That’s a dollar less than the $13 per share or $520 million offer Air Canada announced Thursday, as it said it had entered into a 30-day exclusive arrangement with Transat to try to negotiate its purchase.
Some observers said Thursday they fear a successful bid will result in fewer choices and higher ticket prices but AltaCorp Capital analyst Chris Murray said Friday there’s more likely to be an expansion of routes.
“As to competition and pricing, I don’t see the combination impacting competition as you still have a number of Canadian competitors including WestJet and the new ULCCs (ultra low-cost carriers), including Flair Airlines, as well as international carriers,” he said in an email.
Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.
The timing of Air Canada’s announcement was probably linked to last Monday’s news that Toronto-based Onex Corp. had struck a deal to buy Calgary-based WestJet Airlines Ltd. for about $3.5 billion, thus providing a funding source for growth, said independent airline analyst Rick Erickson.
“We’re going to see very little change in terms of consumer benefit and I see little if anything at all on the cost front,” he said.
He added he doesn’t know of any domestic party that can afford to outbid Air Canada, and pointed out foreign ownership of any Canadian airline is limited to 49 per cent, which makes a bid from outside Canada unlikely.
“I think we certainly need to watch what happens, pay attention, but I think that, having two really strong carriers in Canada, there still will be lots of choice,” she said.
On transatlantic routes this summer, Air Canada has 42 per cent of total industry seat capacity and Transat has 18 per cent for a potential combined 60 per cent, wrote National Bank analyst Cameron Doerksen in a report.
“We see the sun destinations as less of a concern because there would still be two large and well-established competitors in Sunwing and WestJet Vacations, plus there is nothing stopping new entrants (including potential new ULCC start-ups in Canada) from entering these markets,” said Doerksen.
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Companies in this story: (TSX:TRZ, TSX:AC, TSX:WJA)
Dan Healing, The Canadian Press