Nav Canada raises fees, defers capital projects

 - May 7, 2008, 9:35 AM

Nav Canada’s declining revenue from reduced traffic volume over the last year as a consequence of the slowing economy and September 11 has forced the operator of Canada’s ATC system to propose a modest 3-percent across-the-board increase in service charges to the airlines, business jet operators and general aviation users.

The increased fees, if adopted, would be effective next January 1 for airlines and
business jet operators. Annual and quarterly charges for general aviation (defined by Nav Canada as any operation in aircraft with an mtow of less than 6,615 lb) would increase by 3 percent next March 1.

Service charges in Canada are broken down into three categories: movement-based fees for jet aircraft with an mtow greater than 16,538 lb; annual and quarterly fees for aircraft, with an mtow less than 6,615 lb; and daily charges for propeller aircraft with an mtow greater than 6,515 lb; and jet aircraft with an mtow less than 16,538 lb. If the proposal is approved (operators have until December 2 to submit comments) here is what some of the movement-based increases would look like in Canadian dollars (with the current fees shown in parentheses): terminal charges, $13.78 ($13.38); en route charge per km, $0.033 ($0.03204); North Atlantic en route per flight, $79.76 ($77.44); datalink communications per flight, $24.13 ($23.43); voice communications per flight, $47.72 ($46.33).

Examples of new daily operational charges are: helicopters, $60 max ($58); jets less than 13,671 lb mtow, $149 ($145); jets from 13,671 lb mtow to 16,538 lb mtow, $247 ($240). For Canadian-registered airplanes greater than 6,615 lb mtow, the proposed “annual minimum charge” is $201 ($195). For non-Canadian-registered airplanes larger than 6,615 lb mtow, there is a quarterly payment required that is 25 percent of the annual minimum fee.

Service charges were introduced in March 1998, some two years after the Canadian government turned over operation of ATC and flight-planning services to Nav Canada, a nonprofit private corporation. Nav Canada points out that it is permitted to collect only enough revenues to cover its costs, in addition to “reasonable and prudent financial reserves.” The company said that even with the proposed increases, service charges will still be lower, on average, than they were in March 1999, and “one-third below the federal government’s air-transportation tax” before it was replaced by Nav Canada service charges.

15-percent Revenue Drop

As part of its proposed rate increase, Nav Canada noted that in fiscal year 2001/2002, the company faces a loss of about 15 percent of anticipated revenues due to the drop in traffic. “When compared with the pre-9/11 traffic forecast, the cumulative revenue loss for FY 2001/ 2002 through 2004/2005 could reach $360 million at existing fee levels based on current traffic forecasts,” the company said.

The cost-recovery plan involves not just increasing service fees, but also reducing costs, such as deferring capital projects worth more than $20 million from the FY 2001/2002 budget and $38 million from the FY 2002/2003 budget. Nevertheless, Nav Canada claims that its austerity program has been developed within the “overriding objective of maintaining or improving safety.”     

By far, the biggest cost saving will “largely be determined by the outcome of current labor negotiations” with air traffic controllers and other employees, “as labor costs make up nearly three-quarters of the operating costs.” But Nav Canada has had little luck in this area to date. At press time, proposed wage freezes by the company’s employees had been accepted by only one union. In addition, all collective agreements have expired, although “negotiations are still ongoing,” Nav Canada said. “Forecasting operating costs is naturally difficult, given that the level of the largest cost component cannot be determined at this time.”

The proposal also includes a notice that Nav Canada next January 1 intends to take over from the government responsibility for the sale and distribution of aeronautical charts and other airman publications. The company assured users that there would be no price increases. Also, the temporary extension on service charge payments– from 30 to 45 days–will remain in effect “for the time being.”

Further details of this proposal, including the names of those to whom comments should be addressed, are available at www.navcanada.ca.