BUSINESS PLAN20072009

TABLE OF CONTENTS

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

1. Corporate Background and Business Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Corporate Vision, Mission, Objectives, and Values . . . . . . . . . . . . . . . . . . . . . . . . 6

3. Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4. People. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

5. Delivering the Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5.1 Air Traffic Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

5.2 Navigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

5.3 Surveillance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

5.4 Level of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

5.5 Aeronautical Information Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

5.6 Aviation Weather Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

5.7 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

5.8 Maintaining and Renewing the Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . 53

5.9 Commercial Business Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

6. Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

7. Measuring Corporate Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

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FOREWORD by the President and Chief Executive Officer

Dear NAV CANADA Stakeholder,

I am pleased to present the NAV CANADA Business Plan for the period

20072009. This plan represents a high level view of our vision, goals and

objectives, and the specific initiatives and programs which will enable us to

achieve them.

Our ten years of experience as the owner and operator of the Canadian civil

air navigation system has certainly taught us that business planning in the

aviation industry is a dynamic exercise, which recognizes that objectives

must sometimes be amended as we constantly strive to meet our main goals

of safety, efficiency and cost effectiveness. Our Annual Report provides

information on how we are performing against this plan.

Along with the whole NAV CANADA team, I encourage you to provide us

with your feedback on the contents of this plan or any other issue.

John W. Crichton

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Top Priorities

Enhance air navigation system safety.

Improve employee engagement through the effective management of

people, focusing especially on leadership and people practices.

Successfully implement the Canadian Automated Air Traffic System

(CAATS).

Maintain effective control of overall headcount while improving opera-

tional training success to achieve full staffing of our air traffic services

facilities.

Reduce the number and severity of customer restrictions on airspace usage

that are within NAV CANADAs control.

Reduce customer service charges through effective cost controls and

revenue generating initiatives.

Complete the development of, and publish, appropriate benchmarking data.

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1. CORPORATE BACKGROUND AND BUSINESS CONTEXT

NAV CANADA is the owner and operator of Canadas civil air navigation

system (ANS) and provides its customersairlines and other owners and

operators of aircraftwith Air Traffic Control, flight information, weather

briefings, airport advisory services, aeronautical information services and

electronic aids to navigation.

NAV CANADA is the private sector non-share capital company which

purchased the ANS from the Federal Government, on November 1, 1996,

for $1.5 billion.

NAV CANADA is governed by a Board of Directors comprised of 10

appointees from the four founding Members of NAV CANADA as follows:

4 from Air Carriers; 1 from General and Business Aviation; 3 from the

Federal Government; 2 from Bargaining Agents; as well as 4 independent

Directors, appointed by the Board, unrelated to other stakeholders. The

President and Chief Executive Officer is also a Director.

In addition to the four Member groups, NAV CANADA has approximately

180 Associate Members who are customers, groups and individuals with an

interest in aviation and air navigation. Associate Members elect an Advisory

Committee, which provides advice to the Board of Directors on a wide range

of ANS-related issues.

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Approximately 5,400 dedicated employees work at NAV CANADA. The

Company is organized as depicted in the following chart:

NAV CANADA facilities across the country include seven Area Control

Centres, 42 control towers, 60 Flight Service Stations, seven Flight Information

Centres, 38 maintenance centres, as well as over 1,000 unstaffed navigational

aid sites (see figure 1). In addition to a headquarters located in Ottawa, the

Company has a Technical Systems Centre, a Simulation Centre and a National

Operations Centre in Ottawa, and a Training Institute and Conference Centre

in Cornwall, Ontario.

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Board of Directors

President and CEOJohn W. Crichton

VP, Technical Operations

George H. Powell

VP, OperationsKathleen C. Fox

VP, EngineeringKim Troutman

VP, Finance,CFO and TreasurerWilliam G. Fenton

VP, Safety and Quality

John F. David

VP, Customer and Commercial Services

Andrew Campbell

VP, General Counsel and Corporate Secretary

Neil R. Wilson

VP and Human Resources OfficerRichard J. Dixon

VP and Chief Technology Officer

Sidney Koslow

Director Communications

John Morris

Advisory Committee

Figure 1Facility Map

NAV CANADA revenues come primarily from service charges paid by cus-

tomers. In accordance with the Civil Air Navigation Services Commercialization

Act (CANSCA), NAV CANADA sets customer service charges at a level

necessary to recover the cost of providing its services. The Companys

acquisition of the ANS, and its ongoing capital requirements, are financed

with debt issued in the public markets.

The Company maintains one of the worlds best ANS safety records and

incorporates a Safety Management System that supports an already strong

safety culture.

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Over the last ten years NAV CANADA has saved approximately $100 million

annually in operating costs as a result of restructuring. These savings have

been passed on to customers. At the same time, the Company has adopted an

aggressive strategy to modernize and enhance the delivery of air traffic services

across the country. Over $1 billion has been invested in new systems and tech-

nologies since 1996.

The Companys employees are highly focused on achieving NAV CANADAs

overarching objectives related to safety, efficiency and modernization.

Business ContextThere are over 11 million aircraft movements associated with NAV CANADA

Area Control Centres, Control Towers, Flight Service Stations and Remote

Aerodrome Advisory Services annually. These movements include take-offs,

landings and overflights in domestic airspace and international airspace

assigned to Canadian control.

The volume of air traffic in Canadian controlled airspace is central to any

assessment of NAV CANADAs business context. Beginning in 2001, a series

of negative events significantly impacted air traffic volumes. Considerable

efforts were required by the Company to mitigate the impact of declining

revenues. Traffic returned to pre-2001 levels in fiscal 2005 and is expected

to grow in the order of 4 per cent in fiscal 2007. Figure 2 shows traffic in

weighted charging units.

Despite steady traffic growth over the past few years, our customers continue

to face enormous cost pressures, in an intensely competitive environment.

They are looking to us to add value to our services by helping them safely

reduce the cost of flight operations. One way to do that is through improved

ANS efficiency that reduces traffic delays and fuel burn.

Future air traffic volumes may be influenced by several factors, including the

pace of economic growth, the impact of low cost carriers, airline restructurings

and insolvencies, the impact of increased fuel costs, and the effects of terrorist

activities or health epidemics including pandemics.

Continued focus on cost control will ensure an efficient ANS that is prepared

to respond to any eventuality.

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Figure 2Weighted Charging Units (Millions)

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2. CORPORATE VISION, MISSION, OBJECTIVES, and VALUES

VisionNAV CANADAs vision is to be the worlds most respected ANS:

in the eyes of the flying public for our safety record;

in the eyes of our customers for our fee levels, customer service,

efficiency and modern technology; and

in the eyes of our employees for establishing a motivating and

satisfying workplace with competitive compensation and challenging

career opportunities.

MissionNAV CANADA facilitates the safe movement of aircraft, efficiently and cost-

effectively, through the provision of air navigation services on a long-term,

sustainable basis.

Overarching ObjectivesThe Company will achieve its Mission by:

1. Maintaining a safety record in the top decile of major Air Navigation

Service Providers (ANSPs) worldwide;

2. Maintaining ANS customer service charges, on average, in the bottom

quartile (lowest charges) of major ANSPs worldwide;

3. Implementing and maintaining a modern, cost-efficient ANS technology

platform in the top quartile of major ANSPs worldwide;

4. Ensuring that the growth in costs of providing air navigation services does

not exceed the growth in charging units, thereby resulting in a decline in

customer service charges over the long term; and

5. Creating a productive and fulfilling workplace environment which places

NAV CANADA amongst the best employers in Canada.

The goals of each department within NAV CANADA are designed to support

these overarching objectives.

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ValuesThe values we live by guide our everyday actions and serve as a constant

reminder of our commitments. They are also an integral part of how we do

business, linking the high standards we set for ourselves with the realities

that go into making ethical conduct a way of life.

RespectNAV CANADA promotes an environment in which all interactions with

employees, bargaining agents, managers, customers, suppliers, the public and

stakeholders are based on respectfor each others opinions, perspectives,

experience and contribution.

The Company regards courteous and responsible behaviour as the foundation

of respectful interpersonal behaviour. Additional dimensions of respect that

also apply in our workplace include trust, fairness, equity, honesty, integrity,

commitment and loyalty.

On the other hand, respect does not mean that we cannot disagree, in good

faith, on matters of principle or interpretation or perception of factual

situations. It does mean that when such situations arise, we will disagree

in a tactful and diplomatic manner.

ExcellenceExcellence, first and foremost, applies to NAV CANADAs mission of providing

a safe Air Navigation System. This focus is supported by particular emphasis

on attention to detail, a strategic risk management orientation, and efficient

decision-making.

NAV CANADA considers other important aspects of excellence to include pro-

fessionalism, positive attitude, acceptance of responsibility and accountability,

competence, commitment, reliability, honest communications, financial and

operational effectiveness and efficiency, quality, flexibility, cooperation, sharing

and other aspects of performing work and team work in a superior fashion.

Customer ServiceServing NAV CANADAs customers is a very important priority and everything

done at NAV CANADA is oriented toward meeting customer needs for safe,

efficient and cost-effective air navigation services. The Companys ultimate

success rests on safety and on its ability to provide the best possible service.

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Business PrinciplesSafety FirstNAV CANADAs one and only product, conceptually speaking, is safety. Our

primary goal is to reduce risk in the air navigation system to as low a level as

is reasonably achievable. The Company maintains a Safety Charter, which

emphasizes this focus:

Safety is a part of everyones job.

Safety applies to everything we do without exception.

We will meet or exceed our safety targets and our customers expectations.

We will achieve excellence in safety through open communication.

We will make a safe system even safer.

Customer Service FocusWhether it is weather observations, the production of aeronautical publications,

or the provision of air traffic control, or advisory services, the ANS is funda-

mentally a service. Regular dialogue with our customers helps us to remain

focused on meeting their requirements, and on providing cost effective services

that support the safety and efficiency of their operations.

Transparency and ConsultationThe Company conducts its business in a transparent way and consults with

customers and stakeholders directly or through representative associations

and committees. Consultation with customers is essential to ensuring that

the Companys services are provided in a way that meets customers require-

ments and that the charging methodology results in service charges that are

fair and reasonable.

Provision of a Safe, Challenging and Rewarding WorkplaceThe Companys ambitious safety, service and cost control goals can only be

met through the day-to-day work of the dedicated professionals who manage

and operate the ANS. People are the essence of NAV CANADAs business and

are essential to the attainment of the Companys objectives. The Company is

committed to providing a workplace that supports and engages its employees.

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International Leadership and Co-operationNAV CANADA believes that sharing information with other ANSPs, and

deploying common technologies whenever possible, is in the interest of our

mutual customers. When developing its plans and priorities, NAV CANADA

coordinates regionally and globally to promote international system compati-

bility for the benefit of its customers.

Prudent Financial ManagementNAV CANADA fulfills its essential services mandate based on a sound finan-

cial foundation, evidenced in part through high credit ratings in the financial

markets. Maintaining this foundation requires a fiscally prudent approach that

balances the interests of the Companys key stakeholders while complying

with our statutory and contractual obligations.

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3. SAFETYMAINTAINING THE FOCUS ON JOB ONE

Conceptually, safety is NAV CANADAs only productsafety underpins

everything the Company does. ANS safety depends on a complex and

dynamic interaction between people, procedures, technology and the

working environment.

NAV CANADA maintains one of the best ANS safety records in the world.

The table below shows a decline in the rate of losses of separation between

Instrument Flight Rules (IFR) aircraft per 100,000 movements over the last

four years. (see Fig 3).

A strong safety culture encourages open safety reporting. NAV CANADA

maintains a comprehensive safety reporting system and investigates all

Air Traffic Services (ATS) incidents, regardless of whether or not a loss of

separation occurred.

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NAV CANADA has identified the following strategic safety goal:

to reduce safety risks resulting from the provision by NAV CANADA of AirNavigation Services and products to a level as low as reasonably achievable.

Specific corporate safety goals for 2006-2008 are:

to enhance mechanisms to enable NAV CANADA to better communicatesafety hazards and risks;

to evaluate the effectiveness of operational risk management activities; and

to sustain or enhance safety performance through investment in technology.

Figure 3Rate of IFR/IFR Loss of Separation per 100,000 Movements

CommunicationNAV CANADA has developed and implemented a comprehensive Safety

Management System (SMS).

The communication of safety information is one of the key requirements

of an SMS. A safety survey of all employees conducted in 2005 showed that

employees wanted to be better informed of the ongoing work being done by

all functional groups in the area of safety initiatives, projects and processes.

Over the next year the Company will focus on enhancing the understanding

of safety culture through the development and communication of safety

initiatives. More information exchange sessions will be held to promote

open discussion and the exchange of ideas on best practices and innovative

safety initiatives.

Additional communications will be undertaken regarding the enhanced inte-

grated SMS processes for operational systems, equipment and facilities to

ensure that all parties fully understand roles and responsibilities with respect

to the identification and mitigation of operational hazards.

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Note: The data in the above chart reflects a moving 20-quarter average of losses of separation in this category involving two aircraft operating under instrument flight rules.

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Risk ManagementThe Company will evaluate the appropriateness and effectiveness of risk

monitoring on key safety risks. We will also look at how effective our

contractors, suppliers and other third party organizations are at meeting

safety management requirements.

Assessing Technology Implementation Fast paced technological advancement has the potential to leave the human

using the technology in a position of catch up. An understanding of the

appropriate pace of technology implementation and its effects on the human

component of the system is therefore essential.

The Company will develop strategic plans for enhancing the integration of

industry-leading practices in Human Factors into the design, development,

implementation, operation and maintenance of our operational systems. We will

also seek to identify the means to use existing data and processes to identify

Human Factors issues related to the implementation of new technology.

Additional details regarding the Companys safety objectives and activities can

be found in the Companys Corporate Safety Plan at www.navcanada.ca.

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4. PEOPLE ESSENTIAL TO OUR SUCCESS

The attainment of NAV CANADAs corporate goals depends on skilled

employees with a safety and customer-focused attitude and a dedication to

excellence. The Companys people strategy is focused on putting the right

people with the right skills and tools in the right places, and sustaining and

supporting their dedication to excellence.

Leadership, Learning and DevelopmentLeadership at all levels is critical to the Companys ability to adapt and deal

with the complexity and constant changes inherent in the business environment.

Through learning, evaluation and development strategies NAV CANADA is

providing its employees with the programs and tools they need to support a

high performing organization.

The Company will provide employees with the learning and development

necessary to excel at their jobs through extensive NAV CANADA focused

training programs. In addition to up-to-date technical training, this includes

developing, optimizing and leveraging managerial and leadership competencies

through PINNACLE, the Companys management development program.

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NAV CANADAs people goals are:

to sustain a motivated and high quality workforce through focused leadership,learning and development;

to foster a constructive, trust and respect-based relationship between employees, their unions and the Company as employer;

to provide a safe and healthy work environment for employees while promoting a healthy lifestyle;

to actively promote the principles of excellence, efficiency, customer serviceand respect within NAV CANADA; and

to achieve full operational staffing.

Recruitment and retention of talent is critical to the success of any organization.

NAV CANADA monitors human resource requirements closely and maintains

succession plans focused on identifying and developing the talent and skills

required to meet the needs of the organization. The Leadership Evaluation and

Accelerated Development (LEAD) program is one strategy used for developing

corporate leadership needed for the future.

Attracting talent also requires the promotion of NAV CANADA as an employer

to outside candidates with the potential to join the Company at all levels. This

is accomplished by maintaining an active profile in the professional community

and with educational institutions, as well as regularly reviewing the Companys

human resource policies and total compensation plans, and promoting a culture

of recognition, engagement and performance.

Reinforcing the Values Essential to SuccessThe engagement of employees is an important determinant of organizational

success. In 2006 NAV CANADA adopted as one of its overarching objectives

the creation of a productive and fulfilling workplace environment which will

place NAV CANADA among the best employers in Canada.

An employee engagement survey was conducted in the fall of 2006 to assess

corporate climate and measure engagement levels. Both managers and

employees will be surveyed next in December 2008, with regular surveys

occurring every two years after that.

The Companys response to the 2006 survey outcomes will seek to address

the major themes identified. The key priorities for improving engagement as

a result of the last series of surveys include executive leadership, communica-

tions, recognition, career planning and management development, and human

resources practices. Initiatives have been launched in each of these areas and

will be refined in response to the latest survey results.

The Company is developing programs and tools to support a performance based

culture. Recognition of performance is a critical component to the strategy.

Additionally, customer service measures and service standards are being

implemented within the Human Resources Department and further stream-

lining of systems and processes will be made to assist managers in applying

NAV CANADAs people practices effectively and consistently.

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The Employee/UnionEmployer RelationshipEffective labour and employment relations between management, employees

and their bargaining agents are very important to the business. Approximately

90 per cent of the Companys employees are represented by one of eight different

bargaining agents as follows:

Air Traffic Specialists Local 2245 CAW-Canada;

Association of Canadian Financial Officers (ACFO);

Canadian Federal Pilots Association (CFPA);

Canadian Auto Workers Local 1016;

Canadian Air Traffic Control Association Canadian Auto Workers

Local 5454;

International Brotherhood of Electrical Workers (IBEW Local 2228);

Professional Institute of the Public Service of Canada (PIPSC); and

Public Service Alliance of Canada (PSAC).

The Company is focusing on improving communications and engagement with

unions and employees. Better consultation and collaboration with the unions

on decisions that affect employees, a more expedited review of grievances,

and decreased reliance on third party interventions are all components of

this strategy.

Currently, all collective agreements with the Companys various unions are

signed. The agreement with the CFPA, which goes until October 2008, is the

next agreement to expire.

The Work EnvironmentNAV CANADA complies with all safety standards and regulations, and

provides a healthy and safe workplace environment. The Company has

instituted programs that raise awareness of safe work practices and potential

hazards in the workplace.

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A healthy physical environment has to address not only the health and safety

of the workforce but must also empower and support employees in adopting a

healthy lifestyle. NAV CANADA has instituted employee programs designed

to promote wellness and offer a healthy and safe environment. These plans

include proactive and preventive programs such as fitness activities, nutrition

and wellness events, an ergonomic assessment program and education sessions.

Equally important are programs that support employees and assist with their

safe return to work such as the Critical Incident Stress Management (CISM)

peer program, Chemical Dependency Education and Rehabilitation program

(CDERP) and health professional and rehabilitation support through our

Disability Management Program. Alertness strategies that assist in mitigating

and managing fatigue in the workplace are also in place at operational sites.

Official LanguagesNAV CANADA is committed to ensuring respect for the language rights of its

employees, customers, and all those with whom it does business by ensuring

that English and French, the official languages of Canada, are appropriately

used in the way we conduct our business. Our goal is to create a work envi-

ronment conducive to the effective use of both English and French where

appropriate in accordance with the Official Languages Act.

Operational Staffing LevelsNAV CANADA has approximately 5,400 employees, including 592 management

staff, 1,819 technical and administrative support personnel and 3,039 opera-

tional staff. While various cost control measures have reduced overall staffing

levels during the last decade since privatization, operational staffing levels

have increased.

Over 70 per cent of the Companys operating expenses and nearly 60 per cent

of its total expenses relate to salaries and benefits. These ratios are typical for

most ANS organizations worldwide. The fixed-cost nature of the ANS business

means that there are few opportunities to reduce labour costs in a declining

market, but significant potential to achieve economies of scale in a rising

marketprovided head-count is controlled. Therefore, as traffic continues to

grow, NAV CANADA intends to exercise rigorous control on overall head-

count, taking into account our operational staffing targets and our safety and

efficiency goals.

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Air Traffic ControllersThe Air Traffic Control (ATC) Operational Resource Plan is used to monitor

staffing levels to ensure there are sufficient operational resources available

at all Area Control Centres (ACCs) and Towers. Training is adjusted when

appropriate based on changes to the staffing requirements, the expected attrition

and the training output, to ensure that there is sufficient operational staff

available in the right places at the right times, to provide the services required

by our customers.

As previously forecast, a wave of retirements is now in progress, and training

continues at maximum capacity where required. While traffic growth will

necessitate some increase in Air Traffic Controller staffing requirements over

the period covered by this Plan, productivity improvements, largely as a result

of new technologies, will reduce the amount of the staffing increase required.

Basic training must continue in order to ensure the sufficient availability of

Air Traffic Controllers to meet forecast traffic demand. NAV CANADA has

made changes in recent years aimed at improving the quality of operational

training, reducing overall training times and improving the training success rate.

The Company will expand the use of computer-based training, and is examining

web-based training and virtual classroom technology to determine if it could

support our training programs. We are also reviewing ATC selection criteria

with the intent to better refine our overall selection process.

The company continues to focus on a variety of initiatives to reduce training

times, enhance training effectiveness and reduce costs.

Flight Service SpecialistsThe Flight Service Specialist (FSS) Operational Resource Plan is used to

monitor staffing levels to ensure there are sufficient operational resources

available at all Flight Information Centres (FICs) and Flight Service Stations

(FSS). Training is adjusted when appropriate based on changes to the staffing

requirements, the attrition and the training output, to ensure that 100 per cent

of requirements is maintained. Consideration is also given to the number of

available staff.

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Over the next several years,

minor changes to overall FSS

staffing requirements will occur

as a result of level of service

changes, the reduction in the use

of High Frequency (HF) radio

communications over the North

Atlantic, and traffic growth.

In future years, sufficient basic

training will be required to

maintain 100 per cent of future

FSS operational staffing require-

ments, in order to replace those

specialists who retire, depart or

who leave for other job opportu-

nities within NAV CANADA.

Technical OperationsThe national maintenance program is constantly monitored for overall effective-

ness and efficiency pursuant to the Technical Operations departments ISO 9000

Quality Program. NAV CANADAs staffing requirement for Technical Operations

is currently optimized at a level of approximately 675 skilled technologists,

administrative specialists and managers. Staff have been streamed primarily

into specialties consisting of Air Traffic Management (ATM), Communications,

Navigation and Surveillance (CNS) or facility skill sets.

Annually, the Technical Operations department develops a National Maintenance

Plan which outlines the goals, objectives and work plans for the upcoming year.

Technical Operations Technologists, Facility Specialists, Team Supervisors

and Managers contribute to the development of the Plan by participating in a

series of national advisory group meetings which provide a forum for program

discussion and the review of accomplishments and priorities.

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Quebec City Control Tower and Flight Information Centre

5. DELIVERING THE SERVICE

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NAV CANADAs customers operate aircraft in Canada and in international airspace where we provide service. Their requirements are to:

Operate safely;

Maintain schedules;

Operate cost-effectively by:

minimizing aircraft operating costs;

taking full advantage of investments in cockpit technology; and

obtaining good value from fees paid to NAV CANADA.

NAV CANADA helps its customers meet these requirements through a varietyof means, including:

applying Safety Management System (SMS) principles to evaluate any proposed change in services or products;

seeking to increase airspace capacity to reduce delays and disruptions thataffect schedules;

designing instrument approach procedures with lower minima that increaseairport accessibility;

co-ordinating efforts with customers to match aircraft and ANS technologysolutions;

accommodating customer-preferred routes to the maximum extent possible;

planning and managing airspace effectively to meet customer needs;

improving internal productivity;

coordinating planning on a regional and global basis to promote inter-operability with other ANSPs;

developing requirements for services, products, procedures and systems thatare consistent with customers goals;

reviewing priorities to maintain the focus on customers goals; and

coordinating operations and planning with airport operators to maximize airport operating efficiencies and minimize costs to air operators.

Due to the nature of the aviation business, external factors can significantly

affect our customers and in turn influence service provision. NAV CANADA

must keep abreast of the changing environment to respond proactively to

customers needs. Some of the more important factors and trends are:

The overall business environment as it impacts commercial air traffic;

The increased use of regional aircraft, meaning more flights carrying the

same number of passengers, and the use of regional jets which compete

with other jets for the higher flight levels;

The hub and spoke concept which puts a premium on just in time arrival

at the busiest airports;

The trend to polar routes which cross paths with Atlantic and Pacific traffic;

The rate at which operators equip with new technology such as Global

Navigation Satellite system (GNSS);

The emergence of very large aircraft such as the A380 coupled with the

emergence of Very Light Jets (VLJs);

Open skies and regulatory harmonization with the United States; and

The emergence of Unmanned Aerial Vehicles (UAVs).

Adopting New TechnologyThe ANS currently comprises more than 100 different Communications,

Navigation, Surveillance/Air Traffic Management (CNS/ATM) system types

with more than 10,000 individual systems deployed across the country. The

modernization of the ANS is an ongoing process which is essential for the

long term viability of the system. NAV CANADA believes that a modernized

ANS is a safe and efficient ANS.

A significant amount of the new technologies being introduced involve the

sharing of data among aircraft, dispatchers and ANS operational staff to

support better strategic and tactical decision-making. Therefore, benefits

may depend on parallel investments by NAV CANADA and aircraft operators.

Dialogue with customers on benefits and requirements is essential to decisions

on adopting technology and coordinating the timing of corporate investments.

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To minimize technical, cost and schedule risks, NAV CANADA follows an

incremental approach to adopting existing technology that allows the Company

to derive early benefits and provides a path to future benefits.

Whenever possible, off-the-shelf technology is used to avoid the risks

associated with system development.

It is NAV CANADAs goal to adopt new technology in coordination with all

of its stakeholders:

to ensure that new technology is introduced safely;

to ensure that customers can plan investments in aircraft technology

that work with ANS technology to provide operational benefits;

to ensure acceptance of new technology by customers, pilots and the

NAV CANADA staff involved in providing services; and

to ensure the effective use of resources.

Near-Term Service TrendsDuring the business plan period, NAV CANADA anticipates the following

changes in the services it provides:

more area navigation (RNAV) and Required Navigation Performance

(RNP) procedures to match customer equipage;

improvements in air traffic flow management to increase airspace capacity

through a reduction in complexity, to maximize runway utilization and to

minimize deviations from optimal flight paths;

the implementation of the Canadian Automated Air Traffic System

(CAATS) to streamline the exchange of ATC operational data, enhance

productivity and support better, more responsive service to customers;

the use of more Controller decision support tools and safety net features

aimed at reducing routine tasks, enhancing productivity and improving

safety and service;

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redesign of the Remote Communications Outlet (RCO) network to reduce

frequency congestion and to allow for more responsive delivery of Flight

Information Services En Route (FISE);

the implementation of level of service changes to better align service with

changing customer requirements;

expanded use of air to ground data-link, Automatic Dependent Surveillance-

Broadcast (ADS-B) and Multilateration to support communications and

surveillance functions in the interest of increasing airspace capacity and

supporting customer-preferred trajectories;

the replacement of obsolete and in some cases unreliable infrastructure to

reduce downtime and maintenance costs;

expanded use of the Internet to aid pilot flight planning and accept flight

plans from pilots and dispatchers;

expanded use of Automated Weather Observation Systems (AWOS) to

increase the availability of weather data and improve the efficiency of

weather data gathering;

expanded use of weather cameras;

airspace changes in Vancouver, Toronto, Ottawa, and Montreal and the

northern Alberta/northern British Columbia area known as the Oil Patch

to resolve safety and efficiency issues;

the reduction in traditional non-precision approaches, with the increased

use of Wide Area Augmentation System (WAAS) and onboard systems;

expanded use of simulation in the development of airspace plans and in

the introduction of new ATM hardware and software; and

more transparency and consultation with customers on the Companys

strategic plans.

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5.1 Air Traffic Management

Effective air traffic management is a key element of the service NAV CANADA

provides to its customers. Over the next three years NAV CANADA will con-

tinue to implement proven technologies and procedures and will investigate

new initiatives to improve the Companys performance in this area.

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The Company will pursue the following goals in support of ongoing improvementsto Air Traffic Management:

reduce the number and severity of ANS-controllable customer restrictions inairspace managed by NAV CANADA;

continue investigation into the possibility of reduced separation standardsthrough procedural changes and improvements in CNS/ATM technologies;

increase the use of automated Decision Support Tools to reduce ATC workloadand improve safety and efficiency;

work with customers to optimize route structures and increase the use of customer-preferred trajectories;

invest in current and developing ATM technology to meet specific customerchallenges;

reduce costs for the implementation of new ATM systems through the use ofsimulation throughout the design and fielding process;

exercise more sophisticated air traffic flow and capacity management, withthe emphasis on increased capacity rather than demand management;

continue to apply and develop new collaborative, decision-making modelsbetween ATC, aircraft operators and airports;

measure the operational performance of systems and procedures;

continue to contribute to the development of international standards, policiesand guidance material on air traffic management; and

practice more dynamic and flexible use of airspace in identified areas toinclude the ability to adjust to changing circumstances while keeping tacticalATC intervention to a minimum.

Reducing Flight RestrictionsNAV CANADA continues to focus on reducing customer service restrictions

nationally. Re-examination of training, staffing, equipment, airspace, and

consultations with staff and customers was undertaken in the past year. This

integrated approach has resulted in a number of new initiatives which will, in

the longer-term, enable the provision of a more consistent level of service.

Edmonton ACC implemented a number of initiatives resulting in a more

streamlined approach to air traffic control in the Flight Information Region.

These internal airspace realignments along with equipment enhancements

have provided Air Traffic Controllers with more tools to effectively manage

the current and anticipated future growth in traffic. Staffing levels in the

Edmonton ACC continue to improve. Staffing is projected to be at 95%

by August 2008 and training continues at maximum capacity.

Route ChangesAs the percentage of aircraft equipped for RNAV increases, it will be possible

to improve efficiency by basing routes on RNAV rather than on the location of

ground aids. The Companys focus will be on how air traffic can most efficiently

be served to maximize customer preferred trajectories through the application

of random routes, flex tracks and fixed tracks.

Canadian Automated Air Traffic System (CAATS)CAATS promises to enhance safety, reduce Controller workload, and provide

increased operational efficiencies for NAV CANADA and its customers. It

provides a new Flight Data Processing System (FDPS) that replaces several

systems, automating flight profile monitoring and extending conflict prediction

and detection into non-radar airspace.

The system has been implemented in Moncton, Gander and Winnipeg ACCs.

The schedule for deployment to the remaining ACCs is planned with start

dates as follows:

Montreal ACC April 2007

Toronto ACC November 2007

Vancouver ACC March 2008

Edmonton ACC November 2008

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The Company has also developed a long-term strategy for introduction of

advanced functionality, including CAATS training simulation capabilities.

Scheduling and Sequencing System (SASS)SASS will improve operational efficiency through computer automation of the

sequencing and scheduling of arrival traffic and will assist in the allocation

of available landing slots and therefore minimize delays. It also provides the

capability to apportion potential delays from en route fixes to the landing run-

way at times when demand exceeds capacity. SASS will provide Air Traffic

Controllers an enhanced ability to maximize airport efficiency and deal with

traffic surges. Eventually SASS will acquire arrival fix times via datalink from

aircraft equipped with flight management systems.

The system is in operational readiness demonstration (ORD) at Toronto ACC.

Evaluation is complete at Vancouver ACC with ORD planned for fiscal 2007.

National Operations Centre (NOC)The NOC performs an important role in the daily operation of the ANS and is

the national focal point for customer service, system status, traffic management,

crisis coordination, corporate information, strategic planning, and analysis.

The NOC is responsible for coordination of information regarding the status

of the ANS. The NOC acts as a single point of contact for senior management,

operational units, customers and other stakeholders to ensure a consistent

approach to operational situations whether critical or routine.

Collaborative decision-making (CDM) is central to the operations of the NOC.

Using the principles of CDM, the NOC ensures that circumstances with the

potential to impact the flow of air traffic are analyzed and mitigated. The NOC

facilitates reductions in costs and delays by implementing Air Traffic Flow

Management (ATFM) initiatives. CDM between operational units, customers,

and other service providers is enhanced using e-conferencing technology and

advanced web applications to provide stakeholders with operational information

in real time.

Current NOC initiatives include:

The Airport Performance Monitor (APM) will continue to expand beyond

the current Toronto, Calgary and Edmonton sites to include Vancouver,

Montreal, Ottawa and Halifax airports.

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The Integrated Information Display System (IIDS) Web View provides

current wind and Runway Visual Range (RVR) altimeter settings and

active runway allocation for major airports across the country.

Active runway status and Runway Surface Condition (RSC) information

will be included as an enhancement in the near future.

The Traffic Density Analyzer (TDA) used for collaboration in designing

the daily North Atlantic Tracks (NAT) will expand to include the Northern

airspace in Edmonton FIR and will be enhanced to show Notice to Airmen

(NOTAM) with additional graphics and functionality.

The Enhanced Traffic Management System (ETMS) maintains and monitors

air traffic data and displays the data to traffic management specialists in

a variety of forms on a graphic display. ETMS data is used in developing

short-term strategic flow management plans and is treated as one of

NAV CANADAs operational systems.

Flight Schedule Monitor (FSM) is being used as part of the CDM process.

With the exception of Gander, all ACCs have access to FSM.

Airspace Flow Programs (AFP) is a new development in flow management

tools that allows traffic managers to control demand in airspace in ways

similar to how arrival demand at an airport can be managed through ground

delay programs.

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The National Operations Centre in Ottawa

ATS SimulationThe ATS Simulation Centre is being upgraded with the installation of CAATS,

RDPS-R and new consoles to better reflect the operational systems in use at

our facilities. This will further the Companys ability to realistically replicate

the operational environment in support of simulation activities and to evaluate

new technologies, procedures and potential level of service changes prior to

implementation.

New Decision Support ToolsIn the business planning period, NAV CANADA will focus on the deployment

of new decision support tools, including:

Medium-Term Conflict Detection (MTCD) provides a warning of possible

airspace conflicts and enhances the en route controllers ability to determine

whether a user-requested change in the flight plan will be conflict-free.

MTCD will be developed to function in a CAATS environment.

Airspace Warning Function (AWF) provides the controller advanced

warning when an aircraft is predicted to enter a defined volume of airspace

and an alert when aircraft actually penetrate the airspace. AWF is now in

widespread use across the country and we plan to further increase its use

during fiscal 2007 and 2008.

B U S I N E S S P L A N 2 0 0 7 2 0 0 9

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Minimum Safe Altitude Warning (MSAW) will provide controllers with

audio and visual warnings for aircraft that are predicted to come too close

to terrain. Operational validations have been conducted at the Companys

Combined ANS facility adjacent to the Ottawa airport. Initial implemen-

tation at the first sectors in Vancouver ACC will occur in fiscal 2008. If

successful, national implementation will follow.

The Visual Aircraft Spacing Tool (VAST) which improves aircraft arrival

rates at an airport during Instrument Meteorological Conditions (IMC).

Other software upgrade tools complementary to VAST are also being

assessed. One such tool is Terminal Routes Using Speed Control Techniques

(TRUST).

Traffic Alert Collision Avoidance System (TCAS) provides pilots with

traffic advisories to enhance their situational awareness, and resolution

advisories to act as a last line of defence in collision avoidance. The

feasibility of down-linking TCAS resolution advisory information for

display to the controller is being investigated.

Northern ATMTraffic levels in the northern part of the Edmonton and Montreal FIRs are

rising as customers increase service on North Atlantic, Pacific and Polar

routes. Limited surveillance and VHF communications in these areas mean

that it is difficult for ATC to allow customers to follow preferred trajectories.

NAV CANADA has developed a Northern Air Traffic Management Concept

of Operations (CONOPS) which proposes the use of various technologies and

control techniques to address customer concerns about efficiency of operations

in this area.

Current OperationsNorthern airspace is designated Canadian Minimum Navigation Performance

Specifications (CMNPS) to the north and Required Navigation Performance

Capability (RNPC) to the south. In CMNPS airspace there is no surveillance

and communications are limited to HF voice, therefore separation standards are

very similar to the rules used in the North Atlantic (NAT). In RNPC airspace,

lateral separation is less than in CMNPS airspace. The southern portion of this

airspace is under radar surveillance.

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Future Northern ATM Concept of OperationsNAV CANADA plans to improve airspace capacity and overall service via

expanded flow management capability, expanded VHF direct controller-pilot

communications (DCPC), data link services (ADS-WPR and CPDLC) and

implementation of a Northern Organized Track System (OTS).

Expanded Flow Management CapabilityNAV CANADA is adding capability in the National Operations Centre (NOC)

and in Edmonton ACC to support better detection and planning, allowing for

the resolution of potential conflicts for cross Polar traffic well in advance. The

NOC will monitor traffic and assist in conflict resolution through collaboration

with dispatchers and the appropriate ACC.

Additionally, the NOC will use Flight Schedule Monitor to assist in providing

flow control into domestic Oil Patch airports.

Expanded VHF Communications CapabilityNAV CANADA will expand the provision of DCPC throughout nearly all

RNPC airspace and some parts of CMNPS airspace through the installation

of additional VHF voice communications facilities (PALs) in the north.

The first 10 PALs were installed and commissioned in the fall of 2006 and

five additional PALs will be commissioned in fall 2007. The availability of

DCPC enables controllers to apply reduced longitudinal separation, meaning

increased airspace capacity.

Data Link (ADS-WPR and CPDLC)Edmonton ACC will be able to accept automatic dependant surveillance way-

point position reports (ADS-WPR) via data link by summer 2007. Because

data link messages will be relayed via geostationary satellites orbiting over

the equator, there is a large area near the North Pole where this service will

not be available.

ADS-WPR will be used instead of HF or VHF through Arctic Radio or

VHF DCPC to provide position reports. As a result, ADS-WPR will partially

mitigate the impact of HF black-outs.

Controller Pilot Data Link Communications (CPDLC) will be implemented in

order to provide a seamless data link service between the North Atlantic and

northern domestic airspace. This capability will be introduced following

implementation of CAATS in Edmonton.

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Northern Organized Track System (OTS)

It is estimated that the implementation of an organized track system in the

north will save North Atlantic customers US$6M annually as well as provide

safety, efficiency and associated environmental benefits.

The Northern OTS was implemented for westbound North Atlantic traffic

in January 2007. The OTS is created using airline generated Preferred Route

Messages which are used to create the most operationally beneficial tracks.

NAV CANADA works closely with customers to develop the most efficient

tracks on a daily basis. In the future, the OTS will be expanded to include

tracks between cities in North America, Asia and Europe via Pacific, Cross

Polar and North Atlantic routes.

ADS-B Implementation

The availability of surveillance and DCPC

are the keys to minimum separation,

maximum airspace capacity and the ability

to support random routes. Analyses of

International Air Transport Association

(IATA) estimates for aircraft equipage

indicate that 90 per cent of the flights

operating in northern Canadian airspace

will be equipped for ADS-B by 2010.

NAV CANADA will install ADS-B ground

stations in the Hudson Bay area in order to

provide continuity of surveillance from the

Baffin Island/Ungava Bay area through to

southern airspace. Following the completion

of necessary changes to ATM systems, it is

expected that this service will be operational in late 2008 and customers will be

able to plan operations on random routes rather than on a fixed route structure.

Based on consultation with customers and assessment of equipage levels,

airspace will be segregated vertically, allowing only ADS-B aircraft above

a specified flight level. Eventually all levels FL290 and above would be

restricted to ADS-B aircraft.

In the airspace below FL290 a mixed equipage environment will exist for

some time. Control service and flight information service utilizing ADS-B

will be integrated into this airspace following high level implementation.

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Sensis Corporation ADS-B unit

North Atlantic (NAT)Customers have invested in advanced avionics. At the same time, the

International Civil Aviation Organization (ICAO) has been introducing

new lateral and longitudinal separation minima to take advantage of

these capabilities.

The current NAT ATC environment is based on a strategic separation concept,

where separation is assured from oceanic entry to exit, and where controllers

monitor the situation and intervene only when necessary.

A key feature of Required Navigation Performance (RNP) is the application of

distance-based longitudinal separation, where ATC automation systems more

frequently update the relative positions of aircraft and controllers intervene

to resolve conflicts based on the information provided by the FDPS. Moving

from a time-based to a distance-based separation standard on the NAT would

require major changes to operational processes and procedures and to the

Gander and Shanwick Automated Air Traffic Systems (GAATS and SAATS),

and these changes would take time and resources.

Achieving near-term benefits by reducing separation therefore requires main-

taining current operating techniques to the maximum extent possible, including

distance/latitude-based track separation and time-based longitudinal separation.

This approach is compatible with the capabilities of current FANS 1/A and

other GNSS-equipped aircraft.

Current NAT OperationsEach day NAV CANADA and UK NATS establish the eastbound and west-

bound Organized Track Structure (OTS) to manage the oceanic traffic flows

as efficiently as possible.

Some NAT aircraft are FANS 1/A equipped, so already employ GPS, CPDLC

and ADS-Contract in NAT operations. FANS 1/A equipment is specific to

Boeing and Airbus aircraft, but other aircraft could meet the same perform-

ance standard with similar avionics components. These technologies increase

navigation, communications and surveillance performance to the point where

reducing separation becomes feasible.

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Future NAT ATM Concept of OperationsThe goal is to improve airspace capacity and overall service by taking advantage

of increased navigation, communications and surveillance performance to

reduce separation.

Reduced Longitudinal Separation

FANS 1/A aircraft broadcast very accurate GPS-time-stamped ADS-C position

reports. It should therefore be possible to safely reduce longitudinal separation

between these aircraft. Retaining the use of time for longitudinal separation

would mean minor changes to GAATS and SAATS, and no change to current

ATC techniques used by controllers.

A reduction in time-based longitudinal separation would increase overall

airspace capacity and result in fuel savings, particularly by increasing the

likelihood that altitude change requests could be granted. The ability to step

climb enables more fuel efficient flight profiles for aircraft. This approach

could enhance the provision of fuel efficient profiles without changing the

basic operation, but rather providing altitude changes consistently on a case

by case basis.

Reduced Lateral Separation

NAT flight planning, separation application and separation monitoring cur-

rently depend on a routing scheme based upon specifying significant points

spaced by whole degrees of latitude at each ten degrees of longitude.

A reduction to half degree lateral separation would require navigation perform-

ance that supports a 25.25NM (or less) separation standard. ICAO is developing

Performance Based Navigation specifications to address the need for increased

capacity in oceanic and remote airspace.

It is possible that the operational implementation of a reduced lateral standard

in the NAT environment may require specifying required communications

performance (most likely CPDLC) and/or ADS-C reporting in order to satisfy

the safety case. Any such requirement would confine the main benefits to

FANS 1/A equipped (or equivalent) aircraft.

Studies have shown that the fuel savings available from reduced lateral separa-

tion are significant because more aircraft are able to follow tracks closer to the

optimum Minimum Time Track (MTT).

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5.2 Navigation

NAV CANADA currently provides a network of ground aids to support IFR

en route, terminal and approach operations. The use of area navigation (RNAV)

routes and approaches is expanding, allowing operators to take advantage of

onboard systems. The introduction of SatNav, based on the Global Navigation

Satellite System (GNSS), has brought RNAV within reach of all operators,

and makes it possible to consider a full transition to RNAV-based en route

and terminal operations.

However, in the meantime, some ground aids require replacement. Two factors

will determine the scope of the ground aid replacement program: the rate at

which aircraft operators equip with SatNav avionics; and, the extent of the

requirement to retain some ground aids as part of the mitigation to the hazard

posed by interference with SatNav signals.

The RNP concept, which considers the accuracy, integrity, continuity and

availability of an RNAV system, is directly linked to airspace design, both for

route spacing and for approach design, which has positive impacts on airspace

capacity. The latest airline and corporate aircraft use GNSS and other sensors,

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NAV CANADAs goals in the provision of navigation services are to:

allow operators to benefit from investments in satellite navigation (SatNav)and other area navigation (RNAV) avionics by making a transition to a totalRNAV environment en route, in terminal areas and for some approaches;

design approach procedures that take advantage of SatNav systems and otheradvanced avionics to deliver lower minima;

design approach procedures to take advantage of the vertical guidance available from SatNav and other onboard avionics, resulting in reduced risk of controlled flight into terrain (CFIT);

design airspace using the Required Navigation Performance (RNP) conceptwhere it provides increased airspace capacity and/or customer efficiencies;and

reduce the cost of providing navigation services by reducing the dependenceon ground-based navigation aids.

along with aircraft-specific software, to meet RNP standards for most phases

of flight. ANS providers and regulators for Canada, Mexico and the United

States are continuing to implement the RNAV and RNP strategies agreed to in

a joint strategy signed by the parties in 2005.

GNSS avionics certified for IFR flight meet en route, terminal area and non

precision approach RNP, so they support the use of new airspace designs that

allow customers to follow the most fuel efficient routes. GNSS already supports

highly accurate straight-in approaches with low minima to many runways at

secondary airports, meaning fewer delays, diversions and overflights for oper-

ators at those airports.

However, GNSS by itself does not support approaches with vertical guidance,

a key to reducing the risk of CFIT. Moreover, GNSS by itself does not provide

the level of availability needed to allow the Company to consider decommis-

sioning an appreciable number of ground aids. The augmentation of GNSS with

the Wide Area Augmentation System (WAAS), described below, may allow

the company to reach these two goals.

RNAV TransitionThe introduction of SatNav, based on the GNSS, has brought RNAV within

reach of all operators, and makes it possible to consider a full transition to

RNAV-based en route and terminal operations. NAV CANADA, with the

support of our customers, continues to espouse the concept of RNAV every-

where and the application of RNP where required for increasing airspace

capacity and/or customer efficiencies.

Wide Area Augmentation System (WAAS)The United States Federal Aviation Administration (FAA) commissioned WAAS

in 2003 to enhance GNSS service. WAAS supports instrument landing system

(ILS)-like LPV (Lateral Precision with Vertical guidance) approaches, with

decision altitudes as low as 250 feet AGL at over 90 per cent of runways that

meet physical standards.

These LPV approaches do not require navigational aids at the airport. WAAS

also raises the availability of SatNav service to the point where ground aids

are not required except to mitigate against potential signal interference.

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NAV CANADA is fielding stations connected to the FAAs WAAS to expand

LPV service coverage across southern Canada and the western Arctic. Stations

have been installed in Goose Bay, Gander, Winnipeg and Iqaluit. These stations

will be integrated into the North American WAAS in the fall of 2007.

NAV CANADA has worked with Transport Canada to enable the use of WAAS

for all phases of flight in Canada. LPV procedures are being developed and the

Company will accelerate the publication of these procedures as the availability

of commercial avionics and the number of equipped operators increases.

Navigation Aid Replacement/Update ProjectsNAV CANADA continues to provide a network of ground-based navigational

aids to support IFR en route, terminal and approach operations. Currently,

some of the Companys ground aids require replacement. As mentioned above,

the rate at which aircraft operators equip with SatNav avionics, and the extent

of the requirement to retain some ground aids as partial mitigation to the vul-

nerability of SatNav signals to interference, will be assessed to determine the

scope of the ground aid replacement program.

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Instrument Landing System at Toronto Lester B. Pearson International Airport

In 2002, NAV CANADA identified approximately 40 ILS installed in the early

1970s which had reached the end of their life cycles. The systems are being

replaced in order to improve service reliability and reduce maintenance costs,

except at sites where a level of service review fails to demonstrate a continued

requirement. Twenty-two have been replaced to date. The remainder will be

replaced by fall 2009.

The new ILS do not radiate a back course signal and therefore their installa-

tion results in a loss of service to the opposite end of the runway. A WAAS

LPV approach will support a vertically-guided approach, likely with lower

minima, to the former back course end of the runway. The new ILS can sup-

port Category II operations, and this, coupled with flight deck technologies,

may allow the use of Category II minima without the need for expensive

runway and approach lighting.

NAV CANADA currently operates 130 Distance Measuring Equipment (DMEs);

approximately 100 of these will soon reach the end of their projected service

lives. The Company began replacing the older DMEs in 2007 with completion

of the replacement project expected by the end of fiscal 2009.

As the use of RNAV based on SatNav or DME-DME continues to expand there

will be less reliance on Very-High Frequency Omni-directional Range (VORs).

The majority of VORs are over 30 years old. An examination of customer

requirements will be undertaken prior to replacement of these systems.

Eight obsolete high power Non-Directional Beacons (NDBs) are being replaced

and some infrastructure associated with status monitoring of NDBs is being

updated. The future of NDBs will be evaluated as part of the SatNav signal

vulnerability analysis.

Flight Inspection CapabilityGround-based navigational aids and instrument landing procedures require

periodic flight checks to ensure they meet international safety standards.

NAV CANADA utilizes aircraft equipped with sophisticated measuring and

testing equipment to meet this requirement.

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NAV CANADA has begun to replace key hardware components of the

Flight Operations System and will integrate the equipment into two aircraft

purchased in fiscal 2007. Software upgrades and functional enhancement of

the flight inspection system will be completed in fiscal 2008. These changes

will decrease the cost of completing this mandate while decreasing the dis-

ruption to customer flight operations and airport traffic flow.

Further procedural changes and the transition to an RNAV environment will

further reduce the reliance on traditional ground based VHF navigational aids

in the ANS, resulting in a further decrease in flight operations related to our

flight inspection capability. Through to 2009, flight inspection operations will

focus on achievement of the following goals:

reduce the total cost of NAV CANADA flight operations;

reduce the disruption to airport traffic flows while mandated checks are

being conducted; and

add value to the ANS by promoting technology and procedures that will

enhance air traffic flow throughout the ANS.

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NAV CANADA Flight Inspection Aircraft

5.3 Surveillance

Communications and navigation capability both contribute to airspace capacity,

however, in some instances, the presence or absence of surveillance has the

greatest impact on airspace capacity. In busy, complex and congested airspace,

surveillance is critical in maximizing airspace capacity. As traffic levels rise in

remote and oceanic areas, NAV CANADA is being proactive in responding to

customer needs for user-preferred trajectories through, for example, the imple-

mentation of surveillance based on Automatic Dependent Surveillance (ADS)

in the vicinity of Hudson Bay.

Surveillance SystemsAutomatic Dependent Surveillance Broadcast (ADS-B)Separation standards for Primary Surveillance Radar (PSR) and Secondary

Surveillance Radar (SSR) are already established in the Canadian Aviation

Regulations (CARs). Work is well underway to establish separation standards

for ADS and Multilateration that will see reference to surveilled targets

rather than technology specific radar targets.

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NAV CANADA strives to achieve the following goals through the provision ofaircraft surveillance:

enhance safety through broadening the areas of surveillance coverage both in the air and on airport surfaces;

reduce restrictions to user-preferred trajectories that might result from surveillance limitations;

reduce costs to acquire aircraft and airport vehicle position data;

increase the volume of airspace where reduced separation standards can beapplied as a result of improved surveillance;

broaden the sharing of surveillance data among control facilities and withexternal stakeholders to enhance tactical and strategic trajectory planning;and

increase flexibility in the provision of ATM.

ADS has several response modes that serve different ATC requirements for

surveillance. ADS-B equipped aircraft transmit highly accurate GNSS position

reports at a rate greater than radar, meeting the target acquisition demands of

SSR. Basic ADS functionality is currently operational in Gander airspace for

position reporting for oceanic traffic, and is under development for Edmonton

northern airspace.

ADS-B will be operational in the airspace in the vicinity of Hudson Bay in

2008, providing significant customer benefits through the availability of

user-preferred trajectories. Continued expansion of the volume of ADS-B

surveilled airspace will be determined in conjunction with our customers

and is highly dependant on the rate of avionics equipage.

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MultilaterationThe technical evaluation of multilateration is being conducted in parallel with

the necessary regulatory reform to allow the use of the technology for both

ground and airborne target separations. Operational trials have been undertaken

at Calgary and Springbank. NAV CANADA intends to implement Wide Area

Multilateration (WAM) at Vancouver Harbour and Fort St. John in 2007 to

address surveillance requirements in those areas. It is expected that multilat-

eration will initially be used by ATC as a Decision Support Tool (DST) and

beginning in early 2008, will be used for air traffic separation.

Airport Surface Detection Equipment (ASDE)NAV CANADA has installed and modernized ASDE equipment at major

airports in Canada because of the safety and operational efficiency aspects

it provides in support of low visibility runway and taxiway operations.

Enhancements to the ASDE system that will improve tracking and multipath

processing are underway. A new ASDE in Edmonton, and an upgrade to the

Toronto Lester B. Pearson ASDE are also being examined.

Northern Airspace Display System (NADS)NADS helps Air Traffic Controllers providing service in the northern areas

of Canada where there is no radar control. NADS will be enhanced to apply

ADS and FMS Waypoint Reporting to improve reliability and accuracy of

surveillance in northern Canada and to reduce voice radio loading.

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Surveillance Data Processing and Display SystemsNAV CANADA will continue to modernize and upgrade current surveillance

data processing and display systems including:

Radar Data Processing System (RDPS)The re-hosting of the RDPS is

complete in Winnipeg, Toronto, Edmonton and Vancouver ACCs. Remaining

ACCs will be completed by fall 2007.

Radar Situational Display (RSiT)RSiT will be upgraded to provide

Minimum Safe Altitude Warning (MSAW) capability in fiscal 2007. Further

enhancements will be minimized as the system is replaced by CAATS.

Gander Automated Air Traffic System (GAATS)GAATS has been

enhanced to apply ADS and Flight Management System (FMS) Waypoint

Reporting as superior alternatives to voice position reporting. That capabil-

ity serves approximately half of Gander oceanic traffic and use is growing

steadily. GAATS will be further enhanced to reduce ATC dependence on

paper flight data strips. Additionally, improvements to the aircraft to aircraft

conflict algorithms will be made in fiscal 2007.

Extended Computer Display System (EXCDS)EXCDS will undergo

changes to ensure smooth interoperability with CAATS and provide backup

and recovery functionality. This will increase operational efficiencies in

the handling of Visual Flight Rules (VFR) traffic, SSR code management

and reduce ATC workload.

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41IIDS/EXCDS Monitor surrounded, from left to right, by the Airfield Lighting Control Panel, NARDS and ASDE.

NAV CANADA Auxiliary Radar Display System (NARDS)NARDS

now provides lightning situation awareness to controllers and Flight Service

Specialists (FSS). Data from the Canadian Lightning Data Network (CLDN)

is displayed on NARDS so that NAV CANADA can provide advisory

information or re-route traffic around severe lightning activity. With the

exception of 3 FSS in western Canada, NARDS deployment is complete.

Radar Data Transfer/Maintenance Data Transfer Redesign (RMR) Project

This project has created a Surveillance Data Network that leverages network

scalability and flexibility to provide access to surveillance data cross the

country. The system will be operational at all ACCs by August 2007.

FAA/DND Radar Data Sharing ProjectNAV CANADA has increased

the sharing of surveillance data with external agencies and will continue

to do so where ANS services are enhanced.

Radar Data Analysis (RDA) UpgradeFollowing the roll-out of the new

Radar Target Information Server systems, network-based surveillance data

recording and archive services will be implemented through the new

Radar Archive Server subsystems.

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5.4 Level of Service

Changes to levels of service are assessed through the Aeronautical Study

process. This process involves consultation with customers and other stake-

holders to assess site-specific hazards and risks, and identify appropriate

mitigation in accordance with recognized SMS principles.

Airspace StudiesNAV CANADA has completed a major review of airspace and procedures for

the Vancouver FIR. Interim changes were implemented in 2005 to the control

zones at Boundary Bay and Vancouver to address safety issues. Additional

changes to the airspace structure, classification, special use airspace and train-

ing areas and IFR services and procedures will occur in the spring of 2007.

The Company will also implement VFR flyways, and make other charting

improvements as well as undertake pilot education efforts to improve service

and safety for VFR customers. Over the longer-term the capacity of the new

IFR design to accept more VFR traffic within terminal airspace and other

capabilities will be assessed and procedures amended accordingly.

Eventually, it is anticipated that traffic density in the Vancouver area will grow

to the point that positive control of all VFR traffic within and below the Terminal

Control Area will be required.

Airspace reviews for other areas such as the Windsor-Toronto-Montreal corridor

will be initiated within the business planning period. A focus on the efficiencies

associated with RNAV, airspace reclassification and other solutions will be

applied to develop airspace structures that will handle long term IFR growth

in conjunction with concurrent VFR operations.

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NAV CANADA has identified the following Level of Service goals:

regularly review the level of service NAV CANADA provides to ensure servicesmatch customers needs;

ensure ANS services are provided in the most cost-effective way possible; and

implement the results of the 2004 National Level of Service Review. This is anongoing initiative forecast to be completed in fiscal 2010.

Another area of focus is services in the Oil Patch. Air traffic is rapidly growing

in northern Alberta and parts of north-eastern British Columbia due to oil and

gas exploration and development. As a result, the Company initiated a review

of air navigation services in the area in 2006. A number of initiatives have

already been implemented to improve aircraft efficiency in this area which

is experiencing significant traffic growth. A review of the airspace between

Edmonton, Grande Prairie and Fort McMurray above 12,500 ft ASL has been

initiated to examine potential further improvements to operations. A separate

review will be conducted of the airspace in the vicinity and north of Fort

McMurray in 2007.

Transponder AirspaceWith the expansion of the capabilities derived from the use of transponders, a

review of transponder required airspace and associated airspace classifications

will be undertaken. The use of transponders is already required in many control

zones and terminal control areas. There are safety benefits to be gained from

enhancing radar surveillance using transponders.

Procedural AltitudesA review of approach procedure altitudes will be conducted to see if more

operationally suitable constant descent angle altitudes can be used that would

allow for a rationalization of the volume of controlled airspace required for

an instrument procedure. This contributes to safety and efficiency and reduces

cockpit workload by requiring fewer profile changes during descent and

standardizing the approach technique across all procedures.

Additional Area ReviewsThe Company often conducts aeronautical studies as area reviews in order

to study the complete package of services provided in support of customer

operations in any particular area as an integrated system.

A review of our services in the oil exploration area of the McKenzie valley

will be initiated in 2007.

Additionally, the Company intends to complete a level of service review of the

services it provides in northern Quebec which was initiated in fiscal 2006.

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5.5 Aeronautical Information Services

NAV CANADA is designated to

provide AIS for the purposes of

ICAO Annex 4 and Annex 15.

Aeronautical information is

information about the aeronauti-

cal infrastructure that is essential

for the safe use of ANS services

and facilities.

Aeronautical information is

increasingly dependent on the

collection and management

of digital data in relational

databases. NAV CANADA is

moving quickly towards using

aeronautical databases for

procedure preparation and,

investigation is ongoing into

the distribution of AIS data in

electronic format. NAV CANADA

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NAV CANADA Aeronautical Information Services (AIS) has established the following goals:

meet customers requirements for aeronautical information in a safe and costeffective manner, with particular emphasis on airport and airspace accessthrough the provision of aeronautical instrument procedures;

implement a strategy for the delivery of Aeronautical Information Services that addresses the move from a product-centric AIS to a data-centricapproach to Aeronautical Information Management;

move towards a greater use of automation in the collection, storage, manip-ulation and dissemination of aeronautical data where increases in efficiencyand data integrity can be achieved; and

meet all of our national and international commitments with respect to com-pliance to standards and recommended practices in the provision of AIS.

is seeking to make data available to customers in more useful standardized

forms such as AIXM that can be easily manipulated for display as a product

specific to their applications.

AIS Operational Implementation Plan The Company has developed an AIS Strategic Plan that includes a business

concept and operational concept and identifies transitional issues. The Company

has also developed an AIS Operational Implementation Plan that outlines how

the strategy will be implemented over the next three years. Procedures and tools

will be established to support quality control/quality assurance requirements,

and to support the automated acquisition and distribution of data.

AIS Data Management System (ADMS)The company has procured an AIS Data Management System (ADMS) that

will be the authoritative source of AIS data for all AIS publications, charts

and NAV CANADA operational systems. The system will be commissioned

in fiscal 2007.

NOTAM Format ConversionTo meet the requirements of both domestic and international customers,

NAV CANADA currently produces time sensitive flight-planning information

in two NOTAM formatsCanadian Domestic and ICAO. The Company will

standardize the domestic NOTAM format with the international ICAO format,

which is based on geographical co-ordinates. This will simplify NOTAM

format and methodology as well as support web applications, improve NOTAM

functionality and make retrieval of route information more accurate.

Instrument Procedures Design Automation Tool (IPDAT) ProjectImplementation of a new computer-aided design tool for designing landing

approach procedures will occur in phases in fiscal 2007. This will result in a

significant increase in the production capacity of instrument procedure design

time and allow the Company to improve customer responsiveness.

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5.6 Aviation Weather Services

NAV CANADA is seeking to make new sources of aviation-relevant weather

data available for strategic and tactical decision-making regarding aircraft

routes and flow management.

Observation Data GatheringAutomated Weather Observation Systems (AWOS)AWOS are designed to produce full routine (METAR) and special (SPECI)

aviation weather reports. The current AWOS in use in Canada are reaching the

end of their life cycle and must be replaced.

Transport Canada developed performance specifications for AWOS and issued

these in March 2005 as an Exemption to Canadian Aviation Regulation 804.

The next generation AWOS must demonstrate full compliance with these

specifications, in part through the use of clinical observer trials.

NAV CANADA has competitively selected a commercial off-the-shelf AWOS

for evaluation at test sites in Iqaluit and St. Johns. Following NAV CANADA

and Transport Canada acceptance of the results, a follow-on contract is expected

to be issued in late 2007 for up to 81 systems, conditional upon the chosen

system passing its clinical observer trials.

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NAV CANADA has adopted the following service provision goals related toaviation weather services:

improve the accuracy of weather information;

improve the clarity of weather information;

improve the timeliness and reliability of the delivery of weather information;

improve access to weather information;

reduce the costs of weather data collection, forecasting and briefing; and

improve the usefulness of weather information data in support of cus