{"id":214771,"date":"2019-05-18T01:00:26","date_gmt":"2019-05-18T05:00:26","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=214771"},"modified":"2019-05-18T01:00:26","modified_gmt":"2019-05-18T05:00:26","slug":"air-canadas-520m-bid-for-transat-unlikely-to-harm-travellers-observers-say","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2019\/05\/18\/air-canadas-520m-bid-for-transat-unlikely-to-harm-travellers-observers-say\/","title":{"rendered":"Air Canada’s $520M bid for Transat unlikely to harm travellers, observers say"},"content":{"rendered":"
\"\"<\/a>
FILE: The headquarters of Transat A.T. Inc. (Photo By MontrealviewTransatAT.jpg: caribb from Montreal, Canadaderivative work: WhisperToMe (talk) – MontrealviewTransatAT.jpg, CC BY-SA 2.0<\/a>)<\/figcaption><\/figure>\n

Consumers will likely see little change in their travel choices or ticket prices if Air Canada buys Transat AT Inc., industry observers said Friday.<\/p>\n

They added it’s unlikely another bidder will upset the proposed merger, nor is it likely to be waylaid by required reviews by federal transport and competition regulators.<\/p>\n

Shares in the parent company\u00a0of\u00a0airline Air Transat were little changed Friday after rising more than 13.4 per cent on Thursday to a closing price\u00a0of\u00a0$12.<\/p>\n

That’s a dollar less than the $13 per share or $520 million offer Air Canada announced Thursday, as it said it had entered into a 30-day exclusive arrangement with Transat to try to negotiate its purchase.<\/p>\n

Air Canada shares, meanwhile, rose by 1.6 per cent by 3 p.m. EDT on Friday to a new all-time high\u00a0of\u00a0$41.04.<\/p>\n

\u201cWe do not expect a higher bid,\u201d said analyst Kevin Chiang\u00a0of\u00a0CIBC World Markets in a report.<\/p>\n

He said the offer represents a premium\u00a0of\u00a0148 per cent over the 20-day average share price before Transat announced on April 30 that it was in discussions with unnamed parties for a potential sale.<\/p>\n

Some observers said Thursday they fear a successful bid will result in fewer choices and higher ticket prices but AltaCorp Capital analyst Chris Murray said Friday there’s more likely to be an expansion\u00a0ofroutes.<\/p>\n

\u201cAs to competition and pricing, I don’t see the combination impacting competition as you still have a number\u00a0of\u00a0Canadian competitors including WestJet and the new ULCCs (ultra low-cost carriers), including Flair Airlines, as well as international carriers,\u201d he said in an email.<\/p>\n

Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.<\/p>\n

The timing\u00a0of\u00a0Air Canada’s announcement was probably linked to last Monday’s news that Toronto-based Onex Corp. had struck a deal to buy Calgary-based WestJet Airlines Ltd. for about $3.5 billion, thus providing a funding source for growth, said independent airline analyst Rick Erickson.<\/p>\n

But neither deal is expected to harm travellers.<\/p>\n

\u201cWe’re going to see very little change in terms\u00a0of\u00a0consumer benefit and I see little if anything at all on the cost front,\u201d he said.<\/p>\n

He added he doesn’t know\u00a0of\u00a0any domestic party that can afford to outbid Air Canada, and pointed out foreign ownership\u00a0of\u00a0any Canadian airline is limited to 49 per cent, which makes a bid from outside Canada unlikely.<\/p>\n

Travel consumers shouldn’t worry about a lack\u00a0of\u00a0competition if the two airline announcements go forward, said Wendy Paradis, president\u00a0of\u00a0the Association\u00a0of\u00a0Canadian Travel Agents.<\/p>\n

\u201cI think we certainly need to watch what happens, pay attention, but I think that, having two really strong carriers in Canada, there still will be lots\u00a0of\u00a0choice,\u201d she said.<\/p>\n

She added Canada’s other charter airlines such as Sunwing and Sunquest will continue to provide competition on Transat’s holiday routes.<\/p>\n

On transatlantic routes this summer, Air Canada has 42 per cent\u00a0of\u00a0total industry seat capacity and Transat has 18 per cent for a potential combined 60 per cent, wrote National Bank analyst Cameron Doerksen in a report.<\/p>\n

But he pointed out that new competitors are growing in the Canada-Europe market including WestJet and several Europe-based leisure-focused carriers.<\/p>\n

The transaction would result in a combined Caribbean\/Mexico sun destination market share\u00a0of\u00a046 per cent for Air Canada, he added.<\/p>\n

\u201cWe see the sun destinations as less\u00a0of\u00a0a concern because there would still be two large and well-established competitors in Sunwing and WestJet Vacations, plus there is nothing stopping new entrants (including potential new ULCC start-ups in Canada) from entering these markets,\u201d said Doerksen.<\/p>\n

The deal provides for a break fee\u00a0of\u00a0$15 million payable by Transat if it accepts a superior offer.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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