The WestJet Group has announced a deal to buy Sunwing Airlines and Sunwing Vacations, marking a foray into the holiday tour market as competition among Canadian carriers heats up.
Financial terms of the agreement, which will see Sunwing’s shareholders become equity holders in the WestJet Group, were not disclosed.
WestJet chief executive Alexis von Hoensbroech says the deal, unveiled Wednesday, brings together two highly complementary businesses.
Under the agreement, WestJet will create a new tour operator unit headed by Sunwing CEO Stephen Hunter that includes Sunwing Vacations and WestJet Vacations as separate brands.
The WestJet Group of companies will expand to include Sunwing Airlines. The company says this will add capacity as it sees otherwise seasonal aircraft operate year-round. Currently, Sunwing supplements seasonal demand with imported aircraft.
Both airlines are privately held. Toronto-based Sunwing is controlled by the Hunter family — Germany’s TUI Group owns the other 49 per cent of the airline — and Calgary-based WestJet was purchased by Onex Corp. for $3.5 billion in 2019.
The acquisition Wednesday will increase WestJet’s flight footprint to sun destinations and resorts after what has been a tough two years for the airline and travel industries.
The federal government last month lifted its advisory against international travel and both airlines are hiring. WestJet employs about 8,500 workers, down from roughly 14,000 in 2019. Sunwing has fewer than 2,500 on staff.
WestJet and Sunwing “will respect all arrangements with union and employee associations,” WestJet said in a release.
“This combination brings together Canada’s two original low-cost carriers and positions us to accelerate growth in value-oriented travel, already the fastest growing segment of the airline market,” said Hoensbroech, who became WestJet’s CEO two weeks ago.
Hunter noted WestJet is one of a handful of airlines that has not issued debt or equity during the pandemic or accepted sector-specific government aid.
Crystal Hill, vice-president of CUPE 4070, the union that represents WestJet flight attendants, attributed that fact in part to the deep pockets of Onex, which boosted net earnings by 48 per cent to $1.4 billion last year.
“This is positive overall,” she said in a phone interview, observing that the deal suggests faith in a travel market rebound. “Onex has the money. It means stability.”
The agreement, which is subject to regulatory approvals, is expected to close late this year. Transport Canada and the competition commissioner must both review the would-be takeover and report their findings to the transport minister, who has final say.
In April, Air Canada abandoned its attempted acquisition of Transat AT after the European Commission warned the country’s largest airline it would face high regulatory hurdles.
