The Competition Bureau has raised significant concerns about WestJet’s proposal to acquire Sunwing Vacations and Sunwing Airlines, saying the deal would likely result in higher prices and less service for Canadians.
In a report delivered to Canada’s Transport Minister on Wednesday, the federal regulator noted that eliminating rivalry between the two companies would likely prevent or significantly lessen competition in the sale of vacation packages. to Canadians.
“The contemplated transaction will result in the acquisition of one of Canada’s largest integrated tour operators by one of its main rivals in the supply of vacation packages,” the report said. “Together, WestJet and Sunwing represent approximately 37% of non-stop capacity between Canada and sun destinations and 72% of non-stop capacity between Western Canada and sun destinations. »
WestJet announced in March a plan to complete the acquisition of Sunwing, a transaction that would allow it to strengthen its footprint in the market for sun destinations and resorts. Financial details of the agreement, whereby Sunwing shareholders would become shareholders of the WestJet Group, were not disclosed.
In its report, the Competition Bureau noted that a merger of the two carriers would create a monopoly on 16 routes between Canada and Mexico or the Caribbean, and would reduce or prevent competition for the supply of vacation packages on a total of 31 lines between these same countries.
In an emailed statement Wednesday, Sunwing spokeswoman Melanie Anne Filipp, however, said the routes considered to be of concern were primarily in Western Canada, representing a very small portion of Sunwing’s business — just over 10% of all seats — and were mostly seasonal routes. “It should also be noted that Sunwing no longer operates six of the routes mentioned in the report,” said Mr.me Filipp. We remain convinced that this transaction is good news for Canadians. »
In a press release, WestJet said the proposed transaction with Sunwing is a central part of the Calgary-based airline’s commitment to prioritize leisure travel and sun destinations from coast to coast. other, and to increase the availability of affordable airline and vacation packages for all Canadians.
Transport Canada is also conducting a public interest review of the proposed transaction. The final decision on the deal will be made by the cabinet, based on a recommendation from the minister.
WestJet said this decision would take into account other factors, including WestJet’s promised preservation of the Sunwing brand, its commitment to maintain Sunwing’s offices in Toronto and Montreal, the creation of new flights by retaining Sunwing aircraft in Canada all year round and the new jobs that would result.
“We thank the Competition Bureau and welcome its report,” WestJet Vice President Angela Avery said in the statement. “We look forward to bringing this transaction to fruition for the benefit of Canadian travellers, communities and employees. »
The companies said they expect the transaction to close by the spring of 2023, pending remaining regulatory and government approvals.
Other ways to promote competition
The president of Toronto-based consulting firm AirTrav, Robert Kokonis, said he’s not surprised the Competition Bureau is reporting problems with the proposed acquisition. “We knew before this whole process began that, of course, WestJet is the dominant player in Western Canada and that Sunwing is the largest vacation package company in the country, and that bringing the two together would be a strength. more dominant in the west, Mr. Kokonis said. But I would prefer to see the government promote competition in other ways. For example by generating the right regulatory environment for the creation of new carriers,” he added.
Mr. Kokonis noted that there was nothing to prevent another carrier from starting service on one of the routes flagged by the regulator for lack of competition. He added that the proposed acquisition of Sunwing was an important part of WestJet’s plan to refocus its business in Western Canada and that the deal would create a significant number of jobs in the West as aircraft operated from seasonally would now be year-round. Currently, Sunwing meets seasonal demand by leasing most of its fleet during the winter.
“The Competition Bureau’s position will probably be perceived as a blow to Western Canada by the central powers of Ontario and Quebec,” said Mr. Kokonis.