From The Globe and Mail 🔗 link to source story
ERIC ATKINS, TRANSPORTATION REPORTER • March 2, 2022
WestJet Group is buying Toronto-based Sunwing Airlines and Sunwing Vacations, taking a bigger step into the holiday tour market as the travel industry tries to rebuild two years into the pandemic.
The takeover, set be announced on Wednesday, marks a new foray into the airline business for Onex Corp., which bought Calgary-based WestJet for $3.5-billion in 2019. The purchase price for the Sunwing deal, which requires government approval, was not disclosed. The companies said the takeover could be finalized in late 2022.
The heads of Sunwing and WestJet said in a joint interview the companies’ tour businesses will be combined and headquartered in Toronto, while WestJet will run Sunwing’s airline from its Calgary base. The two brands will be marketed separately.
The deal comes as the airline industry tries to rebound two years after COVID-19 spurred governments to close borders and sent demand plummeting, leaving airlines with steep financial losses.
There will be no job losses in the planned takeover, Alexis von Hoensbroech, chief executive officer of WestJet, and Stephen Hunter, Sunwing’s CEO, said in a joint interview.
Both airlines are hiring employees as demand for travel returns. WestJet has 8,490 on staff, down from its pre-pandemic level of about 14,000, and flies 180 planes. Sunwing employs 2,400 with a fleet that ranges in size from 40 to 10 depending on the season.
“We have a lot of staff [who] have been here for a long time. So I have many sleepless nights thinking about how we’re going to get through this pandemic,” said Mr. Hunter, who will run the combined tour division. “Not only is it going to be okay because finally, our Prime Minister helped us out with his announcement a couple of weeks ago [on looser COVID-19 testing rules for travelers] and sales have been tremendously good for everybody across the sector. But ultimately this marriage will mean more jobs for Canadians.”
Mr. Hunter said he is optimistic the deal will receive regulatory approval, given it combines complementary businesses – an airline with a strong presence in Western Canada with a tour operator that is mainly based in Ontario and Quebec.
Mr. Hoensbroech, who started in the top job at WestJet two weeks ago, said the deal will allow WestJet to tap into a bigger market of Canadians who want to buy resort vacations in the winter. “We are complementing each other … in areas where we both are weak,” Mr. Hoensbroech said.
Sunwing was founded in 2002 by Colin Hunter, father of Stephen Hunter. German tourism and airline company TUI Group owns 49 per cent. The company also owns and operates 45 resorts in Mexico and the Caribbean, several tour providers, a luxury charter jet service, and other vacation and hotel brands. Mr. Hunter and TUI become shareholders in WestJet while retaining ownership of several hotels in the Caribbean.
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WestJet is Canada’s second-largest airline, trailing Air Canada. The two companies command 83 per cent of the domestic market and 88 per cent of international airfares sold in Canada, according to Cirium, an aviation data company. WestJet in 2021 accounted for 37 per cent of domestic seat sales and 18 per cent of the international market. Sunwing has a 3-per-cent share of sales to foreign markets.
WestJet’s airline combined with Sunwing’s strong tour business would present a more formidable competitor to Air Canada and vacations division, as well as Montreal-based Transat, which has a significant presence in the European tourism market.
Airline takeovers in Canada are reviewed by the Competition Commissioner and Transport Canada, which report to the Transport Minister, who makes the final ruling. Air Canada dropped its planned takeover of Transat AT Inc. last year when the European regulator refused to approve the deal.
The deal comes a year after the Globe and Mail reported Mr. Hunter had received a takeover offer from an unnamed suitor. Around the same time, Marriott International took on the marketing for 19 of 44 Sunwing resorts in a deal spurred by the collapse in travel caused by the pandemic.
Sunwing has borrowed $227-million from taxpayers under an emergency loans program for large employers. The airline has also borrowed another $99-million from the federal government to repay customers whose flights were cancelled in the pandemic.
Mr. Hunter said the government loans will be repaid when the deal closes.
