Air Canada Intends To Acquire Air Transat

Filed Under: Air Canada, Other Airlines

This is turning into quite a week for Canadian aviation. At the beginning of the week it was announced that WestJet is being acquired by a private equity firm in a $5 billion deal. Now there’s further airline activity, this time in the form of consolidation among Canadian airlines.

Air Canada intends to acquire Air Transat

It has been announced today that Air Canada has entered into an exclusive agreement with Air Transat to purchase all issued and outstanding shares.

The proposed transaction is valued at approximately $520 million, or $13 per share.

Air Canada CEO, Calin Rovinescu, had the following to say regarding this:

“A combination with Transat represents a great opportunity for stakeholders of both companies. This includes the shareholders of both Transat and Air Canada, employees of both companies, who will benefit from increased job security and growth prospects, and Canadian travellers, who will benefit from the merged company’s enhanced ability to participate as a leader in the highly competitive leisure travel market globally. The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel. It will also allow us to further grow our hub at Montréal-Trudeau Airport, where we have added 35 new routes since 2012 to the benefit of the Montreal and Quebec communities, and from which we carried 10 million customers in 2018 alone.”

This isn’t a done deal yet, so we can expect further announcements only after the definitive agreements have been signed.

My take on Air Canada taking over Air Transat

Most of you are probably familiar with Air Canada, though Air Transat is an airline that not everyone is familiar with. The Montreal-based airline has a fleet of about 40 planes, and they have quite a varied fleet, including A310s(!!!), A330s, A321s, and 737s, and they have A321LRs on order to refresh their fleet in the long run (replacing the A310s).

Air Transat A321LR

Air Transat primarily operates leisure routes, a majority of which are seasonal. They operate to quite a few transatlantic markets, and also to the Caribbean, Mexico, and flights within Canada.

What makes this interesting is that Air Canada has their own low cost carrier, Rouge, which operates to some of the same destinations.

It would be interesting to see if Air Canada plans to fold Air Transat into Rouge and eliminate a competitor in the process, or if they’d keep the branding separate.

My guess would be that Air Transat would become part of Rouge, though maybe in the process some of the planes would go to Air Canada’s mainline fleet, just so the airline can keep some consistency.

Based on Air Transat’s current fleet:

  • While Rouge currently uses 767s for long haul flights, I could see them using Air Transat’s A330s for long haul flights as well
  • Air Transat’s A310s will likely be retired soon, and replaced with A321LRs
  • Air Transat has a small fleet of 737s; Air Canada only has 737 MAXs, so I wonder if Rouge would actually start a small subfleet of 737s, or if they’d just retire them
  • I almost wonder if Air Transat’s A321LR orders might just go to Air Canada mainline, since it doesn’t seem like that necessarily fits into Rouge’s business model, and I could see merit to A321LRs in Air Canada’s fleet

Bottom line

Air Canada acquiring Air Transat seems like a good fit, as Air Transat could join the Rouge fleet. With such a deal, Air Canada would be able to eliminate a competitor.

While Air Canada talks about the benefits of such a deal, it almost certainly wouldn’t be beneficial for consumers. Air Canada’s CEO says that consumers would “benefit from the merged company’s enhanced ability to participate as a leader in the highly competitive leisure travel market globally.”

The much bigger reality for consumers is that Canadian aviation isn’t that competitive, and we’d see an airline eliminated. That leads to higher airfare…

What do you make of Air Canada’s plans to take over Air Transat? Do you think they’d just fold the airline into Rouge, or?

Comments

  1. I´m not sure US aviation market is a lot more competitive in most places. Few exceptions granted.

  2. That’s terrible news. An excellent airline with good fares will merge with AC, who has ridiculous prices. Don’t see how the Canadian gov’t will approve this.

  3. Ben I’m starving for a trip report. Help!!!

    Ps. I know it takes a long time, take it

  4. Very exciting day. This week has been fun to watch for the shareholders of Canadian airlines. Myself included! 🙂

  5. Make no mistake, this is absolutely terrible for customers.

    Though it’ll be interesting to see if they paint the A310s into the Air Canada or Rouge livery, or just leave them as they are until they’re retired. Imagine an A310 in the current AC livery.

  6. “The much bigger reality for consumers is that Canadian aviation isn’t that competitive, and we’d see an airline eliminated. That leads to higher airfare…”

    This really is the bottom line for the consumer. The Canadian aviation market is notoriously uncompetitive and high-cost. Air Transat targeted charter holidaymaker routes, but at 40 aircraft was more than just a niche player. This will further consolidate Air Canada’s dominance in Eastern Canada and particularly bad news for the airfare paying public in Montreal.

  7. I just hope that Porter can hold on to their independence. Living in Chicago, their flight from MDW to Billy Bishop is a great, affordable option to get to places throughout Ontario, Quebec, or the Maritimes. With the potential consolidation in the Canadian market, I sadly think their days are limited.

  8. This is horrible news for Canadians. It’s the last competition/decent fare option to fly Vancouver to Europe, among others. We need some better anti-monopoly legislation.

  9. Canada becomes more of a glorified oligarchy by the minute. Perhaps worse, because of it’s failure to recognize it.

  10. The headline and content is misleading. They have agreed to exclusive discussions, but there has been not agreement to purchase as of yet.

  11. AC probably feels threatened because WestJet is expanding its Transatlantic presence. Maybe David Neeleman will be inspired to help fund a Canadian startup airline.

  12. Not good at all. We drive 4 hours to YUL to fly Air Transat. Far cheaper than any US carrier to Europe.

    You avoid the hassle of outbound connections in ATL, ORD, PHL, JFK and ending up with a train ride or mega-hub connections in Europe because Transat flies into so many great locations. Of course YUL is not a great airport.

    Less airlines = higher fares, worse service, crapification. Been there, done that.

  13. May be good for Air Canada but I can’t see how this is good for the public. It’s also anti-competitive.

    Would Air Canada be able to commit that routes would not be axed and fares not increased more than X% over X years were the deal to go through?

  14. Oh no this means Transat is getting Rouged. Rouge is by far the worst Canadian flying experience.

  15. When I lived in Seattle, there was one summer a few years ago when oil was really highly priced, and Air Transat had flights from Vancouver to London and Frankfurt for hundreds of dollars cheaper than anything out of Seattle or other airlines out of Vancouver. I didn’t particular care for the airline while flying them, but they provide useful competition to other carriers.

  16. Very very bad news, especially for people living in and around Montréal. The almost monopole there of Air Canada will be complete.
    After humble beginnings with a few L-1011, Air Transat improved a lot over the years. Our choice when going south or a good alternative to AC premium economy with Club Transat when going to Europe. Rouge is clueless. Sunwing not much better.
    More people will be travelling to Plattsburgh to fly from there.

  17. We’ll see if the competition bureau actually approves this. As others have said, this limits choice further in an already limited market.

  18. I much prefer Transat Club Class to Rouge Business or AC premium economy. Would be said if they go as they have a Quebec French flair and better food than AC, who now seem a more faceless and characterless just another Anglo American airline.

  19. Willem

    Many are actually quite long haul, European holiday destinations such as Spain and Croatia. I much prefer the stocky twin aisle a310 to a single aisle a321 sausage.

  20. @lucky Air Transat received it’s 1st A321LR a few days ago (1st delivered in NA) and is already bookable on YUL-BOD. Also, Transat is on a transition to an all-Airbus fleet. Most of the 737 are exchanged for a season with European leisure carriers like TUI but the future deal is with Thomson I think for A320/A321/A330.

    @Willem, you’ll find many A310 routes with Transat such as YQB-CDG, YQB-CUN, YUL-BCN.

    Makes sense for AC. There is an alignment with Rouge’s narrowbody fleet that is all-Airbus too. AC said they want more A330 based in YUL. I see Transat’s A330 joining YUL based AC fleet, that allows AC to retire the remaining 767 and transfer them to Rouge and at one point, the A321LR will slowly replace Rouge’s 767. Alternatively, the deal could be on the other sense, where Transat customer service, call center, tour operator, Airbus maintenance, ground handling, etc. will work for Rouge and the ties between AC and Rouge will be cut.

    Definitely not good news for the flying (paying public).

  21. You exclamation mark they fly A310s – not so long ago they had some of the world’s oldest Lockheed Tristars, along with Delta.

    Canadian friends, especially an expat Brit, speak highly of Transat, not least because of the low prices for trips home. Anytime a competitor buys a competitor out, competition usually diminishes, regardless of what the press releases say. Are things as competitive in the US as they once were post deregulation with Pan Am, Continental, US Air, TWA, etc, etc, all broke or swallowed up and household name brands gone for ever?

    But this is a difficult business in which to stay in the black, as our recent British losses of Monarch, etc, and today’s horrendous Thomas Cook profit announcement attest, so maybe this move will keep Transat in the air. We’ll see.

  22. This is not good for us at all. As noted in other posts, there is so little competition in this country. AC will strengthen their monopoly. That’s never good.

  23. this transaction is just bullshit, no one remember the Canadian airline transaction in 2001 to air canada, air canada took Canadian airline (CP) out of the market in few year why!!! CP was getting to big, now it’s TS turn the are getting bigger and bigger every year and they make money compare to AC who loose money and almost went bankrupt and the nice Canadian government give AC money and they decided to paint all the aircraft with a new logo (this will change something ) but they keep all the same staff controlling air canada, (WOW)
    at this time TS was starting to grow and doing well until sept 11 2001 and they pick very quick, TS knew what to do to solve this problem.

    so now you know what will happen with TS the will put it out in less than 5 years and get most of the TS employees out identical what happen to CP this is very nice from are Canadian government close down business doing well by other company with a lot of money from the government

  24. This is dismaying news. I’ve flown both Transat and Rouge and they’re simply not in the same league. Rouge has been scruffy, cramped, with indifferent service. Transat has been clean, comfortable and attentive. Furthermore, Transat consistently costs less.

Leave a Reply

Your email address will not be published. Required fields are marked *