New fees mean “staggering” jump in air freight rates
Northern Canadians are about to face a potentially devastating economic shock: skyrocketing rates for air freight.
New user fees for air navigation services will mean a jump in freight costs for northern customers by as much as 30 per cent.
“The impact on the North as far as we’re concerned is staggering,” said Stephen Nourse, director of planning and projects for First Air, the North’s largest airline company.
“We don’t understand how the North is going to cope with some of these.”
The fees are an effort by a company called Nav Canada to collect the nearly one billion dollars it costs to provide air navigation services annually in Canada.
But northern airline companies and northern consumers can’t believe the proposed new rates.
Airline companies face charges based on weight and distance flown. This may be no big deal to southern airline companies, who may not see an increase in expenses at all, but northern airlines are facing increases of several hundred thousands dollars to several million.
North will be hit hard
That’s because northern carriers, on the whole, have fewer passengers, more freight, and fly longer distance to reach remote communities than their southern counterparts.
Nav Canada, the private corporation which provides the service, plans to introduce new charges over the next two years.
In November, charges will be levied against aircraft heavier than 5.7 tonnes aircraft larger than a Twin Otter. Additional fees for lighter aircraft will be introduced in November, 1998.
The system is now funded by Ottawa through transfer payments and taxes it collects on passenger tickets. By 1998 both the passenger tax and the funding will be phased out.
Bob Davis, executive vice president of Air Inuit, which services remote communities in northern Quebec, said under the proposed rates, the airline will pay about $600,000 this year, increasing to $1.2 million by 1998. Those figures, he says, don’t take into consideration fees for the lighter aircraft.
Air Inuit faces 250 per cent jump
Six of Air Inuit’s carriers will be charged the new rates this fall. Its other eight aircraft will be charged the new fees next November.
When all the new rates are in place, Air Inuit will see a 250 per cent increase from its present cost for the service.
Davis said the airline could increase ticket prices an amount equal to what customers pay as the passenger tax, but that would recover only about $460,000 in 1998, a shortfall of about $740,000.
“If we took that and applied it across our cargo and charter cargo rates, those rates would increase between 15 and 20 per cent,” he said.
As a director of the Northern Air Transport Association, Davis attended several meetings with Nav Canada representatives where northern concerns were discussed.
“The association was reassured that northern concerns would be carefully considered and accounted for,” he said.
Other northern airlines have similar concerns.
NWT Air, recently purchased by First Air, stated its freight rates would have to increase between 20-30 per cent.
First Air will be hardest hit
First Air, the largest airline in the North, will be hardest hit. Stephen Nourse, First Air’s director of planning and projects, said the airline, by 1998, will pay about $6.2 million to Nav Canada for air navigation services on its scheduled flights.
An estimated $2 million could be recovered, he said, without any noticeable increases on passenger fares, leaving a $4 million shortfall. That doesn’t take into account First Air’s many freighter and charter flights.
“It’s massive,” he said. “The other thing that really hits us is that freight in the North moves only one way. The airplane has to go two ways. It incurs just as much Nav Can fees going back empty as it does coming up.”
Basic food prices will go up
On a freighter flight from Ottawa to Iqaluit, the Nav Canada charges will add 13 cents a pound to delivered freight, Davis said, and result in an increase in food mail costs of about 20 per cent.
“We’re not talking a luxury item,” Davis said. “We’re talking basic food and supplies.”
Fifteen of First Air’s aircraft will be charged the new fees this fall and its other 15 next year.
Don Douglas, executive director of the Northern Air Transport Association, which represents northern airlines, said he met with a Nav Canada representative prior to the release of the proposed fees.
“It’s a bit of a surprise because we had a number of meetings with them and they’ve given us assurances that costs would not go up in the North.”
Airlines asked for delay
Douglas has asked Nav Canada to delay implementing the new fees until a Canadian industry-wide review of the system is done.
“They seemed to have agreed when we invited them to our board meeting that they had overlooked a number of things, so we’re optimistic they will change it,” Douglas said.
And though airlines companies are upset about the proposed fees, their customers will ultimately end up absorbing the costs.
Devastation for northern consumers
These increases will devastate northern consumers, said George Filotas, general manager of the Co-operative Federation of Northern Quebec. There are 12 co-op stores within the federation and two independents in Nunavik.
Filotas said he only heard about the new fees two weeks ago when he received a letter from Air Inuit outlining the rates.
“If there are no changes then it’ll have tremendous consequences,” Filotas said.
With an increase in freight rates of 15 per cent, Kuujjuaq-bound cargo from La Grande, the main launching point for north-bound freight, would increase from $3.09 a kilogram for general cargo to $3.55. Salluit-bound freight would jump $1.23 a kilogram from $8.17 to $9.40.
Filotas added it’s a bad time to put together a response to Nav Canada’s fees, because the stores are in the process of restocking their inventory with sealift cargo.
Nunatsiaq MP writes to Nav Canada
Nancy Karetak-Lindell, member of Parliament for Nunavut, along with northern airline companies, has written to Nav Canada asking for a re-evaluation of the fees.
“There is no other method of transportation in my constituency to travel from community to community or ship goods,” she stated. “There are no highways linking communities or any rail service.”
Karetak-Lindell said although the proposed fees are within the legal boundaries of the Civil Air Services Commercialization Act, they don’t comply with the spirit of the act.
She said she intends to raise the concerns at the August caucus meeting of the governing Liberal party.