Decision No. 393-NC-A-2006

July 14, 2006

July 14, 2006

IN THE MATTER OF appeals filed by the Canadian Owners and Pilots Association and the Helicopter Association of Canada pursuant to section 42 of the Civil Air Navigation Services Commercialization Act, S.C., 1996, c. 20, of a new charge for air navigation services to be implemented by NAV CANADA on March 1, 2008.

File Nos. M4250/06-1
M4250/06-2


INTRODUCTION

[1] On December 5, 2005, NAV CANADA filed with the Canadian Transportation Agency (hereinafter the Agency) a copy of a Notice of New and Revised Service Charges (hereinafter the Notice) as well as a document entitled Details and Principles Regarding Proposed New and Revised Service Charges.

[2] On April 18, 2006, NAV CANADA filed with the Agency a copy of its Announcement of Revised Service Charges (hereinafter the Announcement) as well as a copy of the Background Information on Announcement of New and Revised Service Charges - April 2006 Resulting from Service Charges Review.

[3] Where NAV CANADA has both given notice and made an announcement in respect of a new or revised charge, any appeal must be made within 30 days after the announcement was filed with the Agency. The Agency received two appeals prior to the expiration of this period of time.

[4] On May 16, 2006, the Canadian Owners and Pilots Association (hereinafter COPA) and the Helicopter Association of Canada (hereinafter HAC) each filed with the Agency an appeal pursuant to section 42 of the Civil Air Navigation Services Commercialization Act (hereinafter the CANSCA). Both COPA and HAC filed a copy of their respective appeals on NAV CANADA on May 16, 2006.

[5] The appeals are in respect of a new $10 daily charge (hereinafter the Daily Charge) for aircraft weighing three tonnes or less using one of seven major international airports, with an annual maximum limit of $1,200 per aircraft. The Daily Charge is scheduled to come into effect on March 1, 2008.

[6] COPA filed its appeal on the grounds that NAV CANADA failed to observe three of the charging principles set out in section 35 of the CANSCA in establishing the Daily Charge. In filing its appeal, HAC supports COPA's arguments and also submits the argument that NAV CANADA failed to observe the charging principle set out in subsection 35(7) of the CANSCA. In these same appeals, both COPA and HAC requested that the Agency, pursuant to paragraph 51(1)(a) of the CANSCA, order NAV CANADA to cancel the Daily Charge and, if applicable, refund the amount of the cancelled charge to each user who paid it. In addition, COPA requested that the Agency, pursuant to section 25.1 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA), order NAV CANADA to pay its costs of the appeal, including the goods and services tax.

[7] In its Decision No. LET-A-132-2006 dated May 17, 2006, the Agency informed NAV CANADA, COPA and HAC of the time frames, among other matters, to file an answer and replies.

[8] On May 29, 2006, NAV CANADA filed with the Agency its answer to the appeals and concurrently served it on COPA and HAC. Neither COPA nor HAC filed with the Agency a reply to NAV CANADA's answer.

LEGISLATIVE PROVISIONS

[9] Pursuant to Part III of the CANSCA, NAV CANADA may establish new charges or revise existing charges for its air navigation services in accordance with the provisions of the CANSCA which includes the requirement that NAV CANADA observe the charging principles contained in section 35 of the CANSCA, the notice and announcement requirements for the proposed new or revised charges as stipulated in sections 36 to 41 of the CANSCA, and the right of certain parties to appeal to the Agency the new or revised charges on the specific grounds set out in section 43 of the CANSCA.

[10] Pursuant to section 43 of the CANSCA, charges by NAV CANADA for air navigation services may be appealed to the Agency on one or more grounds, including that one or more of the charging principles have not been observed or that there has not been compliance with the notice or announcement requirements.

[11] The CANSCA prohibits the Agency from making an order preventing the charge that is the subject of the appeal from becoming effective, or preventing NAV CANADA from imposing the charge, pending the outcome of the appeal. Where an appeal is made on the grounds that NAV CANADA failed to observe one of the charging principles set out in section 35 of the CANSCA in establishing the charge which is the subject of the appeal, the Agency may decide to allow the appeal only if it is satisfied, on a preponderance of the evidence, that NAV CANADA failed to observe that charging principle. In making such a decision in respect of a new charge, the CANSCA requires the Agency to order NAV CANADA to cancel the new charge that is the subject of the appeal, and refund the amount of the cancelled charge to each user who paid it.

[12] Pursuant to section 48 of the CANSCA, the Agency shall decide such an appeal as expeditiously as possible, but no later than 60 days after it is made, unless the Agency is of the opinion that there are special circumstances involved in the determination of the appeal, in which case the Agency has a further 30 days to decide the appeal.

[13] Lastly, section 53 of the CANSCA provides that a decision of the Agency pursuant to an appeal is final and binding and, notwithstanding any other Act of Parliament, no appeal lies from the decision.

PRELIMINARY MATTERS

Who may appeal

[14] A user, group of users or representative organization of users may appeal NAV CANADA's new or revised charges to the Agency. The Agency notes that both COPA and HAC have filed their respective appeals as a representative organization of users within the meaning of section 44 of the CANSCA. COPA has also filed its appeal in its capacity as a user. Based on their respective submissions, the Agency is satisfied that each of COPA and HAC have established that they are each a representative organization of users. In addition, COPA has established its status as a user.

Request for reimbursement of costs

[15] In response to COPA's request that the Agency order NAV CANADA to pay its costs of the appeal, the Agency informed COPA, in its Decision No. LET-A-135-2006 dated May 23, 2006, that although the Agency has the power pursuant to section 25.1 of the CTA to award costs in any proceeding before it, section 54 of the CANSCA stipulates that, inter alia, section 25.1 of the CTA does not apply in respect of the CANSCA. Accordingly, the Agency further informed COPA that it does not have the jurisdiction to rule on COPA's request for reimbursement of the costs associated with its appeal.

Intervener status

[16] Two parties, the Saskatchewan Aviation Council and Don Bell, filed letters dated May 16 and May 26, 2006 respectively, requesting to be granted "intervener status" in support of the appeal filed by COPA. In its Decision No. LET-A-136-2006 dated May 23, 2006 and its Decision No. LET-A-139-2006 dated June 1, 2006, the Agency advised the Saskatchewan Aviation Council and Mr. Bell respectively that pursuant to subsection 39(2) of the Canadian Transportation Agency General Rules, SOR/2005-35 in an appeal under subsection 42(1) of the CANSCA, an intervention does not form part of the pleadings.

THE CHARGE WHICH IS THE SUBJECT OF THE APPEALS

[17] NAV CANADA proposes that effective March 1, 2008, the Daily Charge will be applied to aircraft weighing three tonnes or less that depart from Vancouver (including the water aerodrome), Calgary, Edmonton, Winnipeg, Toronto (L.B. Pearson), Ottawa (Macdonald-Cartier) or Montréal (Trudeau) international airports. An annual maximum limit of $1,200 per aircraft will be in place for the Daily Charge and will apply to both Canadian-registered and foreign-registered aircraft. The Daily Charge will apply in addition to the existing annual and quarterly charges which would not count towards the annual maximum pertaining to the Daily Charge.

THE APPEALS

[18] COPA has appealed to the Agency pursuant to paragraph 43(a) of the CANSCA in respect of the Daily Charge on the grounds that NAV CANADA failed to observe the three charging principles set out in paragraphs 35(1)(a), 35(1)(b) and 35(1)(f) of the CANSCA. COPA also refers to subsection 35(7) of the CANSCA.

[19] HAC has reviewed the appeal made by COPA and states that it supports COPA's arguments. In addition, HAC submits the argument that NAV CANADA failed to observe the charging principle set out in subsection 35(7) of the CANSCA.

[20] Both COPA and HAC have requested that their appeals be allowed and that NAV CANADA be ordered to cancel the Daily Charge.

[21] The Agency will address the submissions as filed in respect of the following four issues:

  1. Charges must be in accordance with a methodology established and published by NAV CANADA that is explicit and that also includes the terms and conditions affecting charges – Paragraph 35(1)(a) of the CANSCA;
  2. Charges must not be structured in such a way that a user would be encouraged to engage in practices that diminish safety for the purpose of avoiding a charge – Paragraph 35(1)(b) of the CANSCA;
  3. Charges in respect of recreational and private aircraft must not be unreasonable or undue – Paragraph 35(1)(f) of the CANSCA; and
  4. A category of users may be charged on a flat-fee basis so long as the charge is otherwise consistent with the charging principles set out in subsection 35(1) – Subsection 35(7) of the CANSCA.

1. Charges must be in accordance with a methodology established and published by NAV CANADA that is explicit and that also includes the terms and conditions affecting charges – Paragraph 35(1)(a) of the CANSCA.

Charging methodology

COPA's position

[22] COPA references NAV CANADA's Appendix to its document entitled Details and Principles Regarding Proposed New and Revised Service Charges (hereinafter the Appendix) in which NAV CANADA stated that "in reviewing the charging methodology, it is important to bear in mind that the proposed changes in existing charges will result in the same total amount of revenue for the company as under the current charges, i.e., the proposed provisions are revenue neutral". In view of NAV CANADA's stated objective that the additional charge would also serve as an incentive for small aircraft to use reliever airports, COPA submits that it is clear that NAV CANADA's revenue projections will not be met and therefore the proposed changes will not be revenue neutral.

NAV CANADA's position

[23] NAV CANADA submits that COPA's arguments do not establish a violation of these subsections of the CANSCA. Further, NAV CANADA states that these arguments are invalid and irrelevant to the question of whether the Daily Charge conflicts with the charging principles set out in paragraphs 35(1)(a) and (f) of the CANSCA.

[24] Notwithstanding this, NAV CANADA states that it is anticipated that the Daily Charge will encourage some of the flight activity at the seven major international airports by aircraft weighing three tonnes or less to move to surrounding airports. Given that some aircraft activity may be shifted to other airports, this will result in lower additional revenue at the major airports. NAV CANADA maintains, however, that revenue neutrality will be ensured with the Daily Charge by taking the additional resources into account when the rates for the other charges are established in the rate analysis for the fiscal year 2007-2008. NAV CANADA submits that if the forecast is different than the actual, this will be adjusted in the next rate revision exercise, as is done for all other charges.

[25] NAV CANADA further submits that since the inception of NAV CANADA charges, information sufficient to calculate a charge has, apart from the terms and conditions, been the criterion applied to ensure compliance with the charging principle set out in paragraph 35(1)(a) of the CANSCA. This was originally approved by the Minister of Transport and, in subsequent revisions to charges by the NAV CANADA Board of Directors, in accordance with the CANSCA and NAV CANADA's by-laws.

Agency's analysis and findings

[26] While the Agency notes COPA's concern that the revenue projections may not be achieved for the reasons noted above, the Agency recognizes that NAV CANADA is not permitted by statute to set customer service charges higher than what is required to recover its current and future financial requirements in relation to the provision of air navigation services. NAV CANADA plans its operations to result in an annual break even position after expenses are met through customer service charges, other revenue sources and adjustments to the rate stabilization account. As a result, the net adjustments to customer service charges, including the Daily Charge, must be revenue neutral for NAV CANADA.

[27] The Agency also notes that customer service charges are set based on estimated air traffic volumes and planned expenses. Due to a level of subjectivity in projections, actual revenues and expenses could differ from the estimates. The Agency notes that NAV CANADA has in place a mechanism, called the rate stabilization account which takes into account any positive or negative variances experienced in NAV CANADA's financial results. The rate stabilization account accumulates such variances so that they may be taken into account when setting future customer service charges.

[28] In the document entitled Details and Principles Regarding Proposed New and Revised Service Charges, NAV CANADA assumed that any additional revenue from the Daily Charge would depend on whether some aircraft operators decide to shift their flights to other airports. In its Notice, NAV CANADA further assumed that if there were no such shift, the additional annual revenue resulting from the new $10 Daily Charge would be approximately $250,000. This estimate was subsequently revised to approximately $200,000 in NAV CANADA's answer to COPA's appeal. The Agency notes that the impact of any variance in the revenue estimated by NAV CANADA from the Daily Charge will be considered in the context of all revenue from all customer service charges and thus would likely be minimal. Notwithstanding this, if the forecast of the revenues is different than the actual for this and all other customer service charges, NAV CANADA will make the appropriate adjustments during the next rate revision exercise.

[29] In addition, the Agency is of the opinion that the amount and application of the Daily Charge is clearly set out and accessible to all users and provides the information necessary to understand what, among other matters, amount would be payable for a given flight. It also includes the terms and conditions affecting the Daily Charge.

[30] In light of the above, the Agency is of the opinion that the principle established under paragraph 35(1)(a) of the CANSCA has been observed in establishing the Daily Charge.

2. Charges must not be structured in such a way that a user would be encouraged to engage in practices that diminish safety for the purpose of avoiding a charge – Paragraph 35(1)(b) of the CANSCA.

COPA's position

[31] COPA submits that the introduction of the Daily Charge for use of these airports will adversely impact safety as it will encourage pilots to avoid the designated airports. COPA provides some examples in support of this argument, including that pilots may stretch their fuel reserves to reach reliever airports and that most of the reliever airports are served with non-precision or no approach aids and thus pilots who avoid airports with better approach facilities will increase their risk of an accident.

[32] COPA also maintains that at several locations, the designated airports are the only ones in the area with certain approach procedures for pilots to conduct practice approaches to maintain their proficiency. It states that the Daily Charge will apply for the first touch and go (i.e., land and then take off again in one operation) each day. If pilots only conduct approaches to overshoot rather than touchdown, which allows pilots to practice the transition from relying on cockpit instrumentation to relying on visual reference to the ground, in order to avoid the charge, proficiency will diminish and safety will be affected.

[33] Lastly, COPA states that the experience with the introduction of modest landing fees at airports across Canada has made it clear that the use of such airports is substantially diminished by the introduction of even minor fees. As a result, COPA is of the view that the Daily Charge for use of these airports will adversely impact aviation safety.

NAV CANADA's position

[34] NAV CANADA submits that safety is not in any way potentially or actually affected or reduced by the Daily Charge and thus is fully consistent with the charging principle set out in paragraph 35(1)(b) of the CANSCA. NAV CANADA provides air navigation services in accordance with its published Level of Service Policy and the level of air traffic service, including air traffic control tower and flight service station, depends on the volume and nature of the traffic. NAV CANADA states that each level of service is safe for the traffic range and nature to which it pertains and has been accepted as safe by the aviation safety regulator, Transport Canada. As well, the vast majority of airports in Canada do not have as high a level of air navigation services as the international airports, as this is not required for the volume and nature of traffic to operate safely.

[35] While NAV CANADA anticipates that the Daily Charge will encourage some of the flight activity at the seven major international airports by aircraft weighing three tonnes or less to move to surrounding airports, it notes that all of these smaller airports are certified and all meet Transport Canada's safety standards. Further, a shift in current traffic to surrounding airports would not result in the need for additional services at the other airports. However, if traffic did reach a threshold value at a future date, NAV CANADA would complete an Aeronautical Study to determine if additional services were required. Traffic at all airports is monitored over time to determine whether the level of air traffic services is adequate or needs to be changed.

[36] NAV CANADA maintains that it has taken measures in structuring the Daily Charge to ensure that it does not encourage practices that diminish safety. NAV CANADA will provide an exemption from the charge for flights using the specified airports in an emergency or as a result of a diversion due to bad weather. NAV CANADA submits that the application of the exemption will be based on a broad interpretation as opposed to a narrow technical interpretation and thus will preclude any safety-related situation from occurring on the basis of the Daily Charge.

[37] NAV CANADA further submits that even if an exemption was not provided, it is not credible to suggest that the Daily Charge would influence a pilot's decision on whether to refuel. This decision will be based on safety (i.e., low reserves or running out of fuel), the inconvenience of an additional landing, revising the flight plan, refuelling - followed by the departure, the implications of arriving late at the destination, and costs.

[38] Lastly, NAV CANADA states that with respect to practice approaches, the benefit of practice Instrument Flight Rules (IFR) approaches extends to the point at which minimums are reached and the pilot declares to the instructor or check pilot that he/she has the runway visual. This operation is exempted from the Daily Charge as there is no landing and subsequent takeoff. Completing the approach from this point to touchdown would have little impact on a pilot's IFR proficiency. This would be more applicable to a pilot's ability to land the aircraft and this can be practised under Visual Flight Rules conditions at other airports and utilizing the precision or non-precision approach aids at those airports.

Agency's analysis and findings

[39] Upon review of the evidence, the Agency finds that the assertion that users would be encouraged to engage in practices that diminish safety for the purpose of avoiding the $10 Daily Charge is not supported.

[40] In support of this finding, the Agency has considered, among other matters, NAV CANADA's response to receiving representations suggesting that aircraft operators would not use the international airports in emergencies or as an alternate in the event of poor weather in order to avoid the Daily Charge. NAV CANADA indicated that it will provide an exemption from the payment of the Daily Charge in such instances. As a result of these representations, the Announcement details the exemptions to be provided, including a departure that follows a landing by a flight: where an emergency was declared and where the airport had not been the intended destination as well as using the airport as a poor weather alternate. Accordingly, if the aircraft operator has an emergency, if there was bad weather expected at the reliever airport, or if an aircraft needs refuelling and the reliever airport is closed, the exemption would apply and the aircraft operator could use the international airport without being charged the Daily Charge.

[41] The Agency further notes that NAV CANADA proposed in its Notice and in the document entitled Details and Principles Regarding Proposed New and Revised Service Charges, that the Daily Charge would also apply to the Halifax International Airport. After receiving considerable representation regarding the lack of a suitable reliever airport near Halifax, NAV CANADA has now excluded this airport from the Daily Charge.

[42] With respect to COPA's argument that the introduction of the new $10 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 decide to stretch the fuel reserves at the risk of diminishing safety, including the pilot's safety and potentially any passengers' safety.

[43] Nor is the Agency convinced that if users choose to forgo using some or all of the seven major international airports there would be an increased risk of accidents due to the reliever airports being served with non-precision or no approach aids. The Agency is of the opinion that no probative evidence was filed to support this view. To the contrary, as indicated by NAV CANADA, the Agency notes that all of the smaller and reliever airports are certified, meet Transport Canada's safety standards and their traffic is monitored to determine if the air navigation services meet the requirements of the operating environment.

[44] With respect to COPA's pilot proficiency training argument, the Agency is satisfied with NAV CANADA's response. The Agency is also of the opinion that the submissions filed by COPA in the context of this argument do not support the view that the charging principle set out in paragraph 35(1)(b) of the CANSCA has not been observed in establishing the Daily Charge.

[45] Furthermore, the Agency notes that while COPA alleges that the introduction of a daily charge for the use of these airports will adversely impact aviation safety it has failed to demonstrate that the Daily Charge is structured in such a way that a user would be encouraged to engage in practices that diminish safety for the purpose of avoiding it.

[46] Pursuant to section 50 of the CANSCA, the Agency shall only decide to allow an appeal based on the failure of NAV CANADA to observe a charging principle if it is satisfied on a preponderance of the evidence that NAV CANADA has failed to observe that charging principle. In such a context, the Agency notes that mere allegations in pleadings, unsupported by probative evidence in the record, are insufficient for the Agency to allow an appeal.

[47] In light of the above, the Agency finds that the charging principle established under paragraph 35(1)(b) of the CANSCA has been observed in establishing the Daily Charge.

3. Charges in respect of recreational and private aircraft must not be unreasonable or undue – Paragraph 35(1)(f) of the CANSCA.

Aeronautical system

COPA's position

[48] COPA indicates that during the proceeding which led to Decision No. 650-NC-A-2003, NAV CANADA stated that the aeronautical system is one comprehensive system. In that Decision, the Agency noted COPA's support of the argument by NAV CANADA that "the charges should not be based on whether some parts of the system are used, or not, by certain aircraft operators" (Emphasis added).

[49] If charges should not be based on whether some parts of the system are used or not by certain operators, COPA argues that it would not make sense to introduce a new daily charge that specifically does that. Many owners and operators of small private aircraft have protested over the years that they do not use and do not want to use any of the system. COPA notes that the "balance" that was struck in 1999 was an acknowledgement that while some may be unfairly charged, others will use the system extensively. COPA is therefore of the opinion that the introduction of a daily charge without any changes to the original methodology would upset the balance that was established and therefore be "unreasonable" and "undue". COPA further submits that the Daily Charge is "unreasonable" and "undue" in view of the fact that general aviation's contribution to the comprehensive aeronautical system is satisfied by the flat annual charge.

[50] In addition, COPA is of the view that NAV CANADA has simply asserted that the introduction of these charges is not "unreasonable or undue" but has not provided any information or empirical data in support of that position.

NAV CANADA's position

[51] NAV CANADA clarifies that its submission in the proceeding leading to Decision No. 650-NC-A-2003 stated that charges are not required by CANSCA to be varied according to whether some parts of the system are used or not by an aircraft operator, which is quite different from "should not". NAV CANADA submits that all of its charges are based on the provision or availability, as opposed to the use, of services. It maintains that this does not mean that there cannot be a variation in charges. NAV CANADA states that the existing terminal, en route and daily charges do not apply everywhere services are provided. For example, the terminal and daily charges only apply at airports with a flight service station or an air traffic control tower, although services are provided at many other airports. NAV CANADA also submits that charges can and do vary depending on where aircraft operate, a feature of NAV CANADA's charges which has been in effect since they were first introduced and approved by the Minister of Transport as being consistent with the charging principles.

[52] With respect to COPA's position that the Daily Charge would "upset the balance established", NAVCANADA states that the revisions to its overall charging methodology represent an adjustment in the balance of charges between smaller and larger aircraft. NAV CANADA further states that in general, to achieve a better balance, the total charge applicable to all ranges of smaller aircraft increased, while that applicable to larger aircraft decreased. Similarly, with respect to small aircraft weighing three tonnes or less, which are subject to the annual charge, NAV CANADA is of the view that the increase for aircraft using the seven major international airports contribute to the re-balancing. All other aircraft weighing three tonnes or less are unaffected in any way.

[53] In support of the Daily Charge, NAV CANADA submits that the existing annual charges apply to active aircraft, whether they operate at a private air strip or a major international airport. As a result, the level of one uniform charge tends to reflect what is reasonable for smaller aircraft operating at smaller airports. NAV CANADA maintains that in view of this consideration and the fact that the existing annual and quarterly charges are very modest, its Board of Directors did not deem it appropriate to reduce or make any other changes to these charges.

[54] In light of the above, NAV CANADA submits that the aeronautical system considerations presented by COPA do not make the Daily Charge inconsistent with the charging principle set out in paragraph 35 (1)(f) of the CANSCA.

Agency's analysis and findings

[55] COPA argued that the original methodology established by NAV CANADA is based on the principle that charges "should not" be based on whether some parts of the system are used or not by certain operators, with emphasis on "whether they are used" by certain operators.

[56] The Agency notes that subsection 32(1) of the CANSCA specifically states that NAV CANADA may impose charges on a user for both the availability and the provision of air navigation services. The Agency is of the opinion that this does not preclude NAV CANADA from imposing the subject Daily Charge. This charge is not inconsistent with, for example, the existing daily charges which also apply only at airports with a flight service station or an air traffic control tower.

[57] The Agency also notes that while small aircraft are subject to annual charges regardless of whether they operate at a private air strip or at a major international airport, it was recognized at the time of the annual fee development that, among other matters, more services are provided at airports with flight service stations and towers than in other areas. Also considered at that time was the fact that a flat charge based on the average annual aircraft utilization would not be reasonable for aircraft operators with low utilization.

[58] In addition, the Agency notes that one of the reasons provided by NAV CANADA in support of the Daily Charge was that one uniform annual charge tends to be reflective of what is reasonable for smaller aircraft operating at smaller airports given that the air navigation services provided or made available, as well as the related costs, vary widely due to the wide range of operating circumstances. As such, the Daily Charge ensures a more reasonable allocation of costs for those small aircraft operators who continue to choose to utilize the seven international airports. As well, the introduction of the Daily Charge, along with all other changes to its customer service charges, do represent revenue neutral modifications of the charging methodology.

[59] In light of the foregoing and considering the reasons stated under the sections addressing cost recovery and subsection 35(7) of the CANSCA, the Agency is of the opinion that COPA's "aeronautical system" argument has failed to demonstrate that the imposition of the Daily Charge, in addition to the annual charge, for these seven international airports, is either unreasonable or undue.

[60] The Agency therefore finds that this argument does not demonstrate that the charging principle established under paragraph 35(1)(f) of the CANSCA has not been observed in establishing the Daily Charge.

Cost recovery

COPA's position

[61] COPA states that NAV CANADA originally determined that the contribution for aircraft weighing three tonnes or less would be made by a flat annual charge for all aircraft used for recreational and private purposes as well as exempt aircraft weighing less than .617 tonnes. This, COPA states, recognized the cost sensitivity of its segment of general aviation. Further, COPA notes that the Agency, in its Decision No. 650-NC-A-2003, stated as follows:

...The Agency is of the opinion that a charging principle which requires that charges for recreational and private aircraft not be "unreasonable" or "undue" recognizes that the ability of operators of these type of aircraft to pay for charges may be different than that of commercial air carriers. Accordingly, generating less revenues 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.

[62] COPA maintains that as this methodology was approved by the Minister of Transport and subsequently by the Agency in Decision No. 650-NC-A-2003, any attempt to levy a daily charge on this segment of general aviation is contrary to this approved methodology.

NAV CANADA's position

[63] NAV CANADA submits that COPA interprets the Agency's statement in Decision No. 650-NC-A-2003, that being "to generate less revenue from general aviation than the cost of providing services to general aviation would not be inconsistent with the charging principles set out in paragraph 35(1)(f) of CANSCA", to mean that any charge in addition to the annual flat charge to aircraft used for recreational and private purposes is contrary to the approved methodology and therefore inconsistent with paragraph 35(1)(f) of the CANSCA as being unreasonable and undue.

[64] NAV CANADA states that it has interpreted the inclusion of the charging principle in CANSCA to mean that, in general, the charges for recreational and private aircraft would typically be less than the cost of the service provided. NAV CANADA's main consideration in establishing the level of charges for recreational and private aircraft has been to ensure that such aircraft make a contribution, rather than recovering the costs associated with their flight activity.

[65] While CANSCA does not define what "unreasonable or undue" means, NAV CANADA notes that the courts have recognized that its meaning will vary with the circumstances. It submits that the Daily Charge was established taking into account the factors attributable to rate setting considered by the courts, such as the costs of providing the services as set out in subsection 35(5) of the CANSCA. Based on information provided by NAV CANADA, it submits that its charges for aircraft weighing three tonnes or less are very modest in relation to the cost of services provided.

[66] NAV CANADA maintains that under COPA's reasoning, the existing charging methodology, whether for large or small aircraft, could not be changed by virtue of the Agency's Decision. The finding by the Agency that the existing charging methodology is consistent with the CANSCA does not mean that other methodologies or levels of cost recovery cannot also be consistent with the CANSCA. The role of an appeal decision is to establish whether a specific charge is consistent with the charging principles and not whether other theoretical charges may or may not be consistent with the principles.

[67] NAV CANADA submits that the COPA cost recovery arguments are irrelevant to the question of whether the Daily Charge conflicts with the charging principles set out in paragraph 35(1)(a) or (f) of the CANSCA.

Agency's analysis and findings

[68] In support of its submission that the implementation of the Daily Charge is contrary to the previous methodology, COPA noted that the Agency, in Decision No. 650-NC-A-2003 stated that "...a charging principle which requires that charges for recreational and private aircraft not be "unreasonable" or "undue" recognizes that the ability of operators of these type of aircraft to pay for charges may be different from that of commercial air carriers. Accordingly, generating less revenues 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.

[69] The Agency notes that paragraph 35(1)(a) of the CANSCA sets out the requirement that NAV CANADA may only set its charges to recover its current and future financial requirements in relation to the provision of civil air navigation services. Subsection 35(5) defines those specific costs or requirements which include, among other matters, operational and maintenance costs, management and administration costs, debt servicing requirements and financial requirements arising out of contractual agreements relating to the borrowing of money, depreciation costs on capital assets, and financial requirements necessary for NAV CANADA to maintain an appropriate credit rating.

[70] In its examination of whether the $10 Daily Charge is unreasonable or undue, the Agency continues to recognize that the requirement of the air navigation services is largely driven by commercial aviation and that the cost of providing or making available air navigation services at these seven international airports is much higher than at other smaller locations.

[71] The Agency considered, among other matters, the costs for some of the facilities and services that are also provided or made available to small aircraft. The total directly attributable operating costs for terminal air navigation services from flight service stations and air traffic control towers were approximately $160 million in the fiscal year 2002-2003. This amount does not include costs related to weather information, terminal air navigation services from area control centres, en route services, navigation aids and aeronautical information. It also does not include costs related to depreciation, interest, or common costs such as overhead.

[72] The Agency also considered the costs of providing the air navigation services and the traffic at the seven major international airports in question and notes that the average cost per day for private aircraft weighing three tonnes or less is approximately $232. The proposed Daily Charge of $10 per aircraft weighing three tonnes or less represents approximately four percent of this average daily cost.

[73] In addition, the Agency notes that NAV CANADA reported that during the fiscal year 2004-2005, the existing annual and quarterly charges generated approximately $1.3 million, representing approximately one percent of NAV CANADA's total revenue and less than one percent of the cost of $160 million plus the direct weather information operating costs of $75 million.

[74] The Agency finds this evidence to be compelling and, without evidence to the contrary, determines that the Daily Charge is not unreasonable or undue. The Agency, therefore, finds that the charging principle established under paragraph 35(1)(f) of the CANSCA has been observed in establishing the Daily Charge.

4. A category of users may be charged on a flat-fee basis so long as the charge is otherwise consistent with the charging principles set out in subsection 35(1) – Subsection 35(7) of the CANSCA.

COPA's position

[75] COPA submits that NAV CANADA decided that a flat annual charge would be the fairest and most effective method for private and recreational users to contribute to NAV CANADA's costs. It states that the flat charge is specifically recognized in subsection 35(7) of the CANSCA. COPA is of the view that the introduction of a new Daily Charge is over and above the flat fee and, therefore, is contrary to the charging principles contained in the CANSCA.

HAC's position

[76] HAC submits that the Daily Charge should be rejected because, among the other reasons raised by COPA, it is contrary to the legislative intent of the CANSCA and is non-compliant with the charging principle established by subsection 35(7) of the CANSCA. HAC is of the view that the CANSCA is not intended to empower NAV CANADA to regulate market access by limiting the use of any airport for purposes of market management.

[77] It further submits that subsection 35(7) of the CANSCA precludes NAV CANADA from double billing for services and that charges must be based on either a specific service rendered basis or on an annual basis, but not both.

[78] HAC also submits that the Daily Charge is inconsistent with NAV CANADA's uniform system wide charges policy. In support of this, HAC states that the Agency adhered to the principle of uniform charges in Decision No. 650-NC-A-2003 and it must, therefore, also reject the Daily Charge under this appeal.

NAV CANADA's position

[79] In response to COPA's submission, NAV CANADA maintains that subsection 35(7) of the CANSCA does not preclude it from imposing a daily fee in addition to a flat annual fee. NAV CANADA states that the Daily Charge is also a flat fee. However, if it was not, the provision is permissive rather than restrictive. NAV CANADA submits that it allows a flat fee as long as it is otherwise consistent with the charging principles but nowhere does it restrict NAV CANADA's ability to impose another type of charge over and above the flat fee.

[80] In response to HAC's submission, NAV CANADA states that subsection 35(7) of the CANSCA simply permits the use of flat fees and does not prescribe its application. In addition, NAV CANADA references its Announcement, wherein it notes that the total charge at the seven designated airports consists of two components: the annual charge and the Daily Charge. NAV CANADA maintains that this is a practical way of differentiating the charges between the seven international airports and other airports, and does not represent double charging.

[81] Accordingly, NAV CANADA submits that the appeal filed by HAC should be dismissed.

Agency's analysis and findings

[82] The Agency notes that the Daily Charge is applied to an aircraft only once per chargeable day, with an annual maximum limit of $1,200 per aircraft. As such, the Agency considers the Daily Charge to be a flat fee.

[83] The Agency has examined the submissions in respect of subsection 35(7) of the CANSCA and notes that this provision permits NAV CANADA to charge a category of users on a flat-fee basis if the fee is otherwise consistent with the charging principles set out in subsection 35(1). Subsection 35(1) establishes principles which NAV CANADA must observe when introducing new charges or making revisions to existing charges.

[84] Based on the above, as well as the Agency's opinions and findings already discussed herein in respect of the charging principles set out in paragraphs 35(1)(a), 35(1)(b) and 35(1)(f) of the CANSCA, the Agency finds that subsection 35(7) of the CANSCA does not prohibit NAV CANADA from charging the Daily Charge in addition to the existing annual fee. The Agency also finds that there is no probative evidence indicating that NAV CANADA has failed to observe the charging principles nor that evidence has been provided to support the view that the Daily Charge represents "double billing".

[85] In light of the above, the Agency finds that NAV CANADA has complied with subsection 35(7) of the CANSCA.

OTHER ISSUES

[86] In its appeal, COPA raises a number of other issues. Specifically, it is of the view that:

  • in light of the potential reduction in the use of the seven international airports by general aviation, the reduced resulting revenue would cause NAV CANADA to fail from meeting the objective stated in the Appendix which is to "better balance the charges between large and small aircraft";
  • there is no information which would justify the imposition of this additional charge other than the use of these airports by jet aircraft;
  • the ulterior purpose for the introduction of the Daily Charge is to reduce the use of the seven international airports by small aircraft;
  • there is no supporting information or data in respect of the "efficiency benefit" for air carrier traffic at the seven international airports resulting from less use of these airports by small aircraft;
  • there is no information, data or costing related to the administrative costs to be incurred by NAV CANADA in collecting the Daily Charge;
  • an Aeronautical Study is required in accordance with the requirements of Part VIII of the Canadian Aviation Regulations; and
  • there are significant problems and issues that will affect the airports that have been chosen.

[87] Lastly, COPA makes specific recommendations which would, in effect, exempt its segment of general aviation, that is those who fly for personal purposes, from the Daily Charge.

[88] While NAV CANADA has specifically addressed each of the issues listed above, NAV CANADA is of the view that these submissions are irrelevant as to whether NAV CANADA's Daily Charge complies with paragraphs 35(1)(a), 35(1)(b) or 35(1)(f) of the CANSCA.

[89] The Agency has reviewed each of these seven issues and, where COPA has expressed a concern for the safety of a specific airport, the Agency notes that it has previously addressed the safety issue. In respect of all other issues, the Agency finds that they are outside of the scope of the charging principles set out in section 35 of the CANSCA. In addition, with respect to COPA's specific recommendations to provide for an exemption from the Daily Charge for its segment of general aviation, the Agency does not have the jurisdiction to take them into consideration. As stated earlier, in the case where the Agency upholds an appeal that NAV CANADA did not observe one or more of the charging principles, the Agency is limited to ordering NAV CANADA to cancel the new charge and refund the amount of the cancelled charge to each user who paid it.

CONCLUSION

[90] Based on the above findings, the Agency hereby dismisses the appeals filed by COPA and HAC.

Members

  • Guy Delisle
  • Gilles Dufault
  • Beaton Tulk
Date modified: