By Amanda Fraser -- The recession hasn’t been kind to the NWT’s mining sector. The big guys – De Beers, Rio Tinto, BHP Billiton – have been announcing slow-downs, shutdowns and layoffs for months. But the downturn is going to be felt even more severely this summer by the junior miners and the airlines that rely on their business. Here, at a glance, is their advice for flying during an economic storm.
“I’ve talked to a number of companies who have good prospects up here but they just can’t raise the money to do any work on them this year,” says Mike Vaydik, general manager of the NWT and Nunavut Chamber of Mines. Judging from the mood he encountered at the recent Prospectors and Developers Association Convention in Toronto, “there aren’t going to be too many (prospectors) in the Northwest Territories this summer.”
The numbers recently put out by Natural Resources Canada reinforce that mood. Exploration spending in the NWT in 2008, for example, was $133-million. This year, that number is expected to drop almost 80 per cent to $28-million. For many of the NWT’s charter and scheduled airlines, that’s the plummet heard ‘round the North. About 40 of the Chamber’s 1,000 members are junior mining and prospecting companies and Vaydik estimates that about 60 juniors have worked in the NWT over the past couple of years. The companies rely on investor dollars to move their exploration projects forward.
“Any companies that rely on prospecting are going to take a hit,” said Stephen Norse, president of the Northern Air Transport Association. A broad customer base is the key to longevity, he adds, but that’s tough for the smaller airline companies.
“The good news , I guess, is a lot of the small charters have low overhead,” says Norse. Typically they’re owneroperators who own their own planes, “so there might be some crew layoffs and that type of thing, but they’re able to pull back a long ways. It’s not like there are huge pay rolls and huge debts.” They will also scratch and claw for more and different work.
Buffalo Airways
Buffalo turns to Turkey
In late-February, two of Buffalo Airways’ 40-year-old, twin-engine water bombers took off from Yellowknife for Ankara, Turkey.
To make the epic journey, the Canadair CL-5s – used to fight forest fires – first stopped in Red Deer, Alberta, to be outfitted for 5,400 kilograms of fuel, three times as much as they normally carry.
Along with four Buffalo pilots, two company mechanics, and a pair of documentary cameramen, the planes made a milk-run trip, stopping in Winnipeg, Montreal, St. John’s and the Azores – a Portuguese archipelago 2,000 kilometres from St. John’s – for rest and refueling.
Not done yet, they stopped in Portugal, Spain and Malta. The first bomber arrived in the Turkish capital in mid-March and the second one, having required minor repairs along the way, in early April.
General manager Mikey McBryan calls it a “Charles Lindbergh” flight for its pioneering spirit. But the sale of the airplanes to the Turkish Aeronautical Association has also kick-started a project right when Buffalo was in the market for a big deal.
Whereas Buffalo once generated about 60 per cent of its revenue landing on remote air strips with cargo and supplies for mining camps, that business has shriveled. The global economic recession and credit crunch have made it impossible for some junior mining companies to raise investor dollars to fund their projects.
It’s a predicament that has “dramatically” changed the business climate in the North, says McBryan, 26, and has given companies cause to look around and see what else is out there.
“Before it was so busy, you didn’t know what month it was. It was just one job to the next. That’s why it’s possible to do these things overseas. This time last year it was almost an inconvenience. Now it’s a necessity.”
Buffalo’s multi-million dollar deal with the TAA (each plane is worth between $2.5- and $4-million) will fill in the revenue gaps, hopes McBryan. The deal, brokered by Bombardier, has been in the works for two years. It will see Buffalo staffers training Turkish pilots and mechanics in Turkey. Over a twoyear period, Buffalo will have trained at least six Turkish pilots for the TAA. Buffalo pilots will also fight fires on a rotating basis in Turkey, where forest fires are common but the capability to fight them is not.
“We’re basically training them from scratch. We’re training them how to operate the aircraft from a business standpoint and a mechanical and flight operations standpoint so at some point, they can just do it themselves,” said McBryan, adding the pilots in Turkey recently earned licenses to fly float planes.
Buffalo also plans to set up an office in Turkey, permanently manned by up to 20 people, to look into doing the same thing with other European or Central Asian countries. “It’s a blessing this happened when it did or we’d be in the exact same situation as everyone else,” McBryan adds, referring to layoffs at competing Northern airlines. “Firefighting is a saving grace. It’s basically what we do now. Everything else is just extra.”
Buffalo has a long-term goal of weaning itself off servicing mid-stage mining and exploration projects, a segment many of the North’s charter airlines have grown their business on. The company, which owns and operates 35 planes, continues to run daily scheduled flights from Hay River to Yellowknife and to deliver groceries and cargo to four Northern communities.
It is also following in the footsteps of Ice Road Truckers. British Columbia-based OMNI Films is making a 13-episode documentary series on Buffalo, its pilots, and its quirky Second World War-era planes. It is set to air on Global and the History Channel in the fall.
For this last project, the company is being paid only in exposure, but McBryan says even that can be leveraged into income, and plans to plaster the Buffalo logo on everything from t-shirts to watches and belt buckles. “Basically anything you can put a name on, I’ve got a name on it,” he says, laughing, “I’ve got to learn e-commerce.”
He’ll have to learn to write employment ads, too: The Turkey project puts Buffalo in a position to hire about 10 pilots and mechanics this summer. “Right now, we need to hire specialized people,” says McBryan. “A pilot who has 30,000 hours on a brand new jet flying around Korea is useless to us, but a bush pilot from Inuvik that flies
5s is super valuable.”
Summit Air
A little guy retrenches
Steve Tanton, operations manager at Yellowknife- based charter airline Summit Air, had to lay off almost half of his 42 staff early this year.
The company had grown a fair bit since Tanton and his business partner, Dave Mathieson, took over in 2007. In the last three years, two 19-passenger Dorniers and two snub-nosed Skyvan aircraft had been added to the company, giving it a fleet of eight.
The planes were purchased to keep up with the booming times. “We were finding, especially in 2006 and 2007, that we were turning away so many trips and we didn’t have enough capacity,” says Tanton, “or our airplanes were all flying as much as they possibly could.
“Our airplanes tend not to service the initial start-up, where the guys head out in a helicopter or in a twin otter on floats and hammer stakes in the ground,” he says. “We’re the next level, once they get an airstrip and their camp comes up to 20, 30, 50 people. “We’re right in the mid-range. And that’s where everything’s being hit right now – initial start-ups to mid-range.”
This time last year, the company was doing 18 flights a week. That’s dropped to between four and 10, albeit the flights are longer, to places such as Newmont Mining’s Hope Bay project in Nunavut. The company also has a plane contracted to Baffinland Iron Mines for the Mary River iron ore project on Baffin Island.
“It’s the same for everyone,” says Tanton, who tends to get out of the office and into the cockpit during slow times. “It’s kind of a situation where everybody has their eggs in one basket a bit. [Air] Tindi has scheduled stuff, but it all boils down to those mines up north that are driving everything.”
Overall, business is down 40 to 45 per cent, says Tanton. He’s trying to sell one of the Skyvans and, much like Buffalo, he’s looking overseas, to potential contracts with the United Nations. But it’s a process that involves lots of paper work and up to a year before companies hear if they’re successful.
The company is also eyeing Central and South America and Asia for scheduled services but, “right now, that’s a long shot,” says Tanton. “A lot of that is in mining and oil so they’re hit hard as well right now.”
The company has leaned a little harder on surveying contracts with the territorial government and on transportation to DEW-line sites for Ottawa and the Department of National Defence. Those categories, which used to generate five per cent of the company’s revenue, are now almost 50 per cent. Last year, Summit was so busy with exploration contracts it didn’t have enough capacity to fit that segment in.
Air Tindi
It’s a variety show
“The sky’s not falling,” says Peter Arychuk, vice-president of marketing at Air Tindi. “There’s definitely an adjustment in place right now and I don’t think anyone will disagree that we should have had one. Everything can’t continue to go up, up, up for 10 or 15 years and then not have a little bit of an adjustment.”
Arychuk says Tindi, which operates a combination of scheduled flights to the NWT’s smaller communities and passenger and cargo service to the mines, had to let go six staff in November, but that’s typical of the fall. Aside from that, the company hasn’t been affected by the downturn.
“Right to this point, it hasn’t hit us. Now in the spring, if there’s no exploration, it might be a different story. But to this point, we’re flying our airplanes everyday and keeping our people employed.”
Tindi’s bottom line is bolstered by its charter flights and by the medevac contract it has to provide air ambulance services to the territorial government.
Air Tindi was in the news earlier in the year when its parent company, Discovery Air, received a $34-million loan from the NWT government to help it cover $33-million of debt to private banks. Yellowknife stalwarts Great Slave Helicopters and Discovery Mining Services are also subsidiaries of Discovery Air.
North Wright Airways
As goes the pipeline...
Warren Wright, founder of North Wright Airways in Norman Wells, foresees challenging times ahead. He owns or leases 23 planes and employs, at peak times, 54 people. But he doesn’t expect to see peak times again anytime soon.
He does have a solid core for his business: About 55 per cent of his operating is in scheduled flights to Fort Good Hope, Aklavik, Colville Lake and Tulita in the NWT’s Sahtu and Beaufort Delta regions.
But the work to supply companies in the oil patch around Norman Wells looks like it’s not going to be there this summer, nor will much of the mineral exploration the company serviced.
“The oil business completely went away and there’s just a little bit of mineral exploration coming up. So yeah, it’s affected us pretty bad,” says Wright. “You had to gear up the aircraft and have them online for the oil patch and minerals, and all of a sudden they’re not there and you’re carrying the load.”
But diversification is not in the company’s future. “We’re hoping the [Mackenzie Valley] pipeline is going to go through Norman Wells and like everybody, we’ve been waiting for that for 30 years. If that comes back, we’ll be busy enough without going anywhere.”
Wright says some of his employees will spend the downtime renovating and upgrading the 20 or so houses the company supplies to staff. “It costs money, but we hope the flow will keep coming and the government will spend a few dollars,” he says, “in areas such as surveying and mapping.”
Northwestern Air
Moving into Alberta
Scheduled flights from Fort Smith to Yellowknife and Edmonton are Northwestern Air’s bread and butter, but for the past several years, the company has been quietly diversifying, both in location and industry.
In 2006, Fort Smith-based Northwestern moved a plane that had been stationed in the somewhat saturated market of Yellowknife to a newly purchased hub at the Red Deer Airport. Scheduled and charter flights there cater to workers in the oil sands industry.
“It has slowed down a bit, but they still seem to be moving people around,” says Terry Harrold, president and co-founder of Northwestern. The company has 13 planes, 10 of which are owned. The others are leased.
In February of this year, Northwestern took over where Alberta-based Peace Air left off, starting three flights a week from Cold Lake, Alberta to Calgary, on a 19-seat Jetstream. Peace Air went out of business in 2007, and the year before, Northwestern bought two of its planes.
“We’ve had to practically rebuild them, so we’re doing that right now. That’s kept a lot of our people going,” he says. He adds it’s too early to tell how well the flights are performing.
The company’s scheduled flights from Fort Smith to Yellowknife, and from home base to Edmonton aren’t recession proof, says Harrold, but they are a revenue staple. Especially in Fort Smith, a community of about 2,400 nestled on the NWT/Alberta border, where the signs of a global recession aren’t obvious anyway, he adds.
“We’ll focus on keeping our scheduled flights going, and maybe increasing passenger loads if we can, especially on the new scheduled flights we’ve started,” he says.
Not unlike its competitors, Northwestern’s charters have taken a hit. The company serves government, exploration companies, and provided three crew change flights a week to the NWT’s diamond mines. And although charters aren’t a huge part of the business – 10 to 15 per cent of revenue – the slowdown was cause enough to layoff six staff, bringing numbers down to around 55.
A pilot and industry veteran, Harrold’s been through two recessions. The company “squeaked through” the 1980s, he says, but made it intact. In times like this, “you don’t look to diversify too much,” he says. “You look to consolidate what you have. Sort of build on what you have already, and try and do a good job of it.”
