Keep the competition going

In splitting its latest scheduled medical travel contract between Nunavut’s two dominant air carriers, the Government of Nunavut has sent out a strong message – airline competition is hear to stay.

The deal, signed just before Nunavut’s outgoing cabinet was to have been replaced by a new one today, divides the work between First Air and Canadian North on a 60-40 basis.

For Nunavut airline customers, this is good news. Canadian North now has a guaranteed share of north-south medical travel business on the busy Iqaluit-Ottawa route, strengthening their position in the Baffin region. In turn, Baffin residents may continue to choose between two viable airlines for north-south airline travel.

Not so long ago, that wasn’t the case. In the mid-1990s, First Air’s owner, the Makivik Corp., used its political muscle to help drive Canadian out of the Iqaluit-Kuujjuaq-Montreal route. First Air ended up with an unregulated monopoly on jet service between Iqaluit and the South.

But Norterra – owned on a 50-50 basis by the Inuit of Nunavut and the Inuvialuit of the western Arctic – bought Canadian North in 1998. Norterra’s Inuit board – along with numerous Nunavut organizations and residents – insisted their new airline return to the Iqaluit market to help reduce the cost of north-south air fares.

Though their financial records are not in the public domain, it’s no secret that in the years since, Canadian North has often lost money on its Iqaluit-Ottawa route while carrying out its mandate to provide competition. This week’s medical travel contract, however, will surely help put Canadian North’s eastern operations on a stronger financial footing.

Airline customers shouldn’t expect miracles, however. The northern airline business is a low-profit business with brutally high costs. Northern consumers will continue to pay those costs through air fare and cargo rates that are many times higher than in the South.

But the continued prospect of competition means that Nunavut’s two dominant airlines will continue to try to outdo each other through seat sales and charitable acts of corporate citizenship. And to encourage such competition is the best possible use of the Nunavut government’s purchasing power. JB