WestJet CEO Ed Sims on closure of Onexs $5-billion deal to buy airline
WestJet’s new owner wants the airline to build a stronger presence in Eastern Canada with increased frequency on Toronto, Montreal and Ottawa routes, according to CEO Ed Sims.
Toronto-based private equity firm Onex Corp. officially closed its $5-billion deal to buy WestJet Airlines Ltd. Wednesday after receiving approval from the Canadian Transportation Agency on Tuesday with the condition that the new ownership meets federal airline ownership rules.
“What I see Onex doing is adding considerable strength to our presence out east,” Sims told the Financial Post in an interview. “I want to see us have as high brand recognition and support in Ontario, Quebec and the Maritimes as we currently do in the west.”
Despite the new Ontario connection and goal of building a stronger presence out of Toronto Pearson International Airport, Sims said WestJet is proud of its Alberta roots. At a time when business confidence in Alberta is shaky, WestJet said it will maintain its corporate headquarters in Calgary and has no plans to introduce additional brands along the lines of “EastJet.”
“We are a Canadian operation proudly headquartered here in Alberta,” Sims said. “Everywhere is west of somewhere in the world. Why would we change a brand we’ve spent the past 23 years growing?” he added. “SouthJet, NorthJet wouldn’t help us either. I’m really proud of the brand, proud of the history.”
Sims said the deal closure brings “satisfaction and relief” after months of due diligence following the announcement of the friendly takeover in May, in what’s considered the largest private equity deal in the country’s aviation history.
Onex first approached WestJet with an offer in March after a rough year for the airline, which faced labour disruptions and unionization as it embarked on an ambitious plan to diversify into both the low-cost carrier market with Swoop and the premium market by introducing business class seats on new Boeing Dreamliner jets.
Going private was the right answer for WestJet because it wanted to focus on its long-term strategy without the tension of needing to deliver quarterly results, Sims said in an interview. Plus, no longer being obligated to reveal its tactics to the investor community – and competitors – gives it an advantage, he added.
WestJet was founded in 1996 as a lower-cost, regional airline with no business class seats and non-unionized employees. It grew into Canada’s second-largest airline and in the past several years pursued the ambition of becoming a full-service, global carrier with a low-cost brand, premium business offerings and partnerships with airlines such as Delta Air Lines.
Some investors questioned the expansion strategy as the company bumped through a turbulent 2018. Yet Sims said Onex’s offered to buy the company for $31 per share, a 67 per cent premium to the stock price on the date it made the offer, because it believes in the strategy.
WestJet has committed to no direct job losses as a result of the deal and has promised to honour its recent collective agreements with its pilots and flight attendants.
I strongly sense they’ll be looking for nimbler decision making.
WestJet CEO Ed Sims
Based on a conversation he had with Onex chief executive Gerry Schwartz, Sims said Onex will expect WestJet to execute that strategy more quickly.
“In his view, the outcome of a meeting is a decision, it’s not another meeting,” Sims said. “I strongly sense they’ll be looking for nimbler decision making.”
Next steps include finalizing a new board. The approval from Canada’s transportation regulator came with the condition that Onex amend its bylaws to ensure any decisions related to WestJet or Swoop are made by a board that is majority Canadian.
In September, Air Canada, the country’s largest airline, filed a challenge against the takeover because Onex’s bylaws only stipulated 25 per cent of its board members be Canadian, while federal aviation rules require at least 50 per cent of airline board members be Canadian.
“We don’t see that as particularly onerous,” Sims said, adding the intention is to form a new board with a blend of Canadian, international, financial and operational experience.
Sims himself isn’t a Canadian citizen, but holds permanent residency.