Feds greenlight northern airlines merger in wake of 'monopoly' warnings

first air

The federal government has approved a merger between two northern air carriers that Canada's competition watchdog has said would amount to a monopoly on key routes.

Transport Canada says in a statement that First Air and Canadian North can merge under conditions that strike a balance between corporate viability and the public interest.

The conditions bar price increases for passengers and cargo service beyond those tied to operating costs, and prohibit reductions to the weekly flight schedule.

Transport Minister Marc Garneau will sign a monitoring agreement with the parent companies of the two airlines to ensure compliance.

The combined entity would adopt First Air’s Kanata HQ as its head office. First Air’s manager of marketing and communications Dan Valin told OBJ when the deal was first proposed last year that combining resources and workforces would result in fewer delays and better aircraft maintenance. Both airlines run competing daily flights from Ottawa to Iqaluit, but the merged company could potentially increase the frequency of trips to Canada’s north.

“When you look at the size of the market, we certainly believe that a merged airline is something that will benefit all the communities and all the population,” he said. “Instead of competing for the same customers, we can offer more options.”

Conversely, the competition commissioner said in a February report that the proposed merger could be characterized as a monopoly on the carriers' overlapping routes, and would likely lead to significant price hikes and worse service for passengers and cargo customers.

– With files from OBJ Staff