Nav Canada's Ratings Affirmed by S&P;Outlook Stable.TORONTO--(BUSINESS WIRE)--Standard & Poor's CreditWire 11/4/97-- Standard & Poor's today affirmed its double-'A' issuer credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings on Nav Canada NAV CANADA is a privately run, non-profit organization that operates Canada's civil air navigation service (ANS) and employs approximately 2,000 air traffic controllers (ATCs), 800 flight service specialists (FSSs) and 700 Technologists. . The rating outlook remains stable. Nav Canada is the private-sector non-share capital corporation, which acquired Canada's air traffic control system from the Canadian federal government in October 1996. The impetus behind the privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned was a desire on the part of both the federal government and the aviation industry to put Canada's air navigation air navigation, science and technology of determining the position of an aircraft with respect to the surface of the earth and accurately maintaining a desired course (see navigation). system on a more commercial footing, following the successful example of other countries such as New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. . A legislated monopoly, Nav Canada has been given the mandate to operate and develop Canada's air traffic control services for all civil transportation in and through Canadian airspace Canadian airspace is the region of navigable airspace above the surface of the Earth that falls within a region roughly defined by the Canadian land mass, the Canadian arctic, the Canadian archipelago, and areas of the high seas. . Nav Canada's rating reflects very strong credit characteristics including: -- Monopoly position in the provision of an essential service; -- Legal ability to impose and collect user charges on a full cost recovery basis; -- Strong contingency reserves and covenant package; and, -- An experienced management team. In the year since acquiring the air traffic control system, Nav Canada's management has moved quickly to implement a number of measures aimed at reducing operating and maintenance expenses, establishing user charges, and generally improving the quality of air navigation services while maintaining high safety standards Safety standards are standards designed to ensure the safety of products, activities or processes, etc. They may be advisory or compulsory and are normally laid down by an advisory or regulatory body that may be either voluntary or statutory. . Of note, Nav Canada has announced a plan to reduce annual operating and maintenance (O&M) expenses by 18% over the next three years by consolidating regional operations and reducing overlapping services, and rationalizing staff through early retirement packages and attrition. Resulting efficiencies will ultimately benefit airlines and other users of the air navigation system through rate reductions and enhanced service Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; levels. Another important accomplishment has been the establishment of a user fee schedule following extensive consultations with users over the course of the summer, which received ministerial confirmation in September 1997. New user charges for enroute and terminal air navigation services and increases to the existing charges, including overflight o·ver·flight n. An aircraft flight over a particular area, especially over foreign territory. Noun 1. overflight - a flight by an aircraft over a particular area (especially over an area in foreign territory) fees, are scheduled for March 1, 1998. Additional consultations will take place over the next year to develop a proposal for user fees that will provide for full cost-recovery scheduled for Nov. 1, 1998, according to plan. On this date, federal transition payments to Nav Canada are expected to cease and the Air Transportation Tax is anticipated to be fully phased out. In keeping with Standard & Poor's expectations, operating performance since Nav Canada took over the air navigation system has been good. In the ten months ended August 31, 1997 (Nav Canada's year-end), net earnings of C$13.4 million were somewhat above projection, even with a C$57 million restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. taken during the year. Revenues were higher than anticipated owing to stronger than expected air travel, while O&M expenditures came in about 8% below forecast. Nav Canada's prudent revenue forecast and well-defined expenditure management plan suggest that operating results should remain healthy going forward. OUTLOOK: STABLE Nav Canada's operating performance will benefit from continuing growth in aviation activity in Canada, the company's conservative management practices and its legal ability to impose and raise user fees. A positive revision in either the outlook or rating hinges on the successful implementation and collection of user charges beginning in March 1998, as well as on Nav Canada's ability to achieve its proposed operational savings in the near-to-medium term, Standard & Poor's said. -- CreditWire CONTACT: Valerie E Blair, Toronto 416/202-6012 Ernest R Perez, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of 212/208-1855 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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