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What is going on with Sunwing? WestJet update

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TORONTO –

Air travel industry observers say federal regulators should watch closely for consumer price impacts as WestJet winds down Sunwing Airlines.

WHAT IS CHANGING?

WestJet completed its acquisition of Sunwing Airlines in May, and news broke this weekend that the larger carrier would shut down Toronto-based Sunwing in a bid to streamline its overall operations.

The development came shortly after WestJet said it would also shut down and fold in operations at budget carrier Swoop.

Calgary-based WestJet confirmed the changes to BNN Bloomberg, noting that travel tour operator Sunwing Vacations will continue to run as part of the WestJet Group.

“While we can confirm the eventual integration of Sunwing Airlines into WestJet, the anticipated timeline to do so has not been determined at this time,” spokesperson Julia Kaiser said in an email. “Our immediate focus remains on the integration of Swoop’s highly successful business model across WestJet’s operations.”

John Gradek, faculty lecturer in aviation management at McGill University, said he sees the possibility of steep price hikes on the horizon, particularly when it comes to Sunwing Vacations as it takes on an even more prominent position in the vacation-booking space.

“This has the potential to be a significant increase in pricing as a result of this consolidation,” he told BNNBloomberg.ca in a phone interview.

BNNBloomberg.ca has reached out to WestJet for further comment.

In the immediate future, the integration will mostly affect branding at the two airlines, Gradek said, “as the Sunwing colours and the Sunwing brand disappear.”

“It really is a way for WestJet to consolidate its operations and its overheads in managing an airline,” he said, noting that the recent contract agreement with WestJet pilots involving significant wage increases may have put pressure on the company to reduce other costs.

Gabor Lukacs, president of advocacy group Air Passenger Rights, said the consolidation is a mere technicality after the federal government approved the airline acquisition in March – a decision he described as a “terrible mistake” that will result in less competition, higher prices and worse service for passengers.

“It is the government’s decision that needs to come under scrutiny,” he said. “From WestJet’s perspective, they’re just doing what is logical and makes sense.”

In Lukacs’ view, the most significant anti-competitive damage to the air travel sector was done at that time of the federal approval, and the most recent news about the business integration was predictable.

“It may have some slight impact in terms of marketing techniques, but in terms of economic processes, in terms of air travel market, it has no bearing on it,” he said. “The moment Sunwing was purchased by WestJet, the competition ceased to exist.”

SUNWING VACATIONS

Sunwing Vacations will continue to operate under its own name, and Gradek said the success of that travel tour operator is likely what attracted WestJet to Sunwing in the first place.

Gradek said he expects WestJet might fold in its WestJet Vacations brand with Sunwing Vacations, as the latter is a more recognizable name that “has done a great job of positioning itself in the Canadian marketplace.”

“Sunwing will have a lot more opportunities to fly to different markets and increase their services, but the consumer will in fact be paying more for those services, because there’s less choice for the type of airplanes that are going to be required to operate those Sunwing Vacations holidays,” he said.

PRICES AND OVERSIGHT

The federal government attached several conditions to the WestJet-Sunwing sale, including rules about maintaining business presence in Toronto and Montreal, keeping up capacity on affected travel routes and protecting Canadian jobs.

Gradek said he is keen to see how the government follows up on a condition that calls for “supplying airfare data on vacation packages for monitoring of post-acquisition price trends.”

He said he sees a risk that Sunwing may aggressively go after Transat, its main competitor in the holiday tour-booking space, and said there needs to be oversight of “how much does the Canadian consumer have to bear in terms of the price increases” that may arise from the consolidation.

“To me, there has to be some statement from the federal government that they will keep an eye out on pricing, particularly for Sunwing Vacations in central Canada,” he said. “I don’t hear any noise coming out of Ottawa that they might want to do that.”

Lukacs would like to see the government acknowledge it “messed up” in approving the sale, and take other measures to improve competition such as allowing foreign airlines to transport more passengers within Canada.

A spokesperson for Transport Minister Omar Alghabra referenced the terms and conditions placed on the sale, and said any violation of those terms “would be a violation of the merger agreement.”

 

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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