Air Canada-Air Transat Merger Clears Another Hurdle

Air Canada's takeover of leisure carrier Air Transat moved forward Thursday after the board of Air Transat's parent company unanimously approved the terms merger proposal.

The deal is worth approximately $520 million (Canadian), according to an Air Canada press release.

"We are very pleased to join forces with such a successful player in our industry. The combination with Air Canada will give Transat new perspectives of growth, with the support of a strong network offering many options for connecting traffic," Jean-Marc Eustache, Transat's president and CEO said in a statement.

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Air Transat is a leisure-focused airline and will remain as a standalone brand even after the merger is completed. That includes maintaining Transat's Montreal offices. While executives at both airlines say this is a move to help retain customer loyalty and differentiate their products, the "airline-within-an-airline" model can be a risky business proposition. The Lufthansa Group, for example, recently announced that it would terminate long-haul service on Eurowings, its low-cost subsidiary.

The deal, which was formally announced in May, still has to go through a court-approved plan under Canada's Business Corporations Act before being finalized. It comes amid broader shakeup in the Canadian airline industry. Also in May, WestJet -- Canada's No. 2 carrier -- announced its intention to go private after it agreed to a friendly acquisition from Toronto-based private-equity firm Onex Corp.