Is the Air Canada-Transat deal flying into a monopoly?
While Air Canada's proposed takeover of Transat AT sits in a state of limbo, new information obtained by The Globe and Mail reveals that WestJet is urging Ottawa to reject the $180 million-dollar transaction, or draft conditions that would limit the combined companies’ pull in the market.
According to the Jan. 20 report, WestJet sent a submission to then-Transport Minister Marc Garneau on Jan. 3, saying that the COVID-19 pandemic must not be used as an excuse to allow Canada’s biggest airline to buy its third-biggest.
“A fundamental element of Canada’s national transportation policy is to have at least two strong national airlines,” said WestJet said in the document, which was obtained by The Globe. “WestJet’s ability to contribute to the Alberta economy and more broadly to the Canadian economy is imperilled by the proposed transaction.”
The Calgary-based airline is asking Ottawa to prevent Air Canada from offering its Aeroplan loyalty program to Transat passengers, saying that it would “lock up otherwise contestable customers” and lead to a near-monopoly on international routes from Canada to Europe.
WestJet is also requesting the federal government to require the two airlines to relinquish airport slots to help offset their market dominance.
(WestJet, reportedly, wants Air Canada and Transat barred from using Toronto Pearson’s Terminal 3 to ensure room for other airlines).
Deadline set for Feb. 9
Meanwhile, the much-talked-about transaction has yet to receive a green light from the European Union, which has been delaying their decision to approve the proposed purchase.
The European Commission (EC), which oversees competition policy in the 27-member European Union, is studying the deal to determine if it will hinder competition, increase prices and lead to fewer choices for consumers.
In March, the Competition Bureau of Canada was unfavourable to the deal, but it should be noted that their analysis was done before the COVID-19 pandemic outbreak.
Air Transat shareholders, in December, accepted a takeover bid from Air Canada in a deal worth $5 per share.
Earlier this month, Quebec businessman and telecom owner Pierre Karl Péladeau had called on the Canadian government to block the sale of Air Transat, claiming an offer to purchase the Montreal-based tour operator for $6 per share, or for approximately $233 million.
On Jan. 12, however, Transat issued a clarification, stating that Mr. Péladeau’s unsolicited Dec. 22 proposal from investment firm Gestion MTRHP Inc. was not supported by binding, fully committed financing, that it was actually $5.00 per share (not $6.00) and that it lacked financing to support Transat's 2021 working capital requirements of approximately $500 million.
“We continue to believe that Air Canada's proposal continues to be the best option for Transat's future, especially in the context of the pandemic and its devastating effect on airlines,” said Jean-Yves Leblanc, president of the special committee of the Board of Directors of Transat on Jan. 13.
The arrangement has also received final approval of the Superior Court of Québec on December 18, 2020.
The EC is expected to announce its ruling by Feb. 9, 2021. If nothing transpires, the deal will dissolve on Feb. 15 (unless Air Canada and Transat agree to an extension).
WestJet, in the meantime, is reportedly taking its concerns to European Union competition watchdogs.
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