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Features Operations
One on One with Ward Pike

Vice-President and CEO of Air Labrador


September 28, 2007
By Darren Locke

Topics


Interviewed in St. John’s, Newfoundland, Sept. 25, 2005.


298-labWITH
TOMORROW’S INTRODUCTION OF A NEW DASH 8 TO YOUR FLEET AND YOUR
CORRESPONDING INTRODUCTION OF SERVICE TO MONCTON FROM GOOSE BAY AND
LABRADOR WEST, TOMORROW IS SURE TO BE A LANDMARK DAY FOR AIR LABRADOR.
WHEN YOU LOOK AT YOUR COMPANY’S DEVELOPMENT SINCE IT STARTED IN GANDER
AS NEWFOUNDLAND AIRWAYS IN 1948, HOW WOULD YOU DESCRIBE THE JOURNEY SO
FAR FOR AIR LABRADOR?

Some people call it the “second coming” of
Air Labrador. It’s the second coming of Newfoundland Airways in a way,
because Newfoundland Airways gave birth to Eastern Provincial Airlines,
and also gave birth to Air Nova. And it’s the same routes, the same
origins, the same fundamental basis of Coastal Labrador hinterland
flying operations, where true aviation takes place, giving birth to
greater regional success.

In terms of the growth of the company
right now, the company is very, very poised and has a very slow and
strategically minded manner of growing towards the needs of what’s left
in Eastern Canada. It’s not our aim to upset any particular leader in
the marketplace, or to try and reinvent the wheel, but to look at where
the needs really are in the marketplace in Quebec, Newfoundland and
Labrador, and the Maritimes. You’ve noticed in terms of our route
expansion and growth that the routes that we’re travelling on aren’t
necessarily the ones that come to mind, or hadn’t come to mind from a
lot of other airlines. While we do have a local competitor that does
mimic everything that we do, we try to do a lot of market research, and
see where the needs really exist in Eastern Canada.

In terms of
our new, latest routing into Moncton, the Magdalene Islands, the
‘Maggies’, really have driven this. There was the demise of another
carrier in Eastern Canada called Quebec Air Express, and we jumped in
to pick up some of their personnel and some of the routes that they
were flying, and increase capacity on some routes that we shared with
them, shared as competitors of course. The Magdalene Islands was one
(situation) where they were the only alternative to Air Canada’s Jazz
operation. And the natural progression was to just duplicate what Air
Canada was doing – fly Montreal, Quebec City, Gaspe, and the Maggies.
We did enough research into it to discover that a lot of the business
and government and community needs were grounded in Quebec City, but
also in Moncton, and not so much in Gaspé. So by offering a service
that connected Montreal and Quebec City into Moncton and Gaspé, we’re
able to offer sort of a parallel product to Air Canada Jazz … . If we
can offer something to the marketplace that varies slightly, and adds
value to the aviation industry as well as the consumers of aviation
services, then we’ve done our job.

WHAT ABOUT THE ADDITION OF
AIR LABRADOR’S NEW 0655 DEPARTURE FROM WABUSH TO MONTREAL? IS THIS A
SOLID INDICATOR OF HOW FAST THE ECONOMY IS DEVELOPING IN LABRADOR AS
NEW INDUSTRIES LIKE THE VOISEY’S BAY MINING MEGAPROJECT AND THE IOC
(IRON ORE COMPANY OF CANADA) ENHANCEMENTS COME ON STREAM?

Certainly,
we pay attention to what’s happening in the economy of any region that
we fly into. The Central Labrador and the Western Labrador economies
are very, very telling in terms of what we will do in the future.
What’s happening in Labrador West right now, including Fermont, Quebec
is more significant than what’s happening in Central Labrador and Goose
Bay. With IOC putting this enormous investment into their operations in
Labrador West, and there being real growth in the iron ore industry,
and the product that they’re after having increased so much in value,
especially with the incoming demand from the Chinese market, there is
increased demand for flight services into Labrador West, and we’re
responding to it … and we’re already seeing results from this on our
morning departure to Sept- Iles and Montreal.

IN 1983 YOUR
FAMILY BECAME 100% OWNERS OF AIR LABRADOR VIA PROVINCIAL INVESTMENT’S
PURCHASE OF THE AIRLINE AND ITS ASSOCIATED COMPANY, LABRADOR AVIATION
SERVICES. WHY DID YOUR FAMILY AND MORE PARTICULARLY YOUR FATHER DECIDE
TO TAKE A GAMBLE IN BUYING AIR LABRADOR?

At the time it wasn’t
so much a gamble, it was a solid business that just needed to be run
more like a business and less like a social program, and it was all
centred in and operated only in Labrador at the time. What my father
(Roger Pike) did was exercise a certain panache for business dealings
and for refining operations that was handed down from his father, and
of course he schooled me in it as well. It’s something that goes back
generation upon generation – we’ve been able to control costs, and
still get the job done, to the point where we operate an airline that
flies a certain number of people and a certain amount of cargo, and
comparable operations need twice the aircraft and three times the
personnel to do the same job. There’s no other airline that’s as
efficient as ours is. That might come as quite a bold statement to the
face of people who run discount airlines, but I can only tell you this
– we’ve been in business since 1948. We’re one of the oldest
successfully operating airlines in North America. I wouldn’t be
surprised if now we’re considered the most successful. It’s been said
to me by a couple of US publications that we are the longest airline in
operation without a bankruptcy, liquidation, or any serious condition
taking place.

DO YOU THINK TOMORROW’S SERVICE EXPANSIONS BY AIR LABRADOR TRULY DEMONSTRATE YOUR STAYING POWER IN THIS INDUSTRY?

Base
of operations, in a diversified group of companies. The airline itself
has maintained good cost controls, and tries to maximize revenue
sources on each individual product. It also moves very slowly. We could
have easily expanded our fleet three or four times as quickly as we
have over the last two years, and our number of flights and our
operations. But instead of doing it that way and jumping at every
opportunity, we’ve decided to maintain our omnipresent attitude of
working very slowly towards a much larger picture, a much larger goal.
That in itself means that you don’t have to do incredible restructuring
or a difficult financial restructuring, or to engage in various
large-scale capitalization schemes, but instead maintain a sensible,
albeit slim for an industry, margin. And continue with current account
financing. You can only grow as fast as the profits you make.

Jetsgo
is not the only example of growth exceeding profits. There are many
airlines that basically hedge their bets, to some degree. And to
another degree they leverage the hell out of everything that they’re
doing, and when everything is completely leveraged there’s no room to
move or to be able to respond to drastic changes in the industry such
as costs (e.g., fuel).

DO YOU THINK IT’S FAIR TO SMALLER
REGIONAL AIRLINES SUCH AS YOURS WHEN AIRPORTS OFFER SPECIAL SUBSIDIES
AND CONCESSIONS TO BRING IN NATIONALBRAND LOW FARE AIRLINES IN
PARTICULAR (FOR EXAMPLE, WESTJET INTO CHARLOTTETOWN AND GANDER)? AND DO
YOU THINK GANDER’S EXPERIENCE WITH WESTJET IN PARTICULAR DEMONSTRATES
JUST HOW WELL THIS WORKS?

I think Gander is still in denial
about what happened … and you know it’s a typical scenario, it’s almost
Canadian philosophy: “the Gods live somewhere else.” So we can’t
possibly look to local carriers to answer our needs, we must bring them
in from somewhere else. And that particular regional mentality that
exists in Canadian markets is what has crushed a lot of regional
carriers from British Columbia to Nunavut to Newfoundland and Labrador
to Nova Scotia – all corners. It’s crushed a lot of carriers, and it’s
not the inability of regional carriers to be flexible, or to respond to
needs. It’s a question of this regional mentality.

We’re not
really that interested in what WestJet does, to be honest. We’re not
really that interested in what many of the discount airlines do. We’re
interested in becoming the best regional airline in Eastern Canada –
that’s our goal.

IS IT POSSIBLE TO BEAT THE NATIONAL CARRIERS?
FOR EXAMPLE, ON THE ROUTE THAT BOTH AIR LABRADOR AND CANJET FLEW
BETWEEN DEER LAKE AND ST. JOHN’S?

We’re not able to beat the big
guys, the discount carriers, at their own game, and we don’t play that
game at all. We do a different strategy altogether. If you want to look
at Deer Lake-St. John’s as being an avenue where ourselves and CanJet
both flew it and they decided to change their strategy, it would be
because there is actually communication between us, and good common
sense in the industry. And in a market as thin as Deer Lake-St. John’s,
not able to sustain multiple 737 daily flights, where it can sustain
multiple Dash 8 flights, they wisely chose to deploy their assets where
they could actually sustain good load factors.

So they made the
right decision for their own business, and we made the right decision
for our business, and we’ll continue to make the right decisions for
our business. You know there’s no fear of us flying nose-to-nose with
WestJet or CanJet in virtually any market, and Moncton is an example of
that. Yes, we fly between Moncton and Montreal, but we fly through
Quebec City because Moncton-Quebec City is our target market.

HAVE THE DASH 8S BEEN A DECISIVE FACTOR IN UNLOCKING THIS AIRLINE’S POTENTIAL?
Definitely,
but the Dash 8 is no mystery either. The Dash 8 was chosen by Air Nova,
Air Alliance … . It’s a solid product that’s built on the most
trustworthy airliner in the entire industry, the de Havilland Dash 6
Twin Otter. And those two particular aircraft are the best two regional
aircraft in the entire world, and they happen to make up our fleet.

Here’s
the most interesting thing about this: one of the things that we’ve
learned from discount carriers is that fleet simplification leads to
unknown cost savings. With fleet simplification into one or two types,
even as a regional discount airline or a regional low-cost, we’re not
really discount, we are low-cost, our costs are very, very much at a
minimum. But even at the regional airline level, simplification of
fleet types leads to unknown savings, leads to greater reliability,
leads to interchangeability of equipment, interchangeability of crew
members, and simplification of your procedures and your training
programs. And it baffles me when I see other regional carriers in
Canada and other places in North America diversifying into additional
equipment types, realizing that they have to invest millions into each
aircraft type. Despite the fact that on their own books or in their own
business plans they may be able to justify such moves, it is going to
come back to get them in the end.

I’ve also thought about the
Jetsgo model a lot, I’ve thought about what went wrong with it, and
people are quick to point the finger at their fare discounting, but it
seems to me that the airline picked the wrong type of equipment first,
and the second go-around tried to pick an equipment type that was
better suited to their market needs. That was a very costly mistake,
and with everything so leveraged … they weren’t able to absorb that
costly change. If they’d let us run their business, they’d still be in
business today!

DO YOU FORESEE THE EVENTUAL ADOPTION OF JET
AIRCRAFT INTO YOUR FLEET AS WELL, SIMILAR TO WHAT HAPPENED AT AIR
ATLANTIC SOME YEARS AGO WITH THE BAE 146? WHAT ABOUT REGIONAL JETS?

There’s
other people flying them, and we’re not foolhardy enough to try and
point ourselves in that direction right now. We’re operating a
fuel-efficient, very reliable and flexible workhorse of the regional
airline industry. Our model is built solidly on simplification of fleet
type – if we did anything it would be a larger product from the Dash 8
family, such as the 300. That would be the only move that I could see
us making in the foreseeable future.

OVER THE PAST FEW YEARS
YOUR AIRLINE HAS SOMETIMES HAD TO MAKE THE TOUGH DECISION TO CUT
SERVICES AS WELL, FOR EXAMPLE FROM ST. JOHN’S TO STEPHENVILLE AND ST.
ANTHONY. WHAT DOES THIS SAY ABOUT THE FUTURE OF SOME SMALLER AIRPORTS
IN CANADA AND THEIR LONG-TERM VIABILITY?

In Canada there is no
regional airport policy to benefit smaller airports like there is in
the US. The US does a much better job of taking care of smaller
markets, regional airports, and supporting both the airport and the
airline side of the industry where the consumer and ultimately the
person in the rural centre benefits. Were Canada to actually be as
socially conscious as it claims to be, and not as socially backward as
it is in reality, something would be done about this, and services to
smaller regional airports would not be threatened.

It caused me
tremendous pain to have to pull service from Stephenville, and rest
assured that although I grew up in the town, it was my decision to do
so. And that might not give much pleasure to the people in Stephenville
with whom I had worked hard to develop a market there for quite some
time, but that’s the sad reality of it. Our airline changed direction
towards a Dash 8 equipment type, and a 37-, 50-seat aircraft is really
what’s needed in most regional centres, and we have to serve most
regional centres. We cannot go to the lowest common denominator and
say, well, the Beech 1900 or something similar in terms of 16-19 seats,
is what’s needed to serve it, therefore that’s the only type of
equipment we’re going to operate. That would just basically doom us to
do nothing but small airports that are marginally viable at best, and
in reality seriously threatened, again due to the lack of a regional
airport policy in Canada.

St. Anthony is another example. Now we
still serve St. Anthony with our coastal operations, the only
connection that we changed was St. John’s, and the market was too thin
to sustain the number of flights that were going in and out of there.
And we may have a competitor in that marketplace that’s willing to lose
money, but we don’t follow suit.

NEWFOUNDLAND AND LABRADOR HAS
LED THE WAY IN CANADA IN CREATING REGIONAL AIRLINES RELATIVE TO ITS
POPULATION SIZE AND RELATIVE LEVEL OF PROSPERITY. DO YOU THINK THIS IS
WELL RECOGNIZED IN CANADA?

Sparsely populated areas tend to give
flight to airline companies – Alberta and the Northwest Territories is
another parallel example. And you can go right back and trace Canadian
Pacific, Wardair and Pacific Western, starting from bush operations and
working way up into solid, regional-base carriers that started flying
jets in the day and age of heavy regulation. Newfoundland and Labrador
is no different – Newfoundland and Labrador got its strong roots in
aviation because of the fact that it was a country, and as a country it
needed airmail, hence the lead to develop Newfoundland Airways. And
then Newfoundland Airways branched out as Newfoundland and Labrador
merged with Canada, and it branched out into being able to take its
expertise and being able to fly very, very lean routes, control costs,
and fly into other areas and be successful. Newfoundland Airways gave
birth to Eastern Provincial Airways, which in turn swallowed up
Maritime Central Air in the early 60s. Newfoundland Airways then
changed to Labrador Airways Ltd. in ’68.

That in turn led to our
family coming into this particular company, and enjoying taking over a
business that had been run for so many years by so many other great
people, which led to Air Nova. If you look at the connections
throughout the industry you’ll see that there’s almost one route and
one common thread, and that common thread is the Air Labrador family.
And I use that terminology very deliberately, because our airline might
change ownership three or four times over the next 30, 40 years, who
knows. Will it always be me and my father, and then maybe my son
someday, and maybe some other people? I don’t know. It’s hard to tell,
but I’ll tell you one thing – this company is going to survive for a
long, long time.

IS THIS SOMETHING WE INHERITED AS WELL FROM THE
MASSIVE USAF/RCAF/RAF PRESENCE ALL ACROSS NEWFOUNDLAND AND LABRADOR FOR
MANY YEARS DURING AND SINCE WORLD WAR II?

Certainly the American
presence has had an incredible impact on aviation in Newfoundland and
Labrador. I don’t think any other presence has had any impact
whatsoever. The American presence was not just a question of their
occupying airspace, or land use for military bases. They integrated
into the economy, and were willing to lend a helping hand to those who
were local residents of any particular community. Our family business
exists today because the US Air Force saw value in doing business with
Newfoundlanders, and saw value in giving local people some dignity. And
were it not for the US Air Force in Goose Bay, we wouldn’t be talking
now.

WHAT ABOUT THE FUTURE FOR AIR LABRADOR? DO YOU SEE YOUR
AIRLINE EXPANDING INTO NEW MARKETS AND NEW OPPORTUNITIES, AND WHAT DO
YOU THINK THE FUTURE HOLDS?

The thing about us is that we’re
playing with openfaced cards – our cards are on the table. There are no
secret clandestine meetings in backrooms or war rooms, and no
incredible, heavy-duty planning on surprising the industry with
brilliant moves. Our particular strategy is obvious, and our business
is very, very much focused on our growth in Quebec and how that ties
into Labrador, and that’s pure north-south trade. And in terms of what
we’re doing now into the Maritimes through Moncton and the Magdalene
Islands, that’s just an obvious extension of what needed to be done in
the province of Quebec, and an ability to bring Moncton and New
Brunswick into the picture.

We are going to do nothing more than
strengthen our position in Quebec and Eastern Canada. There may be a
couple of possibilities in Ontario, but they’re not on the immediate
horizon, although they are things that we’re certainly talking about
and looking at. Everything that we do will be well planned, it will be
well researched, and it will be something that anyone else in the
industry looking at us says, “well, of course.” There won’t be any
“a-ha!!” or “eureka” or “look at that brilliant move they just made.”
It’s going to be just, you know … we have an incredible knack for the
obvious. How does that sound?