Without Nunavut ownership, airline merger requires major scrutiny: Akeeagok
GN says its focus is to keep air fares low; government has added a public travel component to its own RFP
Nunavut’s transport minister, David Akeeagok, raised concerns last week that while Nunavut Inuit have a huge stake in air travel, they will have little leverage in the proposed airline merger. (Photo by Sarah Rogers)
As the federal government reviews the plans of two northern airlines to merge, the Government of Nunavut says its priority is to keep airfares low and affordable.
The Competition Bureau’s new report on the proposed union between Canadian North and First Air captured that and other concerns: it found the new airline could translate into less capacity, fewer flights and higher prices for its customers.
“The burden of Nunavut’s high cost of living is a consistent message we hear in every region and in every community,” Economic Development and Transportation Minister David Akeeagok told the legislature in a Feb. 28 minister’s statement.
“We are united on our efforts to make living in the territory more affordable.”
For the most part, the GN has remained quiet on the proposed merger, saying it’s unable to share its position on the transaction until a full review of the merger is complete.
Transport Canada is conducting its own review of the proposal, the results of which will inform the federal cabinet’s final decision.
The GN also has a request for proposals out now for its medical travel, duty travel, air freight and a newly added component—public travel—which requires bidders to include a percentage of seats to be made available to the general public at an economy class fare.
But Akeeagok went further in his statement, raising concerns that Nunavut Inuit have a huge stake in air travel, but little leverage in the new venture.
“This is a merger between two non-Nunavut companies, owned by two non-Nunavut entities who receive no special consideration under the Nunavut Agreement,” he said.
“Nunavummiut are well-justified to expect that this merger be scrutinized to ensure Nunavut interests are protected.”
That same day, Arviat North-Whale Cove MLA John Main pressed Akeeagok for more details on the GN’s submission to both the Competition Bureau and Transport Canada.
“I don’t understand why the Nunavut government wouldn’t come out and make its position clear on this issue,” he said. “I’m sure the public shares my confusion.”
Akeeagok insisted that the merger is a private business decision for both airlines’ ownership to decide on.
“If the merger does not take place, we still need to work with the airlines,” he said.
That said, Akeeagok said his department is considering when and how it can release the GN’s submission publicly.
Transport Canada has the authority to put terms and conditions on the merger, and it’s through that process the GN hopes to have safeguards put in place for Nunavut air travel.
Akeeagok pointed to First Air’s Ilak fares, which offer Inuit beneficiaries in Nunavut a discounted rate.
“If there is a merger that takes place, how is that going to be protected?” he said in an interview, following question period.
“Those are the benefits that our beneficiaries are seeing as a result of partnerships with the Inuit organizations. Those are wonderful benefits, but whether that’s going to exist post-merger or not, those are things we all need to find out.”
Nunavik’s Makivik Corp., which owns First Air, and the Inuvialuit Regional Corp., owner of Canadian North, are in ongoing discussions with regional Inuit organizations in Nunavut about coming on as shareholders to the new venture.
But even if Inuit organizations from Nunavut bought into the new venture, they would remain a minority, said Akeeagok.
“For our government, that doesn’t have a major impact,” said Akeeagok. “I would think [Nunavut] would have more say, but that would be for [those organizations].”
In a March 1 emailed statement from Economic Development and Transport, the department said that including a publicly available fare class in the GN’s travel contract “is the only opportunity we have to use our purchasing power to influence the fares paid by the public.”
The government should call on First Air and Canadian North to tell the public what their post-merger airfare rates for passengers and cargo would be between all communities.
From what I have seen of airlines operating in the North, the profit margins is slim to none. and that is why they are looking at a merger. It will be very interesting to see how this all works out. If this merger fails we could very conceivably see one of them shut down altogether or scale back considerable. It is very difficult to make a profit with such a small economic base as exists in the North.
Minister Akeeagok needs to ask the three regional Inuit organizations some pointed questions. It is my understanding that at least one if not both of the airlines have invited all three of the RIOs to take up an equity position in their companies in the past.
I also understand that the equity offered would have been well under any market rate. Now it may be because the RIOs , and the GN, want to play off one airline against the other like they have been doing for over 20 years, but that time is at an end.
The RIOs, or the GN, or both need to get on board and take up an equity position in the merged airline. Bottom line is that only the north/south markets are big enough for competition, and even then none of those markets can support two competing airlines. Time for the GN to face reality.
It costs less to fly on an around the world ticket with air canada than between two communities in the North. Something is wrong. We need to nationalize air travel and take it out of corporate hands (who must always seek to make a profit).