Nunavut government mulls new approach to $60M air travel budget

In the past, the government has divided up its contracts to create competition on routes as a benefit for all Nunavummiut, but it's open to completely revamping all aspects of the airline contracting process.

Lufthansa Consulting awarded $700K contract to help rethink airline procurement

The Lufthansa Group is affiliated with both the airline and the consulting firm. The company has been awarded a $700K contract to help the Nunavut government rethink its airline procurement strategy. (Mike Hillman/CBC News)

The Government of Nunavut is due to renew its contracts with northern airlines for medical and work travel by 2019—before then, it wants help rethinking its approach.

The government spends approximately $60 to $65 million a year on medical and duty travel combined—a number that makes up more than a third of the territory's airline marketplace, according to a 2010 study commissioned by the government. The number seems to be trending upwards. 

It put out a request for proposals in July asking for contractors to bid on an airline procurement strategy. Lufthansa Consulting, a company founded by the owners of the airline with the same name, was awarded the tender on September 1.

The contract is worth $698,000 and requires the company to make three trips to Iqaluit in addition to some community visits.

'What... if there were no formal contracts?'

As the largest single customer for the airlines, the government says it wants to know if combining medical and duty travel contracts is a good idea.

Medical travel accounts for 22 per cent of air travel in Nunavut, while government travel accounts for 14 per cent.

In the past, the government has divided up its contracts to create competition on routes as a benefit for all Nunavummiut, but it's open to completely revamping all aspects of the airline contracting process.

"What would be the impact if there were no formal contracts... and the GN were entirely reliant on the free market?" the request for proposals asked.

The government explains in the request that northern airlines have had to adjust to the present "market reality" which it says has meant fewer flights, price increases and cargo delays.

"These changes have resulted in an overall decrease in levels of customer service," the RFP said.

Lufthansa Consulting is expected to issue a proposed strategy to the government by July 2, 2018.

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