NAV CANADA proposes rate reductions and other adjustments to align revenues with costs
(Ottawa, April 8, 2016) – NAV CANADA today unveiled a proposal to revise its services charges through a temporary one-year rate reduction in addition to revisions to its base rates.
The temporary adjustment provides a reduction to charges for all services during the Company’s next fiscal year, from September 1, 2016 to August 31, 2017. On average, these adjustments represent a 3.7 per cent reduction from the current base rates. This temporary reduction would apply to all of the air navigation services provided by NAV CANADA. For general aviation charges, the reduction would be in place from March 1, 2017 to February 28, 2018, consistent with the revision cycle for these charges.
For the current fiscal year, ending August 31, 2016, NAV CANADA forecasts a year-end notional balance of $150 million in the Company’s Rate Stabilization Account, compared to the target balance of $100 million. “The purpose of the one-year temporary rate reduction is to return this additional $50 million to customers,” said Neil Wilson, President & CEO.
In addition to the temporary reduction, the Company is also proposing to revise its base rates in order to ensure they are aligned with costs. This proposed revision will result in an average reduction of 3.9 per cent from existing base rates, on an ongoing basis. This proposed revision is also effective September 1, 2016, except for general aviation charges where it will be effective March 1, 2017. Customer savings as a result of this proposed revision are also estimated at approximately $50 million per year.
“Under the ANS Act, NAV CANADA is obligated to ensure that our service charges are set at the levels necessary to meet the financial requirements of providing civil air navigation services,” said Wilson. “Strong cost controls coupled with a growth in air traffic have resulted in a forecast surplus for 2017, putting us in a position to make this proposal consistent with our cost recovery mandate.”
The proposed change to base rates involves different rate adjustments within the Company’s various service categories to better align rates with anticipated costs and traffic by service. The adjustments are necessary to address an imbalance that has occurred due to the stronger growth in overflight traffic.
The proposed changes to base rates include a 1 per cent increase for Terminal services; a 7.3 per cent reduction for Enroute services including overflights; a 6.5 per cent reduction in the North Atlantic charge; and a 13.7 per cent reduction in the International Communications charge. Flat charges would be reduced by 0.5 per cent under the proposal.
During fiscal 2017, when the base rate changes and the temporary adjustments would both be in effect, charges for all services would be lower than they are now by an average of 7.6 per cent. On an individual service charge basis, the reductions versus existing rates would be 2.9 per cent for terminal, 10.9 per cent for enroute (including overflights), 10.1 per cent for North Atlantic and 17.0 per cent for International Communications. Flat charges would be 4.4 per cent lower than they are today.
Customer savings as a result of these proposals are estimated at approximately $100 million for fiscal 2017, and approximately $50 million for fiscal 2018 when the temporary adjustments expire. NAV CANADA’s fiscal year runs from September 1 to August 31.
NAV CANADA service charges have not increased in close to 12 years, with the most recent rate reduction occurring in August 2007. Under the current proposal, now subject to consultation, NAV CANADA base rates would be only 1.5 per cent above the levels of March 1999 – when they were originally introduced on a full cost-recovery basis.
Said Wilson: “Customers expect and deserve safe and efficient air navigation services at a reasonable cost. We are pleased to be able to deliver on these expectations through this rate proposal, while continuing to ensure appropriate compensation and a professional and fulfilling workplace for employees.”
These proposals are subject to the mandatory notice and consultation period required by legislation. Input received during the consultation period will then be reviewed by the Company’s Board of Directors.
Details of NAV CANADA's proposed revised service charges are available on this site:
View: Notice of Revised Service Charges
View: Details and Principles Regarding Proposed Revised Service Charges
NAV CANADA is the country's private sector civil air navigation service provider. With operations from coast to coast to coast, NAV CANADA provides air traffic control, flight information, weather briefings, aeronautical information services, airport advisory services and electronic aids to navigation.