WestJet buys Sunwing in turbulent global travel market

The WestJet Group has announced an agreement to buy Sunwing Airlines and Sunwing Vacations, strengthening its presence in the holiday travel market as competition between Canadian carriers intensifies.

Financial terms of the deal, which will see Sunwing shareholders become WestJet Group shareholders, were not disclosed.

Unveiled on Wednesday, the deal brings together two highly complementary businesses, “WestJet being a bit more upscale and Sunwing being a bit more mainstream,” WestJet CEO Alexis von Hoensbroech said in an interview.

Under the agreement, WestJet will create a new tour operator unit led by Sunwing CEO Stephen Hunter, which includes Sunwing Vacations and WestJet Vacations as separate brands.

WestJet will also expand to include Sunwing Airlines, adding capacity by converting aircraft operated seasonally into year-round jets. Currently, Sunwing meets seasonal demand by leasing most of its fleet during the winter.

Both airlines are private. Launched in 2005, Toronto-based Sunwing is controlled by the Hunter family – German group TUI owns the remaining 49% of the airline – and Calgary-based WestJet was bought by Onex Corp. for $3.5 billion in 2019.

The acquisition would increase WestJet’s air footprint to sun destinations and resorts after two tough years for the airline and travel industries.

Last month, the federal government lifted its advisory against international travel and both airlines are hiring. WestJet employs 8,490 workers – up from around 14,000 in 2019 – and 180 aircraft.

Sunwing has less than 2,500 employees and operates 40 aircraft in winter and 10 in summer. It owns 18 of these planes, renting eight from European carriers during the warmer months.

Both CEOs said no layoffs would result from the takeover.

“There will be fewer planes from Europe, which means more planes from Canada will be manned by Canadian crews. So that will eventually mean more jobs,” Hoensbroech said.

“We feel strong enough, even stronger together, to recover well from this pandemic and to be more competitive, especially in a low-cost market,” said the CEO of WestJet, who took office two years ago. weeks.

“I am more the messenger than the artisan of the transaction.”

Sunwing has secured access to up to $375 million through a federal loan program for large corporations, as well as up to $100 million in funds borrowed from Ottawa to reimburse customers whose flights have been canceled due to the COVID-19 pandemic. The debts will be repaid when the deal with WestJet is completed, he said.

WestJet is among a handful of airlines that have not issued debt or equity during the pandemic or accepted sector-specific government assistance, Hunter noted.

Crystal Hill, vice-president of CUPE 4070, the union that represents WestJet’s flight attendants, attributed that in part to the deep pockets of Onex, which boosted its net profit by 48% to $1.4 billion. last year.

“It’s positive overall,” she said in a phone interview, noting that the deal suggests confidence in a rebound in the travel market. “Onex has the money. It means stability.”

The deal is expected to close by the end of this year. Both Transport Canada and the Commissioner of Competition must review the potential takeover and report their findings to the Minister of Transport, who has the final say.

In April, Air Canada dropped its bid to acquire Transat AT after the European Commission warned the country’s largest airline that it would face significant regulatory hurdles.

“There are no exclusive routes that we operate on or that we would operate on as a combined entity. So from our perspective there is very, very little concern,” Hunter said.

About 95% of seats sold by Sunwing are part of a vacation package, compared to just 5% for WestJet, he said.

Hunter said he received an acquisition offer early last year from a Montreal company he did not identify. Hunter declined “mainly because of the culture,” he said, saying he preferred a more growth-oriented “entrepreneurial” attitude.

Several low-cost carriers have strengthened since the summer in preparation for a clash with Air Canada and WestJet – and each other – especially for domestic flights and sun destinations.

Flair Airlines has added more than a dozen Boeing 737s to its fleet, as WestJet subsidiary Swoop tackles the routes and Lynx Air – which is due to make its maiden voyage on April 7 – also joins the melee.

This report from The Canadian Press was first published on March 2, 2022.