An Air Canada Airbus A320 takes off from Vancouver International Airport. Photo: IC

The biggest shareholder in Air Canada (AC) and Transat Inc said on Tuesday that AC's revised offer for the Canadian tour operator was "a very reasonable one," given the turmoil in the international aviation industry amid the global pandemic.

Peter Letko, a co-founder of investment manager Letko Brosseau, called the deal "good news" but said that the company would wait to see if a rival bidder emerged before committing to the Air Canada offer.

On October 10, Air Canada, which is Canada's biggest airline, cut the deal value to buy Transat by nearly 75 percent to about C$188.7 million ($143.9 million), which was down from C$720 million, as COVID-19 weighs on travel demand.

Air Canada's revised offer has raised optimism that the proposed deal, once shaken by the COVID-19 pandemic, could be completed.

With the pandemic grounding flights globally, Air Canada had faced shareholder pressure to renegotiate the deal, which is still pending approval from European and Canadian regulators.

"The price is a long way from what we agreed...but it's clear that the industry has gone through a period where it's really suffered," Letko told Reuters in a phone interview. "If nothing transpires, I think the Air Canada offer is a very reasonable one."

Letko Brosseau owns an 8.69-percent stake in Air Canada and almost 15 percent of Transat, according to Refinitiv data.

As part of the revised deal, the purchase price could be paid to Transat shareholders either in cash or shares of Air Canada, which Letko called interesting.

Analysts said the revised price would give Air Canada greater motivation to conclude the deal, which had previously been believed to be on thin ice.

Due to the fallout of the coronavirus pandemic outbreak worldwide, the global aviation industry will lose an estimated $419 billion by 2020, and airlines around the world will lose $84.3 billion in profits, according to the International Air Transport Association, which has said that global aviation will not recover to 2019 levels until 2024.

Meanwhile, AC ended 2019 with a cash balance of C$6 billion, and it has also taken steps to push its liquidity well beyond C$7 billion. But similar to all airlines worldwide, the Canadian carrier is aiming to reduce its cash burn, according to the travel market intelligence   provider CAPA.

"COVID-19 has resulted in significant uncertainty for the airline industry, which made us doubt whether the combination of TRZ and AC would even occur," Desjardins analyst Benoit Poirier said in a note to clients on Tuesday.

"We believe the revised agreement offers incentives for AC to obtain regulatory approvals for the transaction."

The deal requires approval by Transat shareholders, who are set to vote on the transaction in early December.

One portfolio manager who holds AC stock said he believed that Transat shareholders would have little option other than to approve it.

"This is the best that they are going to get in this environment."

The company's total revenues fell from $4.73 billion in the second quarter of 2019 to $527 million in the second quarter this year, a decline of $4.21 billion or 89 percent, in light of the Air Canada Reports Second Quarter 2020 Results released in July.