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NAV Can Fee Increase

Tue Jul 22, 2003 10:55 am

MONTREAL (CP) - WestJet Airlines is upset that smaller Canadian airlines have to pay higher fees to Nav Canada, partly to subsidize the unpaid fees that dominant carrier Air Canada owes the air navigation company.

Nav Canada said Monday it is going ahead with a 6.9 per cent increase in fees on Aug. 1 after revealing a $14-million deficit in the three months ended May 31.

Included in those figures is a $22-million provision for charges not paid by insolvent Air Canada.

"It's disappointing that the industry is having to pay for that (Air Canada deficit) and, more importantly, that the customers are having to pay for it," said Siobhan Vinish, spokeswoman for Calgary-based WestJet (TSX:WJA).

"Taxes and fees are having a significant impact on the air travel industry in Canada."

The provision is for March, in Nav Canada's fiscal third quarter. Air Canada filed for court protection under the Companies' Creditors Arrangement Act on April 1 and has kept up its payments since then, said Nav Canada spokesman John Morris.

But Nav Canada will have to join the list of creditors to claim its pre-filing balance of $32 million.

Morris acknowledged that Air Canada's failure to pay its bills is putting a heavier burden on the rest of the industry, but said there is little Nav Canada can do.

"That's one part of a much bigger picture, which is the downturn in the industry," he said. "Our mandate is to balance our revenues and our costs."

Morris expects the total annual increase in revenue from the new rate increase will be about $65 million. Broken down, it adds 65 cents to the cost of a one-way ticket from Toronto to Ottawa.

Warren Everson, president of the Air Transport Association of Canada, said it still amounts to a substantial amount, under the circumstances.

"We understand Nav Canada's plight. They're volume-based and volume has fallen off a lot," said Everson in an interview.

"It's still a blow to the industry because we're not making any money right now. Every dollar of increased cost is a dollar of increased debt or somebody else's job getting lost."

After being burned by Air Canada, Nav Canada said it has introduced a $4-million credit limit to any one customer.

Despite being in arrears, Air Canada (TSX:AC) denounced the rate hike as "completely out of touch with industry realities. Canada's air transport industry is facing some of the worst economic circumstances that it has seen in its history," said spokeswoman Isabelle Arthur.

Nav Canada reported $225 million in revenue for the quarter ended May 31, while expenses totaled $239 million.

The not-for-profit company expects to cut costs by $45 million from the level originally planned for the 2003 fiscal year, but now predicts a deficit for the year of $121 million. Last September it had forecast a deficit of $84 million.


As an airline employee, I am very angered to see this fee increase.

Included in those figures is a $22-million provision for charges not paid by insolvent Air Canada.

Had Air Canada paid their bills, Nav Can would have had a surplus of $6 million dollars and there would be no fee increase. Instead, the successful airlines of Canada have the pay the hefty price of one airlines misfortunes. The people of Canada are already pounded with fees, and it appears there is no end in sight to an already battered industry.

Here's an idea - why doesn't the government give relief to all airlines not Air Canada and see how AC likes to not receive money? It sounds stupid and I know it will never happen, but when does the government step in? When there are no airlines in Canada? All I know is that what goes around comes around.


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