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EU joins Air Canada fray
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October 18, 1999: 6:59 a.m. ET
Regulator probe of hostile bid for airline may serve to boost rival offer
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LONDON (CNNfn) - European regulators announced a formal probe Monday into a hostile takeover bid for Air Canada, threatening to derail the deal and open the way for a rival offer for the country's largest carrier.
Onex Corp., a Canadian investment firm, teamed up in August with Canadian Airlines International and its largest shareholder, AMR Corp.'s (AMR) American Airlines, with a $3.8 billion plan to merge the carriers.
However, antitrust officials at the European Commission, the Brussels-based executive arm of the European Union, believe that the Onex-led deal could raise competition problems on U.K.-Canada routes.
The launch of a four-month probe by the Commission marks the second time that it has intervened in an aviation deal not involving EU companies. Brussels sought and secured concessions from Boeing (BA) before approving its takeover of McDonnell Douglas in 1997.
The Onex deal involves merging the two Canadian carriers and bringing Air Canada into the "oneworld" global alliance led by American and British Airways (BAY).
That would leave the merged Canadian airline and BA as the only carriers flying to Canada from London's Heathrow airport. Canadian International currently operates from London's second airport, Gatwick.
Air Canada is currently a member of the Star alliance led by Lufthansa (FLHA) and UAL Corp's (UAL) United Airlines. Lufthansa chief executive Jurgen Weber said Friday that the two leading members were "prepared to defend [Air Canada] financially," raising speculation of a counterbid.
The Commission has struggled in the past to deal with the rapid increase in airline alliances that have expanded route networks while diluting competition on some routes.
Analysts speculated that Brussels may seek to carve out concessions such as forcing Air Canada or BA to divest their U.K.-Canada routes. Virgin Atlantic has in the past expressed interest in launching Canadian services from London. 
-- from staff and wire reports
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