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Government restricts Air Canada/United transborder cooperation

Last year, the Canadian government’s Competition Bureau sought to block a joint venture between Air Canada and United Continental Holdings, which it said would hurt consumers by limiting competition on transborder routes. But now the bureau announced a new agreement with the two airlines that it says will preserve competition.

“The consent agreement the Bureau reached with Air Canada and United Continental will ensure that passengers do not face higher prices and less choice on high-demand routes between Canada and the U.S. resulting from the airlines’ proposed joint venture and coordination agreements,” said Canada’s Interim Competition Commissioner John Pecman.

The government noted that as originally proposed, the joint venture would effectively merge the overall flight operations of the two airlines in the transborder market. So it imposed certain restrictions on just how closely they can coordinate their activities.

The agreement prohibits the airlines from coordinating prices; from coordinating the number of seats available at each price; from pooling revenue or costs; and from sharing “commercially sensitive information.”

In its initial analysis of the proposed joint venture, the Competition Bureau identified 19 routes where it said competition would be “substantially reduced” if the plan went through. Subsequently, it determined that “competition on five of the routes originally identified is unlikely to be substantially harmed as a result of the airlines’ coordination and, as a result, the consent agreement only applies to the 14 remaining routes,”: the Bureau said.’

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