Air Transat mulls options after EC thwarts Air Canada tie-up

Air Canada (AC, Montréal Trudeau) has abandoned plans to acquire Air Transat (TS, Montréal Trudeau), after efforts to secure antitrust consent from the European Commission (EC) failed. In a joint statement, the two Canadian carriers said they had mutually agreed to terminate plans for Air Canada to acquire the airline’s parent Transat Inc., initially announced in June 2019 and then revised in October 2020 as a result of the severe economic impact of the COVID-19 pandemic, after the EC rejected Air Canada’s enhanced package of remedies aimed at placating European competition concerns. “Following recent discussions with the EC, it has become evident, however, that the EC will not approve the acquisition based on the currently offered remedy package,” Air Canada said in a statement. “After careful consideration, Air Canada has concluded 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. Especially in this challenging environment, it is essential that Air Canada focus on creating the optimal conditions for its full recovery by preserving and leveraging all of its key strengths and assets including its strong employee culture.” In response, the EC’s executive vice-president in charge of competition policy, Margrethe Vestager, said the bloc had to maintain stringent anticompetitive benchmarks even in times of economic crisis to ensure recovery in the travel market is equitable to all sides concerned. “EU merger control policy standards and framework also apply in times of severe shocks affecting the economy,” she said. “Every case has to be assessed on its facts and merits. In this case, the Commission investigated the extent to which the coronavirus crisis would impact Air Canada, Transat and their competitors’ operations and, based on the information available to date, reached the preliminary conclusion that in the long-run Air Canada and Transat would likely remain actual or potential competitors on the vast majority of the routes between the European Economic Area and Canada, which they both operated before the crisis. “Based on the in-depth analysis carried out during the Phase II investigation, the Commission’s preliminary findings were that the proposed transaction would raise competition concerns on a large number of transatlantic routes. Based on the results of the market test, the remedies offered appeared insufficient.” Both Air Canada and Transat have agreed to terminate their agreement with Air Canada paying Transat a termination fee of CAD12.5 million Canadian dollars (USD10 million), and with Transat no longer under any obligation to pay Air Canada any fee should it be involved in another acquisition or similar transaction in the future.