With First Air and Canadian North proposing to merge and alarmed by some recommendations in the GN’s Airline Procurement Strategy, Iqaluit city council has passed two resolutions encouraging more airline competition.
Coun. Kyle Sheppard’s introduced the July 24 motions calling on the Government of Nunavut to attract more national carriers and for the City of Iqaluit to promote the capital as a viable destination.
“If the GN decides to try and attract additional carriers to the (Ottawa/Iqaluit) route, they can do this easily by requesting meetings directly with the airlines or at various trade events,” Sheppard said. “The GN carries some heft with the business they are able to provide and I’m certain that airlines would make time to hear their pitch.”
Sheppard expressed concern over aspects of the GN’s Airline Procurement Strategy, being assembled by German-based Lufthansa Consulting, particularly the idea of splitting the three Nunavut regions into separate markets for duty and medical travel and government cargo. He said the study states “without evidence, that the Iqaluit-Ottawa route subsidizes the rest of the Qikiqtaaluk routes.
“I don’t believe this to be true and feel that the Iqaluit-Ottawa route should be treated as its own market, separate from the rest of the region, allowing larger carriers to compete for GN business and to provide improved and lower cost services to Iqaluit,” said Sheppard.
A spokesperson from the Department of Community and Government Services, which is overseeing the GN’s $698,000 Airline Procurement Strategy, wasn’t available for an interview prior to Nunavut News’ deadline.
The initiative, launched last summer, is intended to reduce the cost of airline travel, ensure adequate service to all Nunavut airports and make duty and medical travel – which costs the GN an estimated $60 million to $65 million per year – more efficient and affordable.
The strategy states, in part, “Due to the apparent lack of effective competition in the marketplace, the GN decided to hire an airline industry consultant to advise the GN on the development of an airline procurement strategy.”
That objective was laid out prior to the July 6 announcement that First Air and Canadian North plan to merge their assets and operations. Asked how much of a factor the GN’s Airline Procurement Strategy was on the merger decision, First Air spokespeson Dan Valin replied that it wasn’t an influence.
“Rather, it serves as a valuable proof-point for what ownership on both sides have long-known: that Northern communities would be better served by one air carrier operating a sustainable schedule,” Valin stated.
The Airline Procurement Strategy is in a “request for input” stage until Aug. 31. The awarding of airline contracts is targetted for April 2019 with an effective date of Jan. 1, 2020.
The contracts will be in place for five years with two options to renew, each for another two years, making the agreements effective for a maximum of nine years. The longer terms will benefit the airlines by allowing them to “invest in new infrastructure and more efficient assets,” according to the strategy document.
Airline Procurement Strategy recommendations
Consultant Lufthansa Consulting has made the following findings and recommendations in regards to the Government of Nunavut’s Airline Procurement Strategy:
The volume of GN-booked flights should allow the government to promote more efficiency in Nunavut’s airline industry and also to provide more predictable revenue for the industry. A percentage of volume or revenue on grouped fight routes could be offered,which may attract new service providers
Air freight rates for Nunavut can be up to 80 per cent higher than other small isolated markets
Some routes are over-served and flights are well below capacity
Nunavut airlines contend with higher-than-average maintenance, staff and fuel costs, and the older aircraft used in Nunavut consume more fuel
The number of flights cancelled due to mechanical failure in Nunavut is higher than the industry average. This may be attributed to challenging environmental and climatic factors and aging planes
Too many passengers miss their medical travel flights, resulting in lost revenue and unnecessary expenses
The government lacks a central management process or tool to coordinate and track duty and medical travel
Airlines should regularly provide greater detailed data to the GN to improve service quality, such as customer service during flight cancellations