Canadian North gets federal approval to reduce community service to 1 flight per week

The federal government has signed off on changes to the terms and conditions of Canadian North's 2019 merger with First Air, which now allows the airline to reduce service to communities to as little as one flight per week.

The changes, announced in a news release on Friday afternoon, also open the door for the airline to hike passenger and cargo rates by up to 25 per cent per year, whereas under the previous merger conditions fares were locked in for seven years beyond those related to operating costs.

Canadian North will be required to adjust its schedules if demand on a particular route ramps up. But the threshold is an 85 per cent passenger load, on average, for six consecutive months.

Canadian North will also now be subject to a 10 per cent cap on profit margins (except for its Edmonton-Yellowknife and Montreal-Kuujjuaq routes), although it will be allowed to recoup past losses over a three-year period. It's unclear whether Transport Canada is allowing Canadian North to exceed the 10 per cent profit cap in order to recoup losses.

It's also unclear whether these new conditions supersede the previous ones from 2019, or are an extension or amendment of those. In particular, the previous conditions protected Ilak and Pivut fares for Inuit beneficiaries for seven years — although those fares in Nunavut are also protected under the conditions of the territorial government's medical and duty travel contract.

Canadian North refused CBC's request for an interview, deferring to the news release from Transport Canada.

The news release pointed to the impacts of the COVID-19 pandemic as the underlying reason behind the changes though it didn't elaborate on how exactly the airline continues to be affected.

The changes to the merger conditions come despite the government of Nunavut's request to keep the original conditions in place for service in Nunavut. Nunavut Transportation Minister David Akeeagok said he wrote to his federal counterpart earlier this year in the midst of negotiations between Ottawa and the airline, asking as much.

"The other impacts are out of our jurisdiction," Akeeagok said, adding he hadn't yet seen the full list of new merger conditions.

"Those terms and conditions were being applied equally to where there was competition, and that's what they were having difficulties with."

The 2019 merger with First Air effectively created a monopoly on air travel in Nunavut, where communities are only accessible by plane. In reviewing the proposed merger at the time, the federal Competition Bureau warned such a lack of competition would lead to price increases, reduced passenger and cargo capacity, and fewer flights.

The conditions imposed at the time were touted as safeguards to ensure costs would remain low while maintaining service levels to communities.

Transport Canada was unable to accommodate CBC's request for an interview, citing difficulties to secure a spokesperson because of the ongoing strike by federal public workers. The department also did not respond to a list of written questions by deadline.

Federal Transport Minister Omar Alghabra was also unavailable for an interview, as he announced proposed changes to the Air Passenger Protection Regulations on Monday.