WestJet (WS, Calgary) has agreed to acquire Sunwing Travel Group, parent of fellow Canadian carrier Sunwing Airlines (WG, Toronto Pearson), to explore synergies and expand its leisure business.

The value of the transaction has not been disclosed as both airlines are privately-held. It remains subject to regulatory approvals, and WestJet expects to close it in late 2022.

"We are bringing together two highly complementary businesses with powerhouse brands to strengthen our successful leisure business and deliver greater value to our guests. This combination brings together Canada's two original low-cost carriers and positions us to accelerate growth in value-oriented travel, already the fastest-growing segment of the airline market," WestJet's newly-appointed chief executive Alexis von Hoensbroech said.

The transaction will result in the full integration of Sunwing Airlines into WestJet Group. However, the tour operator subsidiaries of both companies (Sunwing Vacations and WestJet Vacations Inc.) will be re-incorporated as a new business unit headquartered in Toronto and led by Sunwing's chief executive, Stephen Hunter. They will continue to sell holiday packages under the Sunwing brand. The airline's headquarters will remain in Calgary.

Owing to the merger, WestJet said it would now be able to address the critical issue of seasonality. Sunwing currently relies on aircraft sub-leased from its minority shareholder TUI Group during the winter seasons to provide additional capacity on routes to sun destinations but will no longer do so as a part of the WestJet Group.

"[The merger] will add increased capacity, dedicating otherwise seasonal aircraft to operate year-round in Canada, instead of Sunwing supplementing seasonal demand with imported aircraft, which translates into more jobs for Canadians," WestJet said.

Sunwing said it would no longer require the pandemic-related Large Employer Emergency Financing Facility (LEEFF) it obtained from the Canadian government in early 2021 and intends to fully repay the loan upon closing of the transaction.

WestJet is wholly-owned by private equity fund Onex and operates forty-five B737-700s, fourteen B737-8s, thirty-eight B737-800s, and six B787-9s (as well as thirteen parked B737-600s slated for phase-out), as well as forty-seven DHC-8-Q400s operated by regional unit WestJet Encore (WR, Calgary), the ch-aviation fleets advanced module shows. It has a further thirteen B737-7s, ten B737-8s, four B737-9s, and four B737-10s on firm order from Boeing. Its LCC unit, Swoop (WO, Hamilton, ON), operates ten B737-800s with plans to lease six B737-8s shortly. Pacific Coastal Airlines operates nine Saab 340As under the WestJet Link regional partnership. The airline also plans to enter the cargo sector with a B737-800(BCF) due shortly.

Sunwing Airlines - which disclosed that it had received a takeover offer a year ago - is controlled by the Hunter family, which owns a 51% stake. The remaining 49% is owned by TUI Group. Existing Sunwing Travel Group shareholders will become equity holders in the WestJet Group, although the firm did not disclose the exact structure of its future shareholding. The airline operates twenty-nine B737-800s, of which 15 are covered by the aircraft exchange agreement with the TUI Group, as well as six B737-8s.

TUI Group did not respond to ch-aviation's query about the impact of the deal on its business.