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Air Canada continues to eye closer United ties

Air Canada continues to evaluate closer ties with United Airlines, as competitors WestJet and Delta Air Lines work towards a joint venture between Canada and the USA.

"We'll have to go back and look at how we can strengthen our JV with United," said Michael Rousseau, chief financial officer of Air Canada, in response to how the carrier plans to respond to Delta and WestJet at a CIBC investor conference on 26 September.

Delta and WestJet reached an agreement for a transborder joint venture in July, paving the way for the carriers to seek antitrust immunity from regulators and implement their pact in 2019.

Immunised partnerships are popular with airlines as they allow members to operate as essentially a single carrier in a specific international market. They can jointly coordinate everything from schedules to fares, and share revenues and expenses under a joint venture.

"We currently have certain routes that are carved out of that JV, and we'll have to go back to the drawing board to see if there are some value we can add to both carriers by extending that JV," he says.

Air Canada and United do not operate a joint venture between Canada and the USA, despite Rousseau's comments. However, they have the "ability" – as Air Canada has indicated in multiple annual reports since 2012 – to implement one with 14 transborder markets excluded under a 2012 agreement with Canada's Commissioner of Competition. The airlines have had antitrust immunity to cooperate in the market since 1997.

The airlines also cooperate across the Atlantic under a three-way joint venture with the Lufthansa Group.

Air Canada clarifies that, in his comments, Rousseau was "referring to our long-standing, integrated relationship with United" and "how it might help us respond to developments in the North American market". He was not referring to a transborder joint venture.

"We continuously look at opportunities to build our global route network," says United on a potential joint venture with its fellow Star Alliance member.

Air Canada is the largest carrier between Canada and the USA, with a 49% share of capacity in 2018, FlightGlobal schedules data shows. Delta and WestJet together control nearly a 28% share, and an Air Canada-United tie-up would control a 59% share.

Calin Rovinescu, chief executive of Montreal-based Air Canada, told FlightGlobal in June 2017 that the airline saw "opportunities" for a closer relationship with United on transborder routes.

Asked about the carve out markets required by Canadian regulators in 2012, Rovinescu said: "At the time, many of our competitors, including for example WestJet, were not in some of the markets on the transborder that they are now in. The transborder market has become more competitive."

Air Canada and United could implement a joint venture under the 2012 agreement, however, they would need to again seek approval from regulators to form a pact that includes the 14 markets that were excluded. Those markets include Calgary-Chicago, Montreal-Washington DC, Toronto-Washington DC and Vancouver-San Francisco.

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