Proposed Air Canada-United arrangement could cost customers millions, watchdog says

The federal Competition Bureau says a proposed Air Canada and United Airlines arrangement could harm competition on 10 routes between Canada and the United States, costing consumers millions of dollars in airfare each year. The watchdog sent its report to Transport Minister Steven MacKinnon for review.

The affected routes connect Toronto, Montreal, Ottawa and Vancouver with Chicago, Cleveland, Denver, Houston, New York, San Francisco and Washington. They are restricted under a 2012 consent agreement (https://decisions.ct-tc.gc.ca/ct-tc/ord/en/item/463302/index.do?q=air+canada). The Bureau said similar coordination between the airlines was found to substantially harm competition, prompting the restrictions, which remain in force.

The Bureau said the proposed arrangement would eliminate an important source of competition between the airlines on these routes. The two carriers account for all non-stop traffic on five of the 10 routes and have “significant combined market shares on the others,” it said.

Transport Canada says the airlines have operated under the Transborder Joint Business Arrangement (TBJBA) since 2022. It allows them to work together on certain routes. The Bureau says that cooperation includes joint pricing, inventory management, revenue sharing and the exchange of competitively sensitive information (https://competition-bureau.canada.ca/en/how-we-foster-competition/review-proposed-air-canada-united-airlines-arrangement#sec05).

The airlines’ latest proposal includes an amended and restated agreement. The Bureau said that if the existing agreement is successfully rescinded, the new arrangement would let the parties coordinate on the 10 restricted routes in the manner contemplated by the TBJBA, eliminating competition. The expansion would likely raise prices and cause “millions of dollars in consumer harm each year,” the Bureau said, and could create monopoly or near-monopoly conditions on several routes.

Interim president Jeanne Pratt said competition between airlines helps keep fares lower and gives travellers more choice and better service. The Bureau’s review found that allowing Air Canada and United to coordinate on these routes would likely reduce competition on key Canada-U.S. routes and lead to higher fares for travellers, she said.