A new WestJet deal is setting the stage for a future with more flights to Paris and Seoul.
What happened: WestJet owner Onex is selling 25% of the airline for $550 million, with 15% going to Delta Air Lines, a leading U.S. airline, and 10% to Korean Air, South Korea’s largest. After the transaction closes, Delta plans to sell a 2.3% stake to Air France-KLM.
- It’s worth noting that there are federal rules to prevent foreign ownership from gaining controlling stakes in a domestic Canadian airline.
Big picture: Delta, Korean Air, and Air France are members of the airline alliance SkyTeam, which has been battling with the larger Star Alliance to expand networks and resource-sharing. With most major airlines already in an alliance, competition over new members is fierce.
Why it matters: After previously co-operating with SkyTeam members, it seems inevitable that WestJet will officially join the alliance, a development that could see it compete more in Canada’s international market, which is currently dominated by its chief rival and Star Alliance member Air Canada.
- In particular, WestJet’s transatlantic network could potentially expand to focus on connections and long-haul flight service with Delta, Korean Air, and Air France hubs.
Zoom out: The deal comes five-and-a-half years after Onex acquired WestJet for $3.5 billion. After this sale, WestJet’s equity is now valued at $3.1 billion. Combined with the dividends it’s earned, Onex has already made back its investment, and is primed to make more.—QH