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No increase for Nav Canada service charges

NEWS HIGHLIGHT

No increase for Nav Canada service charges
Nav Canada has announced that it has decided not to propose an increase in its service charges at this time.


June 12, 2009
By Administrator

June 11, 2009, Ottawa – Nav Canada has announced that it has decided not to propose an increase in its service charges at this time, citing an acceptable level in its “notional” rate stabilization account. However, due to the significant uncertainty regarding the timing of an improvement in air traffic levels, the Company will carefully monitor air traffic levels on a monthly basis. Should traffic levels not improve, a rate increase will be considered no later than October for effect in 2010, if required.
 
“Thanks to the efforts of all employees, we have been able to offset much of the impact of declining air traffic and revenues. Our operating expenses, which remained essentially unchanged from fiscal 2007 to fiscal 2008, are currently forecast to be approximately $20 million lower in fiscal 2009. We have done this through active cost management, consistent with safety,” said John Crichton, President & CEO.
 
The rate stabilization account was established at the inception of Nav Canada to accumulate the variances between actual financial results and estimates of traffic volumes and planned expenses. The Company has established a target balance for the rate stabilization account of 7.5 per cent of recurring expenses, or $94 million.
 
The Company considers the “notional” balance in the rate stabilization account, for rate setting purposes, to be $92 million as of February 2009 (the end of its second fiscal quarter), in view of the consideration that a significant part of the cumulative fair value adjustments recorded on its commercial paper investments should be recoverable over the time that the Company continues to hold them.
 
Traffic levels will be closely monitored over the coming months, with rate action a real possibility at a later date if traffic growth does not occur.
 
Overall charges are only five per cent higher than they were in 1999 when they were fully implemented, which is 19 percentage points below the growth in inflation.
 
Despite rate increases earlier in the decade following the 9/11 downturn, the Company recently reduced fees by a combined total of about 6 per cent – in 2006 and 2007 – saving customers over $50 million on an annual basis.
 
Nav Canada, the country’s civil air navigation services provider, is a private sector, non-share capital corporation financed through publicly-traded debt. With operations coast to coast, Nav Canada provides air traffic control, flight information, weather briefings, aeronautical information services, airport advisory services and electronic aids to navigation.