Competition Bureau seeks to block joint venture between Air Canada and United Continental
27-Jun-2011 The Commissioner of Competition filed an application today with the Competition Tribunal to prohibit a proposed joint venture between Air Canada and United Continental Holdings Inc. If the joint venture is allowed, it will monopolize ten important Canada/United States routes, and substantially reduce competition on nine additional routes, leading to increased prices and reduced consumer choice on key transborder routes.
"The proposed joint venture would allow Air Canada and United Continental to operate and set prices as one airline," said Melanie Aitken, Commissioner of Competition. "If allowed to proceed, consumers will face higher prices and even less choice on key, high demand air passenger routes."
The proposed joint venture is effectively a merger between Air Canada and United Continental on all of their Canadian and US operations. It would allow the parties to jointly set prices, capacity and schedules. If allowed to proceed, it will result in:
- a monopoly on ten transborder routes;
- substantially reduced competition on an additional nine additional transborder routes; and
- significantly higher prices.
In addition to challenging the joint venture, the Commissioner is challenging three existing "coordination agreements" between Air Canada and United Continental. These agreements allow Air Canada and United Continental to coordinate key aspects of competition including, but not limited to, joint pricing and scheduling, as well as revenue sharing. Through these existing agreements, the companies currently have the power to charge passengers inflated fares. Moreover, if these anti-competitive provisions are further implemented, with or without the joint venture, Canadians will pay even more for less choice and higher fares.
"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 Act," added Ms. Aitken. "Making matters worse, they now want to fully merge their operations."