Proposed United-Continental JV with Air Canada meets Canadian resistance

Washington DC
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After missing an early 2011 deadline to launch their transborder joint venture, Star Alliance partners Air Canada and United-Continental are meeting resistance from Canada's Competition Commissioner, who aims to block the proposed tie-up.

Citing the reasons for its rejection of the joint venture in a statement, the office of the Competition Commissioner said it concluded competition would be substantially reduced if the joint venture is created, which would lead to increased pricing.

The Commissioner concluded that 19 routes would be affected by the joint venture, and if the partnership is approved the two carriers would achieve 100% market share in 10 of those markets - Calgary-Houston, Montreal-Houston, Montreal-Washington, Ottawa-Washington, Ottawa-New York and Toronto to Cleveland, Denver, Houston, San Francisco and Washington.

Additionally, the Commissioner concluded United-Continental and Air Canada would attain a 99% market share on the Vancouver-San Francisco pairing. The Commissioner's analysis showed two of the nineteen routes result in a market share below 50% -- Vancouver-New York at 34% and Vancouver-San Francisco at 42%.

The Commissioner has formally applied to the Canadian Competition Tribunal to block the proposed joint-venture, and challenge other agreements between United-Continental and Air Canada it deems anti-competitive including a marketing agreement between Air Canada and United, an alliance expansion pact between United and Air Canada and the Air Canada-Continental alliance agreement.

Continental joined Star Alliance in October 2009, and merged with fellow Star partner United last year. The two carriers aim to receive a single operating certificate from FAA by year-end.