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Home » Air Canada and Air Transat Deal is in Danger

Air Canada and Air Transat Deal is in Danger

by Abubakar Shoaib

Since May 2019, Transat AT Inc. and Air Canada are negotiating their terms of the acquisition. Air Canada‘s acquisition plan of Transat AT Inc. is in danger after Canada’s largest airline said it would not allow more time for the deal to go through.

Air Canada and Transat

Air Canada is the flag carrier and the largest airline of Canada by fleet size and passengers. It is headquartered in the city of Montreal, Quebec. In 1937, the airline provided scheduled and charter air transport for passengers and cargo to 207 destinations worldwide. Air Transat is a Canadian airline based in Montreal, Quebec. Founded in 1986, it is the country’s third-largest airline, operating scheduled and charter flights, serving 60 destinations in 25 countries.

Acquisition Plan

The acquisition was set to be completed by Feb. 15. Still, since the deal has not yet received approval from the European Union, both parties now have the right to terminate the agreement at any time, Transat said in a statement Tuesday morning.

Air Canada will go ahead with its plan to buy up rival Air Transat, despite the drastic reduction in demand for air travel right now.

Credit: (Marcus Schmal/Shutterstock, Pascal Pavani/AFP/Getty Images)

“Transat and Air Canada are continuing their discussions regarding potential amendments to the arrangement agreement that may be required,” Transat said. Despite the discussions, there is no guarantee that any new agreement will be reached or that the existing one will not be terminated altogether, Transat said. The Canadian government had previously approved the transaction on Feb. 11. Transat’s stock was down 9.13 percent in morning trading on the S&P/TSX composite index, while Air Canada’s shares were up 2.64 percent.

Flights Suspension

Air Canada’s decision not to extend the transaction date comes amid an uncertain and rapidly changing business environment for the airline industry. Canada’s airlines recently suspended all flights to Mexico and the Caribbean until April 30 at the federal government’s request, in addition to a mandatory hotel quarantine for air travelers entering Canada, which goes into effect on Feb. 22.

The restrictions further hampered travel demand and forced widespread layoffs and route cuts. Transat, for its part, has suspended virtually all of its operations until April 30.

Calin Rovinescu, Air Canada’s former CEO and president, said during the company’s most recent earnings call on Feb. 12 that he was encouraged by signs of progress in talks between the industry and the federal government bailout for the airline sector.

What’s your opinion about Air Canada and Transat? Will they be able to make it happen?

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