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This article was published 15/9/2010 (3320 days ago), so information in it may no longer be current.
Exchange Income Corp. is adding Bearskin Airlines to its portfolio of Manitoba regional airlines and now owns just about the entire set.
The Winnipeg-based holding company has signed a letter of intent to buy Bearskin Airlines for $32.5 million.
The Sioux Lookout, Ont.-based airline will broaden Exchange Income's air service reach into northwestern and central Ontario as far south as Ottawa and Kitchener-Waterloo.
Bearskin operates hubs out of Thunder Bay and Winnipeg and dominates in the Thunder Bay, Sault Ste. Marie, Sudbury, North Bay markets.
It also flies to Flin Flon and The Pas and has several flights into northwestern Ontario from Winnipeg.
Last year Bearskin generated about $47 million in revenue and the company has consistently turned a profit for several years.
After raising about $60 million in debt offerings during the last 12 months, Exchange had made it clear it was on the lookout for acquisitions.
It will pay for Bearskin by issuing about $3 million in new shares and the remainder will be in cash.
Harvey Friesen, who owned Bearskin with his brother Cliff, said they have been talking with Exchange for several years.
"We see what they have done with the other airlines they have bought," Harvey Friesen said from Sioux Lookout. "The other airlines have continued to operate independently and we are really looking forward to continuing to grow the business."
The Friesens and all the rest of its 260 employees will continue to work for the airline.
In addition to Bearskin, Exchange owns Perimeter Air, Keewatin Airways and Calm Air.
Last year Exchange Income Corp.'s airlines generated $153.5 million in revenue out of total revenue of $211 million. (It also owns some industrial manufacturing companies mostly in Alberta and B.C. )
Recently, Exchange acquired the Manitoba dealership for Shell aviation fuel and runs depots in Winnipeg, Thompson and The Pas.
Its operations have also solidified their presence in the field with Keewatin Air recently winning a multimillion-dollar medevac contract with the Nunavut government and Calm Air winning a multimillion-dollar contract with Hydro One in Ontario to distribute diesel fuel in the region.
The newest addition to Exchange Income's family of airlines gives it considerable dominance in the market.
Although it will control the entire air service offerings in many small communities in Manitoba, company officials maintain its interest is in expanding service, not cutting it or gouging its customers.
"We do have a strong market position, but we bristle at the suggestion that we have a monopoly," said Exchange Income CEO Mike Pyle.
He said the price-per-seat-mile at Perimeter, Keewatin and Calm Air is less than air service prices in northern Ontario and Quebec.
Tribal Councils Investment Group holds a large block of Exchange Income shares and has a marketing agreement with the company to establish community partnership agreements in many of the First Nations communities that Perimeter flies into. Those deals mean significant money has flowed back into the communities in the form of free tickets and other services.
"For instance, when NAC (North American Charters) failed a few years ago we cut fares rather than increase them," Pyle said.
Barry Prentice, a transportation expert at the University of Manitoba, said the Bearskin purchase makes sense for Exchange.
"They have become successful in their niche market and this will allow them to grow it," he said. "These communities need service and Bearskin provides it. It is the right sized company. The whole idea of deregulation in the airline industry was that niche markets would be serviced."
Prentice said rather than ownership concentration being a negative thing, it could be seen as a good thing for the region. "It is a vote of confidence in the region that there is a commercial enterprise willing to invest," he said.
Exchange shares closed down 12 cents on Wednesday to $15.74.
Manitoba — Flin Flon, Lynn Lake, The Pas, Winnipeg
Ontario — Kenora, Fort Frances, Dryden, Red lake, Sioux Lookout, Thunder Bay, Sault Ste. Marie, Kapuskasing, Timmins, Kitchener/Waterloo, Sudbury, North Bay and Ottawa.
Manitoba — Berens River, Brandon, Brochet, Cross Lake, Dauphin, Garden Hill, God's Lake Narrows, God's River, Lac Brochet, Lynn Lake, Norway House, Oxford House, Red Sucker Lake, Shamattawa, St. Theresa Point, Tadoule, Thompson, York Landing and Winnipeg
Ontario — Pikangikum and Sandy Lake
Nunavut — Arviat, Baker Lake, Chesterfield Inlet, Coral Harbour, Rankin Inlet, Repulse Bay and Whale Cove
Manitoba — Churchill, Flin Flon, Gillam, The Pas, Thompson, Winnipeg
Nunavut — Arviat, Baker Lake, Chesterfield Inlet, Coral Harbour, Repulse Bay, Rankin Inlet, Sanikiluaq, Whale Cove
Manitoba — Winnipeg and Churchill
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.