Cost-efficiency - Finland

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PRB monitoring

▪ The en route 2020/2021 actual unit cost of Finland was 76.32 €2017, -6.3% lower than the determined unit cost (81.42 €2017). The terminal actual unit cost was 337.89 €2017, -8.0% lower than the determined unit cost (367.09 €2017).

▪ The en route 2021 actual service units (495K) were +2.9% higher than determined (481K).

▪ In 2021, actual total costs were -3.8 M€2017 lower (-9.5%) than determined. The main driver was the reduction of other operating costs (-2.0 M€2017, or -13%) due to lower training costs and lower travel costs. Staff costs (-1.3 M€2017, or -7.0%) were lower than determined due to temporary layoffs and postponement of the recruitment, a decrease in head count, cancellation of bonuses, and lower pension costs.

▪ Fintraffic ANS spent 6.7 M€2017 in 2021 related to costs of investments, -5.8% lower than determined (7.1 M€2017) due to the postponement of investments.

▪ The discrepancies regarding total costs and costs of investments are significant, especially as the performance plan has been submitted at the end of 2021. The PRB invites the NSA to analyse the discrepancies and identify their reasons, including potential inaccurate planning and possible misusing of the regulatory framework to finance the liquidity.

▪ The en route actual unit cost incurred by users in 2020/2021 was 71.52€, while the terminal actual unit cost incurred by users was 372.16€.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 75 NA NA NA
Determined costs 79 45 48 50
Difference costs -4 NA NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.5% 1.6% 1.8%
Determined inflation index NA 105.7 107.4 109.3
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 -6.3%, or -5.10€2017). This results from the combination of higher than planned TSUs (+1.5%) and lower than planned en route costs in real terms (by -4.9%, or -3.8 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 for 2020-2021 are -4.9% (-3.8 M€2017) lower than planned. This result is driven by the main ANSP, Fintraffic ANS (-4.9%, or -3.2 M€2017), the MET service provider (-4.4% or -0.2 M€2017) and the NSA/EUROCONTROL (-4.7%, 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 Fintraffic ANS in 2020-2021 (-4.9%, or -3.2 M€2017 lower) results from:
- lower staff costs (-4.3%), “due to temporary lay-offs, lower head count, abandoning bonuses, lower pension costs, postponing recruiting and other savings in staff costs;”
- lower other operating costs (-6.2%), “due to savings in many cost groups: voluntary staff costs (health cost, training, parking), travel costs and telecommunication and maintenance and spare parts expenses, less payments to airport operator (Finavia) due to new contracts related to HR and ICT, lower credit losses, purchases from military (ATCO) and LFV (ATCO service for Kvarken flights) were lower, costs of operative ICT services lower than planned”;
- lower depreciation (-2.6%), “due to postponing investments”;
- lower cost of capital (-14.9%), “due to postponing investments”;
- lower deduction for VFR exempted flights (-0.3%).

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

AUCU components (€/SU) – 2020-2021
Components of the AUCU in 2020-2021 €/SU
DUC 83.62
Inflation adjustment 0.22
Cost exempt from cost-sharing -0.92
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) -0.19
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -11.22
Application of lower unit rate 0.00
Total adjustments -12.10
AUCU 71.52
AUCU vs. DUC -14.5%
Cost exempt from cost sharing by item - 2020-2021 €'000 €/SU
New and existing investments -424.2 -0.44
Competent authorities and qualified entities costs 0.0 0.00
Eurocontrol costs -364.4 -0.38
Pension costs -88.9 -0.09
Interest on loans 0.0 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing -877.5 -0.92

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in combined year 2020-2021 for Finland en route charging zone (71.52€) is -14.5% lower than the nominal DUC (83.62€) which includes DUC initially charged: 47.25€; and to be charged: 36.37€. The difference between these two figures (-12.10€) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+0.22€), to be charged to the airspace users in future years;
- the deduction of the traffic adjustment (-0.19€) for the costs not subject to traffic risk sharing to be reimbursed in future years;
- the deduction of the other revenues (-11.22€);
- and the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-0.92€).
The share of regulatory result in the AUCU is 6.7%.

Regulatory result (RR)

Fintraffic ANS net gain on en route activity in the Finland charging zone in the combined year 2020-2021
Fintraffic ANS’s net gain amounts to +3.8 M€, as a combination of a gain of +2.8 M€ arising from the cost sharing mechanism and a gain of +1.0 M€ arising from the traffic risk sharing mechanism.
Fintraffic ANS 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 (+3.8 M€) and the actual RoE (+1.3 M€) amounts to +5.1 M€ (7.5% of the en route revenues). The resulting ex-post rate of return on equity is 16.9%, which is higher than the 4.3% planned in the PP.