Does Air Canada want out of the Transat deal?

Shortly over a week after the European Commission announced that it was looking into Air Canada's deal to buy Transat A.T, a new report is claiming that Air Canada is now looking to exit the takeover altogether.

In a story first published by French-language daily Journal de Montreal on June 2nd, three unnamed sources close to “behind-the-scenes discussions” say that Air Canada is lobbying the Canadian government to block the deal.

Last August, Air Canada sweetened its offer to buy Transat for $18 per share, a move that brought its total offer to roughly $720 million (up from a previously announced bid of $520 million).

The fate of the transaction is subject to Transport Canada’s approval and the decision is still pending.

Whispers of Air Canada wanting out come as airlines grapple with the economic downturn of  COVID-19 while preserving whatever liquidity they have.

An "unnecessary" takeover?

The coronavirus crisis has made the Transat takeover unnecessary and "Air Canada has made it clear to the federal government," the Journal de Montreal story says, citing “an informed source” close to the negotiations.

A fair bit of lobbying on behalf of Air Canada has taken place since the beginning of the pandemic, records show.

According to the federal lobbyists register, Air Canada logged some 25 communications on several subjects with elected officials and public servants dating as far back to March 18th, as Journal de Montreal points out. 

Air Canada denies that these recent meetings had anything to do with the Transat deal.

"All of the meetings registered by Air Canada in the lobbyists' register with the ministers of the federal government relate only to the impact of COVID-19, and not to the acquisition of Transat," Air Canada’s director of communications Pascale Déry, told Journal de Montreal.

PAX reached out to Air Canada for clarification on its pending acquisition of Transat:

"Regarding the transaction, the regulatory approval process is still in progress and Air Canada has nothing new to share at this point," Déry stated. 

PAX also asked Transat if it had anything to say about the Journal de Montréal story, which was also reported by TVA, a French-language television network.

"No comments," stated Christophe Hennebelle, vice-president, Human Resources and Public Affairs, of Transat.

Since the start of the year, Transat's share has fallen sharply. The company will release its second quarter results on June 11th.

Meanwhile, European regulators are investigating if whether the Air Canada-Transat deal would hinder competition and result in higher ticket prices.

The European Commission is concerned that the proposed deal would hinder competition on 33 origin and destination city pairs between Europe and Canada.

The commission has stated it would give itself until September 30^th to decide on whether or not to green light the transaction.

With files from Serge Abel-Normandin.

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