WestJet’s takeover and consolidation of discount airlines Swoop and Sunwing into its main carrier has some vacationers and travel experts worried about higher prices to come. But the CEO of the Calgary-based airline says the moves are a win for everyone.
Thank you for reading this post, don't forget to subscribe!On Sunday, WestJet Airlines Ltd. announced it plans to fold recently acquired Sunwing Airlines as a standalone entity and merge it into its eponymous carrier. That move came only days after it announced similar plans for Swoop, the discount airline it launched itself in 2017. The federal government approved the takeover of Sunwing in March.
The merger means two fewer discount airlines serving travellers in Canada — raising concerns from critics that there will be less competition in the industry and higher prices.
For travellers like Amber Murray, both moves sound ominous. She and her family frequently fly on Swoop for vacations instead of on mainline carriers because its hub in Hamilton is about 80 kilometres from their home in Beachville, Ont. — closer than Pearson International Airport in Toronto — but also because the prices are far more affordable for her family’s budget.
Over the years, Murray said, she’s managed to snag flights as cheap as $99 per person for vacation destinations like Las Vegas. She was planning to use the airline again when the family flies to Mexico this winter, but she said prices offered by WestJet are in the thousands of dollars — not the roughly $900 she typically manages to spend on her family of four.
“We’re not going to be able to travel as a family of four,” Murray told CBC News in an interview. “I’m not going to be able to show our kids the world.”
While she typically flew on Swoop, not Sunwing, Murray said news that WestJet is consolidating multiple airlines known for no-frills fares under one full-service banner is not an encouraging development.
“Who knows if we’re going to be able to afford to be able to go away anymore,” she said. “I’m very worried.”
Less competition, higher prices: analyst
Anshul Singh, founder of travel and loyalty-program website Points, Miles and Bling, said he thinks travellers like Murray have reason to worry.
“It’s not good news for Canadian consumers overall, it never has been,” he said in an interview. “Any time we see lowered competition, we should really expect prices to go up over a period of time.”
Singh said WestJet may be trumpeting the moves as a win for everyone and told regulators what they needed to hear to sign off on the pact. But ultimately, he said, the moves to fold in Swoop and Sunwing are designed to maximize their profitabilty.
WATCH | Will Swoop and Sunwing’s demise mean higher airfares?
Will Swoop and Sunwing’s demise mean higher airfares?
With discount airlines Swoop and Sunwing being absorbed into WestJet, some fear the reduced competition will mean higher overall airfares. WestJet’s CEO says it won’t.
Although they aren’t exactly luxurious, discount airlines tend to pull down prices from mainline carriers in destinations where there are multiple options, and they indirectly impact the market by giving travellers alternative destinations within the same country.
Swoop, in particular, made major gains in selling domestic flights between smaller Canadian cities, such as Abbotsford, B.C., and Hamilton — as opposed to Toronto and Vancouver.
According to data from the federal Competition Bureau, of all the sun destinations that Canadians fly to, more than a third of them were serviced by WestJet or Sunwing. Among those that depart from Western Canada, the ratio jumps to almost three-quarters.
Singh said the loss of competing airlines is not going to compel WestJet to slash prices or launch new routes any more than it has to. “I do not see them doing a U-turn and suddenly start offering sub $100 fares to anywhere in Canada,” he said.
‘Consumers are fairly savvy’
For its part, WestJet says that consumers should indeed expect to see the same type of cheap seats they saw before, except now they’ll be on a WestJet-branded plane.
In an interview with CBC News, WestJet CEO Alexis von Hoensbroech said the move to amalgamate the other carriers’ planes into its mainline service will lead to more options for consumers, not fewer.
“Instead of selling super-low fares on 16 airplanes, we’re going to sell super-low fares on 180 airplanes,” he said, repeating the company’s earlier pledge that a portion of seats on every single flight will be reserved for discounted fares — even though the majority of tickets on any given flight are likely to be more expensive, full-service fares.
“We are giving choice for every thing on every airplane, and I think that actually makes more sense because the consumer ultimately wants to have choice,” von Hoensbroech said. “In the end, the market makes the prices, but it … has always been our ambition and remains our ambition to offer very competitive fares.”
Karl Moore, a professor at McGill University who studies the airline industry says mergers like this typically aren’t great for consumers, but in this case the industry is still highly competitive.
“Reduced competition typically in economics means higher prices but Air Canada and Air Transat will be pushing WestJet … for good prices and will keep them honest, keeping them competitive to a very large degree.”
And even if there are legitimate reasons for worry on the pricing side, the mergers have a silver lining for travellers by fixing a nagging problem for discount carriers: a dearth of planes which leads to chaos and stranded passengers when things go awry.
“They’ve had some problems at Sunwing, having enough planes at times,” he said in an interview with CBC News. “Being part of a larger fleet will help solve that problem.”
Ultimately, however, Amber Murray said she remains unconvinced because, as she puts it, “bigger companies always promise something and don’t ever follow through — they’re only out there to monopolize the market and buy up everything that they can.”
“I don’t buy it at all. I have yet to see a decent sale from WestJet,” she said. “We’ve been able to score tickets to go to B.C. for $48 from Swoop. There’s no comparison.”
