Air Canada and United Continental suspend joint venture plans

Mon Jun 27, 2011 3:57pm EDT
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By John McCrank

TORONTO (Reuters) - Air Canada and United Continental Holdings suspended a planned joint venture on Monday after Canada's competition watchdog filed an application to have the proposed deal scrapped on antitrust grounds.

If the joint venture between Canada's No. 1 carrier and the world's biggest airline was allowed, it would monopolize 10 key Canada-U.S. routes and substantially cut competition on nine others, forcing prices higher, the Competition Bureau of Canada said in a statement.

The bureau also said it was challenging three existing coordination agreements between Air Canada and United Continental.

"The current agreements between Air Canada and United Continental already allow the companies to set prices above competitive levels on all key 19 transborder routes, which alone violates the (Competition) Act," said Melanie Aitken, commissioner of competition at the bureau.

"Making matters worse, they now want to fully merge their operations."

Both Air Canada and United Continental issued statements saying they strongly disagree with the board's findings, and that they had worked with the commissioner to address her concerns.

They argued that the proposed transborder joint venture would actually increase customer benefits through lower fares, better coordinated flight schedules and connection times, more route choices, and improved frequent flyer benefits.

But in the end, the companies said that pending further developments regarding the outcome of the competition board's application, they have agreed to suspend the joint venture.   Continued...