Air traffic control firm hiking fees by 30%

Non-profit can’t get government assistance despite industry crisis

OTTAWA— Battered by the steep drop in air travel, the company that runs Canada’s air traffic control system is hiking fees by almost 30 per cent — costs ultimately passed on to passengers — after being unable to get federal help to cope with dramatic revenue losses.

Nav Canada announced the increase Wednesday as plummeting air traffic hammers its bottom line.

“We are proposing this only after pursuing all available alternatives, including government assistance,” Neil Wilson, the company’s president and CEO, said in an interview.

“We will continue to pursue any other alternatives that are there to see if we can minimize or avoid the rate increase. But this is where we are at this point,” he said Wednesday.

But in a nod to the perilous state of the airline industry, payment of the increase — due to take effect on Sept. 1 after a consultation period — is being deferred for a year, giving airlines and passengers a break.

“We are acutely aware of the challenges faced by our customers so we structured this proposal to support them and … defer the collection of this rate increase until they are on a stronger financial footing,” Wilson said.

Nav Canada is a not-for-profit company established in 1996 to take over the country’s air traffic control system from the federal government.

The agency, which has 5,000 employees, handles 3.4 million flights a year and its operations are funded entirely from fees charged to aircraft flying through Canadian airspace, based on their size and routing. In the 2019 fiscal year, the company collected $1.4 billion in service charges.

Yet that revenue has dried up with the shutdown in air travel. Traffic in April was down about 75 per cent compared to the same month a year earlier and revenue is down by about the same amount, costing the company about $3 million a day, Wilson said.

The company has tapped Ottawa’s wage subsidy program — Neil said it has provided “significant assistance — but is unable to use the government’s loan program for big corporations because of its structure. And while it’s had “good” discussions with the federal government about other forms of assistance, there’s been no further help offered, he said.

“We have exhausted all options, including all available government programs and all available alternatives,” Wilson said.

He said that Nav Canada has taken measures to curb costs, such as cutting management salaries, reducing the ranks of temporary employees and getting concessions from its unions.

It has also scaled back some services in response to the slowdown but unlike airlines, which can ground planes and halt routes to save money, Nav Canada is obligated to provide air traffic control operations.

“We are essential to Canada’s national infrastructure. We can’t close Toronto. We can’t close Gander. We can’t close Inuvik or Iqaluit or Norman Wells. We have to be there to provide service everywhere in Canadian airspace, 24-7,” he said.

“There are still people flying, whether it’s humanitarian flights or medevac flights or cargo flying, and we have to be there to support them,” he said.

The company last raised its service charges in 2019 and 2020 — the first increases since 2004 — to help with the cost of new satellite-based system to track aircraft.

The federal government gave some early hints that it would provide targeted assistance to the aviation sector, which has been brought to a virtual standstill by border closures and travel restrictions.

In April, daily flights nationwide dropped to 2,680 from 9,304 in April 2019.

Flights at Toronto’s Pearson International Airport — the country’s business airport — averaged 186 a day in April, down from 1,249 daily the previous year.

Air Canada has chopped its capacity by some 90 per cent and earlier this week announced that 20,000 employees would be laid off. Experts predict a slow rebound for the travel industry.

Wilson sees traffic bouncing back to 70 or 80 per cent of pre-pandemic levels next year, but says a full recovery is likely to take several years.