October 21, 2021
NAV CANADA today released its financial results for the year ended August 31, 2021.
While air traffic levels began to increase in the last quarter of fiscal 2021, on a year-over-year basis, the Company’s air traffic levels for fiscal 2021, as measured in weighted charging units(1), decreased by 32.7% versus fiscal 2020 and 55.7% as compared to pre-pandemic levels in fiscal 2019.
As a result of the lower air traffic levels, the Company’s revenue for fiscal 2021 was $870 million, compared to $1,000 million in fiscal 2020, despite the increase in customer service charges, whereby base rates increased on average by 29.5%, effective September 1, 2020.
“The aviation industry continues to face and adapt to significant challenges due to the COVID-19 pandemic’s impact on demand for air travel. Throughout this period, NAV CANADA has maintained a strong focus on delivering on our core safety mandate and prudent fiscal management,” said Raymond Bohn, President and CEO. “As we look to the future, continued fiscal responsibility, judicious investment in air navigation system modernization and the dedication of our people will be foundational in delivering value to our customers and industry stakeholders while continuing to deliver on our safety mandate. NAV CANADA is taking all necessary steps to ensure it is well positioned to safely support the aviation industry recovery which we see occurring as air carriers restore routes, vaccination levels increase and as travel restrictions are removed.”
Operating expenses for fiscal 2021 were $1,278 million as compared to $1,371 million in fiscal 2020 mainly due to Canada Emergency Wage Subsidy receipts and continued cost saving measures, partially offset by a full year of oceanic space-based surveillance data service costs, which came into effect in January 2020.
Other income and expenses for fiscal 2021 were a net expense of $176 million as compared to a net expense of $241 million in fiscal 2020. During 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 fiscal 2020. The reduced fair value reflects the continued impact of the COVID-19 pandemic on the global aviation industry.
The Company had a net loss (before net movement in regulatory deferral accounts including rate stabilization) of $577 million in fiscal 2021 as compared to a net loss of $584 million in fiscal 2020. This is reflective of the material 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 debit balance of the rate stabilization account increased to $656 million at the end of fiscal 2021 from $255 million at the end of fiscal 2020.
The Company had negative free cash flow(2) of $509 million in fiscal 2021 as compared to $231 million in fiscal 2020. Cash flow for operating expenses and capital expenditures again exceeded receipts from customer service charges in fiscal 2021. During the second quarter, the Company issued $500 million of General Obligation Notes. Net proceeds of these notes were used to repay the $250 million Series MTN 2011-1 General Obligation Notes which matured on February 18, 2021 and the remaining balance is being used for general corporate purposes. Since the onset of the pandemic, the Company has increased its long-term debt by $1,100 million. The Company ended the fiscal year with a cash balance of $319 million.
The Company is subject to legislation that regulates its approach to setting customer service charges. The timing of the recognition of certain revenue and expenses recovered through customer service charges is recorded through movements in regulatory deferral accounts. The net movement in regulatory deferral accounts for fiscal 2021 was income of $577 million as compared to income of $584 million in fiscal 2020. This change in regulatory deferrals is primarily due to lower adjustments to align the accounting recognition of certain transactions to the periods in which they will be considered for rate setting of $60 million, largely offset by higher rate stabilization adjustments of $53 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.