Air Canada’s proposed acquisition of Transat AT Inc., the owner of Air Transat, likely will hinder competition and result in less choice for Canadian travellers, according to the Competition Bureau. In a report delivered to Transport Minister Marc Garneau, the watchdog said that eliminating the rivalry between the two Montreal-based carriers would result in higher prices, fewer services and ultimately less travel by Canadians on a range of competing routes.
The bureau’s analysis found that the deal would impact 83 overlapping routes, including 49 between Canada and Europe and 34 between Canada and sun destinations in Florida, Mexico, Central America and the Caribbean.
The agency noted that its report released after markets closed draws on information collected prior to the COVID-19 pandemic, which has cratered airline revenues as borders close and travel demand plummets.
Shareholders at Transat approved a $720-million acquisition offer from Air Canada in August, but the deal also faces scrutiny by European regulators eyeing the impact of a takeover that would see the country’s biggest airline control more than 60 percent of transatlantic air travel from Canada.
Transport Canada has until May 2 to complete a public-interest assessment and provide it to the minister.
Transat said the report “does not affect the company’s confidence” in the deal.
“The commissioner’s role is limited to studying the impacts on competition in the marketplace…without taking the public interest more broadly into account,” CEO Jean-Marc Eustache said in a statement.
“Transport Canada’s assessment will provide a more comprehensive overview of the nuts and bolts of the transaction and of all the benefits for the Canadian public and economy.”
The COVID-19 crisis, which prompted Transat to halt all flights until April 30, is “calling into question the relevance of any analysis conducted prior to its outbreak,” Eustache added.
He characterized the merger in near-opposite terms from the Competition Bureau, saying it will “improve customers’ choices and opportunities” with more flight connections and frequencies.
Analysts seemed to agree, saying the Competition Bureau’s warning should be taken in context.
Desjardins Securities analyst Benoit Poirier says he believes the purchase will still be approved “considering the companies’ willingness to address the bureau’s competition concerns,” such as potential dominance of airport slots.
Poirier and others say they believe the proposed transaction will help Canada’s airline industry recover from the economic downturn sparked by the COVID-19 pandemic, a detail that should work in its favour.
Transport Canada has until May 2 to complete a public-interest assessment and provide it to Transport Minister Marc Garneau, who will consider it along with Competition Bureau’s analysis.
Transat and Air Canada saw their shares drop nine percent and six percent respectively in early trading Monday.
Source: Travel Industry Today
TRANSAT REMAINS CONFIDENT: Proposed acquisition under scrutiny