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. As part of Budget 2023, CATSA received multi-year funding for 2024/25 and 2025/26. 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 a wait time service level where, on average, 95% of all passengers wait less than 15 minutes to be screened at Class 1 airports on an annual basis;
• Ongoing implementation of changes to non-passenger screening to address upcoming amendments to security measures set by Transport Canada;
• Replacing current X-ray technology at PBS checkpoints at major airports 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 2022/23, the forecasted financial results and original budget for 2023/24, as well as the operating and capital budgets for 2024/25 to 2028/29 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 2028/29, CATSA will require supplemental funding in order to continue to deliver its mandated activities for these fiscal years.

2024/25 – 2028/29

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, which is mainly attributable to additional screening hours to accommodate increasing passenger traffic, improved wait time service levels, as well as the ongoing implementation of the changes to the screening standard for non-passengers, with the balance due to inflationary increases in screening contractor billing rates. These additional screening hours will require incremental staffing of new screening officers over the planning period, creating employment opportunities in communities across the country.

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 improve the passenger experience. These investments will include the ongoing upgrade of existing screening equipment with the latest detection algorithms. In addition to these investments, CATSA will collaborate with Transport Canada to explore opportunities for risk-based screening including enhancements to the verified traveller program.

CATSA will make investments in several corporate initiatives that have a profound impact on the organization’s operations. These investments include exploring the application of advanced analytic techniques and artificial intelligence to enhance oversight, screening operations and training programs, 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.

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 improve 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 major airports over the course of the next five to six years, which will 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 the 95/15 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 2024/25, CATSA expects to screen 73.1 million passengers, representing an approximate 6% increase from 2023/24 levels. CATSA’s current passenger volume projections are based on a range of passenger forecast scenarios, and reflect ongoing increases in passenger traffic levels over the planning period. Any significant deviation from CATSA’s passenger forecasts will have a material impact on the organization’s financial requirements.

Screening Officer Staffing — The financial plan assumes screening contractors will be able to hire and retain the necessary number of screening officers to address the increasing volumes of passengers and non-passengers over the planning period. If labour market challenges persist, it may be challenging for screening contractors to hire the necessary number of screening officers, which could negatively impact passenger wait times.

95/15 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, airports 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 represented a ramp-up period, with the targeted 95/15 wait time service level expected to be 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 unknown 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.

Inflation and Billing Rates —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. The contractual rates used in the financial plan are based on the terms of CATSA’s new and existing contracts, including the latest contract rates in the new ASSAs, and the most recent contract for the deployment of CT at PBS checkpoints. Any significant change to inflationary assumptions may have a material impact on CATSA’s financial requirements going forward.

Foreign Exchange Rates — Financial projections reflect a projected USD exchange rate of 1.35 for the planning period, except for maintenance costs for 2024/25 that have been hedged at approximately 1.357 to 1.359. CATSA will continue 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 may have a material impact on CATSA’s financial requirements.

Re-Profiles — 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, including the possible transfer of capital funding to a future financial period based on a revised spending profile for major projects.

Refocusing Government Spending — CATSA seeks opportunities to maintain or reduce spending levels whenever possible. In addition to the reductions of $10 million per annum identified in Budget 2023 for 2023/24 to 2025/26, CATSA’s financial plans reflect the implementation of several cost saving initiatives, including the associated reductions in spending.

Internal transfer — The financial plan is based on the assumption that CATSA will receive approval for internal budget transfers as required, from capital to operating in order to align the organization’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 the organization’s capital requirements are lower than the approved funding for that fiscal year.