SOMBA K'E/YELLOWKNIFE - Canadian North has announced they will cancel flights to Hay River and Calgary due to unprecedented competition and an oversaturated market.

Service to Calgary will stop Oct. 10 and flights in and out of Hay River will end Oct. 25. Three full-time and four part-time employees – five in Hay River and two in Calgary – lost their jobs Thursday.

Tracy Medve, the airline's president, said the downturn in the economy was affecting customers and hurting business.

"It's had a ripple effect and fewer people are in demand for our services," she said.

Challenged by seat sales from two national airlines, the Yellowknife-based company decided to scale back its routes.

"People flying are getting phenomenal deals but … we're vulnerable to exploitation by the competition," she said, adding the cuts are a business decision that had to be made.

The airline will also be reducing service between Edmonton and Yellowknife. The 7:15 a.m. flight from Edmonton won't be taking off after Oct. 25, nor will a Tuesday evening flight to Yellowknife.

"There are four jet carriers with the capacity for 4,900 seats per week. Less than 47 per cent of those seats are being used," said Medve of the route between Edmonton and Yellowknife. "We don't have any choice but to respond."

Medve said the airline will be contacting customers who've already booked flights and making arrangements on other carriers. Passengers can also contact the airline if they have questions.

Canadian North has been feeling the pinch since Air Canada entered the market in 2005, followed by Westjet in May of this year. Medve said the Northern market isn't large enough to support the number of airlines operating in the region.

"The seat capacity is unrealistic," she said. "It's not sustainable."

Medve was in Hay River Thursday meeting with the employees whose jobs have been cut. She said further staffing decisions will be made in the coming days and it's likely there will be more job cuts.

"We want to talk to people face to face," she said. "It's a tough decision to open up a new market and it's equally hard to pull out."

The airline employs more than 450 people and has been operating since 1998.

Medve said no further route changes are planned but said it's difficult to know what will happen.

"No one can predict the future. We're making these changes to take us well beyond 2009," said Medve, who said her company will remain committed to serving Northern communities.

Chris Ferris, vice president marketing and sales at First Air, said he was sorry to hear about the decision.

"Some Northerners lost their jobs today and that's unfortunate," he said. "I was a little surprised at the timing of it. It’s a big decision for any carrier to make… There's far too much capacity on the Edmonton Yellowknife line. I anticipated that it might be Westjet before Canadian North, actually," he said.

Ferris said his airline has also been experiencing the fallout of a poor economy and lower tourism numbers, but has no plans to reduce any of their service or make changes to their schedule.

He said Northern carriers are caught in the crossfire between Air Canada and Westjet.

"There is still an overcapacity in the market. We're continuing to fight the battle with the national carriers. As an airline of the North, that's not a battle we're prepared to lose," Ferris said. "It makes it very tough to participate at the price level. It's not sustainable over the long term."

First Air has had service in Hay River for more than ten years.