Thank you, Mr. Chair, members of the committee, and other guests here today. We sincerely appreciate the opportunity to present our views and to provide feedback on the new Nutrition North Canada program, specifically as it relates to the cost of air cargo transportation.
Allow me first to provide a brief background and description of Cargojet in order to put into context our ability to provide commentary and opinion on this issue.
Cargojet is a Canadian-based public company. We trade on the TSX and our executive and senior management team have over 500 years of combined air cargo transportation experience. We are Canada's cargo airline. We have been recognized with numerous industry awards, including the award as one of Canada's 50 best-managed companies. We are the only Canadian cargo airline that is a full member of IATA , and recently we achieved our ISO 9001 quality accreditation for the ninth consecutive year.
We provide air cargo services across Canada and are the only air cargo carrier that operates a scheduled Canada-wide overnight air cargo network providing air cargo services to multiple customers. Typically, other cargo carriers operate aircraft in networks on behalf of a single air cargo customer.
We operate our air cargo network using a modern fleet of B727, B757, and B767 freighter aircraft on behalf of major couriers, freight forwarders, and various manufacturers. We carry over 750,000 pounds of time-sensitive and time-definitive air cargo every business night, including perishable foodstuff and temperature-controlled pharmaceuticals among a vast range of products. We do this with a high level of reliability, operating at over 98% on-time performance and virtually claim-free in respect to loss or damage.
We are experts in air cargo transportation, which will continue to be a vital element and the single largest cost component of the new Nutrition North Canada program. Cargojet supports the elimination of the outdated and costly single entry point concept that forms part of the current food mail program. It will improve efficiency by eliminating the middleman, reducing the delivery time from the producer to the shelf, and ultimately lowering the overall cost to the consumer in the north.
It is recognized that the majority of nutritious food products that make up the new program are grown, sourced, or purchased in the southern parts of Canada. Flying them directly to the north whenever possible will significantly lower transportation costs.
Many southern-based air cargo carriers, including Cargojet, have the aircraft capacity and availability to provide air cargo services between southern Canadian points and the major northern destinations of Iqaluit and Rankin Inlet. Two or more northern air carriers provide sufficient competition and, presumably, competitive pricing, as these carriers serve approximately 98% of these smaller communities.
Utilizing aircraft assets that have the fixed cost of ownership paid for by their overnight air cargo business to provide air cargo transportation during the day from southern points to the north will provide significant cost savings to the Nutrition North Canada program. Removing the fixed cost component of any air cargo carrier reduces the transportation cost by approximately 25% to 30%. This is a significant cost saving when the average air cargo cost is approximately $4 to $5 per kilo.
These cost savings can be passed on directly to the consumer by northern retailers and will help government to reduce the overall cost to the Nutrition North Canada program. It will also help to provide lower costs of transport for other non-subsidized--yet still needed--products for northerners.
In summary, Mr. Chair, we believe this can help to ultimately provide three fundamental benefits to the Nutrition North Canada program.
Number one is to provide the lowest air cargo transportation cost to all retailers. This model presents new elements of competition and growth that enable the program to be a more competitive model by allowing retailers and suppliers to access the lowest cost of air transportation.
Number two is to improve reliability and provide fresher products for northerners. We applaud INAC's fundamental goal of supply chain streamlining and improving the availability of more nutritious and fresher foods for northerners. Sourcing products from various southern points and matching the right aircraft type to the demand will lower costs and enhance delivery time and freshness for northern consumers.
Number three is to ultimately reduce the subsidy levels required and/or provide the resources for additional required products at cheaper costs. By opening up the transportation component of the Nutrition North Canada program to more competition, there is a tremendous opportunity to significantly reduce the cost of food and other essentials for northerners.
In conclusion, Cargojet believes that the changes made to the old food mail program will allow market forces to determine the lowest possible air cargo transportation cost options. Savvy retailers and other shippers will take advantage of these cost reduction opportunities to grow market share and improve reliability and freshness of products to their customers in the north.
The people of the north will win with lower costs, improved availability, and better quality food products, and the government and the taxpayers of Canada will win with potential lower cost levels in the future.
Thank you for the opportunity to speak to you today. I look forward to your questions.