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Grounded Air Transat Investigates Alternatives To Air Canada Deal

An artist’s rendering of an Air Transat A321LR (Photo: Air Transat)

Canadian leisure airline Air Transat is exploring its options as the takeover deal that would see it become part of the Air Canada Group is still being vetted by the European Commission.

The Montreal-based carrier grounded all its flights on Jan. 29 following the decision by the Canadian government to ask all airlines to suspend for 90 days all services to Mexico and the Caribbeans in an attempt to curb the spread of the COVID-19 pandemic.

Unsustainable Losses

Air Transat currently expects to resume flights in mid-June, though that decision is subject to government-imposed restrictions being lifted in the months ahead.

“With the arrival of vaccines, we’re now preparing ourselves for a resumption of operations in the summer and particularly next winter” stated Jean-Marc Eustache, President and Chief Executive Officer of Transat in a statement announcing the financial results for the first quarter of 2021. The airline posted an operating loss of 98 million Canadian dollars ($78.5 million) on revenues of just 41 million Canadian dollars.

“These results are for a quarter where it was once again impossible to operate our business in a sustainable manner,” Mr. Eustache continued. “Our priority for the current quarter, while continuing to work on obtaining EU approval, is to secure financing, finalize our recovery plan and review all our options in the event the transaction with Air Canada will not take place.”

In 2019, Air Canada decided to purchase Transat with a final offer of 18 Canadian dollars per share. After the coronavirus pandemic decimated demand for air travel and government restrictions made it impossible for airlines to maintain significant international operations, Air Canada drastically reduced its offer to 5 Canadian dollars per share, valuing the company approximately 200 million Canadian dollars, Bloomberg reports.

EU clearance overdue

The deal has not yet been approved by the European Commission by the Feb. 15 deadline that would have kept both parties locked into the transaction. Now both parties are allowed to walk away from the deal, increasing the worry over Air Transat’s ability to continue operating without alternative sources of funding. The airline currently holds a 302.8 million Canadian dollar cash position and short-term credit facilities for 250 million Canadian dollars arranged by Export Development Canada and National Bank of Canada.

An alternative to the Air Canada takeover could be represented by the Large Employer Emergency Financing Facility (LEEFF), a response measure the Canadian government put in place last May to help companies heavily affected by the COVID-19 pandemic. This would see the beleaguered carrier receive a loan at 5% interest with rates increasing year after year that could replace the short-term credit facilities that are due to expire on June 30. The LEEFF would, however, come with strict conditions attached to it, such as the possibility of the government taking an equity stake in the airline.

Other options would be represented by private equity, possibly offered by other Quebec corporations. Communication giant Quebecor, whose interests include telecommunications, a media empire, and sports teams and arenas, offered to take a stake in the airline at 5 Canadian dollars per share last December, the same price as Air Canada, the Montreal Gazette reported. But with the Air Canada deal still in place, Air Transat cannot formally follow up on the possible offer by Quebecor.

Vanni Gibertini


  • Vanni Gibertini

    Vanni fell in love with commercial aviation during his undergraduate studies in Statistics at the University of Bologna, when he prepared his thesis on the effects of deregulation on the U.S. and European aviation markets. Then he pursued his passion further by obtaining a Master’s Degree in Air Transport Management at Cranfield University in the U.K. followed by holding several management positions at various start-up carriers in Europe (Jet2, SkyEurope, Silverjet). After moving to Canada, he was Business Development Manager for IATA for nine years before turning to his other passion: sports writing.

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