Guest M. McRae Posted May 15, 2003 Share Posted May 15, 2003 Attention News/Business/Financial/Health Editors: NAV CANADA Releases Service Charge Proposal OTTAWA, May 15 /CNW/ - Faced with a growing financial deficit due to the continuing downturn in air traffic and significant bad debt expenses - and despite cutting about $75 million in operating costs over two years - NAV CANADA must increase its air navigation service charges by an average of 6.9 per cent, the Company announced today. NAV CANADA charges airlines and other owners and operators of aircraft for air traffic control, the provision of flight information and advisories, and other essential air navigation services and facilities across the country. "NAV CANADA service charges are still 3 per cent lower, on average, than they were in March 1999," said President and Chief Executive Officer John Crichton. "With this proposal, they would be only 4 per cent above March 1999 levels. "That represents a rate of increase well below the rate of inflation. And our charges would still be 28 per cent below the old Air Transportation Tax they replaced." On a per-passenger basis, the proposed increase amounts to 65 cents more per one-way ticket for a flight from Toronto to Ottawa. Additional examples of the per passenger impact for a variety of routes are available in the attached backgrounder. The new charges would come into effect August 1, 2003, with annual and quarterly charges to be implemented on March 1, 2004. The proposal is now subject to the mandatory 60-day consultation process. Said Crichton: "Through the current industry downturn, NAV CANADA has done everything possible to reduce costs while maintaining the highest safety standards. Our approach has included initiatives to access non-aeronautical revenues and the complete draw down of $75 million from the rate stabilization account. In addition, the $75 million in operating cost reductions were on top of $100 million in annual cost savings and staff reductions already achieved through previous restructuring. "Unfortunately, we face further traffic declines due to the war in Iraq and SARS. And anticipating an accumulated shortfall of $176 million after two years, we've exhausted our ability to help ease the burden of the downturn on our customers." The level of the proposed increase is significantly mitigated by NAV CANADA's plans to access additional revenues from non-aeronautical sources. The Company recently signed three contracts involving the sale of its world- leading air traffic control technology to UK NATS, its counterpart in the UK. In addition, NAV CANADA continues to pursue a significant cross-border lease-leaseback opportunity with a significant financial one-time benefit. "This opportunity becomes more possible now due to a recent favourable tax decision from the Federal Government - a decision which the Company applauds," Crichton said. NAV CANADA will be in a position to maintain its sound financial foundation through the additional revenues from the service charge increase, together with the anticipated benefit from the lease-leaseback transaction as well as new non-aeronautical revenues. All of this is intended to allow the Company to break even in fiscal 2003-2004, recover its anticipated $176 million cumulative deficit within five years, and replenish its rate stabilization account to $50 million over the same time period. The increase comes after years of cost reductions at NAV CANADA. The Company reduced overhead by more than $400 million and staff levels by 1000 from 1997-2001, following the transfer of the Air Navigation System (ANS) from government. These savings were passed on to customers through lower service charges. Since the 9/11 terrorist attacks, NAV CANADA has cut the additional $75 million in operating costs through measures such as a targeted hiring freeze, reducing or freezing management and non-union salaries, and two waves of widespread cuts in discretionary spending. The Company has also proposed a wage freeze for unionized employees, the outcome of which is still undetermined for 98 per cent of the workforce. NAV CANADA operates one of the world's safest Air Navigation Systems. "It's important to note that safety is not at risk, and that our financial position is sound with some of the best credit ratings in corporate Canada," Crichton said. "However, we must take this action now to ensure our continued ability to provide a safe, reliable and financially sound air navigation system into the future. Going forward, we will continue to apply strict controls on discretionary costs while maintaining safety" Further details of the service charge proposal - including tables showing NAV CANADA's current rates along with the proposed revised rates - are available on the company's Internet site (www.navcanada.ca). Those interested in responding to the service charge proposal should file their submissions by July 14, 2003. NAV CANADA, the country's provider of civil air navigation services, is a non-share capital, private corporation with operations coast to coast providing air traffic control, flight information, weather briefings, airport advisory services and electronic aids to navigation. Certain statements made in this document are of a forward-looking nature and are subject to risks and uncertainties. The results indicated in these statements may differ materially from actual results. The forward-looking information contained in this document represents NAV CANADA's expectations as of May 15, 2003, and are subject to change after such date. However, NAV CANADA disclaims any intention or obligation to update or revise any forward- looking statements whether as a result of new information, future events or otherwise. NEWS RELEASE No: 13/03 BACKGROUNDER ADDITIONAL DETAILS ON SERVICE CHARGE PROPOSAL Percentage of Airline Costs --------------------------- NAV CANADA charges airlines and other owners and operators of aircraft for the services it provides, with charges in general based on aircraft weight and distance, but also including annual, quarterly and daily charges. Air navigation fees typically represent less than 5 per cent of the operating costs of most airlines - much lower than items such as labour and fuel. Revenue Impact of Downturn -------------------------- The Company has seen a significant decline in revenues associated with the continuing downturn in air traffic - an estimated $450 million for the period 2001-2002 to 2004-2005, compared to pre-9/11 forecasts. The factors driving this traffic downturn are well known and include the events of September 11, 2001, the global economic slowdown, the war in Iraq and the outbreak of Severe Acute Respiratory Syndrome (SARS). Traffic Forecast ---------------- Air traffic measured in NAV CANADA weighted charging units for 2002-2003 is estimated to be more than 10 per cent below the levels of 2000-2001, meaning virtually a nil recovery from last fiscal year's 10 per cent decline. Weighted charging units in 2003-2004 are forecasted to be 1.5 per cent below the levels of 2000-2001, as indicated in the detailed proposal. Individual Fee Increases ------------------------ The 6.9 per cent average increase involves individual fee increases as follows: - 8.3 per cent for the terminal service charge; - 5.2 per cent for the en route charge; - 18.3 per cent for the North Atlantic charge; - 3.1 per cent for the International Voice Communication charge; - 3.0 per cent for the International Data Link Communication charge and - 7.9 per cent for the flat charges (daily, quarterly and annual). International Comparisons ------------------------- Even with these increases, NAV CANADA charges would still be among the lowest of any air navigation system in the world. For details see the charts at www.navcanada.ca. Comparison to Airports ---------------------- NAV CANADA charges would also continue to compare very favourably with other aviation organizations such as the country's major airports, which have raised their fees by about 70-to-140 per cent from 1997-2002. See chart at www.navcanada.ca. History of Rate Changes ----------------------- NAV CANADA charges were reduced by 11 per cent in September 1999, and kept at these lower levels until January 1, 2002. Despite recent increases, rates are still 3 per cent below the levels of March 1999, and with this increase, will be 4 per cent above those levels. In comparison, the Consumer Price Index grew by about 12 per cent over the same period. See chart at www.navcanada.ca. Terms and Conditions of Service ------------------------------- The Company's detailed service charges proposal also includes modifications to its terms and conditions in order to reduce its exposure to the possibility of unpaid service charges. The modifications involve increases in billing and payment frequency to weekly or other measures such as advance payment, in response to certain customer situations. These include situations in which amounts billed and accrued for unbilled charges for a customer or group of affiliated companies might exceed $4 million; revised credit terms where there has been a decline in a customer's credit rating beyond specified thresholds; or a customer has filed or announced its intention to file for creditor protection. Certain statements made in this document are of a forward-looking nature and are subject to risks and uncertainties. The results indicated in these statements may differ materially from actual results. The forward-looking information contained in this document represents NAV CANADA's expectations as of May 15, 2003, and are subject to change after such date. However, NAV CANADA disclaims any intention or obligation to update or revise any forward- looking statements whether as a result of new information, future events or otherwise. ILLUSTRATION OF INCREASE IN NAV CANADA CUSTOMER SERVICE CHARGES EFFECTIVE AUGUST 1, 2003 INCREASE INCREASE A/C IN COST IN COST PER DEPART ARRIVE TYPE MTOW SEATS PER FLIGHT PASSENGER (1) ---------------------------------------------------------------------------- OTTAWA TORONTO Airbus 320 75.5 132 $ 59.81 $ 0.65 CALGARY EDMONTON Boeing 737 54.2 125 $ 43.27 $ 0.49 ST. JOHN'S MONTREAL Airbus 320 75.5 132 $ 78.88 $ 0.85 VANCOUVER WINNIPEG Airbus 319 70.0 112 $ 77.43 $ 0.99 VANCOUVER MONTREAL Boeing 767 145.0 195 $ 174.47 $ 1.28 TORONTO LONDON(U.K.)(2) Boeing 747 375.0 421 $ 208.03 $ 0.71 (1) Assumed 70% load factor (2) One-way charge is calculated as the charge for the return trip divided by 2 http://www.newswire.ca/releases/May2003/15/c2412.html Link to comment Share on other sites More sharing options...
Guest b52er Posted May 15, 2003 Share Posted May 15, 2003 Should they not simply add the fee increase proposal to AC tickets only? They are after all, the "significant bad debt expense". Why should others travelling on other airlines be punished and burdened with higher fees? Link to comment Share on other sites More sharing options...
dozerboy Posted May 15, 2003 Share Posted May 15, 2003 It is a good thing that you represent a very small minority of the Westjet employees. The majority have real class and I can attest that Air Canada employees have a real appreciation and envy for what has been accomplished. You on the other hand... Link to comment Share on other sites More sharing options...
Guest b52er Posted May 15, 2003 Share Posted May 15, 2003 Why exactly, with any logic behind your response, should others pay for AC's misguided leadership and predatory practices of the past. Could you explain your logic as to why most, and I repeat, most other people in Canada feel as I do? I can gaurantee that I am not alone. You on the other hand.....fail to see reason behind a perfectly logical statement? Why should other airlines continue to support AC only to be attacked with rediculous seat sales, capacity placed into a market simply because someone else is there, and I could go on. Link to comment Share on other sites More sharing options...
Guest Vermillion Bay Posted May 15, 2003 Share Posted May 15, 2003 The increase in charges should go according to how the airlines current financial position is...i.e. If airline "W" is making a profit then they should suck up the increases based on a percentage of how well they are doing comparative to the rest of the industry. Also, if a particular company is in "growth" mode (adding more flts and routes) then they should also be hit harder with the increases. It would work kind of like our personal taxes work Link to comment Share on other sites More sharing options...
Guest JakeYYZ Posted May 15, 2003 Share Posted May 15, 2003 Are you willing to advocate the same logic ("kind of like our personal taxes work") when it comes to wage concessions? Link to comment Share on other sites More sharing options...
dozerboy Posted May 15, 2003 Share Posted May 15, 2003 B52er, I just re-read the latest court appointed monitor report and can't see on it where Air Canada has not paid its bills to Nav Canada. In fact unless this monitor is lying, it looks like Air Canada and Nav Canada have come to an agreement as to invoicing and payment. It states no where that Air Canada has ceased payments. I believe that only the aircraft leases have been put on a 60 day hold. So perhaps if you could enlighten me as to how Air Canada is currently costing Nav Canada and therefore Westjet this increase in Nav Fees. Now once again (with your divine wisdom and if I am wrong please correct me) I was under the impression that Nav Canada fees were charged for usage. From what the newspapers and the airlines are telling us, most airlines are reducing their flight schedules dramatically. So I guess it would be safe to assume that fees for overflights by foreign carriers have decreased and also fees from Air Canada and Air Transat have also decreased. Seems to me I remember reading somewhere that they have reduced their schedules. I presume that Nav Canada wouldn't be getting the same fees from the airlines. Now again correct me if I am wrong, but has Nav Canada reduced their infrastructure that supported the pre-perfect storm situation? I don't think that they have so I guess they would have to either cut costs or increase revenue by raising fees to the remaining aircraft that ARE flying in/overflying Canada. Finally, since you speak for "most other people in Canada", if Air Canada is making their payments, how does this relate to Nav Canada increasing their fees. As an aside, if Air Canada does fail, who do you think will be paying the majority of the fees? I, along with the rest of Canada that you speak for, look for your logical response. How did you get past the Westjet interview? The friends that I have there are all topnotch and untwisted. It is people like that, that have made Westjet such a success. It all has to do with attitude. You on the other hand, seem to have an intense bitternes. Link to comment Share on other sites More sharing options...
Guest Vermillion Bay Posted May 15, 2003 Share Posted May 15, 2003 The post was just a response to the "no logic" by the village idiot! When it comes to wage concessions then perhaps the people making the least should be hit the least. More should be more..as long as everyone is contributing . Link to comment Share on other sites More sharing options...
Guest Q Posted May 15, 2003 Share Posted May 15, 2003 It would be silly to expect NavCan to just get thier cost in line like any other company....In stead they should go to the Canadian Aviation Industry bank machine and make another withdrawl.... What a Joke!! "Q" Link to comment Share on other sites More sharing options...
Guest mars Posted May 15, 2003 Share Posted May 15, 2003 "Q" DEFINITION - Another person who has no idea of what they are talking about. While many airlines were losing BILLIONS and their management and employees seemed blissfully ignorant, NAVCAN was downsizing and reducing. Did you read the whole press release detailing the multiply changes to NAVCAN's business (pre and post 9/11) to try and help the industry? Until then I'm justing wasting my breathe as usual. Q's knowledge of ATC/ANS business... What a joke!! Link to comment Share on other sites More sharing options...
Guest acj Posted May 16, 2003 Share Posted May 16, 2003 Mars; Mr. Exxageration. Nav Can has been sitting pretty well past few years - no layoffs, no paycuts and yet the NC BOD still feels that it is appropriate to keep it's HQ's in Ottawa's finest most expensive downtown mirror palace real estate. Nav Can has NOT sacrificed anything since the MOT handover - it's all PR. Most NC employess are all ex- TC ansd would not accept otherwise. Link to comment Share on other sites More sharing options...
Guest MikePapaKilo Posted May 16, 2003 Share Posted May 16, 2003 G'day Mates On good authority, Air Canada is said to owe to Navcan some 44 million dollars. It is said that this debt is "protected" via the CCAA filing. Post CCAA filing, Air Canada is said to have built up an account with NC to the tune of $$10 million, which is the source of the agreement/accommodation that was in the financial pages last week. Air Canada and Nav came to an agreement on payment of those fees that were incurred and not paid post CCAA filing. One can conclude that the 44million is unpaid, and may be a contributing factor to the fees increase. Interested folks might go to the navcanada website and look in the bin on press releases to see the information that is there. Various accounts in the G&M and the FP are mentioning the amount owing in an oblique fashion yesterday or today, in terms of NC being unable to collect on bad debt. Nav says it has done virtually all it can to share the load / reduce costs, according to its president and CEO in those same press releases on the web-site. See the press releases again. The fee increases are cited by pax load based on a 75%LF. For instance to a YYZ-YOW flight the numbers would indicate an increase of 62 cents per passenger. As I recall the increase on YYZ-YVR would result in an increase of $1.62 per passenger. Hope this helps..... MPKountant Link to comment Share on other sites More sharing options...
Recommended Posts
Archived
This topic is now archived and is closed to further replies.