In 2003, North Cariboo Air became one of the first two charter airline companies to operate in the Alberta oil sands. Traffic has really picked up in the last decade, and the oil sands now account for 70 per cent of North Cariboo’s business, with six to eight flights transporting 700 to 800 passengers a day. According to Hart Mailandt, director of business development, North Cariboo Air has been able to double its growth every two years since 2007. It is now one of the largest single carriers in the oil sands.
CIM: Given the expense of air travel, why do oil companies choose to air commute their workers?
Mailandt: When you do a risk analysis of flying versus ground transportation, the numbers are just so skewed in favour of aviation. It is absolutely, unquestionably the best way to do this work. Of course there are time factors and all those other things involved, but the reality is that the safety in aviation is so much higher than ground transportation; it’s almost a no-brainer.
CIM: What developments do you foresee for the air travel business?
Mailandt: One of the projects that we’re working on right now is an innovative approach for bringing people into Fort McMurray. Carriers based in Calgary pick workers up at the end of their shifts, taking them home to Atlantic Canada, but because they use the same aircraft to return to Alberta, it is an entire day until that plane can make it back with replacement workers. That means virtually an extra day when that group of employees is not on site because Calgary-based carriers traditionally did not have their equipment permanently reside in Eastern Canada. We do. It’s a very different model and it’s much more economical because we don’t lose an entire day of shifts to flying across and flying back.
ConocoPhillips, with their Surmont project, was the first one to rethink the way they did their transportation. We perceived, designed and implemented the logistics for their project, including systems, aircraft, reservations and software. Other producers and carriers are re-evaluating their projects based on this solution. We’ve taken their innovation to a whole marketplace. A big change is coming to our industry over the next few years.
CIM: It’s a surprisingly simple change.
Mailandt: It is, except for us, the carriers. We’re here in Calgary, and somehow have to figure out how to get that airplane to the other end of the country and have it sit there, and for that to still be economic enough to fly specific clients. It’s challenging to make a schedule work and make the economics work. It’s going to be interesting over the next few years to see how this changes the fly-in/fly-out programs for our existing customers.
Another change is going to be more cross-border traffic from the United States. Our biggest challenge with that workforce group is the difference in qualification and certification in tradespeople between Canada and the United States. Both of our governments, federal and provincial, are working very hard to come up with a standard and some qualifications that will fit people into the specific trades, which will allow Canadians to expand into workforces that are underemployed in certain parts of the United States. This will be extremely important for projects in Fort McMurray.
CIM: Were there risks that you took early on that helped you establish a foothold in the oil sands?
Mailandt: In general, the risks from a financial standpoint are not onerous. Airplanes are valuable assets no matter what you do with them. Age and how you maintain them of course are important, but there’s always residual value in an investment in aviation equipment.
At the same time, an airplane is a perishable asset. You have to maintain it to keep it to standard, but eventually it expires. To be able to continue your business you have to understand that it’s a perishable item and ensure that you build a reserve so that you can continue to refresh your fleet.
CIM: How were you able to capitalize on the growth in Alberta?
Mailandt: Most of the work that we do is for multinationals, and their requirements and safety standards are quite high. So we maintain those and actually push the limits of, which separates us from some of our competition. And, as a result, we gain contracts.
And then of course we can take that to our financiers and continue to acquire airplanes and facilities. Facilities are key for positioning within the marketplace, as is being able to service the client, even in terms of things like parking and departure facilities. Those are all key components to making a logistics package work for our clients.
Finally, it’s about timing. You have to be able to work with your client to fit their schedules in with what “tin” – as we call airplanes in our business – is available.
CIM: We often hear of worker shortages in the oil sands. Is it similarly difficult for you to find your technical staff?
Mailandt: It’s becoming increasingly difficult, because not enough new pilots are coming into the industry to support the outgoing pilots. There are things that we have going for us. Because we do fly-in/fly-out of Fort McMurray, most of our pilots get to go home at night. A lot of the commercial aviation pilots, they’re away from home 10, 12, 14 days a month, and 90 per cent of the time our guys are at home. We bring a high quality of life to the pilots, allowing us to recruit and retain the people who work in our business. We also have things in place like pension plans and some flexibility in health care benefits that a lot of our competitors don’t. But again, that flows from the size and momentum we’ve created for ourselves.
CIM: I’m interested in your perspective on the logistics scene outside the air business. Have you seen other industries shift and adapt to changing demands?
Mailandt: The most urgent thing right now is workforce logistics. If you manufacture a product, you need to get it out, and you need to get material in to produce that product. A key component to the manufacturing process is people – at the right time, with the right qualifications, and in the right quantity. It’s the same thing in every industry. Even trucking companies have started calling themselves logistics companies. All these components are intermixed, and all the things that go into this process are logistics.
I think producers are seeing logistics as a specialty performance, and maybe not necessarily one of their core competencies. So what I see in the future is more logistics organizations coming in to help producers, as opposed to them having that expertise in-house. This will be a major shift.
CIM: Some of the larger oil companies run their own aircraft. Do you see this as a trend? Is this a viable business option?
Mailandt: Certainly companies like Suncor and Shell have proven that the model works for them in this particular environment. There is, of course, value in having an asset that you can utilize to its fullest extent. The challenge for the smaller companies is how to use assets effectively, because it is a costly proposition if you’re the only one using an aircraft. You have to have enough momentum or enough of a requirement to make that business model work.