(Reuters) – Air Canada on Friday abandoned its plan to acquire Transat AT Inc after being told by the European Commission that it would still face high regulatory hurdles, paving the way for other domestic contenders for the tour operator .
Canada’s largest airline said that after recent discussions with the European Commission (EC) it had become clear that the EC would not approve the acquisition on the basis of the corrective package proposed by the carrier earlier this year.
Quebec businessman Pierre Karl Péladeau said on Friday that his December offer for Transat was still available.
Montreal-based Air Canada said it had offered “an important package of remedies” to address the EC’s anti-trust concerns over competition.
“Air Canada concluded that providing additional and costly remedies, which may not yet obtain EC approval, would significantly compromise” its ability to compete internationally and recover from the effects of the pandemic on air travel. the airline said in a statement.
Air Canada refused in February to extend the deadline on its C $ 188.7 million ($ 150.19 million) deal for Transat, after European regulators did not give the green light for the buyout.
The two companies had agreed in June 2019 on the acquisition, the terms of which were subsequently amended in August 2019 and then revised in October 2020 due to the severe economic impact of the COVID-19 pandemic.
EU antitrust chief Margrethe Vestager said Air Canada had offered insufficient concessions to address competition concerns.
“While the coronavirus epidemic has strongly impacted the airline industry, preserving competitive market structures is essential to ensure that the recovery can be swift and strong,” she said in a statement.
“The proposed transaction would raise competition concerns on a large number of transatlantic routes. Based on the results of the market test, the remedies offered seemed insufficient. “
The Canadian government has said that protecting jobs at Transat and preserving the long-term viability of the company, also based in Montreal, is the most important thing for the government.
Transport Minister Omar Alghabra said in a statement he had spoken with Transat and the two sides were “considering next steps.”
The airlines have been in talks with the federal government since November over a possible aid package, so far to no avail.
Quebec Economy Minister Pierre Fitzgibbon also declared that the provincial government “will not leave Transat without support”.
Quebecor Inc CEO Péladeau said he made a new offer for Transat in December and it was still available. Péladeau, who previously attempted to acquire Transat as a personal businessman, said his offer would keep the tour operator independent and competitive.
“This proposal is still valid and included certain conditions that Mr. Péladeau wishes to lift quickly in order to remove the uncertainty in which the company has been for several months,” said the press release.
A spokesperson for Transat said the airline’s priority was to secure funding and its recovery plan.
“We will also examine all of our options, including the continuation of the company’s business plan and Mr. Péladeau’s proposal,” Christophe Hennebelle said in an emailed statement.
Transat said it needs at least C $ 500 million in new financing in 2021. It also has a C $ 250 million short-term subordinated credit facility maturing June 30.
The tour operator said it was at “advanced stages” of discussions on federal government support for the airline industry and access to Ottawa support for businesses affected by the pandemic.
Quebec Premier François Legault, who co-founded Transat in 1986, said in February that the province was considering different scenarios for Transat, with or without Air Canada.
Air Canada has agreed to make a termination payment of C $ 12.5 million to Transat.
($ 1 = 1.2564 Canadian dollars)
Reporting by Arunima Kumar in Bengaluru and Allison Lampert in Montreal, additional reporting by Foo Yun Chee in Brussels; Written by Amran Abocar Edited by Marguerita Choy Edited by Matthew Lewis, Marguerita Choy