What does the First Air/Canadian North merger mean for northern air travel?
Airline analyst Robert Kokonis says the merger will help make air travel in the North sustainable, efficient
Since it was announced, the planned merger between Northern airlines First Air and Canadian North has led to trepidation from passengers, who are concerned about the potential impacts on prices and flights schedules. But what does the merger really mean for air travel in the North?
To try and answer some of your questions on the merger, we reached out to airline analyst Robert Kokonis. Kokonis is the president and managing director of AirTrav Inc., an aviation consulting firm based in Toronto, and has over 26 years of experience in aviation and travel.
The following interview first appeared on CBC Northbeat. It has been edited for length and clarity.
What do you think of the merger?
I think it's good. I know the two tried to merge, got to the altar a couple of years ago, and it got called off. But I think it needs to happen.
Canada's North is a vast territory, totally reliant upon air travel to move people, goods and other elements, including natural resources. And, with a relatively small population, we need to make sure the airline we've got there is going to be efficient and sustainable.
In that regard, if the Inuit of the North [the companies are owned by the Inuvialuit Development Corporation and Makivik Corporation] have been able to come together from both companies and put something together that makes sense for the North, then let's go.
Why are they doing this now?
Well, like any merger, it's a matter of finding the right formula for success. It's finding the right terms. It's looking where the head office is going to be, it's finding what services are going to be operated. But it seems to make sense now, so they've found the right way to do it.
Again, any merger, whether it's in Canada's North, or some of the mega airline mergers in recent years, such as American Airlines and US Airways, it's all about building scale and cutting costs. And I think it's critical in bringing together Canadian North and First Air, that they're able to build that scale, and they're able to reduce some cost.
Again, the whole objective is to have a reliable and sustainable airline going forward. And I believe, having been through a number of these mergers before around the world, that this is the right way to go.
Back in 2015, Canadian North and First Air entered into a codeshare agreement that only lasted 2 years due to customer dissatisfaction. Could we see a repeat of that with this merger?
As far as this particular go-around, to the best of my knowledge inside and outside this deal, no community in Canada's North is going to lose service.
Maybe there'll be an alignment of capacity and demand. Here's a silly example. When I was in Australia, there were two wide-body jets operating within five minutes of each other within Brisbane and Sydney. Well, let the two airlines work it out on how best to deploy their [combined] capacity.
But within these two airlines, both have got good fleets. They know the North, they know all these communities. This is a commercial venture. It's important to note here that for essential air services in Canada, there is no subsidy.
So these airlines are going to do what's right in terms of commercial demand in the North, including natural resources air charters, not just people. There's going to be service for all these communities. That much I'm sure of.
Do you think the airlines learned anything from the codeshare failure?
Don't forget, that codeshare was outside a merger environment. And now, we're talking about a full merger between the two carriers: fleets, destinations, seat capacity, and making sure they've got the right formula for every single community.
It's really less of a codeshare; what a codeshare implies is that there's going to be two separate airlines. If we have one airline we're dealing with here, we're going to be looking at the right amount of capacity into each and every northern community.
There are concerns that no competition on many routes could eventually lead to higher fares and fewer choices. What do you think?
Generally speaking, the airline business is based on the economics of supply and demand. Less supply, or higher demand, or both together, can push up prices.
I can't speak for Canadian North or for First Air, or for the merged entity. But again, I think it'd be crazy for them — in a relatively small northern market that's highly reliant on air transport — to push up prices [in a way] that's actually going to curtail demand, I think would not do the merged airline any service.
Will there be input from Canada's competition bureau? There may very well be. But again, I don't think we'd be at the altar of a merger unless both parties had carefully thought out what would make sense for their markets, and what would make sense for Canada's regulators.
With files from Juanita Taylor