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Air Canada’s Transat purchase faces review for impact on airline competition: minister

May 16: Air Canada is in the final stages of an exclusive bid to buy Transat AT Inc., the parent company of Air Transat. The proposed deal would mean an even bigger market share for Canada's largest airline. Eric Sorensen explains.

Air Canada‘s planned acquisition of Transat AT raises issues of public interest and will require additional scrutiny, including the impact on airline competition, before it can be approved, Canada‘s transport minister said on Monday.

Transat shareholders overwhelmingly voted last week in favor of Air Canada‘s C$720 million ($542 million) or C$18-a-share bid for the tour operator.

WATCH: March 9 — Crew unloads Air Transat plane from Montreal which made emergency landing in New Jersey

Crew unloads Air Transat plane from Montreal which made emergency landing in New Jersey
Crew unloads Air Transat plane from Montreal which made emergency landing in New Jersey

The deal between Canada‘s largest carrier and Transat, which runs leisure carrier Air Transat, would give Transat a 60% market share of select trans-Atlantic routes to and from Canada and would require domestic and European regulatory approvals.

Transport Minister Marc Garneau said in a news release issued after the market close that a public interest assessment would be conducted on the deal with input from Canada‘s competition commissioner.

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READ MORE: Pierre Karl Peladeau dangles offer for Transat if Air Canada deal can’t take off

Consultations will begin on Nov. 4 and involve the air industry and public, among others, as well as an “analysis of the economic benefits or challenges resulting from the proposed transaction,” he said.

Garneau said the government had 250 days, or until May 2, 2020, to complete the public interest assessment.

WATCH: July 30 — Air Canada to keep Boeing 737 MAX planes grounded until at least January, WestJet until November

Air Canada to keep Boeing 737 MAX planes grounded until at least January, WestJet until November
Air Canada to keep Boeing 737 MAX planes grounded until at least January, WestJet until November

Investors are closely watching the regulatory process surrounding the deal. Transat stock closed down 1.36% on Monday at C$15.97.

AltaCorp analyst Chris Murray said in a recent note he expected the transaction to receive regulatory approval.

READ MORE: Air Canada raises Transat purchase offer, secures support of largest stakeholder

Murray said the review by Canadian competition regulators was expected to be “the most strenuous given the overlap of the companies in Montreal and Quebec markets,” but he believed “any remediation proposed by regulators to be manageable.”

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