The Competition Bureau of Canada has outlined some concerns about the Air Canada’s acquisition of Air Transat. Some of the concerns indicate fewer options available for passengers to choose air travel or vacation packages.
Competition Bureau highlights concerns of reduced competition
In an official release, the Competition Bureau issued concerns about increased prices, fewer choices, decreases in service, and a significant reduction in travel on a variety of routes with overlap. As part of the analysis, the Competition Bureau noted that there are 83 overlapping routes between the two carriers.
49 of these overlapping routes are on lucrative transatlantic services between Canada and Europe. In addition, another 34 routes are between Canada and warm leisure destinations including Florida, Mexico, Central America, and the Caribbean. The report also noted that the merger would give Air Canada a monopoly on 22 nonstop routes.
The ultimate conclusion of this report was that the proposed Air Canada acquisition of Air Transat is likely to lead to “substantial lessening or prevention of competition in the sale of air travel or vacation packages to Canadians.”
This report will go into Transport Canada’s public interest review. Currently, Transport Canada is conducting a public interest assessment that will be provided to the Minister. However, the final decision on the takeover will be made by the Governor in Council (Cabinet) based on the Minister’s recommendation.
Airline response to Competition Bureau report
Air Canada noted that it would review the report in due course. Air Transat, however, in a press release, reaffirmed its confidence in the deal. Citing market variabilities and public interest, CEO and President of Transat, Jean-Marc Eustache, reaffirmed confidence in the deal being able to protect jobs and provide benefits for shareholders.
Will the merger reduce competition?
The Air Canada-Air Transat deal has been known for quite some time now. However, it is not unusual for mergers and acquisitions to take some time and face scrutiny, as well as a few regulatory hurdles and mounds of paperwork.
It is not uncommon for airlines to restructure acquisitions. This includes shedding some routes, and implementing some layoffs. Initiating aircraft retirements, and closing hubs are also risks associated with most mergers. Given the current volatility of the airline industry, it is up in the air what the acquisition will look like a few months from now.
The Competition Bureau of Canada has highlighted some concerns with the Air Canada-Air Transat acquisition deal including reduced competition. Given the volatility of the air market currently, it is unclear exactly what this merger could lead to.
Do you think the Air Canada-Air Transat deal will reduce competition in Canada? Let us know in the comments!