Air North will stay the course.

That's the word from the airline's president, Joe Sparling, as the Yukon carrier is faced with competition on its Alberta route.

"At Air North, Yukon's airline, we are comfortable with our role in the Yukon aviation market," Sparling wrote in a statement to shareholders late last week.

"More than one in 15 Yukoners is a shareholder and I believe that we have demonstrated our value to the Yukon market was well as to the Yukon economy time and time again over the past 32 years.

"We believe that Yukoners will continue to buy from their airline even when there are more alternative choices out there."

Air Canada announced last week it will offer daily service between Whitehorse and Calgary for the summer as well as its usual Whitehorse-Vancouver route. At the same time, it also announced a major seat sale across the country.

Currently, Air North is the only airline providing direct flights to Alberta from Whitehorse, flying to and from Edmonton and Calgary three times a week along with daily flights to Vancouver.

"I think there's more to it than meets the eye," Sparling told the Star, as he pointed to the competition in the South between WestJet and Air Canada.

The announcement of the new Whitehorse route from Calgary was part of a larger announcement detailing other new routes out of the Alberta city, which is also WestJet's headquarters.

One has to question why, during the current economic situation, when Air Canada has been reducing its service in response to the economic downturn, it would add additional flights to the market, Sparling said.

"Air Canada has, in general, reduced capacity in many markets in response to a declining economy," he noted in his statement to shareholders.

"WestJet has taken some competitive advantage of this by increasing capacity to gain market share. WestJet has, in general, added less seats than Air Canada has removed, so the net effect has been improved load factors for both carriers and improved market share for WestJet at the expense of Air Canada."

In the Yukon, with six flights south some days, it would mean a a total of 1,080 seats daily for flights in the Yukon each day between Air North's 480 seats and Jazz's (Air Canada buys Jazz's seats and sells them for their flights) 600 seats.

As Sparling pointed out though, the busiest month at the Whitehorse airport last summer was July, when traffic to and from southern destinations saw an average of about 750 people per day.

"If, by some miracle, the Whitehorse market is able to achieve record-setting passenger volumes each month next summer, the increased market capacity will reduce market average load factors to just over 69 per cent," Sparling wrote, pointing out that Air Canada's entire load capacity in December was 82 per cent.

"At a 69 per cent load factor, break-even pricing for Air Canada will be about $290."

That means that for tickets sold on sale at $109, another seat will have to be sold down the road at $471 to break even, Sparling said.

"While I would like to be able to say that we do not care what our competitor does in the market, the simple reality is that what they do has an impact on us," Sparling told shareholders.

He argued Air Canada is taking an aggressive and reckless route in business. While being aggressive is part of being in business, he said, flooding the market with more seats than will be occupied is reckless and wouldn't prove sustainable.

If he thought flooding the market would make money, it might be a business approach he would take, but last year, Air Canada was losing money while Air North saw positive gains, he said.

The situation means that rather than doing business as officials with Air North would like, which would see prices more closely reflect the actual cost of flying with a narrow range of prices, the airline has to widen that gap in pricing to compete with Air Canada.

Air North's target yield on a seat heading south is $250.

"I think that this represents a fair price and exceptionally good value for the product provided," he told shareholders.

"Our pricing philosophy is to charge a fair price for our product each and every day. We do not like to price below our cost nor do we ever try to take advantage of our customers."

On average, flying Air North to one of its southern destinations is between $193 and $447, while Air Canada's range can be as low as $109, as it was during the most recent seat sale, or as high as $1,106.

The situation means Air North has little choice but to follow Air Canada's pricing during a seat sale, even though it won't go as high as Air Canada's priciest tickets.

"We're not happy about it, but we do it," Sparling said, later questioning how he'd be able to walk down Main Street and justify prices exceeding $1,000 to potential passengers.

While the airline has dropped prices at times to compete with major seat sales, it opted not to make any changes to its schedule based on Air Canada's announcement.

As Sparling argued, Air North couldn't compete by taking seats out of the market, but it also didn't want to add more seats in a flooded market.

He remains confident customers will continue to fly Air North when Air Canada begins its Alberta route.