By Jacob Lorinc, Business Reporter | Mon., April 5, 2021
Struggling airline Air Transat says it’s in the “advanced stages” of negotiations with the federal government for an aid package after Air Canada dropped its bid to acquire the Quebec-based company.
“Our discussions are in their advanced stages, both for relief and for sectoral aid,” company spokesperson Christophe Hennebelle said Monday. “We believe that funding will arrive in the coming weeks.”
On Friday, Air Canada dropped its planned $190-million purchase of the much-smaller Transat after European regulators signalled it likely would not pass their antitrust concerns last week. The airline, which first bid on Transat in 2019, reduced its offer last year as the COVID-19 pandemic decimated the travel industry.
The Air Transat now says it needs financing, fast. The tour operator has obligations to repay a $50-million revolving loan by April 29 and a $250-million short-term loan that matures at the end of June. In total, it says it needs at least $500 million in the coming year to stay afloat.
The latest development adds new turbulence to Ottawa’s ongoing talks with the airlines for a bailout. Thousands of Montreal-area workers will be out of jobs should the airline fail — ahead of a possible federal election this year.
In a statement on Friday, federal Transportation Minister Omar Alghabra said the government is in “active discussions regarding financial support” for Air Transat and the other airlines.
“The most important thing for our government is to protect jobs in Quebec and across Canada, as well as preserving the long-term viability” of the discount flyer, Alghabra said.
Quebec Economy Minister Pierre Fitzgibbon has also said that the province “will not leave Transat without support.”
Air Transat has long struggled to compete against its larger competitors, and is surveying prospective buyers that could help keep them competitive in the years ahead.
One option is Canadian billionaire and Quebecor Inc. chief executive Pierre Karl Péladeau, who said he’d made an offer for Transat in December and that the deal is still available. The businessman proposed buying Transat for $5 a share, though the company had previously said his bid wasn’t high enough.
Hennebelle said the company is now reviewing all its options, including Péladeau’s proposal.
On Monday, Transat AT shares plunged by 14.5 per cent to $4.69 on the Toronto Stock Exchange as it closed its first day of trading since the late-Friday announcement of the failed takeover. Meanwhile, Air Canada shares gained 2.4 per cent, to $27.10, as investors expressed confidence in the company’s cost-saving decision.
John Gradek, a former Air Canada executive and lecturer at McGill University, says the smaller airline will need to secure government aid in order to remain competitive.
“Without this money, they’re toast,” Gradek said of Air Transat. “They need the money for customer refunds, for hiring pilots and mechanics and for getting planes in shape so they’ll be ready to fly come June.”
Customers who’d booked flights with the discount airline were not given refunds for flights that were cancelled at the outset of the pandemic. Since bailout negotiations started last year, Ottawa has been adamant that financial relief cannot go ahead unless the airlines agree to refund customers.
Air Transat said the company has agreed to that demand.
“Since the beginning, we’ve said that our intention is to refund customers provided the government will give us an aid package. We’re still of that opinion,” said Hennebelle.