NAV CANADA notes 5.9% bump in traffic volumes
NAV CANADA has released its financial results for the three and nine months ended May 31, 2017. The results reflect growth in air traffic volumes as measured by weighted charging units of 5.9 per cent over the same period in the prior fiscal year (5.5 per cent excluding the effect of the leap year in fiscal 2016) and demonstrate the company’s ongoing efforts in controlling costs and making strategic investments in its core services while maintaining safe and efficient air navigation.
The company’s fiscal year runs from Sept, 1 to Aug, 31. In the third quarter of fiscal 2017, the company had cash of $218 million, a negative free cash flow of $34 million due to seasonally weaker air traffic but continued its strong financial performance for the fiscal year as evidenced by its rate stabilization account, which finished the quarter with a positive balance of $177 million which is above its target balance of $101 million.
The company’s revenue for the third quarter of fiscal 2017 was $332 million, compared to $337 million over the same period in fiscal 2016, mainly due to the lower service charges (7.6 per cent on average) that became effective Sept. 1, 2016 partially offset by a 5.9 per cent growth in air traffic volumes.
“The steady and sustained traffic growth that we have seen over the past three years has continued into the third quarter of fiscal 2017,” said Neil Wilson, president and CEO. “This strong traffic and the increases we have seen to our rate stabilization account put the Company in good stead to implement the proposed rate reductions and a customer refund slated for the next fiscal year.” The company issued a notice of revised service charges for consultation on May 30, 2017, providing details of the proposed revisions. The consultation period concludes on July 31, 2017.
Operating expenses for the third quarter of fiscal 2017 were $348 million as compared to $319 million over the same period in fiscal 2016, mainly due to a curtailment loss recorded on the voluntary elimination of severance benefits for employees represented by the CATCA collective agreement, higher pension current service costs and higher compensation costs. The company uses a regulatory approach to determine the net impact charged to net income (loss) for its pension costs. The objective of this approach is to expense the cost of the company’s cash going concern and special payment contributions. Going concern pension contributions were lower in the third quarter of fiscal 2017 and this reduction in expense was recorded as a net increase in regulatory deferrals adjustments.
Net other income and expenses for the third quarter of fiscal 2017 were a net expense of $16 million as compared to a net expense of $34 million over the same period in fiscal 2016, primarily due to gains recorded on the partial sale of the company’s investment in a subsidiary during the quarter, lower interest expense and higher foreign exchange gains, partially offset by higher net interest costs related to employee benefits.
The company had a net loss (before net movement in regulatory deferral accounts including rate stabilization) of $35 million in the third quarter of fiscal 2017 as compared to a net loss of $16 million for the third quarter of fiscal 2016.
The company is subject to legislation that governs how it sets its charges. The timing of the recognition of certain revenue and expenses recovered through charges is recorded through movements in regulatory deferral accounts. The net movement in regulatory deferral accounts for the third quarter of fiscal 2017 was income of $27 million as compared to income of $8 million over the same period in fiscal 2016. This change in regulatory deferrals of $19 million as compared to the same period in fiscal 2016 is due to lower deferrals of favourable results through rate stabilization adjustments of $18 million and a $1 million net increase in regulatory deferral adjustments to adjust the accounting recognition of certain transactions to the periods in which they will be considered for rate setting.
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