Calm Air has lost a $14 million annual contract following the North West Company's purchase of its own airline, but passenger routes will not be affected, according to Calm Air's president.
On Friday, the North West Company announced that they had purchased Thunder Bay, Ont.-based North Star Air for $31 million. The company also plans to invest another $14 million to expand airplane and hub capacity, with the goal of streamlining freight delivery to their Northmart and Northern Stores in remote communities.
The North West Company currently relies on Calm Air for freight delivery in Nunavut's Kivalliq region. On Friday, the airline announced it had been given 90 days notice that the North West Company would be terminating its relationship with Calm Air.
The North West Company plans to add aircrafts to North Star's current fleet of 11.
"We will be acquiring another Basler and leasing an ATR," said Derek Reimer, the company's director of business development.
The final details of the North Star acquisition are expected to be finalized in June. The switch from Calm Air will happen in early August.
Minimal impacts, says Calm Air prez
A press release from Calm Air said the airline gets $14 million in annual revenue for carrying North West Company freight, but due to the "competitively priced" service it offers the company, it expects to see only a $1 million impact on its bottom line.
"The pricing we were giving North West Company was by far and away the lowest price we had anywhere within our network," Calm Air president Gary Bell told CBC.
Bell said that because North West Company freight was not transported on Calm Air's mixed cargo-passenger flights, those routes will not be affected.
In January of 2017 the North West Company did not renew a long-term contract with Calm Air according to Bell. That led to to Calm Air moving its freight off its main Winnipeg-Rankin Inlet corridor and on to chartered frights from Thompson and Churchill, Manitoba.
Staffing in those locations may be affected by the loss of the contract if replacement business cannot be found, Bell said.
As far as North Star Air encroaching on their business in the Kivalliq, Bell said that he isn't worried.
Most of Calm Air's cargo clients, like the Canadian Arctic Co-operatives, have signed long term agreements with the airline, he said.
"We don't see them as a competitive threat," he said. "Only because they won't be able to match the frequency that we provide."
Bell said that he believes that North Star Air's dedicated freighters won't be able to compete with the seven-day-a-week service Calm Air provides the region via Combi aircraft flights from Rankin Inlet.
The North West Company announced Friday after their acquisition of North Star Air that they planned to expand the airline's cargo service to Manitoba and the Kivalliq region.