Minister of Transport Omar Alghabra has announced that the Government of Canada has approved the proposed purchase of Transat A.T. Inc. by Air Canada, subject to strict terms and conditions that are in the interests of Canadians.
In a release on Thursday (Feb. 11), the government said it considered a "broad range of factors, such as level of service, wider social and economic implications, the financial health of the air transportation sector, and competition."
The value of the deal is worth approximately $190 million (CAD), down from $720 million previously. (In October, Air Canada lowered the price to $5.00 per share to reflect the economic impact of the COVID-19 pandemic).
The pandemic was a key factor in Ottawa's 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.
“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," said Minister Alghabra.
Noting the effects of the pandemic on air service in general, and on Transat A.T. in particular, the federal government 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."
A complex, "rigorous analysis"
The assessment conducted by Transport Canada was "complex," Ottawa said, and "necessitated a rigorous analysis and consultation with Canadians and stakeholder groups."
Online public consultations ran from November 4, 2019, to January 17, 2020.
The public interest assessment also included input from the Canadian Commissioner of Competition, who looked at how the proposed purchase would affect competition in the air sector. This report was published in March 2020.
Transport Canada completed the public interest assessment in May 2020.
The acquisition, which Transat A.T shareholders approved on Dec. 15, 2020, provides clarity and stability with regard to the company’s future, despite the effects of the pandemic, Ottawa said.
"Enforceable terms and conditions" will be introduced to facilitate future connectivity and competition on routes to Europe previously operated by Transat A.T, the government said.
What about refunds?
The government 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," the government said in a statement.
Above and beyond the terms and conditions, Air Canada will have a duty to ensure that, as a subsidiary of Air Canada, Transat A.T. will provide communications and services to the public in both official languages.
The terms and conditions associated with the proposed acquisition include:
- 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; and
- Launch and operation of new destinations within the first five years.
As per the legislative process, the final decision rests with the Governor in Council.
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