Higher airfares likely result from Sunwing-WestJet integration, experts say

MONTREAL — WestJet’s decision to shut down Sunwing Airlines and incorporate it into its core business could lead to reduced service and higher fares, particularly in Western Canada and smaller cities across the country, experts say.

Sunwing told employees it was absorbed by the new owner on Wednesday, less than a week after WestJet announced plans to close Swoop, a discounted subsidiary.

Given the more limited flight options and more expensive tickets likely to result from a merger of former competitors, the latest move is “not good news” for consumers looking to travel to warmer destinations, said John Gradek, who teaches in McGill University’s aviation management program.

“There will be a reduction in air services and there will be a corresponding increase in prices,” Gradek said.

WestJet and Sunwing account for 37 percent of seat capacity on direct flights to Sun destinations and 72 percent from Western Canada, according to an October report from the Competition Bureau.

WestJet last month completed the acquisition of Sunwing’s core aviation and vacation divisions in a major consolidation of the Canadian aviation market. As a condition of Ottawa’s signing of the deal, the parties pledged to maintain capacity on the most affected routes and maintain both Sunwing Vacations’ headquarters in Toronto and a regional office in Montreal for at least five years.

WestJet confirmed in an email that Sunwing Vacations will continue as a separate entity, paving the way for the Calgary-based airline to fly Sunwing tour package customers to their vacation destinations.

Sunwing Vacations is a price leader in the Canadian market, Gradek said. “The question is, how much does WestJet charge Sunwing Vacations for using those planes?”

But airline consultant Rick Erickson said he thinks rival airlines will provide a healthy mix of competition for sun destinations, with some fares barely affected.

“I don’t think much will change, mainly because the consumers are quite savvy, the Competition Bureau is watching and there are other players in the market,” he said.

“Two big ones, Air Canada and Transat, will make sure that WestJet doesn’t get glory wins because of this,” Erickson said, adding that six-year-old low-cost carrier Flair Airlines is also getting “pretty aggressive.” .”

Nevertheless, travelers in smaller markets ranging from Saskatoon to St. John’s, NL, may have to pay more, Erickson said.

“There could be problems in those marketplaces,” he said, such as Kelowna and Prince George in BC, Fredericton and Moncton in New Brunswick, and Waterloo and Windsor in southern Ontario.

Len Corrado, president of Sunwing Airlines, told employees in a memo last week that the integration with WestJet will occur within two years as part of a strategy to unlock greater scale and growth opportunities.

WestJet spokeswoman Julia Kaiser said in an email Saturday, “Our immediate focus remains on integrating Swoop’s highly successful business model into WestJet’s operations.”

This report from The Canadian Press was first published on June 19, 2023.

Companies in this story: (TSX:AC, TSX:TRZ)

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