WestJet set to buy Sunwing airline
The WestJet Group is buying Toronto-based Sunwing Airlines and Sunwing Vacations, taking another step into the vacation travel market as the travel industry attempts to rebuild two years into the pandemic.
The takeover, announced Wednesday, marks a new foray into the airline business for Onex Corp. ONEX-T, which bought Calgary-based WestJet for $3.5 billion in 2019. The purchase price for the Sunwing deal, which requires government approval, was not disclosed. The companies said the takeover could be finalized at the end of this year.
Sunwing and WestJet executives said in a joint interview that the companies’ tourism operations will be combined and headquartered in Toronto, while WestJet will operate Sunwing Airlines from its Calgary base. The two brands will be marketed separately.
The deal comes as the airline industry tries to rebound, two years after COVID-19 prompted governments to close borders and slump in demand, leaving airlines with heavy financial losses.
There will be no job losses under the planned takeover, WestJet CEO Alexis von Hoensbroech and Sunwing CEO Stephen Hunter said in an interview spouse.
Both airlines are hiring employees due to demand for travel returns. WestJet has 8,490 employees, down from its pre-pandemic level of about 14,000, and operates 180 planes. Sunwing employs 2,400 people with a fleet that varies in size from 40 to 10 depending on the season.
“We have a lot of staff [who] have been here a long time. So I’m spending many sleepless nights thinking about how we’re going to get through this pandemic,” said Hunter, who will lead the Combined Tours division. “Not only will it be fine because finally our Prime Minister helped us with his announcement a few weeks ago [on looser COVID-19 testing rules for travellers], and sales have been extremely good for everyone in the business. But ultimately, this marriage will mean more jobs for Canadians.
Hunter said he is optimistic the deal will receive regulatory approval, given that it combines complementary businesses – an airline with a strong presence in Western Canada and a tour operator primarily based in Ontario and Quebec.
Mr Hoensbroech, who started in WestJet’s top job two weeks ago, said the deal will give WestJet access to a bigger market of Canadians who want to buy winter resort holidays . “We complement each other…in areas where we are both weak,” he said.
Sunwing was founded in 2002 by Mr. Hunter’s father, Colin Hunter. The German tourism and air transport company TUI Group owns 49%. The company also owns and operates 45 resorts in Mexico and the Caribbean, several tour operators, a luxury jet charter service, and other vacation and hotel brands. Mr. Hunter and TUI become shareholders of WestJet while retaining ownership of several hotels in the Caribbean.
WestJet is Canada’s second largest airline, behind Air Canada. The two companies control 83% of the domestic market and 88% of international air fares sold in Canada, according to Cirium, an aeronautical data company. In 2021, WestJet accounted for 37% of domestic seat sales and 18% of the international market. Sunwing has a 3% share of sales to overseas destinations.
WestJet’s airline, combined with Sunwing’s strong tourism business, would be a tougher competitor for Air Canada and its vacation division, as well as Montreal-based Transat, which has a significant presence in the European tourism market.
Airline takeovers in Canada are reviewed by the Commissioner of Competition and Transport Canada, who report to the Minister of Transport, who makes the final decision. Air Canada AC-T has abandoned its plan to take over Transat AT Inc TRZ-T. last year when the European regulator refused to approve the deal.
The deal comes a year after The Globe and Mail reported Mr Hunter had received a takeover bid from an unnamed suitor. Around the same time, Marriott International took over the marketing of 19 of Sunwing’s 44 resorts in a deal spurred by the pandemic-caused travel slump.
Sunwing borrowed $227 million from taxpayers under an emergency loan program for large employers. The airline also borrowed an additional $99 million from the federal government to reimburse customers whose flights were canceled during the pandemic.
Mr Hunter said the government loans will be repaid when the deal is done.
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