June 27, 2011 / 4:53 PM / in 6 years

Watchdog seeks to block Air Canada-United joint venture

TORONTO (Reuters) - Canada’s Competition Bureau said on Monday it filed an application to block a proposed joint venture between Air Canada, the country’s biggest airline, and United Continental Holdings, which operates the world’s No. 1 carrier, due to antitrust concerns.

If the joint venture was allowed, it would monopolize 10 key Canada-U.S. routes, and substantially reduce competition on nine others, the bureau said in a statement.

“If allowed to proceed, consumers will face higher prices and even less choice on key, high demand air passenger routes,” said Melanie Aitken, commissioner of competition at the bureau.

Air Canada announced in October it had agreed to a revenue-sharing joint venture with United Airlines on Canada-U.S. flights, saying it would help both airlines compete more effectively, while supporting substantial service and pricing benefits for passengers.

United Continental issued a statement on Monday saying it strongly disagrees with the bureau’s view and that it had worked with the bureau to address its concerns.

“The proposed U.S.-Canada transborder joint venture opposed by the bureau would increase existing customer benefits significantly via lower fares, better coordinated flight schedules and connection times, more route choices, and improved frequent flyer benefits,” it said.

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,” Aitken said. “Making matters worse, they now want to fully merge their operations.”

An Air Canada spokesman said the carrier would not comment on any aspect of the proposed joint venture whatsoever, but would issue a statement later in the day.

In October, Air Canada said the joint venture would bolster its transborder network of 59 U.S. cities by adding United’s presence in 210 U.S. airports. United’s network of 16 Canadian cities would add the 59 communities that Air Canada serves.

Shares of Air Canada were down 2.61 percent at C$2.24 in Toronto, while United Continental was up 0.70 percent at $23.15 in New York.

The application was filed with the Competition Tribunal, which will eventually rule on its worth. When a case is presented to the tribunal, parties have a right to respond within 45 days, then the commissioner must reply within 14 days of having been served with the response, after which a timetable to proceed will be decided upon.

Reporting by John McCrank in Toronto and Kyle Peterson in Chicago; editing by Peter Galloway

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