European regulators are reviewing Air Canada’s (TSX:AC) deal to buy travel company Transat A.T. amid concerns that the takeover may reduce competition and lead to higher prices.
A European Union competition commission is worried that the proposed deal could significantly reduce competition on 33 origin and destination city pairs between Europe and Canada. These include 29 where both companies offer direct services and four where one company flies direct and the other one indirect via one of its hubs.
The European commission said in a news release on Monday that it was giving itself until September 30 to decide whether to approve the deal. The commission said that even if WestJet expanded its transatlantic operations to Europe, it is unlikely that it would be enough to offset the potential loss of competing routes caused by the Air Canada/Transat deal.
Air Canada’s proposal to buy Transat for $720 million has been agreed to by shareholders, but still requires regulatory approval in both Canada and the European Union. The Canadian Competition Bureau warned in March that eliminating the rivalry between the two Montreal-based carriers would discourage competition by prompting higher prices and fewer services.
The takeover would give Air Canada control of more than 60% of transatlantic air travel from Canada and 45% of passenger capacity to sun destinations, according to the Canadian Competition Bureau’s report.