WestJet Group’s decision to shut down Sunwing Airlines barely a week after announcing plans to give its low-cost brand Swoop the same treatment is bad news for Canadian air travellers, according to experts who spoke to Global News.
They say consumers could see fares fly higher with fewer brands competing for business.
Some are pointing the finger not at WestJet but at the federal government for clearing the runway for the western airline’s consolidation at the expense of competition in Canada’s increasingly concentrated aviation industry.
WestJet’s deal to acquire Sunwing was approved by Ottawa in March and formally closed in May.But the plans are now to wind down the Sunwing brand over the next two years, according to an internal memo obtained by the Canadian Press.
Global News reached out to WestJet to confirm the report but did not hear back on Monday.
0:31 WestJet to shut down Sunwing Airlines, merge it with mainline business The disappearance of Sunwing-branded planes, alongside the Swoop jets that will be folded into WestJet’s primary fleet by the fall, will likely hit Canadian air travellers when they try to book flights in the months to come, says Toronto Metropolitan University’s Frederic Dimanche.
“The main issue is probably going to be that there will be fewer options, obviously fewer flights on fewer brands and probably a higher price,” says the tourism and hospitality professor.
While the changes are largely internal, Dimanche says bringing together three disparate airline operations under a single banner means operating the flights under the WestJet cost structure — not the low-price model that Swoop offered, for example.
Some of this stems from the Calgary-based airline’s recent collective bargaining with its pilots, he says, which mandated boosts to compensation and more pay equity across Swoop and WestJet.
John Gradek, head of McGill University’s aviation management program, agrees with Dimanche that the consolidation of Sunwing and Swoop is an effort from WestJet to offset the higher expenses on its payroll following the pilots’ wage negotiations.
“We knew they’d have to take some other action to recover some of that expense in some other ways,” he tells Global News.
2:05 WestJet resolution could impact future travel costs Duncan Dee, former chief operating officer at Air Canada, says that it’s more expensive to run multiple airlines at the same time, and there may be benefits to passengers from breaking down walls between WestJet, Sunwing and Swoop.
Slapping the same coat of paint on WestJet’s expanded fleet and bringing pilots and staff into a singular operation can make the airline more nimble and able to substitute jets and staff when there are unexpected technical malfunctions on a plane that would ordinarily have delayed or cancelled a flight, he says.
“These are operational decisions that make it much easier for WestJet to serve the customers that it has,” Dee tells Global News.
Competition Bureau warned of higher prices Dee says that these kinds of efficiencies were the “next logical step” for WestJet after the acquisition closed on May 1, adding that “the die was cast” when the federal government OK’d the deal.
Ottawa’s approval of the Sunwing acquisition went against urging from the Competition Bureau, which predicted in a letter to Transport Minister Omar Alghabra last fall that rubber-stamping the deal would lead to higher prices for consumers.
“The Competition Bureau forewarned it was going to result in worse service and higher prices.I very much agree,” Gabor Lukacs, president of the Air Passenger Rights consumer advocacy group, tells Global News.
When the Sunwing acquisition was approved, it came alongside a series of conditions that WestJet would have to honour.
In addition to expanding Sunwing vacation packages to five new Canadian cities, Ottawa expected WestJet to maintain capacity on routes most affected by the merger.
“Any violation of these terms and conditions would be a violation of the merger agreement,” said Nadine Ramadan, press secretary for Alghabra, in a statement to Global News on Monday.
1:40 WestJet and pilots union strike averted, but airline faces recovery challenges Lukacs says the government’s approval of the deal was “ill-advised,” as it would leave Canadians with less choice and costlier airfares.
Trending Now Bebe Rexha collapses after fan throws phone at her face, man arrested ‘F–king grifters’: Spotify exec calls out Prince Harry and Meghan Markle Alghabra said in a statement that the time that the “decision was not taken lightly” but the government felt the approval would “allow Sunwing to continue to provide affordable vacation packages” and conditions put in place would protect competition in the industry.He did not specifically comment on the possibility of more expensive fares.
The federal government also claimed then that denying the acquisition could have spurred “greater instability” in the Canadian aviation sector with reductions in vacation offerings and possible job losses in the industry.
Global News reached out to the Competition Bureau for comment on WestJet’s plans to wind down Sunwing.While a spokesperson for the competition watchdog confirmed it was “aware” of the reports WestJet plans to absorb Sunwing, he said the Bureau only provides input on such matters when directed by the minister to conduct public interest review.
Is there enough competition left in Canadian skies? The Competition Bureau said in October that WestJet and Sunwing comprise 37 per cent of seat capacity on direct flights to sun destinations, and 72 per cent from Western Canada.
Aviation consultant Rick Erickson says Air Transat and Air Canada will ensure a healthy mix of competition for sun destinations, but that travellers in smaller markets ranging from Saskatoon to St.John’s, N.L., may well have to shell out more.
Though WestJet will end its Swoop offering that previously competed with other low-cost carriers such as Flair Airlines and Lynx Air, some experts worry the western airline will flex its expanded fleet to redouble its efforts to quash competition.
Gradek says he expects WestJet will soon decide which markets it will scale down its presence in and which markets it will lean on to offer “aggressive pricing” in order to re-entrench itself.
He says it remains to be seen whether there’s room for multiple low-cost carriers in Canada’s aviation industry, and the next few years could see more consolidation and big moves.
“We are going to be shaking up the Canadian aviation industry over the next couple months and we’re just heading into the summer,” he says.“Batten down the hatches.”
2:30 Flair Airline launches new base in Calgary Dimanche says that the new status quo in Canadian airspace after Sunwing and Swoop’s exit will see two players with Air Canada largely in the east and WestJet primarily focused in the west.
He says regulators will have to keep an eye out to make sure that these airlines are not aligning prices too closely to abuse their dominance in the market.
As for low-cost carriers, Dimanche argues they might not be as threatened as long as they can maintain their niche in the market.
He says Lynx and Flair could learn from regional player Porter Airlines, which flies only a few markets in central Canada but focuses on customer service as much as price.
“They have to differentiate themselves,” he says.“They try to do it by price.I think they also have to do it with quality.”
— with files from Global News’s Sean O’Shea and The Canadian Press
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