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Onex Corp. chief executive Gerry Schwartz, seen here at the University of Toronto in March, 2019, has long been fond of the aerospace industry.

Cole Burston/The Canadian Press

In 1999, when Onex Corp. chief executive Gerry Schwartz was trying to finesse a hostile acquisition of Air Canada with skeptical politicians, the CBC ran a story on the financier’s ties to federal Liberals that highlighted Mr. Schwartz’s brief flight in the backseat of a F-18 fighter jet.

The coverage bothered Mr. Schwartz, in part because it made him look like a boy infatuated with toys, rather than a serious investor. (Onex’s founder also felt singled out for taking part in an armed forces goodwill program, when a long list of CEOs and media types have taken part in similar military boondoggles.)

A Quebec judge ultimately nixed Onex’s planned takeover of Air Canada. Fast forward 20 years, and Onex is once again bidding for an airline, announcing a friendly $3.5-billion offer for WestJet Airlines Ltd. on Monday. Once again, Onex is taking pains to point out the deal is all about business, rather than an obsession with the aviation industry, which private equity investors traditionally avoid.

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Given Mr. Schwartz’s past success on aerospace investments, it’s an easy case to make.

There is no shortage of doubters on the wisdom of long-term investments in airlines. Private equity firms such as Onex typically look for businesses that kick out reliable cash flow. Reliable is not a term that’s often applied to WestJet or Air Canada: Carriers lose serious money when the economy tanks or fuel prices soar. In 2007, no less an authority than Warren Buffett said: “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

Views change over time. Mr. Buffett’s Berkshire Hathaway Inc. is now a significant investor in airlines. And the Onex team backing the 77-year-old Mr. Schwartz – effectively, his heirs at the firm – have done their homework on the WestJet bid.

In bidding for WestJet, Onex is wagering the company’s expansion plans will bear fruit over the long term. The private equity firm is taking advantage of the fact that public market investors with shorter-term horizons are disillusioned with the high cost and limited returns from initiatives such as the launch of international flights and a discount carrier. WestJet’s stock price has significantly underperformed rival Air Canada over the past three years.

Onex managing director Tawfiq Popatia kicked off this takeover by personally calling WestJet brass; he’s now the front man on the bid. If you’ve never heard of Mr. Popatia, you’re not alone. The last time he was mentioned in media was in 1996, when he won a student council seat at the University of British Columbia. The former Morgan Stanley banker has been at the Toronto-based firm since 2007.

Mr. Popatia’s responsibilities include overseeing Onex’s 35-per-cent ownership in BBAM Aircraft Leasing & Management, an investment that dates back to 2012. BBAM is one of the world’s largest aircraft financiers, with a US$26-billion portfolio; clients include WestJet, Air Canada and Sunwing Vacations Inc. BBAM owns 261 Boeing aircraft in its 512-plane fleet, so Mr. Popatia is unlikely to be surprised by problems in WestJet’s grounded 737 Max 8s or newly-introduced 787s.

“Onex has been an aerospace investor since the company was founded in 1984, across every business cycle,” said Mr. Popatia in an interview. He said Onex pays particular attention to domestic companies, and followed WestJet “for a very long time, and we have a lot of affection for it."

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Why does Onex have warm and friendly feelings for an aviation industry that’s been a serial destroyer of wealth? Consider how the firm’s past investments in the sector worked out. In 2005, Onex put US$108-million into a buyout of Spirit AeroSystems Holdings Inc., a former Boeing division. It sold the business nine years later for US$955-million. Onex owned airline catering firm Sky Chefs for 15 years and turned a US$99-million investment into a US$1.8-billion payday.

However, Onex also invested US$500-million in corporate jet maker Hawker Beechcraft Corp. in 2007, and lost the entire amount when the company filed for bankruptcy five years later. Onex was also fortunate to be part of a consortium that tried but failed to buy Australia’s Qantas Airways just ahead of the global financial crisis; the economic downturn would have brought down a debt-heavy airline.

Skeptics will point out that Onex is buying into WestJet, a classic trophy asset, late in the economic cycle, at a time when private equity funds are awash in cash and competing to put that money to work. Mr. Schwartz and his colleagues have heard similar critiques of Onex’s aviation investments in the past, and have consistently proven detractors wrong.

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