First Air and Canadian North did not break any laws, but there is evidence both companies’ sale prices affected GoSarvaq’s attempt to join the Iqaluit-Ottawa market.
That’s according to the Competition Bureau, which released the result of its two-year, three-pronged investigation Aug. 22.
GoSarvaq had announced $499 flights between Iqaluit and Ottawa, to which competitors Canadian North and First Air responded with $399 sales of their own. First Air offered a further sale during a limited time for $299 flights between Iqaluit and Ottawa.
“Although it is the bureau’s view that the allegedly predatory pricing promotions by First Air and Canadian North likely had an impact on GoSarvaq’s entry plans, the bureau did not find sufficient evidence to conclude that these were anti-competitive acts as required by the Act and established by case law. Consequently, the bureau closed its investigation into the conduct by First Air and Canadian North,” according to the bureau’s position statement.
But the independent agency did note it “found evidence to suggest that GoSarvaq was perceived as a threat and deliberate actions, while not contrary to the Act, were taken in response to its announced entry into the market.”
GoSarvaq president Adamee Itorcheak announced in May 2016 it could not proceed with an Iqaluit-Ottawa route because competitors drastically slashed ticket prices.
The one-way cost of the route with the two main carriers quickly returned to normal prices. As of Aug. 23 Canadian North offered the flight at $715 and First Air at $1307. Both carriers occasionally offer sales.
The bureau had two other investigations going along with the allegations of predatory pricing on the Iqaluit-Ottawa route: the merger between First Air and Calm Air relating to air passenger and cargo services in central Nunavut and the codeshare agreement between First Air and Canadian North relating to air passenger and cargo services on 16 Northern routes, including the Iqaluit-Ottawa route.
“In conducting its review of the merger between Calm Air and First Air, the bureau spoke with the airlines and obtained certain information from them, including strategic business documents and route-level financial statements and ticketing data. The bureau also spoke with third parties, such as competitors, customers and various government representatives regarding competition for air transportation services in the North and in the Kivalliq region,” according to the position statement.
The bureau also used services from an economic expert for an analysis on the likely effects of the merger and a financial expert for an analysis and views on the potential efficiencies resulting from the merger and the financial viability of the airlines.
“Upon review of the evidence, including the expert analysis, the bureau did not find a sufficient basis to challenge the merger,” the bureau stated.
Meanwhile, the investigation into the codeshare agreement between First Air and Canadian North and its potential anti-competitive effects was ended when First Air announced that it was pulling the plug on codeshare effective May 16 of this year.
“Air transportation is challenging in the North due to difficult weather conditions and operational challenges. However, it is also essential to remote communities, businesses and governments who rely on it for economic development, food and healthcare,” stated Commissioner of Competition John Pecman in a news release.
“For these reasons, competition plays a key role and while we are closing our investigations, airlines must recognize that compliance with the Competition Act is an essential practice and the bureau will continue to be vigilant in this arena.”
Canadian North president Steve Hankirk released his own statement in the wake of the investigation’s conclusion.
“Importantly, the bureau’s statement confirms that Canadian North’s competitive response to GoSarvaq’s proposed entry into the Ottawa-Iqaluit market as a third-party re-seller of aircraft capacity complied with all applicable competition laws,” he said.
GoSarvaq’s Itorcheak could not be reached for comment.