Canada’s Competition Bureau has warned that a proposed expansion of Air Canada and United Airlines’ cooperation would likely weaken competition and raise prices on most of 10 Canada–US routes. The airlines seek to coordinate more closely, including on pricing, on routes currently excluded from their joint business arrangement. The Bureau’s findings will inform the Transport Minister’s public-interest review; the proposal has not been authorized.
The affected routes link Toronto, Montreal, Ottawa and Vancouver with Chicago, Cleveland, Denver, Houston, New York, San Francisco and Washington. Air Canada and United account for all nonstop passenger traffic on five of the routes and have significant combined market shares on the others. The Bureau also found that high barriers to entry and expansion make it unlikely that rival airlines would provide enough competition.
The Bureau’s modelling predicted materially higher prices on eight routes, with the largest increases on Ottawa–Washington, Vancouver–San Francisco, Montreal–Washington, Toronto–Denver and Toronto–Houston. It estimated that the effects could cause millions of dollars in consumer harm annually, but did not provide specific fare-change estimates. These are forecasts, not observed price increases.
The airlines already cooperate under a transborder joint business arrangement, except on the 10 routes restricted by a 2012 consent agreement. Those restrictions remain in force. The Transport Minister will consider the Bureau’s findings and decide whether to authorize the proposed expansion.