WestJet has received official approval from the federal government for its proposed acquisition of Sunwing, a move that paves the way for the merger to proceed.
However, the permit is subject to “strict conditions that are in the interests of Canadians,” Transport Minister Omar Alghabra said.
Among those requirements is a stipulation that vacation-focused Sunwing expand its getaway package offerings to five new Canadian cities. The combined airline must also maintain capacity on the routes “most affected” by the merger.
The government is also requiring the airline to maintain a vacation headquarters in Toronto and a regional office in Montreal for at least the next five years, and requires that net employment at Sunwing’s Toronto headquarters grow by at least 20 percent during that time .
“Today’s decision was not made easy for us,” said Alghabra. “After weighing the pros and cons, we made the decision that allows Sunwing to continue offering affordable vacation packages to Canadians, create more good jobs, and protect current jobs and Canadians who have already purchased tickets.”
In an email statement late Friday, Sunwing told CBC News, “We look forward to completing the transaction and officially joining the WestJet Group in the coming weeks.”
Similarly, WestJet said in a statement it was “pleased that regulatory review of the transaction is now complete.”
The deal has faced a number of roadblocks over the past year.
In the fall, the Competition Authority issued a report to the Department for Transport, citing concerns the deal would be bad for consumers.
The bureau said a merger of the two airlines would create a monopoly on more than a dozen routes between Canada and Mexico or the Caribbean and reduce or eliminate competition on more than 30 others to the same destinations.
Robert Kokonis, president of consultancy AirTrav Inc., told The Canadian Press that western Canadians might want to consider discount airlines like Flair Airlines and Lynx Air, which offer cheap flights to sunny southern destinations but not package deals.
“Any time you take away selection in a market, it can impact pricing. But I still think we have a reasonable level of competition in the East,” he said, pointing to Air Canada Vacations and Air Transat.
“In the west it will be a little less.”
One less competitor
Ian Lee, who teaches business administration at Carleton University in Ottawa, says it’s hard to imagine the deal being good for consumers in the traditional sense, since having one less competitor on airline tickets usually means less choice and higher prices.
“Whenever an industry becomes more concentrated [it] usually means higher prices and reduced services,” he told CBC News. But in this case, it might be tastier, because the alternative might well be that the privately held Sunwing ceases to exist.
The airline became the focus of outrage this winter when travel chaos stranded or harassed thousands of passengers in December and January. The airline canceled most flights out of Manitoba, Saskatchewan and the Maritimes for the remainder of the season to focus on other routes.
“The alternative, I think, is probably worse because Sunwing is in … a precarious state,” he said. “I think many Canadians would rather have a stable airline that shows up and gets me home than fly on an airline that risks me being stranded because they went out of business.”
The deal also faced opposition from within Sunwing’s own union, which claimed that management knew the takeover bid was in the works but did not disclose it – even as it negotiated a collective bargaining agreement with its pilots.
The concerns of the pilots
On Friday, Marquis Taylor, a Sunwing pilot and president of Unifor Local 7378, said Ottawa’s approval was expected but there were concerns about what it means for the pilots.
“On the face of it, I’d say the conditions don’t offer us anything and probably make us very vulnerable to whiplash,” he said, referring to contract negotiations with WestJet and Sunwing pilots.
“Sunwing has unique working conditions with many pilots in Quebec City, Winnipeg or Edmonton,” he said, pointing to centralization as an industry trend. “The last thing we want is for everyone to have to work in Calgary or Toronto.”
Based in Calgary, WestJet employs approximately 8,500 people. Sunwing employs around 2,200 people.
The financial terms of the deal were not released.
Both companies are private companies, with parent company Sunwing Travel Group majority owned by the Hunter family and WestJet owned by Toronto-based investment manager Onex Corp. is after it privatized the airline in a $5 billion deal in 2019.
