The merger of Air Canada and Canadian Airlines has created a mega-carrier north of the border, with only one national carrier competing against several regional and charter carriers. As a result, the government is moving back toward regulation of the airline industry. This situation provides a cautionary tale as to what should be avoided in the case of the proposed airline mergers in the United States.
Economies of scale are the motivation for the mergers both north and south of the border.
In Canada, a sparse population spread over a large area made it difficult for two national carriers to operate profitably. In the U.S., the capacity limitations of the existing infrastructure limit growth through the addition of new routes, making mergers and acquisitions the most feasible method of expansion. Thus, each flight is more profitable. Yes, both are the natural result of decreased competition. The U.S. hub and spoke system allows for competition since routes between major hubs are generally served by, at a minimum, the two carriers that are dominant at the two hubs.