Canadian competition watchdog warns Air Canada-United deal could raise airfares

By Allison Lampert and Rajesh Kumar Singh

MONTREAL/CHICAGO Oct 28 (Reuters) - Canada's Competition Bureau warned on Wednesday that a proposal by Air Canada AC.TO and United Airlines UAL.O would likely weaken competition on 10 routes between Canada and the United States and drive up ticket prices on eight of them, costing passengers millions of dollars annually.

The proposal, which the carriers made earlier this month, would allow the airlines to coordinate prices on routes where they currently compete for passengers.

With the two carriers already dominating nonstop flights on several of those routes, the watchdog warned that closer cooperation would remove an important check on fares, leaving travellers with fewer competitive choices.

Airlines are grappling with soaring fuel costs and a prolonged downturn in Canadian travel to the United States, adding pressure on carriers to protect revenue through higher ticket prices.

The Competition Bureau said its report would inform a Canadian government public interest review of the proposed changes requested by the airlines on October 16. The two Star Alliance member partners are seeking regulatory approval to expand their coordination on 10 routes currently restricted by a 2012 consent agreement, the bureau said.

United was not immediately available for comment.

Air Canada said the partnership plays an important role in supporting connectivity between communities across Canada and the US. Since the partnership was established in 2022, 20 new routes have been created between Canada and the US, and more than 4.3 million passengers have flown jointly on United and Air Canada.

Leisure travel has weakened between Canada and the United States due to economic and political tensions caused by a US-led trade war.

Canadian residents' return air trips from the United States were 26% below 2024 levels in the first nine months of 2026, even as trips from other countries rose nearly 11%, according to Statistics Canada data cited by industry group Airlines for America. Airlines have also cut capacity between the two countries.

Canada's Competition Bureau said Air Canada and United "currently account for all non-stop passenger traffic on five of the 10 routes and have significant combined market shares on the others."

"The Bureau's analysis found that the proposal would likely result in higher prices on most affected routes, resulting in millions of dollars in consumer harm each year," it said in a release.