The competition watchdog says it plans to deny Air New Zealand and Air Canada permission to team up to promote and sell direct flights from Australia and New Zealand to Canada.
The Australian Competition and Consumer Commission (ACCC) on Thursday issued a draft determination proposing to deny authorisation to give effect to the cooperation agreement.
Chairman Graeme Samuel said the ACCC was concerned the proposed agreement was likely to reduce competition for flights between Australia and Canada.
"Air New Zealand and Air Canada are two of the four main carriers on the route," he said.
The agreement would involve the two airlines jointly promoting and selling direct flights between Sydney and Vancouver, operated by Air Canada, and Auckland and Vancouver, operated by Air New Zealand.
The agreement would also provide for the airlines to pool and share revenue from the direct flights.
The ACCC said it is important to ensure effective competition in aviation markets.
Mr Samuel said the ACCC was not convinced the agreement was needed to underpin the direct services, or that it would ensure the ongoing provision of direct services.
"On balance, the ACCC considers that the public benefits of the cooperation agreement are not likely to outweigh the public detriments," he said.
