Ottawa approves purchase of Air Transat by Air Canada
The Honourable Omar Alghabra – the new Minister of Transport – has just announced that the Government of Canada has approved the proposed purchase of Transat A.T. Inc. by Air Canada.
The COVID-19 pandemic was a key factor in the final decision. As Transat A.T. itself noted in December 2020, current uncertainty casts doubt on its ability to continue, as it faces significant financing challenges.Gouvernement du Canada
The Government of Canada considered a broad range of factors:
- level of service
- wider social and economic implications
- the financial health of the air transportation sector
Noting the effects of the pandemic on air service in general, and on Transat A.T.in particular, the Government of Canada has determined that the proposed acquisition offers the best probable outcomes for workers, for Canadians seeking service and choice in leisure travel to Europe, and for other Canadian industries that rely on air transport, particularly aerospace.Gouvernement du Canada
Terms and Conditions
The Government of Canada is imposing some conditions regarding this acquisition:
- Measures to facilitate and encourage other airlines to take up former Transat A.T. routes to Europe
- Preserving the Transat A.T. head office and brand in Quebec
- Employment commitment of 1,500 employees around the new entity’s leisure travel business
- Commitment to facilitate aircraft maintenance in Canada, prioritizing contracts in Quebec
- A price monitoring mechanism
- Launch and operation of new destinations within the first five year
Given the devastating impact of the COVID-19 pandemic on the air industry, the proposed purchase of Transat A.T. by Air Canada will bring greater stability to Canada’s air transport market. It will be accompanied by 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.L'honorable Omar Alghabra
A message about customer refunds
In its press release, the Government of Canada takes this opportunity to once again send a message to airlines, and particularly to Air Canada – the future owner of Air Transat – regarding the reimbursement of airline tickets related to the COVID-19 pandemic:
The Government of Canada is aware that some Transat A.T. customers are still waiting for refunds for flights cancelled due to COVID-19. Refunds are an integral part of the negotiations with airlines regarding any assistance plan, and the government will continue to take into account the needs of Transat A.T. customers.Gouvernement du Canada
We are in a chess game that has been dragging on for almost a year now and no one will come out a winner:
- Canadian airlines have not reimbursed their customers to avoid facing a liquidity crisis
- The Government of Canada is clearly not interested in providing financial support to the aerospace sector without an agreement on refunds.
An impression of a dog biting its tail!
All G7 countries have provided substantial support to their airlines, whether through loans or subsidies, enabling many airlines to refund their customers. Canada, at this time, has not decided to help the airlines.
What’s more, it adds some of the world’s strictest conditions – and devastating for the travel industry – especially with the upcoming hotel quarantine.
It is therefore understandable that the COVID-19 pandemic was a key factor in the decision making. Without it, Ottawa would have been more concerned about the significant reduction in competition in the country.
This paves the way for another possible primary bid that is whispering: Sunwing’s takeover by WestJet. And the possible formation of a duopoly that will certainly have a negative effect on airfares, coupled with the devastating consequences of COVID-19 on the sector for the next few years.
There is a slim glimmer of hope for transatlantic flights: Air Transat has a fleet of seven Airbus A321LRs perfectly suited to the resumption of activities between Canada and Europe. With only 199 seats instead of the 300+ seats on large aircraft (or even 450 seats on some Air Canada B777s), these aircraft are much more economical to operate.
For those who are interested in the subject, I invite you to read this article.
Discuss this topic in the Facebook group!