Air Canada and Canadian Airlines Agree to Break Longtime Stalemate

CANADA'S two big airlines appear to have ended a long-running legal battle over computer reservations systems and routes.

Air Canada of Montreal, which had sued to block Canadian Airlines of Calgary, Alberta, from dropping out of the Gemini computer reservations system dropped all legal actions last week.

The move clears the way for Canadian to join the Sabre reservation system run by AMR Corporation of Dallas, American Airline's parent company. AMR required Canadian to join Sabre as part of a deal in which American would give Canadian a much-needed $246 million (Canadian; US$186 million) cash infusion. For its investment in PWA Corporation, Canadian Airlines' parent, AMR would also gain a one-third interest in the company.

Air Canada had opposed Canadian's departure from Gemini, in which both participate, saying the reservation system would fail as a result. Amid the legal wrangling, however, there were attempts at reconciliation. Canadian and Air Canada held merger talks several times, all of which failed.

The standoff broke in November, when Canada's Competition Tribunal gave the OK for Canadian's withdrawal from Gemini. But Hollis Harris, chairman of Air Canada, vowed to continue the fight and appealed the ruling.

Analysts say Air Canada's sudden cessation of legal hostilities is likely a response to the Canadian government's move last week to grant Air Canada access to lucrative air routes to Japan. Although Gemini may falter, Air Canada has a consolation prize in the east.

Government officials were said to be anxious to get Canada's airline industry back on its feet and stop the expensive fight that has gone on since early 1991.