UPDATE 1-Air Canada, United settle with Canada on routes

Wed Oct 24, 2012 11:30am EDT
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* Air Canada-United cannot coordinate on 14 transborder routes

* Competition Bureau to appoint monitor to ensure compliance

TORONTO Oct 24 (Reuters) - Canada's Competition Bureau said on Wednesday it had reached an agreement with Air Canada and United Continental Holdings that prohibits them from coordinating on 14 transborder routes but clears the way for a joint venture that excludes those routes.

The government agency, which said its deal will protect consumers, had filed an application in June to block a proposed transborder joint venture between the airlines, saying that the partnership would monopolize key routes between Canada and the United States.

Under the deal, the airlines have agreed not to coordinate prices or the number of seats available at each price, to pool revenue or costs or share commercially sensitive information on the 14 high-demand routes.

They can coordinate on other routes where their joint venture is not seen harming competition substantially.

The bureau also said it will appoint an independent monitor to ensure the airlines comply with the terms of the agreement.

The two airlines have three existing agreements and want their joint venture to merge flight operations between Canada and the United States, the bureau said.

Air Canada, the country's largest airline, said it was pleased with the decision and the preservation of its long-standing alliance with United Airlines, which bought Continental in 2010.

"In addition, this agreement provides the flexibility to implement a Canada-U.S. transborder joint venture, an increasingly common practice in the global aviation industry," said Air Canada's Chief Commercial Officer Ben Smith in a statement.

Air Canada shares rose 1.6 percent to C$1.90 on the Toronto Stock Exchange, while United Continental shares fell 1 percent to $20.29 on the New York Stock Exchange.