Air Canada's Transat deal requires additional scrutiny, minister says

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, Transport Minister said on Monday.

Transat shareholders overwhelmingly voted last week in favour of Air Canada's $720 million or $18-a-share bid for the tour operator.

The deal between Canada's largest carrier and Transat, which runs leisure carrier Air Transat, would give Transat a 60 per cent market share of select transatlantic 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 the federal competition commissioner.

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.

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

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

Murray said the regulatory review 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."