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A proposed expansion of cooperation between Air Canada and United Airlines would likely lead to higher fares on most of 10 affected Canada-U.S. routes, Canada’s Competition Bureau said Wednesday.
The finding is a warning to the transport minister, not a final decision blocking or approving the proposal. The minister is conducting a public interest review and will decide whether to authorize the arrangement.
Why could a partnership affect ticket prices?
Two airlines do not have to merge to reduce competition. In this case, the proposed arrangement would let Air Canada and United expand coordination, including on pricing, on routes where that coordination is currently restricted.
The bureau’s October 28 announcement says the proposal would eliminate an important source of competition between the airlines on those routes. It estimates higher prices would cause millions of dollars in consumer harm each year.
Air Canada and United account for all nonstop passenger traffic on five of the 10 routes and have significant combined market shares on the others, according to the bureau.
Which routes are involved?
The bureau says the affected routes connect Toronto, Montreal, Ottawa and Vancouver with Chicago, Cleveland, Denver, Houston, New York, San Francisco and Washington. Its announcement does not identify the individual city pairs, so that list should not be read as saying every possible pairing is affected.
The bureau says barriers to entry and expansion are high and other airlines would be unlikely to constrain the two carriers. It concludes that the proposed arrangement would create or reinforce monopoly or near-monopoly conditions on several routes.
What happens next?
The airlines already cooperate through their Transborder Joint Business Arrangement, but a 2012 consent agreement prohibits coordination on these 10 cross-border routes. Those restrictions remain in force, the bureau says.
The competition report will inform the transport minister’s review under the Canada Transportation Act. The announcement does not give a date for the minister’s final decision.
JBizNews Desk | New York
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