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North West Company buys airline

The North West Company has purchased an air carrier and is terminating its cargo contracts with the Kivalliq- and Manitoba-servicing carrier Calm Air. - NNSL file photo

The North West Company (NWC), which owns and operates Northern and Northmart stores across Nunavut, announced April 28 it has purchased an air carrier and is terminating its cargo contracts with the Kivalliq- and Manitoba-servicing carrier Calm Air.

The $31 million purchase of North Star Airlines (NSA), a Thunder Bay, Ont. based carrier, is scheduled to be completed in June, subject to a variety of technical steps, such as shareholder approval.

"Moving goods is critical to our success and (North Star) is a proven, superior performer," stated NWC president and chief economic officer Edward Kennedy in a news release.

"We expect to continue to rely on third-party carriers in many regions, but with (North Star) we will have options to compete and deliver faster, more consistent service to our customers where the opportunity or the need arises."

The North West Company, by way of a joint venture with Logistec Corporation called Transport Nanuk, jointly owns sealift operator NEAS with Makivik Corporation.

Nutrition North Canada is a freight-based subsidy to retailers and North West Company is the major recipient of that subsidy. Tracey Galloway, a long-time critic of the program, notes Nutrition North paid out 50 per cent of the subsidy, or $32.8 million, to the company in 2014–15.

"The subsidy is expressly designed to iron out the inequities posed by the high logistical and transportation costs of shipping perishable foods to isolated communities," Galloway stated in an article published in the International Journal of Circumpolar Health earlier this year.

Asked last week what impact the company's purchase of an air carrier might have on food costs, Galloway responded by saying there's no way to know under the current program.

"The subsidy rates currently in use by the Nutrition North Canada program were calculated based on data available in 2009-11, prior to implementation. (The program) currently contains no regulations for how retailers set food prices. Without program change, food prices will continue to be set by retailers," Galloway told Nunavut News/North.

"Using the data currently collected by (Nutrition North), there is no way to verify whether subsidy rates reflect the true freight costs borne by retailers that receive subsidy payments. There is scope within the existing program to change subsidy rates, and many participants in the recent engagement urged INAC (Indigenous and Northern Affairs Canada) to do this.

"The challenge will be to collect accurate data on freight costs to communities in an air transportation landscape where retailers either own an air carrier or have undisclosed contractual agreements with airlines."

Nunavut News/North also asked the company if the airline purchase might result in changes to the cost of goods for Kivalliq residents, specifically related to food.

"By now being able to manage the coordination, planning, tracking and flow of goods, (North West) can enhance delivery time, by continuing to employ creative solutions, to move freight more efficiently as well as improve aircraft utilization and ultimately better manage these costs," director of business development Derek Reimer replied.

"As an example, North West has invested in freight tracking systems which when fully implemented, will result in improved management of our product. We believe this will ultimately improve the quality and freshness of our food in the new regions that NSA (North Star Airlines) will serve."

Exchange Income Corporation, which owns Calm Air, responded to the news through a release, stating the end of its relationship with North West Company would have a "small" impact, "under $1 million" to its own business.

"Calm Air also provides freight service for the other multi-location retailer in the far north, Arctic Cooperatives, under a new long-term contract. Calm Air’s work for Arctic Cooperatives will not be affected by this change," stated the corporation.

Meanwhile Galloway, whose findings and analysis all come from publicly available documents noted that "in 2015 North West Company’s Canadian operations generated over $1 billion in revenues and $98 million in earnings before taxes. In March 2016 the company posted a $15 million profit in its 4th quarter alone.

"In reports to shareholders, company officials describe its Canadian operations as its most profitable sector: 'the engine of our Company’s continued growth is our northern Canadian market.'"

INAC completed consultations on Nutrition North in January, and told Nunavut News/North April 25 it would make the full report of the findings available in the coming weeks.