Arctic airline merger would raise prices, reduce service, says Competition Bureau

Airline owners say report reflects “continued ignorance of northern businesses”

First Air and Canadian North jets are pictured parked at Iqaluit’s airport. The Competition Bureau said this week that the proposed merger between the two airlines is likely to create the “substantial lessening of competition” on many northern routes. (Photo by Sarah Rogers)

By Sarah Rogers

(Updated at 3:20 p.m.)

The Competition Bureau says the proposed merger between First Air and Canadian North raises significant concern over its potential to raise prices and reduce flight schedules in the North.

In a report prepared for and submitted to Transport Canada this week, the bureau said the merger is likely to create a “substantial lessening of competition” on many northern routes, including the Ottawa-Iqaluit and Trans-Arctic routes, as well as most routes within Nunavut’s Baffin and Kitikmeot regions.

In those areas, “the proposed transaction represents a merger-to-monopoly,” the bureau said, which could translate into less capacity for both passengers and cargo, fewer flights and an increase in air fares, the report said.

Even the expansion or entry by competitors into Nunavut’s highest-volume route, Ottawa-Iqaluit, is unlikely, the bureau found in its analysis, pointing to both Air Canada’s and GoSarvaq’s failed attempts.

Only the Edmonton-Yellowknife route would be spared from a lessening of competition, the bureau said.

After several years of talks, Nunavik’s Makivik Corp., which owns First Air, and the Inuvialuit Regional Corp., owner of Canadian North, signed a deal last September to create one “premier northern airline.”

The new airline is set to operate under Canadian North’s name, while using First Air’s livery, and would be headquartered in Ottawa.

The owners of First Air and Canadian North said in a joint statement that they were surprised and dismayed by the bureau’s findings.

“By neglecting to consider the overwhelming financial and non-financial benefits to northerners that will be generated, the Bureau’s assessment fails to recognize that a merger is necessary to sustain air travel to the North and relieve the substantial financial burden currently shouldered by Inuit Land Claim Organization owners,” the airlines’ owners, Makivik Corp. and Inuvialuit Regional Corp., said in a news release on Feb.26.

“This process is representative of southern-led institutions’ continued ignorance of northern businesses and we disagree with the Bureau’s decision to ignore the overwhelming and substantial positive impacts this transaction would have for northerners.”

The airlines called on the Ministry of Transport to look at the merger “holistically,” and to consider its role as a major economic driver as one of the North’s largest private-sector employers.

The Competition Bureau review was triggered in November, when the federal Ministry of Transport started its own review into the proposed merger.

To reach its conclusions, the bureau met with the two airlines to analyze their own ticketing and flight data, as well as other northern airline representatives, passengers, government officials and Inuit leadership.

It’s not the Competition Bureau’s first review of First Air and Canadian North; in 2017 the agency looked into the codeshare agreement the two airlines were involved in at the time, as well as allegations of predatory pricing along the Iqaluit-Ottawa route.

Though the bureau found there was evidence of predatory pricing, it found insufficient evidence to lay charges under Canada’s Competition Act.

The latest review is the first time that the bureau has provided a report to the Minister of Transport as part of a public interest review as it relates to national transportation.

Transport Canada continues to do its own review of the merger, the results of which will be passed along to the federal cabinet, which has the final say in the proposal.

You can read the Competition Bureau’s full report in English here and in Inuktitut here.

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(17) Comments:

  1. Posted by Peter on

    That is a given. When these two airlines started their code share scheme the prices went up, fewer flights and some schedules cancelled, job cuts. Service went down.

    So yes! Its obvious the level of service will go down and the price will go up.

    Now has the GN waited long enough before doing anything, their wait and see approach is useless.

  2. Posted by ANTI MERGER on

    One day , people are going to have to be millionaires to travel in the north

  3. Posted by NuDude on

    Great decision by the Board. Very insulting language by the airlines about southerners not respecting the North. Thats BS. These “northern” airlines gouge us and were going to do it worse after the merger. Thanks you competition Board from everyone in Nunavut.

  4. Posted by Justice! on

    Pretty ironic these two airlines killed their possible competition Go Sarviq with predatory pricing and now they can’t merge because they have no competition. Lol. Serves them right!

  5. Posted by Larry on

    I’m wondering how it works in the Kivalliq, they pretty much have only one airline in their region outside of Rankin, is the service better and cheaper or is Calm Air taking advantage? The other two regions have two airlines and now a possible merger.

    Also why does the Kivalliq not be more vocal with a monopoly in their region? Maybe it’s what they want?

  6. Posted by Inuapik on

    Nunavut is the poorest in all of Canada. Gouge the poor again. The airlines have no shame picking on the poor. Shame on them.

  7. Posted by Welcome to Larceny Air on

    Thank you to the Competition Bureau for pointing out what all of us Northerners have been saying for years after they started talking about this monopoly merger.

    Everyone of us are going to pay and suffer because these incompetent companies do not know how to manage their businesses properly, more for freight, more for food, more for tickets, more for health care travel, more for VTAs, more for staff travel, more for everything. All our organizations, hamlets, housing associations, local businesses and individuals, everybody is going to pay more.

    This statement here is absolutely unbelievable, “the Bureau’s assessment fails to recognize that a merger is necessary to sustain air travel to the North and relieve the substantial financial burden currently shouldered by Inuit Land Claim Organization owners.”

    So they are saying that the Inuit Land Claim Organization owners are so incapable of running a business they have no choice except to make a monopoly and drive the whole population into poverty? That is so stupid and arrogant.

  8. Posted by Northern Guy on

    The comments from the two airlines in response to the Competition Board’s recommendations were the epitome of arrogance verging on stupidity. How gullible do they think regulators are throwing around that well worn tripe about better service and lower costs, Everyone knows what happened during the “code share” days and that it didn’t result in either better service or lower prices. Monopolies never benefit anyone other than the monopoly holder. And then they topped off the farce by trotting out the land claims and the financial burden imposed upon the Inuit orgs. by running two airlines!!! Don’t make me laugh! If it is really that expensive to run an airline in the north either First Air or Canadian North (or both) should simply call it quits and vacate the field.

  9. Posted by Nunavik Inuk on

    I m not in favour of a merger , the priceses are already high , if , it goes ahead , they will go up and up. It will not benifit the average inuk anywhere in the north

  10. Posted by Gobble Gobble on

    So much trash from the airlines. The only way you’d both want to merge is if you can increase the profits you both make combined, right? Please, airlines, tell us what the “overwhelming and substantial positive impacts this transaction would have for northerners” would be. If you’re so confident, make a commitment. Release what your cargo rates would be. Release what your ticket prices would be. Otherwise, you’re not convincing anybody.

    They talk about neglecting to consider the overwhelming financial benefits. What financial benefits? We saw prices rise under code-share. In an atmosphere with no competition, a merged company would pretty much be able to name its own price for GN medical travel, duty travel, and all cargo rates, including those for groceries and other supplies.

    Financial burden shouldered by Inuit Land Claim Organization owners? How about this Jobie Tukkiapik quote from October 2017: “Due to solid returns from our financial portfolio, which resulted in a $3-million dividend from First Air, and a $2-million dividend from Air Inuit, we are proud to once again be in a position to allocate funds to all communities”. Really shouldering that airline burden, must be totally unsustainable.

    Non-Financial benefits? Consider its role as a major economic driver as one of the North’s largest private-sector employers?

    What non-financial benefits? You talk about overlapping routes, so I assume you’ll cut routes in a merger, meaning less flexibility for flights and cargo. Cutting routes means fewer employment hours. Merging baggage and cargo handling means fewer employment hours. Fewer jobs.

  11. Posted by John on

    The airlines’ comments really sums up the commercial illiteracy and arrogance of northern business owners. Expect the locals to be uninformed enough to believe you and then get bent out of shape when the competition board lets the cat out of the bag.

  12. Posted by NunavutTeacher on

    The airlines’ statement is such manipulative doublespeak — appropriating the anti-racism language of the marginalized (the Inuit of Nunavut) to try to portray this merger as somehow being a positive thing for the average person in the north. It’s disgusting and so hypocritical. I sure hope the Competition Bureau does more than simply talk, and actually dismisses this merger a second time — hopefully once and for all… Though that’s unlikely.

  13. Posted by Crystal Clarity on

    Have to wait and see what the federal cabinet will decide now I guess.

  14. Posted by Kenn Harper on

    A bad decision. I have always maintained that there is not enough business for two carriers in the east, but there is enough for one a half. They should merge, and fly full planes and be consistently profitable. Freight volumes will decline as North West Company cuts their teeth on hauling their own freight to the Kivalliq – which resulted in a huge revenue loss for Calm Air. Baffin is next. With reduced freight, passenger fares may have to rise if other efficiencies are not found. The obvious one is to merge. Every company has a goal to be profitable. Government should regulate the returns of the merged airline, like a utility

    • Posted by Paul on

      Air North please start frying from Yellowknife-Iqaluit-Ottawa!
      Westjet! Sarvaq try again please. We all know this merger will be terrible for service and price. Really not looking forward to it.

    • Posted by Northern Guy on

      Your post ignores one simple element of capitalist economics and that it is that the invisible hand of marketplace dictates price and availability. The only way a merged airline could work in the favour of northern residents is if it was nationalized (for lack of a better word) and its prices, routes etc. externally regulated. Pretty sure the Inuit orgs that own First Air and Canadian North wouldn’t be having anything to do with a scheme like that. There has never been a monopoly created anywhere in any free market system that did not harm the consumer in favour of the monopoly holder.

  15. Posted by yada yada yada on

    The communities in Nunavut are similar to Russian prison camps. For most people, who live on Social Assistance, the only way out of town is to go to jail or to go for medical. You are not allowed to save enough money to buy an airline ticket. You are effectively a prisoner.

    The economic colonialism continues.

    The last election was 16 months ago and the current government seems to be as clueless as the last one.

    Just 32 more moths until the next election in Nunavut. Time for those who want positive change to start planning how they will do it when they are elected.

    Failing to plan is planning to fail.

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