(Reuters) - Air Canada and Air China Ltd entered a joint venture on Wednesday, with the Canadian carrier saying the deal would significantly increase its presence in the Chinese market which is set to be the world's largest by 2022.
The two airlines said the joint venture, which they have been discussing since 2014, would allow them to increase commercial cooperation on flights. It is also Air China's first such deal with a North American airline.
The proposed tie-up, however, came under scrutiny last month after the Montreal-based company decided to list Taipei, the capital of Taiwan, as part of China on its booking website, drawing a sharp reaction from Taiwan's foreign ministry which asked it to make a "speedy correction".
Air Canada denied that the deal had anything to do with its recent decision to refer to Taiwan as part of China.
"One's got nothing to do with the other," Air Canada's Chief Executive Calin Rovinescu told reporters on the sidelines of the signing ceremony in Beijing, when asked if its decision to change its website was prompted by the pending joint venture.
"I'm not getting into Taipei. Today is not a day for discussions on Taipei," he said.
China's civil aviation administration in April sent letters requesting airlines remove references on their websites or in other material that suggests Taiwan, Hong Kong and Macau are part of countries independent from China. The move was described by the White House as "Orwellian nonsense."
Last month, the aviation body said 18 out of the 44 airlines it contacted had changed the way they referred to the territories. Qantas Airways Ltd on Monday said it had decided to comply, a move that was criticized by the Australia's foreign minister.
John MacLeod, Air Canada's vice-president of global sales and alliances, said the carrier did not receive any pushback from the Canadian government and that it had not lost any bookings as a result of the website change.
"We responded to the Taiwanese government that we are an airline that will always be compliant and we are compliant with the rules of the countries that we fly too," he said.
ALLIANCES Canada's biggest airline has said the joint venture would help it compete more "aggressively" in the Pacific market, especially at a time when it is facing yield pressures on flights to China and Hong Kong.
The joint venture "is an important strategy in our global expansion as it significantly increases Air Canada's presence in an aviation market set to become the world's largest by 2022," Air Canada Chief Executive Officer Calin Rovinescu said.
Both carriers had earlier agreed to codeshare services and allow passengers to use each other's lounges, but a complete joint venture is expected to help expand their collaboration.
The companies did not reveal financial terms for the deal, but said the process is expected to be wrapped up in six months. Between them, they operate up to a total of 52 trans-Pacific flights per week between Canada and China.
Air China Chairman Cai Jianjiang said that the Sino-Canada market was one of its most significant long-haul markets and that it hoped to roll out more products and services under the partnership.
Air China's domestic rivals have also been forging alliances with North American peers.
China Eastern Airlines Corp Ltd agreed to sell a 3.55 percent stake to Delta Air Lines Inc in 2015, while China Southern Airlines Co Ltd sold a small stake to American Airlines Group Inc for $200 million last year.
Source: Reuters; Reporting by Philip Wen; Writng by Brenda Goh, Editing by Sherry Jacob-Phillips and Alexandra Hudson
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