News provided by The New York Times – link to full story – with a hint from P.N.
Ian Austen – 28 June 2019 – Canada Letter
The Canada Day long weekend means that some of you may well be reading this at an airport. And the start of this year’s peak summer travel season was preceded with an announcement that bodes ill for Canadian air travelers.
After much speculation, money losing Air Transat agreed this week to be purchased by Air Canada for 520 million Canadian dollars.
For those of us who are airline travelers, not investors, there are two troubling figures in this news: Once joined, the companies will control about 60 percent of the trans-Atlantic air travel business to and from Canada, and about 45 percent of several winter routes to the Caribbean. The takeover also will further expand Air Canada’s hold over travel at Montreal.
Air Canada promised to keep Air Transat’s name on airplanes and a main office in Montreal. Both appeared to be measures intended to placate Quebec’s premier, François Legault, a co-founder of Transat.
Conspicuously missing from the announcement, however, is any mention of what will happen to airfares after a lower price competitor loses its independence. That’s something the federal competition bureau will investigate before it signs off on the deal.
But recently revised laws limit foreign ownership of Canadian airlines to 49 percent, restricting potential buyers for Transat. So there’s a widespread expectation that the takeover will be approved.
Ultimately, another takeover may be Canadians’ best hope for keeping up competition to keep down ticket prices. WestJet, the No. 2 carrier, is in the process of being sold to the Onex Group, a private equity fund in Toronto. (If you don’t follow financial news closely, you may not know Gerry Schwartz, the founder of Onex. But most Canadians probably know his wife, Heather Reisman, the chief executive of Indigo Books and Music, if, for nothing else, than for her ubiquitous literary recommendations.)
After years of sticking mainly to domestic flights, with a focus on Western Canada, WestJet is slowly moving into the trans-Atlantic business. The financial muscle of Onex may allow it to accelerate that overseas expansion, which had been limited by the airline’s comparative lack of planes that can fly across oceans.
The Transat deal could help Air Canada if the mess surrounding Boeing’s 737 Max jet continues.
Along with WestJet and other airlines around the world, Air Canada has been fiddling with schedules to deal with the grounding of its two dozen Boeing 737 Max planes after two deadly crashes. And this week my colleagues Natalie Kitroeff and Tiffany Hsu reported that yet another problem has been uncovered in the software connected to the two crashes, which killed 346 people.
The troubled airplane is supposed to be Air Canada’s future workhorse; the airline is waiting for another 60 deliveries.
But Air Transat long ago agreed to lease 15 of Airbus’s equivalent to the 737 Max, a particularly fuel-efficient plane. Airbus can’t make enough of its planes, so anyone now looking at them as a Boeing alternative gets put at the bottom of a very long waiting list. The Air Transat purchase will allow Air Canada to jump that queue, if necessary.