July 7, 2000
JANE GEORGE
Nunatsiaq News
IQALUIT — A battle is brewing between two maritime transport companies, with skirmishes already taking place in Nunavik.
"From the consumer’s point of view, there is a war going on here," said Kuujjuaq businessman Eric Pearson. "And it’s the consumer who will be benefiting from lower prices and better service."
Nunavik’s $15 million dollar sealift business is at stake.
The competition for this lucrative market is pitting two companies, Transport Desgagné, and the Nunavut Eastern Arctic Shipping [NEAS], against each other. Each is vying for the loyalty and patronage of customers who want to send goods by sealift to Nunavik.
This year, their rivalry lowered prices by up to $150 per tonne for some customers.
Mounting pressure?
While many clients say they’re very happy to be saving money, some are concerned over mounting political pressure to move the region’s business to NEAS, which is owned by a group of Inuit birthright development corporations in Nunavik and Nunavut with close ties to Inuit political organizations.
Nunavik’s Makivik Corporation is one of the Inuit corporations that owns NEAS.
Transport Desgagnés is a privately-owned, Quebec City-based company that’s been shipping to Nunavik for more than 35 years. Transport Desgagnés has already allied itself with Arctic Cooperatives Ltd. in a new joint venture in Nunavut.
"People are being warned or threatened," said one Kuujjuaq entrepreneur who — like others in the community — doesn’t want to see his name appear in print.
The Association of Secretary-Treasurers in Nunavik recently sent a letter urging its members to bring their municipalities’ business to NEAS, and receive a preferential rate.
Makivik’s subsidiaries, Air Inuit, First Air and Halutik Fuels, have already moved to NEAS. The substantial amount of materials needed for this year’s maritime and housing projects in Nunavik, projects also administered by Makivik, will be transported North by NEAS. The Kativik Regional Government has also decided to go with NEAS for its sealift needs.
NEAS wins contract
This year, NEAS also wrested a lucrative government contract away from Transport Desgagnés to ship Quebec government goods to Nunavik. When this contract went to tender, NEAS won with its low price — an all-inclusive rate of $198 a tonne.
Last year the government paid $369 per tonne for the same "one stop" service NEAS is offering, and this lower figure has now become a kind of benchmark for maritime transport business in Nunavik.
"It’s significantly less expensive," said Guy Marcil, an analyst with Quebec’s transport department. "It means the new CLSC [community clinic] being built this summer will cost thousands of dollars less."
The amount sent through government channels decreases every year, as regional organizations such as the KRG and the Kativik School Board make their own independent deals, but Quebec will still send more than 2500 tonnes to Nunavik this year – and this is a big guaranteed chunk of sealift business, by anyone’s standard.
Makivik Corporation President Pita Aatami says customers in Nunavik are turning to NEAS solely because of its better prices.
"There’s no political pressure. If it’s cheaper, why shouldn’t people want it?" Aatami said. "We’re here to try and help the people in the North. We’re not here to milk them."
A loss for Makivik?
Some people in Nunavik say Makivik is deliberately taking on a substantial financial loss this year, just to lower prices and gain new business.
But Suzanne Paquin, vice-president of NEAS, insists that Nunavik sealift prices used to be artificially high, and that the current lower prices are "sustainable."
She said NEAS’s three large boats, including the new $14 million vessel, the MV Umiavut, can keep prices low because of their volume and efficiency.
She said NEAS is also offering a "more sophisticated type of service" which includes crating and delivery — a "one stop shop" that’s attractive to potential clients.
For his part, Daniel Desgagnés said his company will try to adjust to the new demands of the market.
"The ideal is that everyone has access to the market, and that the best performer gets the work," Desgagnés said.
Yet there’s growing concern about the future because the consequences of Canadian North’s pull-out from Kuujjuaq — which left no competition and rising costs in its wake — are still fresh. Some fear Desgagnés may eventually drop out of the Nunavik market altogether, putting NEAS into a monopoly postion.
With no competition, they worry that prices under NEAS may rise too.
"They’re the next First Air of the sea," predicted one uneasy businessman.
Non-Inuit get 70 per cent of profit
The power structure of NEAS has already come under scrutiny. NEAS is a joint venture between Nunavut Umiaq Corporation — whose partners include three regional Inuit development corporations (Makivik, Qiqiqtaaluk and Sakku), and Transport Nanuk, whose partners are the Northwest Company and Logistec.
Transport Nanuk’s two partners have 40 per cent of the voting shares, and receive 70 per cent of the profit, while Inuit-owned Nunavut Umiaq has 60 per cent of the voting shares, but only 30 per cent of the profit.
The connection with the Northwest Company, the owner of Northern stores, makes some Nunavimmiut nervous.
They don’t like what Makivik’s involvement with the Northwest and Northern could mean for the region’s Inuit-owned co-operatives, who have traditionally done business with Desgagné.
They think an NEAS with no competition on the seas could have the power of life and death over companies, by giving preferential treatment to certain clients.
"What would happen if the players who are not in the venture are edged out of the business?" suggested one long-time observer of the shipping industry in Nunavik.
Pita Aatami said it’s "normal" for people to be worried, but he emphasized that Makivik is not in the retail business with the Northwest Company — but in the shipping business.
Training Inuit
He added that NEAS plans to train and hire 12 Inuit from the three Inuit partner regions to work with the company.
Aatami said NEAS is only a "win-win" proposition for Nunavik, as shipping costs could drop even more when Quebec gives Nunavik some form of a transportation subsidy.
But would, in fact, such a subsidy go directly to NEAS, and, if so, could it be the final kiss of death for any competition in Nunavik’s waters?
Bruce Myers, who was formerly in charge of Canada’s northern food mail program, said a similar kind of questioning occurred in the mid-1990s. Then, after much public consultation, it was decided to give the food mail subsidy to individuals through Canada Post – instead of directly to companies.
"The people insisted that it was a safer, more competitive, more friendly approach," Myers said.
In Nunavut, where the sea lift is being devolved from the Coast Guard to the government of Nunavut, consultants are drafting a study on how the territory can keep its sealift services equitable and competitive.