IQALUIT
A price war has broken out in the skies between Iqaluit and Ottawa, and it could have long-term effects on the aviation industry in Nunavut.

GoSarvaq spokesperson Brian Tattuinee says his company took more than 200 bookings within the first day of being open-

Newcomer GoSarvaq officially launched last week with summer flights between Ottawa and Iqaluit going for $499 per seat if booked before May 6. That's a far cry from average prices on that route of around $1,200.

But Canadian North and First Air, market leaders in that route, came right back and offered $399 per seat on the Iqaluit-Ottawa route for the same timeframe.

Social media reacted with jubilation at GoSarvaq's announcement, followed by critical comments about the Canadian North and First Air response and why it took competition for the companies to offer such a good price.

GoSarvaq spokesperson Brian Tattuinee said his company took more than 200 bookings within the first day of being open, which were split equally between southerners and Northerners.

"We asked for people to be patient while we sorted out the issues that caused our delay and we sincerely appreciate the support from Nunavummiut, Haligonians, people from Ottawa and customers far and wide," said Tattuinee.

The company is operating as a reseller and regulations forced it to change the name from the original title of Fly Sarvaq. Flair Air will operate the aircraft.

"Together, Flair Air and Sarvaq developed the GoSarvaq product and are looking forward to servicing Nunavut for a long time," said Tattuinee.

Regarding the price cut by Canadian North and First Air, Tattuinee said it's GoSarvaq's policy not to comment on other companies' decisions.

"GoSarvaq has put a lot of time into developing this business model and plan and feels that their fares, which start at $499, are sustainable for a long-term model and are committed to offering that to the market," he said.

Tattuinee said that after the summer sale, GoSarvaq intends to set prices from $503 to $810 consistently in the long term.

Canadian North communications manager Kelly Lewis said his company's motivation is clear on its $399 sale.

"We're pretty transparent," he said. "First of all, we set our prices independently and as part of our overall business strategy we're committed to offering competitive pricing in every market that we serve. We're constantly watching pricing in our markets and we're going to quickly respond to challenges from our competition whenever appropriate, and this is definitely a challenge that we've seen.

"If we were to stand idly by and do nothing, we'd let others determine the market pricing and we'd risk losing bookings. In order for us to operate sustainably, we have to maintain our market share."

He said he can't speak to whether the $399 price is still profitable for Canadian North.

"I can't speak to whether it's a profitable price for us or not, but I will say that it is a limited time price," said Lewis.

He added that his company's behaviour is consistent with how it has always operated.

"We've seen low prices before on that market," said Lewis. "It's a very competitive marketplace. We've gone head-to-head with another airline for many years."

When Canadian North first entered the Ottawa-Iqaluit market 17 years ago, it faced a similar reaction from current players, he said.

"In the years since then we've been willing to go head-to-head with our competition whenever necessary to maintain price parity and that's exactly what we're doing here."

Asked if the plan was to sink GoSarvaq and then raise prices back up to normal levels, Lewis said, "No, not at all.

"We're respectful of an open marketplace and we wish anybody who wants to compete with us the best of luck."

Bert van der Stege, First Air's vice-president commercial, indicated his company's $399 Ottawa-Iqaluit sale could still be profitable for First Air.

"Total on-board revenue depends on the sum of total sales at all fares and the amount of passengers booking with us at various pricing levels," stated van der Stege in an e-mail. "There is also the cargo revenue component. With good revenue management, it could be possible to achieve a profit and offer seats for even less than $399."

After the sale window, van der Stege said First Air will continue to offer competitive pricing in every market it serves.

"Like any other business, our fares are determined by supply and demand reflecting market conditions," he stated.

This is not the first seat sale First Air has done and won't be the last, he added.

"At First Air, we welcome competition," stated van der Stege. "As always, we will continue to offer competitive pricing in every market we serve and that includes the Ottawa-Iqaluit route."

Following First Air's and Canadian North's sales, GoSarvaq launched a survey asking Nunavummiut if they'd rather the company maintain its $499 price point or drop to $399 but the latter would come with long-term risks.

"We worked hard to develop a business model that we think works and is fair and affordable for everyone," stated the survey. "We must be onto something. After all, we figured out a fair price that's now being modelled on our first day."

The introductory pricing of $499 is the minimum that GoSarvaq could operate at in a sustainable way, it went on to say.

"However, since GoSarvaq brought this affordable option for passengers to Iqaluit, prices in the market have dropped," it continued.

It gave responders two options for their preference: maintain the $499 price and grow the service, or "sustainability is not my concern" and offer $399 pricing with limited availability and "take my chances on price increases later."

GoSarvaq revealed that the vast majority of responders favoured the $499 price point.

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