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NavCan daily charge charges ahead

 

In response to COPA’s appeal to the Canadian Transportation Agency (CTA) against the new daily charge, set to take effect in March 2008 at seven major airports, the CTA decided the new fee does not contravene the charging principles that are supposed to protect us from being gouged by Nav Canada.

But there are also two other developments that have or could have an impact on our overall costs. Nav Canada dropped its proposal to convert the $1 temporary adjustment into a permanent increase in our annual fee. Also, Nav Canada has decided to support another push at the government for reducing the fuel excise tax.

These three events are interrelated and deserve a detailed discussion so that you can fully appreciate where we stand in the era of commercialized air navigation services.

COPA used the provisions of the Commercialization Act to appeal the new daily charge ($10 daily departure fee at seven airports, starting March 2008) to the CTA. The only other group to appeal was the Helicopter Association of Canada, who supported our position and argued one additional point as explained below.

Our appeal focused on the charging principles dealing with safety and reasonableness, as was explained in the June newspaper. Their decision upholding the new daily charge can be found on our website under August President’s Corner (CTA decision).

The CTA decided against our safety arguments primarily because Nav Canada softened the affect of the charge by exempting aircraft with emergencies or weather diversions and they decided that there were not compelling arguments made regarding lower safety margins at reliever airports, such as non-precision, circling approaches.

In other words, the CTA would have to see evidence, such as accident reports, that people will be put in peril or even die before they would accept our arguments. This is unfortunate because it would be nearly impossible to prove conclusively that the new daily charge was a factor.

The CTA disagreed that a $10 charge was sufficient, in light of the costs of flying, to cause pilots to make decisions that would lead to safety problems. Their decisions said:

“With respect to COPA’s argument that the introduction of the new ten dollar Daily Charge would encourage pilots to stretch their fuel reserves and fly over one of the airports rather than to stop for fuel, the Agency is of the opinion that the Daily Charge, when viewed in the context of all other costs associated with flying, has not been set at such a level which would encourage a pilot to stretch the fuel reserves at the risk of diminishing safety, including the pilots safety and potentially any passengers safety.”

Perhaps the most damaging decision by the CTA is the new daily charge is in essence a flat fee. In responding to a submission from the Helicopter Association of Canada the CTA stated that by virtue of the fact there was an annual maximum of $1,200.00 dollars per aircraft, the Daily Charge can be considered to be a flat fee. 

This statement by the CTA does not make sense; pay-as-you-go cannot be a flat fee but there can be no appeal to the decision and it certainly opens the door for Nav Canada to introduce new charges on that basis. 

So, the CTA effectively established that, counter to COPA’s assertions, a line had not yet been crossed. But they went one step further, in terms of defining the line, and this is good news for us.

The airlines pushed hard during the consultation for the new daily charge for general aviation to pay its share of the overall air navigation system costs. In a previous appeal by Air Canada, in which they pushed for general aviation to pay more, the CTA indicated that generating less revenue from general aviation than the cost of providing services to general aviation is not inconsistent with the charging principles.

In response to our appeal, the CTA reinforced this concept by referring to the Air Canada decision:

“. . .  a charging principle which requires the charges for recreational and private aircraft not be ‘unreasonable’ or ‘undue’ recognizes that the ability of operators of these types of aircraft to pay for charges may be different from that of commercial air carriers.  Accordingly, generating less revenue from general aviation than the cost of providing services to general aviation would not be inconsistent with the charging principle set out in paragraph 35(1)(f) of the CANSCA. The agency remains of the same view.”

So, at one end of the continuum, the CTA says in this decision that the $10 daily charge to land at one of seven major airports is not a safety issue and is neither “unreasonable” nor “undue.”

At the other end of the spectrum, the CTA says in both this decision and in the Air Canada decision, there is no expectation that general aviation will pay the total cost of the air navigation services provided to that segment of aviation.

If the daily charge is increased, more airports are added to the list or additional charges are introduced in the future, at some point the charges will cross the line on that continuum such that they will be held to cause safety issues or be “unreasonable” or “undue”, but there is no way of knowing when the line will be considered to have been crossed by the CTA accept to appeal any new charges.

This is a nature of the commercialization of the air navigation system. We are at the mercy of Nav Canada, its Board of Directors and a government agency.

Members should note that the daily charge comes into affect in March 2008 at Vancouver (CYVR) including the waterdrome, Calgary (CYYC), Edmonton (CYED), Winnipeg (CYWG), Toronto (CYYZ), Ottawa (CYOW) including the north field and Montreal (CYUL).

Although COPA provided arguments against fees at any of the listed airports, Nav Canada only accepted our arguments for Halifax (CYHZ), and they removed it from the list.

Coincident with the CTA decision, Nav Canada decided not to proceed with a planned change to our annual fee. In 2003, Nav Canada introduced a temporary adjustment of $1 to help recover from the 9/11 downturn in traffic and recuperate the rate stabilization account. Earlier this year, they introduced a proposal that would convert the $1 adjustment into a permanent increase so that, in March 2007, instead of the current $71, plus $1, plus tax, it would be $72 plus tax, in other words no change.

However, financial results recently are good, such that the rate stabilization account is now overfilled. So, not only is the conversion of the adjustment abandoned, they have decided to eliminate it all together. Our fee in March 2007 will therefore be $71 plus tax; a small consolation.

A third and perhaps very important action was recently taken by Nav Canada. When the initial fees were being established for our sector in 1998, COPA had convinced Nav Canada and the entire industry that the fairest way to charge our sector, if there must be a fee, was to use a levy on fuel because it is the closest proxy for actual use of the system. If you do not fly, you do not pay. The more you fly, the more you pay. And, for the most part, we cannot avoid the fee because we need fuel to fly.

Nav Canada supported our efforts to convince the government to either transfer a portion of the eleven cent per litre tax to Nav Canada as our contribution, or reduce the tax so that Nav Canada could introduce an equivalent fee, similar to the cost neutral situation that occurred for airline passengers when the Air Transportation Tax was rescinded.

At that time, the government refused to give up any of the tax and they also forbade Nav Canada from collecting a levy on fuel. Faced with that road block, the annual fee was developed.

With the increased cost pressure from the new daily fee, coupled with circumstances that are different today from 1998, such as a budget surplus and the government now using a portion of the fuel excise tax to pay for road repairs, the time has come to reduce our tax burden.

Nav Canada has sent a letter to the Finance Minister in support of our position that it is unfair for our sector to continue to pay fuel excise taxes when the government no longer incurs any expenses related to the commercialized air navigation system, and we are paying fees to Nav Canada (flat fee and now an additional daily departure fee). It is interesting to note Nav Canada makes it clear they will not introduce any new fees in response to any tax relief.

Nav Canada has sent a letter to the Finance Minister in support of our position that it is unfair for our sector to continue to pay fuel excise taxes when the government no longer incurs any expenses related to the commercialized air navigation system, and we are paying fees to Nav Canada (flat fee and now an additional daily departure fee). It is interesting to note Nav Canada makes it clear they will not introduce any new fees in response to any tax relief.

COPA has also sent a letter to the Finace Minister. I urge every COPA member to contact the Finance Minister and your Member of Parliament in support of Nav Canada’s letter. You can find out how to reach you MP by clicking on “Feedback to Feds” on the front page of our website.

Emphasize the budget surplus, the fact the government no longer carries the cost burden of air navigation system, and we are paying into the air navigation system through the annual fee and now a new departure fee, so the time has come reduce the tax burden on our sector.

With these recent developments, COPA is faced with the question: are we still “in favour” of Nav Canada or the commercialization of the air navigation system?

Certainly, with the raging debate in the U.S. over user fees, Canada is being held out as either a poster boy for why any move toward privatization and user fees should be vigorously resisted, or we are held out as a shining example of all things good about commercialization. It depends on one’s perspective.

But hand-in-hand with this question is what alternative would we propose? While there are some significant problems and uncertainty about our future fees and access to the system, there have been some significant improvements in the system and some of the services we are provided.

But these questions are not for one person to answer. That is why your Board of Directors, representing your interests, has been involved every step of the way, from the formation of Nav Canada to development of the original fees to this current situation.

They have decided this is not the point to throw in the towel. I agree. It is, however, time to concentrate on the government to reduce our burden by rolling back the tax. It is fair and it would acknowledge that we are in a new era that does not warrant such general taxation measures.

In my opinion, the jury is still out on whether commercialization is a success. It remains a work in progress.