Mr. Speaker, today I would like to bring the Assembly up-to-date on the commercialization of Canada's air navigation system under NAV Canada and the likely effects we should expect on the cost of air transportation in the north. I know this is an issue of interest for everyone who lives in the north because there is no region in Canada that is more dependent on air transportation than the Northwest Territories.
Just a little more than a year ago NAV Canada, a private corporation, assumed ownership and control of the Canadian air navigation system from Transport Canada. NAV Canada's legislated mandate is to operate the air navigation system in Canada exclusively on a cost recovery basis. The corporation will receive no appropriation or subsidy from the Government of Canada and the corporation does not answer to the federal Minister of Transport or the Parliament of Canada. NAV Canada answers only to its Board of Directors which is appointed to represent the interests of industry, labour and the public.
Up until now, the air navigation system has been paid for mainly through the Air Transportation Tax collected along with the fare on every air passenger ticket sold. Earlier this year, NAV Canada proposed to replace the Air Transportation Tax with a new fee structure based simply on gross aircraft weight and flight distance. The announcement of the new fee structure prompted a great deal of speculation as to its effect on the price of air travel and freight rates.
In truth, it is very difficult to make comparisons and projections between the two methods of collecting revenue because they work on entirely different principles. The Air Transportation Tax was levied strictly on passengers. It did not apply to air cargo. NAV Canada's new fees are based on the carrying capacity of the aircraft. The air carriers can recover the fees from the passengers or the cargo or some combination of the two. How the carriers will choose to distribute the fees remains to be seen.
While the fee structure would be, as intended, mainly revenue neutral on air routes in southern Canada, the northern air carriers and the Department of Transportation were quick to realize that it would increase passenger fares and air cargo rates in northern Canada. The new fee structure applies to an aircraft's carrying capacity regardless of whether that carrying capacity is fully or partially used. Flights on northern routes are not generally as full as flights on southern routes. Aircraft in the north carry freight mainly one way. Return flights are usually empty. The NAV Canada fees will have a greater impact on low traffic routes in the north than they will on high traffic routes in the south.
Since NAV Canada announced its proposed fee structure, we have lobbied hard with the Northern Air Transport Association (NATA), the northern air carriers and Chambers of Commerce for concessions and exemptions that would lessen its impact on the north. I have expressed my concerns directly and in writing to the federal Minister of Transport and the President of NAV Canada.
The Department of Transportation convened a meeting on September 2nd of provincial and territorial deputy ministers of Transportation to consider the impact of the fees. The deputy ministers from Ontario, Nova Scotia, Newfoundland and Manitoba agreed with our concerns with the impacts on northern and remote communities. British Columbia and Saskatchewan were not pleased with the consultation process. The deputy ministers agreed to put the issue at the top of their agenda for the Transportation Association of Canada's meeting in Montreal later this month.
At a meeting in Yellowknife on September 3rd with the department and NATA representatives, NAV Canada officials recognized that the fee structure would increase air transportation costs in the north, but if there were an increase, they thought it would be small.
The Honourable Goo Arlooktoo, the Deputy Premier; Mr. Joe Handley, the deputy minister of Transportation; Mr. Ken Copeland, the president and chief executive officer of NAV Canada and Mr. Arthur Andreassen, the director of Rates and Revenues, met in Ottawa on September 10th. At this meeting, NAV Canada conceded that the effect on northern air routes had been an oversight. They agreed to watch the impacts closely through the first phase of fee implementation when it takes effect on March 1, 1998.
They also agreed to better consultations for the second phase of implementation that begins on November 1, 1998 and extends the fee structure to include smaller aircraft.
As things stand today, we will have to wait and see how receptive and flexible NAV Canada is prepared to be to our representations. NAV Canada suggests that its new fee structure will not produce an increase in our air transportation costs of any more than three percent. Some northern air carriers have projected an increase as high as eight percent.
Mr. Speaker, my time is up. I would like to seek unanimous consent to conclude my statement.