Cost-efficiency - Latvia

Terminal charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 12 NA NA NA
Determined costs 12 6 7 7
Difference costs 0 NA NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 10.0% 3.9% 3.1%
Determined inflation index NA 119.7 124.3 128.1
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 terminal AUC was -4.2% (or -12.79€2017) lower than the planned DUC. This results from the combination of higher than planned TNSUs (+1.8%) and lower than planned terminal costs in real terms (-2.6%, or -0.3 M€2017).

Terminal service units

The difference between actual and planned TNSUs (+1.8%) falls within the ±2% dead band. Hence the resulting additional revenue is kept by the ANSPs..

Terminal costs by entity

Actual real terminal costs are -2.6% (-0.3 M€2017) lower than planned. This is driven by the main ANSP, LGS (-2.6%, or -0.3 M€2017) and the NSA costs (-2.8%, or -0.01 M€2017).

Terminal costs for the main ANSP at charging zone level

The lower than planned terminal costs in real terms for LGS (-2.6%, or -0.3 M€2017) result from:
- lower staff costs (-3.0%), “due to reduced headcounts by 6.1% of FTEs. At the same time, LGS did increase remuneration of several staff categories due to enormous pressure from trade unions;”
- lower other operating costs (-12.2%), “mostly by scaling down of the training and business trips;”
- lower depreciation (-4.5%), “As in FY 2020 the ANSP did invest only in the critical part of the services and could not afford to undertake large scale investments with long-term benefits;”
- higher cost of capital (+17.9%), driven by the use of higher asset base (+18.9%) to compute cost of capital.
- deduction for VFR exempted flights.

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

AUCU components (€/SU) – 2020-2021
Components of the AUCU in 2020-2021 €/SU
DUC 312.73
Inflation adjustment 0.99
Cost exempt from cost-sharing 0.40
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) −0.76
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 0.63
AUCU 313.37
AUCU vs. DUC +0.2%
Cost exempt from cost sharing by item - 2020-2021 €'000 €/SU
New and existing investments 52.8 1.33
Competent authorities and qualified entities costs −14.9 −0.38
Eurocontrol costs 0.0 0.00
Pension costs −21.8 −0.55
Interest on loans 0.0 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing 16.1 0.40

The actual terminal unit cost incurred by airspace users (AUCU) in respect of activities performed in combined year 2020-2021 for Latvia terminal charging zone (312.59€) is -0.05% lower than the nominal DUC (312.73€) which includes DUC initially charged: 153.34€; and to be charged: 159.39€. The difference between these two figures (-0.15€/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+0.99€/SU);
- the deduction of the traffic adjustment (-0.76€/SU) 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 (-0.38€/SU).

The share of regulatory result in the terminal AUCU is 14.6%.

Regulatory result (RR)

LGS net gain on activity in the Latvia terminal charging zone in the combined year 2020-2021
LGS’s net gain amounts to +0.5 M€ due to gains of +0.3 M€ from the cost sharing mechanism and of +0.2 M€ from the traffic risk sharing mechanism.

LGS overall regulatory results (RR) for the terminal charging zone activity
Ex-post, the overall RR taking into account the net gain from the terminal activity mentioned above (+0.5 M€) and the actual RoE (+1.3 M€) amounts to +1.8 M€ (15.5% of the terminal revenues). The resulting ex-post rate of return on equity is 9.1%, which is higher than the 6.6% planned in the PP.