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Thread: Westjet Sold to Onex

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    Default Westjet Sold to Onex

    Well, holy @$%! There were vicious rumours, but nothing concrete...

    https://globalnews.ca/news/5270077/w...old-onex-corp/

    ...I remember the fight for CAI with Onex...and here they are almost a generation later getting a Calgary-based airline into their portfolio...
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    a 2/3 share premium will likely be pretty attractive to existing shareholders.
    "If you did not want much, there was plenty." Harper Lee

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    Wow

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    Quote Originally Posted by kkozoriz View Post
    And taking it private.
    Yes, but Onex itself it publicly traded: https://ir.onex.com/stock-information

    Airlines are one of the most volatile businesses out there. Combining Westjet with a range of other businesses, some of which are more recession proof, seems to make a lot of sense.

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    Quote Originally Posted by East McCauley View Post
    Airlines are one of the most volatile businesses out there. Combining Westjet with a range of other businesses, some of which are more recession proof, seems to make a lot of sense.
    I'm not really a fan of that logic - its better for investors to diversify by choosing different companies in their portfolio, allowing companies to focus on what they are good at. At the end of the day here though, presumably West Jet sees some advantages of being private, given the price differential. It appears to be a big value add for their shareholders (i.e. pension funds, etc.), so it makes sense they are doing this.

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    airlines can arguably be one of the most difficult businesses to analyze.

    firstly, they are extremely sensitive to market cycles - both business and personal air travel are highly discretionary (which may make this acquisition a positive in terms of it being an overall economic projection by onex).

    secondly, airlines are one of the few - if not the only - business model that doesn't control either it's income or its expenses which makes it difficult to manage or forecast either internally or externally with any real degree of accuracy or certainty.
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    The new single private owner ONEX, (subject to shareholder acceptance), is Toronto based as we all know. Major financial decisions to be taken by/for WS will be made in Toronto by ONEX not by WS out in YYC. No doubt WS executive organizational structure will change, with new reporting lines to key ONEX Execs.

    That is a hell of a premium price and the ONEX investors will want that returned quickly. I would not be surprised to see route cuts and Swoop metal sold if its not profitable. Will ONEX actually keep this company and operate long term? I doubt it and here is what their core mission states: "manages and invests capital in its private equity and credit platforms on behalf of investors from around the world". Investors in ONEX private equity placements expect solid returns ... not asks for more capital to grow a company. Makes me wonder what ONEX is really up to by this acquisition as "The investment will be led by Onex Partners, Onex’ private equity platform".

    https://ir.onex.com/static-files/92b...1-f6da878d1b05
    Last edited by EdmTrekker; 13-05-2019 at 09:29 AM.

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    Quote Originally Posted by EdmTrekker View Post
    That is a hell of a premium price and the ONEX investors will want that returned quickly.
    WJA was as high as $22 a few months ago. a 40% premium is pretty standard on a takeover like this. It was over $31 4 years ago.

    I don't think we're going to see substantial changes to WJ or their business model. ONEX owns a lot of companies, though most of them are not consumer-focused. Cineplex is a good example. They've certainly grown and expanded since the ONEX takeover.
    https://www.onex.com/portfolio

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    National and multinational conglomerates are some of the biggest problems in the world.... Westjet now owned by one. Many of these conglomerates have more power and influence in the world than many non-G8 countries.

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    Quote Originally Posted by nobleea View Post
    Quote Originally Posted by EdmTrekker View Post
    That is a hell of a premium price and the ONEX investors will want that returned quickly.
    WJA was as high as $22 a few months ago. a 40% premium is pretty standard on a takeover like this. It was over $31 4 years ago.

    I don't think we're going to see substantial changes to WJ or their business model. ONEX owns a lot of companies, though most of them are not consumer-focused. Cineplex is a good example. They've certainly grown and expanded since the ONEX takeover.
    https://www.onex.com/portfolio
    ONEX is not invested in Cineplex. That investment ended in July 2004. Cineplex is a publicly traded company and ONEX was in with an equity situation which was either repaid with interest or sold off.

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    Quote Originally Posted by EdmTrekker View Post
    ONEX is not invested in Cineplex. That investment ended in July 2004. Cineplex is a publicly traded company and ONEX was in with an equity situation which was either repaid with interest or sold off.
    You're right. Onex got rid of the last of its Cineplex investment in 2009.

    My point was, I'm not worried about it. They have a history of taking what they see to be undervalued companies, take them private, make them work, and then either sell them or put them on the stock market. They've always been big in the aviation world with Boeing's Kansas and Oklahoma manufacturing facilities and buying the former Hawker Beechcraft.

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    The only positive I am hoping for is the reversal of their dominance at YYC......they're willy nilly routes to Austin, Atlanta, Portland and Nashville will be scrutinized and hopefully re-route some metal our way to more sensible locations.....

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    Quote Originally Posted by EdmTrekker View Post
    The new single private owner ONEX, (subject to shareholder acceptance), is Toronto based as we all know. Major financial decisions to be taken by/for WS will be made in Toronto by ONEX not by WS out in YYC. No doubt WS executive organizational structure will change, with new reporting lines to key ONEX Execs.
    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.

    Quote Originally Posted by EdmTrekker View Post
    That is a hell of a premium price and the ONEX investors will want that returned quickly. I would not be surprised to see route cuts and Swoop metal sold if its not profitable.
    Swoop and Encore are not a part of the deal. Just WestJet. They will change this into a full service airline and leave the ULCC stuff to whatever they make Swoop and Encore.

    Quote Originally Posted by EdmTrekker View Post
    Will ONEX actually keep this company and operate long term? I doubt it and here is what their core mission states: "manages and invests capital in its private equity and credit platforms on behalf of investors from around the world". Investors in ONEX private equity placements expect solid returns ... not asks for more capital to grow a company. Makes me wonder what ONEX is really up to by this acquisition as "The investment will be led by Onex Partners, Onex’ private equity platform".
    They are in it for the short term as they see WJA as undervalued. They are going private to really shake things up....including the union...IMO...then make it public or sell it ASAP. This, again, is the exact playbook from 1999.

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    Quote Originally Posted by maclac View Post
    The only positive I am hoping for is the reversal of their dominance at YYC......they're willy nilly routes to Austin, Atlanta, Portland and Nashville will be scrutinized and hopefully re-route some metal our way to more sensible locations.....

    Don't hope too hard. With ONEX at the helm, there will be definite pressure for high returns on metal. WJA will still dominate at YYC.
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    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by maclac View Post
    The only positive I am hoping for is the reversal of their dominance at YYC......they're willy nilly routes to Austin, Atlanta, Portland and Nashville will be scrutinized and hopefully re-route some metal our way to more sensible locations.....

    Don't hope too hard. With ONEX at the helm, there will be definite pressure for high returns on metal. WJA will still dominate at YYC.
    There are weak routes at YYC where a better return might be at YEG or YWG etc. Now we have hawks looking over WS decisions that pander to YYC ... we will see soon enough how they skinny down. ONEX owes nothing to YYC or WS ... they have international investors sinking capital into this and they want the returns they have been promised. Its all about the money.

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    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by EdmTrekker View Post
    The new single private owner ONEX, (subject to shareholder acceptance), is Toronto based as we all know. Major financial decisions to be taken by/for WS will be made in Toronto by ONEX not by WS out in YYC. No doubt WS executive organizational structure will change, with new reporting lines to key ONEX Execs.
    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.

    ...
    Alaska. Southwest. Delta. Northwest Airlines from back in the day. Even Norwegian for that matter.

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    Quote Originally Posted by RichardS View Post

    Quote Originally Posted by EdmTrekker View Post
    That is a hell of a premium price and the ONEX investors will want that returned quickly. I would not be surprised to see route cuts and Swoop metal sold if its not profitable.
    Swoop and Encore are not a part of the deal. Just WestJet. They will change this into a full service airline and leave the ULCC stuff to whatever they make Swoop and Encore.
    Swoop and Encore are 100% WestJet and are 100% part of the deal.

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    Head office in Alberta just by name now. Toronto will make the decisions now.

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    Quote Originally Posted by RichardS View Post

    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.
    Southwest Airlines would beg to differ.



    As would Alaska Airlines


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    Quote Originally Posted by EdmTrekker View Post
    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by maclac View Post
    The only positive I am hoping for is the reversal of their dominance at YYC......they're willy nilly routes to Austin, Atlanta, Portland and Nashville will be scrutinized and hopefully re-route some metal our way to more sensible locations.....

    Don't hope too hard. With ONEX at the helm, there will be definite pressure for high returns on metal. WJA will still dominate at YYC.
    There are weak routes at YYC where a better return might be at YEG or YWG etc. Now we have hawks looking over WS decisions that pander to YYC ... we will see soon enough how they skinny down. ONEX owes nothing to YYC or WS ... they have international investors sinking capital into this and they want the returns they have been promised. Its all about the money.
    Yes, it is all about the money...

    ...and YEG's growth is in ULCC.

    The new WestJet is not going to be a ULCC.

    There is more money on other routes, and this is not about Edmonton vs Calgary. Maybe Edmonton will have a change...but that is still a long build off. I'm actually one of them working on this buildout, and I am NOT betting on or jumping for joy on this leading to sudden LHR, FRA, or other routes. There is still a lot of work to do.

    End of line.
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    Quote Originally Posted by TheGreatestX View Post
    Quote Originally Posted by RichardS View Post

    Quote Originally Posted by EdmTrekker View Post
    That is a hell of a premium price and the ONEX investors will want that returned quickly. I would not be surprised to see route cuts and Swoop metal sold if its not profitable.
    Swoop and Encore are not a part of the deal. Just WestJet. They will change this into a full service airline and leave the ULCC stuff to whatever they make Swoop and Encore.
    Swoop and Encore are 100% WestJet and are 100% part of the deal.
    I'm being told differently by WestJet team members. They only want the new iron. Swoop and Encore, while wholly owned by the parent company, are separate legal entities. ONEX is under no obligation to take on the regionals, nor the ULCC.

    Regionals and others are often run by other companies not owned by the parent. Why would ONEX want the regionals?

    Sure, my sources could be completely wrong, or the order of operations is off (Swoop/Encore are gonzo at close)...but I can see no desire or need given the current industry models to have ONEX own and operate regionals.
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    Quote Originally Posted by OffWhyte View Post
    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by EdmTrekker View Post
    The new single private owner ONEX, (subject to shareholder acceptance), is Toronto based as we all know. Major financial decisions to be taken by/for WS will be made in Toronto by ONEX not by WS out in YYC. No doubt WS executive organizational structure will change, with new reporting lines to key ONEX Execs.
    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.

    ...
    Alaska. Southwest. Delta. Northwest Airlines from back in the day. Even Norwegian for that matter.
    Alaska is a regional west cost carrier who has some flights outside that main geographic area. Sure, it could grow to rival United/American/Delta....and get international and eastern hubs, and the Alaska brand may be quirky enough to survive.

    Northwest was Northwest Orient. Now Delta.

    How is Delta regional?

    Norwegian is a Flag carrier. Like Air France, KLM, British Airways...
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    Quote Originally Posted by kkozoriz View Post
    Quote Originally Posted by RichardS View Post

    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.
    Southwest Airlines would beg to differ.
    Southwest is a ULCC that competes with the bus. It is not a national, or international, full service airline.

    If you want an international presence, you get an international name. WestJet is not it.

    Let's chat in a year, shall we?
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    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by TheGreatestX View Post
    Quote Originally Posted by RichardS View Post

    Quote Originally Posted by EdmTrekker View Post
    That is a hell of a premium price and the ONEX investors will want that returned quickly. I would not be surprised to see route cuts and Swoop metal sold if its not profitable.
    Swoop and Encore are not a part of the deal. Just WestJet. They will change this into a full service airline and leave the ULCC stuff to whatever they make Swoop and Encore.
    Swoop and Encore are 100% WestJet and are 100% part of the deal.
    I'm being told differently by WestJet team members. They only want the new iron. Swoop and Encore, while wholly owned by the parent company, are separate legal entities. ONEX is under no obligation to take on the regionals, nor the ULCC.

    Regionals and others are often run by other companies not owned by the parent. Why would ONEX want the regionals?

    Sure, my sources could be completely wrong, or the order of operations is off (Swoop/Encore are gonzo at close)...but I can see no desire or need given the current industry models to have ONEX own and operate regionals.
    Interesting enough, a union rep I know just called. It is more the latter. Yes, all entities are being bought. Yes, the game plan will be to toss Encore and Swoop soon after the close. Yes, rebranding is on the table.

    It's still early, but this approach makes sense.
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    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by kkozoriz View Post
    Quote Originally Posted by RichardS View Post

    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.
    Southwest Airlines would beg to differ.
    Southwest is a ULCC that competes with the bus. It is not a national, or international, full service airline.

    If you want an international presence, you get an international name. WestJet is not it.

    Let's chat in a year, shall we?
    Way to move the goalposts. You said, and I quote,
    You cannot have a national airline with a regional name.
    . Southwest flies from coast to cast as well as internationally. Checking their map, I see Havana, Grand Cayman, Montego Bay, Punta Cana as well as A number in Mexico as well as Costa Rica.

    If you ask the average person if Southwest flies nationally, they'd say yes. If you ask them if it's the functional equivalent of a bus, they'd say no.

    Sure, Onex may change the name but that has nothing to do with it being impossible for Westjet to be a national carrier.
    Last edited by kkozoriz; 14-05-2019 at 12:32 AM.

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    ^I agree, there is nothing wrong with the name "WestJet", which is completely neutral (every country has a "west" in it, every province has a "west" in it, every town has a "west side"). Its a lot less geographically restricting than the name "Air Canada" (which implies some connection to Canada). If anything, the trend we see today, is to companies taking the nationality out of their name (Trans Canada is an example, now TC Energy). I think it will be interest to see if this fund acquires a US airline now to create some synergy.
    Last edited by downtownone; 14-05-2019 at 07:57 AM.

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    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by OffWhyte View Post
    Quote Originally Posted by RichardS View Post
    Quote Originally Posted by EdmTrekker View Post
    The new single private owner ONEX, (subject to shareholder acceptance), is Toronto based as we all know. Major financial decisions to be taken by/for WS will be made in Toronto by ONEX not by WS out in YYC. No doubt WS executive organizational structure will change, with new reporting lines to key ONEX Execs.
    That is definitely going to happen. The play is the same play as 1987 with PWA/CP becoming Canadian. You cannot have a national airline with a regional name. It won't be "west"jet much longer.

    ...
    Alaska. Southwest. Delta. Northwest Airlines from back in the day. Even Norwegian for that matter.
    Alaska is a regional west cost carrier who has some flights outside that main geographic area. Sure, it could grow to rival United/American/Delta....and get international and eastern hubs, and the Alaska brand may be quirky enough to survive.

    Northwest was Northwest Orient. Now Delta.

    How is Delta regional?

    Norwegian is a Flag carrier. Like Air France, KLM, British Airways...
    The Alaska name has nothing to do with where its revenues come from.

    Northwest was a national (global actually) carrier with a regional name.

    Delta is a national (global actually) carrier with a regional name.

    You ignored my mention of Southwest.

    Norwegian is nothing like Air France, KLM, and BA. Their growth strategy is focused on markets outside of Norway. They even operate domestic flights in Argentina! Here's an excerpt from their annual report:

    In 2018, Norwegian focused its long-haul growth in European capital cities. The UK, France, Spain and Italy accounted for 26 of 32 aircraft. The UK saw the largest growth with an additional five aircraft being allocated to Gatwick. These aircraft contributed to our continued growth across the US market, such as the London to New York route which was increased to three daily services and in Florida where we were able to significantly increase the frequency of flights into Miami, Orlando and Tampa. In addition, a new route to Buenos Aires performed well from launch.
    Source: https://www.norwegian.com/globalasse...egian-2018.pdf

    (Parenthetically, you could argue that based on Norwegian's recent results that their strategy isn't working out so well for them but they have much larger issues than their name.)

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    West is fine. There's nothing wrong with a name linked to it's birthplace, and even if it grows massively it will be in the western hemisphere and the global west.

    The jet part could be worse, actually, since airlines with jet in them are LCCs. Easyjet and JetBlue, Jetstar is Quantas' LCC, Jet2 is another British LCC. And remember Canjet & Jetsgo?
    There can only be one.

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    Quote Originally Posted by RichardS View Post

    Interesting enough, a union rep I know just called. It is more the latter. Yes, all entities are being bought. Yes, the game plan will be to toss Encore and Swoop soon after the close. Yes, rebranding is on the table.

    It's still early, but this approach makes sense.
    I doubt that ONEX has shared that much of their game plan, but that makes sense. Ditch swoop fast, and prep Encore for sale separately when they've done everything else they want to do.

    I expect that most of the operational streamlining they have in mind will work for Encore too so why not fix it and add value before they sell?
    There can only be one.

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    Westjet's CEO did tell shareholders just a few weeks back that Swoop's performance was "disappointing," so maybe the gig will be up for big pink before too long.

    Possibly too Encore will get spun off, ala Jazz. But whatever name Onex chooses, the mainline will still need a smaller market feeder, so count on Encore maintaining its role.

    As for Norwegian, it's a low-cost carrier, apparently the object of many passenger complaints. But I'd give up a precious body part to have a non-stop to Oslo. I love that airport!
    Last edited by McBoo; 14-05-2019 at 01:34 PM.
    ... gobsmacked

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    Quote Originally Posted by downtownone View Post
    ^I agree, there is nothing wrong with the name "WestJet", which is completely neutral (every country has a "west" in it, every province has a "west" in it, every town has a "west side"). Its a lot less geographically restricting than the name "Air Canada" (which implies some connection to Canada). If anything, the trend we see today, is to companies taking the nationality out of their name (Trans Canada is an example, now TC Energy). I think it will be interest to see if this fund acquires a US airline now to create some synergy.



    Or ONEX sells out to a US airline ... which is more the likely. As far as I am concerned I would welcome complete integration of airlines in North America - as part of a free trade deal and axing the regulatory processes.

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    Let's not forget that Air Transat is also for sale. They did confirm that they received bids. Onex could be one of them and it would open up a whole bunch of points in Europe and a significant operation in YUL.

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    The worst possible outcome for the Canadian flying public would be fo Onex or AC to buy TS. We need more competition in Canada not less so I doubt (hope) the government would not approve such a deal.
    “Canada is the only country in the world that knows how to live without an identity,”-Marshall McLuhan

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    Quote Originally Posted by McBoo View Post
    Westjet's CEO did tell shareholders just a few weeks back that Swoop's performance was "disappointing," so maybe the gig will be up for big pink before too long.

    Possibly too Encore will get spun off, ala Jazz.
    The whole Swoop, Encore, Jazz, low cost sub brand thing, never made any sense to me. I realize it had something to do with union / non-union / staff costs, and perhaps being a predator to new competition, but from a branding perspective it was always just "getting the cheap WestJet/Air Canada" when you booked it through West Jet or Air Canada.

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    Flair must feel like they died and went to heaven.
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    Quote Originally Posted by Glenco View Post
    Flair must feel like they died and went to heaven.
    Remains to be seen whether they make another 6 months.
    Last edited by EdmTrekker; 17-05-2019 at 07:31 PM.

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    Quote Originally Posted by downtownone View Post
    Quote Originally Posted by East McCauley View Post
    Airlines are one of the most volatile businesses out there. Combining Westjet with a range of other businesses, some of which are more recession proof, seems to make a lot of sense.
    I'm not really a fan of that logic - its better for investors to diversify by choosing different companies in their portfolio, allowing companies to focus on what they are good at. At the end of the day here though, presumably West Jet sees some advantages of being private, given the price differential. It appears to be a big value add for their shareholders (i.e. pension funds, etc.), so it makes sense they are doing this.
    Holding companies and conglomerates have gone in and out of favour over the years, but I'm not a fan of that logic either. I think what Onex might bring to WestJet is a bit more financial muscle so they can expand to compete better with Air Canada in the long run. I think if they are going to be successful in that strategy, the short term results will not be very great, but the long term could be very good. The markets don't have the patience for that sort of strategy and issuing more capital would dilute things for the existing shareholders, so there is a logic to being privately held at this point for WestJet.

    I don't think this strategy is a sure thing, but Onex takes risks. It wins some and loses some. I suppose they feel this is worth the risk.

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    I think you hit the key with "finance". As long as there is good corporate stewardship, the secured backers gives it confidence to make steep decission. They might become a full fledge international carrier? I think this transaction forced AC to take over 'AT' imo.
    " The strength of a man is in the stride he walks."

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    I don't know how much Encore adds to their bottom line. I assume it's moderately profitable. If they're looking at ditching it, would they sell to Chorus, who runs Jazz (profitably)? I'm sure AC has agreements that Jazz planes have to mesh with AC schedules, but maybe WJ could have the same with Encore planes. AC has no ownership stake in Chorus and they're publicly traded so have a duty to maximize value for the shareholder.

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    Quote Originally Posted by nobleea View Post
    I don't know how much Encore adds to their bottom line. I assume it's moderately profitable. If they're looking at ditching it, would they sell to Chorus, who runs Jazz (profitably)? I'm sure AC has agreements that Jazz planes have to mesh with AC schedules, but maybe WJ could have the same with Encore planes. AC has no ownership stake in Chorus and they're publicly traded so have a duty to maximize value for the shareholder.
    I am not sure the contract between Chorus Aviation and AC is public information. It could be time limited. Chorus may have some cards to play. Although Chorus received approval to allow foreign investment to 49% just this week, Onex could easily make a play for it - and AC will be left without small feeder routes and WS could grow in spades. Lots of moving pieces out there.

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    Last edited by SP59; 17-05-2019 at 09:16 PM.

  43. #43

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    Quote Originally Posted by nobleea View Post
    I don't know how much Encore adds to their bottom line. I assume it's moderately profitable. If they're looking at ditching it, would they sell to Chorus, who runs Jazz (profitably)? I'm sure AC has agreements that Jazz planes have to mesh with AC schedules, but maybe WJ could have the same with Encore planes. AC has no ownership stake in Chorus and they're publicly traded so have a duty to maximize value for the shareholder.
    With that topic, I'm curious if the 'Flair' group can secure finance/alliance to take over rather than the other option. I much rather not see AC absorb and get larger... We desperately need a third carrier- discount or not.
    " The strength of a man is in the stride he walks."

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