CALGARY — WestJet has been making major moves to become a powerhouse in Western Canada, most recently announcing its plans to integrate Sunwing Airlines into its mainline operations.
As part of its acquisition of Sunwing Airlines and Sunwing Vacations, which was completed in May 2023 and originally announced in March 2022, WestJet has confirmed that it will be merging Sunwing Airlines with its mainline business within the next two years. Its ultimate goal is to transition to a one-jet aircraft operating certificate (AOC) model, which WestJet Group CEO Alexis von Hoensbroech says will provide more affordability for passengers and enhance the company’s “collective operational resilience.”
The news about Sunwing Airlines came less than a month after WestJet announced that its ultra low-cost airline, Swoop, which first launched in 2018, would also be integrated into its mainline business. Swoop’s integration is expected to conclude by the end of October 2023, while Sunwing Airlines will not start integrating before 2024. Sunwing Vacations will continue its independent operation to run alongside WestJet Vacations.
So what does all this mean, for both WestJet and Canada’s aviation industry? How will WestJet’s latest moves impact key markets, and how will they affect Canadian passengers?
We asked John Gradek, Faculty Lecturer and Academic Program Coordinator of Supply Networks and Aviation Management at McGill University School of Continuing Studies, to break down WestJet’s recent whirlwind of activity.
Were you at all surprised that WestJet will be integrating Sunwing into its mainline operations?
“The Sunwing integration is focused on aircraft operations; Sunwing Vacations is to remain as a standalone unit of WestJet. Given the conditions of the ALPA collective agreement with WestJet, wherein Sunwing flight crew were offered equivalent seniority in the integrated seniority list, it was very clearly an easier decision to integrate aircraft operations into one entity. As a result, no surprise on this move by WestJet.”
What does Sunwing’s integration tell you about WestJet’s long-term goals?
“These latest initiatives by WestJet follow the path that [parent company] Onex initiated with the hiring of Alexis von Hoensbroech in December 2021, and the strategic orientation of WestJet to focus on improved profitability through cost containment. The decisions by WestJet to concentrate on Western Canadian services, operate limited Calgary-focused intercontinental services with a minimum fleet of Boeing 787 Dreamliner aircraft, and the acquisition of Sunwing, all aimed to build a Western Canadian powerhouse with a strong focus on strengthening its presence in the leisure marketplace. WestJet sees itself as fast-tracking its profitability objectives by becoming a formidable competitor to Air Canada and protecting its Western Canadian dominance against low-fare initiatives by Alberta-based ULCCs Flair and Lynx.”
Wouldn’t it be more cost-effective for WestJet to simply keep Sunwing Airlines as is and run routes side by side, instead of changing livery and rebranding planes?
“WestJet is looking for fleet simplification and integrated branding. The B737 aircraft across all three sub-fleets – WestJet, Swoop and Sunwing – will allow for aircraft substitutions without undue stress on passenger aircraft configurations. The more costly reconfiguration will be with Sunwing’s aircraft, requiring seat pitch changes as well as installing two rows of Premium economy seating. WestJet sees common configuration as an integral step to improved aircraft utilization and operational integrity.”
Why do you think WestJet is keeping Sunwing Vacations intact? Why not also integrate it into WestJet Vacations?
“The value proposition in WestJet’s purchase of Sunwing purchase was Sunwing Vacations. The brand strength of Sunwing Vacations far eclipses that of WestJet Vacations, and folding WestJet Vacations into Sunwing Vacations seems, to me at least, the logical move to pursue expense reductions. The significant presence of WestJet Vacations in the Toronto Sun marketplace will most likely mean that WestJet Vacations will continue as a standalone unit for Winter 2023-24, for one last season before full integration into Sunwing Vacations for the Winter 2024-25 season.”
Concerns over competition were already raised when news first broke that WestJet would be acquiring Sunwing. But now that it’s been confirmed that Sunwing as a brand will be no longer, does this change anything about those previous concerns?
“Whenever there is a loss of an aviation brand in Canada, concerns about market concentration and potential for price increases abound. In the Sunwing integration, the air travel marketplace will only be affected minimally, given the meager availability of Sunwing air-only product offerings. And the availability of the larger WestJet fleet, inclusive of the Swoop and Sunwing fleets, would most assuredly impact the operational reliability of the Sunwing Vacations product.”
How will Swoop’s integration impact WestJet’s plans in the budget market and its domestic and Sun operations?
“The integration of Swoop’s operations will most definitely have an impact on low-fare availability in the Canadian leisure marketplace. While WestJet has assured Canadians that it will remain price competitive in the low-fare marketplace, it must be noted that both Flair and Lynx have evolved as price leaders on competitive WestJet and Swoop routes, that Swoop had relinquished any pricing leadership and that WestJet had decided to maintain a healthy gap in not matching these ULCC (ultra-low-cost carrier) fare levels.
“While this strategy will most likely be maintained through the Summer 2023 travel peak period through mid-September 2023, early indications are that aggressive pricing by the ULCCs on North American routes will be predominant for Fall 2023. The degree to which WestJet and its newfound Swoop aircraft capacity will be offering ULCC competitive product remains to be seen. Aggressive revenue management practices by WestJet will probably be in order, with pricing at near-ULCC competitive levels on limited operations in competitive markets being used to support WestJet’s price positioning commitments.”
With all this integration, do you think WestJet is now in a position to better compete with Air Canada in key markets?
“WestJet’s recent moves all point to its vision of Western Canada’s North American carrier of choice and Canada’s leading leisure packaged tour operator. In my opinion, WestJet is putting Air Canada on notice that Western Canada is only available to Air Canada for intercontinental air services, with the Toronto-Vancouver route remaining as a strong Air Canada presence to route aircraft for intercontinental Vancouver routes.
“It is also my opinion that WestJet may be considering the sale of its Dreamliner fleet and focus entirely on its North American network, an updated nod to WestJet’s original vision of being Canada’s Southwest Airlines success story.
“The moves by Air Canada remain to be seen, but its recent concentration on growing its international services indicates its current thinking to reinforce this growth strategy at the expense of North American point-to-point services.”
Sunwing has played such an essential role in Canadian aviation – are you sad to see it go?
“The Hunter family’s stewardship of the Sunwing brand has resulted in the significant value that WestJet paid to acquire Sunwing. WestJet sees the lag in North American business traffic recovery as significant and has decided to capture Canadians’ desire for Sun package tours through this acquisition of the Sunwing brand. The innovative use of Sunwing’s European partner, TUI, in supplementing the Sunwing fleet to meet winter Sun demand for Canadian travellers further enhanced the value of the Sunwing brand. By bringing the entirety of the WestJet fleet to support Sunwing’s winter Sun strategy will allow Sunwing Vacations to further expand its packaged tour product offerings and realizing significant benefit to WestJet.
“This move by WestJet will enhance Sunwing’s potential for market leadership, so I do not see Sunwing Vacation’s demise. Yes, the Sunwing livery will disappear but the market presence of Sunwing will remain.”
Aviation expert John Gradek also analyzed the WestJet-Sunwing deal as it awaited approval from the federal government last year. To read the article, click here.
Once the deal was approved in March 2023, Gradek also broke down the various terms and conditions that the government enforced for both airlines. To read the article, click here.