Transat Inc (TSX:TRZ) Sees Partnership Fall Through

Two years ago, Transat Inc (TSX:TRZ), a popular Canadian travel company more commonly known as Air Transat came to a partnership with Thomas Cook Group. The partnership was set to see the companies exchange airlines on a seasonal basis over the next seven years. Today we’re left with one major problem, the Thomas Cook Group doesn’t exist anymore.

News broke today that the oldest travel group in the United Kingdom had collapsed. After weekend talks over a potential rescue situation by the UK government failed, the company simply closed shop and left over 150,000 people out of flights and over 21,000 people’s jobs at risk.

Analysts and industry experts point their fingers at the 178 year old airline company’s inability to adapt to a changing landscape. As more and more travelers shift towards online bookings, Thomas Cook was dependent on brick and mortar revenues, which have been on a steady decline. Discount airliners have also erupted in Europe, as travelers are looking to book flights on a no-frills style basis to save the most money.

What will this mean for Transat?

We could see some volatility in the company’s share price moving forward, at least until contingency plans, which the company says are in place, surface. Transat was slated to receive 7 jetliners from the UK airline giant, and with only 39 planes in operation this makes for a significant portion of its jetliners.

Both companies swapped planes on a seasonal basis, but with Thomas Cook going under there is a possibility that the planes won’t be received. In the end, this could lead to cancellations and delays by the Canadian airliner if it cannot replace the planes. 

Will this affect the takeover from Air Canada?

In early August, Air Canada (TSX:AC) had to sweeten the deal to execute the purchase of Air Transat by upping its offer from $13 a share to $18 a share. The deal has since gone through, and Air Canada spokesman has said that the collapse of Thomas Cook will have little effect on Canadian travelers, which bodes well for Air Canada.

The collapse couldn’t have come at a better time, as the expected takeover by Air Canada should provide stability to Transats jetliner numbers.

Overall, if you’re an owner of Transat Inc, I’d expect a little bit of market noise over the next few days. But in the long run the collapse should have little impact on overall share price.