Can Transat survive without Air Canada? “The short answer is yes,” says aviation expert

Federal government gives the green light to Air Canada’s acquisition of Transat 

OTTAWA — The Canadian government has given the green light to Air Canada’s proposed acquisition of Transat.

Under new terms announced in October 2020, the sale price is $190 million. Back before COVID-19 changed just about everything, Air Canada was set to buy Transat for $720 million, even higher than the $520 million put forth in spring 2019 when the proposed deal was first announced.

“COVID-19 has had a devastating effect on the global airline industry, with a material impact on the value of airlines and aviation assets,” said Air Canada’s President and CEO, Calin Rovinescu on Oct. 10, 2020.  “Nonetheless, Air Canada intends to complete its acquisition of Transat, at a reduced price and on modified terms.”

 

ANNOUNCEMENT MADE TODAY

Minister of Transport, Omar Alghabra, announced today that the Government of Canada has approved the proposed purchase of Transat A.T. Inc. by Air Canada, “subject to strict terms and conditions that are in the interests of Canadians.”

Today’s announcement from the federal government says that in determining that Air Canada’s acquisition of Transat was in the public interest, the government considered a broad range of factors, such as level of service, wider social and economic implications, the financial health of the air transportation sector, and competition.

And the COVID-19 pandemic was a key factor in the final decision, notes the statement: “As Transat A.T. itself noted in December 2020, current uncertainty casts doubt on its ability to continue, as it faces significant financing challenges. Noting the effects of the pandemic on air service in general, and on Transat A.T. in particular, the Government of Canada has determined that the proposed acquisition offers the best probable outcomes for workers, for Canadians seeking service and choice in leisure travel to Europe, and for other Canadian industries that rely on air transport, particularly aerospace.”

The proposed acquisition “provides clarity and stability with regard to the company’s future, despite the effects of the pandemic It will also result in enforceable terms and conditions intended to facilitate future connectivity and competition on routes to Europe previously operated by Transat A.T.”

 

REFUNDS AND OTHER TERMS

The announcement goes on to say that: “The Government of Canada is aware that some Transat A.T. customers are still waiting for refunds for flights cancelled due to COVID-19. Refunds are an integral part of the negotiations with airlines regarding any assistance plan, and the government will continue to take into account the needs of Transat A.T. customers.”

The government notes that Air Canada will have a duty to ensure that, as a subsidiary of Air Canada, Transat A.T. will provide communications and services to the public in both official languages.

Other terms and conditions include:

  • Measures to facilitate and encourage other airlines to take up former Transat A.T. routes to Europe;
  • Preserving the Transat A.T. head office and brand in Quebec;
  • Employment commitment of 1,500 employees around the new entity’s leisure travel business;
  • Commitment to facilitate aircraft maintenance in Canada, prioritizing contracts in Quebec;
  • A price monitoring mechanism; and
  • Launch and operation of new destinations within the first five years.

In making the announcement, Transport Minister Omar Alghabra said: “Given the devastating impact of the COVID-19 pandemic on the air industry, the proposed purchase of Transat A.T. by Air Canada will bring greater stability to Canada’s air transport market. It will be accompanied by strict conditions which will support future international competition, connectivity and protect jobs. We are confident these measures will be beneficial to travellers and the industry as a whole.”

The deal still needs approval from the European Commission.