Canada’s Competition Bureau says a proposed merger between Canadian North and First Air would increase fares and hurt services for vast swaths of the Northwest Territories and Nunavut, creating a monopoly that would be virtually impossible to break.

The holding companies for the two airlines were quick to respond, issuing a statement outlining their concerns.

“Our Inuit communities are surprised and extremely dismayed by the report and it is our sincere hope and expectation that the Minister will pursue his mandate of reconciliation and acknowledge that the very organizations proposing this merger have a constitutional mandate to represent the rights and interests of Nunavik and the Inuvialuit Region.”

Canadian North and First Air specialize in serving small and remote communities in Canada’s north, a sparsely populated region where flying is often the only viable means of transportation.

The companies warn they risk going out of business if they aren’t allowed to merge, the same conditions mean it would be extremely expensive – not to mention risky – if another airline wanted to compete against the merged entity.

“The Bureau’s economic expert found that the Proposed Transaction was likely to result in significant and material price increases for passenger and cargo customers in the Kitikmeot region, the Qikiqtaaluk region, the Mackenzie Valley region, and on the Ottawa-Iqaluit and Trans-Arctic routes,” reads a report to Canada’s Transport Minister.

“The Bureau’s assessment fails to recognize that a merger is necessary to sustain air travel to the North and relieve the substantial financial burden currently shouldered by Inuit Land Claim Organization (LCO) owners,” reply the airlines. “This process is representative of southern-led institutions’ continued ignorance of northern businesses and we disagree with the Bureau’s decision to ignore the overwhelming and substantial positive impacts this transaction would have for northerners.”

On only one norther route was competition seen as sufficient, from Edmonton to Yellowknife. On top of Canadian North and First Air, Air Canada and Westjet also serve the route. Yukon was not part of the assessment, being served separately by Air North.

The airlines say the merger is vital to the northern communities they serve, and to the long-term economic vitality of their Inuit owners.

“Our Inuit-led solution came about through hundreds of hours of discussion among Inuit and northern-elected leaders. The incomplete analysis in the Competition Bureau’s report demonstrates a lack of understanding of the northern reality which disproportionately and negatively impacts Inuit. We are reminded that the federal government has bailed-out southern national carriers, while northern airlines see continual increases in regulation and fees.”

Transport Minister Marc Garneau is reviewing the proposed merger to determine whether it is in the public interest. The Competition Bureau report is part of the process.