Plus: why are airlines so awful? January 13, 2025 Sign Up | View online IN THIS ISSUE 8 min read 🦅 Trump threats 🏛️ Parliament pause 🛫 Awful airlines Do you remember when flying was a luxurious experience? We don’t either! Below, we explain why some of the major carriers only seem to be getting worse. | Getty Images THE WEEK IN MARKETS The Loonie takes an L Annnnd we’re back. U.S. President-elect Donald Trump hasn’t been sworn in yet (inauguration day is January 20), but some of his comments are already costing Canadians money. We’re not talking about stocks — global markets, including the TSX, are still near all-time highs despite a dip last week — we’re talking about the Loonie. Thanks to Trump’s persistent tariff threats, CAD is down 2% this month versus the U.S. dollar and down 5% over the past three months, putting the conversion rate at C$0.69 to US$1. These are huge declines for a major currency, which tend to stay within a steady range. CAD hasn’t been this weak since early 2016, when oil prices fell hard, and this downward swing means Canadians have to spend more money for stuff imported from abroad — cars, meds, Nikes, Tesla shares. Maybe it’s all just talk, but Trump’s words are already getting expensive. THE WEEK IN ONE CHART WHAT HAPPENED LAST WEEK THE POST-TRUDEAU ECONOMY: A SPECIAL REPORT Most weeks in this space, we recap the week’s biggest money-related news. But since Prime Minister Justin Trudeau’s resignation last Monday eclipses every story we might otherwise cover, we’re dedicating this section to unpacking some of the biggest economic questions his impending departure raises. Let’s get to it! When will we find out who’s going to lead Canada over the next few years? It won’t be until the general election, which could be called as early as late March, with voting in May. Until then, we should brace for a period of “delays in business decisions, sluggish hiring, and subdued investment,” at least according to economist Tu Nguyen, of research firm RSM Canada. Who might take charge, and what are their policies? The Liberals plan to pick a new leader on March 9, but so far few candidates have officially entered the race — perhaps because, based on polling data, Pierre Poilievre’s Conservatives have a 98% chance of winning a majority. And what politician wants to lead the charge into a buzzsaw? Poilievre outlined some policy proposals in an interview with Jordan Peterson. Among them: a more relaxed regulatory environment; more energy development; tying municipal funding to home-building targets; scaled-back immigration; and cuts to the carbon tax, foreign aid, and corporate welfare. What happens to all the policies the Liberals were working on? Whatever measures were in the works are now in legislative purgatory and likely dead in the water when Parliament resumes. That includes the proposed $250 cheque handouts and the higher capital-gains taxes for some individuals and businesses. But heads up: even though that particular tax hike might never pass, the Canada Revenue Agency is already implementing it, so experts suggest setting money aside if the measure stands to affect you. If the proposal fails, you may, fingers crossed, get your money back. Last but maybe most important: what about Trump’s tariff threats? This is a toughie. TD Securities noted that having a rudderless government for months could raise “the risk of an economically damaging trade war” with the U.S., because Canadian negotiators will probably be more effective with a leader in place when they’re dealing with a president who has mused about using “economic force” to annex Canada and has threatened to slap a 25% tariff on our goods, which all the big banks agree would be catastrophic for our economy. (Even a 10% levy wouldn’t be great, as the chart up top shows.) Experts wonder if tariffs will happen at all, because Canada’s inevitable retaliation could sting certain U.S. industries. Still, the prospect of inflation soaring to 7% and the loss of 1.5 million jobs if a 25% tariff takes effect is enough to hope we get someone in the PM seat as soon as possible. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 📣 Meta announces it will end its fact-checking program. Readers added context that it’s definitely because of chemtrails. Source 😮 Trump wants Greenland and the Panama Canal. And he says to throw in some extra ice and a bunch of those straw hats. Source ✉️ The United States Postal Service announced it will resume sending mail to Canada. Don’t accept any pre-approved statehood offers. Source 🐵 Study concludes monkeys can’t type the complete works of Shakespeare. Some emails and a Netflix series, tops. Source CRASH & BURN TO THE MOON ✏️ Washington Post cartoonist resigns after cartoon critical of Jeff Bezos is pulled. In retrospect, she probably should’ve given him bigger pecs. Source 🅿️ Parking space in B.C. on sale for $110K. Millennials woefully add “parking space” to list of things they’ll never have. Source 🏃 A 55-year-old woman ran a marathon every day in 2024. Marathon says it’s looking forward to some time away from her. Source 🪒 Man successfully sues razor company after cutting himself shaving. Now going after shaving cream company for making him look silly. Source WHO CARES THE BIG IMPORTANT STORY TRAVEL 2025 Why Are Canadian Airlines So Bad? We Looked Into It Given all the recent Trudeau and Trump headlines, you’d be excused for missing the news last week that, according to a report, Canada’s two largest commercial airlines, Air Canada and WestJet, were some of the world’s worst-performing major carriers in terms of cancellations and timeliness in 2024. The two airlines cancelled roughly one in every 33 flights last year and only had a 70% on-time arrival rate. Compare that to industry leader Delta, which cancelled only one in 100 flights and arrived on schedule 84% of the time. This isn’t exactly a bombshell finding: Canadian carriers have been receiving low marks for years. And that’s not good, since the airlines’ poor service discourages tourism and business travel, and drags down the airlines’ stock prices, since inefficiency hurts profitability. We asked John Gradek, a former Air Canada executive turned industry critic, to explain why Canadian airlines continue to underperform and whether they might one day turn around. Canadian airlines have one big problem. Gradek and most other experts agree that the major issue is — you’ll never guess — a lack of competition. (We’ve covered the topic before.) Air Canada and WestJet are a duopoly that account for 80% of domestic air travel and rake in 95% of industry revenue. The U.S., meanwhile, has four major carriers and several smaller ones that drive down ticket prices. But because Air Canada and WestJet have no real rivals, they can sort of charge whatever they want and customers can’t do much about it. That helps to explain why Air Canada boasts a 10.42% profit margin, whereas the global industry average is about 2.6%. (WestJet is privately held, so its financials aren’t public.) The government has hurt competition, too, mostly by allowing a whole lotta takeovers — check out this chart. It has also made Canada a less-than-ideal place to start a new airline by charging carriers hefty ancillary and airport-maintenance fees. Canada’s vast size and small population is another wrinkle. “We don’t have the volumes of passengers that would allow ultra-low-fare carriers to have significant volumes of flights,” Gradek explains. Which is what discount carriers need to stay in business when competing against Air Canada and WestJet. And the pandemic just made everything worse. That’s because the COVID outbreak led to industry-wide furloughs and firings; then, once travel rebounded, WestJet and Air Canada hired inexperienced staffers to replace many of their laid-off vets, a large number of whom retired, headed south, or left the industry, says Gradek. But hiring new employees has proved challenging and led to staffing shortages. Yet airlines have kept booking up flights — hence the nightmarish delays and cancellations. The government has taken a few small steps to address the problems. In 2018, Marc Garneau, the former Liberal Transport Minister, established the Air Passenger Protection Regulations (APPR) to bring about “some consequences for airlines misbehaving”— like not preventing controllable delays. The act gave Canadians the right to request compensation from the airlines ranging from $125 to $2,400. The carriers responded by arguing that staffing-related delays were out of their control and didn’t warrant compensation. In 2022, the Canadian Transport Agency (CTA) ruled on the contrary. But that didn’t end the problems. Since there’s no incentive for the airlines to efficiently process complaints, it can take a year or longer to receive compensation under the APPR, provided you receive anything. Gradek estimates up to 80,000 Canadians have filed appeals to the CTA alleging that the airlines wrongly denied their compensation requests. Now the Competition Bureau, which has faced growing public pressure to act, has launched an investigation into the airlines, in a bid to improve the cost and quality of flying. Improving competition wouldn’t be hard. One relatively easy way to do it: right now, foreign carriers aren’t allowed to pick up passengers in Canada then fly them to another Canadian destination — what’s known as cabotage. Foreign jets can only pick up or drop off customers, then turn around and leave. Gradek believes the government should allow a “constrained” presence of foreign carriers on some domestic routes, to give travellers more options and to force our two big airlines to do something novel: fight to win our business. —Claire Porter Robbins OTHER VERY GOOD READS 🛠️ The Death and Rebirth of Europe Can Europe catch up to the U.S. and China? | Noema 😢 The Anti-Social Century* Isolation is changing our personalities and our politics. | The Atlantic 🤑 How Do I Diversify, Anyway? And why should you in the first place? We’ve got answers. | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF SOCIAL We could really use an unprecedented amount of free soft-serve ice cream right about now. THOUGHTS ON TODAY’S ISSUE? 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