Federal government approves Air Canada purchase of Transat A.T. Inc.

The federal government has approved Air Canada's purchase of competing airline Transat A.T. Inc. under a series of strict terms and conditions the government says "are in the interest of Canadians."

A statement released by the transport minister's office said the impact of COVID-19 was a key factor in the final decision to approve the purchase. 

"Given the devastating impact of the COVID-19 pandemic on the air industry, the proposed purchase of Transat A.T. by Air Canada will bring greater stability to Canada's air transport market," said Transport Minister Omar Alghabra in a media statement.

"It will be accompanied by strict conditions which will support future international competition, connectivity and protect jobs. We are confident these measures will be beneficial to travellers and the industry as a whole."

Those conditions include: maintaining Transat's head office and brand in Quebec; encouraging other airlines to take up former Transat routes to Europe; ensuring aircraft maintenance contracts remain in Canada, prioritizing Quebec over other provinces; launching new routes within five years; and committing 1,500 employees to the merged company's new travel business. 

The deal also stipulates that because Transat is now a subsidiary of Air Canada, it must provide bilingual services to customers across the country.

The federal government said it will "continue to take into account the needs of" Transat customers who are still waiting for refunds for flights cancelled due to the pandemic, and that those refunds are key to negotiations with the airlines on a bailout package.

Doubts about Transat's ability to continue operating — a situation that was exacerbated by the pandemic — was another key factor in the decision process.

"The proposed acquisition offers the best probable outcomes for workers, for Canadians seeking service and choice in leisure travel to Europe, and for other Canadian industries that rely on air transport, particularly aerospace," the Transport statement said.

Mixed support for deal

The Transat purchase angered rival WestJet. In a statement, the Calgary-based airline said the purchase means Canadian airline travellers will have fewer choices.

"This decision shows blatant disregard for all Canadians who believe in healthy competition," said Ed Sims, WestJet President and CEO.

"When Canadians look to explore the world and reunite with family and friends once again, they will face fewer choices and higher fares."

Flair Airlines is also against the deal. 

"This further reduction in competition in the Canadian aviation industry underlines the need for a true independent ultra low-cost carrier like Flair. We strongly oppose the merger, and we look forward to bringing competition back to the industry," said Flair Airlines president and CEO Stephen Jones in an email to CBC News Thursday.

But last month, Stephen Hunter, chief executive officer of Sunwing, told the Globe and Mail that the merger would be good for Canada because it would help Air Canada compete with foreign airlines globally.

"Unless we want Canada completely controlled by foreign carriers, we have to allow this," Hunter told the newspaper. "Our main fear is, and what we've got to watch out for, is all the European and other international carriers coming in and taking market share away from Canadian airlines. And this is one way to defend them."

In a statement, Transat noted that Air Canada has agreed — under the terms of the purchase — to ensure a number of public benefits, namely, to maintain a Transat head office in Quebec, and to preserve jobs and the Transat brand.