Air Canada and Transat agree to call off merger after European Commission opposition

0
291

Air Canada and Transat A.T. Inc. (“Transat”) announced today that they have mutually agreed to terminate the Arrangement Agreement for the proposed acquisition of Transat by Air Canada.

Air Canada and Transat had originally agreed in June 2019 on the acquisition, the terms of which were subsequently amended in August 2019 and then revised in October 2020 as a result of the severe economic impact of the COVID-19 pandemic.

As previously disclosed, the acquisition was conditional on the approval of various regulatory authorities, including the European Commission (“EC”). In order to meet that key condition, Air Canada offered and enhanced a significant package of remedies, which went beyond the commercially reasonable efforts required of Air Canada under the Arrangement Agreement and what has been traditionally accepted by the EC in previous airline merger cases. Following recent discussions with the EC, it has become evident, however, that the EC will not approve the acquisition based on the currently offered remedy package.

After careful consideration, Air Canada has concluded that providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada’s ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic. Especially in this challenging environment, it is essential that Air Canada focus on creating the optimal conditions for its full recovery by preserving and leveraging all of its key strengths and assets including its strong employee culture.

Both Air Canada and Transat have agreed to terminate the Arrangement Agreement with Air Canada paying Transat a termination fee of $12.5 million, and with Transat no longer under any obligation to pay Air Canada any fee should Transat be involved in another acquisition or similar transaction in the future.

MONTREAL, April 2, 2021 /CNW Telbec/

Statement by European Commission’s Executive Vice-President Vestager on the announcement by Air Canada and Transat to withdraw from a proposed merger

The European Commission takes note of Air Canada and Transat’s announcement that they have decided to terminate the proposed merger agreement according to which Air Canada intended to acquire sole control over Transat. The Commission confirms that the discussions with the companies and the proposed remedy package thus far were not able to adequately address the competition concerns identified by the Commission. The Commission had opened an in-depth investigation into the proposed transaction on 25 May 2020.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Air Canada and Transat are the two leading airlines with a wide network of routes between Europe and Canada. We opened an in-depth investigation because we had concerns that the proposed transaction would negatively affect competition in these markets leading to higher prices, reduced quality or less choice for travellers.

EU merger control policy standards and framework also apply in times of severe shocks affecting the economy. While the coronavirus outbreak has strongly impacted the airline sector, the preservation of competitive market structures is essential to ensure that the recovery can be swift and strong. Markets should remain dynamic and competitive when travellers will again be able to fly over the Atlantic for holidays or to visit their beloved ones.

Every case has to be assessed on its facts and merits. In this case, the Commission investigated the extent to which the coronavirus crisis would impact Air Canada, Transat and their competitors’ operations and based on the information available to date, reached the preliminary conclusion that in the long-run Air Canada and Transat would likely remain actual or potential competitors on the vast majority of the routes between the European Economic Area and Canada, which they both operated before the crisis.

Based on the in-depth analysis carried out during the Phase II investigation, the Commission’s preliminary findings were that 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 appeared insufficient.”

More information will be available on the Commission’s competition website, in the Commission’s public case register under the case number M.9489.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.