Competition Bureau Concerned About Air Canada/Transat Deal

Filed Under: Air Canada

Most government functions have either screeched to a halt or been re-directed to address pandemic-related concerns, but the Canadian Competition Bureau is still ticking along. Today it released its findings in a review of Air Canada’s proposed acquisition of Transat.

The Bureau has concluded that the deal will likely result in a substantial lessening or prevention of competition in the sale of air travel and vacation packages to Canadians.

Although the full report is in the hands of the federal Minister of Transportation, whose department has until May 2 to complete a public interest assessment for the Minister and federal cabinet to consider, the news release set out some of the primary issues that the Competition Bureau identified with the deal.

Air Canada and Transat are 2 of the 4 largest airlines in Canada, and both offer integrated vacation operators that sell vacation packages. The airlines have 49 overlapping routes between Canada and Europe, with an addition 34 overlapping routes between Canada and sun vacation destinations in Florida, Mexico, Central America, and the Caribbean. On 22 of these routes, Air Canada and Transat are the only Canadian airlines offering non-stop service.

The elimination of competition between the airlines, in the estimation of the Competition Bureau, is likely to lead to increased prices, fewer choices, and decreases in service across the overlapping routes — all things Ben mentioned when news of the potential deal first became public.

The Bureau notes that its analysis is based on data collected in advance of the pandemic, so it’s difficult to say whether it will hold up in our new reality. Depending on how the next few weeks/months go, Air Canada may not be terribly upset if the government ultimately blocks the deal.

In the interim, Canadians can take a little comfort in the fact that at least some government bodies (I’m looking at you, CTA) appear to have an interest in protecting them from predatory airlines.

Comments
  1. The competition bureau has no sense of the reality of business and is full of graduates who have never held a job in the private sector or run a business. TransAt has been losing money. The only other bit was half AC was offering. The other bit only wants the hotels b3cause the airline operates at a loss. The is no option but to shut down, even before the Covid-19 shut downs. There are no investors wanting to lose money buying an airline in Canada, let alone now, the rest of the world…particularly now when the pickings of bankrupt airlines will be much better. And we’ve just seen one new overseas discount carrier go under and Norwegian struggle to stay afloat, across the Atlantic other competitors to TransAt hardly mentioned along with the legacy carriers it also competes with: LH, BA, IB, TP, LX, AF…

    Canada’s market size is 1/10the size of the US but has AC, WS and TransAt domestically and SunWing to southern vacation spots, plus several new discounters. That’s almost as many airlines as operate in the US.

    This is Ottawa’s looney bin agency that lives in a Disneyworld of business. One hopes the CTC rejects this absurd piece of analysis and serves no purpose in the real world.

  2. @DavidB
    Competition Bureau should approve the deal under the condition, that some of the new monopoly routes will be transferred to WestJet or another competitor.

    But generally speaking, the world needs free markets cornered by powerful government bodies who prevent monopolies and companies from growing to big. Just have a look at how bad Facebook got by buying Instagram & WhatsApp. Both sales should have been prevented.

  3. Firstly, as a civil servant myself, I‘m not surprised that colleagues at the Competition Bureau keep working – I suppose from their homeoffices. We all continue working!

    As regards the matter, I‘m equally not surprised. AirTransat has developed from a charter airline to a leisure airline. But Air Canada is also serving the leisure market, so there is definitely competition on some routes.

  4. I agree with the Facebook/Instagram takeover. That’s basically a monopoly on social media platforms. But that’s also a function of weak laws and lack of enforcement by the current administration. As I pointed out, TransAt was on the verge of no-return bankruptcy, unable to reorganize and emerge as the three major US carriers and AC have done. This was a rescue to keep capacity high, not reduce it. And you’re correct, someone else will get the route authorities if there’s actually a viable demand…which is questionable for the coming few years. And as I also noted, there’s at least one foreign competitor flying every one of these routes.

    (Having worked in Ottawa in the regulatory sector, I know the mentality of too many staff who have no familiarity with the industry they sit over…which doesn’t mean I’ve been industry captured, just that I know the way several sectors actual work because I’ve also been at that end of things as an employee or consultant…more often than not, representing not the industry but the users or public interests. With this agency I have no respect because of its continuing naiveté .)

  5. “The Bureau has concluded that the deal will likely result in a substantial lessening or prevention of competition in the sale of air travel and vacation packages to Canadians.”… Well, duh!

    I really feel sorry though for our Canadian friends, who have to make do with one predatory, blood-sucking airline (AC) nannied by the government and then a few other ones that are too small and structurally restricted from building up critical mass to be viable competitors.

    The solution, however, as someone suggested above, isn’t to allow AC to take over TS to “rescue” it. All Air Canada would do is absorb Air Transat and gradually phase it out. Domestic fares in Canada are astronomical; there is no way an airline with any basic scale couldn’t make money there. I call hogwash on the notion that Air Transat is doomed anyway. But in any event, just giving up and eliminating competition regulations is not the answer. And it most certainly (@DavidB) isn’t “naïveté”…. Good grief…

  6. So you think competition bureau that having Transat gone will give more choice to Canadians? As an Air Transat management fellow we will not survive in this post covid-19 era, let alone normal times

  7. There is no meaningful competition in Western Canada even with Transat. I fly to PVR from YLW in the winter which is served by WS, AC, and Sunwing as Canadian couriers and also by AS via Seattle.

    AS through SEA is a pain because of passing through American immigration. And AS has also been cutting massively their flights to YLW as well even though most flights are full in the winter. An overnight is also required at least one way if not both because of flight reductions (2019).

    However, after all is said and done, the AS flights are less than HALF THE COST of any of the Canadian flights. There must be huge collusion here as you can pay $1300 each return for AC or you can pay $1300 for TWO on AS. If you are doing a mattress run the cheap hotels at SEATAC are fine.

    So I see no reason not to let this go ahead.

    A caveat – Airfares in Eastern Canada are much more competitive with much cheaper fares to warm places out of YYZ or YUL. But since they always get the cheap stuff it really doesn’t concern me if their fares go up a little.

  8. @Kate…

    Thanks for this. As a Canadian ex-pat, I’m not too surprised. I’m sure that the Trudeau administration will continue to fleece Canadians with all the crazy taxes that made me leave.

    But, they aren’t the only ones. Right after U.S. entry restrictions went into place, the U.S. Department of Transportation quietly denied Hawaiian Airlines’ request for antitrust immunity for a JV with Japan Airlines. Talk about kicking someone while they’re already falling to the floor.

  9. Air Canada has long been a merciless and bloodsucking airline boasting putrid service (try Rouge, folks). I hope to heck that the Competition Bureau stands firm and blocks this deal but knowing the rightwing true believers in the Trudeau, I am afraid the deal will be approved after some huffing and puffing. More ill gotten gains for CEO Ravinescu, I guess.

  10. I hope the deal isn’t approved. I can’t imagine AC is so hot on it anymore anyways the way the travel market has gone

    But the primary reason airfares are high in Canada is not the airlines gouging but astronomical taxes.

    Sky high landing fees, and gate charges, neverending AIFs, provincial fuel excise taxes, security charges, navigation fees, and then charge GST on it all… no wonder it’s so out of whack.

    Then in the case of AC you have to serve a entire, large, sparcely populated nation in both languages, and keep everything in Montreal, it’s no wonder it isn’t as efficient as it could be.

  11. Obviously most people here have no clue about the economics of operating a business, let alone in the airline sector. Short memories too because neither AC nor CP (in the pre-WS years) ever made a profit, and continually ran loses because of the limited size of the Canadian market and the high operating costs (wages, aircraft, fuel and infrastructure). It’s only in the past several years, and after bankruptcies and rationalization, that the industry became viable with a duopoly and several small players like TransAt, Porter et al. As noted by a former TransAt staffer, it will go under without the merger, at the loss of a few thousand jobs.

    Those who call for more “competition” again fail to recognize that even in the American market that is 10x the size of Canada, there are only three legacy and several smaller players.

    Those who complain about high fares must realize that it’s always been more expensive to run any business in Canada due to the small market, distances to be covered, sparse 2ndary and tertiary population centres, higher cost of infrastructure and (yes) taxes. Taxes which cover the cost of operating the other services we enjoy here like single payer health care, better primary/secondary education, and other things we take for granted.

    For those of you who want this deal turned down, go buy TransAt stock and put your money where your naive talk is. (And you Americans must realize Canada operates by very different norms and practices, and not always by the perverted “free market”.)

  12. All Canadians who travel should be very concerned, travelling with Air Canada has never been a pleasant experience and if this merger goes through – hang on to your wallet and lower your expectations for good service.

    Would really like to hear how they helped Canadians get home as the Coronavirus spread in different countries and at what cost.

  13. AC probably greased same the bureaucracy they greased to be all for it before the C-thing came along, now that they want out of the deal….

  14. This deal is unpopular with Quebecers that have the most to loose. It would be unwise politics for the minority liberal Trudeau government to go ahead with it. The concerns of the Competition bureau is a hint of what this minority government thinks. In politics what you promised and gave is quickly forgotten, but what you take away is remembered with vengeance. With COVID-19 and the fallout of the airline travel business it will also be a relief for Air Canada. I would be surprised if the transport minister Marc Garneau ratified this politicly unpopular merger.

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