Canada's air traffic controller to give airlines first-time refund

MONTREAL (Reuters) - The operator of Canada’s air-traffic control services said on Tuesday it will refund C$60 million ($44.6 million) to airlines because of a higher-than-expected number of flights, in a first for the privately held, not-for-profit corporation.

Nav Canada said in a statement the refund to customers like airlines and private plane operators would represent 4.6 percent of projected revenue for fiscal 2017, which ends on Aug. 31.

Nav Canada said the stronger-than-expected traffic will also allow it to reduce its base rates for fiscal 2018 by 3.5 percent, in what will be the second year in a row of a reduction in the base rates.

Rates vary by the size of a plane and the distance flown, Nav Canada spokesman Ron Singer said.

“Traffic growth over the past year has been higher than expected, considering the actual GDP growth rates of major world economies,” Nav Canada President Neil Wilson said in the statement.

Nav Canada, which covers operating costs through user fees and capital costs through bonds, is considered by some as a model for privatizing air traffic control in the United States, which is now run by the Federal Aviation Administration.

According to a 2016 report by the Civil Air Navigation Services Organization (CANSO), the 2015 cost per flight hour for continental fights was $334.91 for Nav Canada, compared with $453.26 for the FAA. The average continental cost per flight hour was $360, the report said.

U.S. President Donald Trump’s administration has indicated it is in favor of privatization.

Bill Shuster, who chairs the U.S. House of Representatives Transportation Committee, has proposed a similar structure to Canada’s.

While proponents see lower fees and other benefits, critics say the U.S. system poses special challenges because of its size and structure.

Privatization in the United States also has powerful opponents, including the National Business Aviation Association and some members of Congress.

U.S. privatization would require a vote by Congress, and the timing would most likely be in late September, when the current FAA budget re-authorization expires, according to people familiar with the matter.

In fiscal 2016, Nav Canada reported revenue of almost C$1.4 billion ($1.04 billion) and net income of C$37 million ($27.49 million).

Reporting by Allison Lampert in Montreal; Additional reporting by Alwyn Scott; Editing by Bill Rigby and Leslie Adler