An Air Canada Boeing 737 Max 8 lands at Toronto Pearson International Airport on March 13, 2019. (Photo: Chris Helgren/Reuters)

Ottawa approves Air Canada’s $190-M Transat purchase

An Air Canada Boeing 737 Max 8 lands at Toronto Pearson International Airport on March 13, 2019. (Photo: Chris Helgren/Reuters)

Canada’s travel landscape could soon change after the Government approved Air Canada’s $190-million purchase of Transat AT, after COVID-19 diminished the deal’s value.

Transport Minister Omar Alghabra announced the approval Thursday evening, just days before the deal’s February 15 deadline, saying the Government concluded the purchase is in the public interest.

Canada’s Transport Minister Omar Alghabra (Photo: The Canadian Jewish news)

He said it considered a range of factors, including level of service, wider social and economic implications, the financial health of the air transportation sector, and competition.

“Given the devastating impact of the COVID-19 pandemic on the air industry, the proposed purchase of Transat AT by Air Canada will bring greater stability to Canada’s air transport market,” he said in a statement.

The pandemic was also cited as a factor when Montreal-based Transat noted it may not be able to continue on its own because of the significant financial challenges.

A win-win

The Government said the acquisition is the best outcome for workers, Canadians travellers and other industries that rely on air transport.

Parliament Hill in the city of Ottawa, Ontario, is the seat of Canada’s federal government. (Photo: CTV News)

Transat shareholders in December approved the revised deal, equal to CN$5 per share and a significant decrease from an earlier CN$720 million or CN$18 per share.

Air Canada won support from Transat’s largest shareholder, Letko Brosseau, after sweetening the deal in August 2019 from its initial offer of CN$520 million or CN$13 per share a few months earlier.

Preserving Transat AT’s legacy

Alghabra said approval is subject to “strict conditions which will support future international competition, connectivity and protect jobs.

“We are confident these measures will be beneficial to travellers and the industry as a whole,” he added.

Air Canada must ensure that Transat AT provides communications and public services in both official languages.

An Air Transat aircraft (Photo: Travel Week)

The country’s largest airline must also preserve the Transat head office and brand in Quebec, maintain 1,500 employees for Transat’s leisure travel business, conduct aircraft maintenance in Canada while prioritising contracts in Quebec, have a price monitoring mechanism, and launch new destinations within the first five years.

It wasn’t immediately clear when the deal will close. It still requires approval by European regulators.

Another option

Transat reconfirmed its unanimous support for the sale to Air Canada in January after receiving an unsolicited proposal on December 22.

Telecom owner Pierre Karl Peladeau’s investment company Gestion MTRHP Inc had made an offer valued at CN$5 per share if Ottawa and regulatory authorities rejected Air Canada’s takeover.

Transat was co-founded in 1986 by several Quebec businessmen, including current CEO Jean-Marc Eustache and Francois Legault, the province’s premier. Legault left in 1997.

Air Transat founder and chief executive Jean-Marc Eustache prepares to start the company’s annual meeting Thursday, March 10, 2016 in Montreal. Transat chief executive Jean-Marc Eustache stands to make up more than $17 million personally with the sale of the tour operator he co-founded to Air Canada. (Photo: THE CANADIAN PRESS/Ryan Remiorz)

The travel industry has changed wildly since those early days and even in the 19 months since the initial deal was first announced.

Transat, a tour operator that operates Air Transat, has completely has completely paused operations until April 30 and furloughed about 450 employees.

Air Canada, Rouge, WestJet, Swoop and Sunwing had agreed to suspend service to Mexico and the Caribbean at the request of Prime Minister Justin Trudeau to help fight the pandemic’s exposure.

The moves resulted in the temporary layoffs of thousands of airline workers.

Air Canada announced on Tuesday that it will temporarily lay off 1,500 unionized employees and an unspecified number of management staff as it cuts 17 more routes to the U.S. and international destinations.

Aviation experts have warned that the suspension of flights could have widespread repercussions for Canada’s beleaguered airline sector and force permanent closures for airports and travel agencies.