Competition Bureau raises concerns over WestJet-Sunwing deal

If your post-pandemic life dreams include a winter getaway from Toronto to Aruba, you may need to increase your budget, according to Canada’s competition watchdog.

The Competition Bureau released a report on Wednesday concluding that WestJet’s proposed deal to acquire Sunwing Vacations and Sunwing Airlines would likely result in higher prices, less choice and reduced travel for Canadians on some overlapping routes operated by both carriers.

WestJet is Canada’s second-largest airline and Toronto-based Sunwing, although smaller, is a major player in the domestic vacation package market to sunny destinations, operating both a low-cost airline and a travel agency that also includes many hotels and resorts.

The companies, which announced the deal in March but did not disclose pricing, said they wanted to create a stronger, value-driven tour operator business by combining Sunwing with WestJet Vacations’ business.

The bureau’s report focused on the market for vacation packages (flights typically combined with accommodation) between Canada and sun destinations in Mexico and the Caribbean. He highlighted 31 routes where he said competition would suffer – which could include price increases – if the merger goes through.

Four routes from Toronto – to Aruba, Antigua, St. Lucia and Nassau – were on this list, but the report found travelers from Western Canada could see the biggest impact. Sixteen routes to sun destinations from Edmonton, Calgary or Vancouver were on the list.

“With airline mergers, you think about competition in terms of routes,” said Keldon Bester, co-founder of the Canadian Anti-Monopoly Project and researcher at the Center for International Governance Innovation. « So deal size is one thing, sure, but competition happens at a pretty micro level. »

WestJet and Sunwing together account for about 37% of all nonstop flight capacity between Canada and sun destinations in Florida, Mexico, Central America and the Caribbean in winter, the bureau found (Air Canada and Transat make up the most of the rest of this capacity).

But in Western Canada, WestJet and Sunwing together account for up to 72% of that capacity, the bureau found.

« The routes identified as being of concern in the bureau’s report are primarily in Western Canada, represent a very small portion of Sunwing’s operations, and are primarily seasonal routes relative to the year, » the Sunwing spokeswoman said. , Melanie Filipp, in an emailed statement.

“We remain convinced that this transaction is good news for Canadians,” she said, adding that the companies expect it to lead to new jobs as well as travel options.

WestJet said in a statement it welcomed the bureau’s report, but noted it was « advisory and non-binding ».

Transport Canada, the federal department responsible for aviation, is conducting a review of the agreement which is expected to be concluded in early December and the Minister of Transport will ultimately make a recommendation to the federal cabinet.

WestJet said it has filed an application with the Minister which highlights factors such as « preservation of the Sunwing brand, commitment to maintain Sunwing offices in Toronto and Montreal, new flights to be created retaining the Sunwing aircraft in Canada year-round and the resulting new employment opportunities.

The company also noted that the Canadian Transportation Agency had separately « issued its positive decision on the proposed transaction. »

“I think it would be too cynical to say the Competition Bureau has no influence,” Bester said, but he added that the Minister for Transport and Cabinet had not been particularly deferential to the dog. guard competition in the past.

He pointed to the federal government’s approval of Air Canada’s acquisition of Transat last year, after the bureau released a report saying it would be bad for competition. This deal ultimately fell through after European regulators indicated they would not approve it.

The Competition Bureau said Wednesday that WestJet and Sunwing may come up with « certain steps they are willing to take » to address concerns raised in its report. The office would then give its opinion on these proposals to the Minister of Transport.

COVID-19 has had a huge impact on the airline industry, the bureau noted in its report, but it said there were signs international travel was recovering and could top pre-COVID levels. pandemic by 2025. Leisure travel, including travel to sun destinations, « is generally expected to lead the recovery », he said.

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