MONTREAL - Transat AT shares rose 24 per cent Tuesday morning after Air Canada said it still plans to buy its smaller rival but at a substantially reduced price due to the collapse of the aviation industry amid COVID-19.

Transat stock climbed 93 cents to $4.76 after markets opened, buoyed by Air Canada's announcement Saturday of an amended deal.

The revised terms would see Air Canada pay $5 per share for the parent company of Air Transat, compared to the $18 per share originally pledged in its takeover bid.

The revision brings the total sale price down by 72 per cent to $190 million from $720 million previously, but provides assurance to investors that Canada's biggest carrier still intends to go through with the purchase.

“Given Transat shares were already trading at a steep discount to the prior acquisition price, there was clearly a significant degree of skepticism in the original deal terms,” analyst Doug Taylor of Canaccord Genuity said a research note.

The deal is endorsed by Transat's board of directors but must be approved by two-thirds of Transat's shareholders, who will vote in a special meeting in early December.

The company has not indicated whether the agreement has the support of its major stakeholders, which include Letko Brosseau, the Fonds de solidarite FTQ and Quebec pension fund manager the Caisse de depot et placement.

Regulatory approval from Canada's federal cabinet and the European Commission's antitrust body are also still pending, with the European Union expected to rule in early 2021.

The deal is expected to close in late January or early February, with a deadline set for Feb. 15.

Despite the airline sector's travails, Air Canada sees payoffs in expanding its share of the Canadian market and eliminating a rival for European and sun destinations.

Before the coronavirus outbreak, the takeover would have handed Air Canada control of more than 60 per cent of transatlantic air travel from Canada.

“The pandemic has devastated the global airline and broader travel industry, but should the deal close, we see the potential for revenue and cost synergies over time,” said National Bank analyst Cameron Doerksen in a research note.