Air Canada-Transat Merger Off Due to ‘Onerous’ EC Mandates

Madhu Unnikrishnan
April 5th, 2021 at 6:00 AM EDT

Air Canada and Transat on April 2 called off their planned merger, citing “onerous” remedies the European Commission (EC) required for the deal to conclude.

The merger had been hanging by a thread recently, as regulators in the EC dragged their feet on approving the deal. A bid from Quebec businessman, Pierre Karl Peladeau, had emerged as an alternate if the Air Canada deal fell through. Transat, in its most recent earnings call, said it still preferred a merger with Air Canada, however.

Transat said Air Canada pulled the plug after the EC said it would not approve the deal without further remedies. “Air Canada reached its limit in terms of concessions it was willing to provide the European Commission to satisfy their competition law concerns,” Transat CEO Jean-Marc Eustache said.

For its part, Air Canada said it had offered the EC a package of remedies that had been “traditionally accepted by the EC in previous airline merger cases.” Further remedies would affect Air Canada’s ability to “compete internationally,” adding that the carrier wasn’t even certain the EC would accept more accommodation.

“The [European] Commission’s preliminary findings were that the proposed transaction would raise competition concerns on a large number of transatlantic routes,” Margrethe Vestager, EC executive vice president said in a statement. “Based on the results of the market test, the remedies offered appeared insufficient.”

As part of the termination agreement, Air Canada will pay Transat a C$12.5 million ($10 million) termination fee.

Air Canada first proposed its merger with Transat in June 2019. The final deal took shape last October.

Madhu Unnikrishnan

AirAsia Sees International Recovery in Second Half

AirAsia is looking toward the second half of this year for international travel to resume in any meaningful way. If, that is, vaccinations pick up pace and consumer confidence returns.

The company reported fourth-quarter 2020 revenues of RM267 million ($64 million), down sharply from the third quarter, as Malaysia imposed further lockdowns in response to Covid-19 outbreaks. Quarterly revenue was down 92 percent year over year.

For the full year, revenues were down groupwide by 74%, to RM3.1 billion. AirAsia flew just 29 percent of its 2019 capacity last year. But the pain was not felt equally across the group. AirAsia Thailand, for example, flew 116 percent of its December 2019 capacity in 2020, due to the country’s effective control of the virus.

Groupwide, AirAsia reduced staff costs by 61 percent, after layoffs and across-the-board salary cuts. CEO Tony Fernandes said the company plans to reward remaining employees this year with long-term incentives.

“With vaccination programs accelerating around the world, improved testing capabilities, the likely introduction of global digital health passports, formation of leisure travel bubbles in the region and contactless procedures already in place for AirAsia, we are very optimistic that international air travel will resume in the second half of 2021, leading to our full recovery within the next two years,” Fernandes said.

AirAsia’s digital arm reported revenues up 13 percent as the company expands its digital platform to include non-airline sales.

Madhu Unnikrishnan

Delta Nearly Loses Tax Benefit in Georgia Over Elections Law Retribution

It didn’t take long for Delta Air Lines to feel the heat — again. The airline almost lost a $35 million jet fuel tax benefit after Republicans in the Georgia General Assembly sought to punish the Atlanta-based company for speaking out against the state’s controversial new elections law.

Last week, the state House of Representatives narrowly approved an amendment that would have ended the exemption on jet fuel sales from the state’s 4 percent tax. The Assembly adjourned before the state Senate could vote on the measure, effectively giving the airline a months-long reprieve while the legislature is in recess.

Republican State House Speaker David Ralston, however, vowed to press the issue, telling reporters that Delta shouldn’t “bite the hand” that feeds it, the Atlanta Journal-Constitution first reported.

Republicans were furious with Delta CEO Ed Bastian for forcefully condemning the new law, which voting rights activists say hinders minority access to the polls, among other suppressive measures. Bastian called the new law “unacceptable” and “wrong.”

But he came out against the law after Delta itself faced intense blowback and boycott threats for an initial statement that critics said was tepid. Then, Bastian defended the company’s first response by saying Delta worked with legislators to remove some of the more “egregious” measures in the first bill.

Bastian’s criticism of the law drew fire from Gov. Brian Kemp, a Republican, who said Bastian “spread the same false attacks being repeated by partisan activists.”

This is not the first time Republicans have retaliated against Delta with jet fuel taxes over a controversial stand the airline took. In 2018, Assembly Republicans stripped the exemption after Delta cancelled its group discount for National Rifle Association (NRA) members in the wake of the school shooting in Parkland, Fla. Then-Gov. Nathan Deal, also a Republican, later reinstated the exemption through executive order, and the legislature restored it permanently in 2019.

Bastian is not alone in his public opposition to the voting law. Atlanta-based Coca-Cola also called the law “unacceptable,” bowing to pressure after facing boycotts for its earlier silence. Apple and Wells Fargo, although not based in Georgia, are among the companies that in recent days also have criticized the law.

Republicans in Georgia, aghast that the state voted in November to elect President Joseph Biden and Senators Jon Ossoff and Raphael Warnock, all Democrats, and responding to former President Donald Trump’s baseless claims that his defeat in November was due to widespread fraud, rushed through a bill that many say restricts minority access to the polls. Kemp signed the bill into law last week. Biden called the law “sick” and “un-American,” and voting rights activist Stacy Abrams characterized it as “Jim Crow in a suit and tie.”

Madhu Unnikrishnan

Sabre Bets It Can Simplify the Way Airlines Sell Seats

Everyone loves an analogy. Now we have Sabre comparing booking a seat on a plane to shopping in a supermarket as it launches its “new airline storefront.”

Sabre believes airlines have increasingly complex offers. So someone booking directly on an airline’s website could be overwhelmed by different fare names, seat types and the various ancillaries on offer when they try to compare that deal with another airline deal.

And when booking indirectly, say on an online travel agency, Sabre thinks those complex bundles get lost in translation, and end up being shown as just a fare, with little visibility on what’s included.

Sabre’s response is this storefront concept, which provides “shelves” for travel agencies, and travel managers, to display different airlines’ content side by side. It claims it is an industry-first capability that makes it easier to comparison-shop in the indirect channel.

Behind the scenes, its data scientists are mapping all of the airline offers, aspects like baggage allowance, refundability and exchangeability, and normalizing them into something that’s easily comparable.

It went live on March 31, but some of these shelves might not be as fully stocked at it would like them to be. For now, there’s no so-called new distribution capability content, or low cost carrier offers, being mapped over, while there’ll be questions over how travel managers can move away from a lowest price mentality. But Sabre insists this is a milestone.

Matthew Parsons

In Other News

  • American came out swinging just hours after the Texas legislature approved a new electoral law that critics say will hinder access to the polls. “To make American’s stance clear: We are strongly opposed to this bill and others like it,” American said in a statement. “As a Texas-based business, we must stand up for the rights of our team members and customers who call Texas home, and honor the sacrifices made by generations of Americans to protect and expand the right to vote.” Delta faced an immediate backlash and threats of a boycott when its first statement on Georgia’s new elections law was seen as weak. (See above.)
  • IATA is calling on governments in Africa to relax quarantine restrictions and make Covid-19 testing more prevalent to encourage people to return to travel. The trade group urged African governments to more comprehensively implement testing and vaccination programs and to use digital tools, like travel passes, to bypass reliance on quarantines. Additionally, IATA said the continent’s airlines need more state support. African carriers have received only $2 billion across the continent in state aid. Eight airlines in Africa have filed for bankruptcy since the pandemic began, despite the state aid.
  • IATA’s new director general reported for duty. Former IAG CEO Willie Walsh started his tenure at the organization last week after having been named to succeed Alexandre de Juniac last November. Walsh is IATA’s eighth director general.
  • Avianca, which has been operating under bankruptcy protection since last May, reported full-year 2020 losses of $622 million on revenue that was sharply down from 2019. Revenue fell in the year from $4.6 billion in 2019 to $1.7 billion last year. But the carrier reported losses, to the tune of $554 million, in 2019. It’s last profitable year was 2018, when it reported a $232 million profit. While overall revenues fell, cargo revenue held steady at just over $700 million. The company ended the year with 146 aircraft, down from 171 at the end of 2019.
Madhu Unnikrishnan
April 5th, 2021 at 6:00 AM EDT

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