WestJet’s purchase of Sunwing has been in the works for a couple of years now. It is now taking a step forward as the Canadian Federal Government WestJet gave their stamp of approval that moves them closer. There is still some work to be done, but this is as major milestone.
Today, I wanted to share some of my thoughts on this potential merger. Let’s discuss this from the perspective of each airline.
Sunwing’s perspective
Sunwing was founded 18 years ago, back in 2005. Since then, it has increased its fleet size to 32 planes servicing 73 destinations.
Many airlines do not survive that long, much less grow by that much. However, some airlines also reach a sort of peak growth without a major move. Part of the reason is that they are not traded on the stock exchange, which means there is a limited amount of new funding that they can receive.
It sort of feels like Sunwing has reached a bit of a peak potential, so the next real move to expand their business is either to go public (list on the stock exchange) or merge with another company.
A merger would be either they buy someone out or get bought out. It is probably rare for airlines to experience continued, sustained significant growth without some sort of merger.
Overall, I think this is a great move for Sunwing as its founders. They worked hard to bring the airline to this level, now is the next step!
WestJet’s perspective
WestJet was founded over 10 years earlier that Sunwing, 29 years ago, back in 1994. Since then, its fleet size has grown to 168 and servicing well over 100 destinations. It goes over 175 destinations in over 20 countries by including their airline partnerships. These results put WestJet as the second largest airline in Canada, behind only Air Canada.
As you can see, those extra 10 years has put WestJet well ahead of Sunwing in terms of growth. WestJet is also privately owned and will probably be stuck in second place at best for the foreseeable future, unless they make a significant move.
Buying out Sunwing may not instantly move them past Air Canada, but it does bring them a little closer. Personally, I feel that this is a medium risk move by WestJet. Sunwing at least has some track record of success. So it does not seem like WestJet is bailing Sunwing out, which means there is some value to be had.
I would love to see WestJet eventually join a major airline alliance, that would really bring them up another level. I am a little torn about them listing on the stock exchange, as it may not be necessary if they can avoid it. By staying private, they have some flexibility (see Alaska Airlines’ lead!).
Final thoughts
Overall I am excited to see this merger. It is true that Canadians will have less competition overall, but it does give WestJet more resources to push Air Canada and compete more worldwide. If I had to pick, I rather these two airline team up to compete on a more global scale, rather than trying to compete with the limited resources available to them.
Next up would be to revamp its frequent flyer program to set themselves up to eventually join either one of the two major airline alliances: Oneworld or SkyTeam. There would be no need to join Star Alliance since Air Canada is already there. One can only hope!
In the meantime, what are your thoughts about this merger? Please let us know in the comment section below!
Matt
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