Doug Ashbury
Northern News Services

NNSL (Jun 14/99) - First Air has attained its sixth year of profitability in a row, according to Makivik Corp.'s annual report.

But First Air president and CEO Bob Davis describes the 1998 profit as a "marginal" one.

"The airline business is very cyclical. Business in the North was a bit down, particularly in the West where commodity prices affected charter business. In the East (business) was a bit better with division," he said.

The carrier's 1998 East-West revenues were split equally with an additional $30 million generated by freight work abroad, Davis said. Year revenues were $165 million, he said.

In 1998, First Air spent $28 million on capital assets. Of that $28 million, the carrier spent $23 million on aircraft safety and maintenance. The remaining $5 million was spent on facilities and equipment, according to the annual report.

The company also purchased three staff houses in territorial capitals and renovated offices in Carp, Ont., Yellowknife and Iqaluit.

In 1998, First Air, with a staff of 1,000 -- 450 staff reside in the North -- flew 120,000 passengers and transported 18,000,000 kilograms of freight and mail First Air also said the privatization of air navigation systems which resulted in the creation of Nav Canada significantly affected the company.

With privatization, the air transportation tax, charged on all passenger tickets, was replaced with Nav Canada fees charged directly to all carriers.

First Air said the fee structure would have negative affects in the North and lobbying efforts to change the rate structure met with "mixed" results, the company said.

Nav Canada's first round of fees were effective March 1998, with the second phase introduced in March of this year.

During the 10 months from March through December 1998, First Air paid about $4.1 million in Nav Canada fees. For all of 1998, the Nav Canada fees were $4.8 million.

"This amount will increase significantly over the next two years," according to the annual report.

Davis said by March 1999, First Air's Nav Canada fees rose to $6.9 million and by November, the running total will have climbed to $7.9 million.

By November 2000, the cost will reach an estimated $8.2 million annually.

Removal of the air transportation tax offsets the new fee structure by less than half, Davis said. Under the old system, about $4 million in air transportation taxes were collected.

The fee increase was passed on to customers -- passenger and freight -- with the company absorbing a portion.

Davis agreed that the increase in Nav Canada fees expected over the next 18 months will be felt by customers.

"We've been fighting Nav Canada and the (federal) government because air is the only type of transportation for many communities in the North. Nav Canada fees were never meant for somebody buying groceries which is what has happened."

The annual report also noted that First Air purchased Northwest Territorial Airways from Air Canada in June 1997. The Northern arm of Air Canada included 210 employees, $45 million in revenue and $40 million in assets. It was about one-third the size of First Air.

Although the companies were legally amalgamated March 1, 1998, many items, such as union representation, continue to be issues in 1999, the report said.

First Air flies to over 30 Northern communities.

At the end of 1998, Makivik, representing the beneficiaries of the James Bay Northern Quebec Agreement, beneficiaries equity had reached $157.3 million, up 7.8 per cent. Equity has climbed 24.3 per cent in the 1990s (1990: $26.5 million).

First Air is one of several Makivik subsidiaries. Air Inuit, and Nunavik Arctic Foods are others.