FUNDING TO DELIVER BETTER SERVICE FOR AIR TRAVELLERS
Requesting $12M (contingent liability – unannounced) for the 2020-21 Supplementary Estimates B
The CATSA Commercialization Initiative is seeking access to ($12M) in planned spending authorities.
Key Messages:
- This contingent operating funding was provided in Budget 2019 but was unannounced given negotiation sensitivities.
- The objective of the contingent funding is to enable the industry consortium to engage in substantive negotiations with the Government of Canada to acquire the assets and operations of the Canadian Air Transport Security Authority (CATSA).
- The contingent funds are important for facilitating negotiations associated with the transfer of CATSA to a new, independent, not-for-profit entity.
- Once negotiations and the subsequent transaction concludes, Canadians can expect a more nimble, responsive, and innovative screening authority.
If pressed:
- The funds are contingent and support risk mitigation aligned with common practice for this type of transaction.
Background
- Budget 2019 announced that the Government would transfer CATSA to an independent not-for-profit entity. This new entity will have a membership that includes airport, airline, and federal government representation. Enabling legislation was included in the Budget Implementation Act which received royal ascent in June 2019.
- This transfer will in no way change or compromise safety and security. The Government will continue to play an exclusive regulatory and oversight role for security screening services at Canadian airports.
- Once established, the new not-for-profit corporation will ensure a long-term efficient and sustainable approach to a key service that Canadian and international travellers rely on. This initiative is based on the past success of Nav Canada (Canada’s air navigation service provider), which was commercialized in 1996 and has been very successful in reducing fees, driving technological innovation, and improving services while maintaining our world-class safety record.
- Included in the Budget 2019 funding related to this initiative was an unannounced $12M contingent liability to be placed in a frozen allotment and facilitate the establishment of an Expense Reimbursement Agreement (ERA) whereby the purchaser’s approved due diligence and negotiation expenses are reimbursed up to an agreed cap if negotiations fail. ERAs and similar instruments are common practice in these types of transactions and it is an important de-risking tool to facilitate the participation of targeted purchasers. The ERA established by the Government and industry consortium includes a provision requiring confidentiality concerning the terms of the agreement.