The newly green-lighted acquisition of a major travel company by one of Canada's largest airlines may have a dramatic effect on the market.
Several groups lobbied against WestJet Airlines' proposal to acquire Sunwing when the companies first entered a definitive agreement in March 2022. The federal Competition Bureau raised significant concerns proposed acquisition, saying the deal would likely result in higher prices and decreased service for Canadians.
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 lessen or prevent competition for the provision of vacation packages on 31 total routes between Canada and Mexico or the Caribbean.
While the federal government has approved the merger, Westjet must meet several conditions, including extending Sunwing packages to five new cities, maintaining capacity on the most affected routes, and keeping both a vacations business head office in Toronto and a regional one in Montreal for at least five years.
And while Westjet says it will market the brands separately, John Korenic, an aviation consultant and an adjunct professor at the University of British Columbia's Sauder School of Business, doesn't expect they will remain separate.
"When you look at the history in North America over the last 20 years or so, any time there's been an acquisition or a merger, in general, they've actually gone through with combing the brands," he told V.I.A., adding that the behaviour is common in mergers but might not happen "right away."
WestJet Airlines has acquired two different Sunwing brands: Sunwing Airlines and Sunwing Vacations. Since the latter product is so similar to WestJet Vacations, Korenic thinks these brands will eventually be marketed as one.
Vancouver flights might cost more, particularly to sun destinations
WestJet has also stated that the merger will provide travellers with more "competitive airfares and affordable vacation packages" -- but the aviation expert doesn't expect that that will be the case.
As a rule, mergers tend to reduce competition, which generally drives prices up, said Korenic. But since Sunwing has about 40 aircraft to WestJet's 180, the merger will have less of an impact on the market than one with "comparable fleet sizes."
Instead, the merger will likely have an impact on prices, particularly for sun destinations, although its effects won't be felt evenly across the country. WestJet and Sunwing comprise about 37 per cent of seat capacity on non-stop flights between Canada and sun destinations. That number rises to 72 per cent between Western Canada and sun destinations, the Competition Bureau said in an October report delivered to the transport minister.
Flair Airlines, Canada Jetlines, and Lynx Airlines currently offer low-cost flight options in Canada. Right now, only WestJet's budget brand, Swoop, offers vacation packages called "Getaways."
Swoop's flight and accommodation packages, powered by Expedia, generally offer a wider variety of economical options compared to WestJet's vacation product, WestJet Vacations, Korenic explained.
In addition to WestJet Vacations, Swoop Getaways, and Sunwing Vacations, Canadians can currently browse holiday packages with Air Canada Vacations and Air Transat.
With files from the Canadian Press.
