Breaking news out of Canada as Air Transat and Air Canada agree to terminate their merger. After announcing the merger in 2019 and securing an agreement after some bumps, the ongoing crisis and hold-ups with the European Commission (EC) have led the two airlines to cut the merger agreement, with Air Canada paying out a termination fee to Air Transat.
European Commission would not approve the merger
The two airlines are materially concerned about not receiving merger approval from the EC. In order to receive approval from Europe, Air Canada and Air Transat would have to agree to more remedies, which still would not guarantee European approval.
Air Canada stated the following:
“As previously disclosed, the acquisition was conditional on the approval of various regulatory authorities, including the European Commission (“EC”). In order to meet that key condition, Air Canada offered and enhanced a significant package of remedies, which went beyond the commercially reasonable efforts required of Air Canada under the Arrangement Agreement and what has been traditionally accepted by the EC in previous airline merger cases. Following recent discussions with the EC, it has become evident, however, that the EC will not approve the acquisition based on the currently offered remedy package.”
Air Canada believes that providing additional remedies to receive European approval would “significantly compromise Air Canada’s ability to compete internationally.”
The European Commission on the deal
The EU has had some concerns about the proposed merger, which would further consolidate competition and routes between Canada and Europe. The EC was mostly concerned about minimizing competition between Europe and Canada would lead to higher fares and fewer choices for travel.
The EU highlighted in 2020 concerns about the following:
“The Commission is concerned that the proposed transaction could significantly reduce competition on 33 origin and destination (O&D) citypairs between the EEA and Canada. These include 29 O&Ds where both companies offer direct services and four where one company flies direct and the other one indirect via one of its hubs.”
This story is breaking. Check back for updates.