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September 24, 2019

Transat Inc (TSX:TRZ) Sees Partnership Fall Through

Disclaimer: The writer of this article may have positions in the securities mentioned in this article. The fact they hold positions in securities has had no impact on the production of this article

By Dan Kent

September 24, 2019

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 Canadian stocks 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.

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Dan Kent

An active dividend and growth investor, Dan has been involved with the website since its inception. Dan is primarily a researcher and writer here at Stocktrades.ca, and his pieces have numerous mentions on the Globe and Mail, Forbes, Winnipeg Free Press, and other high authority financial websites. He has become an authority figure in the Canadian finance niche, primarily due to his attention to detail and overall dedication to achieving the highest returns on his investments. Investing on his own since he was 19 years old, Dan has compiled the experience and knowledge needed to be successful in the world of self-directed investing, and is always happy to bring that knowledge to Stocktrades.ca readers and any other publications that give him the opportunity to write. Dan manages his TFSA, RRSPs and a LIRA at Questrade, and has compiled a real estate portfolio of his primary residence and 2 rental properties, all before his 30th birthday.

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