I don't think I'll need to exhaust too much time. I'm here on behalf of my father, Joseph Sparling, president of Air North. I came to deliver a report that he wrote. You will receive the report in both languages as soon as it's translated.
Essentially, the report aims to do three things: define the issue as we see it; identify our stance; and provide you with some background information on the Old Crow to Whitehorse market, to which you are currently providing the food mail subsidies.
The issue as we see it is that the Vuntut Gwitchin First Nation of Old Crow would prefer that the subsidy to reside at the transportation level rather than at the level of retail.
The community of Old Crow has a couple of reasons for its concern about having the subsidy at the retail level. First, Old Crow is in very close proximity to a competitive market, Whitehorse, where there are a number of grocery stores, including speciality food stores and organic stores. There are tons of food options with competitive pricing.
Essentially, one of their primary concerns is that the grocery subsidy would limit the variety of competitive choices available in the community of Old Crow. This would occur because presumably not all retailers in Whitehorse would be interested in adopting the subsidy program and administering it, so a system whereby the program was administered at the transportation level would then allow consumers to access any grocer in Whitehorse.
There's a compelling argument for that in terms of cost. In my father's report, it is illustrated that we can get food on the table of customers in Old Crow at a 13% premium over what it costs in Whitehorse, so the pricing is very competitive. We're able to leverage economies of scale in order to drive prices down. The other convenient factor is that we fly to Old Crow five days a week in the peak season. You're actually able to put in an order and receive food within one to two days, at a very competitive price.
Essentially, the two concerns that the VGFN has expressed are that they will have a limited number of options if the subsidy is at the retail level and that prices may suffer.
Our stance on the issue is that essentially we have no problem with the Vuntut Gwitchin proposal that the subsidy reside at the transportation level, but if you look at the report, and particularly at our 2009 income statement information, we actually operated at a slight net loss on the Old Crow segment.
For this reason, we want to make it very clear that this isn't really a profit-generating opportunity for us as much as it is an opportunity for us to back the Vuntut Gwitchin First Nation, which is a huge part of our organization. We've been in business for 30 years with the local communities up north, so it's very important to us, as long as we don't fundamentally disagree with their objectives, that we have their back, and we try to address their concerns as much as possible. Essentially, our stance is that we agree with the Vuntut Gwitchin First Nation, and we are willing to comply with their request.
We also feel that we are well poised to administer the food mail program. I've worked in cargo in Whitehorse for probably seven or eight years, so I'm very familiar with the way the food mail program works. If we started administering the program, not a lot would really change, other than some accounting considerations.
Essentially, we've been the point of contact between the community and the food mail program all along. If you're in Old Crow and you have any questions or concerns regarding food mail, you would be phoning me at the cargo office. You would be dropping off your freight to us at the cargo office. It is for these reasons that we have a very thorough understanding of, first, the food mail system as it currently exists, and second, the customers who are the people in the community of Old Crow. I think that's one of the compelling advantages that would enable us to be very effective in administering the program.
One point that I'd like to make is that we deal with the customer on both ends, on the shipping end and on the receiving end of freight, so the feedback channel to the people overseeing the program would be very strong in the event of us administering it.
The other issue I want to point out is one of oversight. Having the program run through one point, that being Air North, we feel it may be easier to oversee from an administrative perspective.
The rest of the report is simply designed to give you background information on why we feel that our cost structure is competitive and why we feel that we can continue to deliver competitive prices to the community of Old Crow. Essentially, prices would not take a hike with us administering the program.
That's the gist of our report. My contribution will probably be more during the question and answer period.