ONEX plans

[Cargo Fire]

[/quote]
ALPA is engaged. There is good opportunity for improvement and nurturing relationships.
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Great; if the Geniuses at ALPA are involved in determining our financial well being we are all F***ed. At least these "negotiations" will be another opportunity for them to all get together and drink and eat our dues away.

[altiplano]

KAG has it right. If anyone thinks they'll be eating Delta's pilots' lunch I think they'll be disappointed.

I'd guess you'll feed them at MSP/DTW/SEA... pick up a bit of feed into YYZ/YYC, but they have most of the international routes established already.

[fish4life]

ALPA is engaged. There is good opportunity for improvement and nurturing relationships.
[/quote]

Great; if the Geniuses at ALPA are involved in determining our financial well being we are all F***ed. At least these "negotiations" will be another opportunity for them to all get together and drink and eat our dues away.
[/quote]

If you don’t like the direction it’s going why don’t you volunteer for one of those positions?

[DropTanks]

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[plhought]

The way I read it is WJ shuttling the West to Minneapolis then jumping off to Europe/Asia on Delta widebodies. Kinda puts a dampener on this supposed WJ widebody growth? Also every extra dollar being made from all this expansion and Joint-Venture will now go into Onex's pocket rather than the original "owners" - the employees...

Sorry just stirring the pot

WJ will have 25 787s by 2030 easy. They'll be overcapacity across the whole market and I'll end up laid off and it'll just be Canadian all over again.

[Old fella]

“WJ will have 25 787s by 2030 easy. They'll be overcapacity across the whole market and I'll end up laid off and it'll just be CANADIAN all over again.”

Then a western based PM will lean very hard on ole Air Canada to do the preverbal buyout citing massive disruption should that western entity go down the tubes. In the interim while all is being discussed a new entrant pops up called ABSK jet with 3 used B737Max. Overcapacity and a recession looming severely damages AC’s bottom line as they struggle with the “new addition “ and they will be forced to seek assistance from the Canadian taxpayer. After said dust settles the new guy ABSK jet will have a bigger fleet with eyes on expansion while complaining the taxpayer sucking eastern elite AC is on the Government tit yet again. Western alienation will go to rhetoric levels because the oil sands billions dried up as nobody wants the stuff and billions again are needed to clean up the environmental mess. The forlorn Western PM will loose the upcoming election as rest of the country got mightily pissed off , the loss will resemble a ‘93 Kim C rout and a new young female Grit PM from Ontario will be given the keys to the new house at 24 Sussex. AvCanada will still be around and a new crop of bitchers will take the reigns and there will be multitudes of threads each 40 pages long on this subject.

Only positive thing for me is I will be pushing up daisies - no doubt a good thing.

[johnkruk]

Everyone seems to think that companies can just “switch” to the neos... its not like buying a car where airbus has 1000 neos sitting on the lot in case someone wants to buy a few

Not switch , but maybe start a shift towards Airbus , say the MAX isn’t flying this time next year you think perhaps ONEX which owns leasing companies will start to push some Airbus Westjets way ??

[lownslow]

Not switch , but maybe start a shift towards Airbus , say the MAX isn’t flying this time next year you think perhaps ONEX which owns leasing companies will start to push some Airbus Westjets way ??

Doesn’t ONEX own plants that build parts for Boeing? In any case, I would think leasing some late model (but not MAX) 737s would be cheaper than adding a new type to the fleet with the resulting training of personnel, managing another type, various added inefficiencies from doing that, and so on. For a span of a couple years just flying a slightly less fuel efficient plane may be the best route and if for some reason the MAX never flies again they’ll still likely get big discounts from Boeing to help smooth it over. So more Boeings. It’s probably a great time to get your type rating on the 737 from that kiosk at the mall, or however they do it.

[JBI]

Doesn’t ONEX own plants that build parts for Boeing?

Not anymore. Onex purchased Spirit AeroSystems in 2005/2006 and after a number of mergers sold it in 2014 to turn it into a publicly traded company. For what it's worth, Yahoo Finance outlines that:

The Onex Group acquired Spirit AeroSystems from The Boeing Company for approximately $950 million in June 2005, investing approximately $375 million of equity. Over the course of the nine-year investment, the Onex Group has received aggregate proceeds of approximately $3.2 billion, resulting in a multiple of capital invested of approximately 8.5 times and a return on investment of 201% per annum.

Not too bad an investment I'd say.

Onex does still have a 35% ownership in BBAM:

BBAM is the leading provider of asset origination and management services in the aircraft leasing industry. BBAM had over $27.1 billion of assets under management as of June 30, 2019.

So, how this relationship will play out is anybody's guess. However, parting out the pieces doesn't seem to be how Onex makes it's 200% ROI.

[FenceSitter]

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.

Hahaha...pretty soon those chairs will be too heavy for Clive to throw around, if they aren't already.

[Jack Klumpus]

Someone needs to break it down for me and explain what's the difference between this joint venture and a codeshare.

These are all relationships, so I look at them as such;

- interline: dating
- codeshare: engaged
- JV: married

[Fanblade]

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.

Step 1). Create a holding company. Take the whole enterprise private.

Step 2). Once private split WJ up into separate companies. WJ mainline, Encore, WJ rewards, WJ Vacations, Swoop ect all under the holding company.

Step 3). Put up for sale all the separated pieces with the exception of WJ mainline. Saddle WJ mainline with long term contracts with these entities well above the going rate. These long term contract drive up the valuations on the entities being sold. Sell/IPO the entities. The sale proceeds go directly to the holding company and its owners. Huge profits here.

Step 4). When the sales of separated entries is complete. Any unsold entities move back under WJ mainline. IPO WJ mainline. More profits to holding company.

Step 5). Holding company pays out to owners, on a preferred tax basis to boot, and shuts down.

This took Milton about 5-6 years start to finish. As much as he is reviled by AC employees, he is admired in other circles.

The good: You will still have a job.

The bad: You can’t do anything about it once they go private. Multiple unions at AC went to the courts to stop the monetization to no avail. Every AC union attempted strike but was prevented by government. Our pensions were failing while the monetization was going on. Lobbying efforts created sympathy but zero action on new laws or intervention. The holding company will depart with a truck load of cash and leave the entities that are left to recover/sink/swim on their own.

The Crazy: After doing nothing to prevent the extraction of billions from AC’s carcass, the government of Canada had to give AC a public loan to keep them afloat!! To this day nothing has changed with regard to legislation.

But that’s not the end. Then comes the hangover.

You will then have a decade, in AC’s case even longer, as AC started to drown under the contracts with its former entities. The former entities themselves demanded contract extensions in exchange for limited relief. Plus AC had the added issue of addressing the pension shortfall. The pension was dealt with on the backs of employees. The former entities were dealt with by slaughter with the exception of Jazz.

15-17 years start to end of hangover.

[lostaviator]

I think everyone who thinks the transition from a ceo who spends his time teaching us native New Zealand words to a private entity firm is good for us is going to be disappointed.

It’s going to be a challenging few years.

[seriousflyer]

.

[Fanblade]

I understand you have experience with this type process, but onex buying westjet is materially different than the experience you shared.

1)Onex is not acquiring a bankrupt company.
2)Onex would have the AC and Ace holding data to reflect and learn from on how not to repeat what happened in Canadian aviation's past. They very well might, but alot of fundamentals in aviation (planes, technology, fuel prices, pilots) has changed since then, which would make the acquisition process and expansion of westjet have alot of tailwinds and not headwinds.


Deal is rumored to close in October/November. When Onex officially owns Westjet, onex will release their intentions..
Doubling the size of westjet operation center has already been announced and construction is imminent.

Seriousflyer,

My intention was only in response to Cloaks naive remark that there is no money in monetizing WJ. There is money in it. To say otherwise is placing your head in the sand.

But your right. The key difference between AC and WJ is purchase price. It’s actually a very large difference.

Hopefully, as you point out, they see more money elsewhere. I just don’t get the going private and expanding rapidly mantra. It doesn’t make much sense to me.

Between purchasing two widebodies, lounges, gates, slots, marketing, training, initial startup losses, a new route is approaching a billion dollar investment these days. How many billion dollar investments do you think Onex will realistically make as a private company? That isn’t their MO either.

In response to what I highlighted above. I forgot to mention ACE took the buildings and leased them back to AC and its former entries. They made money on the property management side too. Breaking ground on a new building doesn’t tell us anything about what Onex’s intentions are.

You must remember companies like Onex don’t view AC monetization as a mistake. To them it was a multi billion dollar success. In their defence they would state they turn tired, cumbersome, lost their way, companies into lean mean machines. They are kind of like the car wash for industry. Yeah! As such they provide a valuable service to our economy. If they just so happen to make money cleaning industry, good for them. Everyone deserves pay for their contribution. Besides I own the company and its none of your business what I do with it.

Look at AC currently or even Cineplex. Maybe they are right.

[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.