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

Alberni Valley Bulldogs’ goalie Luke Pearson stopped all 22 shots the Cowichan Capitals sent his way to collect a 5–0 shutout in B.C. Hockey League action, Saturday, April 10, 2021. (SUSAN QUINN/ Alberni Valley News)
BCHL: Pearson earns shutout in Bulldogs’ win over Cowichan Capitals

Alberni Valley will face Victoria Grizzlies Sunday, April 11 at 3 p.m.

A 3.0-magnitude earthquake occurred off Ucluelet just after 12:30 a.m. on April 10 and was reportedly felt as far south as Oregon. (Map via United States Geological Survey)
Quake off Ucluelet reportedly felt as far south as Oregon

Magnitude 1.5 earthquake also reported off Vancouver Island’s west coast hours earlier

Princess Elizabeth and her new husband, Prince Philip—behind the wheel—visited the Alberni Valley on the princess's inaugural visit to Canada. A photographer with Charnell Studios in Port Alberni captured the young newlyweds along the parade route on Oct. 25, 1951, months before Princess Elizabeth became Queen. Prince Philip died April 9, 2021, just shy of his 100th birthday. This photo is one of 24,000 in the Alberni Valley Museum's online archives, available for public viewing at https://portalberni.pastperfectonline.com. (PHOTO PN 13605 COURTESY OF ALBERNI VALLEY MUSEUM)
LOOK BACK: Prince Philip and his new bride visit Port Alberni

A special look back with the Alberni Valley Museum to honour the life of Prince Philip

John Ambrose Seward, 33, is described as Indigenous and five-foot-eight with short black hair and brown eyes. (Police handout)
John Ambrose Seward, 33, is described as Indigenous and five-foot-eight with short black hair and brown eyes. (Police handout)
High-risk sex offender banned from central Island, living in Vancouver: police

John Ambrose Seward, 33, has been released from prison under a number of conditions

Third-generation residential school survivor, poet and attorney Francine Merasty will be a featured author at Electric Mermaid Live Reads on April 16. (SUBMITTED PHOTO)
Residential school survivor and poet to read at Electric Mermaid

Electric Mermaid: Live Reads takes place online via Zoom on Friday, April 16 at 5:45 p.m.

B.C. Health Minister Adrian Dix and Premier John Horgan describe vaccine rollout at the legislature, March 29, 2021. (B.C. government)
1,262 more COVID-19 infections in B.C. Friday, 9,574 active cases

Province’s mass vaccination reaches one million people

Two-year-old Ivy McLeod, seen here on April 9, 2021 with four-year-old sister Elena and mom Vanessa, was born with limb differences. The family, including husband/dad Sean McLeod, is looking for a family puppy that also has a limb difference. (Jenna Hauck/ Chilliwack Progress)
B.C. family looking for puppy with limb difference, just like 2-year-old Ivy

Ivy McLeod born as bilateral amputee, now her family wants to find ‘companion’ puppy for her

A vehicle that was driven through the wall of a parkade at Uptown Shopping Centre and into the nearby Walmart on April 9 was removed through another hole in the wall later that night. (Photo via Saanich Police Department and Ayush Kakkar)
Vehicle launched into B.C. Walmart removed following rescue of trapped workers

Crews cut new hole in parkade wall to remove vehicle safely

Four members with Divers for Cleaner Lakes and Oceans were out at Cultus Lake on March 28 and 29 hauling trash out of the waters. (Henry Wang)
PHOTOS: Out-of-town divers remove 100s of pounds of trash from Cultus Lake

Members of Divers for Cleaner Lakes and Oceans hauled out 470 pounds of trash over two days

As of Saturday, April 10, people born in 1961 are the latest to be eligible for a COVID-19 vaccine. (Black Press files)
B.C. residents age 60+ can now register to get their COVID-19 vaccine

Vaccine registration is now open to people born in 1961 or earlier

A new saline gargle test, made in B.C., will soon be replacing COVID-19 nasal swab tests for kids. (PHSA screenshot)
Take-home COVID-19 tests available for some B.C. students who fall ill at school

BC Children’s Hospital plans to provide 1,200 kits to Vancouver district schools this April

Ruming Jiang and his dog Chiu Chiu are doing fine following a brush with hypothermia that saw several people work together to get them out of the Fraser River near Langley’s Derby Reach Park on March 25, 2021 (Special to the Advance Times)
Man finds men who rescued him from drowning in B.C.’s Fraser River

A grateful Ruming Jiang says he will thank them again, this time in person when the pandemic ends

The 10-part Netflix series Maid, which is being exclusively shot in Greater Victoria, was filming near Prospect Lake in Saanich last month. (Photo courtesy Fred Haynes)
Province announces $150,000 towards South Island film studio, fulfilling B.C. NDP promise

Investment to fund movie studio feasibility study at Camosun College

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Most Read