As western Atlantic coastal convoys brought an end to the second happy time, Admiral Karl Dönitz, the Befehlshaber der U-Boote (BdU, commander in chief U-boats) shifted focus to the mid-Atlantic to avoid aircraft patrols.

[3] The British Government Code and Cypher School (GC&CS) based at Bletchley Park housed a small industry of code-breakers and traffic analysts.

By June 1941, the German Enigma machine Home Waters (Heimish) settings used by surface ships and U-boats could quickly be read.

Having broken one Shark cypher in mid-December, the delay in breaking them was serious and on 25 December, no settings had been found for the last six days.

In 1941, B-Dienst read signals from the Commander-in-Chief, Western Approaches, informing convoys of areas patrolled by U-boats, enabling the submarines to move into "safe" zones.

In November, convoys were routed further south than usual, which took them away from the air cover from northern bases, when Allied Anti-submarine warfare (ASW) aircraft were not grounded by the weather.

[16] Convoy ON 154 was routed south towards the Azores to avoid the winter storms and remained distant from escort support groups for longer than usual.

[14] At dawn, Toward rescued 25 men from King Edward and assisted Napanee, recovering all but one of Soekaboemi's crew, the ship remaining afloat when abandoned at 07:30.

[18] U-225 began stalking Scottish Heather as she refuelled some of the escorts 15 nmi (28 km; 17 mi) astern of the convoy on the afternoon of 27 December.

While St. Laurent rescued the Kingfisher crew, a coordinated night attack began with U-boats entering the starboard side of the convoy at 19:58.

As Empire Wagtail disintegrated in an explosion that claimed all of her crew, Fidelity reported a main engine failure and Shediac was sent to assist her two miles (3.2 km) astern of the convoy.

[11] Shediac was ordered to leave Fidelity 30 miles (48 km) astern and rejoin the convoy while searching for survivors.

Fidelity recovered the Kingfisher and the two landing craft with Empire Shackleton's survivors that afternoon and launched MTB-105 to conduct anti-submarine patrols through the night.

U-435 torpedoed Fidelity at 16:30 and was surprised by the size of the resulting explosion and by the large number of men subsequently seen floating in the water where the ship had sunk.

Fidelity had on board 369 people (274 crew, 51 Marines and 44 survivors from Empire Shackleton), all were lost at sea, including Egerton, the convoy commodore.

[21]Battleford, Shediac, Milne and Meteor were released on 30 December to refuel in the Azores, leaving only four escorts remaining and as many as twelve U-boats in contact with the convoy.

Following the loss of the convoy commodore, the two fast ships with large passenger complements (Calgary and Advastun), were invited to escape if they found an opportunity.

[22] HMCS St. Francis and the V-class destroyer HMS Viceroy reinforced the convoy escort before nightfall on 30 December.

B-Dienst warned BdU of the reinforcement of the convoy escorts and the U-boats were ordered to disengage, many to rendezvous with U-117 to the west of the Azores.

Blair (2000) and Milner (2018) point out that the Admiralty also bore responsibility for routing the convoy so far south, through the widest part of the Air Gap, that took five days to cross.

Escort Group C-1 was also expected to operate with a destroyer short, inadequate provision for re-fueling and with without modern equipment, against a pack that outnumbered it by four to one.

[28] The burden of escorting slow convoys on the Atlantic route fell to the British, leading to experiences not dissimilar to those suffered by the Canadians.