Nunavut is paying to keep planes in the sky
Government of Nunavut is spending $2.25M per week for airlines to continue as essential service
The Government of Nunavut is paying $2.25 million per week so Calm Air and Canadian North continue to provide basic services to Nunavut. (File photo)
The Government of Nunavut is paying airlines for empty seats to help ensure flights continue during the COVID-19 pandemic.
The GN has been giving Calm Air and Canadian North $2.25 million a week since March 30.
“We were put between a rock and a hard place, and we had to come up and help out the airlines so they can keep flying,” said Premier Joe Savikataaq on Wednesday, April 15, at the GN’s regular COVID-19 update.
Airlines are an essential service, said George Hickes, Nunavut’s minister of finance and health.
“When the airlines were coming to us and enquiring on how we could assist them, their next option was to further reduce their schedule,” Hickes said.
The reductions in services the airlines were going to have to consider without financial help were “unworkable,” Hickes said.
“We still have essential workers moving around, we still need to get samples down to the lab, so any further reduction in the schedule is unacceptable for Nunavummiut right now,” he said.
Dan Valin, the manager of marketing and communications for Canadian North, said the airline will continue to operate as an essential service throughout the pandemic.
He said the GN needs Canadian North’s services to function, and the airline needs the money it’s getting from the GN in order to keep offering its services.
“It’s a dance, it’s a partnership,” Valin said.
The GN plans to provide the airlines with these payments until the end of April and then reassess. Hickes said the spending had to be approved through the GN’s financial management board, of which he is the chair.
He said he approved the money through a special warrant that gives him the authority to bring it before the legislature later.
The federal government announced $30.8 million in funding on Tuesday, April 14, for Nunavut, plus up to $5 million for Nunavut’s airlines.
Nunavut’s share of the federal airline subsidy, to be paid in instalments over the next few months, will go directly to Calm Air and Canadian North, said Savikataaq.
With this funding boost, Hickes said, “it is still expected that our current obligations [to the airlines] will still be there.”
He added that he is in communication with the federal minister of Indigenous services, Marc Miller, about further help for Nunavut’s airlines.
Hickes said the money for the airlines is the only COVID-related spending that the GN has approved through special warrant.
Because the new fiscal year has begun, departments have available budgets that the GN has been shifting around, Hickes said. For example, the Department of Education has a budget for school food programs. The GN was able to use that money to help Nunavut Tunngavik Inc. deliver food to children who are currently out of school.
The GN said that it has spent $20.4 million on the COVID-19 response to date. That includes $2.25 million per week for the airlines since March 30 and $1.9 million up to April 14 for hotels and security at its southern isolation hubs.
In the meantime, Hickes estimates that the GN has lost between $20 and $24 million in revenue so far because of the pandemic.
Why can’t the monopoly scale down their aircraft size, instead of Boeing 737’s? Their financial statements should be interesting.
Because the communities the 737s fly into transport cargo on them that would require multiple small aircraft flights just to equal it or won’t even fit on the smaller planes. They also transfer cargo that are then distributed to the smaller communities. Cambridge Bay, Rankin, and Iqaluit stopping the big planes from flying in means that other communities get even less than they do now.
They also use Cargojet to ship up cargo, they could use some of their 737 just for cargo and upgrade their jets for passengers only and use smaller more efficient jets.
The embraer 175 and the A220 are beautiful little jets, much more efficient.
And a lot more expensive to buy. And what do you do with the asset that you already own and are still paying for to the banks?
.
Plus a new aircraft means expensive retraining for flight crew, maintenance personnel, plus acquiring new spare parts, etc. Again what do you do with the spare engines and other parts that you have on hand, sell them for ten cents on the dollar?
.
Also I suspect that the Embraer and Airbus cargo capacities suck big time. Not a problem if you just want to live off caribou…..well wait a minute, that might not work either.
Old Trapper so you are saying it can’t be done? GN with the amount of money they are spending, giving Canadian millions per week, should be able to purchase a smaller jet like the Embraer 170 just for passengers, leave the cargo for Canadian to look after.
GN wastes enough money at least this will be more comfortable to travel with new and more efficient planes.
Or maybe Air Canada can start up its flights to Nunavut again with their smaller jets.
Flyer, I’m not saying that it can’t be done. I actually toyed with a “what if” scenario of replacing the 737 with CRJ’s back in the day. It all made sense except for the fact that the CRJ’s were too expensive and didn’t have the range to carry a full payload on most of the stage lengths in the north.
.
Don’t forget that you need fuel for your destination, closest IFR alternate, plus 45 minutes. (Not sure what good the 45 minutes may do in the north where the next airstrip may be an hour and a half away, but that’s the rule).
.
When AC was doing the Vancouver – Yellowknife direct flights with the CRJ’s they were payload limited, that will give you an indication of the range limitations.
.
There’s also the question of cargo, which is vital. If you run a separate cargo operation the best you can achieve is a 50% payload. If you go the combi route you may get up to 75%. It makes a huge difference in your profitability.
Oh, and you can certify the E170 to operate into Pang? Pond Inlet? Any of the gravel strips in the north? Go ahead and buy an E170 – you’ll be flying it between Iqaluit Rankin and Yellowknife and nowhere else.
The reason they use the old 727-200 combi airframes is because Cambridge Bay and Kugluktuk don’ t have a paved runways, and the newer models have jet intakes too large and too low to the ground to prevent them from sucking up a huge amount of gravel. There’s also not enough passengers (in Nunavut) outside the Yellowknife-Rankin-Iqaluit and Iqaluit-Ottawa routes for passenger-only flights on aircraft that big.
I think that you mean 737-200 not 727-200, which have been retired for a decade. Wikipedia does show that there are 2 737-200’s left in their fleet, I believe that these would be ex Canadian North aircraft as I think First Air retired all of their 737-200’s.
.
Most of the 737’s in their fleet are 300’s and 400’s.
Sorry for the typo…737-200s is what I meant.
The A220’s and Embraer 175’s are much larger than the 737-200’s well efficient yes but they are unable to land on the gravel strips that the -200’s operate on and cannot carry as much cargo or be configured into Combis like the 737’s
It’s my understanding that Canadian North is already doing this. they have straight passenger jets and fixed combi’s.
.
It is a time consuming and expensive process to get approval to do initial modifications to passenger aircraft to change them into combi aircraft. Both Canadian North and First Air spent millions to do this years ago as there was not enough traffic for all flights to operate as straight passenger or cargo.
These planes (737 Combi) are reconfigurable for Cargo and freight thru the use of the removable seating and moveable Bulk heads.
I have personally flown in flights as a passenger that had a new 3/4ton truck (I believe a Ford F250) loaded thru the side cargo door in the front of the plane.
They fly regular routes over long distances without refueling and must be capable of being rerouted to often distant alternate airports.
The landing Gear on most of these planes is specially configured to land on snow covered an/or gravel runways.
They carry all the fresh food which mostly just be protected from freezing and many flights that are so long from start to finish that they may require multiple crew changes.
There is not much choice but to bailout these airlines even with their monopoly in Nunavut.
Saying this, isn’t time for the Nunavut government to start looking into buying its own airline! Or getting share in Canadian North?
The GN spends enough money in a year for medical travel alone and that does not include GN staff travel.
One or two jets to start off A220 and go from there. Even just for the hubs to the big cities.
What are your thoughts on the millions spent each week and more each year?
It is my understanding that the regional Inuit organizations, QIA and KIA x2 have had many opportunities in the past to take up an equity position in what was then First Air, and I would assume that Canadian North was also looking at the same sorts of deals.
.
The GN has always maintained that it prefers competition in the airline industry and has worked aggressively through it’s Medical Travel and Duty Travel RFP’s to generate competition, going so far as to divide up the pie between the airlines in spite of options submitted to reduce their costs by going with just one carrier.
.
We know that this strategy has not been successful as it forced both Canadian North and First Air to lose money for many years which led to their merger.
.
The GN, and the GNWT, really do need to reconsider their approach and should look at an equity stake in Canadian North, thereby getting seats on the Board of Directors and being able to have input into decision making.
.
I have argued in the past for the airlines in the north to be treated as a quasi utility/crown corporation. Maybe Covid-19 will be the impetus needed for governments to consider this or other similar ideas.
Old Trapper, I agree with you, GN should be looking at ways to get in with Canadian North or even start a airline as a crown Corp.
like one of the comments about how GN runs things, I do have concerns too, GN does not have a great track record of being effective or efficient with the funds they spend but I think it would still be better to buy into Canadian North or start a airline of their own instead of shoveling funds into a airline and keeping the status quo.
Tom,
Have you ever seen a government run anything (especially an airline) do anything better or cheaper than the private sector??? ,
Look at the American health care “system” and get back to me on that. Also Canada Post. Emergency services. The list goes on. Governments can operate a necessary service at break-even or even a loss. The private sector will not, and cannot, for any length of time.
Police forces and fire departments to give another couple of examples.
.
I’m in constant awe of the way the MAGA crowd is so opposed to “Socialism” yet I don’t think that any one of them contracts with a “free enterprise” fire department. Surely that’s a market opportunity for one of them.
.
Now I grant that not all government services work well. I know that my sister bitches about Nova Scotia’s health care all the time, while I haven’t had any issues with my clinic and doctor (I’m in Ontario at the moment). But overall I would much rather have the Canadian health care system, but we need to think about adding Pharma and Dental as well.
.
As for running an airline, many nations have tried owning their flag carriers. I have yet to see one that was successful in the long term, especially without the government supporting it from time to time. I stand to be corrected (Singapore Airlines maybe?).
There is a northern example of an essential transportation service that has been operated both as a private business and a Crown corporation. NTCL operated as a private business from 1904 to 1936 before it was nationalized. It operated as a Crown corporation from then until 1985. It was then privatized again and then became insolvent in 2016. Since then, it is back to being a form of Crown corporation again.
I do not see any particular magic in whether such services are run publicly or privately. What is true about the transportation sector is that it is not hugely profitable. This is true no matter who runs these enterprises. Net margins for air and sea services are relatively low compared to other business types and even trucking. If a northern airline were to be operated as a Crown corporation, there would have to be clear recognition of this basic fact. The financially illiterate think companies like Canadian North are stuffing their pockets with cash. The truth is they are barely making by.
There would have to be strong firewalls between the Crown corporation and politicians who continually hear gripes about the high cost of freight and passenger service (which is actually close to the true cost) from the public.
It would be almost too tempting for a politician to direct the Crown air service to lower rates to those that are unsustainable. There is no such thing as simply operating a Crown corp at a loss. In such situations, tax dollars are taken from another area to plug in the gap. Then we would end up in a situation where we would be subsidizing our weekend getaways to Edmonton at the expense of things like our schools and health centers. This would be pretty stupid as a matter of public affairs.
Keith,
ummm we are talking about the GN running the airline. The GN…think about that and get back to me.
It makes sense to the GN to buy useless tickets instead of buying shares or giving these guys a loan?
.
The GN should own part of the airline (i.e. not run it – god help us) because it is so dependent on it.
As my tax dollars are flying away, why did this government buy some shares and held them with their development corporation. At least get some return in better times ahead, as opposed to just giving them away.
Since were just naming all kinds of a/c. might as well try get the biggest of them all! Buy an Antonov. Bring all essential needs in one trip!
Too old like the 30 plus year old 737s, go with a smaller new jet like the above mentioned.
The A220, Embraer models, and the RJ’s are all narrow body aircrafts all for only carrying passengers.
Let’s compare apples and apples. Lets say 737-400 vs E175/A220. The 737 has a max takeoff weight (MTOW) of 68,000 kgs. While the E175 has a MTOW of 40,370 kgs and 67,585 kgs for the A220
The Problem with E175 and A220, no combi conversions. Plus they are a very narrow body aircrafts. Even if you convert them to combi, you may not get the volume you need to make a profit.
That’s right, we are not looking at combi or anything that takes cargo, Canadian North will look after cargo for the communities, what we want is smaller newer more economical and efficient planes just for passengers.
Canadian North can continue with their cargo contracts.
E170 would be a comfortable plane to ride on. 220-100 too. GN pays a lot each week, month and year for flying medical and staff. They might break even for flights from Iqaluit to Ottawa and Rankin to Winnipeg.
Well you are not going to get the E175 or A220 into most of the communities in Nunavut as outside of Rankin Inlet and Iqaluit they all have gravel airstrips, and neither of these aircraft are certified for gravel.
.
That means that you can’t get the utilization needed out of the E175 or A220, also you would end up with just one or two aircraft, meaning that the cost of spares is very high.
.
That leave the ATR’s and DH8’s as the planes to use.
Also, a lot of people are failing to realize that there is no fuel in most Kivalliq communities with the exception of Coral, Rankin and YBK. Not to mention the gravel runways and lengths are so restrictive, good luck landing anything on those.
Just leave for the hubs, Iqaluit, Rankin and Cambridge. Canadian can still fly into the communities.
What’s the cost of a 737-400? To maintain them and fuel cost?
million per week seems pretty high to keep these inefficient planes going.
Well a 737-300/400 like Canadian operates holds 20,000L of fuel, and the GN price is $1.50 a litre, so $30k for fuel, then you have to pay the crew. Pay for the meals, people to load it, maintenance on the aircraft etc. From the Good year website, tires are $2,600USD each x 6, so $15k USD for a tire change, and they’re good for roughly 200 flights. Oh, and when the landing gear needs changing? You’re looking at $40,000 plus the cost of the overhauled gear. Engine overhaul? Millions of dollars
This will give you the idea of the costs of things, and keep in mind that’s just in labour.
It is terrible idea for gov. To own airlines. It is good they can own specific purpose planes like for police work, climate or weather research.
Politicans and their husbands would take too much advantage of gov. Property.
Can be run as a crown Corp, government employees have to follow the rules just like everyone else.
Will the airline allow for every Nunavut resident to have a discounted fare south or to other Nunavut community to compensate for our tax dollars being used to save them at this time?
Instead of helping out, Canadian North is gouging the territory. First Air paid its CEO a $7 million bonus and stopped publishing that because of the outrage. Create a GN airline just like Northern/Northmart/NorthWestCo did. Their accountants did the math and it saves money. Canadian North, don’t let the door hit you on the way out.
Extortion, your numbers are WRONG!
.
Total bonuses paid out to all Board members was $1.5 million and Pita Aatami as Chairman of the Board was paid $600,000 which was the largest amount anyone received. George Berthe received $250,000 and other Makivik board members received $5,000 each.
.
Now the $600,000 might seem like a lot of money but you have to consider that it was for his 15 years of active oversight as Chairman and in recognition of the unpaid time he spent working on behalf of the company.
.
I know for a fact that he spent many days, weeks, and even months each year representing First Air at trade shows, events, and lobbying provincial, territorial, and federal officials. He did not draw any salary from First Air during this time so if you break it down he was paid roughly $40,000 per year for his leadership, which was a bargain.
.
Let me ask if there would have been so much outrage if Mr. Aatami had been paid $40,000 a year as Chairman of the Board of First Air? I don’t think so.
.
If you don’t believe my numbers, just Google them, they were printed in Nunatsiaq News many times. Stop making things up!
You are correct, mixed that one up with Lockheed.
Interesting is the airlines get federal subsidies and instead of putting all of it into client economics, they are paying board members bonuses with taxpayer money meant for subsidizing air service.
From Macleans:
“Since the bonuses became public … growing push to have the money returned. “We can’t let this fester any longer,” said Liberal Senator Charlie Watt, … calling for an emergency meeting on the subject and … resignation of the directors involved.”
Bottom line is profits and even subsidies are going to executive bonuses when we have a territory trying to make ends meet. Nunavut and even NWT should operate their own air service like Northmart/Northwest co.
Let Canadian North still fly here but watch how their prices drop to realistic rates. Better yet, put em out of business and keep the profits for territory. Private business is good but monopolies are not.
You are wrong again. Up to this latest Covid-19 pandemic crisis First Air received not a single dollar of federal, provincial, or territorial subsidy,. Your accusation that the airline used government money to pay their Board members a bonus is just wrong.
.
You are conflating a single instance of a company paying members of its Board of Directors, which Is a normal occurrence, with lies that it is now using a territorial subsidy to do this same action.
.
If I recall correctly the bonus payment was a one time payment, made over a decade ago, and was to recognize the work that the Chairman, Pita Aatami did for the company over a 15 year period. I know for a fact that Mr. Aatami flew all over the country, often giving time up with his family, to promote the airline. He was paid a small per diem for the board meetings he attended and for his oversight and guidance. This was in no way adequate compensation for the work that he put in, changing First Air into a profitable company. That is why he was paid a bonus.
.
I’ve come to the conclusion that you know less about the bonus issue than you do about the airline industry and it’s economics. Your understanding is minimal at best if you think that First Air was getting subsidies before the Covid-19 pandemic.
You fail to mention a few salient facts. The bonuses totaled $1.5 million and were paid to a number of Makkivik execs including Aatami and Berthe. You also fail to mention that the bonuses were paid on only $200 million in profits. In comparison the CEO of Air Canada recieved a $690K bonus on profits running into the billions. You also don’t mention that Makkivik is a not for profit corporation so the inclusion of any bonus structure for its executives should be considered massive fiduciary irresponsibility.
And everybody else has come to the conclusions that you like arguing or just plain work for the airlines.
You are mixing up the issue: airlines take profit from Nunavut that could instead be used to keep prices lower and in turn use that money for better services and lower infrastructure development costs.
All I can say is that many years ago myself and my family needed assistance. We had to provide much evidence and he came through with the help. The tickets were not free and to this day I thank him. Mr. Aatami thank you.