OTTAWA — The federal government has approved a merger between two northern air carriers that Canada’s competition watchdog has said would amount to a monopoly on key routes.

Transport Canada says in a statement that First Air and Canadian North can merge under conditions that strike a balance between corporate viability and the public interest.

The conditions bar price increases for passengers and cargo service beyond those tied to operating costs, and prohibit reductions to the weekly flight schedule.

Transport Minister Marc Garneau will sign a monitoring agreement with the parent companies of the two airlines to ensure compliance.

Air services provide a lifeline to remote communities in Nunavut and the Northwest Territories, which are often inaccessible by sea and land.

The competition commissioner said in a February report that the proposed merger could be characterized as a monopoly on the carriers’ overlapping routes, and would likely lead to significant price hikes and worse service for passengers and cargo customers.

The report singled out two regions in Nunavut’s far north, as well as the Mackenzie Valley in the Northwest Territories and the route between Ottawa and Iqaluit.