NAV CANADA announces second quarter results
April 12, 2010, Ottawa - NAV CANADA released its financial results on Friday for the three and six months ended February 28, 2010.
The results show continued success in controlling costs while maintaining safe and efficient air navigation services, despite a continued reduction in air traffic levels compared to the first six months of fiscal 2009. Revenues during the second quarter of fiscal 2010 were essentially unchanged from a year ago.
In the second quarter of fiscal 2010, the Company had an excess of expenses over revenues and other income after rate stabilization of $ 29 million. The Company finished the quarter with a rate stabilization account liability of $ 2 million.
However, when adjusted for rate setting purposes, there is a notional balance in the rate stabilization account of $ 115 million, which reflects the Company's expectation that the majority of the fair value adjustments on its asset-backed commercial paper (ABCP) investments will be recovered over the terms of these investments.
"While we are beginning to see some improvement in the air traffic and revenue environment, our results continue to reflect the impact of the global economic downturn and the current recovery period" said John Crichton, NAV CANADA President & CEO.
"The good news is that — thanks to the efforts of all staff — we have been able to maintain our focus on safe and efficient air navigation services while controlling our discretionary expenses in line with the year-to-date decline in revenues."
In light of the notional balance in the rate stabilization account, the Company does not intend to increase customer service charges at this time. "We will continue to carefully monitor air traffic and revenue, and in June 2010 we will reconsider the need for a rate increase for effect thereafter, in accordance with the ANS Act," said Crichton.
He pointed out that NAV CANADA service charges have only gone up by five per cent in over a decade — 20 percentage points below the rate of inflation, with rate reductions of 2006 and 2007 still in effect.
The Company's revenues before rate stabilization for the second quarter of fiscal 2010 were $ 263 million, compared to $ 261 million for the comparable period in the previous year. Air traffic volumes were 1.3 per cent lower than a year ago (3.6 per cent lower for the first six months of fiscal 2010). However, other revenues for the first six months were $ 5 million higher than in the prior year period.
Operating expenses before rate stabilization for the quarter were $ 232 million, after capitalizing $ 10 million more of internal labour and travel costs than in the prior year period, in line with the Company's revised accounting policy. Operating expenses were $ 4 million lower than in the second quarter of last year. Management continues to effectively manage headcount and overtime to offset somewhat higher compensation levels.
Interest, depreciation and amortization expense before rate stabilization totalling $ 60 million was $ 1 million lower than in the comparable period of the prior year. The fair value of the Company's investments in ABCP restructured notes remained stable at $ 203 million on holdings with a face value of $ 361 million. Of the total fair value provision of $ 158 million, $ 113 million is considered recoverable over the term of the notes.
The Company's Financial Statements and Management's Discussion and Analysis for the three and six months ended February 28, 2010 are available on NAV CANADA's website at: www.navcanada.ca .