ch-aviation interview: Bert van der Stege, VP First Air

Founded in 1946 as Bradley Air Services, First Air offers scheduled passenger and cargo flights as well as charter operations in one of the harshest regions on Earth: the Canadian High Arctic. Under extreme climatic conditions, the carrier serves a large number of communities in Nunavut, Nunavik and the Northwest Territories from Southern Canadian cities, using a diverse passenger and cargo fleet which includes ATR42s and ATR72s, B737 Classics, Hercules C130s and a sole B767 freighter.

ch-aviation’s Niels Trubbach recently caught up with Bert van der Stege, First Air’s Vice President Commercial, to discuss the airline‘s operations, its challenges, and the aviation market in the Arctic as a whole.

Bert van der Stege spent most of his career at Lufthansa and worked in similar roles for Arik Air and RwandAir in Africa, before arriving at First Air in November 2013.

First Air – Airline Information

First Air – Aircraft and Fleet List

First Air – Recent News

First Air – Airline Route Network

First Air currently serves small settlements in Nunavut, Nunavik and the Northwest Territories. How would you say air transport has evolved in this area over the past few decades?

We started off in 1946 as a flight school and expanded north in 1954 with air charter and aerial survey work in support of the DEW line construction sites. This transitioned into operating passenger and cargo scheduled flights into the area we currently serve. Prior to the start of flight services, a lot of the arctic communities could only be reached by ship for two months or so a year, as the ocean is frozen solid for a majority of the year.

As time went by, our fleet grew from small planes (Stearman and Super Cubs) to larger ones like the Hawker Siddley 748 and our first jet aircraft, the Boeing 727, which was introduced in the mid 80’s.

A very important addition to our fleet has been the ATR42 and more recently, the larger ATR72. We actually became the largest ATR operator in Canada and have an excellent Maintenance & Engineering unit for both the 737s and ATRs. The introduction of other aircraft into our fleet such as the Hercules, B737-400s and the B767 have of course also been important milestones in our development.

What still remains a big challenge for us is airport infrastructure. Most hamlet airports have only very basic airstrips with unpaved runways. While conditions have improved over the years, a majority of the strips are still gravel, making operations somewhat challenging.

Copyright: Tis Meyer / www.planepics.org

What about government subsidies?

Airlines in Canada have to be self-sufficient. A few years ago, airlines were given subsidies to transport food from the South to the North, but this programme was superceded by another initiative some years ago which now subsidizes retailers instead.

There are no direct subsidies from the Government to Northern airlines, despite the fact we provide a vital infrastructure service to Northerners. This is very different from essential air services in the US or PSO routes in Europe.

Who operates the largest number of airports in the North?

They are all operated by the government. In general, air transport in Canada has to be self-sufficient, and this also applies to many airports, where operators have to pay for large part of the associated costs. If you are a sole operator with a small passenger base, this can become quite a lot to handle.

Copyright: Tis Meyer / www.planepics.org

What are the main reasons for travel?

There are actually three main reasons for travel up in the North. They include work-related travel, medical travel as the smaller hamlets offer limited health services, and finally tourism or family visits.

Work-related travel makes up about 45% of our passenger base while medical travel accounts for another 30%. The remaining 25% travel mostly for private reasons.

On average, residents of smaller communities only travel a few times a year but this can vary greatly – some never travel while others fly frequently.

There are several different groups of work-related passengers. Some are policemen, teachers, nurses, doctors, with others coming from the south of Canada to work in the north. Another group are Northerners who work in the South returning to their northern homes.

In the Northwest Territories, workers from the mines account for a significant proportion of our passengers. We also offer charter flights to the mines for their companies. Aside from the mining industry, the oil sector is also an important market.

Medical travel is actually paid for by the government thanks to state-backed health insurance. Public health staff in the smaller communities decide whether a patient needs to go to hospital or needs to see a specialist. In the event they have to go to hospital, staff arrange the flight for the passenger, depending on how urgent it is. Which of the airlines the patient eventually flies with is decided by hospital staff and depends on schedule, price and availability. If the case is urgent, the passenger is usually put on the next flight out making it very important to offer frequent, reliable service.

There are currently three carriers – First Air, Calm Air and Canadian North – serving Nunavut with scheduled passenger flights all of whose networks overlap. The case is the same in the Northwest Territories. What led to the co-existence of so many carriers?

While there are many airlines operating in northern Canada, a lot of them do not offer scheduled flights. I think there is need for some consolidation in the North. Markets are thin and costs are steep. On some flights we face stiff competition from Canadian North, while on some others, we go head-to-head with Calm Air.There are only two routes where we are the sole carrier operating.

Copyright: Tis Meyer / www.planepics.org

This past year, there were talks between First Air and Canadian North concerning a possible merger. What were the driving factors behind the move and why did the talks end?

Well as I just mentioned, I believe there is need for some consolidation in Canada’s northern aviation industry

One of our main objectives of the merger was to improve the efficiency of our operations – running an airline in Northern Canada is very expensive. A merger would also have benefitted our passengers and cargo customers substantially, as the combining of flights would have led to improved network coverage. Better connections, new services and more choice for passengers. However, shareholders own the two airlines. They have to agree.

How would you describe the relationship between carriers serving Nunavut and the market situation in general?

Due to heavy competition on flights to nearly every destination, fares are kept relatively low. We haven’t been profitable for a number of years now and have been working hard on reducing costs last year as well as improving our revenue. We expect to be back in the black in 2015.

We have no relationship with other Northern carriers outside of the fact that we help each other in the event of flight cancellations and/or delays with re-protection agreements.

In all, we attract passengers by offering the best network, most frequencies and excellent customer service. Ultimately, the airline that delivers the best connections, the superior product and an attractive price gets the passengers or cargo.

We differentiate ourselves through our generous on-board service. We offer the greatest seat pitch in North America and offer two different choices of hot meals on our jet flights with complimentary beer and wine included. Our flight attendants offer friendly personalized attention that you would otherwise experience in First Class only.

What criteria does First Air use to design its route schedule?

We have three local hubs – Yellowknife, Rankin Inlet, and Iqaluit. Our schedule is focused on connecting the North to South market which is most important as demand for flights within communities is much lower.

As soon as our B737s arrive at our hubs from Southern Canada’s major cities, the rest of our fleet, including our ATRs, spring into action offering connecting flights to the communities. After the B737s have returned, they again offer outbound jet connections to the South.

As a result of the hub concept that we employ, our aircraft utilization is low, ranging from around six to seven hours per day for 737s and a couple of more hours for the ATRs. Our schedule varies from day to day, so on some days certain routes see double daily frequencies.

Generally speaking, we serve all destinations at least four times a week. Many have daily service. On a number of flights, we use combi aircraft which allow us to carry both cargo and passengers while offering frequent departures to both the passenger and cargo markets. On certain routes we also use dedicated freighter or passenger aircraft. Cargo transport is very directional – from the South to the North with very little cargo going in the opposite direction.

Currently our split between passengers and cargo is roughly 65/35 in terms of revenue. As we also use some flexible combi aircraft, we can adapt our configuration for certain routes. When just a few passengers are booked on a flight, we can extend the cargo compartment and carry more cargo.

Copyright: First Air

Concerning First Air’s operations, what are the main challenges it faces in terms of maintaining reliable flight operations?

The three main challenges are high costs, harsh weather and under-developed infrastructure. The majority of the airports we use operate under VFR conditions with very limited instrument navigation and landing aids. Combined with the region’s harsh weather conditions and many gravel runways this sometimes makes it challenging to operate.

Reliability pretty much depends on weather and the time of year. If it is a very cold winter day with temperatures reaching minus thirty to forty degrees, we actually do quite well. During those periods, though it is very cold, the sky is usually blue and conditions are fine. But for approximately two or three months of the year, temperatures increase to around zero degrees. As a consequence, any fog, snowfall or snowstorms can make operations very difficult. As with nearly everywhere else, it is these temperatures that are the biggest challenge.
During our ‘better’ months, weather wise, we cancel a very low number of flights – maybe 3 or 4 per week on average – due to weather. Very often in those cases, it is only a particular airport that is closed. However, during more difficult months, the number of weather-related flight cancellations can go up to around 15-20 a week. If our hubs are affected, it’s worse of course. Currently we have around 240 flights per week so as you can see, we are well adapted to dealing with harsh weather conditions.

First Air currently operates some Boeing 737-200s which average 35 years of age. What makes it the best-suited aircraft for your operations and do you have any replacement plans?

Not really as there is no logical immediate replacement. The Boeing 737-200 is one of only a few jets that are able to operate on gravel runways. Unfortunately we won’t be able to extend the lifespan of these aircraft for more than a couple of additional years. They are in great shape, but will become uneconomical to fly. I expect that we will have to retire the aircraft in 2017-2018, as the maintenance costs are becoming too high.

There is no Boeing replacement. Since we use our ATR42s on most flights to smaller communities, we may have to consider looking for a turboprop replacement. Some of these flights could go to the ATR 72, We also look at a jet solution. There are currently a few potential aircraft that could be certified for gravel operations in Canada, including the Avro RJ85 and the larger RJ100. Our partner airline Summit Air already operates such an Avro RJ85.

Copyright: First Air

First Air recently replaced the Boeing 727 with the Boeing 767, and Hawker-Siddley HS 748 with the ATR. What are the advantages of the new aircraft and have they brought any new difficulties with them?

Not really. This replacement took place a couple of years ago, but we are very happy with these aircraft even though they aren’t really ’new’. Their operational costs are much lower, especially from a fuel consumption aspect. Overall, there have not been any problems with them regarding reliability.

 

First Air recently outsourced its Boeing 767 operations to Cargojet Airlines. What were the reasons behind the move?

We started a relationship with Cargojet in summer 2013 and this culminated in them operating the B767 on our behalf. We only had one B767 in our fleet and the industry saying goes: “one equals none” really. Cargojet is very good at operating B767s. This move allowed us to better focus on what we are specialized in, namely B737s and ATRs

Has First Air ever considered sourcing aircraft from Russia or Ukraine?

No. So far we are very happy with the airplanes we currently operate. The ATR is a great aircraft for the job in the remote and cold Northern parts of Canada. We are also actively looking at the Q400, in particular the new combi that Bombardier introduced.

Copyright: First Air

First Air also operates Lockheed Hercules. On which routes do you deploy them?

They are used on charter and scheduled cargo operations Both Hercules aircraft are based in Yellowknife and though they fly for mining companies in particular, they are also available for any customer that requires specialized bulk cargo capacity. A major advantage of the Hercules is that it can operate on gravel runways, a very important aspect of our business.

There is a lot of mining and oil business in the Northwest Territories and Alberta. Some mines are doing quite well and considering expanding, which would obviously be very good for us. Nunavut only has a single mine, which means there is little demand for those types of cargo planes in the Eastern arctic. The oil business, however, is currently one of our concerns. Due to falling oil prices, and a reduced need to shuttle staff to the sites, we lose business opportunities with oil companies.

The Hercules not only operates within Canada, but also flies foreign flights from time to time. For instance First Air’s Hercs recently completed contract flying from the USA to Bermuda and the Dominican Republic.

Your competitors use Dash-8s and Dornier Regional Jets. Have there been any aircraft types in the past that were not particularly suited to conditions in the Nunavut area?

I am not aware of an aircraft type that operated unsuccessfully in the past and had to be withdrawn from service because of that.The two aircraft you just named also seem to be doing a good job in the Arctic, as they are all able to operate under extreme weather conditions. Another important aspect is baggage capacity. Many of our travelers carry at least two or three pieces of checked baggage. We offer two pieces for free. Ensuring we can take all passengers, cargo and baggage is key to the selection and operation of an aircraft type.

Copyright: First Air

What are First Air’s main goals and what do you think its main challenges will be in the coming years?

Our main goal for 2015 is to become a profitable and sustainable company. First Air used to be a very profitable up until about 2009/2010 when revenue declined and costs went up. We have been loss-making ever since and are in the middle of a turnaround.

In 2014, we made very good progress in terms of reducing our costs and increasing our revenue, but there still is work to do.

In January 2014, we embarked on a major restructuring programme designed to make us more efficient by doing things differently and critically investigating where we could reduce our costs without compromising safety, quality and our well-known service standards. The cost-savings achieved in recent months have eminated from all over the company, while the measures implemented have already begun to make an impact as our numbers have actually improved since. I think that we will be able to post a profit again in 2015.

First Air – Airline Information

First Air – Aircraft and Fleet List

First Air – Recent News

First Air – Airline Route Network

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