ONEX plans

Discuss topics relating to Westjet.

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fishface
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Re: ONEX plans

Post by 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.
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Transonic
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Re: ONEX plans

Post by Transonic »

This is from FlyerTalk and worth sharing.

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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!
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Shinyjetsyndrome
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Re: ONEX plans

Post by Shinyjetsyndrome »

johnkruk wrote:
Fri Aug 02, 2019 2:36 pm
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 8)
Image
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Babar350
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Re: ONEX plans

Post by Babar350 »

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

Time will tell what ONEX wants to do.
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cloak
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Re: ONEX plans

Post by cloak »

Fanblade wrote:
Fri Aug 16, 2019 10:12 am
cloak wrote:
Wed Jul 31, 2019 7:38 pm
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.
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garfield
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Re: ONEX plans

Post by garfield »

They will sell back the company to AC in 2 years for 5.5B or more and the government will approve it!
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fish4life
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Re: ONEX plans

Post by fish4life »

garfield wrote:
Wed Aug 28, 2019 12:10 pm
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.
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WestJet Puke
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Re: ONEX plans

Post by WestJet Puke »

cloak wrote:
Tue Aug 27, 2019 8:52 am
Fanblade wrote:
Fri Aug 16, 2019 10:12 am
cloak wrote:
Wed Jul 31, 2019 7:38 pm
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.
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cloak
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Re: ONEX plans

Post by cloak »

WestJet Puke wrote:
Fri Aug 30, 2019 5:03 am
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?!
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Fanblade
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Re: ONEX plans

Post by Fanblade »

cloak wrote:
Fri Aug 30, 2019 10:10 pm
WestJet Puke wrote:
Fri Aug 30, 2019 5:03 am
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
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goldeneagle
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Re: ONEX plans

Post by goldeneagle »

WestJet Puke wrote:
Fri Aug 30, 2019 5:03 am
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.
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yycflyguy
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Re: ONEX plans

Post by 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.
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Freeport_Flyer
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Re: ONEX plans

Post by 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
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Sharklasers
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Re: ONEX plans

Post by Sharklasers »

Freeport_Flyer wrote:
Wed Sep 04, 2019 11:44 am
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.
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Hudson90
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Re: ONEX plans

Post by Hudson90 »

Sharklasers wrote:
Wed Sep 04, 2019 2:00 pm
Freeport_Flyer wrote:
Wed Sep 04, 2019 11:44 am
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.
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Sharklasers
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Re: ONEX plans

Post by Sharklasers »

Hudson90 wrote:
Wed Sep 04, 2019 4:42 pm

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.
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Hudson90
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Re: ONEX plans

Post by Hudson90 »

Sharklasers wrote:
Thu Sep 05, 2019 4:49 am
Hudson90 wrote:
Wed Sep 04, 2019 4:42 pm

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.
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Last edited by Hudson90 on Thu Sep 05, 2019 8:23 am, edited 1 time in total.

Hangry
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Re: ONEX plans

Post by Hangry »

Who’s Calvin?
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iflyroads
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Re: ONEX plans

Post by iflyroads »

Hangry wrote:
Thu Sep 05, 2019 8:14 am
Who’s Calvin?
The best friend of Hobbs.
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cloak
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Re: ONEX plans

Post by 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!
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Hudson90
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Re: ONEX plans

Post by Hudson90 »

cloak wrote:
Thu Sep 05, 2019 9:02 am
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!

Bingo..!!!!!!
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Tdicommuter
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Re: ONEX plans

Post by Tdicommuter »

Hudson90 wrote:
Thu Sep 05, 2019 9:49 am
cloak wrote:
Thu Sep 05, 2019 9:02 am
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!

Bingo..!!!!!!
Firstly the regulations surrounding ownership/foreign ownership of an airline are legit! All of us in Canada should respect that! Period. We do not want... Nor need foreign money propping up/supporting crappy airlines for their gains while we ALL suffer!!!

Remember that! More than we have against each other we have in common!!!

As pilots we should both celebrate both deals. ((Except cloak... He is a bottom feeding scab that deserves much worst than he (,she) will get)).

We all want growth... And money... And routes. ((Except cloak.. He (she?) Want contractions/crummy wages/ and the same routes)).

Competition bureau's job is not to stop the merger... Rather outline details to make it happen... Aka a Quebec job plan and routes... Etc.

Funding for Onex will be easy. Prove this deal has enough home dough to go.

Other than that just like Nancy Reagan said in response to Swoop looking for people.... "Just say no"

We ALL sick together we will be good. Best thing to happen to an air Canada pilot...a rich WestJet pilot!
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Hudson90
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Re: ONEX plans

Post by Hudson90 »

Tdicommuter wrote:
Thu Sep 05, 2019 8:56 pm
Hudson90 wrote:
Thu Sep 05, 2019 9:49 am
cloak wrote:
Thu Sep 05, 2019 9:02 am
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!

Bingo..!!!!!!
Firstly the regulations surrounding ownership/foreign ownership of an airline are legit! All of us in Canada should respect that! Period. We do not want... Nor need foreign money propping up/supporting crappy airlines for their gains while we ALL suffer!!!

Remember that! More than we have against each other we have in common!!!

As pilots we should both celebrate both deals. ((Except cloak... He is a bottom feeding scab that deserves much worst than he (,she) will get)).

We all want growth... And money... And routes. ((Except cloak.. He (she?) Want contractions/crummy wages/ and the same routes)).

Competition bureau's job is not to stop the merger... Rather outline details to make it happen... Aka a Quebec job plan and routes... Etc.

Funding for Onex will be easy. Prove this deal has enough home dough to go.

Other than that just like Nancy Reagan said in response to Swoop looking for people.... "Just say no"

We ALL sick together we will be good. Best thing to happen to an air Canada pilot...a rich WestJet pilot!
[/quote



Fair enough Tdicommuter, except for the jabs to cloak. He/she has their opinions. It’s been a great debate. I call it as I see it. In no way to harm the dedicated pilots at AC or any other pilot out there. Hoping for the best to all. Looking forward to the day I retire and flying Floats partime.
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TheStig
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Re: ONEX plans

Post by TheStig »

There aren't too many Canadian companies that face more scrutiny than Air Canada. The benefit of having to work within the ACPPA, comply with foreign ownership restrictions, operate as a Federally regulated private organization with employees who need to maintain different licenses, negotiate with 5 different unions, comply with contracts and regulations, etc, is that you get really good at figuring out when your competition is colouring outside the lines. Maybe they are maybe they aren't but it's a good opportunity to have the books of a private equity firm examined.

The only remarks you'll ever hear the CEO make with respect to competition is that AC needs a level playing field. Access to foreign capital is a huge benefit.

Out of curiosity, everyone seems to think that the competition bureau will place restrictions on the AC/TS merger, are there any airlines in the North Atlantic market who have such restrictions? Air France/KLM, BA/Iberia? Open Skies is open skies, I'm not sure why Canadians always feel the need to punish its successful businesses.
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cloak
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Re: ONEX plans

Post by cloak »

TheStig wrote:
Fri Sep 06, 2019 4:50 am
There aren't too many Canadian companies that face more scrutiny than Air Canada. The benefit of having to work within the ACPPA, comply with foreign ownership restrictions, operate as a Federally regulated private organization with employees who need to maintain different licenses, negotiate with 5 different unions, comply with contracts and regulations, etc, is that you get really good at figuring out when your competition is colouring outside the lines. Maybe they are maybe they aren't but it's a good opportunity to have the books of a private equity firm examined.

The only remarks you'll ever hear the CEO make with respect to competition is that AC needs a level playing field. Access to foreign capital is a huge benefit.

Out of curiosity, everyone seems to think that the competition bureau will place restrictions on the AC/TS merger, are there any airlines in the North Atlantic market who have such restrictions? Air France/KLM, BA/Iberia? Open Skies is open skies, I'm not sure why Canadians always feel the need to punish its successful businesses.
On your first paragraph, how was it then in 1999, to fend off the Onex bid, Air Canada secured financing from United and Lufthansa, were they within the limit?

As for your second paragraph, not sure about restrictions, but I expect to see conditions and concessions required to allow the AC/TS merger to pass. Among others, notable would be re-examining LHR slots, other EU routes rights and perhaps requirement to reduce capacity for a number of years to allow new entrants establish themselves, Aeroplan membership, and T3 gates at YYZ will likely have to be surrendered as AC consolidates operations.
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