The flag carrier came in for the group in May, with a C$13 per share deal worth C$520 (£325 million) agreed the following month.

However, Air Canada has now upped its bid to C$18 per share, swelling the total value of the transaction to some C$720.

A C$15 million break clause, payable by Transat in the event it pulls out of the deal, has been increased to C$40 million.

Should the deal go ahead, Air Canada will preserve the Transat and Air Transat brands, which will sit alongside its own Air Canada, Air Canada Rouge and and Air Canada Vacations brands.

It has also pledged to retain the company’s head office and “key functions” in Montreal.

Transat’s largest shareholder, Letko Brosseau, has recommended the offer to fellow shareholders.

Calin Rovinescu, president and chief executive of Air Canada, said the new bid was necessary to ensure the proposed transaction received “the necessary level of support” from Transat shareholders.

“We are very pleased to have received Letko Brosseau’s strong endorsement for our transaction,” said Rovinescu. “We know this achieves the best possible outcome for all stakeholders.

“For shareholders of Transat and Air Canada, the combination delivers excellent value, while also providing increased job security for both companies’ employees through greater growth prospects.”