Canada's Competition Bureau says that the proposed takeover of Sunwing Airlines (WG, Toronto Pearson) by WestJet (WS, Calgary) is likely to substantially lessen or reduce competition in the sale of vacations to Canadians. The findings were contained in a report submitted to Transport Canada on October 25.

WestJet launched its takeover bid in March 2022, saying acquiring the low-cost carrier would boost the airline's ability to offer value for money travel to leisure passengers heading to sun destinations. The Competition Bureau was obliged to provide a report after Transport Canada started a public interest review of the proposed merger in May 2022. Six months later, the Competition Bureau says several significant anti-trust issues are likely to arise if the takeover proceeds in its current proposed form, namely;

  • The proposed transaction will result in one of Canada’s largest integrated tour operators being acquired by one of its primary rivals in the provision of vacation packages;
  • Overall, WestJet and Sunwing account for approximately 37% of non–stop capacity between Canada and sun destinations and 72% of non–stop capacity between Western Canada and sun destinations;
  • The Proposed Transaction is likely to result in substantial competitive effects, such as increased prices, reduced choice, decreased services, and a significant reduction in travel by Canadians through the elimination of rivalry between WestJet and Sunwing in the provision of vacation packages in the areas of overlap between their networks, including by: (a) resulting in a merger to monopoly of the only two carriers and integrated tour operators offering vacation packages through direct service on 16 routes between Canada and Mexico or the Caribbean; and (b) lessening or preventing competition for the provision of vacation packages on 31 total routes between Canada and Mexico or the Caribbean.

The Competition Bureau identified six routes out of Calgary, three routes out of Edmonton International, one route out of Kelowna, one route out of Ottawa International, two routes out of Regina, three routes out of Saskatoon, one route out of Thunder Bay, three routes out of Toronto Pearson, four routes out of Vancouver International, and one route out of Winnipeg International as of particular concern.

WestJet acknowledged the Competition Bureau's report, noting that it was advisory and non-binding. The airline also points out that the Canadian Transportation Agency has issued a positive determination of the proposed takeover. With both reports in hand, the regulatory review process moves into its next stage. WestJet also says that since its initial takeover application, it has also committed to maintaining the Sunwing brand, keeping Sunwing's Montreal and Toronto offices open, and creating new year-round network and employment opportunities.

Transport Canada will complete its public interest assessment by December 5 before handing its findings to the transport minister. The minister will make a recommendation with the final decision on the takeover bid to be made by Canada's Governor in Council (Cabinet).