“A natural next step”: Onex expects WestJet IPO in two years

Onex Corp. plans to take WestJet public in the near future, following the sale of a 25 per cent stake in the airline to three other carriers — a move that secured a substantial profit.

“An IPO would be a natural next step because airlines are very large, capital-hungry enterprises,” Tawfiq Popatia, head of Onex Partners, the firm’s flagship private equity unit, told Bloomberg last week. “I think that would be a natural thing to expect in a couple of years.”

As PAX previously reported, Onex finalized a deal last week that gives Delta Air Lines Inc. a 12.7 per cent stake in WestJet, with Korean Air Lines holding 10 per cent and Air France-KLM 2.3 per cent.

The agreement allows Onex to recoup its entire investment in Canada’s second-largest airline while retaining a 75 per cent ownership share.

Since taking WestJet private almost six years ago – in 2019, just weeks before the COVID-19 pandemic hit – Toronto-based Onex has reshaped the airline’s strategy, bringing in a top executive from Deutsche Lufthansa AG, Alexis von Hoensbroech, WestJet’s current CEO, who trimmed unprofitable short-haul routes in eastern Canada to refocus on Western Canada.

As part of the overhaul, WestJet has expanded its home base in Calgary, leveraging Alberta’s rapid economic growth.

In recent years, the airline has expanded internationally, adding routes across Asia, Europe, and the Americas, with more destinations under consideration.

Additionally, WestJet, last month, reached a deal with Boeing to purchase 737-10 Max narrowbody jets and 787-9 Dreamliner widebodies, increasing its total orders to 123 aircraft with an additional 40 purchase options. The airline currently operates 193 planes, primarily Boeing 737s and 787s.

The deal with Delta, Korean Air Lines, and Air France-KLM paves the way for deeper collaboration among the carriers, especially in lowering aircraft-related costs.

Having partners that are vertically integrated, that have their own maintenance shops, that order aircraft in scale” is beneficial, Onex’s Popatia told Bloomberg.

Delta and Korean have each been codeshare partners with WestJet for years. The broader partnerships could support future benefits for travellers, including an elevated, more seamless travel experience for customers worldwide.

Korean Air and WestJet have partnered since June 2012, expanding their transpacific connectivity.

The closing of the deal “marks a milestone in our airline partnerships, building on existing relationships and reflecting confidence in WestJet's strategy, performance, and people," said von Hoensbroech in a press release issued Oct. 22.

"We are proud to welcome our new airline shareholders and look forward to further strengthening our partnerships with their airlines to create long-term value for guests."