North West Company buys airline in bid to control costs
Operator of remote stores seeks to control distribution costs
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Hey there, time traveller!
This article was published 28/04/2017 (3108 days ago), so information in it may no longer be current.
North West Company is buying its own airline.
The Winnipeg company that owns 218 stores in some of the most remote parts of northern North America has agreed to acquire Thunder Bay, Ont.-based North Star Air Ltd. for $31 million.
NWC is predominantly interested in North Star Air’s cargo business, but will continue to operate its passenger service to a number of northwestern and northern Ontario communities.
“We have been in transportation with our shipping business, but this will be our first time with a direct investment in air cargo,” NWC CEO Edward Kennedy said. He was referring to his company’s 50 per cent ownership in Transport Nanuk Inc., a Canadian shipping company servicing the eastern Arctic.
NWC already accounts for about 17 per cent of North Star’s total business and Kennedy said that will grow to 45 per cent as the retailer shifts more of its air cargo to North Star.
To facilitate that, in addition to the $31-million purchase price, NWC has already committed to spend $14 million to add two additional planes to North Star’s fleet of 11, mostly Pilatus PC-12s and Cessna Grand Caravans. Kennedy said the plan is to broaden the airline’s routes to reach more of NWC’s stores.
“Cost is a big factor for us, no question,” he said. “We have taken some big freight increases and we are not happy with that. We understand the carriers need to get a return, but it is still a pain point for us.”
He said the company will continue to use third-party carriers but it will shift some business to North Star as it studies the cost and benefits NWC might receive by directly controlling the entire distribution channel. NWC has already given notice to Exchange Income Corp., the owner of Calm Air and other northern Manitoba airlines, that it will shift about $14 million of cargo freight from Calm Air to North Star.
martin.cash@freepress.mb.ca