Canada Gazette, Part I, Volume 155, Number 13: ORDERS IN COUNCIL
March 27, 2021
DEPARTMENT OF TRANSPORT
CANADA TRANSPORTATION ACT
Order approving the acquisition of Transat A.T., Inc. by Air Canada
P.C. 2021-70 February 9, 2021
Whereas subsection 53.2(1) of the Canada Transportation Act (the Act) provides that no person shall complete a proposed transaction referred to in subsection 53.1(1) of the Act unless the transaction is approved by the Governor in Council;
Whereas Air Canada and Transat A.T. Inc. (the parties) gave notice on July 17, 2019 to the Minister of Transport, in accordance with paragraph 53.1(1)(a) of the Act, of a proposed transaction in which Air Canada would acquire all of the issued and outstanding shares of Transat A.T. Inc.;
Whereas a departmental report has been presented to the Minister on concerns in respect of the proposed transaction with regard to the public interest as it relates to national transportation;
Whereas the Commissioner of Competition reported to the Minister and the parties on March 27, 2020, in accordance with subsection 53.2(2) of the Act, on concerns regarding potential prevention or lessening of competition that may occur as a result of the transaction;
Whereas following the review of these reports, the Minister, in accordance with subsection 53.2(4) of the Act, consulted with the Commissioner and requested that the parties address the concerns referred to in subparagraphs 53.2(4)(b)(i) and (ii) of the Act;
Whereas, in accordance with subsection 53.2(5) of the Act, the parties have informed the Minister and the Commissioner of the measures that they are prepared to undertake to address the concerns referred to in subparagraphs 53.2(4)(b)(i) and (ii) of the Act, respectively;
Whereas the Minister has, in accordance with subsection 53.2(6) of the Act, obtained the Commissioner's assessment of the adequacy of the undertakings proposed by the parties to address the concerns that the Commissioner has regarding potential prevention or lessening of competition that may occur as a result of the transaction;
And whereas, pursuant to subsection 53.2(7) of the Act, the Administrator in Council is satisfied that, taking into account the measures that the parties are prepared to undertake, it is in the public interest to approve the proposed transaction, as it would notably benefit the overall Canadian air sector given the significant impacts to that sector as a result of the coronavirus disease 2019 (COVID-19);
Therefore, His Excellency the Administrator of the Government of Canada in Council, on the recommendation of the Minister of Transport, pursuant to subsection 53.2(7) of the Canada Transportation Act, approves the proposed transaction in which Air Canada would acquire all of the issued and outstanding shares of Transat A.T. Inc., subject to the terms and conditions set out in the attached schedule.
Terms and conditions
1. Definitions and Interpretation
- (a) The following definitions shall apply to these Terms and Conditions.
- “Act” means the Canada Transportation Act (Canada).
- “Aeroplan Access Measure” has the meaning given to it in paragraph 5.
- “Affiliate” means, in respect of a Person, any other Person controlling, controlled by or under common control which such first Person, whether directly or indirectly and “control” means directly or indirectly hold securities or other interests in a Person
- (i) to which are attached more than 50% of the votes that may be cast to elect directors or persons exercising similar functions, or
- (ii) entitling the holder to receive more than 50% of the profits of the Person or more than 50% of its assets on dissolution.
- “Air Canada” means Air Canada.
- “Air Canada Party” means, during such time as each is an Affiliate of Air Canada:
- (i) Air Canada Rouge and its Subsidiaries;
- (ii) Air Canada Vacations and its Subsidiaries; and
- (iii) Transat and its Subsidiaries; and
- “Air Canada Parties” shall be construed accordingly.
- “Air Canada Rouge” means Air Canada Rouge LP, doing business as Air Canada Rouge.
- “Air Canada Vacations” means Touram Limited Partnership, doing business as Air Canada Vacations.
- “Applicable Law” or “Applicable Laws” means:
- (i) any applicable statute or proclamation or any delegated or subordinate legislation, including regulations, by-laws;
- (ii) any applicable order, direction, directive, request for information, policy, administrative interpretation, guideline or rule of or by any Governmental Authority; and
- (iii) any applicable judgment of a relevant court of law, board, arbitrator or administrative agency which is a binding precedent in the Province of Ontario,
- in each case, in force in the Province of Ontario, or otherwise binding on Air Canada, any Air Canada Party, or Her Majesty.
- “Business Day” means any day other than a Saturday, a Sunday, a statutory holiday in the Provinces of Ontario, Quebec or Manitoba or any day on which banks are not open for business in the City of Toronto, Ontario, the City of Winnipeg, Manitoba or the City of Montreal, Quebec.
- “Closing” means the closing of the Transaction.
- “Effective Date” means the date of Closing.
- “Eligible New Entrant” means an airline proposing to increase or introduce new direct scheduled passenger air transport service on a Relevant City Pair in connection with any applicable measures contemplated herein, that holds or is qualified to hold and is applying to obtain all necessary licenses and meets or is qualified to and is taking appropriate actions to meet all other regulatory requirements to offer passenger air transport services on the Relevant City Pair, provided that Air Canada shall not be obliged to conclude arrangements with such airline until such airline actually obtains all necessary licenses and meets all other regulatory requirements to offer passenger air transport services on the Relevant City Pair. For greater certainty, if an Eligible New Entrant ceases to meet such requirements, any obligations that Air Canada may have with respect to such entity pursuant to the measures contemplated herein will cease unless and until the entity meets such requirements.
- “Fare Combinability Measure” has the meaning given to it in paragraph 4.
- “Governmental Authority” means Her Majesty and any other domestic or foreign, federal, provincial, state, territorial, regional, municipal or local governmental authority, quasi-governmental authority, court, government or self-regulatory organization, commission, board, tribunal, organization, or any regulatory, administrative or other agency, or any political or other subdivision, department, or branch of any of the foregoing, having legal jurisdiction in any way over Air Canada or an Air Canada Party, as the case may be, or any aspect of the performance of the these Terms and Conditions, in each case to the extent it has or performs legislative, judicial, regulatory, administrative or other functions within its jurisdiction; provided, for greater certainty, that airport authorities and managers of airports are not Governmental Authorities.
- “Her Majesty” means Her Majesty in Right of Canada as represented by the Minister.
- “IATA” means International Air Transport Association.
- “Implementation and Monitoring Agreement” means the implementation and monitoring agreement between Her Majesty and Air Canada, providing for the implementation and monitoring of these Terms and Conditions to be entered into prior to the Closing, as amended from time to time.
- “Interline Agreement / SPA Measure” has the meaning given to it in paragraph 3.
- “Maple Leaf Lounge Access Measure” has the meaning given to it in paragraph 6.
- “Minister” means the Minister of Transport.
- “Monitor” means the Person appointed by Air Canada pursuant to the provisions of the Implementation and Monitoring Agreement (or any substitute appointed thereto), and any employees, agents or other Persons acting for or on behalf of the Monitor, to oversee and monitor Air Canada's compliance with these Terms and Conditions and the Implementation and Monitoring Agreement.
- “Offer Period” means the number of years from the Effective Date for which specified measures are available to an Eligible New Entrant on a Relevant City Pair as specified in Appendix 1.
- “Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
- “Relevant City Pair” has the meaning ascribed thereto in the Relevant City Pair Schedule.
- “Relevant City Pair Schedule” means Appendix 1 attached hereto.
- “Slot” means a permission granted by the manager of an airport, which allows the grantee to a landing or departure at that airport during a specified time period; and in the case of YUL means Slots for scheduled movements; and in the case of slots referred to in Appendix 1 means Slots available to Air Canada or to any Air Canada Party.
- “Slot Surrender Measure” has the meaning given to it in paragraph 2.
- “Subsidiary” means in respect of a Person, any other Person controlled by such first Person, whether directly or indirectly, and includes a Subsidiary of that Subsidiary, where control has the meaning ascribed thereto in the definition of “Affiliate” herein.
- “Terms and Conditions” means these terms and conditions, as specified by the Governor in Council in approving the Transaction, in accordance with section 53.2(7) of the Act, as amended from time to time, pursuant to section 53.2(8) the Act.
- “Transaction” means the proposed acquisition by Air Canada of Transat pursuant to the Arrangement Agreement dated October 9, 2020 between Air Canada and Transat, as amended.
- “Transat” means Transat A.T. Inc.
- “Transat Brand” means the brand under which Transat and its Subsidiaries carry on the Transat Business.
- “Transat Business” means the Quebec based leisure travel business undertaken by Transat and its Subsidiaries as such business may evolve and change in Air Canada's commercially reasonable discretion, as a meaningful component of Air Canada's Quebec-based leisure travel business.
- (b) Three-letter airport location identifier codes used in these Terms and Conditions shall refer to the corresponding airports, as designated by IATA.
These Terms and Conditions shall be interpreted according to the following provisions, unless the context requires a different meaning:
- (i) Obligations of Air Canada provided for in these Terms and Conditions shall be deemed to include the obligation to cause Air Canada Parties to perform the obligations, as applicable.
- (ii) The headings, marginal notes and references to them in these Terms and Conditions are for convenience of reference only, shall not constitute a part of these Terms and Conditions, and shall not be taken into consideration in the interpretation of, or affect the meaning of, these Terms and Conditions.
- (iii) Except where the context requires otherwise (irrespective of whether some, but not all, references in an Appendix specifically refer to that Appendix or to other portions of these Terms and Conditions) references to specific Sections, Clauses, Paragraphs, Subparagraphs, Appendices, and other divisions of these Terms and Conditions are references to such Sections, Clauses, Paragraphs, or Subparagraphs of, Schedules to, or divisions of these Terms and Conditions and the terms “Section” and “Clause” are used interchangeably and are synonymous.
- (iv) Except where the context requires otherwise, references to specific Sections, Clauses, Paragraphs, Subparagraphs, Schedules, and other divisions of these Terms and Conditions followed by a number are references to the whole of the Section, Clause, Paragraph, Subparagraphs, Appendix or other division of these Terms and Conditions as applicable, bearing that number, including all subsidiary provisions containing that same number as a prefix.
- (v) Except where the context requires otherwise, references in these Terms and Conditions to specific Parts, Sections, Clauses, Paragraphs, Subparagraphs, Appendices, and other divisions of these Terms and Conditions shall be construed such that each such reference on a page of these Terms and Conditions will be read to be preceded by and to include the prefix Section number or other reference at the top of the applicable page, and all cross-references to any Section in these Terms and Conditions shall be interpreted to include the applicable prefix Section number or other reference.
- (vi) The Appendices to these Terms and Conditions is an integral part of these Terms and Conditions and a reference to these Terms and Conditions includes a reference to the Appendices.
- (vii) All references in these Terms and Conditions to an Appendix shall be to an Appendix of these Terms and Conditions.
- (viii) All capitalized terms used in an Appendix shall have the meanings given to such terms in the Appendix, unless stated otherwise in a particular Appendix in which case such definition shall have the meaning given to it in that Appendix solely for the purposes of that Appendix.
- (ix) Words importing persons or parties are to be broadly interpreted and include an individual, corporation, firm, partnership, joint venture, trust, unincorporated organization, Governmental Authority, unincorporated body of persons or association and any other entity having legal capacity, and the heirs, beneficiaries, executors, administrators or other legal representatives of a person in such capacity.
- (x) Unless the context otherwise requires, wherever used herein the plural includes the singular, the singular includes the plural, and each of the masculine, feminine and neuter genders include all other genders.
- (xi) References to any standard, principle, agreement or document include (subject to all relevant approvals and any other provisions of these Terms and Conditions concerning amendments) a reference to that standard, principle, agreement or document as amended, supplemented, restated, substituted, replaced, novated or assigned.
- (xii) References to any Applicable Law, including any statutes or other Applicable Law specifically referred to herein, whether or not amendments or successors to such Applicable Law are referred to herein, are to be construed as references to that Applicable Law as from time to time amended or to any Applicable Law covering the same or similar subject matter from time to time replacing, extending, consolidating or amending the same.
- (xiii) References to a statute shall include all regulations, by-laws, ordinances and orders made under or pursuant to the statute.
- (xiv) References to Persons shall include their successors and assigns. References to a public organization shall include their successors and assigns, and if a public organization ceases to exist or ceases to perform its functions without a successor or assign, references to such public organization shall be deemed to include a reference to any public organization or any organization or entity which has taken over either or both the functions and responsibilities of such public organization.
- (xv) A reference in these Terms and Conditions to any right, power, obligation or responsibility of any Governmental Authority shall be deemed to be a reference to the Governmental Authority that, pursuant to Applicable Laws has such right, power, obligation or responsibility at the relevant time.
- (xvi) The words in these Terms and Conditions shall bear their natural meaning.
- (xvii) Each of Air Canada's and Her Majesty's respective obligations shall be construed as separate obligations owed to the other.
- (xviii) References containing terms such as:
- i. “hereof”, “herein”, “hereto”, “hereinafter”, and other terms of like import are not limited in applicability to the specific provision within which such references are set forth but instead refer to these Terms and Conditions taken as a whole; and
- ii. “includes” and “including”, whether or not used with the words “without limitation” or “but not limited to”, shall not be deemed limited by the specific enumeration of items but shall, in all cases, be deemed to be without limitation and construed and interpreted to mean “includes without limitation” and “including without limitation”.
- (xix) In construing these Terms and Conditions, the rule known as the ejusdem generis rule shall not apply nor shall any similar rule or approach apply to the construction of these Terms and Conditions and, accordingly, general words introduced or followed by the word “other” or “including” or “in particular” shall not be given a restrictive meaning because they are followed or preceded (as the case may be) by particular examples intended to fall within the meaning of the general words.
- (xx) Where these Terms and Conditions states that an obligation shall be performed “no later than” or “within” or “by” a stipulated date or event which is a prescribed number of days after a stipulated date or event, the latest time for performance shall be 5:00 p.m. on the last day for performance of the obligation concerned, or, if that day is not a Business Day, 5:00 p.m. on the next Business Day.
- (xxi) Where these Terms and Conditions states that an obligation shall be performed “no later than” or “by” a prescribed number of days before a stipulated date or event or “by” a date which is a prescribed number of days before a stipulated date or event, the latest time for performance shall be 5:00 p.m. on the last day for performance of the obligation concerned, or if that day is not a Business Day, 5:00 p.m. on the next Business Day.
- (xxii) Where these Terms and Conditions states that an obligation shall be performed “on” a stipulated date, the latest time for performance shall be 5:00 p.m. on that day, or, if that day is not a Business Day, 5:00 p.m. on the next Business Day.
- (xxiii) Any reference to time of day or date means the local time or date in Ontario.
- (xxiv) Unless otherwise indicated, time periods will be strictly construed.
- (xxv) Whenever the terms “will” or “shall” are used in these Terms and Conditions in relation to Air Canada or Her Majesty they shall be construed and interpreted as synonymous and to read “Air Canada shall” or “Her Majesty shall” as the case may be.
- (xxvi) Any reference to currency is to Canadian currency and any amount advanced, paid or calculated is to be advanced, paid or calculated in Canadian currency.
- (xxvii) Unless otherwise identified in these Terms and Conditions, all units of measurement in any documents submitted by Air Canada to Her Majesty shall be in accordance with the SI system of units.
- (xxviii) Unless otherwise stated, any time a party's approval, consent, authorization or other exercise of discretion is required, such approval, consent, authorization or discretion shall be exercised reasonably and communicated in a timely manner.
Competition and Public Interest Measures
2. Slot Surrender
For the Offer Period specified in the Relevant City Pair Schedule, at the request of an Eligible New Entrant, Air Canada shall without unreasonable delay agree to transfer a specified number of Slots at specified airports on a Relevant City Pair, to such Eligible New Entrant, as specified in the Relevant City Pair Schedule, subject to and in accordance with the provisions of the Implementation and Monitoring Agreement (“Slot Surrender Measure”).
3. Interline Agreement
For the Offer Period specified in the Relevant City Pair Schedule, at the request of an Eligible New Entrant, Air Canada shall without unreasonable delay negotiate, in good faith, and agree to enter into an interline agreement (in accordance with IATA standards) and negotiate, in good faith, and agree to enter into a special prorate agreement, each on commercially reasonable terms, and with a term of five years, subject to one five year renewal at the Eligible New Entrant's option, from the date on which the Eligible New Entrant begins offering direct service on a Relevant City Pair, with one Eligible New Entrant per Relevant City Pair to facilitate “behind” and/or “beyond” flow traffic to up to five airports connecting to the Relevant City Pair, as specified in the Relevant City Pair Schedule, subject to and in accordance with the provisions of the Implementation and Monitoring Agreement (“Interline Agreement / SPA Measure”).
4. Fare Combinability
For the Offer Period specified in the Relevant City Pair Schedule, at the request of an Eligible New Entrant, Air Canada shall without unreasonable delay negotiate, in good faith, and agree to enter into a fare combinability agreement with one Eligible New Entrant per Relevant City Pair to allow the Eligible New Entrant to offer for sale direct round trip flights on the Relevant City Pair with one direction operated by Air Canada and the other direction operated by the Eligible New Entrant, with a term of five years, subject to one five-year renewal at the Eligible New Entrant's option, from the date on which the Eligible New Entrant begins offering direct service on the Relevant City Pair, as specified in the Relevant City Pair Schedule, subject to and in accordance with the provisions of the Implementation and Monitoring Agreement (“Fare Combinability Measure”).
5. Aeroplan Access
For the Offer Period specified in the Relevant City Pair Schedule, at the request of an Eligible New Entrant, Air Canada shall without unreasonable delay negotiate, in good faith, and agree to enter into an agreement to host one Eligible New Entrant per Relevant City Pair in its frequent flyer program in connection only with direct service on the Relevant City Pair, for a period of five years, subject to one five-year renewal at the Eligible New Entrant's option, from the date on which the Eligible New Entrant begins offering direct service on the Relevant City Pair, as specified in the Relevant City Pair Schedule, subject to and in accordance with the provisions of the Implementation and Monitoring Agreement (“Aeroplan Access Measure”).
6. Maple Leaf Lounge Access
For the Offer Period specified in the Relevant City Pair Schedule, at the request of an Eligible New Entrant, Air Canada shall without unreasonable delay negotiate, in good faith, and agree to enter into an agreement with one Eligible New Entrant per Relevant City Pair to offer, for a period of five years from the date on which the Eligible New Entrant begins offering direct service on the Relevant City Pair, subject to one five-year extension at the option of the Eligible New Entrant, access to the Maple Leaf Lounge at the Canadian airport on the Relevant City Pair, as specified in the Relevant City Pair Schedule subject to and in accordance with the provisions of the Implementation and Monitoring Agreement (“Maple Leaf Lounge Access Measure”).
- (a) Air Canada shall not seek or receive any direct or indirect, compensation or recompense from any third party for or in respect of any of the measures in paragraph 2 hereof, save and except commercially reasonable compensation or recompense for any Slot at any airport outside Canada.
- (b) Notwithstanding the references to “up to one Eligible New Entrant” in paragraphs 3 to 6 hereof, Air Canada shall make available any or all of the measures provided for in paragraphs 3 to 6 hereof inclusive on each Relevant City Pair, in accordance with the terms of such measures as specified in the Implementation and Monitoring Agreement, to:
- (i) an Eligible New Entrant that receives a Slot pursuant to the measure in paragraph 2 hereof on a Relevant City Pair; and
- (ii) up to one Eligible New Entrant that does not receive a Slot pursuant to the measure in paragraph 2 hereof on a Relevant City Pair and is not an Affiliate of an Eligible New Entrant that has received a Slot pursuant to the measure in paragraph 2 hereof on a Relevant City Pair.
Public Interest Measures
8. Transat Business Measure
For five years following Closing, Air Canada shall maintain a head office for the Transat Business in the Province of Québec and the Transat Brand for the Transat Business.
For two years following Closing, Air Canada shall ensure that no fewer than 1,500 full-time active employees are employed exclusively in the conduct of the combined leisure travel businesses of Air Canada and Transat, which for greater certainty shall consist of the businesses conducted by the Air Canada Parties.
10. New Destinations
Within five years of Closing, Air Canada shall launch five new international (including transborder) non-stop routes that were not offered by Air Canada in 2019. Air Canada shall operate such routes for a period of at least two consecutive year-round or four consecutive winter or summer IATA seasons. Notwithstanding the foregoing, Air Canada shall not be required to launch or operate such routes if the Monitor, acting reasonably and taking into consideration such relevant information and circumstances as Air Canada or the Monitor may identify, determines that launching or operating such service would not be commercially feasible.
11. Maintenance in Canada
Within one year following Closing, Air Canada shall negotiate, in good faith, and agree to enter into the agreements contemplated in the letter of intent between Air Canada and Avianor dated September 10, 2019 and the letter of intent between Air Canada and AAR dated February 17, 2020, regarding the construction and operation of facilities in the Province of Quebec for all airframe overhaul maintenance for all Air Canada and Air Canada Party Airbus A330, A320 family and A220 aircraft, providing that airframe overhaul maintenance shall, subject to the terms of the agreements to be entered into and consistent with the provisions of this paragraph 11, commence within four years after Closing. In particular, Air Canada shall provide its available volumes of A330, A320 and A220 airframe overhaul maintenance to support the construction and operation of A330 and A220 airframe overhaul maintenance facilities in Québec by Avianor and AAR; it being understood, however, that the decision of the independent suppliers to construct such facilities will be made based on, among other considerations, commercially reasonable volume projections, which will themselves be heavily dependent on when the Canadian airline industry is no longer substantially affected by the COVID-19 pandemic.
12. Air Transport Agreements
For five years from Closing, Air Canada shall consent to the Minister reallocating capacity granted to Transat under the air transportation agreements with Panama, Israel and Colombia in the event that such capacity is reasonably required by a Canadian new entrant.
13. Scope and Duration
These Terms and Conditions shall come into force at and subject to Closing. The duration of each of these Terms and Conditions is set out in the relevant paragraph hereof, subject to and in accordance with the provisions of the Implementation and Monitoring Agreement.
- (a) Air Canada shall provide to the Minister a report and a synopsis thereof every six months stipulating how Air Canada complied with these Terms and Conditions;
- (b) for the five calendar years beginning with calendar year 2021, Air Canada shall provide to the Minister a report within 60 days after the end of each calendar year (provided, however, that the report for the 2021 calendar year shall only cover the period between the Effective Date and December 31, 2021 and such report may be provided within 120 days after the end of the 2021 calendar year) analyzing the pricing variations for air only tickets and the air portion of packaged tickets, both by fare class and in the aggregate, for nonstop flights operated on the routes listed in Appendix 2 during the corresponding calendar year, together with Air Canada's costs, Air Canada's and industry average pricing for both the European and Sun destination regions, for comparison purposes; and Air Canada shall provide to the Minister the ticketing data and financial data with respect to such routes listed in Appendix 2 for the corresponding calendar year;
- (c) the Minister may disclose or publish (including on websites) the synopsis of the reports referred to in paragraph (a); the reports, but not the ticketing data or the financial data, referred to in paragraph (b); and reports based on the reports and data referred to in paragraphs (a) and (b), provided that:
- (i) all such reports will be prepared subject to and in accordance with the provisions of the Implementation and Monitoring Agreement;
- (ii) Air Canada will be consulted in connection with and provided with the opportunity to review in advance any such reports and Air Canada's views regarding the content of such reports will be reflected in an appropriate manner; and
- (iii) with respect to reports in connection with paragraph (b), Air Canada and the Minister acknowledge that the purpose of such reports will be to identify the specific impact of the Transaction on ticket pricing on the routes listed in Appendix 2; and
- (d) subject to any legally recognized privilege, Air Canada shall provide to the Minister all information, reports, documents, records and the like in the possession of, or available to, Air Canada or the Air Canada Parties, as the Minister may reasonably require from time to time for any purpose in connection with these Terms and Conditions.
15. Implementation of the Terms and Conditions
- (a) Air Canada and Transat shall not complete the Transaction until Her Majesty and Air Canada have entered into the Implementation and Monitoring Agreement. The Implementation and Monitoring Agreement shall come into force at and subject to Closing.
- (b) Air Canada shall comply with the provisions of the Implementation and Monitoring Agreement.
- (c) Her Majesty and Air Canada may agree in writing, from time to time, to vary, amend or supplement the provisions of the Implementation and Monitoring Agreement, consistent with the provisions of these Terms and Conditions.
RELEVANT CITY PAIRS
For purposes of paragraphs 2 through 6 of these Terms and Conditions, the specified Offer Period, numbers, routes and airports are set out in the chart below, provided that:
- (a) the measures contemplated in paragraphs 2 through 6 apply only up to the specific numbers, on the specific routes and to the specific airports set out in the chart below;
- (b) the number of Slots specified in the chart below represent the aggregate maximum number of Slots to be transferred by Air Canada on a specified route, at a specified airport;
- (c) notwithstanding anything to the contrary in these Terms and Conditions, Air Canada will not be required to surrender Slots (A) that would prevent it from offering service during any week equivalent to the service Air Canada offered on a standalone basis during such week in the winter 2018 / 2019 IATA season (for winter Slots) or the summer 2019 IATA season (for summer Slots) or (B) that it no longer holds;
- (d) the measures contemplated with respect to London apply only to London Gatwick Airport and not to London Heathrow Airport; and
- (e) notwithstanding anything to the contrary in these Terms and Conditions, the IATA winter 2030 / 2031 season is the last season for which an Eligible New Entrant may request Slots pursuant to paragraph 2 of these Terms and Conditions and Air Canada shall not be required to enter into any agreements contemplated by paragraphs 3 to 6 of these Terms and Conditions after the last day of the IATA winter 2030 / 2031 season.
|Region||Relevant City Pair||Measures||Offer Period|
|Benelux||Toronto – Amsterdam||
|Montréal – Brussels||
|Central Europe||Toronto – Zagreb||
|France||Montréal – Bordeaux||
|Montréal – Lyon||
|Montréal – Nice||
|Montréal – Marseille||
|Montréal – Paris||
|Montréal – Toulouse||
|Québec City – Paris||
|Toronto – Paris||
|Greece||Montréal – Athens||
|Toronto – Athens||
|Ireland||Toronto – Dublin||
|Italy||Montréal – Rome||
|Montréal – Venice||
|Toronto – Rome||
|Toronto – Venice||
|Overseas Territories||Montréal – Fort de France||
|Montréal – Pointe a Pitre||
|Portugal||Montréal – Lisbon||
|Toronto – Lisbon||
|Toronto – Porto||
|Spain||Montréal – Barcelona||
|Toronto – Barcelona||
|Switzerland||Montréal – Basel||
|UK||Montréal – London Gatwicktable 1 note *||
|Toronto – Glasgow||
|Toronto – London Gatwicktable 1 note *||
|Toronto – Manchester||
|Vancouver – London Gatwicktable 1 note *||
Table 1 Notes
|Sun Destinations||European Destinations|
|Montreal-Fort De France||Montreal-Marseille|
|Montreal-Montego Bay||Montreal-Tel Aviv-Yafo|
|Montreal-Port Au Prince||Montreal-Zurich|
|Montreal-Puerto Plata||Quebec City-Lyon|
|Montreal-Puerto Vallarta||Quebec City-Brussels|
|Montreal-Punta Cana||Quebec City-Marseille|
|Montreal-San Jose||Quebec City-Nice|
|Montreal-Santa Clara||Quebec City-Paris|
|Montreal-Santo Domingo||Quebec City-Rome|
|Ottawa-Punta Cana||Quebec City-Prague|
|Quebec City-Punta Cana||Toronto-Athens|
|Toronto-Sint Maarten-Saint Kitts||Vancouver-Barcelona|
2. Ticketing Data
- a. Passenger Data, including:
- i. Ticket number;
- ii. Flight date;
- iii. Ticketing date;
- iv. Ticket origin;
- v. Ticket destination;
- vi. Booking class code;
- vii. Operating carrier identifier;
- viii. Marketing carrier identifier;
- ix. Ticket revenue amount (excluding taxes and fees);
- x. Taxes and fees; and
- xi. Surcharges (by type).
3. Financial Data
- a. Unaudited quarterly financial statements for Air Canada and each of the Air Canada Parties
- b. Profit and loss (P&L) statements for each of the routes listed in the Appendix
(This note is not part of the Order.)
This Order in Council (the Order), issued pursuant to subsection 53.2(7) of the Canada Transportation Act (the Act), approves the proposed acquisition of Transat A.T. Inc. (Transat) by Air Canada (the Proposed Transaction), subject to the Terms and Conditions set out in the annexed schedule.
The objective of this Order is to approve, subject to certain Terms and Conditions (see the Schedule to the Order), the Proposed Transaction, which the Minister of Transport has recommended to be in the public interest. The public interest considerations take into account the extraordinary impact that the COVID-19 pandemic has had on the air sector in Canada, as well as efficiencies and other economic benefits that would result from the acquisition.
The Terms and Conditions establish mitigating measures to address concerns with respect to the effect of the Proposed Transaction on the public interest. The Terms and Conditions are largely based on measures that were proposed by the Parties in the form of undertakings, under subsection 53.2(5) of the Act, to address competition and public interest concerns arising from the Proposed Transaction; these undertakings were finalized by the Parties following consultation with the Minister and the Commissioner of Competition (the Commissioner). The Terms and Conditions form part of the Order and are therefore enforceable under the Act. The Terms and Conditions will be administered in accordance with an Implementation and Monitoring Agreement (the Agreement). The Agreement will set out the administrative details around how the Parties will implement the Terms and Conditions and will further provide that the Minister will measure and monitor compliance through an independent monitor. The Terms and Conditions require that the Parties enter into the Agreement prior to the closing of the Proposed Transaction.
On June 27, 2019, the Parties announced a definitive agreement regarding the Proposed Transaction. On July 17, 2019, the Parties filed an acquisition notification with the Minister, pursuant to subsection 53.1(1) of the Act, and also with the Commissioner and the Canadian Transportation Agency.
On August 26, 2019, the Minister determined that the Proposed Transaction raised public interest considerations relating to national transportation and therefore triggered a 150-day formal public interest review, as required by the Act. Given the complexity of the Proposed Transaction, the Minister also exercised his authority pursuant to subsection 53.1(6) to provide an extension (in this case, 100 days) to Transport Canada to complete its review of the Proposed Transaction. Likewise, the Minister granted two extensions to the Commissioner (totalling 110 days), in accordance with subsection 53.2(2) of the Act, to complete the Commissioner's report.
On March 27, 2020, the Minister received the report of the Commissioner issued under subsection 53.2(2) of the Act, setting out the Commissioner's concerns regarding the potential prevention or lessening of competition as a result of the Proposed Transaction. On the same date, as per subsection 53.2(3) of the Act, the Commissioner's report was made public.
On May 2, 2020, the Minister received from Transport Canada the public interest assessment (PIA) referred to in subsection 53.1(6) of the Act. Pursuant to subsection 53.2(4) of the Act, the Minister consulted with the Commissioner regarding any overlapping concerns between the Minister's PIA and the Commissioner's Report, and on May 25, 2020, the Minister requested that the Parties address with the Minister the Minister's concerns, and with the Commissioner the Commissioner's concerns.
On May 14, 2020, the Canadian Transportation Agency determined that the resulting entity after the Proposed Transaction is complete would be Canadian under subsection 53.2(1) and section 53.3 of the Act.
The report of the Commissioner on the potential prevention or lessening of competition, and the PIA on the effect the Proposed Transaction may have on the public interest as it relates to national transportation were largely based on information that predated the devastating impact that the COVID-19 pandemic has had on the global air transportation sector, including in Canada, as they were written at a time when these impacts were not yet fully understood.
The pandemic led the Parties to renegotiate certain terms of the Proposed Transaction, most notably the purchase price. On October 10, 2020, the Parties announced a revised agreement for the Proposed Transaction.
Transport Canada officials sought additional information from the Parties and, using external expert advisors, conducted additional analysis on the effect that COVID-19 would have on the analysis conducted pre-pandemic, and the Parties were also provided with information on analysis conducted with respect to that effect.
The Parties then proposed detailed measures that they were willing to undertake to address identified competition and public interest (as it relates to national transportation) concerns to each of the Minister and the Commissioner pursuant to subsection 53.2(5) of the Act. These undertakings were finalized by the parties following consultation with the Minister and the Commissioner.
The Minister received the Commissioner's assessment of the adequacy of the Parties' proposed undertakings on December 9, 2020, in accordance with subsection 53.2(6) of the Act. In the Commissioner's view, the proposed undertakings do not conform to the principles of merger remedy design and are unlikely to result in effective entry for new competitors.
In making his recommendation to the Governor in Council, the Minister considered whether it would be in the public interest to approve the Proposed Transaction, and if terms and conditions were necessary, taking into account the benefits and concerns raised in the PIA and in the Commissioner's report; the measures proposed, in the form of undertakings, by the Parties to address both the public interest as it relates to national transportation and competition concerns; the Commissioner's assessment of the proposed undertakings; and the potential benefits of the Proposed Transaction in the context of the impact of COVID-19 on Canada's air transport system.
Economic and social
(a) Commissioner's report
The Commissioner particularly noted the increased market share for non-stop travel that would be controlled by the Parties following the Proposed Transaction. Concerns centered on the likelihood of price increases, reduced choice for travellers, decrease in service, and a reduction in demand for air passenger services and vacation packages as a result of price increases in the areas of overlap between the Parties' networks.
The Commissioner also identified structural barriers to entry for potential competitors to replace Air Transat footnote 1 as an independent entity, including challenges for gaining slots at slot-constrained airports in Canada and Europe. footnote 2
(b) Transport Canada's public interest assessment
Transport Canada conducted internal research, and also retained an external expert to undertake economic analysis and a business valuation of the Proposed Transaction. Transport Canada officials also took the Commissioner's conclusions into consideration.
The PIA, which was finalized on May 2, 2020, found that the Proposed Transaction could lead to less choice and significant price increases for Canadian travellers and international tourists. The PIA concluded that these impacts would be significantly more pronounced on European destinations than sun destinations, mostly as a result of the substitutability of sun destinations by travellers and the presence of more competition coming from Canadian carriers on sun routes. While negative impacts on competition would clearly not occur in the face of the severe decline in travel demand wrought by COVID-19, such impacts would likely occur as the market recovers in future.
On the other hand, the Proposed Transaction could bring greater operating and network efficiencies to the acquired entity that would generate benefits for travellers, such as the introduction of new routes, enhanced connectivity, time savings and cost savings achieved by reducing double marginalization. Double marginalization takes place when a passenger travels with two unaffiliated airlines on different legs of a connecting journey, and is thus charged a markup by both carriers. The Proposed Transaction could also bring about other economic benefits to the wider aerospace sector, including increased employment.
(c) Impacts of COVID-19
The COVID-19 pandemic was a key factor in the final assessment of whether or not the Proposed Transaction would be in the public interest.
At the time this explanatory note was prepared, Canada and the rest of the world were still gripped by the second wave of COVID-19. While more is now known about the impacts of COVID-19 on the global air sector, the sector's recovery trajectory is still unclear. Business leaders and the International Air Transport Association continue to shift and revise recovery forecasts for the global air sector. It is clear, however, that the impacts to date have been extremely significant for the air transport industry, and recovery will take some time.
The great reduction in demand for air travel as a result of the COVID-19 pandemic has reduced the immediate significance of the competition concerns as expressed in the PIA, pending recovery. One example of this reduction in demand is Air Canada's decision to retire Rouge's entire fleet of Boeing 767s, while exiting most of the leisure European routes it previously served in direct competition to Transat. At the same time, it is doubtful that some of the benefits for travellers forecasted in the Parties' original proposal, such as the creation of new routes, would fully materialize. However, the Proposed Transaction may provide operating efficiencies to the wider Canadian air transportation system that may be beneficial as it recovers from the pandemic. The Proposed Transaction would also help stabilize and maintain some employment in the air sector.
Moreover, all air carriers are facing a difficult financial situation in the face of the pandemic, and Transat's most recent financial reporting (Fourth Quarter 2020) clearly identified challenges for the company, including the need to raise significant financing to continue operating and compensate for ongoing losses. As a result, it cannot be assumed that Transat, as an independent entity, would retain the ability to offer the same level of connectivity and competition to Europe following the pandemic that it did when the Proposed Transaction was first announced. Thus, rejecting the Proposed Transaction would not necessarily serve to mitigate the loss of competition identified in the PIA and in the Commissioner's initial report because much of this service could be lost anyway, including the 29 routes that Transat previously operated overlapping with Air Canada, and 17 standalone routes. In fact, allowing the merger could have the impact of maintaining more connectivity and competition on routes to Europe because the undertakings committed to by the Parties would encourage new entrants on Transat's previous routes. Allowing the acquisition would provide a clear and stable future for Transat and Canada's air transport sector in general and would also yield benefits in terms of network and operating efficiencies, as well as employment.
Terms and Conditions
Approval of the Proposed Transaction is contingent on ensuring that net public interest benefits are realized, while at the same time addressing competition and/or public interest concerns. To this end, the Minister and the Commissioner shared their concerns about the Proposed Transaction with the Parties, pursuant to subsections 53.2(4) and (5) of the Act. The Parties then proposed measures in the form of undertakings, under subsection 53.2(5) of the Act, to address the competition and public interest concerns as related to national transportation arising from the Proposed Transaction.
The measures, which are outlined in the Terms and Conditions, and attached as a schedule to the Order, were designed to address a number of these concerns, including mitigating competition concerns on European routes; ensuring the introduction and operation of new routes; maintaining a certain level of employment; maintaining Transat's brand and head office; and facilitating potential benefits that could accrue to the Canadian aerospace sector. Additionally, Air Canada will also be required to provide information on price changes in affected markets, which will allow the federal government to monitor the situation and inform Canadians of the results.
In a letter dated December 9, 2020, the Commissioner provided the Minister with his assessment of the adequacy of the proposed measures put forward by the Parties to address the competition concerns. The proposed measures, in the Commissioner's view, are inadequate, do not conform to the principles of merger remedy design, and are unlikely to result in effective entry for new competitors. Based on his experience and expertise, the Commissioner's view is that there are significant deficiencies in the undertakings proposed by the Parties, such that they do not address the competition concerns likely to result from the merger of Air Canada and Transat.
The Commissioner notes that measures have been proposed only on a limited number of the 81 routes on which he perceived a need for measures following a thorough review of available evidence from the Parties about their future plans independent of the Proposed Transaction. The Commissioner also indicated that the Competition Bureau's market research concluded that the likelihood of new entrants is low. For the one structural remedy proposed by the Parties (slot surrender), the Commissioner noted some additional concerns, including potential issues around implementation of the slot surrender remedy at Toronto's Pearson airport and Montréal's Trudeau airport. The Commissioner did not propose any additional remedial measures.
Some further undertakings were offered by the Parties following receipt of the Commissioner's report, such as a price monitoring mechanism, additional slots at Schiphol Airport in Amsterdam, and longer terms associated with slot surrender and other measures intended to attract other operators on European routes.
The Act requires that the Commissioner of Competition provide views on competition concerns as he is the expert in those questions. Ultimately, according to the Act, it is the responsibility of the Minister to make the final recommendation to the Governor in Council, having considered, on balance, the Commissioner's views as well as the public interest as it relates to national transportation.
The Minister must consider a large number of public interest considerations, such as connectivity, wider social and economic implications, the financial health of the air transportation sector, and competition considerations. The Minister must weigh these factors against each other and determine whether, on balance, the Proposed Transaction is in the public interest. This does not mean that all the concerns in one area must be resolved, but rather that the overall benefits should outweigh the concerns.
Having considered all of the various public interest factors, the Minister is of the opinion that, subject to the following Terms and Conditions, the acquisition would be in the public interest. The Terms and Conditions touch on seven key areas of concern:
Competition and public interest measures
1. Slot dominance
Terms and Conditions have been designed to minimize the impact of the acquired entity's slot dominance at Montréal-Trudeau and Toronto-Pearson airports on routes to European destinations, thereby facilitating the future emergence of new entrants and increased competition on these routes. “Slot surrender” is a structural competition remedy commonly used in airline mergers and acquisitions as a way of limiting the dominance of the merged carrier and promoting competition. The goal of slot surrender is to attract new entrants, which in turn, brings with it a number of spinoff public interest benefits, such as competitive pricing, improved connectivity, and increased consumer choice. The slot surrender remedy mechanism would apply on a relevant city-pair basis. In response to concerns raised by the Commissioner and in the PIA, new entrants will have the opportunity to avail themselves of increased access to airport infrastructure at relevant Canadian airports. In addition to the slot surrender and airport infrastructure commitments, new entrants will be able to avail themselves of interline and fare-combinability agreements with Air Canada to offer feeder service within Canada and a full schedule; give their customers access to Air Canada's frequent flyer (Aeroplan) points program; and allow customers access to the Maple Leaf lounges at specific Canadian airports. These additional measures would serve to enhance a new entrant's competitiveness with the acquired entity when starting a service on these routes, and would be available to eligible new entrants for periods of 5 or 10 years, depending on the relevant city-pair, upon the closing of the Proposed Transaction.
Public interest measures
2. Transat Business
For five years following closing, Air Canada shall maintain a head office for the Transat Business in the Province of Quebec and the Transat Brand for the Transat Business.
A minimum level of employment of 1 500 employees in connection with the combined leisure business of Air Canada and Transat would be maintained for two years upon closing. This commitment would be maintained regardless of pandemic-related or other developments that could further negatively affect the air sector in this two-year period. The level of employment in these areas is currently significantly less than 1 500.
4. New destinations
Five new international (including transborder) destinations that were not offered in 2019 would be introduced to improve connectivity for travellers. The new routes introduced through this commitment would be operated for a minimum of two years.
5. Maintenance in Canada
Air Canada would enter into maintenance contracts for certain types of aircraft with Quebec-based suppliers within one year of closing, which could result in Canadian aerospace sector benefits from the Proposed Transaction.
6. New markets
Barriers to entry would be reduced for other Canadian air carriers seeking to enter the Colombia, Israel, and Panama markets where access was previously granted to Air Transat. Capacity was previously granted to Air Transat under air transportation agreements with these countries. This commitment, which will be in place for five years from closing, allows the Minister to reallocate capacity to new entrants wishing to introduce services to these markets.
7. Price monitoring
Air Canada will systematically share pricing information with the Government of Canada as a means of monitoring pricing post-acquisition. Information will be shared on routes where the Parties previously offered overlapping service to both European and sun destinations. This commitment will remain in place for five years upon closing. The Government will inform the public of the results.
The Terms and Conditions will require the Parties to enter into an Implementation and Monitoring Agreement before closing.
If there is a disagreement over the interpretation of any of these Terms and Conditions that cannot be resolved via the dispute resolution mechanisms contained in the Implementation and Monitoring Agreement, subsection 53.6(2) of the Act could apply if any of the Terms and Conditions of the Order are violated: “Every person who contravenes subsection 53.2(1) or (10) is guilty of an indictable offence and is liable to imprisonment for a term not exceeding five years or to a fine not exceeding $10,000,000, or to both.” As well, under subsection 53.4(1), a superior court may, on application by the Minister, order the cessation of a contravention of the Terms and Conditions, or any other order it deems appropriate, including the divestiture of assets. Similarly, subsection 53.4(2) allows the Commissioner to make an application to a superior court if there is a contravention with respect to a term or condition that relates to potential prevention or lessening of competition.
As part of Transport Canada's public interest assessment, extensive consultations were undertaken with industry stakeholders, as well as the general public, from November 4, 2019, until January 20, 2020. The consultation process included the following channels for input:
- Stakeholder meetings: 34 bilateral consultation meetings took place with consumer advocacy groups, airlines, industry associations, and other relevant stakeholders.
- Written submissions: 54 formal written submissions were received from individual Canadians, consumer advocacy groups, airlines, industry associations, and other interested stakeholders, either via the consultation website or a specific email address used for the consultations. Air Canada and Transat also provided a joint written submission.
- Online forum and submission portal: Transport Canada's consultation website (www.letstalktransportation.ca) provided a discussion forum and portal for submissions. There were 4 048 web visits and 228 comments (195 in English and 33 in French) posted on the discussion forum. Of these, there were 130 individual contributors in English and 31 in French.
The consultations brought forward a wide range of views. Some groups expressed support for the Proposed Transaction, other groups were opposed, and others presented mixed views.
Those that were in favour noted that the acquired entity would benefit from combined expertise and a strengthened global position, and that the Proposed Transaction would yield increased connectivity; increased trip frequencies; a renewed focus on tourism, exports, and investment; and local economic benefits.
Those opposed to the Proposed Transaction raised concerns that it could result in job losses and that the Transat brand could disappear. Some groups worried that there would be a negative impact on competition in a post-acquisition environment, resulting in higher fares and decreased service offerings. Concerns were also expressed that airline suppliers would suffer due to reduced bargaining power when dealing with one large supplier as opposed to two separate companies. Some of the concerns raised focused particularly on transatlantic travel, as a market where Transat traditionally competes with Air Canada.
A subsequent consultation process was initiated once the Parties proposed measures they were willing to undertake. Transport Canada consulted with the Commissioner, as well as with the Toronto-Pearson and Montréal-Trudeau airports on measures of particular relevance to their respective operations. In consulting with the Commissioner, Transport Canada received the results of the Competition Bureau's market testing on the proposed measures, which provided views from key stakeholders. Transport Canada duly considered the Commissioner's views, as well as the views of other stakeholders around specific undertakings.
Further to the Minister's recommendation, having taken into account all relevant factors, including the Commissioner's assessment of competition issues, the public interest issues relating to national transportation, and the measures proposed by the Parties to address any concerns raised as part of the process, the Administrator in Council is satisfied that it is in the public interest to approve the Proposed Transaction subject to the Terms and Conditions in the Order made pursuant to subsection 53.2(7) of the Act.
The merger will provide greater stability to Canada's air transport sector in the context of the COVID-19 pandemic, and particularly when taking into consideration the financial challenges faced by Transat. The Terms and Conditions will ensure that measures are in place to facilitate and incentivize new entrants to take up former Transat routes to Europe. The Terms and Conditions also alleviate concerns with respect to the preservation of the Transat head office and brand and the potential for greater job losses among Transat employees. They also provide opportunities around ongoing aircraft maintenance work in Canada. The merger will result in operating and network efficiencies that would generate benefits for travellers, such as the introduction of new routes, enhanced connectivity, time savings and cost savings achieved by reducing double marginalization. Finally, safeguards will be in place to monitor pricing on routes where the Parties previously offered overlapping service to both European and sun destinations.
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