Air Canada and United Airlines have been negotiating for several months now with the competition authorities on both sides of the border to allow the two Star Alliance partners to further tighten their relationship. The two are seeking anti-trust immunity (ATI) to operate their trans-border flights in a coordinated fashion, allowing them to cooperate on scheduling, marketing, pricing and more. Such arrangements are growing in popularity as, among other things, a way around the foreign ownership rules of various countries and also as a way for airlines to decrease capacity, decrease risk and increase yields.
Canadian authorities this week indicated that an agreement has been reached with the two carriers, allowing the joint venture operation to proceed. From a story in the Canadian media:
The bureau said Wednesday it had struck an agreement with the carriers that would “protect and preserve competition” on 14 high-demand routes between Canada and the U.S. that, in part, led the bureau’s initial challenge of the partnership in June 2011.
Those contentious routes include flights between Toronto, Montreal, Vancouver and Calgary to certain U.S. destinations like Chicago, Washington, Houston and others.
On these 14 routes the two airlines will not be permitted to collude. On all the other trans-border routes they will. Such carve-outs are common in ATI agreements, often on the most popular routes where it is perceived that sufficient competition exists to support the carriers independently. For the other routes it becomes a matter of whether they would simply be dropped from service without the ATI, be significantly more expensive for customers or otherwise affected. Then again, with two major North American carriers essentially combining to be one in those markets, the competition is already dropping.
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