announces year-end financial results
(Ottawa, October 27, 2017) – NAV CANADA today released its financial results for the year ended August 31, 2017.The results reflect growth in air traffic volumes as measured by weighted charging units of 5.1 per cent over the same period in the prior fiscal year (5.3 per cent not including the effect of the leap year in fiscal 2016) and demonstrates the Company’s continued success in controlling costs and making strategic investments in its core services while maintaining safe and efficient air navigation services.
The Company’s fiscal year runs from September 1 to August 31. The Company continues to have strong financial performance as evidenced by its rate stabilization account, which finished the year with a positive(1) balance of $131 million which is above its target balance of $101 million. As at August 31, 2017, the Company held cash of $222 million and in fiscal 2017 had negative free cash flow(2) of $51 million mainly due to increased capital and other investments.
“Fiscal 2017 marks the fourth consecutive year of air traffic growth,” said Neil Wilson, President and CEO. “This steady growth has allowed us to invest in our people, our technology and our infrastructure as we continue to work to ensure we are in a position to handle that growth, while at the same time reducing our service charges and announcing a customer refund. This balanced approach positions us well for the future and demonstrates our commitment to provide value to all of our stakeholders.”
On August 11, 2017, the Company announced revisions to its service charges effective September 1, 2017. Based on the current strength of the rate stabilization account and our positive financial outlook for fiscal 2018, the revised charges decrease rates on average by 3.5 per cent and implement a temporary one-year rate reduction of 0.4 per cent. This effectively continues the 3.9 per cent temporary rate reduction that was implemented last year. The Company will also return to its customers approximately $60 million in a one-time refund of 4.6 per cent of billings for fiscal 2017 air navigation service charges.
The Company’s revenue for fiscal 2017 was $1,291 million, compared to $1,393 million in fiscal 2016, mainly due to the lower revised service charges (7.6 per cent on average) that became effective September 1, 2016 and the recording of the $60 million one-time refund for fiscal 2017 air navigation service billings. The refund is expected to be implemented in fiscal 2018. These revenue decreases were partially offset by a 5.1 per cent growth in air traffic volumes.
Operating expenses for fiscal 2017 were $1,330 million as compared to $1,238 million in fiscal 2016, mainly due to higher pension current service costs and higher compensation costs. The Company uses a regulatory approach to determine the net impact of the pension expense charged to net income. The objective of this approach is to expense the cash cost of the Company’s going concern pension contributions. Going concern pension contributions were lower in fiscal 2017 and this reduction in expense was recorded as a net increase in regulatory deferral account adjustments.
Net other income and expenses for fiscal 2017 were an expense of $97 million as compared to an expense of $116 million in fiscal 2016, primarily due to higher positive fair value adjustments on the investment in preferred interests of Aireon LLC and a lower interest expense, partially offset by higher net interest costs related to employee benefits and higher foreign exchange losses.
The Company had a net loss (before net movement in regulatory deferral accounts including rate stabilization) of $150 million in fiscal 2017 as compared to a net income of $37 million in fiscal 2016.
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 fiscal 2017 was an increase of $150 million as compared to a decline of $37 million in fiscal 2016. This increase in regulatory deferrals of $187 million as compared to fiscal 2016 is due to deferrals of favourable results through rate stabilization adjustments of $66 million, the recognition of the $60 million one-time refund of air navigation service charges and a $61 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.
During fiscal 2017, the Company received the remaining $285 million principal balance of Master Asset Vehicle II Class A-1 and A-2 notes ($212 million was received in the second quarter of fiscal 2017). The partial early redemption of $100 million of the Company’s $350 million series MTN 2009-1 General Obligation Notes was financed out of proceeds from the ABCP investments and surplus cash.
The Company’s Financial Statements, Management's Discussion and Analysis and Annual Information Form for the year ended August 31, 2017 can be found at:
About NAV CANADA
NAV CANADA is a private, not-for-profit company, established in 1996, providing 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.
The Company is internationally recognized for its safety record, and technology innovation. Air traffic management systems developed by NAV CANADA are used by air navigation service providers in countries worldwide.
NAV CANADA is a partner in Aireon LLC, an international joint venture deploying a space based Automatic Dependent Surveillance-Broadcast (ADS-B) system that will expand air traffic surveillance to all regions of the globe.
(1) Free cash flow is a non-GAAP financial measure used by the Company to enhance the overall understanding of its financial and operating performance. Non-GAAP financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company defines free cash flow as cash generated from operations, less capital expenditures and investments in Aireon LLC and equity related investments. Management places importance on this indicator as it assists in measuring the impact of its investment program on the Company’s financial resources.
(2) A positive balance in the rate stabilization account represents a regulatory credit balance on the Company’s statement of financial position, reflecting amounts returnable to customers through future customer service charges.
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Director, Government and Public Affairs
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Media Information Line: 1-888-562-8226
This press release contains certain forward-looking statements that are subject to important risks and uncertainties. Actual results may differ materially from the results indicated in these statements for a number of reasons. NAV CANADA disclaims any intention to update any forward-looking statements.