MIAMI – Today, Air Canada (AC) and Air Transat (TS) announced that the proposed takeover deal by AC would be terminated, citing the disapproval by the European Commission.

The deal, originally announced in 2019, went through a number of stages, including a revision due to the COVID-19 pandemic’s severe impact on the aviation industry.

If completed, the agreement would have created the largest travel company within Canada; a significant feat.

According to a statement sent by AC, many solutions were proposed to appease the European Commission, but the airline decided that any further concessions would put the airline at a major disadvantage with its competitors. In order to terminate the agreement, AC will be paying AT a cancellation fee of US$12.5m.

Air Canada has chosen to focus on recovering from the pandemic, and maintaining the optimal conditions to do so. The airline specifically cited the importance of leveraging their assets and strong employee culture as a means of recovery.

The press release, outlining the reasoning behind this decision, stated that “providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada’s ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic.”

Photo: Fabrizio Spicuglia/Airways

Why Did the Deal Fail?

The acquisition deal faced a number of hurdles, including the COVID-19 pandemic and disapproval by regulators, among others.

Air Transat was forced to retire their Airbus A310 fleet early and permanently lay off 2,000 staff members as the company struggled to recover from the effect of strict travel restrictions. If the deal had been completed, TS would have stayed as a separate brand from Air Canada and Air Canada Rouge.

Although the deal was originally called off at the beginning of the COVID-19 pandemic, the surprise approval by the Canadian government seemed to pave the way for the deal to once again be completed.

The effects of the fallout of the deal will be made clear moving forward as we see how seasonal leisure travel recovers in the coming months. We may even see TS seek out a new partner in an attempt to hedge its reliance on the leisure travel market.

Photo: Milan Witham/Airways

Air Transat’s Rise

Air Transat, one of the leading leisure airlines in Canada, has seen significant growth since its founding in 1986. The airline focused on the acquisition of travel agencies and tour operators as a method of growth.

Although once known in the aviation community for their fleet of rare Airbus A310s, AT has been in the process of renewing their fleet by adding Airbus A321LR and Airbus A330 aircraft.

The pandemic proved to be difficult for TS, among other Canadian airlines, facing significant travel restrictions and a lack of substantial financial support from the government.

This is a developing story. Please check back later for updates.

Featured Image: Roberto Leiro/Airways