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GN should intervene in airline business, report says

Transportation minister takes cautious approach in relations with air carriers

JIM BELL

In response to a Government of Nunavut study that urges aggressive government intervention in air transportation, Peter Kilabuk, Nunavut's transportation minister, is opting for a cautious go-slow approach to improving services in Nunavut.

The study, by LPS Aviation Inc. of Ottawa, says the deregulated free market in air transport is failing Nunavut, and that northern airlines aren't likely to improve service if left to their own devices.

Citing the Kivalliq region as an example, they even say that competition, where it exists in Nunavut, has failed to produce lower air fares.

"While Kivalliq communities enjoy more frequent service by up to three different air carriers, average air fares in the region are the highest in Nunavut," the report says.

Saying it is "very doubtful" that moral suasion will convince airlines to meet Nunavut's needs, the report concludes the territorial government must use aggressive, but risky, strategies to fix the air transport system in the territory.

"An escalating strategy of progressively increasing intervention is recommended to achieve improvements in air services provided in Nunavut," the study's authors say.

Though this "intervention" could include subsidies, or a government-owned airline, the study's authors say the GN's best tactic is the use of its own purchasing power to offer preferential contracts to airlines that supply improved services.

That could even include a Nunavut-wide contract to one big airline that would serve all 26 communities and all southern gateways.

But Kilabuk said the government wants to use consultation and co-operation first.

"This would almost be a last-resort kind of thing for us, because at this time, we want to make sure that our airlines in Nunavut have the full opportunity of being part of the consultations to improving the system in Nunavut," Kilabuk said.

Those consultations started this week. On June 25, officials with the GN's transportation department met with representatives of Nunavut air carriers to discuss the report.

"That's where they'll be discussing a lot of the report and a lot of the recommendations," Kilabuk said.

The next step, he added, will be for the government to issue requests for "expressions of interest" from airlines.

"The air carriers and their representatives will be asked to forward to us their ideas and suggestions, and also to make proposals on how they can improve service," Kilabuk said.

That could include suggestions on better connections between eastern and western communities in Nunavut and a better Iqaluit-Sanikiluaq connection.

This doesn't mean, however, that the government is ready to sign contracts with airlines in exchange for better service.

"This being an expression of interest, it doesn't lock us into any contractual arrangements with the airlines, so it will be to look at what the airlines see as being beneficial to them and also for their clients, and also for the government."

The report also says that many Nunavut runways must be improved before air carriers can invest in newer aircraft. "The major limiting factor for jet aircraft operations are the current airport facilities, particularly gravel surfaces and short runways."

That is why big air carriers like First Air and Canadian North are still using 30- to 40-year-old Boeing 727 and 737 combi jets to serve Nunavut.

But these aging aircraft are reaching the end of their lifespans. "Current jet aircraft serving the territory will likely be phased out of service over the next decade as they reach the end of their useful life," the report says.

The report discusses, and rejects, options like direct subsidies, a return to price and route regulation, and public ownership of an airline.

But it does recommend the use of "contractual incentives," ranging from multiple airline contracts in select routes and markets, right up to one big contract with a preferred carrier.

The report writers did about 400 consultations with community representatives over the past three years and heard numerous complaints. They include:

• cargo and air fare costs are too expensive;
• compassionate travel costs too much, even though both major airlines offer discounts;
• mail is often bumped from aircraft due to lack of space;
• fresh produce arrives late;
• intoxicated passengers;
• food cargo is held too long in Iqaluit;
• not enough service in Inuktitut;
• overloaded planes;
• inadequate runways and airport buildings;
• cargo is often bumped in favour of alcohol;
• the airlines aren't trusted when they claim that planes are fully booked;
• arrival times change without the community being notified;
• airlines don't handle dangerous goods and medical lab supplies with enough care.

"I'm very pleased with this report, because it has been a good starting point, or foundation," Kilabuk said.

Click here to see summary of Nunavut air transport report.
(Acrobat pdf)

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