Friday, August 26, 2011

Opposition to United/Continental/Air Canada Alliance Worth Watching

Despite increased liberalization efforts over the last two decades, international mergers and truly globally integrated carrier networks remain blocked by the nationality rule. As such, the primary mechanism by which airlines have pursued global integration has been through alliances with foreign carriers, enabling coordination on ticketing, scheduling, brand identity and more. The U.S. DOT has promoted these alliances by aggressively granting antitrust immunity to the allying carriers. While some concerns have been raised about the potential impact these alliances may have on competition, before this year no other single State jurisdiction (setting to one side the general investigations conducted by the European Commission) had stepped in to seriously scrutinize any of these arrangements in a way that might jeopardize the entire endeavor. Thus, the June decision by the Canadian Commissioner of Competition to file an application with Canada's Competition Tribunal opposing the planned United/Continental/Air Canada joint venture in is both novel and possibly portentous. United, Continental and Air Canada had already been working together under the antitrust immunity granted by the U.S. authorities to the Star Alliance. Following the United/Continental merger in early 2010, United/Continental and Air Canada announced plans late last year for enhanced coordination between the companies including a new revenue sharing agreement. It is this latest joint effort to which the Commissioner of Competition objects. Air Canada and United/Continental filed their responses to the Commissioner's application earlier this month. A few days ago Air Canada competitor WestJet filed a request to intervene in opposition to the alliance. Those interested in following the case can do so at the Competition Tribunal's website (available here). Over the coming weeks the blog will contain further analysis of the opposing briefs and any new developments in the case.

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