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

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

Air Canada, Transat acquisition deal up in the air as deadline expires

Both parties now have the right to terminate the agreement at any time

Air Canada’s acquisition of Transat AT Inc. is up in the air after Canada’s largest airline said it will not allow more time for the deal to go through.

The acquisition was set to be completed by Feb. 15, but since the deal has not yet received approval from the European Union, both parties now have the right to terminate the agreement at any time, Transat said in a statement Tuesday morning.

“Transat and Air Canada are continuing their discussions regarding potential amendments to the arrangement agreement that may be required,” Transat said.

Despite the discussions, there is no guarantee that any new agreement will be reached, or that the existing one will not be terminated altogether, Transat said. The transaction had previously been approved by the Canadian government on Feb. 11.

Transat’s stock was down 9.13 per cent in morning trading on the S&P/TSX composite index, while Air Canada shares were up 2.64 per cent.

Air Canada’s decision not to extend the date for the transaction comes amid an uncertain and rapidly changing business environment for the airline industry.

Canada’s airlines recently suspended all flights to Mexico and the Caribbean until April 30 at the request of the federal government, in addition to a mandatory hotel quarantine for air travellers entering Canada, which goes into effect on Feb. 22.

The restrictions further hampered travel demand and forced widespread layoffs and route cuts. Transat, for its part, has suspended virtually all of its operations until April 30.

Calin Rovinescu, Air Canada’s former CEO and president, said during the company’s most recent earnings call on Feb. 12 that he was encouraged by signs of progress in talks between the industry and the federal government regarding a bailout for the airline sector.

Rovinescu also said that he expected the federal government to roll out a co-ordinated testing program at airports that would replace some aspects of the current quarantine measures.

RELATED: Air Canada to temporarily cut at least 1,500 jobs, suspend 17 foreign routes