Mach’s surprise bid for Air Transat, topping Air Canada

Canadian aviation has been a hotbed of activity during the past few weeks; the country’s two largest airlines have announced major transactions they believe will better position themselves for the future.

Onex plans to purchase WestJet for CAD5 billion and take the airline private, and Air Canada is moving closer to wrapping up due diligence for its proposed CAD520 million acquisition of Transat

But a Quebec real estate developer, Mach, has now entered the bidding for Transat with a higher price than Air Canada’s initial offer. Mach’s decision to pursue Transat occurs as speculation grows about whether regulators would approve Air Canada’s purchase of Transat, given the concentration the two airlines would create in some international markets from Canada

As the period of exclusivity for negotiations between Air Canada and Transat nears its end, Air Canada needs to decide if upping its offer for Transat is key for execution of its long term plan to maintain its competitive position in Canada’s aviation market. 


  • Air Canada quickly jumps to acquire Transat (potentially) after Onex moves to take WestJet private. 
  • Now, the Quebec real estate developer Mach has outlined a bid for Transat, and pledged to develop Transat’s expansion into hotel rooms.
  • Mach and Air Canada have different reasons for pursuing Transat and Transat’s fate remains tough to predict until the exclusive negotiating period between Air Canada and Transat ends in Jun-2019. 

Canada's aviation landscape has undergone rapid changes in a matter of weeks 

After Onex and WestJet outlined their plans for Onex’s purchase of Canada’s second largest airline for CAD5 billion (including the assumption of debt), Air Canada immediately stated that it had entered into exclusive negotiations for the travel conglomerate Transat

See related report: WestJet and Onex, and privatisation trend? 

At the time that Air Canada stated its desire to purchase Transat, the company remarked that the acquisition presented a unique opportunity to compete with the very best in the world companies with respect to leisure travel. 

Through the launch in 2013 of its lower cost unit, Rouge, Air Canada has been working to ensure that it competes effectively in all passenger segments.

Rouge competes with both Air Transat and WestJet, which has been building up trans Atlantic service during the last few years, and now has three Boeing 787 widebodies deployed on routes to Europe that feature a dedicated business class. 

WestJet mainline fleet summary, as of early Jun-2019 

It is no stretch to conclude that Air Canada was motivated to pursue Transat in part to fortify its leading position in the Canadian trans Atlantic market.

According to data from CAPA and OAG as of early Jun-2019, Air Canada has a 40% weekly seat share between Canada and Western Europe, while Air Transat’s is approximately 18%. WestJet’s share is approximately 6%, but its seat growth has jumped 20% year-on-year, driven by the introduction of the 787

Based on those figures, Air Canada and Air Transat’s seat share is approximately 58% on trans Atlantic routes. Air Transat only operates a handful of domestic routes, instead focusing on transporting leisure passengers to Europe and Latin America on a seasonal basis. 

There have been varying opinions over whether that concentration would raise the eyebrows of Canadian regulators who need to endorse Air Canada’s acquisition of Transat. Some pundits argue that a competitor in the Canadian trans Atlantic leisure market would be eliminated, while others believe that expansion by other airlines, particularly WestJet, could alleviate concerns about market concentration. 

The new bidder Mach seems most interested in the hotel room expansion 

Now, the Quebec-based property developer Mach has tabled its desire to acquire Transat for CAD14 per share (CAD527.6 million) – versus Air Canada’s bid of CAD13 per share. Mach is seeking CAD120 million from the government of Quebec to support the transaction, whereas Air Canada declares that it has all the funding to support its proposed acquisition of Transat

Mach executives told The Canadian Press that Air Transat, for now, is an integral part of Transat’s business. But obviously Mach is more attracted to Transat’s CAD750 million plans to add 5,000 hotel rooms by 2022 in Mexico and the Caribbean

Mach has declared that it would increase that total to 12,000 rooms in six years, and has secured a pledge from TM Grupo Inmobiliario to invest CAD15 million in Transat for a minority stake in the company. TM was a residential real estate developer in Spain and is also the preferred hotel supplier for Transat in Mexico

Obviously Air Canada is likely more interested in Transat’s aviation assets, but after Mach outlined its offer for Transat, Air Canada stated that it was close to finalising a binding agreement with Transat to “create an industry leading, Quebec-based leader in the global leisure travel industry”. 

Essentially Air Transat’s two potential bidders have differing interests in acquiring the company, but for now they are stressing that they have no plans currently to offload any of Transat’s businesses.

At the moment, Air Canada and Air Transat remain in an exclusive negotiating period, and Air Canada does have the necessary level of balance sheet strength to up its offer for Transat.

But it remains to be seen what will ultimately occur, since another Transat bidder has emerged: the Canadian Press has reported that Transat’s largest shareholder Letko Brosseau, holding an 18% share, opposes Air Canada’s bid. 

Mach has potentially created a horse race for control of Transat 

Mach’s decision to vie for control of Transat is an interesting development as both WestJet and Air Canada have recently shaken up the industry through WestJet’s plans to go private and Air Canada’s pursuit of Transat

Mach’s proposal could curry more favour with regulators, but Air Canada does not need help from the government of Quebec to complete its proposed transaction to acquire Transat.

But those factors could ultimately have no bearing on Transat’s fate; and there will be no definitive answers until Transat and Air Canada wrap up their exclusivity period. 

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