After more than a year of study, the federal Competition Bureau says First Air and Canadian North did not break the law in its efforts to stop startup airline GoSarvaq from entering the Ottawa-Iqaluit market.
Iqaluit to Ottawa is a three-hour flight by jet, with a retail cost of $2,500 round-trip. Compare that to Ottawa to Yellowknife, a five-hour flight that costs around $800 on Air North. You could even go from Ottawa to Hong Kong, a 16-hour trip, for $1,000 on Air Canada.
It will take some time for Nunavummiut to forget how First Air and Canadian North – working on a codeshare agreement at the time – dropped the price of one-way tickets to as low as $266. That drop came after GoSarvaq said it would fly twice a week for $499 each way. Hard to get off the ground and compete when your competitors drop the cost of a ticket by almost half the price.
But more than the price war itself, the bigger lesson comes from the argument the Competition Bureau used to absolve the airlines’ knockout punch pricing. The airlines said they were still making a profit at $266 each way.
We’ve noted this before but take another moment to breathe that in.
Under the codeshare, First Air and Canadian North had a monopolistic partnership backed by guarantees of government duty travel and medical travel contracts, which fill planes with travellers who need the ability to change their flights on short notice, not those seeking sale prices. The government rate of $1,500 or so is no problem when someone else is footing the bill.
Still, there is a market for those who want to pay a discount price, or perhaps we should call it a fair price. That market wasn’t fed for many months ahead of GoSarvaq’s launch attempt.
Unfortunately, these same customers were the ones who ended GoSarvaq’s startup hopes as much as the larger airlines. It was these customers who jumped back to the legacy airlines when Canadian North and First Air dropped their prices even lower than GoSarvaq could offer. To paraphrase the old saying, with customers like that, who needs enemies?
In the wake of this episode, and after First Air cancelled its codeshare agreement with Canadian North, we’ve seen some sales bringing prices to a more reasonable level.
But Nunavummiut deserve better. They deserve transparency and actual competition.
That’s why we’re hopeful GoSarvaq can revive itself, this time aware of the benchmark set by the big players. Pick a different route, perhaps closer to Toronto or the East Coast.
Thinking more creatively, an airline would be wise to consider the success of Iceland’s airlines, which have taken a once challenging nation to visit into a free stopover along the way from North America to Europe. Considering the investment made into a $300 million airport in Iqaluit, it’s a good time to consider ways to bring more traffic into our territory, and an airline that makes a stop along the way from southern Canada to Europe would be a good way to do so.
But consumers need to take a hard look in the mirror, and consider who has our best interests in mind. If they don’t support these businesses, they won’t get what they pay for, they will pay for what they get.