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Air Canada challenges Onex takeover of WestJet as ‘not Canadian’

Air Canada challenges Onex takeover of WestJet as ‘not Canadian’

Old Sep 3, 19, 2:39 pm
  #1  
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Air Canada challenges Onex takeover of WestJet as ‘not Canadian’

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Air Canada challenges Onex takeover of WestJet as ‘not Canadian’

Financial Post / Bloomberg News - Sept 3, 2019


QUOTES:

"Air Canada is calling on the country’s transportation regulator to take a closer look at Onex Corp.’s takeover of WestJet Airlines Ltd., arguing that the $3.5 billion deal may run afoul of foreign-ownership rules.

“I am writing to express the concern that, due to the structure of the transaction and the capital and corporate governance structure of Onex, the transaction may result in an undertaking that is not ‘Canadian’ within the meaning” of the Canada Transportation Act, Air Canada’s general counsel David Perez wrote in an Aug. 15 letter to the Canadian Transportation Agency. “Onex’s structure also appears to provide insufficient protections to ensure that WestJet continues to be Canadian in the future.”


Full article from Financial Post
https://business.financialpost.com/t...-rival-westjet


Full article from BNN Bloomberg including video
https://www.bnnbloomberg.ca/air-cana...tjet-1.1310375
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Old Sep 3, 19, 2:56 pm
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mmmhmmm. AC just doesn't want a competitor backed with deep pockets.
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Old Sep 3, 19, 7:15 pm
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Remember, in 1999 - Onex unsuccessfully with American Airlines along with CP tried to take over AC.
The reverse happened, AC took over CP.
One reason that the Onex/AA takeover was unsuccessful was the rule about foreign ownership of Canadian airlines.
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Old Sep 3, 19, 9:56 pm
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Interesting. I expect that Onex has the ownership concerns addressed, although I am sympathetic to the need to maintain Canadian ownership. I wonder if this is a defensive move considering that West Jet was still reported to be eyeing Air Transat in conjunction with our friends over at KLM/Air France, despite the initial approval of the AC purchase.
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Old Sep 4, 19, 5:52 am
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Originally Posted by Transpacificflyer View Post
Interesting. I expect that Onex has the ownership concerns addressed, although I am sympathetic to the need to maintain Canadian ownership. I wonder if this is a defensive move considering that West Jet was still reported to be eyeing Air Transat in conjunction with our friends over at KLM/Air France, despite the initial approval of the AC purchase.
The TRZ takeover is a long, long way from being approved as a “sum of the parts” deal.

AC is trying to throw some sand in the gears here. I don’t think Onex is going to have a great deal of difficulty establishing that it’s Cdn owned and controlled. They’ve been to this rodeo before.

Trying to convince a skeptical public, media and regulator that having the already dominant airline in Canada taking over the #2 leisure carrier in Toronto, Montreal and elsewhere, not to mention a major competitor across the Atlantic, who have historically kept TATL fares in check is going to be anything but anti-competitive is going to be considerably more difficult, regardless of the wishes of TRZ shareholders.



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Last edited by HangTen; Sep 4, 19 at 6:13 am Reason: H
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Old Sep 4, 19, 7:45 am
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Originally Posted by HangTen View Post


The TRZ takeover is a long, long way from being approved as a “sum of the parts” deal.

AC is trying to throw some sand in the gears here. I don’t think Onex is going to have a great deal of difficulty establishing that it’s Cdn owned and controlled. They’ve been to this rodeo before.

Trying to convince a skeptical public, media and regulator that having the already dominant airline in Canada taking over the #2 leisure carrier in Toronto, Montreal and elsewhere, not to mention a major competitor across the Atlantic, who have historically kept TATL fares in check is going to be anything but anti-competitive is going to be considerably more difficult, regardless of the wishes of TRZ shareholders.
The opinions of two of those three simply don't matter.

The third (the regulator) has not shown any inclination to behave in a way that AC doesn't find favourable. Ever.

And oh yeah, this apparently requires repeating: TRZ was failing. They were running an unsustainable business. Fares were going up, or they were going out of business. So maybe the regulator will weigh in the economic impact (job losses amongst others) of TRZ being insolvent?
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Old Sep 4, 19, 8:37 am
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The issue with Onex bid for WestJet is where the money comes from, even if ONEX is a Private Equity Fund based in Canada, they can have investors from all over the world, and AC argument is : will the investors in the Onex fund used to purchase Westjet be above the 50% threshold of canadian funds, and not going over the property limit from one owner. And the regulator will go down the ownership/investors line to make sure those numbers are respected, otherwise it would be "too easy" to just use canadian shell companies to allow an international airline for instance buy Westjet. (This is a similar case to the wind mobile ownership saga when they launched, with a Canadian owning the majority of shares, but with loads of out of country debt that effectively put them in control of the company)

I know they are active in the canadian investment funds and pension plans market to back their purchase to make sure they meet the 50% requirement
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Old Sep 4, 19, 9:17 am
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Originally Posted by WestAust View Post
The issue with Onex bid for WestJet is where the money comes from, even if ONEX is a Private Equity Fund based in Canada, they can have investors from all over the world, and AC argument is : will the investors in the Onex fund used to purchase Westjet be above the 50% threshold of canadian funds, and not going over the property limit from one owner.
That could be a slippery slope for AC - can they prove that 50% of the cash behind their shareholders is based in Canada?
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Old Sep 4, 19, 10:26 am
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Originally Posted by ridefar View Post
The opinions of two of those three simply don't matter.

The third (the regulator) has not shown any inclination to behave in a way that AC doesn't find favourable. Ever.

And oh yeah, this apparently requires repeating: TRZ was failing. They were running an unsustainable business. Fares were going up, or they were going out of business. So maybe the regulator will weigh in the economic impact (job losses amongst others) of TRZ being insolvent?
i
Thus the reason for an unprecedented 250 day review period....

Canadian was failing. Transat is not failing and has more than enough opportunity to do some self course correction to put itself back on the right path.

As was the case with the CP takeover, when CP was one payroll from failure, (Dec 15 1999), the deal will be approved, subject to numerous undertakings and carve outs, especially in the Quebec and YYZ markets.

It’ll be up to AC to determine if the various conditions demanded make the deal at the current, (or at any), price is worth pursuing to conclusion.

Don’t underestimate any government’s sensitivity to the airline file in Canada, especially when it pertains to pricing and competition. A day barely passes in Canada when there isn’t a CBC airline related story describing the latest misery suffered by the consumer at the hands of the so called evil duopoly.

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Old Sep 4, 19, 11:22 am
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Originally Posted by HangTen View Post

Don’t underestimate any government’s sensitivity to the airline file in Canada, especially when it pertains to pricing and competition. A day barely passes in Canada when there isn’t a CBC airline related story describing the latest misery suffered by the consumer at the hands of the so called evil duopoly.
Transat is a vacation service; their internal Canadian service (not connecting to outside the country) would be a rounding error, maybe even compared to Porter. Difficult to make any kind of national argument to support caring about TS. Canadians might vote on the price of flying east/west to visit family, but not north/south to bask in sun... TS is a luxury.

Between Bombardier and SNC-Lavalin Quebec/Liberals got this decades big-bag-of-of-cash-because-unity that English Canada is willing to tolerate. The political calculation for keeping "another Canadian" airline alive vs the view of "pouring money into another unsustainable Quebec operation" will be weight carefully. Or not, as I believe that well is dry.
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Old Sep 4, 19, 1:05 pm
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I believe you are conflating two issues: Rightly being annoyed at spending decisions based on language and politics vs decisions that will alter the competitive landscape, especially at YUL.

For YUL consumers, AC buying TS is bad. Period. I would much rather fly TS than Rouge (especially club vs Premium or 321neo vs 767). I don't think any objections coming from Quebec, in this case, are about keeping the HO around, I think people are attached to the airline and prefer flying it (rightly so in my opinion) to AC. Prices will go up at YUL if AC buys TS, that is what people here are complaining about.

Whether or not the competitive landscape improves enough ex-YUL with AC buying TS on the other side of the balance I do not know. If it improves the competitive landscape across Canada more than it decreases it in YUL (I hope that makes sense) then it should be allowed. I don`t personally think this is the case however (once again, nothing to do with language, politics, etc.) but only time will tell.
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Old Sep 4, 19, 1:41 pm
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In any case, for the TS thread.
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