Canada’s Private ATC System Offers Alternative for Cost-cutting Nations

 - January 1, 2012, 3:10 AM
Controllers were among the groups that embraced the 1996 privatization of Canada’s ATC system, anticipating that a nongovernment agency would encounter fewer bureaucratic roadblocks. Nav Canada funds itself purely through fees collected.

Despite the dire consequences predicted for Europe’s economy if the euro actually comes unglued, or the monthly chaos that ensues at the U.S. Congress’s failure to reauthorize the FAA, nudging close to the brink of financial disaster can sometimes lead to an epiphany and a new way to consider an old problem. Consider, for example, a nation’s air traffic control system.

In 1996, “The government of Canada was faced with a large and continuing deficit,” Sid Kozlow, vice president and chief technology officer for Nav Canada, told AIN. “It was looking for a way to rid itself of things that cost money, like the air traffic control system.” Then Nav Canada assumed control of the ATC system from Transport Canada.

“Until 1996, we used a ticket-tax system to fund air traffic control, similar to what’s used in the United States,” Kozlow added. But the revenue stream, especially in the face of much-needed technology upgrades, never kept up system expenses. The only solution was to ask for more and more money from the Canadian general fund to fill the gap.

The idea for organizational change evolved with input from many of the top Canadian aviation groups, including the Canadian Air Traffic Control Association (Catca), ALPA (Air Line Pilots Association) Canada, the Canadian Business Aviation Association and Canadian Owners and Pilots Association, according to Catca president and CEO Greg Myles.

The controllers wanted a change, said Myles, because “we believed escaping from the federal sector would have a positive effect on our labor-relations efforts.” He added, “We had issues with funding because of the government’s bureaucracy, but, of course, nothing as bad as what is happening in the U.S.” Noting that the transition to a non-governmental entity running Canada’s ATC system was a collective effort, Kozlow recalled, “There was a lot of political will for this to happen.”

Private Company Takes the Reins

Nav Canada opened for business in 1996 as a not-for-profit, non-share capital corporation to own and operate Canada’s civil air navigation service (ANS); it is governed by a board of directors. Although entirely independent of the Canadian government, Nav Canada cannot be sold without government approval. Nav Canada runs approximately 12 million flight operations annually through seven en route air traffic control centers and 41 control towers across the country. By contrast, total FAA ATC operations in 2010 were slightly more than 48 million.

Kozlow said, “There are no ties between any stakeholders and the [Nav Canada] board. In fact, none of the members of the board can be active in any stakeholder group. Members are generally successful business people who understand they have a fiduciary responsibility to the company.” Nav Canada is regulated by Transport Canada and audited just like any other commercial operator through the use of both regular and spot inspections to ensure compliance.

Many in the U.S. wonder if air traffic controllers, technicians, pilots and other users of the Canadian ATC system are better off now than they were in 1996, especially since Nav Canada operations are funded by operator-paid charges, or user fees. If the goal was improved labor relations right off the bat, Myles said they failed at that somewhat. “It actually started off rather dismally…96 percent of our members voted against the first contract.” Attempting to be fair, he added, “Neither side was really experienced at negotiations back then. Labor relations have improved considerably over the past 10 years, however.”

Kozlow recalled, “It took a while for everyone to get used to a private [ATC] entity, but over time we’ve had a lot of communications back and forth. The changes didn’t hurt. We added more controllers and developed a positive, professional relationship…and a reasonable appreciation for the other side. We’re also now very customer-focused.”

The funding model took a few years to get used to as well, said Kozlow. “The first year, the Canadian government gave us all the ticket tax money [it collected], but only half the second year.” By year three, Nav Canada was on its own trying to make the system work with fees based on aircraft type, weight and distance travelled. “We were certainly not the first country to have service charges,” Kozlow reminded. “Europe, Australia, Germany and New Zealand are among just a few, although Australia and Germany are run by a government-controlled company.” The UK’s NATS system is similar to Nav Canada, but also 47 percent owned by the British government.

Fee Structure

This ATC company operates on a simple business philosophy: safety comes first, not business. “We do borrow money and we get that back in services charges,” Kozlow said. Despite the fact that even discussing user fees in the U.S. is akin to committing aviation treason, Kozlow was quite happy to share the history of Nav Canada’s fee structure.

“There have been a few increases, as well as some decreases over the past 15 years,” he said. Fees currently sit about 5 percent higher than they were when Nav Canada opened for business in 1996. “And those fees are about 25 percent less than what they would have been if we’d been tied to the old system,” Kozlow claimed. “Next year’s rates are being created this year. We make a real effort to balance everything, too. There is a little extra [put in reserve] plus or minus 7.5 percent of our total revenue.”

Nav Canada also completed its own ATC system upgrades, a sort of a mini-NextGen–Canadians humorously refer to it as NowGen–when the final piece of new technology was turned on last fall at Edmonton Center.

In all, Kozlow says users and employees are proud of the company they’ve created because they never forget that operating overhead is the enemy. “We try to require as little process and as little overhead as possible in all we do. With the C$1.7 billion we’ve spent over the last 15 years, we’ve changed out radios, ILS, expanded radar by 100 percent, adding ADS-B [in areas were there previously was no ATC service at all], and new flight data processing systems. We didn’t do this on a shoestring either, but on a reasonable amount of money effectively delivered. We tend not to overpromise. Over the 15 years we’ve recapitalized the entire system and now run as modern a system as anyone is likely to find.”

Wondering whether the Nav Canada system was a fluke or an under-reported cutting-edge model of a modern ATC system, AIN called the National Air Traffic Controllers Association (Natca) in Washington to hear what alternative ATC funding and operating options they’d explored. The questions elicited just a few simple, succinct comments from the association’s director of communications, Doug Church.

“Our [ATC] system is inherently governmental and should never be privatized," Church said. "We have the safest and most efficient system in the world and we should not do anything to jeopardize our safety record. We are working collaboratively with the FAA on modernizing our system and working on NextGen.”

If all goes well, meaning Congress and the president approve a consistent flow of funds, FAA spokesman Paul Takemoto estimates NextGen “will cost $14 to $22 billion through 2025. We expect many of the major NextGen technologies to be reaping benefits by 2018, although ADS-B ground stations are expected to be installed by the end of 2013.”

However, recent Government Accountability Office report predicts that number could be significantly higher. NextGen officials reported that full fleet equipage by 2025 could increase ground and airborne costs from earlier estimates of $40 billion to $160 billion

Europe’s Sesar is also not yet ready for prime-time ATC operations. Takemoto said NextGen and Sesar would complement each other, although some ATC experts see the two as competitors.

Catca’s Greg Myles is realistic about the practicalities of scaling a Nav Canada system elsewhere. “Nav Canada was a made-in-Canada solution made just for Canada. There are many different models [around the world]; so one size never fits all. But if you never look at other options, you’ll never know what you might be missing. Just looking and trying to figure out what works doesn’t mean you must commit.”


Nav Canada Products Aid ATC in Other Nations

Nav Canada collects fees for a host of ATC products and services–marketed as NavCan Suite and NavCan Links–and sold to other air traffic service providers around the globe.

Marketing its products around the world was not originally part of the Nav Canada business plan, but that evolved over the years as the agency had a chance to look at items such as ATC and airport situational displays, airfield lighting controls, a NavCan ATIS and Volmet tool and traffic flow-control software. NavCan Link provides users, such as airport operations and air carrier operations managers with the near-real-time data, just like what controllers are using in a graphical display for collaborative decision-making.

In early December, Nav Canada inked a deal with the Dubai Civil Aviation Authority to manage critical ATC information with NavCan ATM technology. Eight airports in the UK use Nav Canada system products, as well some in Copenhagen, Australia and Hong Kong.