MONTREAL - Analysts say the Competition Bureau's warning about Air Canada's proposed takeover of Transat AT Inc., which owns Air Transat, should be taken in context.

The watchdog said Friday that eliminating the rivalry between the two Montreal-based carriers would discourage competition by prompting higher prices and fewer services, ultimately resulting in less travel by Canadians on a range of competing routes.

The federal agency's report found that the $720-million deal proposed in August would hand Canada's largest airline 60 per cent of transatlantic travel from Canada and 45 per cent of passenger capacity to sun destinations.

Desjardins Securities analyst Benoit Poirier says he believes the purchase will still be approved “considering the companies' willingness to address the bureau's competition concerns,” such as potential dominance of airport slots.

Poirier and others say they believe the proposed transaction will help Canada's airline industry recover from the economic downturn sparked by the COVID-19 pandemic, a detail that should work in its favour.

Transport Canada has until May 2 to complete a public-interest assessment and provide it to Transport Minister Marc Garneau, who will consider it along with Competition Bureau's analysis.