Cost-efficiency - Portugal

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PRB monitoring

▪ Portugal is the third most affected Member State by COVID-19 in terms of traffic decrease. In 2020, the actual service units (1,556K) were 61% lower than the actual service units in 2019 (4,034K).

▪ Portugal had the third highest percentage saving in 2020 across all Member States, with a 28 M€2017 (-20%) reduction in 2020 actual total costs compared to 2019 actual costs. The reduction is mainly driven by a decrease in staff costs of 28 M€2017 (-26%), resulting from wage freezes, impact on pension plan liabilities and reduction in overtime.

▪ NAV Portugal spent 13 M€2017 in 2020 related to cost of investments, 4% less than planned in the 2019 draft performance plan (14 M€2017). The reduction can be attributable to a lower cost of capital due to a lower asset base and a reduction of the WACC.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 234 NA NA NA
Determined costs 233 139 150 155
Difference costs 1 NA NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.2% 1.3% 1.4%
Determined inflation index NA 103.6 104.9 106.4
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 -1.3% (or -0.87€2017) lower than the planned DUC. This results from the combination of higher than planned TSUs (+1.8%) and higher than planned en-route costs in real terms but in a lesser proportion (+0.5%, or +1.1 M€2017).

En route service units

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

En route costs by entity

Actual real en route costs are +-0.5% (+1.1 M€2017) higher than planned. This is driven by the main ANSP, NAV Portugal (+0.9%, or +1.7 M€2017), while the costs of the SAR provider and the MET provider are in line with the plan (+0.1% and -0.03%, respectively) and the NSA/EUROCONTROL costs are lower than planned (-3.4%, or -0.6 M€2017).

En route costs for the main ANSP at charging zone level

The higher than planned en route costs in real terms for NAV Portugal (+0.9%, or +1.7 M€2017) result from:
- higher staff costs (+3.6% for the period 2020-2021), “mainly due to the following factors: i) Higher pension fund costs, namely in NAV/CTA-MT; ii) Contingent liabilities arising from specific situations in which ATCOs do not meet the requirements for access to retirement status;iii) Capitalized work that did not materialize at the same level as planned;”
- lower other operating costs (-12.3%), mainly explained by lower spending on IT assistance and other outsourced services, repair and maintenance, communication and travel;”
- slightly higher depreciation (+0.8%); and
- lower cost of capital (-21.5%), due to a slight delay in implementation of the new ATM System.

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

AUCU components (€/SU) – 2020-2021
Components of the AUCU in 2020-2021 €/SU
DUC 66.88
Inflation adjustment 0.00
Cost exempt from cost-sharing -0.50
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) -0.16
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 -0.65
AUCU 66.22
AUCU vs. DUC -1.0%
Cost exempt from cost sharing by item - 2020-2021 €'000 €/SU
New and existing investments -1,149.7 -0.32
Competent authorities and qualified entities costs -38.0 -0.01
Eurocontrol costs -580.9 -0.16
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 -1,768.5 -0.50

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in combined year 2020-2021 (66.27€) is -0.9% lower than the nominal DUC (66.88€) which includes DUC initially charged: 40.19€; and to be charged: 26.69€. The difference between these two figures (-0.61€/SU) is due to:
- the impact of adjustments resulting from the costs exempt from cost-sharing mechanism (-0.45€/SU); and
- the deduction of the traffic adjustment (-0.16€/SU) for the costs not subject to traffic risk sharing to be reimbursed in future years.
It should be noted that Portugal decided not to charge the inflation adjustment for 2020-2021 to airspace users.

The share of regulatory result in the AUCU (before the deduction of other revenues) is 2.1%.

Regulatory result (RR)

NAV Portugal net gain on activity in Portugal Continental en route charging zone in the combined year 2020-2021
NAV Portugal generated a net gain of +0.7 M€, resulting from a loss of -2.8 M€ arising from the cost sharing mechanism and a gain of +3.5 M€ arising from the traffic risk sharing mechanism.
NAV Portugal 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 (+0.7 M€) and the RoE (+3.7 M€) amounts to +4.4 M€ (2.2% of the en route revenues). The resulting ex-post rate of return on equity is 7.2%, which is higher than the 6.0% planned in the PP.