Air Canada Acquiring Air Transat, But…

Filed Under: Air Canada, Other Airlines

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?

Comments
  1. Prices will definitely rise on the Transat routes since Air Canada is their main competitor (along with Sunwing). This is an opportunity for Westjet to enter the Quebec market if their new corporate overlords are willing to put the work and time in to enter that market. However Westjet is currently hamstrung by the ongoing 737 situation.

  2. I could see Ait Transat flying being consolidated to Montreal, taking over Air Canada Rouge routes over there, while the same swap would happen in Toronto where Rouge takes over Transat flying. Then at some later point Air Canada would have to decide how it will merge the two.

  3. Great opportunity for WestJet to excersise those 10 787 options and start competing long-haul.

  4. WestJet isn’t being acquired by a different airline though, so that’s a completely different thing. I see what you mean when you say the Air Transat purchase is bad news for consumers, but I don’t get the logic in the WestJet comment.

  5. When Air Canada launched Rouge there was a cap in place (with fixed annual growth allowances) as to capacity to placate the union as the main driver behind Rouge was to create a separate business unit to pay new hires less than mainline starting pay. I think this acquisition will be a door to a workaround to grow lower CASM routes unrestricted by the Rouge cap. I would imagine a large swath of Rouge leisure routes transferred to the Transat banner and then interline to dovetail mainline with Air Transat for network connectivity.

  6. It would be great if this meant the end of awful, awful, Air Canada Rouge. They’ve been replacing regular AC flights with Rouge for a while now, hopefully this stops. I’ve never encountered an airline like Rouge where not one person I’ve met in person likes them. Not even a little bit. People even have a name for when you have no option other than Rouge or being bumped to Rouge. It’s called getting “Rouged”. Sorry – venting.

  7. I find it so odd that Canadian regulators work so hard to protect Canadian interests from foreign competition entering the market, yet allow domestic competition to perpetually consume itself.

  8. I have a nasty feeling that the result of this merger will be the lowest combined offering of Transat and Rouge will become the norm, there’s no need to compete with each other so why would they.

    Transat may also be scaled back where it competes with mainline which will also lead to higher fares.

    Canada must already have one of the most protected aviation markets in the world and this is only going to make it a whole lot worse.

    Let’s hope measures are in place to stop them squeezing WestJet.

  9. I have to suspect that a lot of the guys who denigrate Air Canada and Rouge are employees of a rival airline. I fly a lot on A/C mainline and Rouge and I’ve never had or heard a complaint from other passengers. Also A/ C has won awards for service in North America and international flights.

  10. How does Air Canada always win those SkyTrax awards. Their Business Class is pretty good, but economy and Rouge are horrible

  11. Having lived 4 decades in Canada before pulling up stakes and moving to the NYC area, I’ve always hated AC with the white hot passion of a million suns. While no longer officially the flag carrier, they still behaved as if they were when I lived there, and regulators bent over backwards to ensure they survive just nicely (and competitors face an uphill battle). Seems nothing has changed. As a coach-only passenger on a limited budget, I always flew CP Air (later Canadian Airlines International) rather than Err Canada. AC’s reservation system is horrid, and I’ll never ever forgive them for the disappearance of 61,000 Aeroplan miles after I’d been saving for 10 years for my first-ever trip overseas when I was in my 30s. It would be another 12 years before I could do that.

    I have a good friend who flies at least a half million miles a year with AC, and even with his status, they still screw his reservations up when he’s flying coach (on someone else’s dime). He flies Westjet whenever possible but sometimes that’s not an option. When I moved here, I discovered Continental and Delta. From the point of view of an ex-Canadian resident, I saw CO and DL as breaths of fresh air. This was long before I discovered credit cards and bonuses, etc.

  12. – Bill @2:21pm: HAHAHAHHAHA. The only two Canadian airlines worth flying are Porter and WestJet (for now, until the merger is completed).

    Air Canada is the Toronto Maple Leafs of flying – not great, overpriced, haven’t been a winner since 1964, but tries to keep charging premium prices.

  13. This is a disaster for Canadian consumers. The spineless Justin Trudeau will not stand up for Canadians. Not here, not against the Orange ConMan, not anywhere. Nice guy, but how much is that worth? What a contrast with his dad, Pierre Elliott. Are the Liberals being bribed to ensure approval?

  14. Keep your friends close, keep your enemies closer. AC could maintain AirTransat as a separate brand as long as it wishes to without any real harm, all the revenues end going to them anyway

  15. @M, I had a number of jump seat flights on Canadian 737s between BOS and YYZ in the 90s. Talked to the crew and invariably I could get a ride up front for at least part of the trip. Best was gate-to-gate in ’98. Had a similar ride from JFK to YYX on a Speedbird 757, too. But yeah, AC is Canada’s golden boy of the air, just as Bombardier will be the perennial winner in the railcar division, regardless of how bad their products are.

    Canada loves protectionism when they’re doing it for their annointed companies, but it’s a dirty word for anybody else.

    They way I could see Air Transat being kept alive as a brand would be exclusively for vacation charters via package tours, rather than competing against mainline scheduled AC flights. In theory, AC mainline should be their full-service regular fare line of business, Rogue–er–Rouge their ULCC arm(pit of hell), and AT for the charter ops.

  16. Not sure that I agree this is bad news for consumers. Consolidation was needed and has been happening for a few years now. As some examples: Continental and United, Northwest and Delta, American and USAir. All of these companies are now stronger in a “globally” competitive market. Air Transat has always been considered to be low lying fruit on the North Atlantic, ripe for the picking. Happy to see it won’t be broken up for cash and assets. The public benefits from stronger airlines rather than being let down by fly by night operators on shoe string budgets. Competition is now global and Canada needs to have a strong player. Will the brand remain? I doubt it. Companies re brand themselves every few years nowadays. Seems to be a thing.

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