The decision by Canadian North and First Air to abandon merger talks could end in reduced service to remote communities and underscores the need for government support for northern airlines, says industry analyst Rick Erickson.
“Governments – Ottawa and the territories – need to step up,” said Erickson.
Without the profits from the lucrative Yellowknife connection to southern cities, northern airlines can’t afford to subsidize flights to remote communities, Erickson said, repeating an argument First Air and Canadian North made when WestJet and Air Canada Jazz elbowed into the market.
Though service on the lucrative and hotly contested Yellowknife-Edmonton-Calgary run is unlikely to be affected by the failed merger, Erickson thinks there may be further reductions in service to small communities.
“WestJet and Air Canada won’t ever fly to Hall Beach or Cambridge Bay, but service to those communities is vital, not just for supplies, but for the psychological link with the South,” he said. “If Ottawa is serious about the North and sovereignty, it needs to get involved in more than just the food program.”
The decision to end plans for a single, strong northern airline surprised the Calgary-based analyst, but he suspects the plan was doomed from the beginning because of the difference in financial strength between the potential partners.
The airlines each claim around 1,000 employees, but Erickson said Canadian North has been strengthened in recent years through contracts with the petroleum industry to ferry workers to bitumen mines in northern Alberta.
Cutting back in YK
Both airlines have reduced their presence in Yellownife in recent years. Canadian North moved its head office south to be in closer contact with the petroleum industry and First Air shifted the base for its jet crews to Edmonton.
When they announced the merger, the airlines said it “would improve the sustainability of these critical Inuit birthright enterprises and would also create better air services and new economic development opportunities across the North.”
At the time, Erickson also expected the merger would reduce service to remote communities, and many read First Air’s decision to eliminate flights to Replulse Bay on October 1 as the first signal of life under the new northern airline.
Currently, Canadian North flies to 19 destinations in the Northwest Territories and Nunavut, via the southern gateways of Edmonton and Ottawa, and provides charter service to industrial customers in Fort McMurray.
First Air boasts that it has the only two civilian owned and operated Hercules cargo aircraft in Canada and offers scheduled, cargo and charter services to more northern destinations than any other airline.