Air Canada Another Step Closer to Purchasing Air Transat

In what looks like a very long and drawn out takeover (merger, buyout), however you want to call it, the Air Canada purchase of Air Transat took another step towards reality. Our first post about this topic was back in the spring of 2019. Two years later, it looks like this is finally becoming a reality with the Federal Government approval.

The reason I am writing this post today was because I wanted to share my thoughts on takeovers that decrease the competition in Canada.

Cons

Let’s talk about the more obvious topic first, the cons of such a merger. There is no doubt that the competition among airlines in Canada will be decreasing. Some would probably agree that Canadians already feel that we have slim pickings regarding which Canadian airline to fly internationally.

Going forward, it looks like Air Canada will control an even larger majority of the Canadian airspace. People are talking about monopoly negatively at this point.

Pros

However, what’s less obvious are the pros. There are actually some 500 airlines in Canada. But there are only really a handful of them who can take any significant market share from Air Canada. Below is a list of airlines that I would say have any sort of impact versus Air Canada (area they can compete in brackets):

• WestJet (internationally)
• Sunwing (internationally)
• Porter (domestically)
• Flair Airlines (domestically)
• Air North (domestically)
• Canadian North (domestically)

But considering that Canada only has a population of 38 million, it is probably only fair to expect only 2 strong Canadian airlines at a time, who can compete with other major airlines around the world. In the current situation, we probably have 1 and two 1/2. The two halves being WestJet and Sunwing.

The default is to think that such a merge would make Air Canada closer to a monopoly and be unfavourable for passengers. Conversely, I would say, keep in mind that Air Canada is not only competing domestically, they need to keep up internationally, so they need to keep growing. So a more positive way to see it is that they now have more resources to offer a more competitive service worldwide.

Conclusion

I’m not saying that Air Canada will for sure do right to passengers. But with the world ever seemingly getting smaller, I do think that if Canada were to stay relevant in the world, we would need at least one strong international airline. I just hope that their Board of Directors are smart enough to hire management who have vision.

What are your thoughts about this merger? A good idea? A necessary evil? A bad idea? Please let us know in the comment section below!