OTTAWA / MONTREAL – Struggling tour operator Air Transat is in talks with the federal government over aid, but may not reach a deal before the debt deadline in April, a source familiar with the situation said, saying pressure on Quebec to come to the aid of another aerospace brand in difficulty in the province.
Air Canada scrapped plans to merge with Transat on Friday, saying European regulators have signaled antitrust concerns are unlikely to be accepted.
The largest Canadian carrier made a first offer for Transat in 2019 and reduced its offer last year as the pandemic decimated the travel and tourism sector.
The airlines have been in talks with Ottawa since last year about a possible aid package. The aborted Transats deal adds a new urgency to the talks, given the jobs at risk if the carrier fails and the political importance of Quebec ahead of the federal elections scheduled for this year.
Transat, which last month suspended flights until June due to pandemic guidelines, said it needed at least C $ 500 million in funding this year.
It has obligations due April 29 for a revolving facility of $ 50 million and a short-term loan of C $ 250 million due June 30. If he doesn’t meet the April 29 requirements or gets another extension, creditors could expedite the repayment obligation.
“There are negotiations going on and there is a budget coming up and there is no guarantee at this point that they will get there before the budget,” said a source familiar with the situation, referring to the budget. Federal scheduled for April 19.
“I think that politically it would be a problem in Quebec. The federal government must therefore absolutely find a solution”, added the source, stressing that “Transat has more cachet in Quebec (than Air Canada)”.
Both airlines are based in Montreal, but Air Canada originated in Winnipeg before moving its headquarters to Quebec in the 1940s. Transat was founded by a group of Quebec businessmen, including the current premier minister of the province, in 1986 and became the third largest airline in the country.
The airline was “confident that we will be able to obtain the necessary financing in the coming weeks,” spokesman Christophe Hennebelle said on Sunday, recalling that it was at an “advanced stage” of discussions with Ottawa on sectoral aid and access to specific aid in the event of a pandemic. companies.
Asked about the state of the government’s talks with Transat, a spokesperson for the Minister of Finance of Canada declared: “I cannot speak of the creditors or the lines of financing that Air Transat is looking for. As a private company, it would be in the best position to respond to this.
Ottawa said on Friday that protecting jobs and ensuring Transat’s long-term viability was a priority for the government. The carrier employs 5,000 people, mainly in Quebec, which is home to a large part of the Canadian aerospace sector.
The survival of Transat, its head office and its employees in Montreal puts significant pressure on the Government of Quebec to ensure its future.
Quebec has already come to the aid of aerospace companies in difficulty. In 2015, the previous provincial government invested US $ 1 billion in Bombardiers’ then struggling CSeries program. Two years later, Airbus paid Bombardier a dollar for control of the commercial aircraft program.
“The Government of Quebec is caught between a rock and a hard place on this issue,” said John Gradek, former airline executive and program coordinator in the Aviation Management Program at McGill University.
“There will be a lot of pressure on (Prime Minister François) Legault to come to (Quebec businessman) Pierre Karl Péladeau for help in terms of funding.”
Péladeau, who offered to buy Transat for $ 5 a share, said Friday his offer was still available. Transat had previously stated that the offer did not have the required level of financing.
Péladeau, CEO of Quebecor Inc, said in a press release that his offer includes “a rigorous business plan focused on areas of the company with high growth potential, on expertise and job creation. in Quebec and a continuous head office in Montreal.
A second source familiar with the matter said Peladeaus’ offer did not call for funding from the Quebec government, which said in February that it was considering scenarios for Transat “with or without Air Canada”.
A spokesperson for Quebec’s Minister of the Economy declined to comment on Sunday.
The separatist Bloc Québécois said it wanted to ensure that Quebec ownership would be favored for the carrier and blamed Ottawa, which approved the merger in February, for delaying an air aid program.
“Air Transat is a flagship that made Quebecers proud while offering Francophones a career in aviation,” said BQ transport spokesperson Xavier Barsalou-Duval in a press release.
“It is in our collective interest that its decision-making center as well as its control remain in Quebec. (Additional reporting by Steve Scherer in Ottawa; written by Amran Abocar)
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