First Air seeking $42M loan from feds

[Donald]

http://www.cbc.ca/news/canada/north/fir ... -1.3549516

First Air has been lobbying the federal government for $42 million to replace some aging planes in the company's fleet, but the company says it is not seeking a handout.

"This is a loan," said Bert van der Stege, First Air's vice-president. "This is not a contribution or a subsidy. This is a loan that the government makes available to businesses."

In January Brock Friesen, First Air's president and CEO, wrote the Parliamentary Standing Committee on Finance asking for "a financial contribution of $42M over two federal fiscal years," starting in the 2016-17 fiscal year.

The federal budget unveiled in March did not include that funding.

Van der Stege says the purchase of new ATR42-500 turboprop planes is part of a three-year restructuring plan at the airline. He says it's important for the company to get these new planes, but not so urgent that a delay in acquiring the planes will affect service.

Company said drastic cuts in service may be needed

Friesen, in his submission to the parliamentary committee, had laid out drastic measures he said the company would need to take if the government denied the funding.

Brock Friesen
Brock Friesen, president and CEO of First Air, wrote a parliamentary committee in January seeking money to buy new planes. (CBC)

"Without funding through Canada's vital business support programs, First Air will need to drastically reduce the volume and frequency of flights or eliminate services to a number of communities," Friesen wrote.

The letter also noted the "high levels of poverty" in Northern aboriginal communities served by the airline and said the "critical fleet replacement requirement" poses "food security and health safety issues."

When asked Friday if First Air might reduce service if the government fails to provide a loan, van der Stege said, "It could be a possibility."

"Obviously, that's not our interest," he added. "That's not what we'd like."

According to van der Stege, the company was already approved earlier this year for a smaller loan from the Business Development Bank of Canada (BDC) — enough to cover the cost of one new plane.

'Northern routes are not economically viable'

First Air began shopping for potential funding early last year, pursuing various government departments and arms-length agencies.

A heavily redacted briefing note written for then-Deputy Transport Minister Jean-Francois Trembley obtained by CBC News outlined several "considerations" about northern air travel.

"It is widely understood that many northern routes are not economically viable," the note reads.

It goes on to say northern carriers are "likely suffering from the slowdown in mining" as well as increased competition and reduced revenues from north-south trunk routes to Yellowknife and Whitehorse.

The briefing note also included a letter Friesen sent to various government departments in October 2015, but the government withheld the content of the letter, citing a section of the Access to Information Act which covers "advice or recommendations developed by or for a government institution or a minister of the Crown."

Competition Bureau investigating northern airlines

Van der Stege says the airline has felt the economic effect of factors cited in the note, explaining that its recent code-sharing agreement with Canadian North and Calm Air is just one example of the company's recent efforts to stay economically viable.

The controversial agreement, which residents say has meant cargo delays, seating shortages and backlogs, is being investigated by the Competition Bureau.

According to the briefing note, Transport Canada officials have made sure investigators "are informed regarding the unique challenges of air service in the North."

In a written statement, the Competition Bureau said it is still reviewing the code-sharing agreement and could not provide any information about the review or how many complaints it may have received.

Van der Stege says the company has tried to explain why it was necessary to take this and other measures — including eliminating flights to Naujaat, Nunavut, in 2014 — to strengthen its financial status.

Speaking to a regional Inuit organization last year, van der Stege said, "Unfortunately, we don't provide a social service."







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[Shady McSly]

Well Ottawa is close to Quebec if the Feds are prob handing money out in that general region anyway...

[URC]

How many millions has Makivik Corp. sucked out of the company in the form of dividends over the last few years ?

[Gino Under]

Lending money to any Canadian business shouldn't be conditional on that business, who also pays taxes, being handcuffed to 'conditions' other than a viable business plan, term and interest rate.
The Canadian government doesn't know the first thing about running a business. Especially an airline business.
I'd love to see them with a Canadian product, but if that product doesn't fit the business plan, it doesn't fit the business plan. What then???

Gino

[pelmet]

How many millions has Makivik Corp. sucked out of the company in the form of dividends over the last few years ?

"Petition also seeks dissolution of Makivik Corp. board

Beneficiaries press for First Air bonus repayments
JANE GEORGE

Some beneficiaries in Nunavik, outraged by large bonus payments paid to First Air board members, have mounted a campaign to press for the repayment of the bonuses.

The beneficiaries are circulating a petition that also demands the resignation of directors of Makivik Corp., First Air's parent.

"I was not advised in advance of these payments. I do not approve of the large bonuses made to the board of Makivik from First Air," the petition reads.

First Air board members recently received bonuses totaling $1.5 million, including several payments to Makivik executives: $600,000 to First Air's chair, Pita Aatami, also president of Makivik, $250,000 to George Berthe, Makivik's corporate secretary, and an undisclosed amount to Michael Gordon, a Makivik vice-president.

The petition, sent out to all Nunavik communities earlier this week, asks for the removal of Makivik's current board and its replacement by the original signatories of the James Bay and Northern Quebec Agreement.

The signatories would manage the corporation's assets in a trust during an inquiry into the bonus payments.

Sarolie Weetaluktuk of Inukjuak, one of the signatories of the 1975 JBNQA, spearheaded the petition, called the "Nunavik Inuit Petition" in its English version.

The goal of the petition, says Senator Charlie Watt, who also signed the JBNQA, is to press Makivik officials to return any First Air money they accepted and to step down, without forcing them with legal action to do so.

The other original signatories of the JBNQA, who are still alive today, include Zebedee Nungak, Johnny Williams, Putulik Papigatuk, Tommy Cain, Robbie Tookalook, Peter Inukpuk, George Koneak, and Charlie Arngak.

The first of the petition's seven bulleted points states that the signer of the petition is a JBNQA beneficiary.

Its second point says that First Air, a subsidiary company owned by Makivik Corp., belongs to the beneficiaries.

The petition then notes that as a non-profit organization Makivik's assets should not be used to benefit any single member as a dividend or gift.

"The assets are only for the good of the community," it says."

http://www.nunatsiaqonline.ca/stories/a ... rp._board/

[bobcaygeon]

Lending money to any Canadian business shouldn't be conditional on that business, who also pays taxes, being handcuffed to 'conditions' other than a viable business plan, term and interest rate.
The Canadian government doesn't know the first thing about running a business. Especially an airline business.
I'd love to see them with a Canadian product, but if that product doesn't fit the business plan, it doesn't fit the business plan. What then???

Gino

Then they should go to a bank/shareholder like every other operator and get the capital. If the business case works then they will get the cash. If not, step aside and let someone else take over the market.

Why is this plan going to go any better than the ATR 72's?

As for fleet replacement it's not like they are currently running the HS748.

Other aviation companies operating in the north are enjoying their shares trading at all time highs but First Air needs a hand out??

Am I missing something?

[Meatservo]

They don't provide a social service... therefore they shouldn't ask for social finance. Van Der Stege sounds like your stereotypical corporate douchebag who expects the rest of us to be so stupid we won't be able to understand the meaningless bullshit he dreams up. A draw on society who expects the rest of us to be so clueless that we don't notice we are the ones paying for him to suck our blood.

[fish4life]

They need cash flow and working capital, they are selling there perfectly functional 300 series ATR's for a lease or at least loan on less fuel efficient 500 series so they can make debt payments for a few more years.

[SuperchargedRS]

Why do they need to go to the tax payers for the "loan"?

If they have a solid business shouldn't they be able to get the capital from the private folks, or is it that any real business CPA or MBA who might look at that loan application would laugh them out of their office?

[Gino Under]

Yikes!
I didn't realize the hostility toward First Air was so widespread.
Maybe First Air should stop serving "the north". Re-organize, re-finance, and serve other markets.
They obviously aren't wanted "up north".
Yes. They should go see the banks and get on with life.

Gino

[bobcaygeon]

Yikes!
I didn't realize the hostility toward First Air was so widespread.
Maybe First Air should stop serving "the north". Re-organize, re-finance, and serve other markets.
They obviously aren't wanted "up north".
Yes. They should go see the banks and get on with life.

Gino

This is not specific to First Air. Discovery Air received a similar deal from the NWT government and their head office is in Etobicoke.
Yes they have companies in NWT but so do other private and public companies and they are not asking for a handout but have to compete with these subsidized carriers.
This puts enormous pressure on revenues and costs to deliver the same or ideally a better product.

First Air is the only Canadian operator that feels the ATR 42-500 is needed. Everybody else, including another artic carrier use the ATR 42-300.
Needed is a relative term.

This is no different than BBD right now.