Sunwing acquisition a boost for WestJet in low-cost space: AirTrav’s Robert Kokonis
Canada’s WestJet Airlines Ltd. agreed to buy low-cost rival Sunwing Airlines and Sunwing Vacations tour operations, ramping up competition in an industry that’s emerging from two years of turmoil brought on by the coronavirus pandemic.
WestJet and Sunwing announced the deal Wednesday in a statement, noting that Sunwing’s current shareholders will become equity holders of WestJet. Terms weren’t disclosed. Bloomberg reported earlier Wednesday that Onex Corp.’s WestJet was nearing a deal for Sunwing.
The deal will position the carriers “to accelerate growth in value-oriented travel, already the fastest growing segment of the airline market,” WestJet Chief Executive Officer Alexis von Hoensbroech said in the statement.
Sunwing Airlines offers flights for Canadians to warm-weather destinations including Mexico, the Caribbean, the U.S. and Central America as well as domestic flights during summer and holidays. The company is owned by the family of Chief Executive Officer Stephen Hunter as well as TUI AG, Europe’s largest tour operator.
The takeover marks the latest attempt by a Canadian airline to combine travel and tour operations, with this deal coming as prospects for tourism and travel improve following two years of pandemic lockdowns that hobbled the airline industry. Air Canada, the country’s largest carrier, sought to buy vacation operator Transat AT Inc. in June 2019, but ended up scrapping the takeover last April because it couldn’t convince European regulators to approve the deal on acceptable terms.
WestJet’s acquisition will increase capacity, “dedicating otherwise seasonal aircraft to operate year-round in Canada,” according to the statement. The combined carriers will have a fleet of around 190 aircraft, comprising mostly of narrow-body Boeing Co. 737 jets. A new tour operating business unit will be created under WestJet Group to include both Sunwing Vacations and WestJet Vacations, which will be led by Hunter.
Airlines the world over are just starting to recover from one of the toughest periods on record after the coronavirus pandemic obliterated demand for travel, prompting carriers to seek government bailouts. The industry’s recovery has since been lopsided, hinging on the emergence of new variants and the measures taken by governments -- including shuttering borders or banning the entry of tourists -- to stop the virus from spreading.
And as the pandemic slashed the valuation of many carriers, it spurred mergers and acquisitions. Recent deals include Canada’s Chorus Aviation and Brookfield Asset Management buying British plane-leasing firm Falko Regional Aircraft Ltd. and a merger agreement between U.S. carriers Spirit Airlines and Frontier Group Holdings.
Onex, based in Toronto, took WestJet private in 2019. The Calgary-based airline operates domestic and international routes and has its own ultra low-cost division under the name Swoop.
Shares of Onex rose 1.8 per cent to $84.67 at 1:39 p.m. in Toronto.
Barclays Plc was the lead bank advising WestJet, while Morgan Stanley, Canaccord Genuity Group and Royal Bank of Canada also provided financial advice.