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Nunavut Air Services System Implementation Options Prepared for: Government of Nunavut Department of Community Government & Transportation March 2003 Submitted by: LPS Aviation Inc. One Antares Drive, Suite 250 Ottawa, Ontario CANADA K2E 8C4 Tel: (613) 226-6050 Fax: (613) 226-5236 e-mail: [email protected] Web site: www.lpsaviation.ca Table of Contents Table of Contents .............................................................................................. i List of Figures ................................................................................................ iv List of Tables ................................................................................................ iv 1 The Challenge ...........................................................................................1-1 1.1 Background .............................................................................................1-1 1.2 Historical Context ........................................................................................1-2 1.2.1 Origins .............................................................................................1-2 1.2.2 Western Nunavut ....................................................................................1-2 1.2.3 Eastern Nunavut .....................................................................................1-2 1.2.4 Central Nunavut .....................................................................................1-3 1.2.5 Beginnings of a Network ..............................................................................1-3 1.3 Aviation Constraints and Opportunities .....................................................................1-4 1.3.1 Over Capacity in the Passenger Market .................................................................1-4 1.3.2 Cargo Market Characteristics ..........................................................................1-5 1.3.3 Competition .........................................................................................1-5 1.3.4 Barriers to Competition ...............................................................................1-6 1.3.5 High Costs and Airfares ..............................................................................1-6 1.4 Strategic Options - Air ....................................................................................1-7 1.5 Study Organization .......................................................................................1-8 2 Air Services Characteristics and Users ...................................................................2-1 2.1 Current Status ...........................................................................................2-1 2.2 Community Air Services ..................................................................................2-2 2.2.1 Route Structure ......................................................................................2-2 2.2.2 Frequent Flier Programs ..............................................................................2-5 2.3 GN Air Travel Purchasing .................................................................................2-6 2.3.1 Decentralization .....................................................................................2-6 2.3.2 Air Transportation Requirements ......................................................................2-7 2.3.3 Medical Travel .......................................................................................2-7 2.3.4 Chief Electoral Officer, Nunavut ........................................................................2-7 2.4 GN Employee Consultation ...............................................................................2-8 2.4.1 Survey Structure .....................................................................................2-8 2.4.2 Survey Results ......................................................................................2-8 2.4.3 Extrapolations .......................................................................................2-8 2.5 Traffic Statistics ........................................................................................ 2-10 2.6 Community Population and Travel Forecasts .............................................................. 2-10 2.7 Industry Consultation ................................................................................... 2-12 2.7.1 Air Carriers ........................................................................................ 2-12 2.7.2 NavCanada ....................................................................................... 2-13 2.8 Other Government and Related Users .................................................................... 2-13 2.8.1 Polar Continental Shelf Project (PCSP) ............................................................... 2-13 2.8.2 Food Mail ......................................................................................... 2-14 2.8.3 Federal Government ............................................................................... 2-16 2.8.4 Inuit Organizations ................................................................................. 2-18 2.9 Total Demand ......................................................................................... 2-18 3 Air Services Issues ......................................................................................3-1 LPS Aviation Inc., Ottawa, Canada i NAS -System Implementation Options 3.1 Community Consultations 1999 - 2000 .....................................................................3-1 3.2 Community Consultations 2002 ...........................................................................3-3 3.3 Medical Travel Contracting ................................................................................3-5 3.4 Strategic Issues for Resolution ............................................................................3-5 4 Proposed Air Service System ............................................................................4-1 4.1 Service Options ..........................................................................................4-1 4.1.1 Service Patterns .....................................................................................4-1 4.1.2 More direct flights with fewer legs ......................................................................4-2 4.1.3 Cargo / passenger mix ...............................................................................4-2 4.1.4 Aircraft Propulsion and Size ...........................................................................4-3 4.1.5 Schedule frequency ..................................................................................4-4 4.1.6 Fare structure .......................................................................................4-4 4.1.7 Essential Services ...................................................................................4-5 4.1.8 The Quebec Government/Air Canada Jazz Agreement ....................................................4-6 4.2 Options Analysis Approach ................................................................................4-6 4.3 Viability Analysis .........................................................................................4-7 4.4 Modelling Viability of New Routes ........................................................................ 4-10 4.4.1 Qikiqtarjuaq-Iqaluit ................................................................................. 4-10 4.4.2 Cambridge Bay-Iqaluit .............................................................................. 4-11 4.4.3 Yellowknife-Iqaluit .................................................................................. 4-13 4.4.4 Greenland - Iqaluit ................................................................................. 4-14 4.4.5 Sanikiluaq-Iqaluit .................................................................................. 4-14 5 Implementation Options .................................................................................5-1 5.1 Options Overview ........................................................................................5-1 5.1.1 Moral Suasion .......................................................................................5-1 5.1.2 Direct Subsidies .....................................................................................5-1 5.1.3 Re-regulation ........................................................................................5-2 5.1.4 Public Ownership ....................................................................................5-3 5.1.5 Contractual Incentives ................................................................................5-3 5.1.6 Conclusion ..........................................................................................5-4 5.2 Types of Contract ........................................................................................5-5 5.2.1 Scope ..............................................................................................5-5 5.2.2 Master Contract ......................................................................................5-5 5.2.3 Prime Contractor + Subcontracts ......................................................................5-5 5.2.4 Structured Contracts .................................................................................5-6 5.2.5 Bundling ............................................................................................5-6 5.3 Implementation Mechanisms .............................................................................5-8
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