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Air Canada Intends To Acquire Air Transat



This is turning into quite a week for Canadian aviation. At the beginning of the week it was announced that WestJet is being acquired by a private equity firm in a $ 5 billion deal. Air Canada intends to acquire Air Transat

It has been announced today that Air Canada has entered into an exclusive agreement with Air Transat to purchase all issued and outstanding shares .

The proposed transaction is valued at approximately $ 520 million, or $ 13 per share.

Air Canada CEO, Calin Rovinescu, had the following to say regarding 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 travelers, 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 201

2 to the benefit of the Montreal and Quebec communities, and from which we carried 10 million customers in 2018 alone. "[19659007] This is not a done deal yet, so we can expect further announcements only after the definitive agreements have been signed.

My take on Air Canada taking over Air Transat

Most of you are probably familiar with Air Canada, though Air Transat is an airline that not everyone is familiar with. The Montreal-based airline has a fleet of about 40 planes, and they have quite a varied fleet, including A310s (!!!), A330s, A321s, and 737s, and they have A321LRs on order to refresh their fleet in the long run (replacing the A310s).

Air Transat A321LR

Air Transat primarily operates leisure routes, a majority of which are seasonal. They operate to quite a few transatlantic markets, and also to the Caribbean, Mexico, and flights within Canada.

What makes this interesting is that Air Canada has their own low cost carrier, Rouge, which operates to some of the same destinations .

It would be interesting to see if Air Canada plans to fold Air Transat into Rouge and eliminate a competitor in the process, or if they'd keep the branding separate.

My guess would be that Air Transat would be part of Rouge, though maybe in the process some of the planes would go to Air Canada's mainline fleet, just so the airline can keep some consistency.

Based on Air Transat's current fleet:

  • While Rouge currently uses 767s for long haul flights, I could see them using Air Transat's A330s for long haul flights as well
  • Air Transat's A310s will likely be retired soon, and replaced with A321LRs
  • Air Transat has a small fleet of 737s; Air Canada only has 737 MAXs, so I wonder if Rouge would actually start a small subfleet of 737s, or if they'd just retire them
  • I almost wonder if Air Transat's A321LR orders might just go to Air Canada mainline, since it does not seem like that necessarily fits into Rouge's business model, and I could see merit to A321LRs in Air Canada's fleet

Bottom line

Air Canada acquiring Air Transat seems like a good fit, as Air Transat could join the Rouge fleet. With such a deal, Air Canada would be able to eliminate a competitor.

While Air Canada talks about the benefits of such a deal, it almost certainly would not be beneficial for consumers. Air Canada's CEO says that consumers would "benefit from the merged company's enhanced ability to participate as a leader in the highly competitive leisure travel market globally."

The much bigger reality for consumers is that Canadian aviation is not that competitive, and we'd see an airline eliminated. That leads to higher airfare …

What do you make of Air Canada's plans to take over Air Transat? Do you think they'd just fold the airline into Rouge, or?


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