Air Transat (TS, Montréal Trudeau) parent Transat AT has said it expects to complete its deal with Air Canada (AC, Montréal Trudeau) in the fourth quarter of 2020, once it finally obtains the necessary approvals and the right conditions are in place.
It is not possible to extend the deadline for obtaining the regulatory approvals it is awaiting from Canada and the European Union beyond December 27, 2020, it explained in a note to investors as it released its second-quarter results.
Factors beyond the tour operator's control and related to the coronavirus pandemic may yet influence Air Canada's intention to buy it, it warned.
“The arrangement remains subject to certain customary closing conditions, including regulatory approvals, particularly authorities in Canada and the European Union,” it said referring specifically to the state-run regulator Transport Canada and the European Commission, both of which are studying the deal's potential impact on competition.
On May 25, the European Commission decided to open an in-depth investigation to assess the transaction, which could take until anywhere between September 30 and November 19.
This, Transat AT explained, “is part of the European Commission's normal process of assessing the impact of transactions submitted for its approval, which is currently complicated by the Covid-19 pandemic and the impact it is having on the international commercial aviation market.”
Amid the ongoing crisis, the vast majority of North American, European, and international air carriers have announced sweeping capacity reductions and requested financial assistance measures, and “this could impact the possibility of reaching an agreement with regulatory authorities regarding an appropriate package of remedies aimed at obtaining the necessary approvals,” the company said.
The effects of the pandemic could also force Transat AT to seek additional sources of funding, even though its capacity to take such measures is restricted by the covenants linked to the deal with Air Canada. For example, the company has agreed not to incur additional indebtedness except in the normal course of its operations and in conditions allowing for repayment without penalty once the arrangement closes.
