Canada's competition watchdog says it has protected consumers from fare increases and reduced choice on 14 trans-border routes by reaching an agreement with Air Canada and its U.S. partner.
The deal, the Competition Bureau said Wednesday, will allow the airlines to co-operate on other routes where they don't hold a near monopoly.
Under the agreement, Air Canada and its Star Alliance partner are prohibited from co-ordinating their prices and schedules on 14 busy routes that connect several large Canadian cities with several large U.S. cities. The federal agency will appoint an independent monitor operating at the airlines's expense to ensure Air Canada and its partner United Continental comply with terms of the agreement.
The deal "will ensure that passengers do not face higher prices and less choice on high-demand routes between Canada and the U.S. resulting from the airlines' proposed joint venture and co-ordination agreements," interim Competition commissioner John Pecman stated Wednesday.
The bureau says studies by U.S. anti-trust authorities of similar route monopolies found that prices increased by 15 per cent when there has been little competitive choice.
The airlines announced the joint venture in October 2010 but suspended its plans in June 2011 after the Competition Bureau intervened and raised concerns about the proposal and filed an application with the Competition Tribunal to block the joint venture.
The bureau originally identified 19 transborder routes, including 10 monopoly routes, where competition would be substantially reduced owing to the joint venture and the co-ordination agreements. But after reviewing additional information determined that competition won't likely be substantially harmed on five of those routes: Montreal-New York, Toronto-Chicago, Toronto-New York, Vancouver-New York and Vancouver-Los Angeles.
Canadian airlines are unable to formally merge with non-Canadian airlines because of foreign ownership restrictions. But former commissioner Melanie Aitken said the original joint venture proposal would have achieved that same result for Air Canada and United Continental.
