ONEX plans

[fishface]

For what it’s worth, the new operations control centre won’t be a new building. They will be knocking down walls and refreshing the space, moving the current office folk elsewhere.

[Transonic]

This is from FlyerTalk and worth sharing.

----------------------------------------------------------------------

Lots of armchair captains and investors in our midst!

Private Equity firms like Onex care about one thing only - making money. They make money by buying an asset as low as possible (the #1 generator of returns for PE firms) and selling as high as possible.

To get the lowest purchase price: good negotiations, relationships, and/or seeing value in something that the current owners don't see.
To get the highest selling price:
Improve margins through operational improvement: more revenue and spend less to get that revenue
Financially re-engineer the balance sheet: using cash flow to pay down debt. Onex is buying WestJet for ~$5b. If they use $500m of their money and $4.5b of loaned money ... and then sell the business for $5.5b (and paid off $1b of debt). The $500m they invested is now $2b ($5.5b proceeds less $3.5b remaining debt). Even though the company value is only +$500m
Multiple expansion: companies are often valued in public markets on a share price to earnings ratio. For an airline, PE firms would apply a multiple to operating cash flow (ie how much money operations make, irrespective of financing activities) to determine the valuation. WestJet's operating cash flow in 2018 was $700m. Therefore they paid "7.1x operating cash flow" ($5b / $700m). If other airlines have a higher multiple (i.e., you are spending more money to get a dollar of operating cash flow), private equity can try and improve this by showing to potential owners that the company has more growth ahead, will earn more money in the future, and then can be bought at a higher price.
As part of the deal, Onex will have figured out how much value will come from each of those 3 levers. Most of the concern in this thread comes from implementation of #2 - using cash to pay down debt, not investing in assets ... This is the "pump and dump" from the last 15-20 years ... which in my view is a dead-end for private equity firms. Therefore it comes from #3 - developing a better growth trajectory for the company, and #1 , running the business better.

For employees, I imagine Onex will keep some type of ownership scheme in place for them (give them shares in the private company, profit sharing, etc) since happy employees help you run the business better. In addition, there will be a new management team in place, and likely key roles 2 levels below the CEO will change. While Onex will sit on the board and take an active interest (weekly/monthly review of financial accounts), they won't run the place day-to-day. And they'll need the unions on board - fighting them hard won't help in my view

For customers, I imagine cheap unprofitable activities (eg YXU-YUL for $90) are gone. Waste and bad spending cleaned up. Decisions made on fleet and brands quickly. Potential M&A and rolling-up Transat. Decisions on fuel hedging. And of course finding ways to grow revenue through ancillaries & surcharges, higher ticket prices, monetisation of the frequent flyer/spend program. more WestJet credit cards, etc etc.

A valid strategy could to "be more like Spirit". They could also be more like Virgin Australia (multi-brand), or easyJet (low cost plus) ... or a true peer to full-service Air Canada.

Looking forward to seeing their thesis of how they will generate value to warrant the premium purchase price!

[Shinyjetsyndrome]

How long will ONEX give Boeing to get the MAX in the air before they make the switch to NEO ?? I’m sure AC is kicking themselves for going With Boeing !!!

If only it were that easy... The new livery would look great on the 320NEO though

[Babar350]

Maybe it is a good thing to not rely on one manufacturer...

Time will tell what ONEX wants to do.

[cloak]

I agree that Onex has big plans for WestJet. It has been after having a major airline for over two decades and at least an many continents. There is no money in selling WestJet group in pieces. More importantly WestJet group as a whole is worth much more than the sum of its parts.

There is no money in selling the pieces? The owners of ACE holdings walked away with billions during and after AC’s bankruptcy. A company that was technically worthless. Onex has always lost out on acquiring an airline to monetize until now. Watch for that word by the way or anything like it. Extracting shareholder value has been used as well. The lingo changes but the methodology doesn’t.

In order to do a “monetization” ala Robert Milton, the first thing you need to do is take the company private. Why? Because you need to rid yourself of the fiduciary duty to shareholders. This one detail should give you pause. If Onex was really about expansion, why go private? That’s counter intuitive to expansion and the billions in investment it will take....

Fanblade,

Of course you could be right and it will all come to pass as you say; at the same time, I don't foresee it that way. Let's just say Robert Milton was a different type of person, which is why he is not remembered well or often. One does not endeavor to repeat Genghis Khan if one knows about his so called "legacy". True that it is an extreme example, but only to drive the point home.

It is known that Onex has been after acquiring a major airline for over two decades and now it has an opportunity, oddly enough against the very airline that fought its first attempt. It is more likely that it is poised to show what it can do to make its new airline, at the cusp of its international growth, a truly international airline with multiple long haul routes, joint venture and partnerships, and then reap its benefits too. It is doubtful that it intends to come in to repeat the exact same "performance" of its nemesis (its Genghis!) to make a few bucks. After making lots of money, which Onex (and Schwartz) have, it becomes about the "legacy". Either way, we'll all know soon enough.

[garfield]

They will sell back the company to AC in 2 years for 5.5B or more and the government will approve it!

[fish4life]

They will sell back the company to AC in 2 years for 5.5B or more and the government will approve it!

That’s a very poor return in investment, especially for a private equity firm. Only 5% / year would not be acceptable.

[WestJet Puke]

I agree that Onex has big plans for WestJet. It has been after having a major airline for over two decades and at least an many continents. There is no money in selling WestJet group in pieces. More importantly WestJet group as a whole is worth much more than the sum of its parts.

There is no money in selling the pieces? The owners of ACE holdings walked away with billions during and after AC’s bankruptcy. A company that was technically worthless. Onex has always lost out on acquiring an airline to monetize until now. Watch for that word by the way or anything like it. Extracting shareholder value has been used as well. The lingo changes but the methodology doesn’t.

In order to do a “monetization” ala Robert Milton, the first thing you need to do is take the company private. Why? Because you need to rid yourself of the fiduciary duty to shareholders. This one detail should give you pause. If Onex was really about expansion, why go private? That’s counter intuitive to expansion and the billions in investment it will take....

Fanblade,

Of course you could be right and it will all come to pass as you say; at the same time, I don't foresee it that way. Let's just say Robert Milton was a different type of person, which is why he is not remembered well or often. One does not endeavor to repeat Genghis Khan if one knows about his so called "legacy". True that it is an extreme example, but only to drive the point home.

It is known that Onex has been after acquiring a major airline for over two decades and now it has an opportunity, oddly enough against the very airline that fought its first attempt. It is more likely that it is poised to show what it can do to make its new airline, at the cusp of its international growth, a truly international airline with multiple long haul routes, joint venture and partnerships, and then reap its benefits too. It is doubtful that it intends to come in to repeat the exact same "performance" of its nemesis (its Genghis!) to make a few bucks. After making lots of money, which Onex (and Schwartz) have, it becomes about the "legacy". Either way, we'll all know soon enough.

It all depends on what side of the coin you are on. There was a study that came out a few years ago that famously pointed out that 1 in 200 people in the world have Genghis Khan's DNA. Talk about leaving your mark.

https://bumpreveal.com/blogs/statistics ... escendants

Although we in the flight ops side tend to look at Milton in a very negative way, I always wonder how people at the executive level perceive him. He walked away from AC with hundreds of millions of dollars. Regardless of who your CEO is or what they are telling you, there is no doubt they know about him and probably hope to achieve that kind of payday. Does Onex thinks that is the kind of strategy that will get them the most $ for their WJ investment? I tend to believe that WJ is worth more in one piece and has a lot of potential when more international flying can be added to our network, but ultimately it is not my call.

[cloak]

It all depends on what side of the coin you are on. There was a study that came out a few years ago that famously pointed out that 1 in 200 people in the world have Genghis Khan's DNA. Talk about leaving your mark.

https://bumpreveal.com/blogs/statistics ... escendants

Although we in the flight ops side tend to look at Milton in a very negative way, I always wonder how people at the executive level perceive him. He walked away from AC with hundreds of millions of dollars. Regardless of who your CEO is or what they are telling you, there is no doubt they know about him and probably hope to achieve that kind of payday. Does Onex thinks that is the kind of strategy that will get them the most $ for their WJ investment? I tend to believe that WJ is worth more in one piece and has a lot of potential when more international flying can be added to our network, but ultimately it is not my call.

So...then in your estimation it's all about money?!

[Fanblade]

It all depends on what side of the coin you are on. There was a study that came out a few years ago that famously pointed out that 1 in 200 people in the world have Genghis Khan's DNA. Talk about leaving your mark.

https://bumpreveal.com/blogs/statistics ... escendants

Although we in the flight ops side tend to look at Milton in a very negative way, I always wonder how people at the executive level perceive him. He walked away from AC with hundreds of millions of dollars. Regardless of who your CEO is or what they are telling you, there is no doubt they know about him and probably hope to achieve that kind of payday. Does Onex thinks that is the kind of strategy that will get them the most $ for their WJ investment? I tend to believe that WJ is worth more in one piece and has a lot of potential when more international flying can be added to our network, but ultimately it is not my call.

So...then in your estimation it's all about money?!

Of course it is. It's business.

The point is no one knows if Onex's plans are to create, or extract value. Both are an option. Money will determine which route is chosen.

Only time will answer the question

[goldeneagle]

Although we in the flight ops side tend to look at Milton in a very negative way, I always wonder how people at the executive level perceive him.

Look where he is today, that'll tell you. Dont think the job of 'chairman of the board at United Continental Holdings' would go to somebody they didn't think highly of.

[yycflyguy]

Milton is not the reason for AC success today. As previous posters alluded to, he stripped value out of AC “unlocking shareholder value” was the buzz term. Calin Rovenescu, and more credit should really be given to Ben Smith for the turnaround. After rouge was forced on us, He was able to convince ACPA negotiators, MEC and the voting members that a ten year contract under present conditions was a good idea. I hate what happened to our contract but respect what their side was able to do. It was the framework for other union negotiations and the market loved that there would be labour peace. Unprecedented growth followed. Would have happened with or without our concessionary losses, IMO.

[Freeport_Flyer]

Whatever Onex's plans are, Air Canada is worried...

Air Canada Challenges Onex’s Takeover of Rival WestJet
https://www.bloomberg.com/news/articles ... al-westjet

[Sharklasers]

Whatever Onex's plans are, Air Canada is worried...

Air Canada Challenges Onex’s Takeover of Rival WestJet
https://www.bloomberg.com/news/articles ... al-westjet

You think Westjet wont be applying for intervenor status when the competition bureau begins its proceedings on the AC/TS merger?
AC isnt scared, this is how the game is played. If onex is outside the lines then they will have to fix it.

[Hudson90]

Whatever Onex's plans are, Air Canada is worried...

Air Canada Challenges Onex’s Takeover of Rival WestJet
https://www.bloomberg.com/news/articles ... al-westjet

You think Westjet wont be applying for intervenor status when the competition bureau begins its proceedings on the AC/TS merger?
AC isnt scared, this is how the game is played. If onex is outside the lines then they will have to fix it.

That’s the problem! Onex isn’t outside the lines. It’s nothing more then stall tactics from AC. Now the AC/TS merger, now that’s another story. Good luck with the competition bureau on that one.

[Sharklasers]

That’s the problem! Onex isn’t outside the lines. It’s nothing more then stall tactics from AC. Now the AC/TS merger, now that’s another story. Good luck with the competition bureau on that one.

Well there you go. The CTA can drop their due diligence and go home, Hudson90 says its all good.
You probably saved the tax payer millions.

[Hudson90]

That’s the problem! Onex isn’t outside the lines. It’s nothing more then stall tactics from AC. Now the AC/TS merger, now that’s another story. Good luck with the competition bureau on that one.

Well there you go. The CTA can drop their due diligence and go home, Hudson90 says its all good.
You probably saved the tax payer millions.

You crack me up. Do you really think the competition bureau isn’t looking at the Onex/WestJet acquisition through a fine tooth comb to make sure their within the Canadian regulatory guidelines. Onex is one of the biggest Equity firms In the world. I would give them a little more credit on their paper work habits after spending over five billion for WS. If their offside, be rest assured they will be called out. Question is why AC felt the need to put this complaint forward now ? I believe it’s a stall tactic.

Onex will, or should I say would have, acquired WS in late September. Mean while Calin is still trying to acquire TS but was given the brake Signal till May 2020. Hmmmmm.

[Hangry]

Who’s Calvin?

[iflyroads]

Who’s Calvin?

The best friend of Hobbs.

[cloak]

Air Canada's merger with Transat is unlikely to be approved without major changes and delays. It knows it and is now trying to delay the competition as well. Of course it has no merit. Not to mention that Air Canada and its CEO have history with Onex and can't stand the fact that it is going to be running the competition, with its deep pockets!