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Air Transat and an Air Canada aircrafts are seen on the tarmac at Montreal-Trudeau International Airport in Montreal, on Wednesday, April 8, 2020. THE CANADIAN PRESS/Paul Chiasson

Paul Chiasson/The Canadian Press

The European antitrust watchdog launched an investigation of Air Canada’s proposed takeover of Transat AT Inc., echoing the concerns of Canada’s Competition Bureau that the combination of the two Montreal-based airlines would limit consumer choices and drive up airfares on transatlantic flights.

European Competition Commissioner Margrethe Vestager said Air Canada and Transat declined to offer concessions to address her concerns during the EU’s preliminary review of the deal, which is awaiting approval in Canada. EU regulators set a Sept. 30 deadline for their decision.

Transat, which has ceased all flights amid the COVID-19 pandemic, said on Monday it has extended the closing deadline for the deal by a month to July 27, given the longer EU review poses a new hurdle amid the global plunge in demand for travel.

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Transat shareholders in August, 2019, approved Air Canada’s takeover offer of $18 a share, or $720-million. Transat’s share price fell by 7 per cent to $7 on the Toronto Stock Exchange on Monday.

The European Commission said the deal could significantly reduce competition on 33 routes between Europe and Canada. The EU antitrust enforcer said other European airlines were just distant competitors and that WestJet Airlines was not a sufficiently strong rival in the market.

“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,” Ms. Vestager said in a statement.

The deal requires approval of regulators in Europe and Canada, where the decision rests with cabinet based on the recommendation of Transport Minister Marc Garneau.

Mr. Garneau’s decision, which has no deadline, will be informed by a confidential public-interest assessment from Transport Canada and a report by Canada’s Competition Bureau. That report, released in March, said the deal would reduce competition and drive up ticket prices. The airlines’ services overlap on 83 routes, including 49 between Canada and Europe, and 34 between Canada and vacation spots in Florida, Mexico, Central America and the Caribbean.

However, the Canadian watchdog did its work before the COVID-19 pandemic, which has halted almost all air travel and thrown into question the survival of many of the world’s airlines. Its conclusions could change as a result, but it is too soon to say, the Competition Bureau said.

Speaking on a webcast for investors last week, Michael Rousseau, Air Canada’s chief financial officer, declined to address the deal in light of the collapse in the airline market and Transat’s share price. “The deal is still on the table as the shareholders approved the deal,” Mr. Rousseau said. “It’s a committed deal subject to regulatory approval.”

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Before winning Transat shareholder approval for the deal last summer, Air Canada raised its takeover price to $18 a share from $13 amid complaints of low-balling from investors and pressure from another would-be suitor.

Air Canada coveted Transat for reasons that included its updated fleet of Airbus planes at a time when Air Canada’s 24 Boeing 737 Max aircraft were grounded owing to safety concerns.

The halt to most air travel amid the COVID-19 outbreak has called the deal into question. Transat has suspended all flights until June 30. Air Canada has laid off 20,000 employees and cancelled 95 per cent of its schedule as it tries to reduce its cash burn of $22-million a day. Air Canada has said it will take three years before demand for air travel recovers.

Transat said in a news release on Monday that the terms of the takeover deal permit either side to extend the closing date by one month three times, and by another three months under certain conditions.

Peter Fitzpatrick, an Air Canada spokesman, declined to answer when asked if Air Canada would seek to change the terms of the deal or end it. “This is part of the normal, ongoing regulatory review process and we have to await the outcome of this process before we will be in a position to comment,” he said of the European investigation.

With a report from Reuters

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