Air Canada to partner with Continental Airlines

TORONTO: Air Canada said on Thursday that it plans to partner with Continental Airlines, the fourth-largest US carrier, to provide better service to the American market.

Canada's largest airline said the agreement will provide customers with more destinations, frequent flyer benefits and lounge access. The partnership is subject to regulatory approvals.

``This is an exciting opportunity for Air Canada and Continental Airlines to develop a deeper relationship that will be of great benefit to our customers,'' said Ben Smith, Air Canada's chief commercial officer.

The move, which comes a few weeks after Air Canada announced plans to cut its capacity by seven percent and lay off up to 2,000 of its 28,000 employees, will also help Air Canada to be more efficient as it struggles to respond to higher fuel costs, Smith said.

Air Canada already has an agreement with United Airlines, which is a Star Alliance partner. Continental announced in June that it also plans to join the alliance after exiting its current partnership with Sky Team.

The transfer could take months to complete because Continental cannot terminate its contract with Sky Team until nine months after the the proposed merger between Delta and Northwest closes, Continental said in June.

Under the new partnership, Canadian travelers will have access to more destinations in the eastern United States, through Continental's hubs in Newark and Cleveland. Better access to the southern U.S., Mexico and Central America will be directed through its Houston hub.

Continental has said its route network has little overlap with United's.

Air Canada has also signed a framework agreement with Continental, United Airlines and Lufthansa to create a trans-Atlantic joint venture to provide service to Africa, India, Europe and the Middle East.

Nine Star Alliance carriers, including Air Canada, have filed a joint application to the U.S. Department of Transportation to add Continental Airlines to their existing antitrust immunity.

Versant Partners analyst Cam Doerksen said the agreement with Continental was an expected result of the U.S. carrier's desire to join the Star Alliance.

``Continental has an extensive network in Central America and other parts of the U.S. where perhaps United doesn't have the same type of coverage so I just think it opens more opportunities for Canadian travelers to fly to more destinations,'' he said.

Established in 1997, Star Alliance has 20 airline regional partners around the world and has nearly 18,000 daily flights to 965 destinations in 162 countries.

Continental provides 3,1000 flights a day to more than 280 US and international destinations.

On the Toronto Stock Exchange, Air Canada shares gained 25 Canadian cents or 4.68 percent to C$5.59 on Thursday in afternoon trading. The shares have fallen by more than 60 percent in the past year.