COMPETITION authorities will decide on the future of Canadian Airlines in the new year after shareholder AMR Corporation agreed to sell its 33% stake to rival Air Canada.
The agreement comes after a year of intense talks and speculation over both Canadian carriers’ future.
Canadian authorities are likely to rubber-stamp the deal which will see Canadian leaving the Oneworld alliance – the American Airlines-led global partnership – and move to the Air Canada-backed Star Alliance.
Under terms of a letter of intent signed with AMR Corporation, which is the parent company of American Airlines, Air Canada will operate Canadian as a wholly owned subsidiary with the two virtually controlling the domestic market.
The agreement will enable Canadian to continue to codeshare with American on North American routes and participate in its frequent-flyer programme for at least 10 years and allow other Star Alliance carriers to do the same.
Employees, who are shareholders, have already accepted the deal. As a separate issue, the remaining 50% shareholders have been given until December 23 to agree to sell their equity to Air Canada for £39m.
Canadian’s board has recommended the bid be accepted.
Canadian Airlines’ UK marketing communication manager Jenny Ruler described the developments as a huge relief, admitting the AMR agreement was the biggest hurdle.
“It has been very stressful not knowing what will happen,” said Ruler.
“It is now up to the Canadian competition authorities to ratify the deal in February.
“We are not legally allowed to talk to Air Canada on pricing and other issues until February,” she said.
“After the competition authorities meet to ratify the deal, then the two airlines can start talking about consolidation.”
Ruler said it was also too early to discuss the sales and marketing structure of the new-look operation in the UK.
But she confirmed that Canadian representatives had stopped attending Oneworld meetings.
The future of both Canadian carriers has been hanging in the balance since the beginning of the year when Canadian industrial firm Onex put together a £735m hostile bid for the two airlines with plans to merge them and create a single entity.
Onex’s moves infuriated Star Alliance members which saw the potential loss of Air Canada from their growing partnership. United Airlines and Lufthansa led a concerted bid on behalf of Star Alliance to counter Onex’s plans with their own bid to rescue Air Canada.
Oneworld was unable to rally a financial package to save Canadian Airlines.