WestJet Group’s takeover of vacation-focused rival Sunwing Airlines has been approved by Canada’s transportation minister, clearing the runway for a major shakeup in the airline industry.
Omar Alghabra gave the Liberal government’s official sign-off on the deal in a press release on Friday afternoon, noting the decision “was not taken lightly.”
First announced in March 2022, the deal will see Calgary-based WestJet acquire Toronto’s Sunwing as well as its tour operation business.
Alghabra attached a number of stipulations to the deal as conditions for its approval aimed at addressing concerns about reduced competition and job losses as a result of the deal.
These include extending Sunwing vacation packages to five new Canadian markets, though those cities were not specified in the release. Other conditions include investing in IT and baggage handling improvements.
Financial terms of the acquisition between the two privately held airlines have not been disclosed, though Sunwing shareholders would gain a stake in WestJet’s business.
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 acquisition would increase WestJet’s flight footprint to sun destinations and resorts.
“We are pleased that the regulatory review of the transaction is now complete,” Angela Avery, WestJet’s executive vice-president, said in a statement after the government’s announcement.
Sunwing said in its own statement the decision marks “an important milestone” in the acquisition process and thanked the government for determining the merger is “in the public interest.”
“We look forward to closing the transaction in the weeks ahead and officially joining the WestJet Group,” the company said.”
The federal Competition Bureau has raised concerns about the merger, arguing the deal will likely result in higher prices and decreased service for Canadians.
The decrease in competition, particularly in the vacation space where the airlines have overlapping routes, will affect the rates Canadians are offered for getaways, the watchdog said in a letter to Alghabra last fall.
But Transport Canada said not approving the acquisition would have led to greater instability in Canada’s air sector, “including job losses, a significant reduction of affordable vacation offerings, negative impacts on passengers, and the Government not being repaid sizable loans.”
“After considering the pros and cons, we have made the decision that will allow Sunwing to continue to provide affordable vacation packages to Canadians, create more good jobs, and protect current jobs as well as Canadians who have already purchased tickets,” Alghabra said in a statement.
Ottawa’s stipulations for the deal state the combined airlines must maintain capacity on routes affected by the merger.
The bureau said that the two airlines represent two of the four largest providers of integrated vacation packages in Canada and are the two biggest players connecting Western Canada to sun destinations.
WestJet has said the acquisition will boost its overall flight capacity, as it can fly Sunwing jets on routes outside of the airline’s traditional holiday schedules. The company has also said it will maintain operations at Sunwing’s Toronto and Laval, Que., offices.
Among Alghabra’s conditions was a guarantee that employment in Toronto would rise 20 per cent over the next three years and that the regional Sunwing offices would be maintained.
Labour union Unifor had pushed the federal government to include job protections for Sunwing employees as part of the deal’s approval. WestJet has argued the expanded flying opportunities with Sunwing’s jets will create more jobs.
Earlier this year, WestJet announced plans to refocus its operations to primarily service routes out of Western Canada.
The announcement comes as Canada’s airline industry struggles to regain footing after three years of disruptions in the pandemic.
Both airlines are coming off a rough holiday season as well, which saw numerous flight delays and cancellations, chaos at airports and hundreds of Sunwing passengers stranded in Mexico.
The chaos led Sunwing to cancel all its flights out of Saskatchewan for the rest of the winter season.
— with files from The Canadian Press