Air Transat agrees to be acquired by Air Canada

Canada's largest airline will absorb its leisure travel competitor, but intends to maintain their respective brands.

Air Transat

The parent company of leisure airline Air Transat has agreed to be acquired by Air Canada in a deal valued at around $520 million, equal to $13 per share, that will see both companies maintain their brands and respective positionings in the market.

News of the acquisition of Canada’s third-largest airline has seemed imminent since the company entered into exclusive negotiation talks with Air Canada in May. However, following news of those negotiations, Montreal real estate developer Group Mach also put its hat in the ring with a bid of $14 per share.

The agreement with Air Canada, the country’s largest airline, remains subject to regulatory and shareholder approvals, although the deal is expected to close and be completed early next year.

In a release, Air Canada president and CEO Calin Rovinescu said the airline intends to keep the brands of both Air Transat and its parent company Transat A.T. Inc, as well as its head office and key functions in Montreal. Air Canada and Air Transat are expected to continue operating as separate entities.

“Travelers will benefit from the merged companies’ enhanced capabilities in the highly competitive, global leisure travel market and from access to new destinations, more connecting traffic and increased frequencies,” he said.

The addition of Air Transat will complement Air Canada’s existing Air Canada, Air Canada Rouge and Air Canada Vacations brands. Transat has a foothold in the leisure travel market, having focused on travel to “sunny” and European vacation destinations. Combined, the companies hold approximately 60% of the share of cross-Atlantic travel from Canada.

News of the deal comes a few months after WestJet, Air Canada’s largest competitor, agreed to be purchased by private equity firm Onex for $3.5 billion.