Delta Air Lines and Korean Air will buy a combined 25 per cent stake in WestJet from Canadian investment firm Onex, the companies announced on Friday.
Under the arrangement, Delta will acquire a 15 per cent stake in the Calgary-based airline for $330 million US, while Korean Air will buy a 10 per cent stake for $220 million US, for a deal totalling $550 million US ($766.8 million Cdn).
After the deal closes, Delta plans to sell a 2.3 per cent stake in WestJet to its joint venture partner Air France-KLM for $50 million US.
“Delta, Korean and Air France-KLM are among the world’s most prominent and best-managed airlines,” Tawfiq Popatia, co-head of Onex Partners, said in a statement. “Onex is delighted to welcome them as shareholders in WestJet.”
Onex acquired WestJet in 2019. WestJet and Delta have been partners since February 2011, and Korean Air and WestJet have partnered since June 2012.
“Investing in a world-class partner like WestJet aligns our interests and ensures that we remain focused on providing a world-class global network and customer experience for travellers in the United States and Canada,” Delta CEO Ed Bastian said.
Delta, Korean Air, KLM and Air France are members of the SkyTeam Airline Alliance. Air Canada is a member of the rival Star Alliance network.
“This strategic partnership will enhance our global network and create long-term value for customers through greater choice and convenience,” said Walter Cho, chairman and CEO of Korean Air and Hanjin Group.
Unlikely to change things for fliers
It’s unclear at this point whether the deal is just a financial arrangement or if it will lead to operational changes, said Geoffrey White, executive director and general counsel at the Public Interest Advocacy Centre in Ottawa.
If it’s the latter, “the partners that are being brought to the table here actually have quite decent track records from a complaint perspective,” White said.
“Whether or not that upside is on the backs of passengers or if it’s part of a reinvigoration to make the airline stronger as a competitor remains to be seen.”
Canadian airlines are bound by ownership rules that require the company and any related voting interests to be Canadian-controlled, White said, and the new arrangement appears to be compliant with that since Onex continues to own the majority of WestJet.
“I don’t see this changing the airline landscape in Canada at all. It’s still highly concentrated and dominated by a handful of carriers,” he said.
Canadian airlines, like others around the world, have engaged in consolidation through mergers, acquisitions and partnerships focused on frequent-flyer programs and rewards to dominate high-volume routes and strengthen their position against rivals.
This has led to higher fares, reduced competition and consumer concerns about anti-competitive practices.
