Air Canada enters tentative deal to buy Transat

The shakeup in Canada’s aviation industry continued, Thursday, with Air Canada announcing it was in talks to buy Air Transat and its resorts in a half-billion dollar deal.

The move comes hot on the heal of this week of Westjet’s bombshell announcement of its purchase by Onex.

“The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel. It will also allow us to further grow our hub at Montréal-Trudeau Airport, where we have added 35 new routes since 2012 to the benefit of the Montreal and Quebec communities, and from which we carried 10 million customers in 2018 alone,” said Calin Rovinescu, President and Chief Executive of Air Canada in a statement.

Transat is one of the world’s largest leading leisure companies, owning both resorts in sun destinations, and the planes to get travellers there. It announced last month it had been approached by potential buyers.

“This announcement is good news for Transat”, said Jean-Marc Eustache, President and Chief Executive Officer of Transat. “This is an opportunity to team up with a great company that knows and understands our industry and has had undisputable success in the travel business. This represents the best prospect for not only maintaining, but growing over the long term the business and jobs that Transat has been developing in Quebec and elsewhere for more than 30 years.”

The sale, if it goes through, would give Air Canada a near stranglehold on trans-Atlantic air travel from Canada, with an estimated 63% of the available seats. It could therefore face increased regulatory and competition scrutiny. Any final approval of a sale would be up to Canada’s Transport Minister.

Westjet will fly only an estimated six per cent of seats to Europe this summer, based on data published by Air Transat. Westjet is in talks to form a joint venture with Air France-KLM, which holds 11% of the trans-Atlantic market from Canada.

Source: Air Transat

Transat is also in the process of adding Airbus A321LR aircraft to its fleet, a good fit for Air Canada, which is adding A321s to its leisure Rouge division, acquired from now-defunct Wow Air.

The offer to buy Transat gives Air Canada 30 days to do its due diligence. The offer represents a 48% premium on Transat’s share price since the end of April.

Air Canada said the purchase would create a “Montreal-based global leader in leisure, tourism and travel distribution offering Canadians choices to more destinations and promoting two-way tourism.”

Air Canada employs about 10,000 people in the province of Quebec, and maintains a hub at Montreal-Trudeau airport, with flights to the U.S., Caribbean, Europe, North Africa, Asia and South America.

The airline is awash in cash, with almost $7 billion in its war chest, and record revenues in the first quarter of 2019.

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