Air Canada, in its boldest strategic move yet, strikes a deal to buy Air Transat
India just lost an airline. Brazil just lost an airline. Europe is losing airlines. Hong Kong is set to lose one of its airlines through consolidation. Now, it’s Canada’s turn.
Early last week, WestJet stunned the market by announcing a takeover by Onex, an investment group. But that was just the warm-up act. Four days later, Air Canada jolted the airline world with much bigger news: A deal to buy its rival Transat for close to US$400m.
If finalized and approved by regulators, Air Canada would be buying a company that’s first and foremost a tour operator—in other words, a company that purchases travel products and services from thousands of providers across the world, which are then packaged together and sold to leisure travelers. A typical package might be a beach holiday in the Caribbean, for a single price that includes airfares, hotel, and perhaps some activities. For most tour operators, the flights involved are procured (often in bulk, and very early in the booking curve at discounted rates) from whatever airlines are offering the relevant flights. Transat, however, like TUI and Thomas Cook in Europe—operates its own in-house airline. It’s this airline—Air Transat—that Air Canada really wants.
Make no mistake: Air Transat is a major player in Canada’s airline industry, not so much domestically but very much so on transatlantic and southern sunshine routes. It began this quarter with 20 A330s (some recently densified), six geriatric A310s, five maximum-density B737-800s, and two A321 CEOs. But its fleet flexes up and down by season, aided by a swap agreement with Thomas Cook. Last winter, for example, it operated 14 widebodies and 24 narrowbodies. But last summer, it operated 26 widebodies and just 10 narrowbodies. This doesn’t completely ameliorate the company’s seasonal profit swings—it still does much better in summers than in winters. But the fleet flexibility helps, and if there’s one thing Air Canada needs to do, it’s make its earnings less seasonal.
To continue reading, become a Skift Airline Weekly subscriber today.