Air Canada is in talks to acquire Quebec-based travel business Transat and its carrier Air Transat in a deal worth C$520 million (€345 million).

Transat and Air Canada revealed they have entered a tentative agreement and agreed a 30-day period of exclusive negotiations, with Air Canada signing a letter of intent to purchase its rival.

The deal is subject to agreement on the final terms and to shareholder and regulatory approval.

Transat announced it was seeking a buyer at the start of this month.

Air Canada president and chief executive Calin Rovenescu said: “The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel.

“It will also allow us to further grow our hub at Montreal, where we have added 35 new routes since 2012 and from which we carried 10 million customers in 2018.”

He added: “A combination with Transat represents a great opportunity for stakeholders of both companies.

“This includes the shareholders of both Transat and Air Canada, employees of both companies who will benefit from increased job security and growth prospects, and Canadian travellers who will benefit from the merged company’s enhanced ability to participate as a leader in the highly competitive leisure travel market.”

Montreal-based Air Transat, originally a charter carrier for tour operator Transat, is now chiefly a scheduled operation. It carried five million passengers last year, flying to 60 destinations in 25 countries.

Transat chief executive Jean-Marc Eustache said a deal with Air Canada represented the best prospect for maintaining jobs at the company.

Air Transat operates flights from London Gatwick to Toronto, Montreal, Vancouver and Calgary.

The proposed acquisition follows the announcement on Tuesday that Canadian private equity firm Onex has agreed to buy WestJet, Canada’s second-largest carrier, for C$5 billion Canadian (€3.32 billion).