Sorting out the regulatory review for an airline merger

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Canada’s Competition Bureau is aware of the proposed merger between First Air and Canadian North and will review the ramifications.

Although First Air and Canadian North hope to have their merger approved by the end of the year, a Competition Bureau spokesperson says it is “difficult to determine in advance” how long the regulatory review process will take. photo courtesy of First Air/marktphoto

The Competition Bureau will aim to determine whether the deal would “result in a substantial lessening or prevention of competition,” Jayme Albert, the organization’s senior communications adviser, confirmed last week.

The extent of Transport Canada’s involvement is still to be determined.

There are different review procedures for mergers where the target’s assets exceed $92 million and when the combined Canadian assets or revenues of the two parties exceed $400 million. Although the Competition Bureau will be privy to those figures as they pertain to First Air and Canadian North, the public isn’t going to get a peek at the numbers.

“We’re unfortunately not able to provide that information, as valuation is a commercially sensitive topic for any business,” stated Kelly Lewis, manager of communications with Canadian North, when Nunavut News requested the figures.

The proponents also won’t publicly disclose the percentage ownership that the Quebec-based Makivik Corporation, parent company of First Air, and the NWT-based Inuvialuit Development Corporation, owners of Canadian North, will each hold if the merger is approved, other than to say it will be a wholly-Inuit-owned venture.

“As the merged airline will be privately owned, just like First Air and Canadian North, its balance sheet and other financial details will not be disclosed,” Lewis stated.

In cases involving national transportation, a public interest review could ensue under Transport Canada. That review would encompass consultations with the territories, other air carriers, airports and citizens who use these airlines, according to Marie-Anyk Cote, spokesperson for Transport Canada. A final decision about the proposed merger rests with federal cabinet, based on advice from the transport minister, with input from the commissioner of competition, Cote added.

Asked whether the Competition Bureau will recommend any service guarantees for Nunavut communities, Albert replied, “The bureau understands the essential role of air transportation to remote communities that rely on it for critical needs such as economic development, food and healthcare. Compliance with the Competition Act is an essential practice for all industries, including the airline industry.

“As the bureau is obligated by law to conduct its work confidentially, I am unable to comment further on our review.”

Although First Air and Canadian North hope to have the green light to complete their merger by the end of this year, Albert couldn’t commit to meeting that time frame.

“It is difficult to determine in advance how long a particular merger review will take to complete as the bureau evaluates the steps that need to be taken on a case-by-case basis,” Albert stated. “As always, we work with the merging parties to complete our reviews as expeditiously as possible. Where a merger is notifiable and the minister of transport triggers a public interest review of the merger as it relates to national transportation, the commissioner of competition has 150 days within which to report on the potential competition concerns to the minister.”