Air Canada–Transat Acquisition Approved with Conditions

Summary#

This Order in Council approves the takeover of Transat A.T. Inc. by Air Canada, subject to a list of conditions attached to the approval. The government required these measures to protect competition, keep some jobs and services in Canada, and monitor prices after the deal closed on February 9, 2021.

What it does#

• Approves the acquisition under the Canada Transportation Act but makes the deal conditional on a schedule of requirements and an Implementation and Monitoring Agreement before closing.
• Competition-type measures to help other airlines enter former Transat routes:
  • A “slot surrender” program that requires Air Canada to transfer specified airport slots on certain Toronto, Montréal and Europe city-pair routes for periods of 5 or 10 years (for example, up to 14 slots at Montréal–Paris and other specific slot counts for routes to Amsterdam, London Gatwick and more).
  • Agreements that Air Canada must offer, on request, to eligible new entrants for up to 5 years (renewable once for another 5 years): interline/prorate deals, fare-combinability (selling journeys that mix carriers), access to Air Canada’s frequent‑flyer program (Aeroplan), and Maple Leaf Lounge access at certain Canadian airports.
• Public-interest commitments:
  • Keep a Transat head office and the Transat brand in the Province of Québec for 5 years.
  • Maintain at least 1,500 full‑time employees in the combined leisure business for 2 years.
  • Launch 5 new international non‑stop routes not offered in 2019, to be run for at least two years, within 5 years of closing.
  • Negotiate certain maintenance contracts in Québec and support the construction of airframe overhaul facilities, with related steps to be started within 1 year and operations within 4 years (subject to commercial feasibility).
  • Allow the Minister to reallocate Transat’s capacity under air‑transport agreements with Panama, Israel and Colombia for 5 years to help Canadian new entrants.
• Monitoring and reporting:
  • Air Canada must report every 6 months on compliance and provide annual ticketing and pricing data (for routes listed in the annex) for 5 calendar years so the government can track price changes.
• Enforcement:
  • The Terms and Conditions are part of the Order and enforceable. The Order notes possible court remedies and, in extreme cases, penalties that can include fines and imprisonment (see “Why it matters”).

Who's affected#

• Air Canada and Transat A.T. Inc. — the companies directly involved in the merger and responsible for meeting the conditions.
• Potential new or smaller airlines (referred to as eligible new entrants) that might take over former Transat routes and receive slots, interline connections, loyalty‑program access and lounge access.
• Passengers who travel on the affected “European” and “sun” routes. The Order focuses most competition measures on transatlantic routes from Toronto (YYZ) and Montréal (YUL) to Europe and other popular destinations.
• Airport operators and slot coordinators at airports named in the annex (for example, Toronto Pearson (YYZ), Montréal–Trudeau (YUL), London Gatwick (LGW) and several European airports).
• Québec aerospace suppliers and maintenance firms mentioned as potential partners, for example Avianor and AAR, which were referenced in the maintenance commitments.
• The federal government bodies involved in monitoring and enforcement, including the office of the Minister of Transport and the Commissioner of Competition, who reviewed the deal and expressed concerns.

Why it matters#

• The approval lets a large Canadian airline buy a major leisure operator while trying to limit the merger’s effect on competition. That can affect airfare, choice and routes, especially for transatlantic travel.
• The conditions aim to preserve some jobs and keep the Transat business anchored in Québec, which matters to employees and local economies.
• The slot transfers and access commitments are designed to make it easier for other airlines to start service on routes that Transat used to operate. That could help keep prices and options from rising as the market recovers from COVID‑19.
• The government will collect ticketing and pricing data for several years. That monitoring is intended to reveal whether prices go up where the two carriers formerly overlapped.
• The federal Competition Bureau (the Commissioner of Competition) warned that the proposed remedies may be inadequate to fix competition concerns. The Minister nevertheless concluded that, on balance and given the COVID‑19 context, approving the deal with these conditions was in the public interest.
• The Order makes the conditions enforceable. The explanatory material says court orders and serious penalties could apply for contraventions, including fines up to $10,000,000 or imprisonment up to 5 years in the most extreme statutory provisions cited.