April 7, 2022
NAV CANADA today released its financial results for the three and six months ended February 28, 2022.
In the second quarter of fiscal 2022, the Company saw air traffic levels, as measured in weighted charging units(1), increase 68.9% on a year over year basis. The Company’s revenue for the second quarter of fiscal 2022 was $313 million, compared to $179 million over the same period in fiscal 2021. However, in comparison to the same period in fiscal 2019 (prior to the COVID-19 pandemic), weighted charging units were 25.7% lower.
“Air traffic in the second quarter remained well below pre-pandemic levels though steadily higher than the same period of the previous year, despite the peak of the Omicron wave. The gradual easing of restrictions and high vaccination rates provide positive signals that are supportive of continued air traffic recovery as the summer travel season approaches. At the same time, the aviation industry must remain prepared for volatility relating to the conflict in Ukraine, the fact that COVID-19 remains a risk globally and the added burden on operators of rising fuel costs,” said Raymond G. Bohn, President and CEO.
“The current environment further highlights the importance of our strategic direction that is focussed on improving the Company’s resilience and enhancing safety, efficiency and operational predictability over the long-term to better serve our customers, meet future demand and reduce the industry’s environmental impacts. Modernizing our surveillance capability with the recently announced roll out of Canada’s ADS-B Out Performance Requirements mandate within domestic airspace will be a key building block of our future air navigation system.”
Operating expenses for the second quarter of fiscal 2022 were $350 million as compared to $316 million over the same period in fiscal 2021. The increase is largely due to the end of the Canada Emergency Wage Subsidy program in October 2021 along with an increase in overtime costs as traffic volume recovers.
Net other income and expenses for the second quarter of fiscal 2022 were a net expense of $29 million as compared to a net expense of $40 million over the same period in fiscal 2021, largely due to lower interest costs related to employee benefits and long-term debt and lower foreign exchange losses primarily related to the Company’s investment in preferred interests of Aireon LLC.
The Company had a net loss (before net movement in regulatory deferral accounts including rate stabilization) of $66 million in the second quarter of fiscal 2022 as compared to a net loss of $179 million for the second quarter of fiscal 2021.
The Company had positive free cash flow(2) of $28 million in the second quarter of fiscal 2022 as compared to negative free cash flow of $139 million for the same period in fiscal 2021. The positive free cash flow is attributable to receipts from customer service charges exceeding cash flows for operating and capital expenditures, as well as receipts from the sale of the Company’s investment in Searidge Technologies Inc. during the quarter. The Company ended the quarter with a cash balance of $367 million.
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 second quarter of fiscal 2022 was an expense of $35 million as compared to income of $122 million over the same period in fiscal 2021. This change in regulatory deferrals is primarily due to unfavourable rate stabilization adjustments of $5 million in the second quarter of fiscal 2022 as compared to unfavourable adjustments of $81 million for the same period in fiscal 2021, along with a net decrease of $11 million in adjustments to align the accounting recognition of certain transactions to the periods in which they will be considered for rate setting.
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.
(1) Weighted charging units represent a traffic measure that reflects the number of billable flights, aircraft size and distance flown in Canadian airspace and is the basis for movement-based service charges, which comprise the vast majority of the Company’s revenue.
(2) 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 regulatory assets, 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 financial resources.
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