Hello again everyone, my name is Alex, and in what has been a very interesting week for
Canadian aviation, it was announced Thursday morning that Air Canada was in talks to purchase
Air Transat.
According to Air Canada’s press release, “the proposed transaction, valued at approximately
$520 million or $13.00 per share of Transat, will create a Montreal-based global travel
services company in leisure, tourism and travel distribution operating across Canada and internationally.”
Now for those of you who may not know, Air Transat is Canada’s third largest airline,
headquartered in Montreal, Quebec.
Transat is very much a vacation airline, flying to sun destinations in the winter from many Canadian
cities, and to a number of transatlantic destinations from their hubs in Montreal and Toronto,
during the summer.
At the end of April, Air Transat announced that that they were in preliminary discussions
with “more than one party” regarding their acquisition.
Today’s announcement puts a lot of speculation to rest, and while nothing is official
yet, Air Transat and Air Canada have agreed to 30 days of exclusive negotiations.
This acquisition is subject to, well, the negotiations, for one, but also regulatory,
court, and shareholder approvals.
On the announcement, Air Canada’s President and CEO, Calin Rovinescu, said this.
“A combination with Transat represents a great opportunity for stakeholders of both
companies.
This includes the shareholders of both Transat and Air Canada, employees of both companies,
who will benefit from increased job security and growth prospects, and Canadian travellers,
who will benefit from the merged company's enhanced ability to participate as a leader
in the highly competitive leisure travel market globally.
The acquisition presents a unique opportunity to compete with the very best in the world
when it comes to leisure travel.
It will also allow us to further grow our hub at Montréal-Trudeau Airport, where we
have added 35 new routes since 2012 to the benefit of the Montreal and Quebec communities,
and from which we carried 10 million customers in 2018 alone.”
Jean-Marc Eustache, Air Transat’s President and CEO, had this to say:
"This announcement is good news for Transat.
This is an opportunity to team up with a great company that knows and understands our industry
and has had undisputable success in the travel business.
This represents the best prospect for not only maintaining, but growing over the long
term the business and jobs that Transat has been developing in Quebec and elsewhere for
more than 30 years."
This announcement comes on the heels of WestJet’s $5 billion dollar sale to Onex, a Canadian
private equity firm, which led some, including myself, to think that *they* could be the
one to purchase Air Transat.
The two carriers have an impressive transatlantic network out of their eastern hubs in Montreal
and Toronto.
There are quite a few routes that the two already compete on, but those could be consolidated
into larger aircraft if the deal goes through.
The potential combined fleet of Air Transat and Air Canada would be a formidable one,
but there would still be a degree of commonality.
Both carriers operate Airbus A320 family aircraft, as well as Boeing 737s.
Transat flies the Next Generation series, while Air Canada flies the MAX.
For the widebodies, Air Transat still operates a few Airbus A310s, being the last passenger airline
in North America to do so.
These are to be replaced with Airbus A321neoLRs, the first of which has been delivered already.
Air Transat also operates over a dozen Airbus A330-200 and A330-300 aircraft.
Air Canada operates eight A330-300s with four on the way, and both fleets are fitted with
Rolls Royce engines.
Air Transat’s operations are highly seasonal, so they normally lease a few aircraft from
European carriers depending on the time of year.
They also lease out their own widebody aircraft to operators like Travel Service and Condor.
Will Air Canada continue this business of leasing aircraft?
Maybe not, seeing as there is a lot of overlap in their two networks already.
This combined with Air Canada’s much stronger domestic network, means they may not need
additional capacity.
It’ll be be very interesting to watch this unfold over the coming weeks.
For now, Air Transat’s operations are unaffected, and nothing is confirmed yet.
What are your thoughts on this announcement?
Let me know in the comments section below.
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