A proposed merger between two northern airlines would cost customers more, and reduce the routes available, according to Canada’s Competition Bureau in a report released Tuesday.
Now, the federal cabinet has to decide whether to allow Canadian North and First Air to merge.
In a written report to Transport Minister Marc Garneau, the Competition Bureau says, “the proposed merger of First Air and Canadian North is likely to result in a substantial lessening of competition in the provision of passenger travel and cargo services.
“The effects of the transaction are likely to include reductions in passenger and cargo capacity, increases in price, and reductions in flight schedules.”
Read the Competition Report here: Proposed Merger of First Air, and Canadian North
It’s hard to overstate the importance of air travel in the Arctic – every one of Nunavut’s communities is a fly-in community.
Garneau now has to take the proposed merger to the federal Cabinet, which will decide whether to let it go through.
Transport Canada is also preparing a separate look into the proposed merger.
Both airlines are owned by the business arms of Inuit Land Claims organizations. Canadian North is owned by the Inuvialuit Regional Corp and First Air by Makivik Corp.
The two airlines first announced their intention to merge in July 2018.
First Air operates routes to 32 northern communities, including the Northwest Territories (NWT), Nunavut and Nunavik. Canadian North serves 16 communities in Nunavut and the NWT.
The report goes further, saying that letting the two merge would create a monopoly on northern air travel.
“The Commissioner is of the view that the Proposed Transaction can be characterized as a merger to monopoly in the vast majority of the Parties overlapping origin and destination pairs and is likely to lead to significant and materially higher prices and lower quality services for air passengers and cargo customers,” the report says.
The Nunavut government is steering clear of commenting on the proposed merger.
While answering questions in the legislative assembly, Nunavut Transport Minister David Akeeagok confirmed that his government had submitted information to the Competition Bureau’s investigation, but wouldn’t describe what that information contained.
Speaking in Inuktitut, Akeeagok said, “The matter you commented on has already resulted in a submission to the federal government, specifically to the Hon. Marc Garneau offices, outlining the position of the government of Nunavut and its concerns about this matter including how Nunavummiut may be impacted by the merger.”
Despite being competitors, the two airlines have remarkably similar pricing already.
Iqaluit to Ottawa return on First Air costs between $2,000 and $3,000. Canadian North has the same pricing. The further north you go, the higher the cost.
A return trip for one from Resolute, NU to Ottawa is over $7,000.
And Canadian North and First Air responded with a joint statement, in favour of the merger.
“It’s artificially restricted findings in this matter are of limited value and suggest a superficial understanding of the Inuit organizations proposing this solution for sustainable northern transportation,” says the statement. “Before Inuit can be meaningful participants in the national economy, they must be meaningful participants in the northern economy; an efficient Pan-Arctic airline is the only long-term viable answer that will provide immediate benefits.”
They also urged Garneau to approve the merger, saying, “it is our sincere hope and expectation that the Minister will pursue his mandate to represent the rights and interests of Nunavik and the Inuvialuit Region.”
This isn’t the first time the Competition Bureau has weighed in on northern airlines.
In 2017, the two airlines were accused of predatory pricing by Go Sarvaq, a group trying to provide more affordable flights from Iqaluit to Ottawa.
The investigation did find some evidence of predatory pricing, but not enough to lead to charges. Go Sarvaq was forced to abandon their project.
The new airline would keep the name Canadian North, while adopting the red and white branding of First Air.