Second Largest Canadian Airline, WestJet will be Privatized

Private equity firm of Canada, Onex ready to buy the second largest airline of Canada, WestJet (WJAFF) in about $5 billion. WestJet long been taken as the Southwest Airlines (LUV) of Canada. Just similar to Southwest, the twenty-three year long standing WestJet offers its customers lower fares as compared to its rivals, and it initially flew an all 737 fleet. Due to the reason Canada’s number one airline, Air Canada and the United States airlines operating in Canada got pressure to keep their fares in Check.

During the last few years, WestJet got the authority to become a full-service airline, with first-class and business seats. Moreover, it also bought longer-range Boeing jets like 787 Dreamliner to expand their services into further overseas markets. In addition, it also started Swoop, too-low cost airline like Ryanair or United States carrier Spirit that has very fewer fares; however, for a manner of extras, they charge their passengers.

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Mainly WestJet still uses 737 aircraft in its about 200 planes fleet including the 737 Max. After the Ethiopian Airlines crash in March, planes grounded in the mid of March 2019, due to the grounded orders, the WestJet airline faced a huge loss rather than any other airline. Around eight percent of its fleet grounded. For a reason, the carrier stopped earnings direction for the rest of the year that hurts its share price.

According to the officials of WestJet, they received the proposal from Onex during March, and they are thinking of it since then. Even though few of privately-held carriers exit like Virgin Atlantic but it is comparatively rare for an airline to purchase privately by equity investors. The airline could get an advantage from the extra money.

Ultimate Goal of WestJet Airlines

Helane Becker, the Cowen airline expert, said that the final goal of WestJet airlines is to recognize as a full-service carrier with products across the whole airline spectrum. Thinking of transformation will be expensive for the airline.

The purchase price of $5 billion signifies a 67 percent premium above stock’s closing price on Friday. WestJet shares rose nearly 60 percent on the news of the deal. It is an expectation that the deal may close at the end of 2019 or at the start of 2020, depends on the regulatory approval.

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