Should we, as consumers, be worried about it?
Air Canada has recently entered into an agreement to acquire Transat A.T Inc – subjected to approvals and final documentation. While this proposed transaction, valued at an estimation of $520 million, is definitely a great news for Transat’s shareholders, should we, as consumers, be worried about this acquisition?
1. Less competition likely to lead to an increase of price – but to what extent?
I believe this is the first thing that comes to mind. According to Ross Aimer, a pilot and CEO of Aero Consulting Experts, he highlighted that Air Transat is currently taking up 20% to 25% of the Canada to Europe market. While a price hike is likely unavoidable, we should note that the airline business is not highly differentiated and is subjected to high competition from other international airlines. Hence, we should expect to see different magnitudes in price change – depending on how saturated the routes are.
2. Better connectivity and more opportunity to earn Aeroplan miles
In this acquisition, Air Canada is likely to get the aircraft and the airport slots from Air Transat. This is going to expand the network for Air Canada and its subsidiaries, including Air Canada Rouge -Low-Cost Carrier. With the expanded network, we can foresee greater connectivity and more opportunity to earn Aeroplan miles or miles from any other Star Alliance airlines. If you have not heard of Air Transat, it is a leisure airline which currently operates to the below destinations (majority of these routes are seasonal)
3. More (and maybe better) aircraft options for us to choose from?
As of now, we have zero idea how Air Canada, as a parent airline, is going to allocate the Air Transat’s existing aircraft. Suppose that Air Canada is not going to re-brand Air Transat to a standalone brand, there are chances that some of the B737 and A330 from Air Transat are going to be allocated to Air Canada Rouge. Different people have different preference when it comes to the aircraft type they fly on; I generally prefer the larger aircraft. If you are standing on my side, it would be great to see the A330 in Air Canada Rouge as they are larger than the existing B767.
|Air Transat||Air Canada Rouge (LCC)|
|A310 ( to be replaced by A321LR)
A321 (200, neo and LR series)
A330 (200 and 300 series)
B737 (700 and 800 series)
|A319 (100 series)
A320 (200 series)
This acquisition may be seen as a double-edged sword to consumers. Although the above points are my (reasonable) guesses, we should brace ourselves for some price hike in the future.
What is your take on this acquisition? Do you think Air Canada Rouge and Air Transat should be consolidated as one, or not?