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Air Transat aircraft sit on the tarmac at Pearson airport in Toronto on April 8.Photographer: Cole Burston/Bloomberg

Air Canada’s Bid for Transat Gets Extended EU Merger Probe

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Air Canada’s bid for tour operator Transat A.T. Inc. faces an extended probe from European Union regulators who said the deal may hamper competition by combining the two biggest airlines linking Europe and Canada.

The European Commission set a Sept. 30 deadline to rule on the deal, citing concerns that the “transaction could significantly reduce competition on 33” routes, according to an emailed statement on Monday.

One potential rival to the combined company, WestJet Airlines Ltd., is unlikely to be able to compete strongly on the routes that regulators see as problematic, the EU said.

Montreal-based Transat agreed in August to be acquired for C$18 a share in cash. Shares have since slumped well below that level, suggesting investors are questioning whether the C$720 million ($515 million) deal will happen in light of the coronavirus crisis, which has hammered the prospects for travel companies. They tumbled again on Monday, falling 7.2% to C$6.99 at 3:24 p.m. in Toronto. Air Canada rose 0.8% to C$16.84.

Margrethe Vestager, the EU’s antitrust chief, said the pandemic shouldn’t prevent careful scrutiny of deals.

“This is a challenging time, especially in markets severely impacted by the coronavirus outbreak, but a return to normal and healthy market conditions must be based on markets that remain competitive,” she said in the statement.

Transat is currently reviewing the European Union’s decision to extend its probe into the proposed deal and decided to activate the first one-month extension of the outside date set for the transaction to July 27 from June 27, the company said in a statement.

The merger allows for the postponement of the deadline for three one-month periods. If the required approvals are obtained, the deal is expected to close in the fourth quarter of this year, Transat said.

A representative for Air Canada didn’t immediately return messages seeking comment.

— With assistance by Sandrine Rastello, and Divya Balji

(Updates with Transat’s statement in the penultimate paragraph.)