Air Canada moves ahead with Transat purchase

Air Canada announced Thursday it would proceed with a purchase of leisure operator Transat, with the boards of both companies recommending shareholders approve the deal.

The two sides have been negotiating the details of a final sale for the past month.

“We are delighted to have reached this definitive agreement to combine Transat with Air Canada to achieve the best possible outcome for all stakeholders,” said Air Canada chief executive Calin Rovinescu in a statement, adding his intention to keep Transat operating as a separate airline.

“Travelers will benefit from the merged companies’ enhanced capabilities in the highly competitive, global leisure travel market and from access to new destinations, more connecting traffic and increased frequencies.”



The deal now heads to Canada’s Transport Minister, Marc Garneau, who has 45 days to decide if he will launch a public interest review, which puts such a review smack-dab into the centre of a federal election campaign.

It will also undoubtedly face intense scrutiny from Canada’s Competition Commissioner, especially with regards to service across the Atlantic. Together, Air Canada and Air Transat hold about 60% of the trans-Atlantic market, and when you include their Star Alliance partner Lufthansa, that share rises to more than two-thirds of all seats between Canada and Europe.

However, if past actions are any indication, Garneau is not likely to interfere with the sale. He ignored advice from the Competition Bureau and approved the merger of Canadian North and First Air, despite the new combined company having a monopoly on dozens of routes in Nunavut and the Northwest Territories.

“The combination with Air Canada will give Transat new perspectives of growth, with the support of a strong network offering many options for connecting traffic,” said Transat President and Chief Executive Officer Jean-Marc Eustache.

Air Canada approached Transat about a possible deal in the fall. It will pay $13 per share for the leisure operator. The boards of both companies are recommending shareholders approve the transaction, it will also have to be approved by a judge.

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