NavCan Raises Fees 6%
Oct 5, 2001 | 11:04 am
#1
Original Poster
Join Date: Mar 2000
Location: Mississauga, Ontario, Canada
Posts: 528
NavCan Raises Fees 6%
From employee email sent by Robert Milton:
Yesterday, we also heard of another impact resulting from the events of September 11. NavCanada, citing a dramatic reduction in demand, has increased our air navigation fees by six per cent, which translates into
$14 million a year.
No other air navigation system has yet initiated a fee increase and this is clearly unacceptable. Obviously, in this environment, airlines cant just raise their prices by six per cent, and our expectation of NavCanada is that they will work a bit more closely with their biggest customerAir Canadaas we collectively work our way through this
difficult period. As such, well be communicating with them immediately.
How much do you expect fares to rise to cover this?
Yesterday, we also heard of another impact resulting from the events of September 11. NavCanada, citing a dramatic reduction in demand, has increased our air navigation fees by six per cent, which translates into
$14 million a year.
No other air navigation system has yet initiated a fee increase and this is clearly unacceptable. Obviously, in this environment, airlines cant just raise their prices by six per cent, and our expectation of NavCanada is that they will work a bit more closely with their biggest customerAir Canadaas we collectively work our way through this
difficult period. As such, well be communicating with them immediately.
How much do you expect fares to rise to cover this?
Oct 5, 2001 | 11:23 am
#2
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$14 million. I cannot find a number for how many passengers AC carried in 2000, but the passenger revenue figure was $8 billion. Assuming an average ticket price of $500, this represents 16 million passengers flown. For the sake of my simplified mathematics, this comes to another $1 per ticket. What did we just get charged $3 a ticket for the other day?
It was a bit ingenuous of Mr. Milton to talk about a 6% increase in fares to offset this. The man must learn to use numbers more judiciously, or he will continue to embroil himself in these self-defeating arguments.
The real issue is that NAVCAN's costs are relatively constant, even if air traffic declines. It must maintain the system at a certain fixed level of staff and equipment. Since this figure was known when NAVCAN set its budget, each airline would have known what its pro-rated payments would have been for the year. So again, it is a bit ingenuous of Mr. Milton to put it the way he has.
While it is true airlines pay by the amount of traffic they generate across the NAVCAN system, AC would have budgeted their contribution at the level NAVCAN needed to operate. This was a known number when NAVCAN set its budget and would not have changed even given the current circumstances. What Milton really means is that he cannot roll back that number just because AC is moving fewer planes through the air. And that, on a per ticket basis, AC must allocate more to NAVCAN. [Or we must pay more for that ticket.]
It was a bit ingenuous of Mr. Milton to talk about a 6% increase in fares to offset this. The man must learn to use numbers more judiciously, or he will continue to embroil himself in these self-defeating arguments.
The real issue is that NAVCAN's costs are relatively constant, even if air traffic declines. It must maintain the system at a certain fixed level of staff and equipment. Since this figure was known when NAVCAN set its budget, each airline would have known what its pro-rated payments would have been for the year. So again, it is a bit ingenuous of Mr. Milton to put it the way he has.
While it is true airlines pay by the amount of traffic they generate across the NAVCAN system, AC would have budgeted their contribution at the level NAVCAN needed to operate. This was a known number when NAVCAN set its budget and would not have changed even given the current circumstances. What Milton really means is that he cannot roll back that number just because AC is moving fewer planes through the air. And that, on a per ticket basis, AC must allocate more to NAVCAN. [Or we must pay more for that ticket.]