A proposed expansion of coordination between Air Canada and United Airlines is facing a competition warning after Canada’s Competition Bureau concluded that the change would likely harm competition on 10 routes between Canada and the United States.
The proposal concerns routes that are currently excluded from the airlines’ wider cross-border joint business arrangement. On those corridors, restrictions introduced under a 2012 consent agreement limit how far the two carriers may coordinate. The proposed update would extend coordination, including on pricing, to those routes.
The Competition Bureau has sent its assessment to the Minister of Transport as part of a public-interest review. That review is still under way. The report does not itself block the proposal, and it does not amount to a final authorisation decision. The Minister will decide whether the arrangement should be authorised, authorised with conditions or refused.
Why the routes are under scrutiny
The 10 routes connect Toronto, Montréal, Ottawa and Vancouver with US destinations including Denver, Houston, San Francisco, Chicago, Washington, Cleveland and New York. They are a small part of a much larger network of flights between the two countries, but the regulator’s assessment focuses on the competition available to passengers travelling on each specific route.
In five of the 10 markets, the two airlines account for all non-stop passenger traffic. They also hold significant combined shares on the others. The Competition Bureau said the proposal would eliminate an important source of rivalry between the carriers and would likely lead to higher prices on most of the affected routes, causing millions of dollars in consumer harm each year.
The assessment also points to the difficulty of a rival carrier stepping in quickly enough to constrain the two airlines. Starting or expanding a service can require aircraft, airport access, suitable schedules and sufficient demand. The regulator concluded that barriers to entry and expansion were high and that competition from other airlines would be unlikely to offset the effect of expanded coordination.
Its conclusion is that the change could create or reinforce monopoly or near-monopoly conditions on several of the routes. That conclusion relates to the proposed expansion, rather than to a finding that the existing arrangement is unlawful. The existing restrictions remain in force while the review continues.
A decision that balances different factors
Joint business arrangements can allow airlines to coordinate elements of their cross-border operations. The existing arrangement covers activities such as schedules, ticket prices, marketing, sales, revenue management and, on some routes, revenue sharing. Supporters of closer cooperation may argue that it can improve connections and make it easier to plan services across a network.
The public-interest process must weigh those potential effects alongside the impact on competition. The Minister has the power to approve an airline joint venture, approve it with conditions or refuse it. The Competition Bureau’s report is an important part of that process, but the final outcome has not been announced.
For travellers, the immediate position is unchanged. The proposal has not yet received an authorisation that would remove the restrictions on the 10 routes. Any later decision will determine whether the airlines can coordinate more fully on those specific services and, if so, whether safeguards are attached.
The case highlights how airline competition is often shaped route by route. A carrier may face strong competition across a broad network while a particular city pair has few realistic alternatives. The forthcoming decision will therefore matter most to passengers using the affected cross-border routes, while also setting the terms for a significant part of the two airlines’ future cooperation.
