Competition should increase a notch in leisure travel – a niche valued by Transat AT – with the purchase of Sunwing and Sunwing Vacations by WestJet. For Quebec travelers, this transaction should not cause too many waves.
By listing nine conditions, the Trudeau government gave the green light to the purchase of the Toronto tour operator by the second largest air carrier in the country on Friday afternoon. In Quebec, WestJet will have to maintain operations at Sunwing’s regional headquarters, located in Laval, for at least five years.
This decision by Ottawa comes despite the unfavorable opinion of the Competition Bureau issued last October. The organization feared an increase in prices, a loss of choice as well as reductions in services in markets – Calgary, Edmonton, Kelowna, Vancouver – located outside Quebec.
“Today’s decision was not taken lightly, especially in light of everything that happened over the holiday season for people who flew with Sunwing,” said Federal Minister of Transportation, Omar Alghabra, in a statement. After weighing the pros and cons, we have made a decision that will allow Sunwing to continue to provide affordable vacation packages to Canadians. »
By taking Sunwing under its wing, WestJet considerably increases its exposure in the leisure travel sector, prized by Transat AT and in which Air Canada Vacations is present.
Rival more solid
For the Quebec tour operator, which has refocused in eastern Canada, the main threat is to see a rival – Sunwing – pass into the fold of a company with solid backs. WestJet is owned by Toronto-based investment firm Onex.
“Sunwing is not a traditional airline,” emphasizes Mehran Ebrahimi, professor at UQAM and director of the Aeronautics and Civil Aviation Observatory. Combined with an airline like WestJet, it risks seeking efficiency gains and better competing with competitors like Transat. »
The transaction, the amount of which has not been disclosed, provides for the establishment of a tour operator at WestJet. She will oversee Sunwing Vacations and WestJet Vacations and will be led by Sunwing CEO Stephen Hunter. Based in Calgary, WestJet has approximately 8,500 employees and operates 180 aircraft. Sunwing, headquartered in Toronto, has an estimated workforce of 2,400. With just over 560 employees in Quebec.
President of the consulting company Air Trav, Robert Kokonis also believes that Sunwing will have more resources at its disposal by passing into the fold of the Alberta carrier.
“However, it is especially in the West of the country that there will be changes in the competitive landscape. »
Ottawa against the tide
MM. Ebrahimi and Kokonis believe, however, that the Trudeau government’s decision goes against the grain of what is observed in the United States, where the Biden administration seems opposed to concentration in the aviation sector.
Earlier this week, Washington filed a lawsuit opposing a US$3.8 billion deal that would allow JetBlue to buy Spirit Airlines. South of the border, JetBlue has already been prosecuted since 2021 by the American competition authorities for its partnership with American Airlines in the New York and Boston markets.
“The Competition Bureau was against buying Sunwing and Sunwing Vacations, but it looks like the federal government is in favor of these deals,” says Kokonis. Let us also remember that it was not Ottawa that had aborted the acquisition of Transat by Air Canada, but the European authorities. »
It’s not just the Competition Bureau that has been concerned about the effects of WestJet’s purchase of Sunwing. Aéroports de Montréal (ADM) – the operator of Montréal-Trudeau – had contacted Transport Canada as part of its consultations by worrying about potential losses of direct flights to Toronto.
The conditions imposed on WestJet
- Offer Sunwing packages in five more cities
- Maintain capacity on routes most affected by the merger
- Increase connectivity between regions
- Improve baggage handling
- Maintain the head office in Toronto and the regional head office in Laval
- Increase net jobs in the Toronto office by 20% in three years
- Investing in IT to Improve Sunwing Communications
- Provide vacation package airfare data
- Ending Sunwing’s Seasonal Aircraft Leasing Practice
- March 2, 2022
- Date on which the agreement between WestJet and Sunwing was announced.