By Skies Magazine | September 21, 2023 Estimated reading time 4 minutes, 47 seconds.
Canada’s not-for-profit air traffic control provider is proposing an average 5.57 per cent drop in service charges, signalling a possible step back from the massive rate increase it introduced at the height of the Covid-19 pandemic.
Nav Canada, which operates air navigation facilities across the country, announced the proposal in a release on Sept. 21, 2023. Legislation requires a 60-day consultation period, during which Nav Canada intends to collect and review stakeholder feedback.
“As part of our rate setting process, we welcome the input of our valued customers and stakeholders,” said Raymond Bohn, president and CEO of Nav Canada.
If approved, the proposal would see service charges drop on Jan. 1, 2024, across all service categories, in the wake of rebounding flight activity as pandemic travel restrictions have eased.
In September 2020, Nav Canada implemented an average 29.5 per cent increase in service charges, citing “significantly lower traffic volume” during the pandemic that produced a material deficit balance in Nav Canada’s rate stabilization account (RSA).
“Due to Nav Canada’s safety and essential service mandate, the majority of its costs are fixed and as a result, Nav Canada was not able to fully offset the significantly lower revenues during the pandemic,” the company said in a release.
Nav Canada said the 29.5 per cent increase was intended to help it comply with its debt covenants, obtain additional debt financing and sustain its operations throughout the pandemic.
In response to that decision, WestJet announced it would increase surcharges on domestic flights by between $4 and $7 per passenger, per the Canadian Press.
Air traffic has rebounded since then, with August 2023 figures higher on average by 9.1 per cent than the same period last year, and only four per cent lower than 2019 levels.
“In recent months … Nav Canada’s air traffic forecast reflects the fact that demand for air travel has remained strong despite mounting economic concerns, and growth is increasingly attributable to normal seasonal variation plus incremental growth,” the company said.
The proposed rate decrease includes two components: An average base rate adjustment to help Nav Canada recover its anticipated fiscal costs for 2024, and a temporary rate adjustment to recover some of the remaining RSA shortfall.
Nav Canada estimated the shortfall to be $346 million as of Aug. 31, 2023.
If approved, the base rate would decrease by an average of 9.33 per cent, and the average temporary rate would increase 3.76 per cent, resulting in an overall average net decrease in service charges by 5.57 per cent, the company said.
“The rates proposal takes a balanced approach between Nav Canada rebuilding its financial resilience, investing in safety and service delivery while supporting the industry by recovering the RSA shortfall over an extended timeframe,” said Raymond Bohn.
A final decision is expected following a review of stakeholder feedback, led by Nav Canada management and the company’s board of directors.
