Air Transat Needs Support To Avoid 2,000+ Layoffs

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Canada’s Air Transat will need to permanently lay off another 2,000 workers in order to survive unless it receives additional financing. The news comes as the airline announced that its revenues have dropped by around 99% in the last quarter. During that period, the airline only flew on nine days because its fleet was grounded in April.

Air Transat
Air Transat is in desperate need of financial aid. Without more money, the airline will have to make more cuts. Photo: Air Transat

The carrier has already temporarily laid off two-thirds of its workers. In further bad news, it’s deal with Air Canada is on the rocks.

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The Montreal-based tour operator announced its financial results on Thursday, giving details of its current net losses, which stand at CA$45.1 million ($34.2 million), up from CA$1.5 million ($1.1 million) earlier this year.

The airline has said that it is now in a dire situation and will need financial support if it is to avoid further layoffs. Earlier this year, the airline announced it was placing almost 4,000 staff on temporarily leave as it tried to cut cash spending. In July, the airline was spending $1.7 million in cash each day.

Now, a further 2,000 workers may be placed on permeant leave as the situation in Canada remains tough. On a conference call, CEO Jean-Marc Eustache said,

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The situation is especially difficult in Canada. Restrictions at the border are particularly stringent, with the closure to foreigners and mandatory quarantine for Canadians coming back from any other country at least until Sept. 30.”

Air Transat Boarding
Air Transat flew for just nine days in the last quarter. The Canadian carrier is continuing to struggle as travel restrictions persist. Photo: Air Transat

Financing trouble

While September 30th doesn’t seem like a long time to wait until things pick up for the carrier, the reality is, it may have to hold out until December. The problem is Air Transat’s current agreement with Air Canada.

Air Canada is set to acquire Air Transat for CA$720 million ($517 million) based on a share price of CA$18 ($13.6). The current Air Transat share price is just $5, throwing the deal into doubt.

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Air Canada may not be willing to accept or secure additional loans to save the airline when the situation is still getting worse. And it isn’t just Air Canada. The EU Commission is now looking into the deal, and a decision isn’t expected until early December. This means Air Canada can’t close the deal, and the deal deadline is December 27th.

Air Canada B777-300ER
Air Canada is set to take over Air Transat for $270 million. However, the deal is being called into question. Photo: Air Canada

This puts Air Transat in a problematic situation. Air Canada does have the power to veto certain loans, but the deal is not yet closed, leaving Air Transat vulnerable.

A positive outlook

Still, the airline remains hopeful. In August, the carrier announced more than 40 destinations for its winter schedule. The destinations include lots of winter sun and include Cuba, Colombia, Mexico, Jamaica, and El Salvador.

However, like all airlines, Air Transat is reliant on international travel restrictions lifting in time for winter schedules to actually operate. Canada recently extended its travel restrictions until the end of September. If these restrictions are continued into the winter months, Air Transat will be in an even more dubious position.

What do you think of Air Transat? Is it worth saving, or will Air Canada let the deal expire? Let us know your thoughts in the comments.

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