Cost-efficiency - Cyprus

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PRB monitoring

▪ The 2020 actual service units (853K) were 58% lower than the actual service units in 2019 (2,051K).

▪ Cyprus reduced total costs in 2020 by 4 M€2017 (-7%) compared to 2019 actual costs. The reduction is mainly due to a decrease of 2.2 M€2017 (-10%) in staff costs induced by less overtime, and a lower cost of capital of 2.4 M€2017 (-53%) due to both lower asset base and WACC.

▪ Other operating costs increased by 1.4 M€2017 (+6%) compared to 2019 actual costs due to a correction of cost allocation methodology as already included in the 2019 draft performance plan.

▪ DCAC Cyprus spent 2.6 M€2017 in 2020 related to cost of investments, 4% more than planned in the 2019 draft performance plan (2.5 M€2017).

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 101 NA NA NA
Determined costs 105 60 67 71
Difference costs −3 NA NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 5.3% 2.3% 2.0%
Determined inflation index NA 109.1 111.6 113.9
Actual inflation rate NA NA NA NA
Actual inflation index NA NA NA NA
Difference inflation index (p.p.) NA NA NA NA

AUC vs. DUC

In the combined year 2020-2021, the AUC was lower than the planned DUC (-5.5%, or -2.76€2017). This results from the combination of higher than planned TSUs (+1.7%) and lower than planned en route costs in real terms (-3.9%, or -4.0 M€2017).

En route service units

The difference between actual and planned TSUs (+1.7%) falls within of the ±2% dead band. Hence, the resulting gain of 1.1 M€ is entirely retained by the ANSP (see items 10 to 14).

En route costs by entity

Actual real en route costs for 2020-2021 are -3.9% (-4.0 M€2017) lower than planned. This reflects the fact that while the costs for main ANSP – DCAC Cyprus remained mostly in line with the plan (+0.05%), the costs were much lower than planned for the MET service provider (-13.6%, or -1.1 M€2017) and the NSA/EUROCONTROL (-9.3%, or -3.0 M€2017).

En route costs for the main ANSP at charging zone level

The stable en route costs in real terms for DCAC Cyprus in 2020-2021 reflects a combination of:
- mostly stable staff costs (-0.1%) in real terms, however, it should be noted that staff costs in nominal terms were slightly above the plan (+0.8%) which is explained by higher overtime costs and changes to the ATCO salary scales;
- slightly higher other operating costs (+0.9%), which are understood to reflect higher subcontracted CNS as well as maintenance costs;
- depreciation costs in line with the plan; and,
- lower cost of capital (-7.4%), reflecting lower than planned actual asset base resulting from delays in the investment programme.

Actual unit cost incurred by the users (AUCU) (PI#1)

AUCU components (€/SU) – 2020-2021
Components of the AUCU in 2020-2021 €/SU
DUC 50.35
Inflation adjustment 0.30
Cost exempt from cost-sharing −1.40
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) −0.33
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues 0.00
Application of lower unit rate 0.00
Total adjustments −1.43
AUCU 48.92
AUCU vs. DUC −2.8%
Cost exempt from cost sharing by item - 2020-2021 €'000 €/SU
New and existing investments 0.0 0.00
Competent authorities and qualified entities costs −2,778.1 −1.31
Eurocontrol costs −183.4 −0.09
Pension costs 0.0 0.00
Interest on loans 0.0 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing −2,961.5 −1.40

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in combined year 2020-2021 (48.81€) is -3.1% lower than the nominal DUC (50.35€) which includes DUC initially charged: 28.78€; and to be charged: 21.57€. The difference between these two figures is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+0.30€).
- the deduction of the traffic adjustment (-0.33€) for the costs not subject to traffic risk sharing to be reimbursed in future years;
- and the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-1.51€).

The share of regulatory result in the AUCU is 3.9%.

Regulatory result (RR)

DCAC Cyprus net gain on en route activity in the Cypriot charging zone in the combined year 2020-2021
DCAC Cyprus’s net gain amounts to +0.9 M€, as a combination of a loss of -0.2 M€ arising from the cost sharing mechanism and a gain of +1.1 M€ arising from the traffic risk sharing mechanism.
DCAC Cyprus overall regulatory results (RR) for the en route activity
Ex-post, the overall RR taking into account the net gain from the en route activity mentioned above (+0.9 M€) and the actual RoE (+2.0 M€) amounts to +2.9 M€ (4.4% of the en route revenues). The resulting ex-post rate of return on equity is 7.0%, which is higher than the 4.8% planned in the PP.