NAV CANADA announces third quarter financial results
(Ottawa, July 10, 2020) – NAV CANADA today released its
financial results for the three and nine months ended May 31, 2020.
In the third quarter of fiscal 2020, the Company’s air
traffic growth decreased 59.4% on a year over year basis, as measured in
weighted charging units, as a result of the COVID-19 pandemic. As a result, the
Company’s revenue for the third quarter of fiscal 2020 was $159 million,
compared to $351 million over the same period in fiscal 2019.
The COVID-19 pandemic and the resulting economic contraction
has had, and is expected to continue to have, a significant negative impact on
global air traffic and on the aviation industry. NAV CANADA has seen the number
of air traffic movements decline since March 2020 as a result of travel
restrictions imposed by governments, the closing of international borders and
the economic impact of the pandemic.
As a result, the Company’s customer
service charges revenue has declined significantly as air carriers have reduced
their operations, grounded fleets and cancelled flights and routes. The
pandemic is expected to continue to have a negative impact on air travel
globally and this will likely continue until such time as travel restrictions
are eased and consumer demand for air travel returns. Industry participants are
indicating it may be some time before they fully return to pre COVID-19
operating levels. We expect until this occurs that reduced air traffic activity
will have a significant negative impact on the Company’s operations and
In response to the impact of the pandemic, NAV CANADA will
continue to review, monitor and take actions to reduce capital and operating
spending and cash outflows, while at the same time ensuring the continued
fulfillment of the Company’s mandate to safely operate and maintain the
Canadian air navigation system as an essential service and to protect the
safety of its employees.
In March 2020, the Company accessed its available syndicated
credit facility to address near-term liquidity requirements and on May 29,
2020, the Company issued $850 million of General Obligation Notes. The net
proceeds of these notes will be used for general corporate purposes, including
the repayment of borrowings under the syndicated credit facility and will
enhance the Company’s liquidity reserves. The Company has also accessed the
Canada Emergency Wage Subsidy government relief program.
On May 20, 2020, the Company issued, for consultation, a
notice of revised service charges, providing details of proposed service charge
revisions. The proposed changes would increase customer service charge base
rates by an average of 29.5%, effective September 1, 2020. The service charge
proposal includes provisions to ease the cash flow burden of the increase on
its customers through payment deferral mechanisms. The consultation period
concludes on July 24, 2020.
“To keep the Company on secure financial footing in these
extraordinary times, we implemented incisive cost-cutting measures that will
reduce spending now and on a go-forward basis, proposed a significant service
charge increase and issued General Obligation Notes in the amount of $850
million.” said Neil Wilson, President and CEO. “We will continue to collaborate
with government and industry stakeholders and will take all measures necessary
to remain focused on safety and on providing value to our stakeholders.”
Operating expenses for the third quarter of fiscal 2020 were
$351 million as compared to $367 million over the same period in fiscal 2019,
mainly due to cost saving measures as well as Canada Emergency Wage Subsidy
receipts partially offsetting compensation costs.
Net other income and expenses for the third quarter of
fiscal 2020 was a net expense of $129 million as compared to a net expense of
$15 million over the same period in fiscal 2019, primarily due to a reduction
in the fair value of the Company’s investment in preferred interests of Aireon
LLC to reflect the potential impact of the COVID-19 pandemic on the aviation
The Company had a net loss (before net movement in regulatory
deferral accounts including rate stabilization) of $294 million in the third
quarter of fiscal 2020 as compared to a net loss of $31 million for the third
quarter of fiscal 2019. This is reflective of the decrease in revenue and
reduction in the fair value of the Company’s investment in preferred interests
of Aireon LLC due to significantly lower air traffic.
The Company ended the quarter with a cash balance of $918
million, largely due to the issuance of General Obligation Notes and borrowings
from its syndicated credit facility. Negative free cash flow(1) of $129 million
in the third quarter of fiscal 2020 was primarily due to operating cash flows
and capital expenditures exceeding receipts from customer service charges.
The Company is subject to legislation that regulates its
approach to setting 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 2020 was income of $280 million as compared to
income of $17 million over the same period in fiscal 2019. This change in
regulatory deferrals is primarily due to a $158 million net increase to reflect
unfavourable variances from planned results due to the decline in air traffic
volumes resulting from the COVID-19 pandemic and a $105 million net increase to
adjust the accounting recognition of certain transactions to the periods in
which they will be considered for rate setting.
During the quarter the International Air Transport
Association discontinued, with the consent of Air Canada as intervenor, its
application for Judicial Review of the Canadian Transportation Agency’s
decision which upheld the Company’s revised service charges implemented
September 1, 2019 and January 1, 2020.
The Company’s Financial Statements and Management's
Discussion and Analysis for the three and nine months ended May 31, 2020 can be
• Financial Statements
Discussion and Analysis
About 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.
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.
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,
investments in Aireon LLC and equity related investments and principal payment
of lease liabilities. Management places importance on this indicator as it
assists in measuring the impact of its investment program on the Company’s
information, please contact:
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.