Aireon aims to provide ANSPs around the world with satellite-based surveillance capability and to deliver it via Automatic Dependent Surveillance-Broadcast (ADS-B) receivers built as an additional payload on the Iridium NEXT constellation that is scheduled for launch between 2015 and 2017.

   Under its agreement with Iridium, NAV Canada will purchase Series A preferred membership interests representing up to 51 percent of the diluted equity of Aireon, totaling up to $150 million, which will be paid in tranches over the next five years. NAV Canada also intends to participate as a customer and utilize Aireon in its North Atlantic airspace operations.

   “ADS-B is a proven technology with proven benefits,” said Nav Canada President and CEO John Crichton. “The level of future savings to airlines and aircraft operators will quickly recoup our planned investment thus providing this project with a strong business case based on customer and environmental benefits.”

   Raymond James Analyst Chris Quilty said that once Aireon’s data service is established, other ANSPs would be able to subscribe to the service for their own flight information regions.

   “The NAV Canada finalization is important as it establishes a $300 million valuation to the Aireon joint venture,” Quilty said in a research note sent to Satellite News. “Aireon’s valuation will grow substantially as new customers such as ANSPs, airlines and government agencies sign up for Aireon’s service.”

   Quilty added that the NAV Canada investment into Aieron should be considered a fully funded development effort. “The $150 million investment should substantially fund Aireon’s $115 million hosted payload development contract with Harris Corp., thereby freeing Iridium from further capital investments into the venture. The revenue details, however, are yet to come. Although NAV Canada has not yet signed a service agreement with Aireon, we expect an announcement in the next month or two, which should serve as a positive catalyst for the stock. Long term, we still believe that Aireon can contribute $50 million to 100 million of incremental cash flow to Iridium in the form of fee dividends.”

   Iridium management reiterated that the company expects Aireon to pay out hosted payload fees of approximately $200 million to the MSS operator between 2014 and 2017. Quilty said debt financing secured against multiple long-term ANSP contracts would likely fund these payments.

   “Now that NAV Canada has formally signed a customer contract with Aireon, we expect other ANSPs to follow suit,” said Quilty. “Overall, NAV Canada’s interest represents a crucial endorsement of the Aireon solution and will be noted by similar agencies such as the U.S. Federal Aviation Administration and NATS (United Kingdom).”

   Aireon’s capability aims to deliver several benefits to the avionics industry, included consumer fuel savings at an estimated $100 million per year and reduced greenhouse gas emissions, which would allow airlines to use more optimal altitudes and routes because of expanded airspace capacity previously limited to less efficient procedural separation.

   The service could also provide efficiency in the space segment. Several market analysts agreed with estimates that Aireon would require less than 80 percent of the hosted payload capacity on Iridium’s NEXT constellation, leaving additional capacity for other hosted payload customers. These customers could provide tens of millions of incremental funding toward NEXT while further diversifying the company’s revenue and end-market exposure, according to Quilty.

   “We are pleased with the NAV Canada announcement and believe that follow-on announcements with NAV Canada and other ANSPs will more clearly establish the substantial value this effort has for Iridium,” said Quilty. “While investors currently seem unwilling to give Iridium credit for the Aireon effort, we believe pending announcements over the next several months will eventually accrue to the stock thereby providing some positive news for a stock that is badly in need of positive momentum.”