"Three possible Transat suitors say they are not interested in acquiring struggling airline"

[simply_no_one]

https://financialpost.com/news/three-po ... ng-airline

At least three potential bidders for Transat AT Inc. say they are not currently interested in acquiring the tour operator after Air Canada terminated its deal to purchase the struggling company late last week.

Since the deal fell apart, Montreal-based Transat has been weighing its options, including seeking long-term funding and potential government support. In an email statement on Tuesday, it reiterated that it would also consider other acquirers, including an offer from Québecor chief executive Pierre Karl Péladeau that remains on the table.

“We will now have whatever discussions are necessary to consider all our options,” Transat spokesperson Christophe Hennebelle said in the statement.

But at least two companies that previously expressed interest say they are no longer in the running for Transat.

Montreal-based developer Groupe Mach, which bid for a block of shares in 2019 in an attempt to stop Transat’s sale to Air Canada, is no longer interested in the deal, president Vincent Chiara said in a phone interview.

“We have no more interest, we have moved on with other strategic partners,” Chiara said, adding that he has recently been contacted by other parties interested in submitting a joint bid for Transat, but has turned them down.

Dominik Pigeon, head of financial services company FNC Capital, which expressed interest in bidding with a group of investors in 2019, has also said that he currently is not in a position to make an offer.

“In the current context, FNC Capital alone has not what is required to make it a success,” Pigeon said in an email statement. “Because of all these elements, Péladeau’s offer may be the best one today.”

A third potential suitor, Calgary-based WestJet Airlines Ltd., told the Financial Post in an email that its not considering bidding on Transat.

While some have speculated that WestJet might be a logical partner, the Calgary-based carrier, which was purchased by Onex Corp. and taken private in late 2019, never publicly entered the bidding on Transat.

It was, however, a strong opponent of the deal with Air Canada, arguing that the merger of Canada’s biggest and third-biggest airlines would undo “years of effort to foster true competition” in the industry, chief executive officer Ed Sims said in a blog post in February.

Péladeau, who approached Transat with an offer of $5 a share in December, has reiterated his interest in the company. The board rejected those offers as it was already in talks with Air Canada.

“Péladeau still appears personally interested in Transat but we would not yet count on his December offer of $5 per share (which matched Air Canada’s cash offer) given Transat doesn’t have any active proposals at this time and it needs at least $500-million in liquidity this year,” Scotiabank analyst Konark Gupta said in a note.

Gupta noted that potential suitors, including Groupe Mach and WestJet, could re-emerge, the latter of which would cause fewer competition concerns.

Without a deal, beleaguered Air Transat needs money. It said in March that, if the deal were to fall through, it would need $500-million in long-term financing on top of the $250-million credit facility that expires on June 30.

It is also seeking help from the federal and Quebec governments. Transat is looking for funding under the federal government’s Large Employer Emergency Financing Facility (LEEFF) and through a potential bailout of travel and tourism companies hit hard by the pandemic, Hennebelle said.

The carrier is one of Canada’s largest sellers of vacation packages, flying travellers from Canada to sunny beaches in the Caribbean and cobble-stone streets in Europe — many destinations that have been locked down during the COVID-19 pandemic. Canada banned all direct flights to Mexico and Caribbean countries on concerns about new variants of COVID-19.

In October, Air Canada slashed the deal to $5 per share from $18 per share due to the collapse of the air travel industry during the pandemic.

The Canadian government approved the deal in February at $5 per share, with conditions including that Air Canada keep 1,500 of Transat’s 5,000 employees, maintain its Quebec headquarters and protect Canadians from higher prices — which airline competition expert Ambarish Chandra says is nearly impossible to promise.

“It is very difficult to force companies to not raise prices and monitor what prices should be,” Chandra said. “It depends on oil prices, and global demand — they could always say that they had to raise prices because costs rose or demand fell. It’s futile.”

The support came a year after Canada’s Competition Bureau denounced the deal, saying that the companies would have controlled a combined 60 per cent of transatlantic flights in the pre-pandemic market, leading to pricier airfares for consumers.

The European Commission also criticized the deal, pushing back its decision to conduct an investigation. An initial review by the EC said the merger could significantly reduce competition on 33 routes between Canada and Europe.

Air Canada said it proposed “a significant package of remedies” in response to the Commission’s antitrust concerns on competition. It did not say what types of concessions it offered.

“The merger is more detrimental to Canadian consumers than it is to European consumers, so it’s interesting that Canada went ahead and approved it while Europe blocked it,” Chandra said.

Financial Post

[rudder]

The list of ‘options’ is fast dwindling.

During the AC CCAA restructuring, the lesson learned was that there is ‘good’ money and ‘less good’ money. TRZ May learn that lesson in 2021.

Best of luck.

[simply_no_one]

I hope that Air Transat pulls through, and honestly I think they will. But to what end is the question.

I have a suspicion CCAA is in the cards, resulting in a vastly smaller airline for the next 5+ years. Unless of course the government acts, but it's been over a year with nothing. And the politics of only bailing out Air Transat, be it provincially or federal help would be detrimental to a federal elections for the Liberals. So any industry assistance that would help Air Transat out of this mess would also likely have to be spread around all the other large airlines in Canada. Easier said than done, given how little action we've seen so far.

[rudder]

I hope that Air Transat pulls through, and honestly I think they will. But to what end is the question.

I have a suspicion CCAA is in the cards, resulting in a vastly smaller airline for the next 5+ years. Unless of course the government acts, but it's been over a year with nothing. And the politics of only bailing out Air Transat, be it provincially or federal help would be detrimental to a federal elections for the Liberals. So any industry assistance that would help Air Transat out of this mess would also likely have to be spread around all the other large airlines in Canada. Easier said than done, given how little action we've seen so far.

There is nothing preventing TRZ from considering a ‘prepackaged’ CCAA filing. A court supervised restructuring can be a very useful tool.

Existing shareholders wiped out. New equity sponsor funds used to shore up the balance sheet. Use CCAA to reduce debt and void aircraft leases that are not part of the recovery commercial plan.

Unsecured creditors and equity sponsor become the new owners. Potential future IPO or additional share offering to generate further capital or pay back equity sponsor.

[simply_no_one]

It may be the best option, to be honest.

[rudder]

It may be the best option, to be honest.

Not sure how keen JME would be to see his stake in TRZ wiped out.

But if a company is borderline insolvent, then you really don’t own shares in anything.

[simply_no_one]

I think it may be tough to find someone willing to buy the company for what, 200 million and then on top of that cover the 250-300 million credit that's currently coming due AND find another 500 million to keep the place afloat for the year? That's nearly a billion dollars to buy an airline in a country that is clearly not interested in having a thriving industry and an airline that has a checkered past when it comes to actually making money. A country with some of the highest fees and taxes to operate an airline etc. Doesn't seem like a smart investment.

You'd probably make more money buying a Formula 1 team for that kind of cash.... Which says a lot.

[RRJetPilot]

I think it may be tough to find someone willing to buy the company for what, 200 million and then on top of that cover the 250-300 million credit that's currently coming due AND find another 500 million to keep the place afloat for the year? That's nearly a billion dollars to buy an airline in a country that is clearly not interested in having a thriving industry and an airline that has a checkered past when it comes to actually making money. A country with some of the highest fees and taxes to operate an airline etc. Doesn't seem like a smart investment.

You'd probably make more money buying a Formula 1 team for that kind of cash.... Which says a lot.

Exactly. Canada is not open for business. I would be surprised if there were any investors willing to bet on Transat after seeing the government mismanagement and inaction with the industry. Its not Transats fault at all. The blame lays squarely with Trudeau and his team. They chose not to support the industry and most investors aren't stupid.

[Yycjetdriver]

I think it may be tough to find someone willing to buy the company for what, 200 million and then on top of that cover the 250-300 million credit that's currently coming due AND find another 500 million to keep the place afloat for the year? That's nearly a billion dollars to buy an airline in a country that is clearly not interested in having a thriving industry and an airline that has a checkered past when it comes to actually making money. A country with some of the highest fees and taxes to operate an airline etc. Doesn't seem like a smart investment.

You'd probably make more money buying a Formula 1 team for that kind of cash.... Which says a lot.

Exactly. Canada is not open for business. I would be surprised if there were any investors willing to bet on Transat after seeing the government mismanagement and inaction with the industry. Its not Transats fault at all. The blame lays squarely with Trudeau and his team. They chose not to support the industry and most investors aren't stupid.

I wouldn’t say lays squarely at the feet of Trudeau. While I’m definitely not a Trudeau supporter and think he has screwed our industry, Transat wasn’t in a strong position heading into this pandemic.

[Latitude]

I love reading all AC employees comment on the future of Transat. I didn’t know you were part of the board of directors... do you feel better now that you wrote that Transat might be going CCAA ? Wake me up in a couple of weeks/months and let’s see how many of you were totally off track !

[RRJetPilot]

Before the pandemic Transat was doing OK. Not making money hand over fist but not too bad. They had a great product and reputation. Thats why AC wanted them. But the Pandemic showed Justin has no intention of helping dirty airlines. And my point stands, investors see this and dont want to lose money. This is ALL Trudeau's fault.

[Yycjetdriver]

Before the pandemic Transat was doing OK. Not making money hand over fist but not too bad. They had a great product and reputation. Thats why AC wanted them. But the Pandemic showed Justin has no intention of helping dirty airlines. And my point stands, investors see this and dont want to lose money. This is ALL Trudeau's fault.

Do you have any numbers to back this up? I know very little about Transat but a quick google search brings up all their financial reports as Transat is a publicly traded company. I see annual losses in the years leading up to 2020. Definitely don’t see “not making money hand over fist but doing ok”.

Perhaps I’m missing something, my apologies if so, or maybe not making money but stay open and hoping for eventual bailouts counts as “doing ok” in Quebec.

[altiplano]

I love reading all AC employees comment on the future of Transat. I didn’t know you were part of the board of directors... do you feel better now that you wrote that Transat might be going CCAA ? Wake me up in a couple of weeks/months and let’s see how many of you were totally off track !

It's glass houses everywhere at the moment (esp. in this country) there is no doubt.

I think it comes down to the fact that most of us here are junkies to this industry that we put so much time and sweat into and airing out the laundry/news/perspectives is what happens no matter where you are.

Up until 5 days ago there was a different track on these discussions, a lot has happened, a lot has changed, the discussion certainly has. But I think everyone in this industry right now feels invested in what's happening and what's next... all of our boats may be inextricably chained together. Hopefully someone catches a line.

[simply_no_one]

I love reading all AC employees comment on the future of Transat. I didn’t know you were part of the board of directors... do you feel better now that you wrote that Transat might be going CCAA ? Wake me up in a couple of weeks/months and let’s see how many of you were totally off track !

What so now that it's AT having issues, no one is allowed to talk about it unless you work there?

Pretty sure EVERYONE had an opinion in 2003 when it was AC, and again in 2009. It's an aviation forum, if you don't like it... don't log on.

[lownslow]

maybe not making money but stay open and hoping for eventual bailouts counts as “doing ok” in Quebec.

Works for Bombardier, no?

[haironfire]

I love reading all AC employees comment on the future of Transat. I didn’t know you were part of the board of directors... do you feel better now that you wrote that Transat might be going CCAA ? Wake me up in a couple of weeks/months and let’s see how many of you were totally off track !

Let me just start by saying I am not an AC employee. (Many other airlines however).

I do not say this with any sort of malice towards Transat Pilots, especially since I can still picture the smiling faces of ex-cowokers who are now laid off. I hope everyone comes out of this, but things are very dire, and I am sure you are aware of this. We cannot just pretend this away. It is very real unfortunately.

Our landscape in Canadian Aviation is going to change quite a bit in the near future.

[Lt. Daniel Kaffee]

Chip?

[haironfire]

No comment

[parallel60]

This has probably been mentioned so point me to it if it has, but why does the EU even have a say in two Canadian companies merging? Because they operate flights to the EU? I'm sure the EU's only focus is protecting EU airlines from competition but honestly, that shouldn't matter.

I read above someone mentioned that Canada accepted the deal and EU did not. I suppose if Lufthansa wanted to merge with KLM-Air France Canada could say no? I doubt Canada would have the authority yet the EU did in this potential merger.

[haironfire]

Air Canada already has quite a footprint in Europe with the International Travel. If they combined with Transat, this would have a VERY BIG footprint in Europe, especially if you consider the tour packages, hotels etc in Europe that Transat occupies. Then if you add the STAR Alliance factor that AC has, this would grow the equation even more. There is probably a lot more that I am not factoring into the equation.

And in fact the Canadian Competition Bureau DID NOT approve this transaction, yet was overruled by then Transport Minister Marc Garneau.

[math66]

This has probably been mentioned so point me to it if it has, but why does the EU even have a say in two Canadian companies merging? Because they operate flights to the EU? I'm sure the EU's only focus is protecting EU airlines from competition but honestly, that shouldn't matter.

I read above someone mentioned that Canada accepted the deal and EU did not. I suppose if Lufthansa wanted to merge with KLM-Air France Canada could say no? I doubt Canada would have the authority yet the EU did in this potential merger.

from what I understood, they can't block the transaction, however, they have the authority to remove slots (like LHR or CDG $$$), or ask concession to keep a kind of competition.
In the event of a merge between AF/KLM and Lufthansa,, I guess Canada would have the power to say, "ok if no more than 4 flights a day to Canada for AF/KLM/Luftansa" when then have actually 9 flights a day as 2 separate company.

[rudder]

I love reading all AC employees comment on the future of Transat. I didn’t know you were part of the board of directors... do you feel better now that you wrote that Transat might be going CCAA ? Wake me up in a couple of weeks/months and let’s see how many of you were totally off track !

What the ‘AC employees’ have apparently that you don’t have is perspective. They have worked for a company with an upside down balance sheet. And they have experienced the bliss of CCAA.

I would pay attention to what is being said. You too may become a CCAA insider.

[Splash]

I love reading all AC employees comment on the future of Transat. I didn’t know you were part of the board of directors... do you feel better now that you wrote that Transat might be going CCAA ? Wake me up in a couple of weeks/months and let’s see how many of you were totally off track !

What the ‘AC employees’ have apparently that you don’t have is perspective. They have worked for a company with an upside down balance sheet. And they have experienced the bliss of CCAA.

I would pay attention to what is being said. You too may become a CCAA insider.

Too painfully true. Every carrier in Canada is in a world of hurt, some more than others.

[Curiousflyer]

Too painfully true. Every carrier in Canada is in a world of hurt, some more than others.

At this point nearly every carrier in Canada has begun to weigh the pros and cons of CCAA/

[termerair]

At this point nearly every carrier in Canada has begun to weigh the pros and cons of CCAA/

And we are all seating at home watching the boat sink...

It is time to go -again- to Ottawa and occupy days and nights the lawn in front of the parlement.

It is time to go to the major airports, occupy and disrupt the few departing or arriving flights...

It is time that ALL Canadian pilots set the parking brake to ON for as long as it will take to get the respect we deserve as professionals.

It is time to make our voice heard and make some real noise! This is our careers being destroyed, our families being hurt, our sanity being completely ignored... It can't end well.

If we can't fight for this, we are just deserving the treatment inflicted to us for the last year...