United States provisionally approves Delta and WestJet alliance

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The US Department of Transportation said Friday it had tentatively approved a proposed alliance deal between Delta Air Lines and Canada WestJet, which is expected to expand travel options between the United States and Canada.

The ministry said as part of its interim antitrust immunity approval it would require carriers to remove Swoop, a low-cost carrier affiliated with WestJet, the alliance, and cede 16 take-off slots and d landing at New York’s LaGuardia Airport.

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The department is also proposing to require WestJet to provide interline access to certain carriers serving Canada and to review the proposed alliance in five years. Interline agreements allow consumers to fly to destinations using both airlines.

The Delta-WestJet joint venture would hold a combined 27% of scheduled air carriers’ cross-border capacity, while the dominant carrier, Air Canada, would hold 45%.

WestJet, which is owned by private equity firm Onex Corp, welcomed the interim approval, saying the two carriers are reviewing the order “and will respond to it.”

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The carriers said the proposed alliance would “optimize the use of aircraft, improve schedules and reduce costs.”

Canada, with 38 million inhabitants, is the second largest international passenger air market in the United States after Mexico, with flights from Toronto accounting for over 50% of cross-border air travel demand.

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The capacity for transborder flights between the United States and Canada has increased by 15% over the past five years to reach 39 million seats per year.

The department said competition was not as healthy for flights between the United States and Canada as it was for cross-border flights from the United States to Mexico, noting that comparable flight fares between the United States and Canada were 12% higher.

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The airlines had urged the divestiture of slots at New York’s LaGuardia, noting that American Airlines, Delta and United Air Lines controlled 83% of all slots, with Delta controlling 45% of flights.

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New York-Toronto flights represent 6% of all US-Canadian flights and the route is the second largest US market for international air travel.

(Reporting by David Shepardson in Washington and Allison Lampert in Montreal; editing by Chris Reese and Richard Chang)

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