Cost-efficiency - Estonia

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▪ Estonia experienced the third most limited decrease in service units across Member States, with 2020 actual service units (419K) being 53% lower than the actual service units in 2019 (897K).

▪ Estonia reduced total costs in 2020 by 2.7 M€2017 (-9%) compared to 2019 actual cost. The reduction is mainly induced by a reduction of 1 M€2017 (-7%) in staff costs due to personnel layoffs and a decrease in other operating costs of 1.1 M€2017 (-14%) (e.g. due to cancellation of trainings and reduction in travel expenses).

▪ EANS spent 3.2 M€2017 in 2020 related to cost of investments, 45% less than planned in the 2019 draft performance plan (5.7 M€2017). The decrease is attributable to the postponement of most of 2020 investments to 2022 onwards.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 53 NA NA NA
Determined costs 54 27 28 30
Difference costs 0 NA NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 2.5% 2.1% 1.9%
Determined inflation index NA 110.4 112.7 114.8
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 (by -3.8%, or -2.29€2017). This results from the combination of higher than planned TSUs (+2.6%) and lower than planned en route costs in real terms (by -1.3%, or -0.7 M€2017).

En route service units

The difference between actual and planned TSUs (+2.6%) falls outside the ±2% dead band, but does not exceed the ±10% threshold foreseen in the traffic risk sharing mechanism. The resulting gain of additional en route revenues is therefore shared between the ATSP and the airspace users, with the ATSP (EANS) retaining an amount of +0.9 M€2017.

En route costs by entity

Actual real en route costs for 2020-2021 are -1.3% (-0.7 M€2017) lower than planned. This result is driven by the main ANSP, EANS (-0.7%, or -0.3 M€2017) and the NSA/EUROCONTROL costs (-3.5%, or -0.4 M€2017).

En route costs for the main ANSP at charging zone level

Lower then planned en route costs in real terms for EANS in 2020-2021 (-0.7%, or -0.3 M€2017 lower) results from:
- lower staff costs (-2.0%);
- lower other operating costs (-9.0%), due to implementation extensive cost-cutting measures to reduce losses. Travelling expenses, rental expenses (especially communication service rental costs) and training expenses were lower than planned and other cost items were cut where possible;
- higher depreciation (+2.4%), due to taking some fixed assets into operation earlier than planned;
- higher cost of capital (+24.0%), resulting from the approval of an additional shareholder investment in equity, leading to higher cost of capital, although the rate of return on equity remained unchanged.

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

AUCU components (€/SU) – 2020-2021
Components of the AUCU in 2020-2021 €/SU
DUC 62.39
Inflation adjustment 0.45
Cost exempt from cost-sharing -0.47
Traffic risk sharing adjustment -0.19
Traffic adj. (costs not TRS) -0.37
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -1.30
Application of lower unit rate 0.00
Total adjustments -1.89
AUCU 60.50
AUCU vs. DUC -3.0%
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 -311.8 -0.35
Eurocontrol costs -107.8 -0.12
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 -419.7 -0.47

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in the combined year 2020-2021 for Estonia en route charging zone (60.50€) is -3.0% lower than the nominal DUC (62.39€) which includes DUC initially charged: 35.61€; and to be charged: 26.78€. The difference between these two figures (-1.89€/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+0.45€/SU);
- the deduction of the traffic risk sharing adjustments (-0.19€/SU) and the traffic adjustment (-0.37€/SU) for the costs not subject to traffic risk sharing to be reimbursed in future years;
- the deduction of the other revenues (-1.30€/SU);
- and the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-0.47€/SU).
The share of regulatory result in the AUCU is 6.6%.

Regulatory result (RR)

EANS net gain on en route activity in the Estonia charging zone in the combined year 2020-2021
EANS’s net gain amounts to +1.3 M€, as a combination of a gain of +0.4 M€ arising from the cost sharing mechanism and a gain of +0.9 M€ arising from the traffic risk sharing mechanism.
EANS 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 (+1.3 M€) and the actual RoE (+2.4 M€) amounts to +3.6 M€ (8.4% of the en route revenues). The resulting ex-post rate of return on equity is 11.2%, which is higher than the 7.3% planned in the PP.