Cost-efficiency - Norway

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▪ The 2020 actual service units (1,230K) were 50% lower than the actual service units in 2019 (2,436K), making Norway the second least affected Member State by COVID-19 in terms of service units.

▪ Norway reduced total costs in 2020 by 13 M€2017 (-11%) compared to 2019 actual costs. The main driver of this reduction is the 14 M€2017 lower staff costs (-17%), resulting from furloughs, reduction in staff and overtime, lower salaries for management, travel and consultancy fees.

▪ Depreciation increased by 2.5 M€ (+32%) due to a change in allocation method. Assets are now allocated to the services they are supporting instead of the cost-centre used in the ANSP asset base.

▪ Avinor spent 16 M€2017 in 2020 related to costs of investments, 11% more than planned in the 2019 draft performance plan (14 M€2017). The increase is induced by a higher depreciation and cost of capital than planned, due to a higher asset base and WACC than originally planned.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 237 NA NA NA
Determined costs 236 130 133 136
Difference costs 1 NA NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 2.0% 2.0% 2.0%
Determined inflation index NA 111.2 113.4 115.6
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 en route AUC was -1.8% (or -14.16 NOK2017, -1.52 €2017) lower than the planned DUC. This results from the combination of higher than planned TSUs (+1.5%) and slightly lower than planned en route costs in real terms (-0.4%, or -7.3 MNOK2017, -0.8 M€2017).

En route service units

The difference between actual and planned TSUs (+1.5%) falls within the ±2% dead band. Hence the resulting additional revenue is kept by the ANSPs.

En route costs by entity

Actual real en route costs are -0.4% (or -0.8 M€2017) lower than planned. This is driven by the NSA/EUROCONTROL (-6.7%, or -1.2 M€2017) and the MET service provider (-8.0%, or -0.2 M€2017), while actual costs of the main ANSP (Avinor) and the other ANSP (KJE) are close to planned costs (+0.3% and -0.7%, respectively).

En route costs for the main ANSP at charging zone level

The slightly higher than planned en route costs in real terms for Avinor (+0.3%, or +0.6 M€2017) result from the combination of:
- slightly lower staff costs (-0.6%);
- higher other operating costs (+7.2%), mainly explained by the decommissioning of radar components (one-off effect), increase in rent at Bodo ACC relating to security and capitalisation of ADQ-investment (capitalized in the mother company Avinor AS and accounted as an intercompany purchase/other operating costs in Avinor ANS);
- lower depreciation (-3.0%), mainly due to the radar components decommissioning;
- higher cost of capital (+4.0%), driven by a higher investment level mainly relating to the new ATM system and the NORWAM project; and,
- slightly lower than planned deduction for VFR exempted flights (-1.1%).

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

AUCU components (€/SU) – 2020-2021
Components of the AUCU in 2020-2021 €/SU
DUC 80.06
Inflation adjustment 0.52
Cost exempt from cost-sharing -0.41
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) -0.10
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues 0.00
Application of lower unit rate -33.02
Total adjustments -33.01
AUCU 47.05
AUCU vs. DUC -41.2%
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 -19.0 -0.01
Eurocontrol costs -1,068.2 -0.40
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 -1,087.1 -0.41

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in the combined year 2020-2021 (500.43NOK or 48.11€) is significantly lower (-40.0%) than the nominal DUC (834.44NOK or 80.06€), which includes DUC initially charged: 499.01NOK or 47.97€; and to be charged: 335.43NOK or 32.09€. The difference between these two figures (-334.01NOK/SU or -31.95€/SU) is due to:
- the application of a lower unit rate (-335.43NOK/SU or -32.09€/SU), which offsets fully the DUC to be charged retroactively and reflects the decision of Norway to not recover from airspace users the losses in en route revenues linked with Covid-19 pandemic;
- the positive inflation adjustment resulting from higher than planned inflation (+5.26NOK/SU or +0.52€/SU);
- the impact of adjustments resulting from the costs exempt from cost-sharing mechanism (-2.81NOK/SU or -0.28€/SU); and,
- the deduction for the traffic adjustment (-1.04NOK/SU or -0.10€/SU) for the costs not subject to traffic risk sharing to be reimbursed to airspace users in future years.
The share of regulatory result in the AUCU (before the deduction of other revenues) is 9.9%.

Regulatory result (RR)

Avinor net gain on activity in Norway en route charging zone in the combined year 2020-2021
A net gain of Avinor of +26.5 MNOK (+2.6 M€), results from a combination of a loss of -2.9 MNOK arising from the cost sharing mechanism and a gain of +29.4 MNOK arising from the traffic risk sharing mechanism.
Avinor overall regulatory results (RR) for the en route activity
Ex-post, the overall RR corresponding to the net gain from the en route activity mentioned above (+26.5 MNOK) and the RoE (+103.2 MNOK) amounts to a gain of +129.7 MNOK (6.3% of the en route revenues). The resulting ex-post rate of return on equity is 12.8%. Please see also Note 2 above.