Air Canada’s proposed takeover of Montréal-based leisure carrier Air Transat has been in the works for quite some time. Yesterday, it reached a significant milestone that has brought the acquisition one step closer to becoming a reality. This saw the takeover receive approval from Transport Canada, a department of the country’s government.
Government approval received
Transport Canada has announced in a press release that the Canadian Government has approved Air Canada’s takeover of Air Transat. This is a huge step forward for the Canadian flag carrier’s acquisition, which has been in the works since May 2019. It purchased Air Transat the following month for $520 million, and its shareholders approved the deal in November 2019.
The ongoing coronavirus pandemic had initially cast some uncertainty over the merger. However, last month, the Superior Court of Québec gave its approval for the takeover. The latest news from the government has also brought it a step closer to becoming a reality.
Omar Alghabra, Canada’s Minister of Transport, has heralded the deal as “beneficial to travelers and the industry as a whole.” However, his statement underlined that it is “subject to strict terms and conditions that are in the interests of Canadians.”
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He also hopes that these conditions will “support future international competition, connectivity, and protect jobs.” The terms of the approval include:
- Facilitating and encouraging other airlines to take up Air Transat’s former European routes.
- Preservation of Air Transat’s head office and brand in Quebec.
- Committing to 1,500 employees for the new entity’s leisure travel business.
- Committing to undergo aircraft maintenance in Canada, prioritizing contracts in Quebec.
- A new mechanism for monitoring prices. This should help to allay fears of a monopoly among other Canadian carriers, which we shall explore shortly.
- Launching new destinations within five years.
Opposition to the takeover
The approval of the deal represents a positive step forward for the two airlines involved. However, other Canadian carriers have voiced their opposition to the takeover, feeling that this may create something of a monopoly in the Canadian market. According to CBC, Ed Sims, the President and CEO of WestJet, the country’s second-largest airline, states that:
“This decision shows blatant disregard for all Canadians who believe in healthy competition. When Canadians look to explore the world and reunite with family and friends once again, they will face fewer choices and higher fares.”
Flair Airlines has also stated its disapproval. However, it also sees an opportunity emerging as a result in the form of a need for an ultra-low-cost carrier. Stephen Jones, its President and CEO, has said that:
“This further reduction in competition in the Canadian aviation industry underlines the need for a true independent ultra-low-cost carrier like Flair. We strongly oppose the merger, and we look forward to bringing competition back to the industry.”
What will the takeover mean going forward?
The argument concerning the takeover’s effects on Canadian airfares is certainly an interesting one. These worries are not a new phenomenon, with Canada’s Competition Bureau having voiced concerns last March of passengers having fewer options should the takeover go ahead.
These concerns have arisen particularly for routes on which Air Canada and Air Transat had been direct competitors. The takeover will see the Canadian flag carrier obtain a monopoly on these lucrative corridors. This, in turn, could lead to passengers having minimal choice, and having to pay higher fares.
However, Air Canada underlined at the time that the deal “will benefit consumers, as well as employees and stakeholders of both companies.” Of course, it remains to be seen what will happen to airfares in reality once the takeover is complete. However, this statement certainly seems to suggest a more positive future for Canadian passengers due to the acquisition.
What do you make of Air Canada having received government approval to acquire Air Transat? Will this change how you fly to, from, or within Canada? Let us know your thoughts in the comments.
