July 9, 2021
NAV CANADA today released its financial results for the three and nine months ended May 31, 2021.
In the third quarter of fiscal 2021, the Company saw air traffic levels, as measured in weighted charging units(1), increase 1.6% on a year over year basis. However, in comparison to the same period in fiscal 2019 (prior to the COVID-19 pandemic), movement-based air traffic has decreased 58.7%. The pandemic began impacting air traffic levels in mid-fiscal 2020 and since then, movement-based air traffic has continued to trend well below the quarterly levels seen in fiscal 2019.
The Company’s revenue for the third quarter of fiscal 2021 was $196 million, compared to $159 million over the same period in fiscal 2020. The increase in revenue reflects both the year over year increase in third quarter air traffic levels as well as the increase in customer service charges, whereby base rates increased on average by 29.5%, effective September 1, 2020. As compared to fiscal 2019 however, revenue for the third quarter remains significantly lower.
“While there is still a significant degree of uncertainty, there have been a number of positive indicators that an industry recovery is forthcoming” said Raymond Bohn, President and CEO. “With air carriers restoring routes, increased vaccination rates, anticipated reductions in travel restrictions and growing travel demand there is optimism that air traffic will continue to rise. NAV CANADA is taking all necessary steps to ensure it is well positioned to support an industry recovery and to ensure the continued safety of our airspace.”
Operating expenses for the third quarter of fiscal 2021 were $305 million as compared to $351 million over the same period in fiscal 2020. The reduction is largely due to an overall decrease in compensation costs and included higher receipts from the Canada Emergency Wage Subsidy program.
Net other income and expenses for the third quarter of fiscal 2021 were a net expense of $86 million as compared to a net expense of $129 million over the same period in fiscal 2020. During the third quarter of fiscal 2021, the Company recorded a $36 million (U.S. $30 million) non-cash reduction to the fair value of its investment in preferred interests of Aireon LLC, for accounting purposes, as compared to a reduction of $112 million (U.S. $82 million) recorded in the same period in fiscal 2020. The reduced fair value reflects the continued impact of the COVID-19 pandemic on the global aviation industry. The fluctuation of the Canadian dollar against the U.S. dollar has also resulted in unrealized foreign exchange losses in the third quarter of fiscal 2021 compared to unrealized foreign exchange gains in the third quarter of fiscal 2020.
The Company had a net loss (before net movement in regulatory deferral accounts including rate stabilization) of $186 million in the third quarter of fiscal 2021 as compared to a net loss of $294 million for the third quarter of fiscal 2020.
The Company had negative free cash flow(2) of $140 million in the third quarter of fiscal 2021 as cash flows for operating expenses and capital expenditures exceeded receipts from customer service charges. The Company ended the quarter with a cash balance of $404 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 third quarter of fiscal 2021 was income of $194 million as compared to income of $280 million over the same period in fiscal 2020. This change in regulatory deferrals is primarily due to lower rate stabilization adjustments of $50 million and lower adjustments to align the accounting recognition of certain transactions to the periods in which they will be considered for rate setting of $36 million.
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 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.