YVR72

I can’t see any Canadian domiciled airline acquiring them. Westjet and AC are unionized and that extra cost wipes out any profit Transat may be slicing out from their airline.

Transpacificflyer

Why would Air Canada wish to take on a troubled Air Transat? There is nothing there to benefit AC. Air Transat is distinguished by flat revenues and a nasty $45 million loss for 2018. With fuel costs increasing, a relatively old fleet lacking fuel economy, an emphasis upon countries with negative tourism outlooks (Mexico, Cuba and the Dominican Republic); the prospects are not positive.

I believe that some financial "analysts" have a vested interest in pushing /promoting the company as its share values decrease. The mere mention of a takeover helped the shares gain back some value. Yes, Air Transat has some aircraft. However, getting access to 7 AB320 and 11 B737 is hardly worth the expense or hassle. Air Canada does not need Air Transat's AB330's, especially not at their age. Whether or not people wish to accept it, the B737 Max will be back in the air this year.

Air Transat would present as a serious liability for a major airline because it is not known for either service, or quality. No one needs the type of passenger demographic the airline attracts. It's additional labour costs once AC wage rates were applied, would make the transaction a money loser.

There is absolutely no way that an AC transaction would be approved in an election year.

And no. West Jet doesn't need this mess either. It has learnt its lesson with its used B767 fiasco. Nor does the airline need the operational and language hassles of a predominately Quebec based airline (and customer base too.) As for Sun Wing, I will be surprised if they are still operating five years from now.

IMO, Air Transat has limited prospects and is in bad shape such that it may be best for all concerned to just let it shut down and release the leased aircraft to the open market slowly.

tracon

So is TS.

YUL

The 11 B737s (and the A310s) are on their way out; Air Transat is transitioning to an all airbus fleet. Their new A321s happens to be more comfortable than AC's B737 Max cattle seats. And their A330s would be a better addition than AC's crumbling 767s, anyways you look at it...

I would argue that Rouge is not any better. And Transat's hoteling side would be a great fit to AC Vacations.

Not sure where you got that, could you share us your source?

Air Transat is definitely not shutting down anytime soon. Their newer A321s (CEOs,NEOs&LR) will be more comfortable than Air Canada's/Sunwing's 737s or Rouge's Airbuses.
They will definitely be better tooled to regain some market share.

Transpacificflyer

Air Canada has made the business decision to transition to the B737 Max, and as I stated, the 737 Max will be back whether or not you dislike the "cattle seats" (sic). It's over dramatic to describe the Rouge B767 fleet as "crumbling" compared to the Air Transat A330's.
Air Canada has maintained its fleet with the intent of keeping the B767 for additional years. Although they have an average age of 22 years, they are not crumbling. The Air Transat A330s have an average age of 17.5 years, and are hardly new. Air Canada is not looking to assume the long term liabilities of an aged leased fleet.

The Air Transat hotel business is not anything like the Air Canada vacations business model. Air Canada is not in the hotel business, but Air Transat is. Air Canada Vacations puts together packages, but does not seek to own or operate or license hotels. There is no way that the competition bureau would allow Air Canada to keep the Air Transat hotels, as was discussed upthread. More importantly, Air Canada does not want to be in the hotel business. You are not sure about the prospects of Air Transat? Well, go and read its financial statement. Large financial losses are usually not indicative of success. Fuel prices are increasing and Air Transat doesn't have the most efficient fleet so it is to be expected that it will take a hit at some point when it has to pay the higher fuel costs.

Air Canada does not need the problems of Air Transat particularly the hassles that its travel agency brings. Air Transat is more of a travel agency operation with the airline feeding the hotels. This requires a different business model and it is a very tough cut throat business to be in. Air Canada vacations is a small incidental segment of Air Canada that services a specific market niche.
More importantly Air Canada does not need to purchase Air Transat to access additional aircraft. Air Canada already took quick action as soon as the B737Max issue hit and it deserves credit for acting relatively fast. More importantly, Air Canada isn't as jammed up as other airlines as it's delivery schedule was relatively modest with 5 due to arrive in 2020, but 11 deferred deliveries of up to 36 months. This was announced in April 2018, long before the 737Max issues hit.

I draw your attention to the announcement of 30 April-2019 (As reported by CH Aviation)
Air Canada mitigates MAX grounding through leases, cuts
(reprint allowed)
30.04.2019 - 23:09 UTC
Air Canada (AC, Montréal Trudeau) has announced a series of measures mitigating the effects of grounding of the B737-8 fleet, including wet-leases of aircraft, fleet adjustments, route cuts, and commercial agreements with Star Alliance partners.
In terms of its own fleet plans, Air Canada decided to extend the dry-leases of three A320-200 and three E190s which initially were due to leave the fleet. The carrier will also accelerate the addition of six ex-WOW air (WW, Reykjavik Keflavik) A321-200s. The first four units are now due to join Air Canada rouge fleet in May 2019, a month earlier than initially planned. The other two Airbus narrowbodies will deliver to Air Canada later. The Canadian flag carrier will also wet-lease two A330-200s from Qatar Airways (QR, Doha Hamad Int'l). The aircraft will be used on daily flights from Montréal Trudeau to Barcelona El Prat and Paris CDG starting on June 15. Air Canada will also wet-lease a single B767-200(ER) from Omni Air International...

This announcement is very clear and the airline certainly will not need the equipment from Air Transat with the additional equipment on the way. The airline merits some praise for its decisive and quick response under difficult conditions with so many airlines chasing similar aircraft.

YUL

Well, you're the one that pretended that "Air Canada does not need Air Transat's A330's, especially not at their age".

Well, AC's 767s are older and are about to cycle out/time out/ending their usefull life. (Not pretending un-maintained here). They'll be gone & scrapped way before Transat's A330s. You know it and I know it.
So indeed AC could make a good use of those A330s and replace the 767s (If Rouges contract allows it)

Transat's A321s economy seating will be more comfortable than the 737 Max 8 economy seats, we both know. it.

And again Transat is not shutting down anytime soon. (It also has plenty of "liquid" assets - for many years to come). We both know it.

In a few months, once all the new A321s are on property (and the A310s gone), Transat fleet will be about the most efficient around and most importantly, a perfect fit for its network.

‐--------------------------------------------------
Now I agree Air Canada has made a fantastic job in mitigating the effects of the Max 8 grounding - including the help of Transat, as Jagboi just indicated ;-)

And yes, AC has been well managed in recent years. Also Rouge has been a suberb tool to successfuly open up routes having lower yields.

Jagboi

Yes, they took action by leasing aircraft from Transat!

Admiral Ackbar

EDIT: Not worth it

YUL

Probably by error, but you seem to indicate that I wrote that "AB320" thing which I did not (Transpacificflyer did); can you please amend your post?

Otherwise I do agree with your post ;-)

YUL

About that cabin space improvement in Transat's new A321NEO Long Range (fitted with only 199 seats, they'll get up to 15 of this model)

https://www.airtransat.com/en-CA/airbus-a321neolr/on-board/extra-space/

Transpacificflyer

Air Transat has posted a significant financial loss for 2018 and it may also incur a loss in 2019. The airline may therefore have to shuffle its lease obligations to control the losses. Nothing unusual with that as that is common with all airlines when they post losses. One should not assume that the all of Air Transat's new aircraft will definitely be delivered over the next few years. If Air Transat was in great shape its would not be actively soliciting an opportunity to sell.

No claim was made that "Transat is shutting down anytime soon." Unfortunately, the claim has been made that the airline "has plenty of "liquid" assets - for many years to come". Apparently, the person making that claim has not read the financial statement of Air Transat as it is rather obvious that the liabilities exceed those liquid assets. Why anyone would then state, 'We both know it" is ridiculous when the financial statement shows otherwise.

The AC B767 will most definitely not be scrapped before the Air Transat A330s, at least not according to Air Transat.
Air Transat has a financing agreement with AerCap specific to the A330 fleet and it is for 2- A321neos and 5 A321neo LRs . The A330 leases are due to expire between 2020 and 2022. Air Canada does not need the 2 or 3 aircraft that AirTransat might take delivery of in 2020. The B737 max issue is occurring now, and will most likely be resolved this summer, or at the latest by the end of 2019. Air Transat is supposed to be taking delivery of an additional 10 new neos starting this month and continuing into next year, but this is related to its need to replace the A310 fleet. Again, 10 aircraft over the next 1 -2 years will not do much for the AC fleet because they would arrive after the B737 Max issue is resolved.


QUOTE=Jagboi;31062023]Yes, they took action by leasing aircraft from Transat![/QUOTE]

Dramatic hyperbole worthy of Fox News. How about complete disclosure to put the National Enquirer style newsflash in perspective?
One airplane was leased for one month, from April 1 to April 30 in order to operate the Montreal to Cancun route. One aircraft was chartered for 11 days to operate one daily frequency between Vancouver and Montreal from March 20 until March 31.
Hardly noteworthy, and certainly not meriting the use of an exclamation mark ! Are British Airways, and Air France worthy of excitement too because they have short leased aircraft in the past, for longer periods? How about Fiji Airlines having leased from Miami Air for the same Max issue?

The issue of Air Transat's A321s economy seating being more comfortable or having more seating space compared to AC is irrelevant at this time. No one has sat in an operating Air Transat A321 seat, and there remains a strong possibility that the configuration may change, especially if the airline needs to improve its profitability.
The A321 neos are intended to service the middle market "MOMA" requirements. This is essentially where the B767 sits.
Sure, the Air Transat proposed configuration shows 187 Y at Seat width: 46 cm (18 in) / Seat pitch: 79 cm (31 in), but its club class will be limited to 12 seats at Seat width: 56 cm (22 in) /Seat pitch: 97 cm (38 in).
Although, the Rouge option offers slightly less space in the premium section space, it allows more than 5 times as many seats with more space in regular Y compared to Air Transat . Premium Rouge - 37 seats 18.5 in width / Seat pitch 18.5 inch; Plus - 35 seats 18 in width / 35 inch pitch and regular Y at 17.5 in width / 30 in pitch. Air Canada delivers options with its Rouge product such that the minor difference of seat width and pitch is a non factor. In any case, the issue here is not the Air Transat seats because any transfer of the aircraft would result in the configuration changing.

The question asked is if AC could buy Air Transat. Yes, Air Canada "could". Taking into consideration that Air Transat is more of a diversified travel agency/hospitality services bundler with air services, while Air Canada is a profitable airline company with the intention of growing its Asia routes and adding new European route segments, Air Transat is not a particularly good fit, particularly since AC has already stated that it wishes to concentrate on its main business as an airline. Unless Air Canada gets handed a bargain purchase and can shed the travel services, it is unlikely that AC will touch this offer. Common sense predicts that a similar type of operation is a most likely purchaser. With the introduction of unbundled cheap airfares and lower cost options at airlines, the days of small specialized niche players like SunWing and Air Transat are numbered. Blockbuster used to be successful too.

tcook052

Global travel giant Tui doesn't think so as it owns a 49% stake in the Sunwing Group which is the largest vertically integrated travel company in N. America and growing. Transat has lost market share to Sunwing but still has value to the right buyer but I'm not sure it'll be AC as more likely it'll be an offshore buyer like Japan-based H.I.S which recently acquired Canada's Red Label Vacations company.

The Lev

As a passenger I can confirm that 9-across on an A330 is way more comfortable than 7-across on a "crumbling" 767.

As a foreign company, I'm pretty sure that they'd only be allowed to buy 49% of Transat (as is the case with TUI and Sunwing) unless the airline was spun off first.

YUL

As of January 31st, Transat had $620M liquidities on hand. To me, that's a cushion of "many years" anyways you look at it...

It did indeed make a net loss of $24.5M in 2018, but expects to save about $30M per year with its new fleet.

Well, having those A310s gone helps a little... ;-)

https://www.lapresse.ca/affaires/entreprises/201904/30/01-5224051-transat-a-t-pourrait-etre-vendue.php

Haha, but on the other end many has sat in those Max 8 economy seats... I'm hearing the word cattle...

With those A321NEO LR @ 199 seats, Transat will have a better economy product, combined with a lower CASM (versus B737 Max8s / B767s).

Very unlikely they would ever go behond 199 seats as it would require one more FA, lower the range and make them lose that "spacing" edge in economy seatings.

Transpacificflyer

Your statements cannot be used to support your claims since they rely on misinterpreted and misapplied data. A M&A review does not look at one month's values, particularly those of a Canadian travel services business. January is peak travel season, so that cash on hand will be at a peak because funds have not been fully disbursed to service suppliers. More specifically, the annual audited financial statement(s) are what are used for the analysis.

1. As of January 31st, Transat had $620M liquidities on hand. To me, that's a cushion of "many years" anyways you look at it...

One does not look at "liquidities" in isolation. There is an entry called current liabilities that puts current assets into context.
As per the 2018 Financial Statement; Cash and cash equivalents $593,654 of which $510,631 are customer deposits and deferred revenues. (in millions)

More importantly, is the undeniable fact that Air Transat has a debt ratio of 62% A good debt ratio is below 40%. A debt ratio in excess of 60% indicates that a company may be unable to service its debt and has financial weakness. There is no cushion and there has not been a cushion for some time. This is why the company has sold assets. Look at the company current liabilities of $835 million.

2. The due diligence exercise for a M&A places a greater emphasis upon multi year ACTUAL operating Income rather than "Adjusted:" operating income because the actual operating income provides a more reliable indication of the potential profitability associated with the business. Adjusted operating income allows for the inclusion of one off events.
Operating income or loss: 2018 - ($44,575) 2017 - $34,720 2016- ($30,335)

The numbers indicate to me that Air Transat has not been profitable for the past three years. Even if one uses the adjusted operating income values, the company lost money. What part of financial loss do you not comprehend?

3. You claim that "Transat will have a better economy product, combined with a lower CASM (versus B737 Max8s / B767s). Very unlikely they would ever go behond 199 seats as it would require one more FA, lower the range and make them lose that "spacing" edge in economy seatings." So what? It is irrelevant to a discussion of whether another airline would purchase because it is unlikely that the buyer would leave the configuration as it was or planned to be. It is wonderful that you are a fan of the possible Air Transat seating configuration, but it has as much relationship to the discussion of someone singing the praise of Air Asia onboard service compared to Air Transat.

The undeniable, irrefutable fact is that Air Transat is financially weak and has problems arising from its financial state. The stock market has responded accordingly. It is a fact that the airline is actively soliciting offers to sell the company. In my experience, a profitable, successful airline carrier with great prospects would not do this. Air Canada does not need the financial burden of the Air Transat debt, nor does it need to access a fleet in this manner. Air Canada has made a decision to switch to the Boeing product and it is very unlikely that it would flip on this decision. If AC or any other airline had its heart set on gaining access to the new leases, it would be just as easy to wait for Air Transat to seek out debt restructuring or in a worse case scenario, to go into CCAA protection.

There is another important financial detail that was ignored and it has an mpact upon the company financials: As per the annual financial statement notes; Leasing is an important and flexible source of financing for many companies. However, under the current IAS 17 standard, it is difficult to obtain a clear picture of the assets and liabilities related to the leasing agreements of an entity. IFRS 16 introduces a single lessee accounting model under which most of lease-related assets and liabilities are recognized in the statement of financial position. For the lessor, substantially all the current accounting requirements remain unchanged. Certain exemptions will apply to shortterm leases and leases of low value assets. Considering that the Corporation is committed under numerous operating leases in accordance with IAS 17, the Corporation expects that the adoption of IFRS 16 will have a significant impact on its financial statements. The Corporation will be required to recognize an asset related to the right of use and a liability at the present value of future lease payments. Amortization of the right-of-use asset and interest expense on the lease obligation will replace rent expense related to operating leases. The application of IFRS 16 is mandatory and will be effective for the Corporation’s annual reporting period beginning on November 1, 2019. The Corporation continues to assess the impact of the adoption of this new standard on its financial statements and has not determined which transition method it will use.

Translation: This will impact on the declaration of assets and because IFRS 16 means that they will not have the full amount of their fleet on the balance sheet, only the right-of-use portion. In plain language I expect that the asset value declared will decrease. However, the company will have the same lease obligation. The change in accounting rules was to provide greater transparency in regard to property leases and it will most likely make some glowing financial statements a little dimmer.

As I stated previously, the most likely purchaser of the operations would be another hospitality services bundler and not a major airline. IMO Air Canada would incur a financial loss if it took on the debt obligations and operating losses of Air Transat. There is minimal economy of scale to be gained since Air Transat does not provide the same level or quality of service as Air Canada. Air Canada does not need a lower end target demographic hospitality operation that has limited prospects as part of a large airline group.