Bloomberg News

Canadian Regulator Seeks to Block United, Air Canada Venture

June 27, 2011

(Updates with airlines’ comments in fourth paragraph.)

June 27 (Bloomberg) -- Canadian regulators objected to a proposed joint venture between United Continental Holdings Inc. and its Star Alliance partner Air Canada, saying it would monopolize 10 routes and hurt competition.

The planned venture is “effectively a merger” between the carriers’ U.S.-Canadian operations and would lead to “significantly higher prices” and fewer choices for passengers, Canada’s Competition Bureau said today in a statement. The carriers suspended the application for the venture, proposed in October.

The regulator also challenged three existing coordination agreements that allow the two carriers to jointly plan pricing and scheduling as well as share revenue on certain routes. Joint ventures let airlines cooperate and make decisions as a single entity on some flights, the way United Continental and Deutsche Lufthansa AG do on trans-Atlantic routes.

“United and Continental strongly disagree with the Bureau’s position and worked in good faith with the Bureau to address its concerns,” United said today in an statement. “United’s trans-border cooperation with Air Canada has provided customers traveling between Canada and the U.S. with more and better service.”

Air Canada, the country’s biggest carrier, also said it “strongly disagrees” with the Competition Bureau’s position and that the two airlines have had a beneficial relationship with antitrust immunity since 1996 that has boosted service options for passengers.

No Material Impact

Chicago-based United Continental, the world’s largest carrier, said the regulator’s opinion won’t have a material impact on its business. The two airlines will continue to provide service to each other’s passengers, reciprocate frequent-flier points, as well as share airport check-in facilities and lounges the way they do today through the alliance, United said.

United rose 29 cents to $23.28 at 4:01 p.m. in New York Stock Exchange composite trading. Montreal-based Air Canada’s Class B shares gained 2 cents to C$2.31 on the Toronto Stock Exchange.

--Editors: Cecile Daurat, James Langford

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.


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