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North West Co. buys North Star Air, ends air freight contract with Calm Air

NWC buys North Star Air, ends cargo contract with Calm Air

2017 05 04

2017 05 04

* Calm Air receives 90-day notice of termination of existing cargo contract with NWC

 

NUNATSIAQ NEWS


The North West Co. plans to use its own airline to move cargo to Nunavut's Kivalliq region, instead of Calm Air aircraft, similar to this one at the airport in Rankin Inlet. 

On May 1, the share price for the North West Co. Inc. rose 3.42 per cent, following news of the company’s intent to buy an airline, North Star Air Ltd., along with its 11 aircraft, for $31 million.

North Star, a Thunder Bay, Ont.-based airline, provides cargo and passenger service throughout northwestern Ontario.

But the NWC also plans to use the airline to ship cargo to Nunavut’s Kivalliq region.

The company that owns Calm Air, Exchange Income Corp., said the NWC plans to end its use of the Manitoba-based Calm Air within 90 days.

“EIC has received notice from North West that it will be transitioning the freight service to its new subsidiary in 90 days and as such, at that time we will cease our relationship as a supplier to North West,” Calm Air’s owners said in an April 28 news release.

EIC’s share price fell by about three per cent on May 1, following the news.

Calm Air received $14 million in revenues annually for carrying North West freight, said the release, issued the same day that the NWC announced its plan to enter the aviation business.

But loss of the NWC contract to Calm Air’s bottom line would be “very small,” the release said, and would produce a drop in earnings of “under $1 million,” because Calm Air used “dedicated” aircraft to move the cargo.

Calm Air’s fleet includes 15 combination aircraft, mainly ATRs, on which it transports both passengers and other cargo.

“As such, it will have no impact on the efficiency or profitability of those operations,” the Exchange Income Corp. release said.

In Nunavut, Calm Air provides service to Arviat, Baker Lake, Chesterfield Inlet, Coral Harbour, Naujaat, Rankin Inlet, Sanikiluaq and Whale Cove.

Calm Air will continue to provide air cargo services to Arctic Co-operatives Ltd. under a multi-year contract, the release said.

And Calm Air recently saw an extension of two years to its medical travel and duty travel contracts with the Government of Nunavut.

As for the NWC’s plans, the company said it plans to invest $14 million in additional aircraft to build on the airline’s existing fleet of Pilatus-12 and Cessna Grand Caravans.

The investment in the airline is expected to create annual earnings for the NWC of $8 million and save another $2 million in air carrier cost increases, NWC said in its release.

The deal is subject to the approval of regulators, and NWC shareholders must vote to approve a new variable voting share structure that will be set up to ensure the deal complies with Canadian ownership rules under the Canada Transportation Act.

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