Manufacturing Industry

Government tentatively approves Air Canada's Canadian Airlines purchase

Airline Industry Information, Dec 23, 1999

Air Canada is set to dominate Canadian skies in the near future with the government tentatively approving the carrier`s proposal to acquire its ailing rival Canadian Airlines for USD62.2m

The gaining of approval did not all go Air Canada`s way however, with the government exacting certain undertakings from the carrier. Under the conditions of the approval, Air Canada must sell Canadian Airlines` regional airline affiliate, it must surrender some of its slots at the Toronto international airport, continue services to small and remote Canadian communities for a duration of three years and must not impose voluntary layoffs of unionised employees for a two year period.

Finally, Air Canada must also delay plans to establish a discount carrier that would serve eastern Canada until September 2000, and if any other Canadian airline apart from WestJet Airlines starts offering discount flights to the eastern market before the stated time, then Air Canada must wait until September 2001 to implement its plans.

The government has also announced that the ownership limit in Air Canada will be increased to 15% in 2000 and in order to complete the acquisition Air Canada must first negotiate a restructuring of Canadian Airlines` debts with the latter`s creditors.

In related news, WestJet airlines has said it will not comment on the approval until it has read the releases distributed by Transport Canada and the federal Competition Bureau.

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