WestJet Airlines to acquire Sunwing
Competition Bureau says it will review proposed transaction
WestJet Airlines Ltd. is acquiring Sunwing Airlines Inc., as competition in the Canadian travel market heats up.
WestJet released a statement on Wednesday confirming the news, adding that "the transaction will bring together two distinctly Canadian travel and tourism success stories."
Under the agreement, WestJet will create a new tour operator unit headed by Sunwing CEO Stephen Hunter that includes Sunwing Vacations and WestJet Vacations as separate brands.
The WestJet Group of companies will expand to include Sunwing Airlines. The company says this will add capacity as it sees otherwise seasonal aircraft operate year-round. Currently, Sunwing supplements seasonal demand with imported aircraft.
Both airlines are privately held. Toronto-based Sunwing is controlled by the Hunter family and WestJet was purchased by Onex Corp. in 2019.
Crystal Hill, vice-president of CUPE 4070, the union that represents WestJet flight attendants, attributed the financial stability of Onex to the company having stronger net earnings last year.
"This is positive overall," she said in a phone interview with the Canadian Press, observing that the deal suggests faith in a travel market rebound.
The agreement, which is subject to regulatory approvals, is expected to close late this year.
Shortly after the announcement of the acquisition, the federal Competition Bureau said it would review the proposed transaction.
"Under the Competition Act, the Competition Bureau has a mandate to review mergers to determine whether they are likely to result in a substantial lessening or prevention of competition," the statement read.
The acquisition would increase WestJet's flight footprint to sun destinations and European cities after what has been a tough two years for the airline and travel industries.
The federal government last month lifted its advisory against international travel and both airlines are hiring. WestJet employs about 8,500 workers, down from roughly 14,000 in 2019. Sunwing has fewer than 2,500 on staff.
WestJet and Sunwing "will respect all arrangements with union and employee associations," WestJet said in a release.
'Bloodbath' on the horizon for airline industry, says expert
The acquisition isn't going to be the last one we see, said John Gradek, a lecturer and co-ordinator of the aviation management program at McGill University in Montreal.
"Consolidation is starting to happen in the industry," said Gradek.
With airlines like Porter and Flair planning to expand their presence in Sunwing markets, Gradek said a "bloodbath" is on the way.
Flair Airlines is planning to expand its fleet to 30 planes by mid-2023, with a goal of reaching 50 planes in five years.
"Sunwing knows it's either get out now while the going is good and there's value or you go through a severe downturn in terms of competitive presence and a reduction in profitability," said Gradek.
As for WestJet, Gradek said its interest in Sunwing is likely driven by its brand appeal and the opportunity to expand into the Eastern Canada market.
"What I think WestJet is doing is really getting themselves into the eastern Canadian leisure market," said Gradek, adding that expanding the WestJet brand into Eastern Canada instead would be a costly endeavour.
With files from The Canadian Press
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