WestJet’s folding of Sunwing could lead to a flying war, experts say
That beach vacation you’re planning for next winter may be a little cheaper than you bargained for, but don’t expect the discounts to last very long.
Aviation industry experts say WestJet’s decision last week to fold the Sunwing brand is likely to result in a short-term battle aimed at vacationers. However, the long-term outcome of WestJet’s purchase of Sunwing? Less competition and higher prices.
“This is consolidation, pure and simple,” said John Gradek, former director of Air Canada and head of McGill University’s Global Aviation Leadership Program.
In the near term, WestJet’s goal is clearly to go after smaller rivals, particularly low-cost carriers like Flair and Lynx, Gradek said. And the easiest way to do that is to lower rates.
“I expect we will have some pretty intense price competition between Flair, Lynx and WestJet this fall and winter,” Gradek said. Still, he cautioned, don’t expect those cuts to last. Think of it, he said, as a supermarket offering deep discounts to lure customers away from a local independent retailer.
“We are here to conquer the market and force the other grocery store on the corner to go out of business. Guess what happens to your prizes then?” said Gradek. “They’re going back to where they were, if not higher.”
Fred Lazar, an economist at York University’s Schulich School of Business, agreed that there will likely be a bit more competition for holiday dollars in the wake of WestJet’s integration of Sunwing, as well as his decision to launch his own internal discount banner, Swoop. eliminate , earlier this month.
Still, Lazar said, it’s probably not due to big discounts because travel demand is high and fuel prices are high.
“There will be some competition in those vacation travel areas, but you won’t see dramatic price cuts,” said Lazar, who has done extensive research on the economics of the airline industry. “Don’t expect to suddenly get bargains in the next three or four months. That was not going to happen.”
Transportation specialist Barry Prentice said WestJet’s decision to fold Sunwing into its flagship airline may also be motivated by concerns about whether business travel will ever return to pre-pandemic levels. It could be a logical decision to move into the leisure travel industry, he added.
“Business travel has really worn the airlines. … There was always that base for business travel there. Maybe they see this as, ‘Okay, we need to become much more of a leisure-oriented company. Going south makes sense,” said Prentice, a professor at the University of Manitoba Asper School of Business and former director of the university’s Transportation Institute.
Prentice will be watching closely whether WestJet decides to double down on or eliminate Sunwing’s strategy of owning sunshine destinations.
“Sunwing owns about 30 hotels and in some cases even the transfer bus that takes you from the airport to the hotel,” says Prentice. “WestJet Vacations serves 200 hotels. Will WestJet sell those hotels or buy more?”
Buying more hotels would be Prentice’s bet.
“I wouldn’t be surprised if WestJet works more of the integrated model because then you can work on both sides. … You can get a discount on the airline tickets and then charge more money for the hotels. It really depends on where you want to make the money.”
For Flair Airlines CEO Stephen Jones, WestJet’s decision to integrate Sunwing was as disappointing as it was unsurprising.
“There’s no doubt it means worse outcomes for consumers,” Jones said, “because it means a reduction in competition, and competition is good for consumers.”
Not that the head of the ultra low-cost carrier is worried about WestJet. WestJet’s current strategy is confused, Jones said.
“You have to choose a job and stay in your job. And our job is price sensitive holiday travel,” Jones said. “At the moment it is not clear to me what their job is.”
Without outright naming the airlines, Jones made it clear that he expects Air Canada and Flair to cope with the current industry turmoil.
“I’ve always felt that there are going to be two clear things in this market in the long run. There will be the national carrier which is a global network carrier. And there will be a large, ultra-low-cost courier service in the price-sensitive leisure market,” said Jones. “The risk of being in the middle is that you have all the costs and none of the revenue.”
In a press release announcing the integration, WestJet CEO Alexis von Hoensbroech said the move will help the company provide passengers with greater affordability and choice.
“Integrating all of Sunwing Airlines, Swoop and WestJet jets into one fleet will give us the scale to increase our collective operational resilience while providing more affordable fares and vacation options across our network,” said von Hoensbroech.
