WestJet committed to Calgary and expansion in wake of $5B purchase offer
CEO Ed Sims says no layoffs, no change in strategy if Onex acquires airline
With a $5-billion purchase offer on the table, WestJet's CEO says the company's long-term vision hasn't changed and it will remain headquartered in Calgary.
Toronto-based private equity firm Onex Corp. wants to acquire the airline — Canada's second largest behind Air Canada — and WestJet has agreed.
The deal, announced on Monday, still needs to jump through several hurdles, including regulatory and shareholder approval.
Ed Sims said the company's roots are in Calgary and there is no plan to rip them up. He pointed to recent construction of a wide-body maintenance facility for its new Dreamliners as an indication of the commitment.
"We like to think we're not just made in Calgary, we're made of Calgary," he said.
"We want to stay very true to our roots and true to our DNA."
No job losses
The purchase by a private equity firm raises the spectre of job losses and asset sales, but Sims says that is not part of the long-term vision for the company.
"They have not spent $5 billion on this entity to try and shrink their way to prosperity," he said.
That includes maintaining current staff and honouring collective agreements.
"We have made further commitments yesterday regarding no job losses as a result of this transaction," said Sims.
Onex has deep pockets and the purchase offer has raised the possibility of consolidation with other airlines, but Sims refused to speculate when asked.
He did say those deep pockets will help the airline realize an ambitious plan that includes more international flights and building out its recently launched ultra-low cost carrier, Swoop.
"One of the biggest challenges in the aviation industry is volatility and people worried about the sustainability of business models. What Onex's investment gives us now is that sustainability," said Sims.
"It gives us the ability to deliver on our long-term strategy."
WestJet started in 1996 as low-cost, no-frills airline with three used airplanes and five destinations in Western Canada, and now has almost 200 planes going to 114 destinations.
Credit rating review
The Onex purchase has prompted Moody's Investors Service to place WestJet's credit rating under review for possible downgrade.
The rating agency says it expects Onex to download some of the $5-billion acquisition cost, which includes debt, onto WestJet when the deal closes. Such a move would increase the airline's adjusted leverage, though WestJet has no room in its current rating for any increase, Moody's says.
The review will examine WestJet's capital structure and any change in business strategy.
Moody's says its review will wrap up around the time the transaction closes later this year or in early 2020.
With files from The Canadian Press