Calgary-based Canadian North and Ottawa-based First Air airlines have announced plans to merge—the latest step in the carriers’ efforts to combine air services to best meet the needs of communities in the Canadian arctic.

The two carriers plan to operate under the Canadian North name with an administrative headquarters in Ottawa. “By merging these airlines, we look forward to new economic opportunities in Canada and internationally, and to better air services for Inuit across the circumpolar region,” the carriers said.

The deal, which requires regulatory approval, is expected to close this year.

The two carriers provide key passenger and cargo connections between communities in Canada’s northern region as well as links to the country’s major metropolitan areas down south. Inuvialuit Development Corp. (IDC)-owned Canadian North flies to 17 cities in the Northwest Territories and Nunavut, using Ottawa and Edmonton as southern gateways. First Air, which is owned by the Makivik Corp., links 31 communities across Northern Canada and serves Edmonton, Winnipeg, Ottawa and Montreal.

The two carriers have taken several approaches to pool resources and better meet the demands of the communities they serve. Talks to merge in 2014 ended without an agreement. That deal also would have set up a single carrier with an Ottawa headquarters. A year later, the carriers announced a codeshare deal, but First Air ended it in 2017.

The goals behind the merger and codeshare deals are similar: stretch resources to provide more consistent, reliable service to northern Canada. The challenges are not going away, and in some ways—such as finding enough qualified pilots—they may be getting worse.

“Air service is not a luxury for Northerners. It is a vital lifeline which requires ongoing investment,” IDC Chair Patrick Gruben said.

Added Makivik president Charlie Watt: “The world is changing and we need to adapt to new realities.”

The two carriers said combining forces “is the only viable way” to meet air service demands in the Canadian north. 

A 2017 investigation by Canada’s Competition Bureau examined several competition issues in the region, including whether a codeshare agreement between Canadian North and First Air was anti-competitive, and whether incumbent carriers were engaging in predatory pricing to discourage startups.

The codeshare agreement was terminated, resolving the bureau's concerns.

In 2016, startup Go Sarvaq shut down shortly before its scheduled launch date, because in part low fares offered by competitors on its proposed routes. The bureau investigated the fare battle, but said it did not run afoul of Canadian law.

The affected pilot groups welcomed the merger plans.

“The merger announcement is a positive step for both pilot groups,” said Bill Rodgers, chairman of ALPA’s Canadian North Master Executive Council (MEC). “The Canadian aviation industry is small, and a more efficient, stronger airline will be better suited to withstand the current economic pressures our two airlines have been facing.”

First Air MEC chairman and first officer Charlene Hudy noted that the two pilot groups are of similar size and have shared understanding of the challenges faced by both carriers. “It’s a practical business decision for this merger to take place, and I am optimistic this will have a positive end result for our pilots in the long term,” she added.

First Air operates a fleet of 20 aircraft, including 13 ATR 42s, five Boeing 737-400s, and two 737-200s, Aviation Week’s Fleet Discovery data show. 

Canadian North has 16 aircraft, including 10 737-300s, three 737-200s, and three de Havilland Twin Otters. 

In addition to its core northern region services, both carriers have sizable charter businesses.

Inset: Canadian North

Sean Broderick,