Financial Overview

Funding

As an appropriated Crown corporation, CATSA delivers its civil aviation security screening mandate in accordance with the resources it is assigned by the Government of Canada.

Since 2015, CATSA’s A-Base funding, has been supplemented with incremental funding in order to maintain its operations. CATSA has received adequate funding for 2023/24 to 2025/26, net of a reduction of $10 million per annum in CATSA’s original funding request. Additional funding will be necessary in 2026/27 and beyond in order for CATSA to continue to deliver its mandated activities ^{Footnote 1}

Financial Plan

The operating and capital budgets are presented on a cash basis. The narrative that follows reflects the strategic objectives, subject to available funding.

Key priorities having a significant financial impact include, but are not limited to, the following:

• Delivering CATSA’s mandated activities, which include targeting an improved wait time service level at Class 1 airports on an annual basis;
• Implementing 100% screening of non-passengers entering restricted areas serving international air operations in response to the standard set by the ICAO and regulated by Transport Canada;
• Replacing current X-ray technology at PBS checkpoints across the country with CT technology, and the introduction of new technologies and trials as part of CATSA’s lifecycle management plan;
• Recapitalizing and replacing of current full body scanner technology with newer technology with improved detection algorithms and the continued introduction of full body scanners as the primary screening tool at PBS checkpoints; and
• Lifecycle management of other Explosives Detection System (EDS) and non-EDS capital assets based on their estimated useful lives.

The following summarizes the financial results for 2021/22, the financial results and budget for 2022/23, as well as the operating and capital budgets for 2023/24 to 2027/28 by program activity based on CATSA’s approved funding.

The following section provides key highlights of CATSA’s financial plan. For the period 2026/27 to 2027/28, CATSA will require supplemental funding in order to continue to deliver its mandated activities for the full fiscal year. 

2023/24 – 2027/28

Screening Operations

Screening services to carry out CATSA’s mandated PBS, HBS and NPS programs account for a large share of its activities and, as such, represent a significant majority of its operating budget. These costs consist mainly of payments to third parties for the delivery of security screening performed by screening officers.

The financial plan reflects an increase in screening services costs to continue to deliver CATSA’s core operations. The increase is mainly attributable to additional screening hours to accommodate increasing passenger traffic, an improved wait time service level, as well as the implementation of the 100% screening standard for non-passengers, with the balance due to inflationary increases in screening contractor billing rates. These additional screening hours will require significant screening officer staffing requirements, creating employment opportunities in communities across the country.

With the recovery of the civil aviation industry well underway, passenger traffic is expected to surpass pre-pandemic levels by 2023/24. Despite these positive signs, CATSA’s screening operations continue to face challenges compounded by difficult labour market conditions and the establishment of new ASSAs in 2024 with its third party screening contractors. As the industry pandemic recovery evolves, CATSA will continue to monitor its evolution and any long-term impacts on travel patterns.

New/Ongoing Initiatives

CATSA’s financial plan emphasizes investment over the planning period in the accelerated adoption of new and advanced technology to enhance operations and the passenger experience. These investments will include the ongoing upgrade of existing screening equipment with the latest detection algorithms as well as the application of advanced analytics techniques and AI to enhance oversight and training programs. In addition to these investments, CATSA will continue to collaborate with Transport Canada to explore opportunities for risk-based screening including enhancements to the verified traveller program.

Since March 2020, in response to the pandemic, CATSA has implemented a number of health and safety measures at security screening checkpoints. The organization anticipates that several of these measures will remain in place for some portion of the planning period, including increased sanitization requirements at security screening checkpoints and the deployment of ultraviolet-C sanitization technology in CATSA Plus lines starting in 2023/24.

CATSA will continue to make investments in several corporate initiatives that have a profound impact on the organization’s operations. These investments include the implementation of a flexible workplace, modernization of CATSA’s IT service delivery model through strategic investments and partnerships, and the introduction of additional cyber controls to strengthen the organization’s cyber security defenses.

Finally, CATSA’s financial plan reflects the implementation of an agreement with a new maintenance service provider. The transition of maintenance activities began in 2022/23, with a complete transition expected in early 2023/24. A successful transition is a priority for CATSA’s operations.

Capital Lifecycle Management/New Technology

A priority for CATSA’s capital plans over the planning period is the introduction of next-generation screening equipment to enhance security effectiveness and the passenger experience. In support of this priority, CATSA’s lifecycle management plans include the replacement of current X-ray technology with CT X-rays at PBS checkpoints in Class 1 and Class 2 airports over the course of the next five to six years, which may reduce passenger-divesting requirements as experienced or committed to in other jurisdictions, pending approval by Transport Canada. As part of this program, CATSA will also replace single-view X-ray machines with multi-view versions at NPS checkpoints and Class 3 airports. In addition, CATSA’s capital plan includes the replacement of current full body scanners with the latest technology featuring improved detection algorithms, as well as deployment of additional full body scanners for primary screening. CATSA’s capital plan also provides for the deployment of additional screening equipment to accommodate an improved wait time service level, as well as additional CATSA Plus lines and the replacement of non-EDS equipment and systems as the existing assets reach the end of their useful lives.

When making capital acquisitions of screening equipment, CATSA follows its procurement and contracting policy which ensures transparency and consistency in establishing operational requirements and procurement strategies for screening equipment. With respect to specific requirements for screening equipment, the equipment must meet Transport Canada detection performance standards which are typically aligned with the TSA and/or ECAC. Key factors considered as part of a capital acquisition include technical, company and financial evaluations which ensure the equipment meets CATSA’s functional requirements and provides good value for money.

It is important to note that unforeseen impacts, including uncertainty surrounding supply chain disruptions and potential delays on the part of industry partners as they continue to focus on financial stability, may affect the timing of capital projects and result in various delays beyond CATSA’s control. Consequently, the organization may require a re-profile of funds to account for any unexpected delays in capital projects.

Key Assumptions and Financial Risks

Passenger Traffic Projections — In 2022/23 CATSA screened an estimated 57.6 million passengers, representing an approximate 135% increase from 2021/22 levels. CATSA’s current passenger volume projections are based on a range of passenger forecast scenarios procured from Oxford Economics received in the summer of 2022, and reflect a return to pre-pandemic passenger traffic levels in 2023/24. As the civil aviation industry recovery continues, CATSA’s operating environment will remain volatile. Given this, passenger traffic forecasts will continue to evolve and change. Any significant deviation from CATSA’s passenger forecasts will have a material impact on the organization’s financial requirements.

Screening Officer Staffing — Through December 2022, in response to the dramatic surge in passenger traffic, over 2300 screening officers were hired and trained across Canada. With the ramp up to an improved wait time service level by early 2024/25, the introduction of 100% NPS screening, and ongoing annual increases expected in passenger traffic, a significant increase in screening officer staffing is still required. The financial plan assumes screening contractors will be able to hire and retain the necessary number of screening officers to address the volumes of passengers and non-passengers over the planning horizon. If labour market challenges persist, and screening contractors cannot hire the necessary number of screening officers, the result could be longer wait times, which has an impact on the broader aviation industry.  

Improved Wait Time Service Level — CATSA’s ability to deliver any given wait time service level target is significantly impacted by the physical space allocated by, or available within, the airport for screening lines. The financial plan assumes physical space at the airports will be available for additional lines that may be required, a key factor to the successful delivery of any targeted wait time service level. Fiscal year 2023/24 represents a ramp-up period, with an improved wait time service level achieved on a national annual average basis across Class 1 airports in 2024/25. In addition, the financial plan is based on current operations and does not consider changes in CATSA's regulatory or operating environment, including possible future advancements in screening technologies, which may increase or decrease the efficiency with which screening is performed. Finally, the financial plan includes additional screening hours and incremental CATSA FTEs, which will be required in order to deliver an improved wait time service level.

Inflation and Billing Rates — The current inflationary environment is unprecedented in CATSA’s history. While CATSA is experiencing inflationary pressure across all areas of the organization, labour rates are the greatest source of inflation in CATSA’s ongoing operations. These rates are based on the terms of CATSA’s existing contracts, which reflect annual inflationary increases. In March 2024, CATSA’s existing ASSAs are set to expire. No significant changes in current billing rates for these contract renewals have been considered in CATSA’s financial plan, nor have transition costs been included in the event new vendors are awarded the ASSA contracts. Significant changes in the billing rates or inflationary assumptions for these services will have a material impact on CATSA’s financial requirements going forward.

Foreign Exchange Rates — Financial projections reflect a USD exchange rate of 1.30 for the planning period, except for maintenance costs for a portion of 2023/24 that have been hedged at approximately 1.36. CATSA continues to monitor its future commitments and will enter into new hedging contracts as per its approved hedging strategy. Significant fluctuations in the exchange rate for any unhedged amounts will have a material impact on CATSA’s financial requirements.

Re-Profiles — As the organization does not have carry forward authority, re-profile requests have become a necessary part of CATSA’s annual financial management process. The financial plan assumes CATSA will continue to receive approval of capital re-profiles. 

Refocusing Government Spending — Despite considerable upward pressure on CATSA’s operating costs due to inflationary and market forces, CATSA continues to seek opportunities to maintain or reduce spending levels whenever possible. In addition to the reductions of $10 million per annum identified in Budget 2023, CATSA anticipates maintaining spending at or below pre-pandemic levels in a number of expense areas over the planning period. CATSA’s financial plan includes a forecast for travel costs, which is flat to pre-pandemic levels, lower facilities-related costs due to a reduction in leased space which has reduced annual operating costs by $1 million per annum, and lower network-related costs following a new managed services contract. CATSA will continue to collaborate with Transport Canada and central agencies to address the spirit of the Refocusing Government Spending initiative. 

Internal transfer — The financial plan is based on the assumption that CATSA will receive approval for internal budget transfers from capital to operating in order to align CATSA’s reference levels to its Budget. Approval of internal transfers in any given year are critical for CATSA to offset incremental operating requirements with available capital funding where CATSA’s capital requirements are lower than the approved funding for that fiscal year. The 2023/24 financial plan includes a transfer of $36.5 million from capital to operating.