Air Canada and WestJet: Two Airlines, One Expensive Country

Two airlines, a vast country and a cost structure set by Ottawa: that is the equation behind Canada’s expensive skies. Air Canada, the former Crown carrier privatised in 1988, and WestJet, the Calgary low-cost upstart that became a full-service rival, between them operate more than 500 aircraft and dominate the trunk routes between Toronto, Montreal, Vancouver and Calgary. The past two years have tested both: Air Canada endured a flight-attendant strike in August 2025 that defied a federal back-to-work order, a March 2026 runway collision in New York that killed two of its regional pilots, and the early departure of chief executive Michael Rousseau; WestJet changed part of its ownership, reversed an unpopular seat-densification plan and lost all flights for two days in August 2026 to its own cabin-crew strike. This article explains how the duopoly works, what the numbers say, why Porter Airlines is the challenger to watch, and why airport rents and fees make the market so hard to disrupt. It is part of the Canadian Company Stories hub.

How did Canada end up with an airline duopoly?

Through a cycle of consolidation and failure that has repeated roughly once a decade since deregulation in the late 1980s. Air Canada absorbed its only full-size rival, Canadian Airlines, in 2000, then went through creditor protection in 2003–04. WestJet, founded in Calgary in 1996 on the Southwest Airlines model, grew into the second national carrier by the mid-2000s. Each subsequent challenger, from Canada 3000 and Jetsgo to Lynx Air, which filed for creditor protection on 22 February 2024 and stopped flying four days later with nine Boeing 737 MAX 8s, has run into the same wall: high fixed costs, a thinly populated country and two incumbents able to match fares on any contested route.

The structure that results is unusual among large economies. Canada has about 41 million people spread over the second-largest land mass in the world, with most of them living within 200 kilometres of the US border. Domestic trunk routes are profitable, but the long thin routes to the North and the Atlantic provinces are not, and the incumbents cross-subsidise them with international and transborder flying. A new entrant cannot easily replicate that network economics.

The regulatory architecture reinforces it. Foreign ownership of Canadian airlines is capped, airports are operated by non-profit authorities that pay rent to Ottawa, and Nav Canada, the privatised air-traffic controller, recovers its costs through user fees. A 2016 study cited in parliamentary debates found Canadian air travel to be the most expensive in the world for consumers; ultra-low-cost carriers such as Flair, which operated about 20 aircraft in mid-2025, have made only modest inroads since.

What did Air Canada’s 2025 results show?

A profitable but bruised airline. For the full year, Air Canada reported operating revenue of C$22.37 billion, operating income of C$918 million, adjusted EBITDA of C$3.12 billion for a 14.0% margin, and net income of C$644 million, or C$1.86 per diluted share. Free cash flow was C$747 million on operating cash flow of C$3.66 billion. Net debt stood at C$5.41 billion at year-end, with a leverage ratio of 1.7x, and the operating fleet numbered 353 aircraft including six Boeing 767 freighters. The airline carried 45.3 million passengers.

The fourth quarter was a record on revenue, at C$5.77 billion, and Rousseau used the results call on 13 February 2026 to say the airline entered 2026 “from a position of strength”. Guidance for the year called for adjusted EBITDA of C$3.35–3.75 billion, capacity growth of 3.5–5.5% and free cash flow of C$400–800 million. A C$194 million one-time charge was booked for the CUPE flight-attendant settlement and a management restructuring.

Capacity, however, barely grew: available seat miles rose just 0.8% for the year. Part of that was deliberate restraint, part was the strike, and part reflected delays to the Airbus A321XLR and Boeing 787-10 orders placed in 2022 and 2023. The airline is also reshaping its leisure arm, Air Canada Rouge, which is taking the 737 MAX 8 fleet and building a Vancouver base while its Airbus narrowbodies move to the mainline.

What happened in the August 2025 flight-attendant strike?

More than 10,000 CUPE flight attendants walked out on 16 August 2025 after their ten-year contract from 2015 expired and talks over unpaid ground duties stalled. Air Canada and Rouge suspended all flying; about 700 flights a day were cancelled, affecting roughly 130,000 passengers daily. Less than 12 hours into the strike, Jobs Minister Patty Hajdu invoked Section 107 of the Canada Labour Code and asked the Canada Industrial Relations Board to order binding arbitration. The board ordered a return to work the next day, and the union refused, an open defiance the board then declared unlawful.

That defiance changed the bargaining dynamic. With the government’s lever visibly blunted, the two sides returned to the table with a federal mediator and reached a tentative deal on 19 August after nine hours of talks. The central win for the union was ground pay: flight attendants would be paid for 60 minutes of pre-flight duties on narrowbody aircraft and 70 minutes on widebodies at 50% of their hourly rate, rising to 60% in April 2026, 65% in 2027 and 70% in 2028. Those terms were binding regardless of how members voted on wages.

The wage package was another matter. In a ratification vote that closed on 6 September 2025, more than 99% of members rejected it, sending wages to arbitration. The arbitrator’s decision, reported on 18 February 2026, largely kept the rejected numbers: 12% in year one for junior mainline crew and 8% for senior crew, 13% for Rouge, then 3%, 2.5% and 2.75% in the following years, with the agreement running to March 2029. The union’s bargaining committee said it was not the outcome it had fought for. Air Canada put the strike’s revenue cost at about C$430 million across roughly 3,200 cancelled flights.

Why did 2026 turn into a crisis year for Air Canada?

Because an accident, a language controversy and an oil shock arrived within six weeks of each other. On the night of 22 March 2026, Air Canada Express Flight 8646, a 20-year-old Bombardier CRJ900 operated by Jazz Aviation from Montreal to New York LaGuardia, struck an airport firefighting truck that air-traffic control had cleared across the runway as the jet was on short final. Both pilots, Captain Antoine Forest, 30, and First Officer Mackenzie Gunther, 24, were killed; 39 people were injured. The US National Transportation Safety Board’s preliminary findings pointed to the controller’s clearance, poor weather and a truck without a surface-surveillance transponder; the FAA later dismissed two LaGuardia controllers for leaving shifts early, though a link to the accident has not been established.

Air Canada’s response created a second crisis. The company posted a condolence video from Rousseau delivered almost entirely in English with French subtitles, prompting criticism from Prime Minister Mark Carney and Transport Minister Steven MacKinnon that it breached the spirit of the Official Languages Act. Rousseau was summoned to Ottawa, and on 30 March 2026 the airline announced he would retire by the end of September. On 8 July it named Anko van der Werff, chief executive of Scandinavian Airlines, as his successor, to take over by the end of January 2027.

Then came fuel. On 30 April 2026, reporting first-quarter net income of C$48 million on revenue of C$5.79 billion, Air Canada suspended its full-year guidance, citing volatility in jet-fuel prices caused by disruption in Middle East energy markets. Second-quarter results on 11 August 2026 showed record revenue of C$6.27 billion but an operating loss of C$215 million and a net loss of C$178 million after C$388 million of labour-related and other charges, with capacity up only 0.3% because of late-quarter weather. Guidance was reinstated at a lower level: adjusted EBITDA of C$2.9–3.2 billion, capacity growth of 2.25–3.25% and free cash flow of C$200–500 million.

How has WestJet changed under Onex?

It has become a bigger, more complex and more internationally connected airline than the low-cost carrier Onex bought. Onex Partners announced its takeover on 13 May 2019 at C$31 a share, about C$5 billion including debt, and closed it that December, months before the pandemic grounded the fleet. Under Alexis von Hoensbroech, chief executive since 2022, WestJet folded its ultra-low-cost brand Swoop back into the mainline in October 2023, closed the purchase of tour operator Sunwing on 1 May 2023 and flew the last Sunwing-branded flight in May 2025, and ended its dedicated freighter operation in March 2025.

Strategically, von Hoensbroech has concentrated the airline on Calgary as its sole global connecting hub, under a 2022 agreement with the Alberta government, with Toronto Pearson as a secondary hub. The fleet, at 169 aircraft with 119 on order as of September 2026, is almost entirely Boeing: 737-700s, -800s and MAX 8s, a growing 787-9 widebody fleet, and an order placed in September 2025 for 60 737 MAX 10s and seven more 787-9s with deliveries running to 2034.

Not every move has landed. A September 2025 plan to densify 43 737s with non-reclining seats drew enough public hostility that WestJet paused it in December 2025 and reversed it entirely on 16 January 2026. A June 2025 data breach exposed names, contact details and travel-document information. In March 2026 the Canadian Transportation Agency fined the airline C$70,000 for 35 passenger-protection violations tied to a February 2025 delay. And on 2–3 August 2026 WestJet’s flight attendants struck, cancelling every flight for two days before a tentative agreement was reached on 3 August.

What does the Delta and Korean Air investment mean?

It converts WestJet from a privately held Canadian airline into a junior member of a global alliance network, without changing who controls it. On 12 May 2025 Onex announced that Delta Air Lines would buy 15% of WestJet for US$330 million and Korean Air 10% for US$220 million, a combined US$550 million for a quarter of the company, implying an equity value of about US$2.2 billion. Delta agreed to pass 2.3% to Air France-KLM for US$50 million after closing. The transaction closed on 22 October 2025, leaving Onex and its co-investors with 75% and, in Onex’s words, continued ownership and control.

For Delta, the stake deepens a joint venture that already links WestJet’s Calgary hub with Delta’s transborder network and its SkyTeam partners. For Korean Air, which completed its own takeover of Asiana in late 2024, it secures a Canadian partner for trans-Pacific feed. Onex’s head of private equity, Tawfiq Popatia, described the new shareholders as among the best-performing airlines in the world; von Hoensbroech called the deal an endorsement of WestJet’s performance through a difficult period for aviation.

The implied valuation is instructive. Onex paid about C$5 billion in 2019; the 2025 deal values the equity at roughly US$2.2 billion, or around C$3 billion at prevailing rates, after six years that included a pandemic, two acquisitions and significant fleet investment. That is not a distressed outcome, but it is a reminder that airline equity in a duopoly market is not the same as airline pricing power. Onex’s investors, including the pension funds profiled in the Maple Eight story, are now waiting for an eventual IPO or sale that the airline-partner stakes make easier to execute.

Is Porter Airlines a real third competitor?

It is the most credible challenger Canada has produced since WestJet itself, though it remains a fraction of the incumbents’ size. Porter was founded by Robert Deluce in 2006 as a turboprop operator out of Toronto’s downtown Billy Bishop island airport, a niche it protected for 15 years. The transformation began in July 2021 with an order for 30 Embraer E195-E2 jets, since raised to 75 firm aircraft with 25 options, and the first delivery in December 2022. Because jets are banned at Billy Bishop, the E2 fleet flies from Toronto Pearson and Ottawa, where Porter built a 150,000-square-foot maintenance base.

By late 2026 Porter operates roughly 82 aircraft, 53 of them E195-E2s and 29 Dash 8-400s, under chief executive Michael Deluce, the founder’s son, with Robert Deluce as executive chairman. The airline has pushed into transborder leisure markets, opened a domestic-only terminal at Montreal’s MET airport on 15 June 2026, moved its Chicago service from Midway to O’Hare in September 2026, and announced winter 2026–27 routes to Cabo, Montego Bay, San José and Aruba. It also dropped San Diego in 2025, evidence that not every experiment works.

Porter’s model is a hybrid: all-economy cabins with free beer and wine, no middle seats on the E2 in its two-by-two configuration, and a reputation for service that is closer to a full-service carrier than to Flair. The question is whether a privately held airline with investors including OMERS can keep funding a 75-aircraft order book while the two incumbents match it on every new route. Readers tracking Canadian consumer brands that have scaled from a Toronto base may find parallels in the Lululemon and Aritzia story; the Toronto city profile in the City Startup Atlas sets out the broader ecosystem.

Why do airport rents and fees make Canada so expensive to fly in?

Because Canada’s major airports are not owned by the cities that host them or by private investors, but by the federal government, which leases them to non-profit airport authorities and charges ground rent based on a percentage of revenue. The authorities recover that rent, plus the full cost of terminals and runways, from airlines and passengers through landing fees and airport improvement fees added to every ticket. Nav Canada, the privatised air-navigation provider, adds its own charges. The cumulative effect is that a substantial slice of a Canadian domestic fare is government-mandated cost before the airline earns a cent.

Toronto Pearson, which handled 47.3 million passengers in 2025, is the clearest example: it is Air Canada’s primary global hub and the airline accounts for more than half of its seats, so any fee increase at Pearson flows directly into Air Canada’s cost base and, through it, into fares. Lynx Air’s February 2024 collapse was attributed by the company to escalating costs and increased airport fees, a complaint that Flair and every would-be ultra-low-cost carrier before them has echoed.

The Competition Bureau’s market study of domestic air passenger service, launched in 2024, revisited this terrain, and successive governments have promised to review the rent structure without acting. The politics are difficult: airport rent is a significant revenue line for Ottawa, and reducing it would hand a benefit to two airlines that already dominate the market. The result is a stable equilibrium in which fares are high, the incumbents are profitable but not spectacularly so, and new entrants struggle to get airborne. The broader question of why Canadian consumers pay more across many sectors is explored in the Rogers–Shaw telecom story.

What can founders and investors learn from Air Canada and WestJet?

The first lesson is that a duopoly does not guarantee pricing power when the government sets a large share of your cost base. Air Canada earned a 4.1% operating margin in 2025, respectable for an airline but hardly the return one might expect from a carrier with its market position. The money flows to airport authorities, Nav Canada and Ottawa before it reaches shareholders.

The second is that labour relations have become the decisive operational risk in Canadian aviation, as they have on the railways. The CUPE strike of August 2025 showed that a federal back-to-work order can be defied, and that defiance can succeed; the 99% rejection of the wage deal showed that a union’s own bargaining committee can lose control of its members. WestJet’s two-day shutdown a year later confirmed the pattern. Investors should model a stoppage as a recurring, not exceptional, event; the parallel story on CN and CPKC shows how the same Section 107 mechanism played out in freight.

The third is that minority stakes from strategic partners are a legitimate way to crystallise value without giving up control. Onex sold 25% of WestJet to airlines that bring network feed and loyalty-programme reach, kept 75%, and now has a clearer path to an eventual exit. Founders of capital-intensive businesses can borrow the structure.

The fourth, drawn from the Flight 8646 aftermath, is that crisis communication in a bilingual country is a governance issue, not a public-relations detail. A chief executive who had steered the airline from pandemic losses to a C$644 million profit was gone within eight days of a condolence video. Finally, Porter’s slow build demonstrates that the way to challenge a duopoly is not to attack it head-on with a copy of its product, but to own a niche the incumbents cannot or will not serve, and to use it to fund the move into the mainstream. Related sector stories are collected in the Canadian Company Stories hub, and the aircraft Porter and Air Canada fly are the subject of the companion story on Bombardier’s comeback.

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