Air Canada airplanes sit on the tarmac at Pearson International Airport in Toronto on Friday, March 20, 2020. THE CANADIAN PRESS/Nathan Denette

Air Canada airplanes sit on the tarmac at Pearson International Airport in Toronto on Friday, March 20, 2020. THE CANADIAN PRESS/Nathan Denette

Air Canada, Transat call off $190 million deal after European approval denied

The European review was the final hurdle in the regulatory process after the Canadian government approved the merger Feb. 12

Transat AT is considering its options after a deal that would have seen Canada’s largest airline acquire its smaller travel rival officially died on Friday with word that Air Canada had come to a mutual agreement with Transat to terminate their planned merger.

Both companies released statements announcing the termination of the $190 million deal initiated more than two years ago and amended due to the weight of the COVID-19 pandemic on the transportation sector.

The end of the deal comes after Air Canada and the tour company that operates Air Transat were advised by the European Commission that it would not approve the transaction.

Air Canada said it offered an enhanced package of remedies beyond what has traditionally been accepted by the commission in previous airline mergers.

“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,” the company said in a statement.

“After careful consideration, Air Canada has concluded that providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada’s ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic.”

The European review was the final hurdle in the regulatory process after the Canadian government approved the transaction on Feb. 12 while imposing conditions.

Air Canada will pay Transat a $12.5-million termination fee, while Transat won’t be required to pay Air Canada anything if it enters into another deal in the future.

Montreal-based Transat said it is disappointed by the failure to complete the transaction but is confident of the company’s future.

“This transaction … was complicated by the pandemic, and, ultimately, Air Canada reached its limit in terms of concessions it was willing to provide the European Commission to satisfy their competition law concerns,” stated Transat CEO Jean-Marc Eustache.

He said the deal would have resulted in benefits to shareholders, customers and other stakeholders.

No longer constrained by terms of the agreement, Eustache said the company he co-founded is free to take necessary steps to ensure its future, including obtaining at least $500 million in long-term financing.

The company will continue to preserve cash and has put in place a $250-million short-term subordinated credit facility, which matures on June 30.

Transat is in negotiations for long-term funding, including under the Large Employer Emergency Financing Facility, and through support from the Canadian government for businesses in the travel and tourism sector.

“Discussions on both topics are at an advanced stage and Transat’s management is confident that a satisfactory financing will be secured in the coming weeks,” it said.

Federal Transport Minister Omar Alghabra says he’s spoken with Transat and is examining next steps.

“The most important thing for our government is to protect jobs in Quebec and across Canada, as well as preserving the long-term viability of Transat A.T.,” he tweeted.

“Our government will continue to support Canadian workers and a strong competitive air transport sector.”

The government has come under fire by the country’s travel sector for failing to provide direct financial relief to airlines during a time when their operations have shrunk dramatically and losses have mounted.

A spokesman for Quebec Economy Minister Pierre Fitzgibbon also offered the government’s support.

“We will not leave Transat without support, we are continuing to monitor development very closely,” he wrote in an email.

Transat’s operations have been grounded since a suspension of flights following the Canadian government’s request in January to stop travel to Mexico and the Caribbean because of the pandemic.

Air Canada is resuming idled operations in May and Transat expects to do so in mid-June with a pick-up in volume to Europe.

Transat is not expecting the air travel market to return to 2019 levels until 2024, chief operating officer Annick Guerard recently said in a conference call.

Transat is now free to hold discussions with potential buyers, including Pierre Karl Peladeau, whose investment company, Gestion MTRHP Inc., previously made a proposal to acquire all of the issued and outstanding shares of Transat for $5 a share.

Like many tourism-related companies, Transat has been severely impacted by lockdowns during the pandemic.

“However, the arrival of vaccines brings us a light at the end of the tunnel, and Transat is well-positioned to bounce back,” Eustache said.

As a smaller operator, Transat said it can be “nimble and quickly adapt to ever-shifting market conditions.”

In addition, pent-up demand for leisure travel should help as this part of the business is expected to recover sooner than business travel, he said.

“In close to 40 years of existence, we have traversed numerous crises and each time, we emerged stronger than before, demonstrating our resilience as an organization. We look forward to a safe and healthy future, as we hopefully put this pandemic behind us.”

Air Canada

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The volume of visitors to White Rock’s Marine Drive over the weekend has led council to consider special measures this week. (Aaron Hinks photo)
White Rock council rejects resident-only parking for waterfront

Other health and safety measures to be considered in a special meeting Wednesday

South Surrey’s Paul Cottrell, who works with the DFO, tows a grey whale out of Semiahmoo Bay Sunday. (Contributed photo)
Dead whale floating near White Rock towed to shore for necropsy

Animal has been dead since at least April 15

Dr. Bonnie Henry gives her daily media briefing regarding Covid-19 for the province of British Columbia in Victoria, B.C, Monday, December 7, 2020. THE CANADIAN PRESS/Jonathan Hayward
BREAKING: Toddler marks youngest British Columbian to die related to COVID-19

Child one of eight people to die from virus this weekend

Vehicles line up for the Greater Vancouver Drive-Thru Food Truck Festival at the Chilliwack Coliseum parking lot on March 27. The touring event comes to Cloverdale this weekend, April 24-25 (Photo: Jenna Hauck/Chilliwack Progress)
Here are the food trucks coming to Cloverdale for a drive-thru festival this weekend

Nine trucks will be parked Saturday, nine Sunday during event at fairgrounds

Pharmacist Barbara Violo arranges all the empty vials of the Oxford-AstraZeneca COVID-19 vaccines that she has provided to customers at the Junction Chemist which is a independent pharmacy during the COVID-19 pandemic in Toronto, on Monday, April 19, 2021. THE CANADIAN PRESS/Nathan Denette
Parts of Surrey, North Delta to get AstraZeneca vaccines for people ages 40+

A total of seven communities in Surrey and Delta will be targeted

Public health restrictions on non-essential travel and vacation bookings are being increased in B.C. (B.C. government)
Out-of-region B.C. vacation bookings, RV ferry reservations to be refused, Horgan says

B.C. extends COVID-19 indoor dining, group fitness ban until May 25

Families of two of three workers killed in a train derailment near Field, B.C., in 2019 have filed lawsuits accusing Canadian Pacific of gross negligence. The derailment sent 99 grain cars and two locomotives off the tracks. THE CANADIAN PRESS/Jeff McIntosh
Families of workers killed in Field train derailment allege negligence in lawsuit

Lawsuits allege the workers weren’t provided a safe work environment

(New Westminster Police)
4 youth arrested after 30-person brawl in New Westminster leaves 1 seriously injured

Police are looking for witnesses who saw the incident take place

Sunday’s storm rocked one of the ferries crossing Kootenay Lake. Photo: Dirk Jonker
VIDEO: Storm makes for wild ferry ride across Kootenay Lake

The video was captured by ferry employee Dirk Jonker

Chakalaka Bar & Grill remains open in defiance of orders from Island Health to close. (Cole Schisler photo)
B.C. health authority seeks injunction against restaurant defying COVID-19 orders

Chakalaka Bar and Grill plans to continue serving customers without public health compliance

The Abbotsford Centre has the ability to host AHL level games if the Vancouver Canucks or any other NHL team chose to move its affiliate to the arena. (File photo)
Abbotsford Centre ready for AHL if right opportunity presents itself

Building recently upgraded glass and boards, schedule would allow for AHL tenant

A defeat Sunday in Kamloops tied up the Giants and Blazers for the most wins this season. Each team has notched seven victories in the B.C. division play unfolding this season on ice in Kamloops and Kelowna. (Allen Douglas/Special to Black Press Media)
VIDEO: Giants record fifth shutout of the season

Vancouver G-Men take down Kamloops Blazers on home ice Sunday, 4-0

Carver Ken Sheen had almost finished work on a large cowboy carving commissioned by the City of Williams Lake to replace the original overlooking the Stampede Grounds when fire broke out Friday, April 18 at his property between Williams Lake and Quesnel. (Pine River Carving Facebook photos)
Cow boss statue destined for Williams Lake Stampede Grounds goes up in flames

Carver Ken Sheen lost the statue, all his tools and his shop in the blaze

Most Read