The series: We look at decision makers among Canada’s mid-sized companies who took successful action in a competitive global digital economy.
A stretch of Nanaimo’s waterfront, by the pier where Harbour Air’s floatplanes land, near where the tiny ferry from Protection Island motors in, a short walk from the Gabriola Island ferry dock, is often busy with boat traffic.
A pilot of a seaplane must have a knack for the flow of boats while banking lower and approaching the water. Once when I flew the route from the dock near Vancouver’s international airport to Nanaimo, 20 minutes pier to pier, the pilot set the plane down in a fairly tight gap between two sailboats trudging along. The timing had to be right.
A while later, the pilot of another floatplane did the same manoeuvre. Everyone seemed preoccupied enjoying the West Coast sunshine that weekend summer day, but I couldn’t help but watch the skill of the pilots setting down their planes among the boats. It also showed the extent seaplane carriers, such as Harbour Air, have slotted into B.C.’s coastal transportation system.
For better or worse, you can’t spend any time gazing at Vancouver’s North Shore mountains without a buzzing seaplane tracing a beeline across the view. They are now that ubiquitous, their schedules that constant.
It’s easy to forget that wasn’t always so. When Harbour Air chief executive officer Greg McDougall first started piloting float planes in the late 1970s, the culture “was the quintessential bush-pilot type. It was very unusual to see a plane that actually looked very good. They usually looked ratty, and the pilots were usually wearing T-shirts and had jeans and a cigarette hanging from their mouth. I don’t think I was any different in the start,” he said.
Growing up in Southern California, he and his Canadian parents summered on the B.C. coast, and after high school, he decided to stay and learn to fly. His first job was flying floatplanes in the Fort Simpson area, along the Mackenzie River, in the Northwest Territories – rugged, back-country work for resource companies.
In starting Harbour Air in 1982, his idea was to introduce floatplane service to a larger market by domesticating them. “We had to take a very unsophisticated product and figure out how to make it sophisticated enough that all walks of life would use it, not just the people who were in the frontier,” he said.
Today, this idea can seem achingly obvious. There’s the popularity of floatplane flights among tourists and visitors despite the relatively high cost, but there’s also the legion of those using them to commute regularly, say, three or four times a week from an island home. Yet back in the 1980s, that market had to be developed, to attract people who would otherwise spend hours on the ferry.
“At the start in 1982, with a couple of airplanes and flying predominantly for resourced-based businesses, there was not much in the way of flying for the general public or tourists. And then the fishing lodges came along, and we started our first foray into flying more tourist-based business.
“And then Expo 86 came and turned on the whole tourism thing in Vancouver, and so we started evolving our airline more toward tourism, as well as continuing to serve the forest sector and conventional resource-based stuff,” Mr. McDougall said.
At the same time, business baron Jimmy Pattison had been merging various West Coast carriers to create the regional operator Air BC (later swallowed by Air Canada Jazz). “But the floatplanes, the ones that he bought, basically didn’t mix very well with the regional model of turbo props and mid-sized airplanes,” Mr. McDougall noted.
Harbour Air also began regular service to the Gulf Islands, and when a non-compete clause which had prevented Harbour Air from to flying to Victoria ended in the early 1990s, the company then started a Vancouver-Victoria run to compete against the route that West Coast Air had acquired from Air BC, Mr. McDougall noted.
“Eventually we bought West Coast Air, and our growth model really has been a lot about buying up smaller carriers that don’t work on their own, but work in the bigger picture of what we do, flying our economies of scale, plus our safety management system, and all of those things which make the business more palatable to the general public,” he said.
The acquisitions continued as the company has continued to make strategic, consistent pivot points. In 2012, the company acquired Whistler Air, a seasonal service, and in 2015, it bought into Salt Spring Air, expanding that service. However, there are various regional seaplane routes which Harbour Air doesn’t fly, the argument being that it would stretch the company too thinly, Mr. McDougall said. So, the company, for instance, doesn’t fly to Gabriola’s Silva Bay marina, which is instead serviced by the smaller carrier Gulf Island Seaplanes.
Instead, Harbour Air has recently focused on larger routes, such as a new flight from downtown Seattle to Vancouver, and a new service from Vancouver to Tofino on the west side of Vancouver Island. At the same time, the company, which now has more than 400 full-time employees, despite some seasonal fluctuations in service, has also expanded the technology side of its reservation and booking systems. Like large airlines, Harbour Air uses yield management to charge more during peak hours.
Yet when Mr. McDougall and Mr. Wright talk about expansion and upgraded systems, their tone is a notch more casual than that of typical, corporate airline executives. Their business exists in a culture in which pilots and counter people on the pier often know regular passengers by sight, even by name. And when the plane meets the dock, the pilot typically jumps out to help tie the mooring lines. It’s a different sensibility and skill set than computerized jet flying. And with a shortage of pilots worldwide, to say nothing of experienced float plane pilots, finding enough available ones is difficult.
This is a major factor in the company’s new phase of helping establish new floatplane services internationally. For instance, Harbour Air is working with a seaplane group creating a service in the English Channel between the islands of Jersey and Guernsey. Even more ambitious are efforts to help create a service in China.
In 2015, Chinese motorcycle manufacturing giant Zongshen Industrial Group, headed by billionaire Zuo Zongshen, bought into Harbour Air, currently owning a 49-per-cent stake in the B.C. company, as it eyes the Chinese market. (Forty-nine per cent is the current cap on foreign ownership of Canadian carriers.)
“They invested in Harbour Air because they wanted to expand the model to China. And so we formed an international consulting group, which I had basically been doing anyway, on a project-by-project basis with people around the world, who had said that they wanted to copy our business model in different places,” Mr. McDougall said.
“There are lots of complications over there [in China], because they’ve never had general aviation really. It’s all been larger airlines, and everything has been controlled by the military, in terms of the aviation over there. So, all of the airports and navigation systems are military controlled,” Mr. McDougall said. “So, introducing smaller airplanes, even though they want them there, [requires] a bit of pioneering, as it were.”
China is a special case, but so is establishing a new service anywhere in the world. “For safety reasons, it’s heavily regulated. Obviously you don’t want anybody starting an operation that doesn’t have the safety mechanisms in place, the right crew, the right maintenance, etc. So, anywhere you go in the world, it’s one of the most heavily regulated industries,” noted Shai Dubey, assistant professor at Queen’s University’s Smith School of Business, who also has a background in flying as a pilot himself, flight training and aviation law.
Like any other industry, it’s a balance of costs and the volume of customers. Yet, seaplane costs, especially the maintenance of the plane can be debilitatingly high. Salt water forces each plane to be completely restored every few years.
“The fundamentals of the business, in terms of customers and all of that, are the same [as any other industry]. The problem is that it’s very heavily regulated. So your cost structure is huge,” Mr. Dubey added.
Yet, demand continues to push Harbour Air. Its business in special flights for tourists and sightseeing trips has been growing 30 per cent a year, and “that requires more equipment, more pilots, more everything. So, the company continues to grow. And the whole international expansion is still very much a goal of ours. To take our business model and expand into different parts of the world,” Mr. McDougall said.
“I’m a firm believer that business either goes up, or it goes down. It’s doesn’t go along flat,” he said.
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