CBAA defends Nav Canada’s ATC user fees

 - October 9, 2006, 5:45 AM

As discussions about user fees in the U.S. heat up, the Canadian Business Aviation Association (CBAA) reflects on the nearly 10 years since Canada privatized the oversight of its air navigation system (ANS) and Nav Canada proposed and implemented charges for air traffic services. At the time, members of the CBAA disapproved of the plan because although business aircraft operators paid some fuel taxes into the nation’s treasury, airline passengers bore most of the cost of operating the ANS through ticket taxes.

Like most other ANS providers, Nav Canada assesses user fees using a combination of aircraft weight and distance flown, so business aircraft operators went from paying essentially no defined fees to paying specific fees.

But the arguments about whether to create Nav Canada have long since passed, and CBAA president and CEO Rich Gage said, “I don’t think many of us really want to go back and revisit that whole concept. I think most of us believe that the system is more service-oriented and certainly has introduced innovative technology ahead of what would have likely occurred under a government-managed system.”

Nav Canada is a non-share capital, private corporation that recovers the costs of air navigation facilities and services through a system of service charges levied on aircraft operators. The first service charges were phased in on March 1, 1999, after a two-year consultation with aviation organizations, government and other interested stakeholders.

Likewise, when Nav Canada proposes new or revised charges, it files a notice of the proposal, which is followed by a formal consultation period. After this period, the agency modifies the proposal as warranted and publishes an announcement setting out the newrevised charges.

Nav Canada claims it has saved the aviation industry more than C$600 million annually in reduced ANS costs since it took over the responsibility for providing services. The agency attributes these savings to cost-control and productivity improvements, with no negative effect on safety.

Nav Canada said the overall cost per charging unit is approximately the same as it was in Fiscal Year 1997, which in real terms represents a reduction of 15 percent.

According to Nav Canada, charges have increased 12 percent overall since the full implementation in 1999, which represents growth slightly below the rate of inflation during the period. The reason the service charges have increased while unit costs have remained the same is the reduction in traffic (revenue) since 9/11.

However, Nav Canada claims the charges compare favorably with those of other ANS providers and are still about 20 percent less than the former Air Transportation Tax they replaced.

Early this year, Nav Canada announced that another review of service charges is in the offing. “Reviewing various areas of operations from time to time is good business practice,” the ANScorporation said. “While Nav Canada’s charges remain fully consistent with the Civil Air Navigation Services Commercialization Act, a review of the charging and cost-allocation methodologies is appropriate at this time. Some customer groups have also suggested a review.”

Performance Review

In addition to Nav Canada’s own need to review its charging service periodically, Gage said there is pressure (principally from the airlines) to find a formula more advantageous to them. “The major airlines of the world–especially the ones using big aircraft–would dearly love to see the weight formula either reduced or eliminated,” he explained. “If that was the case, they would pay a lot less and the smaller operator using smaller aircraft would pay a lot more.”

The issue for CBAA and other non-airline interests, Gage said, is trying to preserve the current weight-distance concept, which is generally accepted by the International Civil Aviation Organization as an appropriate and fair means of charging for ANS.

The CBAA membership is satisfied with the Nav Canada system, which Gage said functions extremely well as a whole, although he conceded there are minor, mostly regional, issues, where operators may not be getting the service they want and expect. Some of this might be related to staffing issues that affect their ability to provide 100 percent of the service.

“The Edmonton North region is a good example. The Edmonton area has not been able to staff to the level that it should,” said Gage. “And that has had, on a periodic basis, an impact on some of our members and also some of the airline operators transiting through that area in terms of getting their altitudes and getting the routing that they would prefer.”

But in terms of the overall system, CBAA members are “quite satisfied with it and we think that we get value for the money that we are putting into it,” he added. He opined that Nav Canada inherited some of those staffing problems from the government system. He said that the agency has done a lot of work to mitigate the labor-relations issues.

“We went through this [commercialization debate] 10 years ago and a lot of the arguments that we’re hearing from [the U.S.] where this is being considered were all part of the debate at the time,” the CBAA president recalls. “I think many of the arguments that NBAA and other folks down there are making were probably made here 10 to 12 years ago.”

Once the decisions are made, he said, there is a period of time when a lot of people are upset. A few years ago, he noted, CBAA had a number of members who were “really upset” that they had to pay.

“People now accept the fact that this is what we’ve got and it’s a matter of how we make the best of the circumstances we’ve got now,” Gage said. “So it shouldn’t necessarily be implied that this was an easy process to get from where we were to where we are. It was not.”

In his view Nav Canada’s Achilles’ heel is labor relations, while its major strength is itsability to find and introducenew technologies.

“That, at the end of the day, hopefully will result in a more efficient system and one that provides as much access and as easy access as possible for all of us,” Gage concluded. “If it is going to affect our members’ ability to access airspace and access airports, then that’s problematic for us.”