Canada’s Airline Shakeup: AAL, LUV, DAL Could Dominate as Borders Open to Foreign Carriers

North America's aviation sector braces for turbulence as Canada eyes deregulation—and legacy carriers scramble to adapt.

Skies Unlocked: The Looming Dogfight for Canadian Routes

American Airlines (AAL), Southwest (LUV), and Delta (DAL) are circling like hawks as Ottawa considers tearing down protectionist barriers. No numbers yet—just the scent of fresh competition in a market long dominated by Air Canada's quasi-monopoly.

Wall Street's betting pool opens

Analysts predict blood in the boarding lanes if foreign carriers get cabotage rights. 'Efficiency gains' for consumers? Maybe. Margin compression for airlines? Absolutely. Queue the usual Wall Street chorus about 'healthy competition' while quietly shorting regional jet stocks.

Final approach: This isn't Open Skies—it's open season. And as every frequent flyer knows, when airlines compete, you get thinner seats... and even thinner profits.

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The Competition Bureau says it is time to open Canada’s skies to foreign airlines as competition has failed to emerge in the country’s “highly concentrated” aviation industry. In a new market study, the watchdog says a new class of airline is needed, one that operates only within Canada but has owners outside its borders.

The recommendation could potentially open the Canadian market to major U.S. carriers such as American Airlines (AAL), Southwest Airlines (LUV), and Delta Air Lines (DAL) operating subsidiaries that only fly from point-to-point within Canada. Canada currently has two national carriers, Montreal-based Air Canada (TSE:AC) and privately held Calgary-based WestJet.

Duopoly

Together, Air Canada and WestJet effectively have a duopoly over the country’s aviation industry. The two airlines are increasingly dividing routes between themselves, with Air Canada operating primarily in Eastern Canada and WestJet in the western part of the country. Critics say that the current situation has led to Canada having among the highest air fares and worst customer service in the world.

Air Canada and WestJet routinely rank dead last in global rankings of airlines based on fares, service, flight cancellations, and on-time arrivals. International flights out of Canada are often cheaper than flights within Canada, notes the Competition Bureau in its report. And Canada’s rural and remote communities, particularly in the North, are underserved by both Air Canada and WestJet, adds the Competition Bureau.

Despite efforts to increase competition, Canada is considered a wasteland for new airlines and budget carriers. Six new airlines founded in Canada between 1995 and 2015 failed, including Greyhound Air and Roots Air. In the last 20 months alone, four low-cost carriers have disappeared from Canada’s skies, raising the need to open the country to foreign airlines, says the Competition Bureau.

The stock of American Airlines, the world’s biggest carrier, is down 39% this year.

Is AAL Stock a Buy?

The stock of American Airlines has a consensus Moderate Buy rating among 12 Wall Street analysts. That rating is based on six Buy, five Hold, and one Sell recommendations issued in the last three months. The average AAL price target of $12.67 implies 18.30% upside from current levels.