North

It's not 'a subsidy': First Air seeks $42M from feds for new planes

First Air has asked the federal government for $42 million to buy new planes. The company's vice-president says it wants a loan, not a handout.

Transport Canada expresses concern about economic viability of northern airlines in briefing note

Bert van der Stege, First Air's vice-president, says the company is looking for a low-interest government loan, not a handout. (CBC)

First Air has been lobbying the federal government for $42 million to replace some aging planes in the company's fleet, but the company says it is not seeking a handout. 

"This is a loan," said Bert van der Stege, First Air's vice-president. "This is not a contribution or a subsidy. This is a loan that the government makes available to businesses."

In January Brock Friesen, First Air's president and CEO, wrote the Parliamentary Standing Committee on Finance asking for "a financial contribution of $42M over two federal fiscal years," starting in the 2016-17 fiscal year.

The federal budget unveiled in March did not include that funding. 

Van der Stege says the purchase of new ATR42-500 turboprop planes is part of a three-year restructuring plan at the airline. He says it's important for the company to get these new planes, but not so urgent that a delay in acquiring the planes will affect service. 

Company said drastic cuts in service may be needed

Friesen, in his submission to the parliamentary committee, had laid out drastic measures he said the company would need to take if the government denied the funding. 

Brock Friesen, president and CEO of First Air, wrote a parliamentary committee in January seeking money to buy new planes. (CBC)

"Without funding through Canada's vital business support programs, First Air will need to drastically reduce the volume and frequency of flights or eliminate services to a number of communities," Friesen wrote.

The letter also noted the "high levels of poverty" in Northern aboriginal communities served by the airline and said the "critical fleet replacement requirement" poses "food security and health safety issues." 

When asked Friday if First Air might reduce service if the government fails to provide a loan, van der Stege said, "It could be a possibility." 

"Obviously, that's not our interest," he added. "That's not what we'd like."

According to van der Stege, the company was already approved earlier this year for a smaller loan from the Business Development Bank of Canada (BDC) — enough to cover the cost of one new plane. 

'Northern routes are not economically viable'

First Air began shopping for potential funding early last year, pursuing various government departments and arms-length agencies. 

A heavily redacted briefing note written for then-Deputy Transport Minister Jean-Francois Trembley obtained by CBC News outlined several "considerations" about northern air travel. 

"It is widely understood that many northern routes are not economically viable," the note reads.

It goes on to say northern carriers are "likely suffering from the slowdown in mining" as well as increased competition and reduced revenues from north-south trunk routes to Yellowknife and Whitehorse. 

The briefing note also included a letter Friesen sent to various government departments in October 2015, but the government withheld the content of the letter, citing a section of the Access to Information Act which covers "advice or recommendations developed by or for a government institution or a minister of the Crown."

Competition Bureau investigating northern airlines

Van der Stege says the airline has felt the economic effect of factors cited in the note, explaining that its recent code-sharing agreement with Canadian North and Calm Air is just one example of the company's recent efforts to stay economically viable. 

The controversial agreement, which residents say has meant cargo delays, seating shortages and backlogs, is being investigated by the Competition Bureau. 

According to the briefing note, Transport Canada officials have made sure investigators "are informed regarding the unique challenges of air service in the North." 

In a written statement, the Competition Bureau said it is still reviewing the code-sharing agreement and could not provide any information about the review or how many complaints it may have received. 

Van der Stege says the company has tried to explain why it was necessary to take this and other measures — including eliminating flights to Naujaat, Nunavut, in 2014 — to strengthen its financial status. 

Speaking to a regional Inuit organization last year, van der Stege said, "Unfortunately, we don't provide a social service."

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