Air Canada Buys Transant Onex Buys WestJet
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Will the Recent Air Canada and WestJet Deals Lead to Higher or Lower Airfares?

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Last updated on April 4, 2022

Toronto-based private equity firm Onex has purchased WestJet in a $3.5B deal, causing share prices of WestJet to jump 63%. Just a few days later, it was announced that Air Canada was in exclusive talks to purchase Air Transat for $520M. Air Transat has traditionally been a cheaper airline compared to Air Canada and offered particularly attractive fares to Europe and sunny southern destinations. If this deal goes through, Air Canada would see its market share of Canada-Europe routes increase to 63% and nearly 50% to Florida and the Caribbean.

What impact will these deals have on how much you shell out to fly out?

Less Competition = Higher Prices on Some Routes

Assuming the Air Canada / Air Transat deal goes through (it needs to be approved by the Competition Bureau), there will immediately be less competition on some routes. Air Transat and Air Canada already share many similar routes to Europe, Florida and the Caribbean, so Air Canada might consolidate routes, e.g. instead of five daily flights total, there may now be just three. Having fewer flights to choose from will likely result in higher prices paid for airfare overall.

Air Canada might argue that there is still plenty of competition out there, since major international airlines fly to Canada, and budget-conscious travellers can also elect to fly with Rouge, Air Canada’s discount line on select routes. Canadians, on the other hand, won’t be so easily convinced. Air Canada’s monopoly on domestic Canadian flights has led to inflated domestic fares, so the worry is that airfares will rise comparably for routes to Europe and down south once the deal with Air Transat is complete. But the WestJet purchase could counteract  that to some extent.

A Growing WestJet Bodes Well

Onex Buys WestJet

Photo credit: Acefitt under license CC BY-SA 4.0

In contrast with the likely outcome of Air Canada’s Transat acquisition, the Onex / WestJet deal could lead to WestJet offering more flights. WestJet recently received its first of ten Boeing 787s, which will facilitate longer international routes. Aside from expanding its fleet, WestJet now has a regional line in WestJet Encore, which was introduced in 2013, as well as budget airline Swoop, which entered the market in the summer of 2018. Both lines compete with some of Air Canada’s routes, and Onex’s deep pockets could lead to even more investment into expanding WestJet’s reach within and outside of Canada.

If Air Canada does increase its fares, WestJet has the opportunity to counter, offering better deals on comparable routes, and snatching travellers away from Air Canada.

Do These Deals Affect My Loyalty Programs?

There have been no announced changes to RBC Rewards and it’s unlikely anything drastic will happen to the program in the near future. But Aeroplan fans should keep an eye on the Air Canada / Transat deal.

Air Transat was set to join Aeroplan sometime during the interlude between Air Canada’s original announcement to pull out of Aeroplan and before its more recent decision to buy Aeroplan back from Aimia. If this merger goes through as expected, Air Transat would likely be brought into the Aeroplan fold, opening up more flights to choose from for Aeroplan collectors. Montrealers with Aeroplan Miles should be particularly pleased, since YUL is Air Transat’s hub.

Should I Hold Off on Signing Up for Co-Branded Credit Cards?

Travellers often take the wait-and-see approach in the aftermath of these types of mergers. For example, when Air Canada bought Aeroplan, many Aeroplan collectors said they were going to wait until the summer of 2020 before using their Miles, to see if program changes would affect the Miles’ value. But no one can really predict if their Miles will be worth more or will be devalued, so it might be unwise to play the waiting game and miss out on good Aeroplan deals.

Author Bio

Barry Choi
Barry Choi is a personal finance and travel expert at MoneyWeHave.com. He has been quoted by media in Canada and the United States, including The Financial Post, The Toronto Star, Business Insider, The Globe and Mail, and has appeared on HuffPost Live. You can follow him on Twitter: @barrychoi

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