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By Paul-Mark Rendon
The hostile takeover bid of Air Canada may have fallen through, but the skies have still not cleared according to several faculty experts who warn monopoly threats still loom.
A 12 week period which saw Air Canada stave off a hostile takeover attempt by Onex Corp., a Toronto-based conglomerate who offered Air Canada shareholders $2.2 billion, is over, said Douglas Reid, a professor at the Queen's School of Business.
The Onex offer was denied after a Québec court ruled the takeover would be illegal in light of a federal rule which limits ownership of Air Canada to 10 per cent, Reid said.
However, he added the threat of an airline monopoly has not faded. "Maybe the Onex bid is gone, but the threat of monopoly isn't that's crystal clear," he said.
John Palmer, a Western economics professor, said there is still the possibility Air Canada is pondering its own merger with the ailing Canadian Airlines.
Palmer explained the federal rule limiting individual Air Canada ownership to 10 per cent does not prevent Air Canada itself from buying out its main competitor. "Less competition means less rivalry and for the consumer, there is a tendency towards adverse affects," he said.
Reid said the formation of one giant airline would allow the company to possibly raise ticket prices and eliminate both seat sales and unpopular local routes. "Onex was going to fold everything into one big company, but Air Canada is promising to keep some level of competition," Reid said. However, he added this move would still result in a monopolistic situation.
Cindy Clark, a first-year honours business administration student from Calgary, said she spends over a $1,000 each year on plane fare back home. She added she was slightly concerned by the possible monopoly threat. "I think you'd see the government step in to impose more rules on the industry," she said.
Reid explained the ruling by the federal court should not have come in the middle of major negotiations. "It would be a good idea for governments to clarify what they're going to do before, instead of engaging in those activities in the midst of an active deal. That does not give the public confidence," he said.