The owners of northern airlines First Air and Canadian North say they have signed an “agreement in principle” to merge.

In a statement issued on Friday afternoon, Makivik Corporation and the Inuvialuit Development Corporation said a merger would “provide the best possible essential air services across the Arctic.”

Once the agreement is finalized, the airline will be known as Canadian North but will operate with First Air’s new livery and Inukshuk logo. It will be headquartered in Ottawa, though the two airlines said they are committed to the North and to growing the merged airline’s presence in Alberta.

The two companies hope to complete the merger by the end of this year.

“The world is changing and we need to adapt to new realities,” read remarks attributed to Charlie Watt Sr, president of First Air owner Makivik, who was credited in the statement with initiating merger talks.

“This is one way to assert our sovereignty across the Arctic.”

The two airlines recently tried working together in a codeshare agreement, launched in 2015 but scrapped within two years. At the time, First Air said the agreement was unpopular with its customers.

Codesharing had been seen as a way to combat what Canadian North called “extraordinarily high operating costs versus relatively low passenger and cargo volumes.”

While codesharing means airlines can sell seats and cargo space on each other’s flights, a merger is much more wide-ranging – involving the consolidation of both companies, including their staff, finances, and legal arrangements, into one entity.

‘The only viable way’

This is not the first time a merger between the two airlines has been proposed.

In 2014, talk of a potential merger attracted scrutiny from federal regulators regarding the possible consequences for ticket prices and seat availability.

That talk never became reality at the time, but the two owners are now back before regulators with their latest proposal.

First Air and Canadian North serve many of the same destinations in the North, particularly Nunavut. Friday’s announcement will raise questions about the long-term impact on passengers, who already pay thousands of dollars per flight even with discounts for beneficiaries.

The two airlines said on Friday their customers “will not see changes to services, including fares and scheduling,” while the merger is completed. However, the deal means a single operator will serve many northern routes.

In their statement, the airlines said the merger would offer greater reliability, efficiency, and punctuality, but they did not discuss longer-term pricing beyond the merger period itself.

The statement added the merger would “contribute to northern and Inuit economic development by creating a wholly Inuit-owned, new airline focused on Canada’s North.”

It cited a recent Government of Nunavut report in claiming “a merger of First Air and Canadian North is the only viable way to both meet and exceed … essential needs for Nunavummiut and all northerners.”