Competition Bureau Concerned About Air Canada/Transat Deal

By: Kate

Published: March 27, 2020

16 comments

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.

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Arthur Albert Guest

April 22, 2020, 2:43 pm

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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Joe Blow Guest

March 29, 2020, 11:07 pm

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....

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MichèleS Guest

March 29, 2020, 5:29 pm

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.

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DavidB Guest

March 29, 2020, 8:38 am

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".)

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Enzo Guest

March 28, 2020, 11:29 pm

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.

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