Air Canada

Court okays Transat takeover, but it’s far from a done deal

An Air Transat Airbus A330 departs Vancouver International Airport in March (photo: Brett Ballah).

A Quebec court has given its blessing to Air Transat’s takeover by Air Canada, leaving one last major hurdle to clear before it can become reality.

The $720 million all-cash deal was approved by Transat shareholders last week. Air Canada said the court did not receive any objections to its agreement.

That decision by the judge leaves Transat’s fate squarely in the political realm.

On Tuesday, federal Transport Minister Marc Garneau announced he would hold a public interest inquiry into the merger.

Officials will consult with people in the aviation industry and with the public to make a determination. Tellingly, politicians will also be consulted. The transaction is a touchy subject in the province of Quebec where both Transat and Air Canada are headquartered, but where Transat is seen as more of a home-grown darling.

Some investors, such as Groupe Mach, have touched on Transat’s Montreal roots to stir up opposition to the deal. Air Canada has promised to keep the Transat brand and its headquarters in Montreal.

The review will also be done with input from the Commissioner of Competition, though the advice is not binding. The commissioner came out against a merger of Canadian North and First Air because it would eliminate competition on all but one route, but the federal Cabinet ignored the advice and gave its blessing to the merger anyway.

The Competition Bureau will no doubt look very carefully at competition on flights to Europe from Canada. A merged Air Canada and Transat and its Star Alliance partners would hold two-thirds of the market. On top of that, the alliance would hold virtual monopolies into the biggest European hubs, such as Frankfurt, with little room for new competition to emerge.

Transport Minister Marc Garneau has given his department 250 days – until May 2, 2020 and after October’s federal election – to advise him on any potential ramifications of the deal. The minister would then take that advice to Cabinet for a final decision.

There is no time limit on Cabinet’s final decision on the takeover, though Air Canada remains hopeful to complete the transaction in 2020.