Air Canada has entered into a tentative agreement to purchase Quebec-based airline and tour operator Transat A.T.

The companies have agreed to a 30-day period of exclusive negotiations. They have also signed a letter-of-intent for Air Canada to purchase Transat for $520 million. 

Air Canada CEO Calin Rovenescu said that the acquisition would be a boon to Canadian travelers. 

"The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel," he said in a statement. "It will also allow us to further grow our hub at Montreal-Trudeau Airport, where we have added 35 new routes since 2012 to the benefit of the Montreal and Quebec communities, and from which we carried 10 million customers in 2018 alone."

Montreal-based Air Transat flies to 60 destinations in 25 countries. The leisure-focused airline carries approximately 5 million passengers annually. 

Transat's tour operator unit sells vacation packages and leisure-focused hotel stays. 

Transat said Thursday that operations are continuing at present without change.

The proposed acquisition remains subject to finalization of the terms, as well as shareholder and regulatory approvals. 

The announcement is the second significant one in Canada's airline sector this week. On Tuesday Canadian private equity firm Onex signed a deal to buy WestJet, Canada's second largest airline, for $5 billion Canadian (3.71 billion).

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