In mid-May it was announced Air Canada intended to acquire Air Transat. At the time the airlines had entered into an exclusive agreement to purchase all issued and outstanding shares in a transaction valued at $520 million.
A lot can still go wrong after a deal like that is announced, so for the past several weeks we’ve been waiting to see if this deal would go through or not. Well the deal is now one step closer to being finalized, as the two companies have reached a further agreement.
Air Canada acquiring Air Transat
Air Canada and Air Transat have concluded definitive arrangement agreements for the combination of the two companies. While the transaction remains subject to regulatory and shareholder approval and other closing conditions, it’s expected that the deal will be completed in early 2020.
Calin Rovinescu, Air Canada’s President and CEO, had the following to say:
“We are delighted to have reached this definitive agreement to combine Transat with Air Canada to achieve the best possible outcome for all stakeholders. For shareholders of Transat and Air Canada, this combination delivers excellent value, while also providing increased job security for both companies’ employees through greater growth prospects. Air Canada intends to preserve the Transat and Air Transat brands and maintain the Transat head office and its key functions in Montreal. Both companies have demonstrated excellence as evidenced by the 2019 Skytrax Awards. Travelers will benefit from the merged companies’ enhanced capabilities in the highly competitive, global leisure travel market and from access to new destinations, more connecting traffic and increased frequencies. The Quebec economy will derive maximum advantage of having a Montreal-based, growth-oriented global champion in aviation, the world’s most international business.”
Air Transat to be maintained as separate brand
What’s surprising here is that Air Transat and Transat brands will be maintained separately to complement Air Canada, Air Canada Rouge, and Air Canada Vacations.
On the surface that’s not very logical — Air Transat is a competitor to Air Canada Rouge. They’re both low cost carriers, and their route networks largely overlap. So long term it doesn’t seem to me like it makes sense to maintain both brands.
If I had to guess, I’d say they’re probably saying that they’ll maintain them as separate brands for now to make it seem like they’re preserving competition as much as possible, as they seek regulatory approval.
Either that, or long term the plan is to position Air Transat and Air Canada Rouge separately and have them serve different markets (one could be focused on long haul flights while the other could be focused on short haul flights, or something).
I just don’t believe that long term it will more or less be “business as usual” for both Air Canada Rouge and Air Transat.
This deal is bad news for consumers
While airlines will always try to spin this differently, this is no doubt bad news for consumers. Air Transat was a strong competitor in Canada, and this deal eliminates them as a competitor. Even if they maintain Air Transat as a separate brand, they won’t have to compete in the same way as before.
Add in the fact that WestJet is being acquired, and I’d say this is all pretty bad news for Canadian travelers.
What do you make of Air Canada’s intention to keep Air Transat as a separate brand?
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