Two of Canada's best-known airlines are planing to merge.

Air Canada announced Thursday it plans to buy Air Transat, snapping up all shares at $13 each, for a total purchase price of $520 million.

Over the next 30 days Air Canada is expected to review every detail of Air Transat's assets, and still needs regulatory and shareholder approval.

Air Transat could still be purchased by another suitor, although at this point it would pay a $15 million penalty to Air Canada if it did so.

Travel agents like Jean-Francois Woods said that it remains to be seen whether the deal would be good for travellers.

"It's not David and Goliath. Goliath would be picking up David, and would that be done with consumer concern?" said Woods.


Quebec politicians pleased with agreement in principle

Both airlines have headquarters in Montreal and Premier Francois Legault, one of the founders of Air Transat, was among the Quebec politicians pleased that the purchase means Air Transat would not be run out of another province or country.

"The good news is that Air Canada has a headquarters in Montreal so I'm happy to see the headquarters will remain in Montreal if the transaction is closed between Air Canada and Air Transat.

He noted that customers could be concerned about concentration in the airline industry, but said there are many players who operate in Canada.

"If we look at southern destinations, Caribbean, there will still be competition from Sunwing and Westjet. Internationally, we'll still have competition coming from United, American Airlines, Air France, British Airways," said Legault.

Economy Minister Pierre Fitzgibbon was also pleased that the airline will continue to be based in Quebec.

"My mission in Quebec is to have solid head offices. If Air Canada is successful to acquire Air Transat it will solidify Air Canada's portfolio of business including the tour operator which is something air Canada maybe has not as well as Air Transat. So therefore, we may see a company that has a more solid ground if they are successful," said Fitzgibbon.

Air Canada's shares hit an all-time high of more than $35 in May, because of carrying more passengers and its new loyalty program, and in spite of dealing with the grounding of its Boeing 737 Max fleet.

After Thursday's deal was announced shares for Air Transat rose about 15 percent to $12.14 while Air Canada shares rose to $40, above its previous all-time high.

Several groups have expressed interest in Air Transat, including Quebec media mogul Pierre Karl Peladeau, but Thursday's announcement means the two airlines are in exclusive talks.