Thursday,  June 20, 2019  1:34 pm

Transat acquisition: what it means for your clients


Transat acquisition: what it means for your clients
Marie-Eve Vallières

For Marie-Eve, who is from Montreal, travel holds no more secrets. Having lived in London and France, she has spent the past nine years quenching her thirst for adventure and discovery. Twenty-nine countries later, Marie-Eve continues to travel the world.

There have been many reactions across Canada, following the shocking announcement that Air Canada was buying Transat

READ MOREAir Canada enters exclusive agreement to purchase Transat A.T. Inc.

But it's important to remember that a deal has not yet been finalized.

On the one hand, only an intention to purchase has been formulated. With the agreement announced Thursday (May 16), Air Canada has 30 days to materialize its offer. Overbidding is not excluded, especially from WestJet which was acquired by Onex for $5 billion earlier last week. Canadian aviation has seen quite a bit of turbulence this week, to say the least! 

Investors from Quebec have also shown interest in purchasing Transat A.T. Inc.

In response to the announcement of negotiations between Transat and Air Canada, Federal Transport Minister Marc Garneau reacted: 

"This type of transaction depends on a number of conditions, such as court and shareholder approval, as well as obtaining certain regulatory approvals, including approval under the Canada Transportation Act, likely to be a noticeable transaction under the Competition Act. In this case, the Minister of Transport determines whether a public interest assessment is warranted. Any information submitted by the parties involved will be evaluated by Transport Canada."

And if it were to be accepted by Transat, the transaction will have to be approved by the Competition Bureau. Several experts say that Air Canada will have to be creative in its financial analysis to demonstrate, beyond any doubt, that consumers will benefit from this historic consolidation. 

If this scenario materializes, what kind of impact can you expect on your sales and customers? PAX has addressed the issue.

Prices: they will go up

A sad fact already, Canada ranks 97th out of 130 countries in terms of affordable airline ticket prices, according to a report by the World Economic Forum.

We live in one of the most expensive places to travel and it's safe to say that fares will only increase if the transaction materializes. 

A reduction in the supply, or at least a reduction of players, will inevitably have the effect of inflating the price of seats from Canada.

Currently, Transat and Air Canada alone account for almost two-thirds of transatlantic trips; European carriers, for example British Airways, Air France - KLM, Lufthansa and Corsair, remain empirically marginal. This proportion decreases to around 50 per cent in the South market, thanks to the presence of Sunwing and WestJet. 

The price increases, if they were to occur, would therefore affect flights to Europe more than the South packages

Garneau, however, said that "our government continues to support the rights of Canadian travelers through better quality and service offerings and lower prices." 

A less broken offer? 

Air Canada will not only benefit from market access: it will see its fleet enhanced with more modern and energy-efficient aircraft. 

But many experts believe that it is first of all the dynamism and creativity of Transat that attracted Air Canada in the first place. Recognized for its entrepreneurial spirit, particularly in its tour operations, Transat has cleared several destinations previously ignored by North American carriers and has, in the hard way, made its way into an ultra-demanding industry. 

Will Air Canada, and by extension Canadian travellers, benefit from this liveliness once the transaction is completed? 

In the immediate future, "Nothing is changing today," said Christophe Hennebelle, vice-president of human resources and public affairs at Transat. "Contracts and reservations will be honored. " 

The transaction has not yet been formally concluded either by the parties concerned or by the Competition Bureau. The packages of your customers purchased under the Transat banner, as well as Air Transat flights, remain unchanged until further notice.

Unanswered questions

Several other questions remain unanswered for the moment: 

  • Will Transat be a separate wing of Air Canada, or will it be absorbed by Air Canada Rouge's operations?
  • What about hotel development initiated by Transat? 
  • Will the regional services, especially from Quebec to the international markets, be maintained? 
  • And will flights to Toronto and Vancouver be integrated by Air Canada as well?
  • With the real hub of Air Canada being in Toronto, will operations be repatriated there?
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