WestJet’s purchase of Sunwing | Red lights for competition, but not in Quebec

Rising prices, loss of choice and reduced service: these concerns raised by the Competition Authority about WestJet’s purchase of Sunwing will not affect Quebec travelers if the deal goes through.

Posted at 10:10 am
Updated at 2:03 p.m

Julien Arsenault

Julien Arsenault

The federal agency takes a dim view of the marriage because it would prevent or “significantly” limit competition in 31 markets to Mexico and the Caribbean. On 16 routes, WestJet would find itself in a monopoly situation.

However, the Quebec market — where Air Canada, Transat AT and Sunwing already compete in leisure travel — does not appear on the authority’s list of locations. Especially in the West (Calgary/Edmonton/Saskatoon/Kelowna/Vancouver) we fear the worst. For example, between Calgary and Cancun, WestJet could command 80% of the winter market.

“WestJet’s presence in Montreal and the rest of Quebec is minimal, while Sunwing’s presence is the opposite,” says Robert Kokonis, president of consulting firm Air Trav. The merger has no impact on the Quebec market. »

Calgary-based WestJet, Canada’s second-largest carrier, announced an agreement last March to acquire Toronto-based Sunwing and Sunwing Vacations. Sunwing Vacations operates a regional headquarters in Laval. In Quebec, the company has approximately 570 employees. The amount of the transaction was not disclosed because the two companies are privately held.

less actors

The federal agency’s analysis is based on data collected before and after the COVID-19 pandemic. In the leisure travel segment, the combination of Sunwing and WestJet raises competition concerns in Western Canada, the Bureau points out.

Indirectly, the relocation of Transat AT towards Montreal and eastern Canada appears to have weighed in the Bureau’s analysis. The federal agency notes that the latter no longer offered flights to sun destinations from Regina, Saskatoon and Kelowna.

“The contemplated transaction will result in the acquisition of one of Canada’s largest integrated tour operators (Sunwing) by one of its main rivals in the supply of package holidays (WestJet),” the document points out.

Mr. Kokonis disagrees with some of the Bureau’s findings.

While acknowledging that the proposed transaction would consolidate the industry in certain markets, the expert believes it would not pose barriers to potential new players.

“The list of low-cost carriers in Canada is growing,” says Mr. Kokonis. There are Flair Airlines, Canada Jetlines, Lynx Airlines and OWG. There is nothing to prevent these carriers from setting up in Winnipeg, for example, and offering flights and packages to Cancun. »

In a statement, WestJet recalled that the position of the presidency is “non-binding” and that it is a document analyzed by Transport Minister Omar Alghabra, who will have to make recommendations to the Trudeau government.

“The final decision made by Cabinet will take into account other factors presented by WestJet, including the preservation of the Sunwing brand, the commitment to maintain the Sunwing offices in Toronto and Montreal and the new flights that will be created,” he stressed. carrier based in Calgary.

Sunwing limited itself to saying that the Bureau had not expressed any concerns about Quebec.

other concerns

The implications of Sunwing’s purchase of WestJet are of concern not only to the presidency. Aéroports de Montréal (ADM) called out Transport Canada as part of its consultation because it was concerned about the potential loss of direct flights to Toronto.

Transat AT took criticism over its proposed merger with Air Canada before its cancellation last year: consolidating airline industry players in the sun destinations segment. The travel agency says it wants to take time to analyze the bureau’s report, but believes the conclusions “seem to be consistent with the same concerns we have expressed in the past.”

WestJet and Sunwing estimate their merger will be completed by spring 2023. Both companies must obtain all remaining regulatory and government approvals.

Find out more

  • 215 million CAN
    Sunwing’s loss for fiscal 2021

    source: tui group

Leave a Comment