What Will The Air Transat-Air Canada Merger Mean For Flight Prices?

**Update: 27/01/21 @ 11:20 UTC – Statement issued by Air Canada and updated information on Air Transat offer have been included.**

We often see the presence of competition on routes result in lower fares for travelers. Therefore, when a merger is on the horizon, it might be something for airline customers to worry about as their airfares could be at risk of increasing. This then begs the question – what will the acquisition of Air Transat by Air Canada do for airfares on the routes where the two airlines once competed?

Air transat a321lr
With a fairly limited domestic footprint, Air Transat’s main areas of focus have been the transatlantic/European market as well as southern “sun” destinations (Mexico, the Caribbean, etc.). Photo: Anna Zvereva via Wikimedia Commons

Concerns from Canada’s Competition Bureau, among others

Indeed, in March of 2020, the Competition Bureau of Canada outlined its own concerns about the Transat deal. It indicated that fewer options would be available for passengers to choose air travel or vacation packages.

Concerns included increased prices, fewer choices, decreases in service, and a significant reduction in travel on various routes with overlap. As part of the analysis, the Competition Bureau noted that there were 83 overlapping routes between the two carriers (before the global health crisis).

“substantial lessening or prevention of competition in the sale of air travel or vacation packages to Canadians.” was the ultimate conclusion of the bureau’s report should Air Canada move forward in acquiring Air Transat.

Air Canada A330
Both airlines serve European cities such as London and Paris. Photo: BriYYZ via Wikimedia Commons 

But it’s not just the Canadian Competition Bureau that predicts that passengers will be worse off with the acquisition of Air Transat.

The Chronicle Herald reports that a European economic consulting group also predicts higher fares on certain routes. The study was conducted by Amsterdam-based Oxera and commissioned by Transport Canada. A leaked page of the report shows that after performing economic analyses on several routes, price increases were the predicted outcome.

Routes examined included Calgary, Halifax, and Montreal flights to Mexican holiday destinations and Halifax and Montreal flights to Florida and Caribbean destinations.

An airline spokesperson provided Simple Flying with the following statement:

Air Canada has made all the necessary representations before the appropriate regulatory bodies and is confident that this transaction will benefit consumers, as well as employees and stakeholders of both companies.

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Response from a Canadian consumer advocate

Dr. Gabor Lukacs of consumer protection group Air Passenger Rights is troubled by the report, including a lack of transparency by the government. Speaking with Simple Flying, Dr. Lukacs stated,

“There is a strong appearance that the government wants Air Canada to buy Air Transat even though there is another, better offer on the table — an offer that, as I understand, was not even disclosed to shareholders — and the government is hiding from the public documents that would expose the adverse impact of the transaction.”

WestJet 737 MAX
WestJet, as well as leisure airline Sunwing, also compete in similar leisure markets as both Air Canada and Air Transat, theoretically keeping fares even lower. Photo: WestJet

The “better offer on the table” refers to something put forward by Quebec businessman Pierre Karl Péladeau, the CEO of a telecommunications, media, and sales conglomerate. Péladeau has sent multiple letters to the government requesting that the sale be denied, alleging that his offer was not given fair consideration.

Air Transat subsequently issued a statement to set the record straight, stating:

    1. contrary to media reports, MTRHP’s current proposal is actually for $5.00 per share (not $6.00),
    2. the proposal lacks binding, fully committed financing or evidence of sufficient cash on hand for the purpose of making the acquisition,
    3. the proposal lacks financing to support Transat’s 2021 working capital requirements of approximately $500 million.

Initial reports said that Air Canada was offering $5 per share, while Péladeau submitted an offer for $6 per share for Air Transat.

What do you think of this situation? Let us know where you stand by leaving a comment.

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