Canada watchdog assails Air Canada-United venture

Tue Aug 30, 2011 4:43pm EDT
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TORONTO (Reuters) - A proposed joint venture between Air Canada and United Continental Holdings would hurt Air Canada's customers and the Canadian economy, the country's competition watchdog said in documents made public on Tuesday.

In June, the Competition Bureau appealed to the Competition Tribunal to have the joint venture scrapped on antitrust grounds.

In the documents released on Tuesday, Commissioner Melanie Aitken said the venture would lead to reduced service at higher prices, undermining the efficiency and adaptability of the Canadian economy.

Air Canada and United are already in an alliance agreement in which they co-ordinate seat sales, fare structures, discounts and marketing campaigns on transborder routes.

The proposed joint venture would go a step further, allowing the two airlines to pool resources and share revenue on transborder routes to the extent that it would not matter which airline operated a certain route or collected the fares.

Aitken also asked for revision of the existing airline alliance agreement between Air Canada and United, describing it and the joint venture as "an anti-competitive exercise of market power that will be funded by Canadian consumers and the Canadian economy".

The documents respond to a submission filed by the airlines in mid-August. The airlines said cooperation benefits passengers, and argued further integration could lower fares and increase flight frequency.

The Competition Tribunal has not yet scheduled its hearing on the watchdog's complaints.

(Reporting by Allison Martell; editing by Peter Galloway)

<p>Air Canada aircraft sit at the terminal at Vancouver International Airport in Richmond, British Columbia February 10, 2011. et by its main domestic rival. REUTERS/Andy Clark</p>