Industry Profile & Trends

Industry Description

Manitoba’s regional carriers have a “north-south” orientation; moving passengers and cargo to places like Dauphin, Swan River, Flin Flon, The Pas, Thompson, and Churchill, as well as to a variety of First Nations communities such as Norway House, Oxford House, God’s Lake Narrows, Little Grand Rapids, Shamattawa, St. Theresa Point, South Indian Lake, Pukatawagan, Poplar River, Tadoule Lake and York Landing.  Operations can extend as far north as Nunavut.  There is some east-west movement between Winnipeg and Brandon.  A sizeable portion of the demand for regional service relates to transporting adolescents from smaller communities to district schools, conducting stable patient transport, facilitating emergency medical evacuations as well as providing normal passenger service.  Industry also interfaces with northern tourism by transporting sport fishers and hunters to drop off points for lodge operations. This aspect of aviation services continues moderate growth responding to moderate growth in the US economy. Manitoba Hydro and Communications Providers utilize rotary wing operations to monitor utility lines and effect other essential services. Finally, aerial applicator operations continue to grow and service the agriculture sector. 

The composition of Manitoba’s Aviation Industry has not changed radically over the past several years.  In terms of its’ characteristics, the industry overview taken from the 2010 sector analysis remains valid. Geographically, a significant number of the operations are centered in and around Winnipeg,   however, Thompson, Portage la Prairie (Southport) and Brandon are also aviation hubs.  Additionally, aviation contributes to the local economies in all four quadrants of the province. At last count there are 139 aerodromes, 81 air carriers, 19 approved maintenance organizations, 2 large flight training units, (FTUs) and several smaller FTUs. There remains one navigational service in Manitoba.  When the Transport Institute’s report was originally developed overall economic activity from the industry had decreased relative to 2003.  There is no evidence to suggest this trend has turned around.  The report described the sector as being in a state of consolidation in which large companies were getting larger and small companies were getting smaller.

Emerging Sector Issues & Trends

Sector Needs, Issues & Enhancement Strategy Study:  During 2013-2014 the Manitoba Aviation Council contracted with InterVistas Consulting to identify industry sector needs and to assist MAC in developing a strategy to  meet those needs.  In the process of completing the contract InterVistas conducted a phone survey of members and in depth interviews with key stakeholders.  The consultants also led a strategy session with MAC’s board members.  The end result is a roadmap for MAC to move forward on important industry issues. While this “Roadmap” has continued to provide guidance for MAC, the current President has directed a review of the Roadmap for 2015/16.

Key Issues Facing the Industry

While many of these issues were identified by the previous study by InterVistas Consulting in 2013-2014 they are still considered valid and of concern for 2015/16.  The results in several areas are particularly relevant to this section of the report.  The study categorized local aviation companies into “individual” (3 or less full time employees) “small” (less than 25 full time employees) “medium (less than 50 full time employees) and “large” (150 or more full time employees). 

In terms of the amount of their business occurring within Manitoba, both individual and large companies do most of their trade within provincial borders.  Small & medium corporations, however, do more than half of their service provision outside of the province. 

When asked about the recent increase in PST, there was a differential impact, but nevertheless all companies felt it would hamper their operations.  Medium corporations felt most strongly that the increase would hurt their operations.  On a scale of zero to five, where zero represented no problem and five represented a significant problem, the medium sized companies assigned a value of 3.8 on average.  Both small and individual companies rated it as 2.9 out of five. 

Finally, when asked to identify their top five issues, these same companies revealed that (federal) regulatory compliance was by far and away the top impediment to their business operations.  This was followed by economic weakness, PST increases, finding and training staff and finally, technological change.

Government Air vs Industry Air

Firstly, Manitoba Infrastructure and Transportation (MIT) has partnered with Manitoba Hydro to have Government Air transport staff back and forth between Thompson and Hydro’s northern worksites.  Prior to the current agreement, this service was performed by industry.  There are also unconfirmed reports that a government directive to staff in Thompson dictates they must use Government Air as their first option for business travel.  What makes this even more disheartening to members of our industry is that in order to fulfill its agreement with Hydro, the province purchased a Twin Otter aircraft at a cost of $7.5 million. 

Manitoba Health appears to be embarking on a similar trend.   They too, have purchased a Twin Otter and have subsequently outfitted it as a “fixed wing” intensive care air ambulance.   These initiatives by MIT and Health have occurred in spite of the fact that industry was either currently providing the service (Hydro staff) or had the staff and equipment to provide the service (Health). 

Industry Consolidation

In the 2010 sector study completed by the University of Manitoba’s Transport Institute, the aviation industry was described as being in a state of consolidation, meaning that a few companies were getting larger and many smaller companies were finding it hard to compete. This development has continued to evolve with Exchange Income Group’s (E.I.G.) purchase of two more companies in 2012 - 2013. (Bearskin Airlines and Custom Helicopters.)  This investment group now owns, Calm Air, Perimeter Aviation, Keewatin Air, Bearskin Airlines and Custom Helicopters.  As such the group controls a very significant portion of the regional air traffic in Manitoba.  They also entered into a partnership with Manitoba Keewatinowi Okimakanak (M.K.O) to launch a northern helicopter service known as Piminawin.  As it now stands, the only major Manitoba operators outside of the E.I.G. group are Fast Air Executive Aviation Services, Keystone Air Services and Northway Aviation.  

This company also owns the land and buildings on which the Government Air hanger and the Western Canada Aviation Museum are located.  They are nearing completion of a massive hanger in the same area which is designated for Calm Air operations.  Clearly this company is centralizing operations of their companies in an effort to create more efficiency within their overall operations.   

From the perspective of MAC members who operate smaller companies whose ability to compete with the massive capital resources of EIG is extremely limited coupled with the shrinking amount of government business, these are seen as very ominous signs for their future.   

Another factor that continues to impact on local operators is WestJet’s continued expansion into the regional market.  The Winnipeg – Regina – Saskatoon run continues to be of interest to WestJet and further expansion into ”North-South” routes may also be tempting to WestJet.

Lack of Support for Regional Infrastructure

It was stated in the introduction to this section that in addition to cargo and passenger traffic, the health of Manitoba’s aviation industry is dependent on government and corporate service contracts and a healthy tourist industry.  However, like the provincial trucking industry, whose success is dependent on the development and maintenance of roads, the regional aviation industry is dependent on a well maintained network of rural airports.  In the latter regard, there is mounting concern over a significant lack of support for these crucial pieces of aviation infrastructure.  Traditionally all airports fell under the jurisdiction of the Federal Government.  Manitoba has never been involved in this type of infrastructure support beyond a token yearly grant of up to $2500.  Prior to the mid 1990’s the Federal Government owned, ran or financed 150 of Canada’s airports which meant it was charged with supporting both their infrastructure and operating needs.  In 1996, the Liberal Government decided to offload what they saw as a drain on their coffers.  They implemented what was known as the National Airports Policy (N.A.P.) which divided airports into a National Airports System (N.A.S.) group consisting of the 26 largest airports in Canada and a second tier (all others) known as the Regional Airports Group.  In terms of the NAS group, the government absolved itself of all maintenance and upkeep but nevertheless charged the various airport authorities rent on their operations.  According to one report this amounts to $2.5 billion over the 16 years since transfer.  The rental fees were originally destined to support regional airports, but this has never occurred.  All airport rent is now moved into general revenue and the vast majority is earmarked for projects outside the industry.

In terms of the various regional operations, municipalities were told to take over their local airports or they would be closed.  (The exceptions here are remote airports like Churchill where there is no road access.)  Outside of transitional monies and something known as an ACAP fund (or Airport Capital Assistance Program) the government relinquished all ties to these airports.  The policy belief is that “market forces” will determine the fate of a given airport.  If an airport cannot break even or turn a profit on its operations, municipal taxpayers will have to shoulder the burden or vote to close their airport.    In regard to ACAP, the available money has remained relatively constant since the beginning, however provincial and territorial airports can now apply, leaving less money available to support individual projects. Adding insult to injury, funding criteria now excludes many regional airports from even applying.  

The consequences of allowing an existing system of rural airport infrastructure to fall into disrepair will be devastating for regional operators.  Obviously air carriers need airports to land their planes and to facilitate the exchange of commerce.  However, outside of paying landing fees, they have no influence on the maintenance of these key pieces of industry infrastructure.   In November 2012, MAC made a written submission to the Senate Standing Committee on Transportation and Communications calling for more support for regional airports and has also advised the provincial government (Minister Ashton) for the need to support Regional Airport infrastructure maintenance.  

While the argument against provincial support for airport infrastructure is based on the premise that this is a federal responsibility, it should be pointed out that a significant amount of the provincial economy, especially in the north, depends on air transport.  Additionally, government offices and services are spread out across Manitoba resulting in various levels of dependence upon air travel.  Without air travel many northern communities would be without those services, including medical transport.  In this one area alone, airport infrastructure is a key issue.  Manitoba Health has determined that transporting stable patients from rural Manitoba into Winnipeg is cheaper and more efficient by air in comparison to ground transport.  Yet its’ Southern Air Ambulance Program will be impossible to operate if rural airports are left to crumble.

Transport Canada

MAC will continue to strive to represent the industry to Transport Canada with the goal of alleviating the stress that almost always occurs when TC and Industry communicate on sensitive issues .

Industry Strategies

There are a variety of environmental markers signaling that the future of S.M.E.s in Manitoba’s aviation industry is destined for a troubled future.  This outlook not only applies to the air carriers but also to the smaller rural airports. Faced with this problem, over the past year MAC has tried to sound the alarm on a number of different fronts.  In addition to exploring methods of creating an efficient and well trained workforce, we have lobbied both the Provincial and Federal Governments to change course in terms of their lack of any real support for our industry.  While the strategy has not shown any significant results to date, we feel that we must continue to press government on the issues described above.   

Sector Council Strategic Goals

In 2010 the Board of Directors of the Manitoba Aviation Council hired a consultant to guide them through a strategic planning process.  As a result of that process, MAC identified a mission statement and a set of strategic goals for the 2010 – 2015 time frame. The mission and goals are briefly summarized as follows and are still considered valid going into 2015/16 :

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