Canadian North, First Air codeshare concerns Norman Wells, N.W.T.

A community in the Northwest Territories is voicing concerns about a new codeshare agreement between Canadian North and First Air, saying it's resulting in fewer flights and higher prices.  

Canadian North and First Air announced in May they would begin "codesharing" some routes, selling seats and cargo space on the other airline's flights.

The arrangement between the two airlines has drawn complaints from travellers in Nunavut.

Now Dee Opperman, president of the Norman Wells Chamber of Commerce, says since the codeshare agreement was announced in May, businesses in Norman Wells, N.W.T., have experienced higher airfares.

"There are [fewer] seats, travel is more expensive and because of the [fewer] seats, there are incidents of where freight is being delayed," Opperman says.

"The increase in cost is putting a hardship on businesses."

Opperman says the codeshare agreement has eliminated all pricing competition for airfare in Norman Wells. She says businesses in the community want the airlines to revert back to offering two separate flights each day.

Gregor Harold McGregor, mayor of Norman Wells, says town council has requested a meeting with both airlines to discuss the codeshare agreement and declined to comment further until then.

'The objective is to break even'

Bert van der Stege, a vice president at First Air, says the airline started internal restructuring in 2014, and "something had to happen" in order to continue servicing the North efficiently.

"First Air has been losing money. For us, the objective is to break even again," he says.

Van der Stege says the market is small, and there's not enough growth to sustain multiple airlines.

"The alternative to not doing codeshares is that airlines will simply withdraw from a particular route," he says.

That was the case, van der Stege says, when First Air discontinued service to Naujaat, Nunavut (formerly Repulse Bay).

"Rather than being worried about which airline comes to what community and at what time, and how many aircraft, and how many different airlines are there, as a community, I would much rather worry about not being served properly at all," he says.

Both airlines show identical fares for flights from Yellowknife to Norman Wells. Codeshare flights from Yellowknife to Inuvik are also priced identically, as are flights from Iqaluit to Pond Inlet.

"There is competition," van der Stege says. "Don't think there isn't by looking at one route or one pricing example. We both have independent sales teams in the field."

He says First Air didn't change any of its prices before or after the codesharing agreement was announced.

"What does change, however, is the inventory," he says.

"The allocation of seats may change. If you book very late, very last minute, you may end up paying more than you used to pay."

In an email to CBC, Kelly Lewis, communications manager for Canadian North, says the airline "independently sets prices on all routes, including codeshare routes.

"We have no control over our competitor's pricing decisions, just as they have no control over ours," he says.

Felice Simonelli, a researcher from the Centre for European Policy Studies, did a report on point-to-point codeshare flights in the United States.

"We found that there is a price increase from point to point routes in the area of 10 per cent," he says.

Simonelli says he believes the increase in fares is a result of either price collusion or a doubling of profit margins — where both companies mark up airfares. Some codeshare agreements are more competitive than others, he says, but a lack of transparency from the airline industry makes studying the effects of codesharing difficult.

'It makes perfect business sense'

The Competition Bureau of Canada confirmed it is reviewing the airlines' codeshare agreement. The bureau has a mandate to review business agreements to determine whether they are likely to result in a substantial reduction or prevention of competition. The bureau was not able to provide a timeline on when the review will be complete.

Robert Kokonis, president of Air Trav, an aviation advisory firm, says it's normal to have airlines match each other's pricing.

Kokonis says he doubts Canadian North or First Air will face any regulatory enforcement because of their codeshare agreement. He says both airlines had many duplicated routes and to be profitable in northern Canada, both companies needed to increase efficiencies.

"It makes perfect business sense," he says.

Kokonis says he would rather see the airlines get together and share flights where it makes sense, rather than see one of the airlines go out of business.

The City of Iqaluit is scheduled to meet with the Competition Bureau of Canada today to discuss the codeshare agreement.