November 19, 2012 / 12:05 PM / 5 years ago

Nav Canada to invest $150 mln in air traffic venture with Iridium

Nov 19 (Reuters) - Nav Canada, the private company that manages air traffic over Canada, said it would spend $150 million for a controlling stake in a joint venture with Iridium Communications Inc that will track planes over oceans in real time.

Nav Canada, which gets its money from airline fees, will make the investment in five installments through 2017, giving it a 51 percent stake in the joint venture, Aireon LLC.

The joint venture, first announced in June, will allow aircraft to fly longer in better weather -- saving fuel, decreasing carbon emissions and increasing passenger safety.

Air traffic authorities currently need to keep aircraft widely spaced due to lack of radar visibility over oceanic airspace and mountainous terrain.

“We’re confident the North Atlantic (air traffic) will substantially cover most of the costs of Aireon but it won’t cover all of them, so we need other parts of the world as well,” Nav Canada Chief Executive John Crichton told Reuters.

“We’re interested in other air navigation service providers becoming investors.”

Iridium, which will own the rest of Aireon, said while costs of setting up the new venture were covered for now, it would be open to taking on other investors.

The companies said they have yet to decide how much they will charge for Aireon’s services, which Nav Canada estimated would save airlines over $100 million in annual fuel costs on their North Atlantic routes alone.

Aireon has agreed that the price needs to be considerably less than the expected fuel savings for the airlines, Nav Canada’s Crichton said.

Aireon’s service will use receivers built into 66 satellites in Iridium’s second-generation constellation, due to be launched starting 2015.

Although the joint venture will be fully up and running only after the launch is complete in 2017, Iridium said Aireon will start generating revenue right from when the first satellite is turned on in just over two years.

Data from aircraft reporting their positions through the system will start flowing in early 2015, Iridium CEO Matt Desch said in an interview with Reuters.

“I know that a lot of the air navigation service providers are going to be interested in that data even upfront and would be glad to pay for it.”

Aireon, whose services will also enable aircraft black boxes to send information real time, could be taken public in the future, the JV partners said.

“It’s premature to (talk about going public) right now, but that certainly is not ruled out in the future,” Crichton said.

Nav Canada, a not-for-profit financed by publicly traded bonds, said it would not raise additional debt to finance the first tranche of its investment in the joint venture.

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