to do with an increased supply of airline seats.

The country is seeing greater competition in the low-cost carrier market, and established airlines are adding more routes, said Steve Sintra, country manager for Canada at Kayak.

Additionally, Canada's major carriers recently began offering a new no-frills "basic economy" fare.

Watch: Basic economy fares come to Canada's airlines. Here's what that gets you.

The arrival of Kelowna, B.C.-based Flair Airlines and the impending launch of WestJet's new low-cost carrier, Swoop, are changing market dynamics. Flair and WestJet are reportedly fighting it out over routes in western Canada (where some of the largest airfare drops were recorded), while Air Canada's low-cost carrier, Rouge, is also increasing service.

Sintra noted that some of the largest decreases in airfares are taking place at "secondary" airports, which have seen more activity lately thanks to new low-cost carriers. Searches at Kayak for flights out of some of these airports such as Hamilton International Airport, near Toronto have spiked by double digits over the past year.

"Consumers are realizing there is an opportunity to save money" by flying out of these airports, Sintra told HuffPost Canada.

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All this is happening at a time when airlines' energy costs are on the rise. According to the International Air Transport Association, North American jet fuel prices have jumped by nearly 53 per cent over the past year.

That is putting pressure on airlines to raise fares, and some U.S. carriers, including United Airlines and American Airlines, have warned in recent months that passengers can expect to see just that.

But Sintra says energy costs are just one part of the price equation for airlines.

"Oil prices have risen and yet we've seen a drop in the prices in the domestic market," he noted.

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