Air Canada and United Continental Agree to Form Transborder Joint Venture

Air Canada and United Continental Holdings, Inc. have agreed a Memorandum of Understanding (MOU) for a transborder joint venture they say would generate substantial service and pricing benefits for consumers traveling between the United States and Canada.

The MOU sets out the principles for a comprehensive revenue-sharing joint venture which would begin in early 2011 between Air Canada and United Continental Holdings that would provide for an enhanced partnership on United States-Canada  transborder flights operated by the Air Canada network and flights operated by Continental Airlines and United Airlines.

Air Canada has a 202-aircraft, all-jet mainline fleet which includes, among other types, 45 Embraer 190s and 15 Embraer 175s

On October 1, United Continental Holdings, Inc. was created upon the closing of the merger of United Air Lines (United’s legal name) and Continental Airlines, combining the carriers’ global networks to create the world’s largest airline. When the two airlines are fully merged, which is expected to happen by the end of 2011, the enlarged carrier will operate under the United Airlines name.

“Working cooperatively with our partner Air Canada, we can create a more streamlined travel experience for customers traveling between the United States and Canada, providing more travel options and benefits while reducing travel times,” says Jeff Smisek, United Airlines’ president and chief executive officer.

“This joint venture between United Airlines and Air Canada will provide many benefits and revenue synergies on this important market allowing us to compete more effectively,” says Calin Rovinescu, Air Canada’s president and chief executive officer. “As founding members of Star Alliance, Air Canada and United have benefited from a close relationship, as have our customers through a simplified travel experience and loyalty rewards. By managing pricing, scheduling and sales through a stronger joint venture, the carriers will be better able to serve customers by offering more travel options.”

One of the first aircraft painted to reflect the merger of Continental Airlines and United Airlines to form United Continental Holdings is this Boeing 737-900, wearing the Continental livery but the United Airlines name under which the merged carriers ultimately will operate. The aircraft was painted in time for the announcement of the completion of the merger on October 1, 2010

The Canada-U.S. market is one of the largest air transport markets in the world. According to the two companies, Air Canada’s transborder network to 59 U.S. cities will be strengthened by United’s presence in 210 U.S. airports. Similarly, United’s transborder network to 16 Canadian cities will be strengthened by Air Canada’s network serving 59 communities across Canada.

Air Canada and United Continental expect the joint venture to come into effect in early 2011, subject to Air Canada and United Airlines making the necessary filings, obtaining regulatory approvals and finalizing documentation. The carriers already benefit from anti-trust immunity granted by the U.S. Department of Transportation (DOT).