Deal will see Calgary-based WestJet take over vacation-focused airline
WestJet has received official approval from the federal government for its proposed takeover of Sunwing, a move that clears the way for the merger to go ahead.
But the approval is "subject to strict terms and conditions that are in the interest of Canadians," Transport Minister Omar Alghabra said.
Among those requirements are stipulations that the vacation-focused Sunwing extend its getaway package offerings to five new Canadian cities. The combined airline must also maintain its capacity on routes "most affected" by the merger.
The government is also requiring the airline to maintain a head office for the vacations business in Toronto and a regional office in Montreal for at least the next five years, and is demanding that net employment at Sunwing's Toronto head office grows by at least 20 per cent in that time.
"Today's decision was not taken lightly," Alghabra said. "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."
Calls and emails to Sunwing and WestJet were not immediately returned to CBC News on Friday afternoon.
The deal has faced a number of obstacles over the past year.
In the fall, the Competition Bureau issued a report to the Ministry of Transportation, citing concerns that the deal would be bad for consumers.
The bureau said a merger of the two carriers would create a monopoly on more than a dozen routes between Canada and Mexico or the Caribbean, and would lessen or prevent competition on more than 30 others to those same destinations.
Robert Kokonis, president of consulting firm AirTrav Inc., told The Canadian Press that Western Canadians may want to consider discount carriers such as Flair Airlines and Lynx Air, which offer cheap flights to sunny southern destinations but without package offerings.
"Any time you take away choice in a marketplace it might have an impact on pricing. But I still think we have a reasonable amount of competition in the east," he said, pointing to Air Canada Vacations and Air Transat.
"It'll be somewhat diminished in the west."
One less competitor
Ian Lee, who teaches business at Carleton University in Ottawa, says it's hard to imagine the deal will be good for consumers in a traditional sense, because one less competitor for airline tickets typically leads to less choice and higher prices.
"Whenever any industry becomes more concentrated [it] typically means higher prices and reduced services," he told CBC News. But in this instance it may be more palatable because the alternative may well be for the privately-held Sunwing to cease to exist.
The airline became the focal point of outrage this winter, as travel chaos stranded or inconvenienced thousands of passengers in December and into January. The airline cancelled most of its flights out of Manitoba, Saskatchewan and the Maritimes for the rest of the season in order to focus on other routes.
"The alternative, I think, is probably worse because Sunwing is in … a precarious condition," he said. "I think many Canadians would rather have a stable airline that is going to show up and take me home rather than flying on an airline where the risk is I'll be stranded because they have gone out of business."
The deal also faced opposition from within Sunwing's own union, which alleged that management knew this takeover offer was in the works but didn't disclose it — even as it was negotiating a collective bargaining agreement with its pilots.
Calgary-based WestJet employs about 8,500 workers. Sunwing has about 2,200 people on staff.
The financial terms of the deal have not been released.
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