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Air Canada's bid for Transat faces extended EU probe

  • Air
  •   05-25-2020  3:45 pm
  •   Pax Global Media

Air Canada's bid for Transat faces extended EU probe
Pax Global Media

Transat A.T. Inc. has taken note of the European Commission's (EC) decision to open an in-depth ("Phase 2") investigation to assess the proposed transaction with Air Canada

The investigation addresses concerns that the deal may reduce competition and result in higher prices. 

Transat is currently studying the EC's decision in order to prepare the next steps in the process.

This extension is part of the EC's normal process of assessing the impact of transactions submitted for its approval, which is currently complicated by the COVID-19 pandemic and the impact it is having on the international commercial aviation market.

To take into account the resulting longer delays, Transat has informed Air Canada of its decision to activate the first one-month extension of the outside date set for the transaction, provided for in the Arrangement Agreement. 

It is therefore postponed for the time being to July 27th, 2020, from June 27th. 

The Arrangement Agreement provides for the possibility of postponing the deadline for three one-month periods by notification from one of the parties, and then for three additional periods under certain conditions.

The transaction is subject to a public-interest assessment conducted by Transport Canada, whose report was submitted on May 1st to the Honourable Marc Garneau, Minister of Transport.

If the required approvals are obtained and the conditions satisfied, the arrangement is now expected to close early in the fourth quarter of the 2020 calendar year.

Hinder competition?

In March, Canada’s Competition Bureau said that Air Canada's proposed acquisition of Transat A.T. will likely will hinder competition and result in less choice for Canadian travellers. 

These findings were detailed in a report that the Competition Bureau delivered to Canada’s Transport Minister Marc Garneau.

According to the bureau's analysis, the deal between Air Canada and Transat 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 findings were, notably, collected before the COVID-19 pandemic set in, the agency says.

In response to the findings, Transat President and Chief Executive Officer Jean-Marc Eustache advised not to "draw any direct conclusions from it." 

Transat President and Chief Executive Officer Jean-Marc Eustache

"We must look at the Competition Bureau report with a bit of perspective, and not draw any direct conclusions from it with regard to the final decision," Eustache said at the time. "The Commissioner's role is limited to studying the impacts on competition in the marketplace; in other words, identifying potential difficulties, without necessarily contemplating what solutions or mitigation measures might be implemented, and without taking the public interest more broadly into account. 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."

Mr. Eustache added: "Particularly against the background of the COVID-19 crisis, our transaction requires a broad perspective that takes into account the company's future, the protection of jobs, the advantages for travellers and the interests of all our other stakeholders, including our investors, our partners, and the communities where we operate." 

Shareholders at Transat approved a $720-million acquisition offer from Air Canada last August, but the deal also faces scrutiny by European regulators that say the impact of a takeover would see the country's biggest airline control more than 60 per cent of transatlantic air travel from Canada.

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