Air Transat: PKP’s counterattack could “change the game”

The leader of Quebecor, who cannot comment on the situation because he is legally bound, was finally the author of the second offer rejected by the board of directors of Transat AT last month. According to one of the three letters, Mr. Péladeau would even offer 20% more than Air Canada, or $ 223 million compared to $ 180 million, in order to guarantee healthy competition and fairer prices to Canadian travelers.

Surprisingly, he would also reveal to have been questioned by the European regulatory authorities for 90 minutes during which he would have expressed his opposition to the takeover for anti-competitive reasons.

In addition to the federal government, the European Commission must also approve the agreement, or approve it with commitments. And nothing is played.

It’s fair game and it can be a game-changer, according to Université de Montréal competition law expert Pierre Larouche. It is certainly a signal to the European Commission that there are interested buyers who could come and create a serious competitor.

The institution launched an investigation in May, fearing a rise in prices and a decrease in supply on 33 routes between Canada and Europe with the disappearance of a competitor such as Air Transat. When a suitor arrives, explains Mr. Larouche, it changes the way of seeing the transaction. We know that we can be a little more severe, knowing that Air Transat is not condemned to bankruptcy by refusing the transaction.

The testimony can play a role in the appreciation of the operation.

In the past, the European Commission has rejected similar groupings in the airline industry. Ryanair and Aer Lingus had three refusals, and Aegean Airlines and Olympic Air had to do so twice.

In the case of Air Transat, the conclusion of a transaction despite the rejection of the European authorities could result in a hefty fine, according to Mr. Larouche, and the legal existence of the merged entity may be called into question at any time by its customers and competitors. In short, it would in all likelihood be abandoned.

A new pretext for the European Commission

The director of the International Observatory of Aeronautics and Civil Aviation of UQAM, Mehran Ebrahimi, adds that Pierre Karl Péladeau certainly presented himself with interesting arguments before a European Commission which goes in the direction of strengthening European companies.

He fears that Mr. Péladeau’s intervention will serve as a pretext for regulatory authorities not to express their true political position and doubts its success if Air Transat finds itself in its hands. In the past two decades, people who improvised themselves in air travel have not led to very happy experiences, he says. It is a particular, cyclical sector which has its own governance logic.

Decline the transaction [avec Air Canada]is to condemn Air Transat to disappearance.

In Canada, Marc Garneau is expected to announce the government’s decision in the coming weeks, after recommendation to the Council of Ministers. A refusal from Ottawa would certainly serve as an additional argument for the European Commission.

The Commission, whose decision was expected last week, told us by email that it has stopped the clock from its investigation, since the parties would have failed to provide within a reasonable time important information of which we do not know the nature.