Canada's biggest charter carrier just became bigger with the takeover of its main British rival. Montreal-based Transat, which sells vacation packages and operates 15 Airbus widebodies, has acquired London-based The Airline Seat Company, which operates under the Canadian Affair name, for C$43 million ($38 million) in a cash deal that closed at the beginning of August.

Transat and Canadian Affair each had 40% of the Canada-UK charter market, thus leaving Transat with a commanding 80% of all charter traffic between the two countries. Including scheduled carriers, that means Transat now flies about a quarter of all seats between Canada and the UK.

Previously Transat sold outbound tours from only Canada and France. By adding the UK, it gains a major presence in the largest European market for leisure travel to Canada. According to Jean-Marc Eustache, Transat's chief executive: "We are now setting up shop in a third market - the UK - which is the most important European market as far as Canada is concerned."

The C$43 million Transat paid for Canadian Affair represents less than a sixth of its current C$268 million cash reserve. Last October the airline's holding company was under shareholder pressure to buy back shares as a way to reduce its cash reserves, which were then near C$500 million.

Transat did buy back C$125 million in shares, but kept the rest as a contingency fund and to finance its growth plans. It has since bought Thomas Cook Travel in Canada, thus expanding its retail distribution network from a Quebec stronghold into other parts of Canada, especially Ontario.

Transat has also added three new European routes with direct flights from Montreal to Madrid, Lisbon and Bordeaux. It also has revealed it is seeking to buy its first hotel chain, but has not yet provided any details. In 2005 Transat carried 2.5 million passengers and had revenues of $1.45 billion. ■

Source: Airline Business