A year ago, WestJet announced its plans to acquire Sunwing Vacations and Sunwing Airlines. Since then, the deal has been going through regulatory approval processes, as well as an assessment from the Competition Bureau.
Late last week, the deal moved one step closer to completion, as it received the support of the federal government, albeit with a handful of conditions. While the deal isn’t final just yet, it’s one step closer to being realized.
WestJet to Buy Sunwing
On March 10, 2023, the federal government gave its support to WestJet for acquiring Sunwing Airlines and Sunwing Vacations. This step marks one of the final hurdles to the deal finalizing, which is expected to happen in Spring 2023.
Following the global pandemic, WestJet’s acquisition of Sunwing represents consolidation in the Canadian travel industry as it recovers from the impacts of the past three years.
WestJet, which also owns the ultra-low-cost carrier Swoop Airlines, intends to offer further competitive airfares and affordable vacation packages with its acquisition Sunwing, challenging Air Canada’s dominant position in the market.
Currently, Sunwing Airlines offers flights from Canada to warm-weather destinations including the US, Mexico, the Caribbean, and Central America, as well as domestic routes at various points throughout the year.
Now, with the acquisition by WestJet, Sunwing’s otherwise seasonal aircraft can be operated year-round within Canada, achieving greater operational efficiencies with WestJet’s existing fleet and network.
Together, WestJet and Sunwing account for about 37% of non-stop capacity between Canada and Sun destinations. From Western Canada, they account for 72% of non-stop capacity to Sun destinations.
It’s worth noting that Air Canada had previously announced its intention to buy leisure-oriented airline Air Transat in June 2019, but eventually scrapped the deal due to difficulty with regulatory approvals from the European Commission.
Unlike the Air Canada/Air Transat deal, the WestJet/Sunwing merger isn’t subject to regulatory approval outside of Canada. Therefore, there shouldn’t be any further regulatory roadblocks to prevent the acquisition from proceeding.
Conditions Placed on Sunwing Acquisition
While the deal has now been given the green light to proceed by the federal government, it came with a number of conditions that will need to be followed.
Recall that both WestJet and Sunwing have faced a number of operational challenges in the recent past that left many travellers stranded away from home or with cancelled itineraries for flights that no longer operate to their home city or province.
Many passengers were also frustrated by a lack of communication from the airlines when travel plans were affected, often being left to fend for themselves.
It appears that some of the conditions placed on this acquisition are meant to address these issues, even as the federal government has promised to bolster Canada’s weak Air Passenger Protection Regulations.
Some highlights of the conditions placed on WestJet’s acquisition of Sunwing and Sunwing Vacations are as follows:
- Sunwing must extend vacation package offerings to five new Canadian cities
- Capacity must be maintained on routes most affected by the merger
- Regional connectivity must increase
- Baggage handling must be improved for a better passenger experience
- Sunwing must invest in IT technology solutions to improve their communications
In the recent past, WestJet has been concentrating its efforts in Western Canada while moving away from Eastern Canada. Additionally, Sunwing cancelled service from Saskatchewan for a period of time, leaving many passengers without a sunny holiday during the winter months.
The conditions placed on the deal will hopefully remediate many of the issues that have affected passengers in the past, although it remains to be seen if the overall passenger experience will indeed be improved.
Other conditions placed on the deal include Sunwing maintaining offices in Toronto and Montreal for at least five years, supplying airfare data on vacation packages to monitor post-acquisition price trends, and eventually ending Sunwing’s seasonal leasing practice to protect Canadian jobs.
It’s also worth noting that the Competition Bureau had expressed concerns about this acquisition back in the fall, stating that it will likely result in increased prices, reduced choice, decreased services, and a significant reduction in leisure travel in the overlap markets.
Only time will tell if the Bureau’s concerns are substantiated, but with the federal government giving the go-ahead to the deal with a number of conditions, hopefully the concerns will have been properly addressed.
What Could This Mean for WestJet Rewards?
While we’ll have to wait to see the eventual implications from a travel cost and loyalty perspective, it’s worth thinking about what the Sunwing deal could signal about the future intentions of Canada’s second-largest airline.
If the deal goes through, we could potentially see WestJet Rewards and WestJet Dollars becoming redeemable on Sunwing flights and Sunwing Vacations in the future. This would open up some new destinations that WestJet Dollars can be used to book, as Sunwing has more flights to Sun destinations than any other leisure carrier.
Indeed, with many changes since the airline’s acquisition by Onex in 2019, the WestJet Rewards program has already been moving in the direction of offering greater mass appeal with minimal weight behind the program, rather than necessarily high-value rewards.
The integration of Sunwing, a low-cost leisure airline, would only be a further step in that direction – one that’s diametrically opposite to the more full-service path that WestJet had appeared to be interested in following a few years ago with their acquisition of Boeing 787 Dreamliners, expanded route network, and elevated onboard and lounge offerings.
One thing’s for sure: the combined group of airlines would be well-positioned to compete on even more fronts against Air Canada, especially as leisure travel is still poised to take a greater share of the market in the coming years.
However, WestJet’s absorption of a competitor in the market represents a major consolidation at the industry level, so while WestJet and Sunwing may be keen to play up their mutual low-cost angle on the public relations front, only time will tell whether the competitive airfares and affordable vacation packages do in fact materialize.
With young upstarts like Flair Airlines, Lynx Air, and Canada Jetlines set to keep the bigger players on their toes, we’ll have to wait and see how things play out following the takeover’s completion to assess the overall impact on the Canadian airfare and loyalty landscape.
Conclusion
WestJet has moved one step closer in its plans to acquire Sunwing Airlines and Sunwing Vacations, representing an upcoming consolidation of Canada’s second- and fifth-largest airlines. Late last week, the federal government announced its support of the deal, which came with a number of strict conditions.
With its acquisition of Sunwing, WestJet appears to be continuing down to the road of re-embracing its low-cost origins rather than moving upmarket towards a more premium identity.
Overall, this news is an example of the major shifts in aviation that were always an inevitable consequence of the global pandemic, with Canada’s industry is set to take on a much-transformed appearance as we continue forth in a world without pandemic-related barriers.
