Canada’s airlines face pressure as Middle East rivals expand

Canada’s airline sector is bracing for sharper competition after Ottawa moved to widen market access for carriers from the Middle East, a shift that industry executives and analysts say could force domestic airlines to improve pricing, punctuality and onboard service as more long-haul capacity enters the market.

The policy change, announced through updated air transport arrangements, gives carriers based in the Gulf greater flexibility to add frequencies and destinations to Canada. Officials have framed the move as a bid to enhance consumer choice, strengthen trade links and improve connectivity between Canada and fast-growing hubs that serve Africa, South Asia and Southeast Asia via single-stop routings.

For Canadian travellers, the immediate appeal lies in more options and potentially lower fares on intercontinental routes that have long been dominated by a small number of operators. For domestic airlines, the challenge is more acute. Executives privately acknowledge that Middle Eastern carriers have built global reputations for high service standards, newer aircraft and extensive networks that funnel passengers through mega-hubs with efficient connections.

Industry observers say the change alters competitive dynamics for Air Canada and WestJet, particularly on routes linking Canada with Asia and parts of Europe where Gulf hubs act as gateways. While Canadian airlines remain protected on many short-haul and transborder routes, long-haul markets are where profit margins are thinner and service differentiation matters more.

Executives at Canadian carriers have publicly maintained that competition is healthy, but labour groups and some provincial officials have voiced concern that added capacity from state-backed Gulf airlines could squeeze yields. They argue that carriers such as Emirates, Qatar Airways and Etihad Airways benefit from scale and government support that allow sustained investment in fleets and passenger experience.

Ottawa has countered that the agreements are reciprocal and aligned with long-standing open-skies principles, noting that Canadian airlines gain additional rights in return, including cargo access and code-sharing opportunities. Officials also point to tourism and export gains, arguing that better connectivity supports business travel, education links and inbound tourism spending.

Aviation analysts say the timing is significant. Canadian airlines have faced persistent complaints over delays, cancellations and customer service, particularly during peak travel seasons. Consumer advocates argue that added competition could act as a catalyst for improvement, especially if passengers respond by shifting loyalty to carriers offering more reliable operations and better in-flight products.

Data from global industry bodies show that Gulf carriers consistently rank high on on-time performance for long-haul operations and invest heavily in premium cabins, lounges and digital services. Canadian airlines, by contrast, have focused capital spending on fleet renewal and network optimisation, sometimes at the expense of softer service elements. Analysts say that gap may now be harder to ignore.

There are also broader geopolitical and economic considerations. Canada has sought to deepen ties with Gulf states as part of a diversification strategy that looks beyond traditional transatlantic markets. Air service liberalisation often follows trade missions and investment flows, and aviation agreements are increasingly seen as tools of economic diplomacy rather than purely transport policy.

Some domestic stakeholders remain sceptical. Airline unions warn that intensified competition could translate into cost-cutting pressures, while regional airport authorities worry that traffic growth may concentrate at major hubs, leaving smaller cities with limited benefits. Industry economists note, however, that expanded long-haul services often stimulate feeder traffic, indirectly supporting regional networks.

The federal government has signalled that it will monitor market impacts, emphasising consumer protection rules and competition oversight. Regulators retain the ability to review capacity growth if market distortions emerge, though such interventions are typically rare once agreements are in place.