TORONTO -- Air travel industry observers say federal regulators should watch closely for consumer price impacts as WestJet winds down Sunwing Airlines.
WHAT IS CHANGING?
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The development came shortly after WestJet said it would also .
Calgary-based WestJet , noting that travel tour operator Sunwing Vacations will continue to run as part of the WestJet Group.
鈥淲hile we can confirm the eventual integration of Sunwing Airlines into WestJet, the anticipated timeline to do so has not been determined at this time,鈥� spokesperson Julia Kaiser said in an email. 鈥淥ur immediate focus remains on the integration of Swoop's highly successful business model across WestJet's operations.鈥�
John Gradek, faculty lecturer in aviation management at McGill University, said he sees the possibility of steep price hikes on the horizon, particularly when it comes to Sunwing Vacations as it takes on an even more prominent position in the vacation-booking space.
鈥淭his has the potential to be a significant increase in pricing as a result of this consolidation,鈥� he told BNNBloomberg.ca in a phone interview.
has reached out to WestJet for further comment.
In the immediate future, the integration will mostly affect branding at the two airlines, Gradek said, 鈥渁s the Sunwing colours and the Sunwing brand disappear.鈥�
鈥淚t really is a way for WestJet to consolidate its operations and its overheads in managing an airline,鈥� he said, noting that the recent contract agreement with WestJet pilots involving significant wage increases may have put pressure on the company to reduce other costs.
Gabor Lukacs, president of advocacy group Air Passenger Rights, said the consolidation is a mere technicality after 鈥� a decision he described as a 鈥渢errible mistake鈥� that will result in less competition, higher prices and worse service for passengers.
鈥淚t is the government's decision that needs to come under scrutiny,鈥� he said. 鈥淔rom WestJet鈥檚 perspective, they're just doing what is logical and makes sense.鈥�
In Lukacs鈥� view, the most significant anti-competitive damage to the air travel sector was done at that time of the federal approval, and the most recent news about the business integration was predictable.
鈥淚t may have some slight impact in terms of marketing techniques, but in terms of economic processes, in terms of air travel market, it has no bearing on it,鈥� he said. 鈥淭he moment Sunwing was purchased by WestJet, the competition ceased to exist.鈥�
SUNWING VACATIONS
Sunwing Vacations will continue to operate under its own name, and Gradek said the success of that travel tour operator is likely what attracted WestJet to Sunwing in the first place.
Gradek said he expects WestJet might fold in its WestJet Vacations brand with Sunwing Vacations, as the latter is a more recognizable name that 鈥渉as done a great job of positioning itself in the Canadian marketplace.鈥�
鈥淪unwing will have a lot more opportunities to fly to different markets and increase their services, but the consumer will in fact be paying more for those services, because there's less choice for the type of airplanes that are going to be required to operate those Sunwing Vacations holidays,鈥� he said.
PRICES AND OVERSIGHT
The federal government attached several conditions to the WestJet-Sunwing sale, including rules about maintaining business presence in Toronto and Montreal, keeping up capacity on affected travel routes and protecting Canadian jobs.
Gradek said he is keen to see how the government follows up on a condition that calls for 鈥渟upplying airfare data on vacation packages for monitoring of post-acquisition price trends.鈥�
He said he sees a risk that Sunwing may aggressively go after Transat, its main competitor in the holiday tour-booking space, and said there needs to be oversight of 鈥渉ow much does the Canadian consumer have to bear in terms of the price increases鈥� that may arise from the consolidation.
鈥淭o me, there has to be some statement from the federal government that they will keep an eye out on pricing, particularly for Sunwing Vacations in central Canada,鈥� he said. 鈥淚 don't hear any noise coming out of Ottawa that they might want to do that.鈥�
Lukacs would like to see the government acknowledge it 鈥渕essed up鈥� in approving the sale, and take other measures to improve competition such as allowing foreign airlines to transport more passengers within Canada.
A spokesperson for Transport Minister Omar Alghabra referenced the terms and conditions placed on the sale, and said any violation of those terms 鈥渨ould be a violation of the merger agreement.鈥�
