Fee increase partially due to AC's failure to

October 6, 2003

http://www.nationalpost.com/financialpost/story.html?id=A31A14AF-71AF-4BFE-91C3-099456EE5C4D

wizard · October 6, 2003

lancaster get your head out of the dirt.

October 6, 2003

Just a twist to your headline...

Apparently, AC is the "lone wolf"

CanadaEH · October 6, 2003

That line kind of threw me off a bit. Air Canada is not the "lone wolf" as the newspaper article reports.

http://globeinvestor.com/servlet/ArticleNews/print/RTGAM/20030515/wnavca514

Air Canada and WestJet Airlines Ltd. have both complained that rising taxes and fees, such as those charged by Nav Canada, are preventing Canadians from flying.

Also, http://temagami.carleton.ca/jmc/cnews/08032002/n5.shtml

WestJet isn’t happy with a proposed security fee on plane tickets, and the company is encouraging travellers who share their displeasure to let the government know.

WestJet placed ads in newspapers in February, and collected 15,000 names on a petition, which its pilots gave to the government in January.

Westjet has been lobbying the government to ease the taxes, fees, and surcharges for years - with no success. And to defend Lancaster, this fee increase is because Air Canada has failed to pay their share of fees during bankruptcy protection. Had Air Canada paid their share of the fees this 6.9% raise wouldn't have happened in the first place.

CanadaEH · October 6, 2003

That line kind of threw me off a bit. Air Canada is not the "lone wolf" as the newspaper article reports.

http://globeinvestor.com/servlet/ArticleNews/print/RTGAM/20030515/wnavca514

Air Canada and WestJet Airlines Ltd. have both complained that rising taxes and fees, such as those charged by Nav Canada, are preventing Canadians from flying.

Also, http://temagami.carleton.ca/jmc/cnews/08032002/n5.shtml

WestJet isn’t happy with a proposed security fee on plane tickets, and the company is encouraging travellers who share their displeasure to let the government know.

WestJet placed ads in newspapers in February, and collected 15,000 names on a petition, which its pilots gave to the government in January.

Westjet has been lobbying the government to ease the taxes, fees, and surcharges for years - with no success. And to defend Lancaster, this fee increase is because Air Canada has failed to pay their share of fees during bankruptcy protection. Had Air Canada paid their share of the fees this 6.9% raise wouldn't have happened in the first place.

October 6, 2003

Government has been using this industry as a cash cow for some time. Funny thing about cows, as soon as they are not getting enough grass to produce the milk averyone has become used to, we all start blaming the cow.

October 6, 2003

Let me quote Lancaster.

"Boring headlines don't catch readers attention."

You have quoted all kinds of different articles with WJ opposition. This particular

article however states AC is the "lone wolf". This according to NavCanada who should probably know who is opposing these hikes. Therefore my headline stays!

tsgas · October 6, 2003

Why doesn't Nav Canada bill the government for the service provided to them ? The Federal and Provencial Governments as well as the military are milking Nav Canada for a free ride.

October 6, 2003

As a result of AC entering CCAA, a number of suppliers across the country have claims which will be handled by the claims process that is currently underway.

The difference is that, unlike NavCanada, suppliers like Cara, which, like NavCanada, depends on AC for a bulk of its revenues, did not use AC's CCAA to hike the price of a hamburger at Harvey's. Like other normal businesses, they have reduced costs to handle the shortfall in revenue.

The bottom line is that AC is as responsible for NavCanada's shortfall as NavCanada is for AC's CCAA filing. If AC did not have to contend with high costs on several fronts then clearly CCAA would not have happened.

Westjet may complain and "lobby" about the fees but they have not taken any action.

UPS, Purolator, ATA, ATAC and IATA have all made submissions in favor of AC's position. Funny how none of the Canadian carriers (Westjet, Transat, Canjet or Jetsgo) which would benefit greatly from a win by AC have chosen to participate.

October 6, 2003

For the same reason that the Government of Canada does not pay rent at the Airports for the space they hold not just for customs and immigration purposes but also for all those CATSA, Transport Canada and other bureaucrats that have the nicer offices at airports across the country.

Not only is the airline industry in Canada expected to subsidize everything that moves (ie. the government takes $250 million in airport land rents alone without putting a penny back into airports), we're also expected to subsidize the government's voracious bureaucratic appetite for office space.

Request deviations · October 6, 2003

Ok, if you are going to start throwing "facts" around, it's wise to ensure they are factual. As I am involved with a provincial government flight department and am the person that actually has to sign off things like NavCanada invoices every month I can assure "tsgas" and others that we do pay things like Navcanada fees and always have done since NC has been in existance. We also pay landing fees etc etc etc just like everybody else. In talking to my provincial colleagues it appears that we all do. To my knowledge the only aircraft that don't are DND.

October 6, 2003

The other difference between Nav Can and the other creditors is that they never gave back hundreds of millions of dollars back to Air Canada and the other airlines when times were good.

October 6, 2003

Foreign military flights are exempt from Nav Can fees as well. The USAF puts a lot of metal through Canadian airspace and that would be one hefty bill if they had to pay.

October 6, 2003

"The difference is that, unlike NavCanada, suppliers like Cara, which, like NavCanada, depends on AC for a bulk of its revenues, did not use AC's CCAA to hike the price of a hamburger at Harvey's. Like other normal businesses, they have reduced costs to handle the shortfall in revenue."

Excellent call, Airmail.

When you have a monopoly on a service or product, there is no market discipline on what you charge. Need more net income? Don't reduce your costs; just increase revenue by charging more. The customer has no where else to go.

neo

Steam Driven · October 6, 2003

The United States Air-force allows users of the airspace a degree of navigational accuracy that is impossible otherwise thanks to the Civilian usage of Military GPS satellites.

By allowing the civilian world to use the GPS sat's, they are not charged for airspace usage.

October 6, 2003

I am often puzzled by those who call for Nav to reduce costs. If you want them to reduce, how and where can they make further cuts than they already have ? Has no one read the information on their website ? They literally gave back tens of millions to Air Canada and others in the first few years, and after fee reductions, have not yet reached the level of charges they started at in 1996.

Neo and others - What would you have them do ? Shut down ILS's that are not currently in use ? Stop installing new radar (that has resulted in great efficiencies acroos the north)? Reduce staff in control towers and ACC's to below the minimum now endured ? (Witness the "system capacity" NOTAMs this past weekend)?

Perhaps Air Canada could reduce costs by not flying cruise relief guys, and pass the savings on to their customers ;-)

It is to many peoples' belief that Air Canada, in failing to pass on the NAVCAN Fees that they levied against each passenger, to the ultimate tune of some 44 million dollars, is directly responsible for this debacle. Funny how Air Canada collected all that money and apparently never directed it to the purpose for which it was collected.

If I collected funds in the name of a charity, or a small business, and I never passed the money on to the "advertized destination", I'm thinkin' I'd be charged by the justice system for sumpthin'......

Let's try to develop a REAL list here. How can Nav reduce their costs ? Who has a realistic suggestion ?

CanadaEH · October 6, 2003

UPS, Purolator, ATA, ATAC and IATA have all made submissions in favor of AC's position. Funny how none of the Canadian carriers (Westjet, Transat, Canjet or Jetsgo) which would benefit greatly from a win by AC have chosen to participate.

I haven't heard anything about them making a submission, could you provide a link?

How can you say that Westjet has not participated? I guess that technically, they have not submitted any formal complaint (or do we even know that they haven't??) but Westjet has been the loudest voice the past oh, two years about the hike in taxes, fees, surcharges, etc. For you to say that Westjet has not taken any action is pretty naive.

Fester · October 6, 2003

Medevacs fly free.

October 7, 2003

Hi MPK,

That's a fair question, but I'm just surprised you have the nerve to ask it of an Air Canada employee.

To address your tongue-in-cheek comment, Air Canada HAS laid off cruise relief pilots, along with some 300-odd other pilots. They did it because (among other reasons) the market told us our costs are too high. NavCan's fees make up part of our costs, so the market is telling NC the same message. Did NC reduce their charges along with everyone else? No, they've raised them. Brilliant!

Furthermore, every Air Canada employee that I'm aware of has taken a cut in pay and benefits; for pilots it amounts to something like 20%. You want to reduce NavCan's costs? Then start there: cut pay and benefits by 20%.

What's more, Air Canada's suppliers, such as leasees and others, have had to renegotiate the terms under which they're paid. While I'm not privy to the terms, no doubt they are leaner than pre-CCAA.

So, MPK, you want an AC employee to suggest ways to lower NavCan's costs? There's two: cut everyone's wages by 20%, and reduce what every supplier charges NavCan. That's what companies and employees in the real, market driven world have to do to survive.

Best wishes,

neo

UpperDeck · October 7, 2003

That's bull! Law firm suppliers to AC...think they're reducing their fees? From food wholsalers to paper napkins; example after example...the issue is not what suppliers can do to help AC; the issue relative to NavCan and others is "reasonable cost for reasonable service". AC has to make its own way without concessions that are designed and intended solely to benefit AC.

October 7, 2003

Whew. Generally speaking, before I call "bull...." I like to check my own boots first.

If AC doesn't like the charges they get at one law firm, they can go to another. In case you weren't aware, lawyers charge WHAT THEY THINK THE MARKET WILL PAY. Some charge $100 an hour, some charge $1000 an hour. The point is, the client gets to choose what they're willing to pay for the service they want.

Navcan, on the other hand, sets their fees, and clients don't have the option of going to someone else for the service, do they?

It's a monopoly service, U/D. What's more, it's a monopoly providing a service into an intensely competitive, market driven industry. If you can't see how that situation needs careful handling, then I respectfully suggest you're not looking at the big picture.

I'm very happy to look at what you claim the issue is: "reasonable cost for reasonable service". But where you won't agree with me is, who gets to determine what's reasonable. You see, if you're ATC, you are providing a service (yes, a monopoly service) into a free market. It's the free market that tells you what's reasonable, UpperDeck. Not your union, not your accountant, not your ego or your sense of self-worth, and most certainly not NavCan's BOD.

As you've probably noticed, tens of thousands of Air Canada employees... who to a man and woman thought they provided a reasonable service at a reasonable cost... have been given notice by the market that the costs for the service we provided were not acceptable.

The same market discipline should apply to NavCan, but it doesn't.

Best wishes,

neo

inchman · October 7, 2003

Actually, the article states that "Air Canada's appeal -- the first in Nav Canada's history -- is backed by the International Air Transport Association and the air transport associations of both Canada and the United States, sending letters of support to the CTA."

It is Nav Canada that states that Air Canada is the lone wolf... that doesn't make it fact.

IN FACT, WJ is a member of ATAC and therefor, by association, backs the appeal. Air Canada just happens to take the lead and put its neck on the line again.

October 7, 2003

There are market values at Nav Can. Where as there is 100's of pilot's willing to do a job, there are very few people willing to become air traffic controllers. Many of the finest controllest in Canada have gone overseas where working conditions and pay are far superior to Canada. Many controllers quit after a couple of years, because "it's just not worth the bull$hit" In the next few years up to 40% of the controllers are eligible to retire, and shift logic has taken ten years off most controllers careers (at least). Market forces? Supply and demand? think about it

October 7, 2003

Neo:

Thanks for noting the tongue-in-cheek.

Not that I am a defender of NAV, we pay a daily rate per aircraft. It's cost effective as there are some days when we don't turn a wheel.

A quick scan of the web-site and I did find that Nav is reducing - here's a cut from a release in their archives from this past April:

" The Company continues to pursue all opportunities to further reduce costs and generate revenues from other sources to partially offset this excess of expenses over revenue. Potential revenues from other sources include sales or licensing of technology. The Company is also currently

pursuing an opportunity to benefit from a U.S. cross-border lease of certain qualified

technological equipment. This type of transaction has been undertaken by a number of other air navigation service providers around the world."

If you talk to some controllers, and heed the NOTAM traffic of the past few weeks, regarding system capacity - you'll read staff shortages across the board. One wouldn't think that a 20% staff reduction is worth contemplating. In some ACC's they are already there, or beyond. Slice by 20% ? - That could be like taking Hans's finger out of the dyke. My info says the system would fail on an abject lack of staff. - Unless all traffic flies on J500, and on no other track.

Whether Air Canada is around or not, the ATC system must function. My question on how to cut was not addressed at you specifically. Altho' this site entertains a lot of AC types there are many of us who are from other ops- corporate, WJ, etc. So the question remains open for everybody.

I am one of those who believe that ACA is where it is for poor and often foolish management, spending like besotted sailors, with a shoot'em-down-defeat-at-all-costs mentality that saw ACA give chase to every new route that anybody cared to fly. When we took on a new airplane, so we had two, we used to joke that if we did a company jet run to somewhere that Air Canada did not go, and they caught wind of our trip, they would be offering sched service to compete with us the very next day. Well, we laughed THEN...

One will have to review the make-up of Nav's BoD. It seems to me ACA is represented on that Board, either directly or through ATAC.

MPK

October 7, 2003