ONEX plans

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johnkruk
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ONEX plans

Post by johnkruk » Fri Jul 19, 2019 1:56 am

Anyone here think ONEX will sell off ENCORE / SWOOP ? And if only one of them were to sell which one ???
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JBI
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Re: ONEX plans

Post by JBI » Fri Jul 19, 2019 5:20 am

Krukkie,

You were a great baseball player and I even had your baseball card when I was 12. When I was trying to convince my Mom that my baseball card collection was a worthy investment she wisely said that something is only worth as much as someone will pay for it.

So, while anything is possible, why would anyone purchase Encore or Swoop? They are both operated in a manner that although they may be slightly profitable in their own right, the primary purpose is to collect more passengers in the spokes in the hub and spoke network (Encore) or protect the lower end ULCC passengers as WJ moves away from the 'rock bottom fares'. Both have extensive integration with WestJet that would add significant costs if they became separate companies.

Also if you look at Onex's past dealings, it really isn't their style to come in and start selling off parts.

So, just like there are a dearth of interested buyers in my 1991 Upper Deck John Kruk card for more than I paid for it, I just can't see any particular Canadian suitors wanting to step up and purchase Encore/Swoop in a manner that makes Onex a profit in the long run. But I mean, hey, if you want to step up to the plate and buy my baseball card collection so I can make a down payment on a house, everything is for sale for the right price...
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DropTanks
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Re: ONEX plans

Post by DropTanks » Fri Jul 19, 2019 6:37 am

It’s very simple really. Just sign a sweetheart CPA deal with Encore thus giving Encore guaranteed income for years raising its value. Sell it off. Count your $$$ while WJ is saddled with a high cost CPA for years.

Swoop is a big ? As well as a festering pus-filled tumor. Somebody might just be dumb enough to buy that shit show.
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Re: ONEX plans

Post by C-GGGQ » Fri Jul 19, 2019 8:06 am

DropTanks wrote:
Fri Jul 19, 2019 6:37 am

Swoop is a big ? As well as a festering pus-filled tumor. Somebody might just be dumb enough to buy that shit show.
Canada Jetlines can buy it, fix their no OC problem
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lownslow
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Re: ONEX plans

Post by lownslow » Fri Jul 19, 2019 8:20 am

johnkruk wrote:
Fri Jul 19, 2019 1:56 am
Anyone here think ONEX will sell off ENCORE / SWOOP ? And if only one of them were to sell which one ???
If I were king of WestJet I’d re-absorb Swoop into the mainline, ditch the overseas stuff, reconfigure back into Canada’s Southwest or even Ryanair, and crank up that PR machine. Encore would of course keep being Encore. Selling it seems short sighted though maybe Georgian would appreciate the work.

My opinion is of course very much biased by my own experiences and narrow views. I don’t have the cost breakdowns, market analysis or experience to really call it from here. I bet most on the forum are in the same spot.
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altiplano
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Re: ONEX plans

Post by altiplano » Fri Jul 19, 2019 8:31 am

johnkruk wrote:
Fri Jul 19, 2019 1:56 am
Anyone here think ONEX will sell off ENCORE / SWOOP ? And if only one of them were to sell which one ???
Absolutely. I would foresee everything eventually being sold. ONEX doesn't want to run an airline forever.

This will be a parts are worth more than the whole situation.

Encore IPO'd with a long term CPA from Westjet will provide a big pay off. It's been shown in the past to be a successful strategy of unlocking value.

Swoop, I'm not sure yet, we'll see what happens with that... The brand is struggling recently, but consumers only seem to care for 1 news cycle and then keep shopping for the cheapest tickets. Westjet are absolutely keeping it exceedingly seperate to protect the Westjet brand, but the division in the pilot group is valuable and the ULCC model has potential.

I put it at 50-50 it gets rolled back into Westjet vs continues... if the latter, I'm not sure it gets sold, but again, Onex is looking for value to unlock... I wouldn't rule it out.
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Splash
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Re: ONEX plans

Post by Splash » Fri Jul 19, 2019 3:32 pm

altiplano wrote:
Fri Jul 19, 2019 8:31 am
johnkruk wrote:
Fri Jul 19, 2019 1:56 am
Anyone here think ONEX will sell off ENCORE / SWOOP ? And if only one of them were to sell which one ???
Encore IPO'd with a long term CPA from Westjet will provide a big pay off. It's been shown in the past to be a successful strategy of unlocking value.
You just have to look south of the border and let history be your guide to see what has happened to regional carriers that were once owned by their mainline partners.
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lostaviator
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Re: ONEX plans

Post by lostaviator » Fri Jul 19, 2019 5:03 pm

That's all long term... Let's talk short term plans. What EVP's, VP's, SVP's, Managers, Managers of Managers, and middle fat are going to be shown the door?

They didn't buy a $18/share company for $31 without some MAJOR plans that they are going to act on fast. This company has been drowning for years, and Onex isn't going to let them just keep splashing around in the big airline ocean. WJ needs a rudder, HELL even a waterlogged second-hand one (with holes) would be a step up.
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Transonic
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Re: ONEX plans

Post by Transonic » Sat Jul 20, 2019 6:06 am

I think Air Canada has ruined the appetite for an Encore IPO.

Enough time had past to judge Robert Milton's "unlocking shareholder value" strategy.

Jazz

Once the initial contract was over, AC started Sky Regional to compete with Jazz and successfully lowered the CPA rate. This happened again with Air Georgian.

AVEOS

AC was struggling with locked in high rates for heavy maintenance. During the financial difficulties of 2012, AC became delinquent on payments and forced AVEOS into bankruptcy. Problem solved.

Aeroplan

The most recent event. AC threatens to start their own FF program thus driving the price of Aeroplan down for a hostile takeover by AC.

The valuation at an IPO is based on long term potential. So with this recent history, what is the long term value proposition that Encore provides to an investor?

ONEX needs to put WestJet on a high rate growth trajectory prior to IPO to get the best valuation. The only way to do that is to turn WestJet into an international airline. WestJet still operates at a 20% cost advantage to Air Canada with one investment grade credit rating.

I expect accelerated 787 deliveries.
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Last edited by Transonic on Sat Jul 20, 2019 10:09 am, edited 1 time in total.

altiplano
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Re: ONEX plans

Post by altiplano » Sat Jul 20, 2019 8:31 am

CHR is still pumping along with 6%+ yield and a long term deal... there have been dips sure, but YTD is up about 40%.
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Transonic
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Re: ONEX plans

Post by Transonic » Sat Jul 20, 2019 10:29 am

altiplano wrote:
Sat Jul 20, 2019 8:31 am
CHR is still pumping along with 6%+ yield and a long term deal... there have been dips sure, but YTD is up about 40%.

So 1 out of 3 have been successful.
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altiplano
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Re: ONEX plans

Post by altiplano » Sat Jul 20, 2019 1:16 pm

The other 2?

Aeroplan? It's IPO was wildly successful and oversubscribed. It's IPO was valued at $2 billion. AIMIA has flourished for the past 14 years and even after selling Aeroplan is still managing, although with some irregularities recently on the board.

Aveos? ACE/Milton sold it and unlocked value. Recall that's the goal of these equity/hedge funds, value... Aveos' Canadian operation was poorly run though and labour is cheaper in Central America, thus is the trend for heavy checks done around the world now. So Aveos went bankrupt in Canada - gone was the debt, the pension deficit ... they do still exist of course, Cayman Islands holding company of undisclosed private equity ownership and operate MROs in Central America (Aeroman).

The one that you really are missing is ACE... they made out like bandits. That's no doubt what Onex hopes to achieve.

Milton unlocked and distributed over $5billion during his time from a bankrupted airline to ACE hedge fund investors through stock buybacks and financial voodoo, he also collected and distributed billions through the aforementioned sales/IPOs, while collecting in salary alone for himself close to $100million plus stock... when Ace wound up they paid out another half billion or so and millions of Air Canada shares to ACE investors. Notable that they did all this while achieving billions of dollars in concessions from the employee groups.

It's remarkable that the parts survived as they did... the amount that was stripped out is significant... That's the thing with airlines, the amount of money flowing through them is huge, lots of opportunity to divert it.

Onex isn't looking for a 20 year timeline here... we shall see what they pump and what they do.
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Transonic
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Re: ONEX plans

Post by Transonic » Sat Jul 20, 2019 10:31 pm

altiplano wrote:
Sat Jul 20, 2019 1:16 pm

Aeroplan? It's IPO was wildly successful and oversubscribed.
So if AC decided to spin off Aeroplan again in 2 years, would you expect it to be wildly successful and over subscribed? Probably not. Once bitten, twice shy.

I don't doubt that a very small minority benefited from the financial engineering of Robert Milton. What I doubt is that the market is gulable enough to fall for it again.
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altiplano
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Re: ONEX plans

Post by altiplano » Sun Jul 21, 2019 4:18 am

It's like buying Swoop tickets... I read an article recently that mentioned a passenger stranded by Swoop for the second time. They bought a ticket again because they saw an opportunity.

If you package the opportunity right, people aren't too concerned with last time whether it's saving a buck, or making a buck.

It certainly isn't as if Milton/Ace were the only equity firm to mine a company for value... perhaps the easiest comparison in our small industry, but it's done all the time in business.

We aren't talking about what AC is doing with aeroplan specifically though - and they're a publicly traded airline today, not an equity or hedge fund. Their leadership has a different duty to stakeholders.

Finding value and getting money by any means is what these equity firms do though. Onex are the only stakeholders now, as far as they're concerned.

What do you see Onex's timeline as?

Here's 97 companies Onex have had equity involvement with over the past 25 years. Vast majority of the investment periods are less than 7 years. I can count on one hand the number of companies it kept a stake in over 10 years.

https://www.onex.com/portfolio

Maybe Westjet will be different and a long term airline ownership is what Onex wants. But I don't think so... these guys want to get paid by any means they can engineer.

Stripping value is a proven method and would fit their typical timeline. Returning a lean lower cost operation to the market would be another. Growth would be another but where? and at significant cost and time. Accelerating a timeline for a true international, multi-continent widebody operation would take a lot of capital and a lot of risk exposure. Does Onex want to push all their chips in?

I guess we'll see..

Also for the sake of accuracy on statements in your earlier post.

Aeroplan: wasn't a hostile takeover.

Aveos: didn't go bankrupt because of delinquent AC payments.
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Re: ONEX plans

Post by cloak » Tue Jul 23, 2019 2:39 pm

And as far as cancelling flights and stranding passengers, every airline has had its share at one point or another, especially Air Canada, including very recently. This just to add perspective.

Now, speculation is easy and here's another! It is rather clear that WestJet group as a whole is worth more and is more than the sum of its parts. It's synergy! It is possible for Onex to buy more parts to consolidate the business, as they normally do, but not necessary as WestJet group has all the required parts. As for future plans: after the completion of the sale, likely long haul program will be expanded and expedited. With Onex's direct involvement in aircraft leasing, this will not be difficult. Another major area of growth would be in loyalty program, unlocking significant value that could equal the whole price tag. And last but not least, Swoop, possibly aligned with WestJet vacations will see significant growth. Mainline NB and Encore will see redistribution of assets to serve the joint venture with Delta where new cross border city pairs will be added. This will take 3-5 years to unfold, allowing for joint venture to consolidate culminating in Delta taking a stake in WestJet and then an IPO whereby Onex will unlock some of its added value while likely maintaining a minor (longer term) stake.
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Splash
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Re: ONEX plans

Post by Splash » Tue Jul 23, 2019 5:19 pm

Looks like it's a done deal! Not that anyone should be surprised.

https://www.bnnbloomberg.ca/westjet-sha ... -1.1291384
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Re: ONEX plans

Post by Dizzy D » Wed Jul 24, 2019 8:10 am

cloak wrote:
Tue Jul 23, 2019 2:39 pm
And as far as cancelling flights and stranding passengers, every airline has had its share at one point or another, especially Air Canada, including very recently. This just to add perspective.

Now, speculation is easy and here's another! It is rather clear that WestJet group as a whole is worth more and is more than the sum of its parts. It's synergy! It is possible for Onex to buy more parts to consolidate the business, as they normally do, but not necessary as WestJet group has all the required parts. As for future plans: after the completion of the sale, likely long haul program will be expanded and expedited. With Onex's direct involvement in aircraft leasing, this will not be difficult. Another major area of growth would be in loyalty program, unlocking significant value that could equal the whole price tag. And last but not least, Swoop, possibly aligned with WestJet vacations will see significant growth. Mainline NB and Encore will see redistribution of assets to serve the joint venture with Delta where new cross border city pairs will be added. This will take 3-5 years to unfold, allowing for joint venture to consolidate culminating in Delta taking a stake in WestJet and then an IPO whereby Onex will unlock some of its added value while likely maintaining a minor (longer term) stake.
Hit the nail on the head with this one. As far as speculation goes and the Onex track record, I think this may be how it all goes down. Onex has told us that they are interested in the growth of WestJet. I hope this is what it means. 🤞
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Re: ONEX plans

Post by Rowdy » Wed Jul 24, 2019 8:58 am

cloak wrote:
Tue Jul 23, 2019 2:39 pm
And as far as cancelling flights and stranding passengers, every airline has had its share at one point or another, especially Air Canada, including very recently. This just to add perspective.

Now, speculation is easy and here's another! It is rather clear that WestJet group as a whole is worth more and is more than the sum of its parts. It's synergy! It is possible for Onex to buy more parts to consolidate the business, as they normally do, but not necessary as WestJet group has all the required parts. As for future plans: after the completion of the sale, likely long haul program will be expanded and expedited. With Onex's direct involvement in aircraft leasing, this will not be difficult. Another major area of growth would be in loyalty program, unlocking significant value that could equal the whole price tag. And last but not least, Swoop, possibly aligned with WestJet vacations will see significant growth. Mainline NB and Encore will see redistribution of assets to serve the joint venture with Delta where new cross border city pairs will be added. This will take 3-5 years to unfold, allowing for joint venture to consolidate culminating in Delta taking a stake in WestJet and then an IPO whereby Onex will unlock some of its added value while likely maintaining a minor (longer term) stake.
:rolleyes: Keep dreaming! So far, all of your 'predictions' and 'speculation' have been very far from the real world happenings.
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Re: ONEX plans

Post by tailgunner » Wed Jul 24, 2019 12:52 pm

Cloak,
You seem pretty optimistic regarding Onex ownership of WJ.
Have you given any thought to the issue of pilot compensation. WJ pilots have enjoyed and benefited from a share purchase plan. It has formed a percentage of overall compensation since the inception of WJ. Some have done extremely well. Onex will probably not be offering the continuation of this program, as it dilutes their ownership. So, how does the reduction in compensation levels moving forward square with your optimism? I would be sceptical that Onex offers any type of pay raise or adjustment to the pilots to make up for the loss of the share purchase plan. It seems to me that Onex will simply wind up the program, keep existing salary levels,and try and move forward. If this occurs, then each pilot has essentially taken a 20 percent (or so) hit to their income.
Your thoughts?
Cheers.
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Re: ONEX plans

Post by x-wind » Wed Jul 24, 2019 3:15 pm

That's definitely not happening tailgunner.

Replacement plan is already in works. My question is what is the option going to be to reinvest with current ESP funds instead of receiving cheque from OneX.
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Re: ONEX plans

Post by DropTanks » Wed Jul 24, 2019 3:40 pm

tailgunner wrote:
Wed Jul 24, 2019 12:52 pm
Cloak,
You seem pretty optimistic regarding Onex ownership of WJ.
Have you given any thought to the issue of pilot compensation. WJ pilots have enjoyed and benefited from a share purchase plan. It has formed a percentage of overall compensation since the inception of WJ. Some have done extremely well. Onex will probably not be offering the continuation of this program, as it dilutes their ownership. So, how does the reduction in compensation levels moving forward square with your optimism? I would be sceptical that Onex offers any type of pay raise or adjustment to the pilots to make up for the loss of the share purchase plan. It seems to me that Onex will simply wind up the program, keep existing salary levels,and try and move forward. If this occurs, then each pilot has essentially taken a 20 percent (or so) hit to their income.
Your thoughts?
Cheers.
Well you seem kinda pessimistic regarding the Onex takeover. Truth is nobody has any idea what will happen for Onex to achieve the goals they’ve obviously set for themselves regarding Westjet. I tend to agree that the clear path to growth is via wide body expansion, not because that’s what every pilot wants but because there’s just nowhere else to grow on the narrowbody side. Don’t you worry about pilot compensation because as Cloak said the Esp continuation is pretty much sorted out. No pay cuts here man. We’ll be just fine. Fact of the matter is most WJ pilots woke up one Monday morning thousands of dollars (some hundreds of thousands) richer and continue to make out like bandits because of this deal.
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tailgunner
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Re: ONEX plans

Post by tailgunner » Wed Jul 24, 2019 6:18 pm

Droptanks,
I agree that those pilots that were holding a lot of 18$ shares have a windfall at 31$. However, that may be a fleeting one time event. If Onex, decides to play hardball on salaries, what are the options for WJ pilots? Widebody expansion, which the optimistic are heavily relying on,cannot make up enough growth to offset the potential loss of wages.Furthermore, widebody expansion is full of great risk and even greater expense. Perhaps Onex, will be wiling to spend the billions required to compete with a combined AC/AT, or perhaps they revert to the business plan that was delivering solid, and predictable positive returns. A combined AC/AT will have almost 130 widebodies.
Cheers.
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Re: ONEX plans

Post by lostaviator » Wed Jul 24, 2019 7:02 pm

tailgunner wrote:
Wed Jul 24, 2019 6:18 pm
Droptanks,
I agree that those pilots that were holding a lot of 18$ shares have a windfall at 31$. However, that may be a fleeting one time event. If Onex, decides to play hardball on salaries, what are the options for WJ pilots? Widebody expansion, which the optimistic are heavily relying on,cannot make up enough growth to offset the potential loss of wages.Furthermore, widebody expansion is full of great risk and even greater expense. Perhaps Onex, will be wiling to spend the billions required to compete with a combined AC/AT, or perhaps they revert to the business plan that was delivering solid, and predictable positive returns. A combined AC/AT will have almost 130 widebodies.
Cheers.
The fact they have still been pushing a head with the JV with Delta tells me they don't plan on reverting back to the old business plan. Delta would have pulled out if they thought this purchase was going to change things for them. Delta doesn't want to partner with 1996 WJ.

I think we (pilots) will have better luck negotiating with the company under Onex. They are smart business people who work/reason with numbers, not emotional leaders who toss chairs when they don't get their way.
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Re: ONEX plans

Post by DropTanks » Thu Jul 25, 2019 1:14 am

tailgunner wrote:
Wed Jul 24, 2019 6:18 pm
Droptanks,
I agree that those pilots that were holding a lot of 18$ shares have a windfall at 31$. However, that may be a fleeting one time event. If Onex, decides to play hardball on salaries, what are the options for WJ pilots? Widebody expansion, which the optimistic are heavily relying on,cannot make up enough growth to offset the potential loss of wages.Furthermore, widebody expansion is full of great risk and even greater expense. Perhaps Onex, will be wiling to spend the billions required to compete with a combined AC/AT, or perhaps they revert to the business plan that was delivering solid, and predictable positive returns. A combined AC/AT will have almost 130 widebodies.
Cheers.
I don’t understand where these lost wages are that you speak of. Nothings been lost, ESP has been replaced and stock options replacement is currently being negotiated. We have a binding labor contract and while the shape of the remuneration might be changing, the grand total is not. As far as the business plan goes I think it’s safe to say Onex is buying into the company because it sees growth potential, not because they want to do a 180 and continue with stagnating earnings in the 1996 WJ model.
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Re: ONEX plans

Post by JBI » Thu Jul 25, 2019 6:42 am

DropTanks wrote:
Thu Jul 25, 2019 1:14 am

I don’t understand where these lost wages are that you speak of. Nothings been lost, ESP has been replaced and stock options replacement is currently being negotiated. We have a binding labor contract and while the shape of the remuneration might be changing, the grand total is not. As far as the business plan goes I think it’s safe to say Onex is buying into the company because it sees growth potential, not because they want to do a 180 and continue with stagnating earnings in the 1996 WJ model.
Agreed completely. While anything could happen, this whole divide and sell thing doesn't make sense for the price that Onex is paying per share.

Lots of challenges still here and lots of changes on the horizon, and again, while anything could happen, I don't see this as a negative.
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