Canada’s Transport Minister has approved a merger between Canadian North and First Air, setting aside concerns expressed by the Competition Bureau. The merged company will control almost all of the flying to remote and isolated communities in Nunavut and the Northwest Territories.

Marc Garneau published the decision Monday, though it was only made public Wednesday afternoon. “The North, more than any other region in Canada, relies on air transportation to maintain quality of life,” he said.

The new company will have to abide by several conditions:

• Cap passenger and cargo fare increases for the next seven years;
• Maintain minimum number of scheduled days of service for community-pairs, though frequency may diminish;
• Apply minimum cargo service standards;
• Allow other airlines access to cargo and airport facilities for the next five years, and;
• Take steps to allow greater employment opportunities for Inuit people.

“We carefully examined the public interest, financial and competition aspects of the proposed merger. A strong, financially stable northern air carrier, taking advantage of operating and network efficiencies of a merger, will best serve the North by leading to greater reliability of service as well as environmental sustainability.”

“This is good news,” said Charlie Watt Sr., Makivik President, which owns First Air. “In 1990 we bought a troubled airline, First Air, and made it sustainable. At the time, we promised to create an airline owned by all of the Inuit of Canada and we are now much closer to making that a reality.”

The new airline will serve 24 communities in the North, with some 40 airport-pairs. It will also offer connections in the South at Edmonton, Ottawa, and Montreal. Canadian North will also have a virtual monopoly on most Northern routes.

BELOW: A map of the combined routes of Canadian North (blue) and First Air (pink). Click on the map for greater detail.

“The Proposed Transaction is likely to result in a substantial lessening of competition with respect to the provision of passenger travel and cargo services on all overlapping origin-destination pairs except Edmonton-Yellowknife,” the Competition Bureau reported in February.

In examining the situation in the North, the Bureau decided it would be too expensive for competitors to enter the market, especially considering the need for specialized equipment to handle the extreme cold and unpredictable weather.

“The Bureau concluded that barriers to entry or expansion in the relevant passenger and cargo markets are high, and also relatively distinct from those found in air transportation markets outside Northern Canada,” it explained.

But in approving the decision, Garneau said he believed the government was striking a balance between citizens’ concerns, and creating a sustainable airline for the North. “The strict terms and conditions will keep costs low and ensure northern and remote communities have the access they deserve, while at the same time protecting northern jobs.”

The new airline will be called Canadian North and fly in the First Air livery. It will be based in Ottawa.