NAV CANADA proposes 29.5% average increase in service charges
May 22, 2020 By Wings Staff
NAV CANADA has released a proposal to revise its customer service charges with an average increase of 29.5 per cent in base rates. The organization states the increases are required for it to meet a minimum revenue level in 2021 based on its statutory obligations and, as a result of COVID-19, new levels of debt financing.
Operating under a unique private, not-for-profit company structure established in 1996, NAV CANADA provides air traffic control, airport advisory services, weather briefings and aeronautical information services for more than 18 million square kilometres of Canadian domestic and international airspace. As mentioned above, the organization holds a statutory mandate to safely operate and maintain the Canadian air navigation system as an essential service.
Back on May 11, before NAV Canada’s new service-charge proposal, 14 Canadian aviation associations worked together to draft a letter, eventually sent to Prime Minister Justin Trudeau and some of his key cabinet members, including Minister of Transport Marc Garneau, outlining specific measures of support that could help the industry return to a state of economic health as quickly as possible. One of the 10 industry-wide actions put forth in the letter by all 14 associations was for Federal financial assistance for air navigation charges incurred for flights during the COVID-19 pandemic period.
In a statement about its service charges increase, NAV Canada explains the impact of the COVID-19 pandemic on the aviation industry has significantly reduced its liquidity; and that its revenue and cash inflows have been substantially reduced as compared to its approved budget.
NAV CANADA notes its proposal for the increased service charges, which must first go through a mandatory 60-day consultation process, would come into effect September 1, 2020, with payment deferral mechanisms to ease the cash flow impact of the increase. The proposal specifically seeks to defer the fiscal 2021 cash impact of the increases to its customers, over a five-year period.
“NAV CANADA is proposing this rate action only after having actively pursued all available alternatives, including government assistance,” said Neil Wilson, president and CEO, NAV Canada. “All available alternatives, including further government assistance will continue to be explored and utilized in order to minimize or avoid the proposed rate increase.”
NAV CANADA explains, that with a majority of its costs being fixed, it cannot fully offset significantly lower revenues and cash inflows due to recent decreases in air traffic volume during COVID-19. The consequent reduction of available liquidity has prompted NAV CANADA to seek additional debt financing. NAV CANADA explains that order to meet the additional indebtedness provisions of its existing debenture agreements, however, it must achieve a minimum level of revenue in its fiscal 2021 year.