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Monday,  April 15, 2024 12:15 PM 

Ottawa to approve WestJet-Sunwing deal: report

Ottawa to approve WestJet-Sunwing deal: report
Ottawa will approve WestJet Airlines takeover of Sunwing, according to a report. (File photos)
Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

WestJet's proposed acquisition of Sunwing Vacations and Sunwing Airlines has passed the public interest test and has received the support of the federal government, according to the Globe and Mail, which is reporting that Ottawa will approve the pending deal.

Citing unnamed sources familiar with the matter, Ottawa will make an announcement on Friday (March 10) and green light the major transaction, which was first announced in March 2022.

The purchase price of Sunwing, founded and owned by the Hunter family, has not yet been disclosed.

READ MORE: Sunwing’s Andrew Dawson says industry’s "best days are ahead of us” amid WestJet takeover

Conditions, however, are expected given that the Competition Bureau, last October, raised concerns about the transaction. 

In a report released at the time, the watchdog concluded that WestJet's acquisition of Sunwing Vacations and Sunwing Airlines is likely to result in a “substantial lessening” or prevention of competition in the sale of vacation packages to Canadians.

Ottawa set to approve WestJet Airlines takeover of Sunwing, according to a report. (Sunwing)

“Eliminating the rivalry between these integrated airlines and tour operators would likely result in increased prices, less choice and decreases in service for Canadians,” The Bureau said. “It would also likely result in a significant reduction in travel by Canadians on a variety of routes where their existing travel networks overlap.”

WestJet, owned by Onex Corp., and Sunwing account for roughly 37 per cent of non–stop capacity between Canada and sun destinations and 72 per cent of non–stop capacity between Western Canada and sun destinations, the Bureau found.

The report noted that leisure travel is "widely projected to lead the post–pandemic recovery," as pent–up demand drives growth in Canadian holiday travel.

"In this environment, maintaining and encouraging healthy competition in leisure travel markets is particularly vital to the interests of Canadian consumers," the Commissioner of Competition stated.

The report, which Sunwing said contained errors about active routes, was created to inform Transport Canada's public interest review of the transaction as it relates to national transportation.

The marrying of WestJet and Sunwing was originally positioned as a move that would keep business competitive as low-cost carriers increase their presence in the Canadian marketplace.

The pending deal would also increase WestJet’s reach to sun destinations and European cities while expanding the brand’s presence in Eastern Canada.

The companies previously explained how the tour businesses will be merged and based in Toronto, while WestJet will operate Sunwing Airlines from its base in Calgary.

The two brands, meanwhile, will be marketed separately.

Brand in crisis

The fate of WestJet's takeover of Sunwing was briefly debated by pundits during the December/January holiday period after the popular tour operator cancelled many flights, at the last minute, after a snowstorm crippled operations. 

Some Sunwing customers were left stranded in destinations – for several days, in some cases  – while the brand, overall, took a hit amid accusations of poor communication and sharp criticism from travel agents facing commission recalls. 

Sunwing, which later clarified that most of its customers enjoyed their holidays with “minimal disruption," blamed Ottawa for blocking the hiring of foreign pilots. Stephen Hunter, Sunwing's chief executive, also apologized to customers.

Andrew Dawson, president of tour operations for Sunwing, said the company was committed to finding ways to make advisors whole again.

“We recognize there is more work to be done in rebuilding your faith in us and will continue to provide updates on this important work,” Sunwing said in an apology to the trade in January. “We are dedicated to regaining your trust in the weeks and months ahead.”

Since Jan. 1, Sunwing has reduced its capacity, suspending winter operations entirely in some markets, in order to “safeguard the integrity” of its operations. 

Ottawa gets final say

Criticism from the Competition Bureau doesn’t necessarily translate into a red light – cabinet ultimately gets the final say on airline takeovers. 

One may recall how the Competition Bureau, in March 2020, concluded that Air Canada's then-proposed acquisition of Transat A.T. would hinder competition and result in higher prices, fewer services and less travel.

Still, the Government of Canada, in February 2021, approved the deal. The economic impact of the COVID-19 pandemic, at the time, was a key factor in Ottawa's final decision.

But the Air Canada-Transat transaction eventually fell apart due to complications in securing approvals from the European Commission. 

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