Don't expect a price war
Airline ticket costs unlikely to go down as First Air and Canadian North end codeshare
Michele LeTourneau
Northern News Services
Monday, December 19, 2016
NUNAVUT
Nunavummiut should not expect to save money after the end of the codeshare agreement between First Air and Canadian North, which ends May 17.
Beginning in January, First Air will start flying passenger-only ATR 42-500 aircraft out of Iqaluit to service corporate, leisure and medical travellers in the Eastern Arctic. Older planes will be converted to freight-only. - photo courtesy of Mark Taylor |
First Air president and chief executive officer Brock Friesen says travellers will notice a change inside the cabin and on the tarmac, not in their wallets.
Interior of a First Air all passenger ATR 42-500 |
"The big news is we have really nice airplanes now," said Friesen. "Nobody's had such nice propeller-driven airplanes in the Arctic. These ATR 42-500s are all passenger, not half passenger and half cargo. They look like new on the inside and the outside. And they're typical of what you'd find in any other part of the world."
The introduction of new planes, though there will be savings to First Air in terms of maintenance, doesn't mean ticket pricing will change.
"The problem is the savings you have in maintenance is offset by the capital cost of buying airplanes," he said. "We have spent, in the last 15 to 18 months, over $100 million on these six turbo-prop airplanes and one additional jet. If you add that to what we had spent the previous year for jets, we've actually spent $150 million on airplanes for the North - much younger than anything else that's flown in the North and more modern."
These new planes have leather seats, pristine cabin conditions, and they will stay that way because there's no freight on them, he said.
"The people in the North are going to have a standard of service for scheduled flying they've never had before on these new ATR 42-500s," he adds.
Canadian North declined to participate in this story, pointing to a previously-released statement from president Steve Hankirk in which he says, "Beginning Monday, Jan. 2, 2017, Canadian North will introduce daily, next generation 737-300 Combi service on our Ottawa-Iqaluit route, bringing an early end to the maintenance-related schedule change we announced earlier this month."
Canadian North will use its first 737-300 Combi aircraft on the route until its second 737-300 Combi is ready in March.
Hankirk further stated that between now and May 17, when the codeshare between the two airlines ends, his company will "develop and implement a long-term plan that will enable Canadian North to continue to offer competitive air service to all of our customers across the north, whether in the Qikiqtaaluk, the Kitikmeot or the Northwest Territories."
According to Friesen, First Air customers are "not going to see a huge difference in our schedule in Nunavut, particularly in the eastern Arctic" after May 17.
"We've got approximately six turbo-prop airplanes in the eastern Arctic and we'll deploy those to all the same places we fly now, with very good frequency and as good connectivity as we can make."
Pangnirtung and Clyde River will not see the new aircraft due to too-short runways.
First Air will turn some of their older planes into freighters.
"There will be scheduled freighter service that will go to the communities and we'll be able to provide better stocking of the stores all over the Arctic. We can do it more efficiently and keep the cost down," said Friesen.
First Air continues to have codeshare agreements with Air North, Calm Air and Kenn Borek Air.
Both Friesen and Hankirk insist they had the best of intentions with the codeshare arrangement.
Friesen says the objective with Canadian North was to "try to find a way to maintain the same service when we both operated a year-and-a-half ago, the same frequency, the same schedule convenience for people. But at the same time take out some of the cost, because we had flights that were literally operating wing-to-wing - two airplanes going into a small community side-by-side with neither airplane very close to being full. So you have twice the cost."
Hankirk echoes that sentiment in his statement: "The benefits of the codeshare agreement have been genuine and significant, with numerous schedule enhancements and new operating efficiencies."
However, for First Air, operating in a way customers so clearly disliked was not an option.
"The problem was there was so much negative feedback, especially in the eastern Arctic, it just wasn't what our customers wanted. For us to keep offering a product they didn't want just didn't make sense. That's why we stopped," Friesen said, adding he's done these kinds of deals on five continents, in 60 to 70 countries.
"I've never seen pushback anywhere in the world like I've seen in Nunavut. People have adjusted well to codesharing all over the world, but not in the Canadian North. I don't know what's so different about it. I wish I knew (why). I don't know."
That pushback took the issue all the way to Nunavut's Legislative Assembly in January, where Premier Peter Taptuna, cabinet members and regular MLAs held a day-long, hearing-style meeting with airline executives. Complaints included freight delays, cargo delays, fewer seats and inconvenience placed on elders and medical patients that have been delayed at hotels and airports and boarding homes.
The executives told the legislative assembly these were "growing pains."
Rumours circulate in Iqaluit that WestJet and Air Canada may look to the Ottawa-Iqaluit route, thereby reducing ticket pricing - but neither has come forward publicly.
GoSarvaq is a small airline that tried to get off the ground earlier this year and in a news release May 6 president Adamee Itorcheak announced it could not proceed because competitors drastically slashed ticket prices. Itorcheak could not be reached about any plans that company may have for the future.
Friesen is not worried about competition.
"It always factors into our planning. You always have to be aware that there are potential competitors everywhere and you have to be as efficient and as high-quality as you possibly can," he said.
The Competition Bureau continues its investigation into "alleged anti-competitive conduct of the two airlines," as well as "investigating allegations that First Air and Canadian North have engaged in predatory pricing," according to senior communications advisor Taylor Bildstein.
The predatory pricing complaint came from GoSarvaq.
"Predatory pricing occurs when a company deliberately sets prices below cost for long enough to eliminate, discipline, or deter entry by a competitor. This involves an expectation that the company will be able to recoup its losses later, by raising prices again," explained Bildstein. "I am unable to speculate on how long the investigation will take due to confidentiality."
