Air Transat and an Air Canada aircraft are seen on the tarmac at Montreal-Trudeau International Airport in Montreal, on Wednesday, April 8, 2020. THE CANADIAN PRESS/Paul Chiasson

Air Canada, Transat call off $190 million deal after European approval denied

Air Canada, Transat call off $190 million deal after European approval denied

Transat AT is considering its options after a deal that would have seen Canada’s largest airline acquire its smaller travel rival officially died on Friday with word that Air Canada had come to a mutual agreement with Transat to terminate their planned merger.

Both companies released statements announcing the termination of the $190 million deal initiated more than two years ago and amended due to the weight of the COVID-19 pandemic on the transportation sector.

The end of the deal comes after the Air Canada and the tour company that operates Air Transat were advised by the European Commission that it would not approve the transaction.

Air Canada said it offered an enhanced package of remedies beyond what has traditionally been accepted by the commission in previous airline mergers.

“Following recent discussions with the EC, it has become evident, however, that the EC will not approve the acquisition based on the currently offered remedy package,” the company said in a statement.

“After careful consideration, Air Canada has concluded that providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada’s ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic.”

The European review was the final hurdle in the regulatory process after the Canadian government approved the transaction on Feb. 12 while imposing conditions.

Air Canada will pay Transat a $12.5-million termination fee, while Transat won’t be required to pay Air Canada anything if it enters into another deal in the future.

Montreal-based Transat said it is disappointed by the failure to complete the transaction but is confident of the company’s future.

“This transaction … was complicated by the pandemic, and, ultimately, Air Canada reached its limit in terms of concessions it was willing to provide the European Commission to satisfy their competition law concerns,” stated Transat CEO Jean-Marc Eustache.

He said the deal would have resulted in benefits to shareholders, customers and other stakeholders.

No longer constrained by terms of the agreement, Eustache said the company he co-founded is free to take necessary steps to ensure its future, including obtaining at least $500 million in long-term financing.

The company will continue to preserve cash and has put in place a $250-million short-term subordinated credit facility, which matures on June 30.

Transat is in negotiations for long-term funding, including under the Large Employer Emergency Financing Facility, and through support from the Canadian government for businesses in the travel and tourism sector.

“Discussions on both topics are at an advanced stage and Transat’s management is confident that a satisfactory financing will be secured in the coming weeks,” it said.

Federal Transport Minister Omar Alghabra says he’s spoken with Transat and is examining next steps.

“The most important thing for our government is to protect jobs in Quebec and across Canada, as well as preserving the long-term viability of Transat A.T.,” he tweeted.

“Our government will continue to support Canadian workers and a strong competitive air transport sector.”

The government has come under fire by the country’s travel sector for failing to provide direct financial relief to airlines during a time when their operations have shrunk dramatically and losses have mounted.

A spokesman for Quebec Economy Minister Pierre Fitzgibbon also offered the government’s support.

“We will not leave Transat without support, we are continuing to monitor development very closely,” he wrote in an email.

Transat’s operations have been grounded since a suspension of flights following the Canadian government’s request in January to stop travel to Mexico and the Caribbean because of the pandemic.

Air Canada is resuming idled operations in May and Transat expects to do so in mid-June with a pick-up in volume to Europe.

Transat is not expecting the air travel market to return to 2019 levels until 2024, chief operating officer Annick Guerard recently said in a conference call.

Transat is now free to hold discussions with potential buyers, including Pierre Karl Peladeau, whose investment company, Gestion MTRHP Inc., previously made a proposal to acquire all of the issued and outstanding shares of Transat for $5 a share.

Like many tourism-related companies, Transat has been severely impacted by lockdowns during the pandemic.

“However, the arrival of vaccines brings us a light at the end of the tunnel, and Transat is well-positioned to bounce back,” Eustache said.

As a smaller operator, Transat said it can be “nimble and quickly adapt to ever-shifting market conditions.”

In addition, pent-up demand for leisure travel should help as this part of the business is expected to recover sooner than business travel, he said.

“In close to 40 years of existence, we have traversed numerous crises and each time, we emerged stronger than before, demonstrating our resilience as an organization. We look forward to a safe and healthy future, as we hopefully put this pandemic behind us.”

This report by The Canadian Press was first published April 2, 2021.

Companies in this story: (TSX:AC, TSX:TRZ)

Ross Marowits, The Canadian Press

Air Canada

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Cowboy Kicks, originally scheduled for May 5, will now take place Sept. 18. (Contributed photo)
Westerner Park’s Cowboy Kicks fundraiser moved to Sept. 18

A major fundraiser for Westerner Park and the Canadian Pro Rodeo Sport… Continue reading

Red Deer Rebels forward Josh Tarzwell tries to tip a point shot past Lethbridge Hurricanes goalie Car Tetachuk in WHL action Friday night at the Centrium. (Photo by ROB WALLATOR/Red Deer Rebels)
Red Deer Rebels struggles continue, drop seventh straight to Hurricanes

Hurricanes score three power-play goals in 6-3 win

Downtown Red Deer patio restaurants have been busy this summer. Contributed photo
City of Red Deer expediting patio application process for restaurants

The City of Red Deer is allowing businesses to install patios prior… Continue reading

RDC Queens forward Camryn Wallan was named the 2020-21 RDC Outstanding Female Athlete of the Year. (Photo by BYRON HACKETT/Advocate Staff)
Wallan, Podgorenko named 2020-21 RDC Outstanding Athletes of the Year

Even with the cancellation of the 2020-21 Alberta Colleges Athletic Association, RDC… Continue reading

A new Angus Reid poll says that close to two-thirds of Albertans think premier Jason Kenney is doing a bad job handling the COVID-19 pandemic. (Photo by Chris Schwarz/Government of Alberta)
75% of Albertans disapprove of Kenney’s pandemic leadership: poll

Nearly 75 per cent of Albertans believe Premier Jason Kenney is doing… Continue reading

Red Deer-South MLA Jason Stephan is among those who have signed an open letter criticizing the government’s return to stricter health measures. (Advocate file photo).
Updated: Kenney tells UCP caucus COVID-19 dissent OK, breaking health rules means expulsion

15 MLAs released letter on Wednesday critical of new health restrictions

Here masking tape was applied to both sides of a joint to be caulked. Peeling the tape off as soon as the caulking is smeared with a finger leaves behind a neat edge. (Photo by Robert Maxwell)
Houseworks: Unheated spaces can cause tools to rust

Q: How well do woodworking tools survive in an unheated Canadian workshop?… Continue reading

University of Victoria rowing coach Barney Williams is seen in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, Friday, Nov. 29, 2019. The University of Victoria and the head coach of its women's rowing team have denied allegations of demeaning and aggressive treatment outlined in a lawsuit filed last summer by a former student and team member. THE CANADIAN PRESS/Chad Hipolito
UVic, women’s rowing coach deny former athlete’s allegation of verbal abuse

UVic, women’s rowing coach deny former athlete’s allegation of verbal abuse

Canada's Julia Grosso, right, and Wales' Natasha Harding battle for the ball during the women's international friendly soccer match at Leckwith Stadium, Wales, Friday, April 9, 2021. Canada blanked Wales 3-0 but lost captain Christine Sinclair to an injury in the fist half of a soccer friendly Friday. THE CANADIAN PRESS/AP-PA, Nick Potts
Canada blanks Wales in soccer friendly but has injury scare with Christine Sinclair

Canada blanks Wales in soccer friendly but has injury scare with Christine Sinclair

Canada's DTH Van Der Merwe, left, is tackled by Hong Kong's Toby Fenn, during the 2019 Japan Rugby Union World Cup qualifying match between Canada and Hong Kong, in Marseille, southern France, Friday, Nov. 23, 2018. THE CANADIAN PRESS/AP/Claude Paris
Canadian rugby star DTH van der Merwe enjoying life in Los Angeles

Canadian rugby star DTH van der Merwe enjoying life in Los Angeles

Team Canada skip Brendan Bottcher, right, makes a shot as second Brad Thiessen sweeps against Germany at the Men's World Curling Championships in Calgary, Alta., Friday, April 9, 2021.THE CANADIAN PRESS/Jeff McIntosh
Canada’s Bottcher heads into men’s world curling playoffs on a winning note

Canada’s Bottcher heads into men’s world curling playoffs on a winning note

Justin Rose, of England, hits out of a bunker on the seventh hole during the second round of the Masters golf tournament on Friday, April 9, 2021, in Augusta, Ga. (AP Photo/Gregory Bull)
Rose clings to 1-shot Masters lead as Spieth, Thomas lurk

Rose clings to 1-shot Masters lead as Spieth, Thomas lurk

People shop for essential items at Costco as pallets block off aisles and sections that have been deemed non-essential during the COVID-19 pandemic, in Mississauga, Ont., Thursday, April 8, 2021. Retailers in Ontario are adjusting to new lockdown restrictions with stores like grocers, discount and big box chains roping off non-essential items from underwear to calculators. THE CANADIAN PRESS/Nathan Denette
Ontario retailers adjust to new rules, non-essential goods off-limits to shoppers

Ontario retailers adjust to new rules, non-essential goods off-limits to shoppers

A worker smooths concrete at a construction site in Toronto on January 16, 2020. THE CANADIAN PRESS/Cole Burston
Economy adds 303,000 jobs in March, unemployment rate falls, Statistics Canada says

Economy adds 303,000 jobs in March, unemployment rate falls, Statistics Canada says

Most Read