Delta, Korean Air buy 25% of WestJet in $714 million deal
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The 25 per cent stake is being sold by Onex Partners and affiliated funds and co-investors of the group, the parties said on May 9.
PHOTO: REUTERS
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SINGAPORE – Delta Air Lines and Korean Air Lines will spend US$550 million (S$714 million) acquiring a stake in Canadian carrier WestJet, adding to the broader consolidation among airlines globally.
The 25 per cent stake is being sold by Onex Partners and affiliated funds and co-investors of the group, the parties said in a May 9 statement. The Onex group will continue to own and control Calgary, Alberta-based WestJet.
As part of the deal, Delta will buy a 15 per cent minority interest for US$330 million, while Korean Air will pay US$220 million for a 10 per cent stake. Delta will also have the right to sell and transfer a 2.3 per cent share to its joint venture partner Air France-KLM for US$50 million upon the deal closing.
The transaction was completed at a more than 25 per cent premium to WestJet’s current net asset value, Onex chief executive Bobby Le Blanc said during an analyst call on May 9. WestJet will “ultimately one day” be “reintroduced to the public markets”, co-head of Onex Partners Tawfiq Popatia said on the same call.
The Toronto-based money manager bought the then publicly listed airline in December 2019, a few months before the Covid-19 pandemic began.
Airlines have engaged in industry consolidation since that pandemic, buying small rivals outright and taking stakes in one another. There is growing concern that the dominance of a few large airlines is stifling competition, potentially leading to higher fares and reduced service options, and limiting market access for smaller carriers.
The CEO of WestJet’s domestic rival, Air Canada, told analysts this deal “shouldn’t be surprising to anybody. Delta does have a relationship with WestJet and has had one for quite some time”.
“We all know Delta has a strategy of putting minority interest in airlines around the world,” Mr Michael Rousseau said on May 9. “So it doesn’t really surprise us, and we’ll monitor it, and we’ll see what, if anything, changes over the next little while, but we don’t expect anything.”
The swoop by Delta, which already partners Korean Air on routes across the Pacific, deepens the Atlanta-based carrier’s grip across the Americas. Delta holds a stake in Korean Air’s parent company and also has stakes in other carriers including Grupo Aeromexico, Latam Airlines Group, Air France-KLM and China Eastern Airlines.
Deutsche Lufthansa recently took control of Italian carrier ITA, Alaska Airlines snapped up Hawaiian Airlines, while Korean Air itself finalised approval for its merger with Asiana Airlines. Europe’s largest carriers, meanwhile, are circling TAP Air Portugal. BLOOMBERG
