The federal Competition Bureau has raised significant concerns about WestJet Airlines Ltd.'s proposed acquisition of Sunwing Vacations and Sunwing Airlines, saying the deal will likely result in higher prices and decreased service for Canadians.

In a report delivered to Canada's transport minister on Wednesday, the regulator said eliminating the rivalry between the two companies is likely to result in a substantial lessening or prevention of competition in the sale of vacation packages to Canadians.

"The proposed transaction will result in one of Canada’s largest integrated tour operators being acquired by one of its primary rivals in the provision of vacation packages," the report stated.

"Overall, WestJet and Sunwing account for approximately 37 per cent of non–stop capacity between Canada and sun destinations and 72 per cent of non–stop capacity between Western Canada and sun destinations."

WestJet announced a plan in March to buy Sunwing, a move that would bolster its holiday tour business. Financial terms of the agreement, which would see Sunwing's shareholders become equity holders in the WestJet Group, were not disclosed.

In its report, the Competition Bureau noted that a merger of the two carriers would create a monopoly on 16 routes between Canada and Mexico or the Caribbean, and would lessen or prevent competition for the provision of vacation packages on 31 total routes between Canada and Mexico or the Caribbean.

But in an emailed statement Wednesday, Sunwing spokeswoman Melanie Anne Filipp said the routes identified as concerns are predominantly in Western Canada and account for a very small portion of Sunwing's operations — just over 10 per cent of all seats — and are primarily seasonal routes.

"Also of note, Sunwing no longer operates six of the routes mentioned in the report," Filipp said. "We remain confident that this transaction is good news for Canadians."

In a news release, WestJet said the proposed Sunwing transaction is a central piece of the Calgary-based airline's commitment to prioritize leisure and sun travel from coast to coast and increase affordable air and vacation package offerings for all Canadians.

Transport Canada is also conducting a public interest review of the proposed transaction. The final decision regarding the deal will be made by cabinet, based on a recommendation from the minister.

WestJet said that decision will consider additional factors, including WestJet's promised preservation of Sunwing’s brand, its commitment to maintain Sunwing’s Toronto and Montreal offices, new flying that will be created by retaining Sunwing’s aircraft in Canada year-round and the resulting new employment opportunities. 

“We thank the Competition Bureau and welcome their report,” said WestJet executive vice-president Angela Avery in the release. “We look forward to bringing this transaction to life for the benefit of Canadian travellers, communities and employees.”

The companies have said they expect the transaction to close by spring 2023, pending remaining regulatory and government approvals.

This report by The Canadian Press was first published Oct. 26, 2022.