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Turbulent days for Northern aviation
Canadian North announces layoffs, First Air hiring

Walter Strong
Northern News Services
Published Saturday, January 24, 2015

NORTHWEST TERRITORIES
Canadian North and First Air are both facing industry-wide economic challenges and developing different strategies to deal with them.

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According to Canadian North president Steve Hankirk, the company faces difficult decisions in the coming months thanks to a decline in demand for its services in northern Alberta. - photo courtesy Canadian North

Two memos to employees from Canadian North president Steve Hankirk earlier this month braced staff to prepare for layoffs, which come in the wake of reductions associated with two of the company's larger contractors.

Hankirk said Canadian Natural Resources (CNRL), a major player in Alberta oil sands projects, has suspended for 2015 the trans-country charter service the airline serviced. Esso also announced it would be reducing its flying program, citing low oil prices.

"The aggregate impact to Canadian North is a significant loss of revenue for 2015," Hankirk stated in a Jan. 6 message.

The message went on to say all "departments and employee groups" stand to be affected by measures the company will need to take to combat the loss in revenue.

Those measures include "staff reductions to match a reduced level of flying activity", hiring freezes and the elimination of as many third-party sub-chartered flights as possible.

A subsequent Jan. 15 memo suggested layoffs were already underway, but didn't mention numbers.

"This substantial reduction in flying activity and revenue required me to move quickly to reduce the size of our organization," Hankirk stated in the Jan. 15 memo.

Kelly Lewis, Canadian North manager of communications, said in an e-mail to News/North he wasn't at liberty to discuss the specific contents of an internal company document, but he could speak to the changes the airline was putting in place to ensure its competitiveness and long-term viability.

"The memo discussed steps we will be taking to ensure our business continues to operate efficiently and remain profitable during a challenging time," Lewis said.

"As a result of the recent drop in global oil prices and the move by several major energy companies to reduce spending this year, the airline industry as a whole is experiencing a slowdown in demand from the energy sector," he added.

According to Lewis, Canadian North has no plans to reduce scheduled northern routes. In fact, Canadian North continues to update its fleet to better serve the North.

"We are continuing to move forward with our ongoing fleet modernization program this year, including the addition of our new 737-300 combi(aircraft), which will go into service in on our scheduled network in February," he said.

"This aircraft, which is larger and more fuel efficient than our existing 737-200 aircraft, will allow us to offer increased capacity for both passengers and cargo on our northern scheduled routes."

[breaker]First Air

Bert van der Stege, First Air vice-president of commercial operations, has never been shy to express himself on the challenges northern carriers face.

Last October in Ottawa, van der Stege told the Economic Club of Canada it was time for northern governments to consider subsidizing some of the high cost associated with providing air service to small and remote communities.

"There is not much 'economic' about flying to and within the Arctic," van der Stege said. "Most importantly the operating costs are very steep."

More recently, van der Stege told News/North the economic contraction in the oil patch will have no immediate impact on First Air. The company, he said, dos not operate in that sector, although it could have longer term impacts related to potential business expansion.

While the company doesn't rely on oil industry contracts the way Canadian North does, northern aviation industry has struggled under relatively modest mineral exploration contracts.

Alliances with potential competitors is part of First Air's strategy in this regard.

"I strongly believe there is need for consolidation in northern aviation," van der Stege told News/North in an email.

"Operating an airline is a very expensive exercise. Partnerships are key to achieving economies of scale and combining strengths. This will lead to better service for customers and efficiencies for the operators."

First Air strengthened one of those key strategic relationships recently with Yellowknife's Summit Air. On Jan. 27 Summit Air will begin serving First Air routes between Edmonton, Yellowknife, Inuvik and Norman Wells.

The "wet-lease" arrangement where Summit provides not only the aircraft but related crew and maintenance is an extension of an already-existing relationship between the two companies.

"We jointly operate flights to and from some mine sites," van der Stege said in an e-mail to News/North. We jointly bid on contracts where individually the two airlines would be too small to qualify, and Summit has outsourced all dispatching of their flights to the First Air Operations Control and Dispatch Centre."

Van der Stege said the new arrangement with Summit Air will not negatively affect First Air staffing or service level.

Instead, First Air will be hiring.

"As an airline we at First Air are growing our business this year and expanding our staffing levels accordingly," van der Stege said.

"As we speak we are in the process of hiring an additional 28 staff members already."

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