This will be a week for Canadian aviation. At the beginning of the week, it was announced that the WestJet was acquired by a private equity firm in a $ 5 billion deal. Now there is further airline activity, this time in the form of consolidation among Canadian airlines.
Air Canada intends to acquire Air Transat
It has been announced today that Air Canada has entered into an exclusive agreement with Air Transat to purchase all issued and outstanding shares .
The proposed transaction is valued at around $ 520 million, or $ 13 per share.
Calinas Rovinescu, Air Canada, has the following to say about this:
"A combination with Transat represents a great opportunity for stakeholders in both companies. This includes shareholders in both Transat and Air Canada, employees of both companies, who will benefit from increased job security and growth prospects, and Canadian travelers who will benefit from the merged company's increased ability to participate as a leader in the highly competitive leisure travel market globally, offering a unique opportunity to compete with the very best in It will also allow us to expand our hub at Montreal-Trudeau Airport, where we have added 35 new routes since 2012 for the benefit of Montreal and the Quebec communities and which we only had 10 million customers in 2018 alone. " This is not a final deal yet, so we can expect further announcements only after the final agreements are signed.
I take Air Canada over Air Transat
Most of you are probably familiar with Air Canada, although Air Transat is an airline that is not all familiar with. The Montreal-based airline has a fleet of about 40 aircraft, and they have quite a varied fleet, including the A310s (!), A330s, A321s and 737s, and they have A321LRs in order to update their fleet in the long run (replaces the A310 ).
Air Transat A321LR
Air Transat operates primarily recreational routes, most of which are seasonal. They operate in quite a few transatlantic markets, and also in the Caribbean, Mexico and flights in Canada.
What makes this interesting is that Air Canada has its own low-cost carrier, Rouge, which operates to some of the same destinations.
It would be interesting to see if Air Canada is planning to throw Air Transat into the Rouge and eliminate a competitor in the process or whether they would keep the brand separate.
My guess would be that Air Transat would become part of the Rouge, but maybe some of the planes would go to Air Canada's main fleet, so the airline could keep consistency.
Based on Air Transat's current fleet:
- While Rouge currently uses 767s too long haulfly, I could see them using the Air Transats A330s for long-haul flights
- Air Transats A310s will probably be retired soon and replaced with A321LRs
- Air Transat has a small fleet of 737s; Air Canada has only 737 MAXs, so I wonder if Rouge would actually start a small surface in the 737s, or if they just wanted to retire
- I almost wonder if Air Transat's A321LR order can only go to the capital in Canada. doesn't look like it necessarily fits into Rouge's business model, and I could see the profit of A321LRs in the Air Canada fleet
Air Canada buying Air Transat seems like a good fit when Air Transat could join the Rouge fleet. With such an agreement, Air Canada could eliminate a competitor.
While Air Canada is talking about the benefits of such an agreement, it would hardly be beneficial to consumers. Air Canada's CEO says consumers will "benefit from the merged company's increased ability to participate as a leader in the competitive leisure travel market globally."
The much greater reality for consumers is that Canadian aviation is not as competitive and we would see an airline eliminated. It leads to higher airfare …
What do you do with Air Canada's plans to acquire Air Transat? Do you think they just wanted to fold the airline to Rouge, or?