Cost-efficiency - Norway

Download Report

PRB monitoring

▪ The en route 2022 actual unit cost of Norway was 54.57 €2017, -7.0% lower than the determined unit cost (58.67 €2017). The terminal 2022 actual unit cost was 192.42 €2017, -2.0% lower than the determined unit cost (196.29 €2017).

▪ The en route 2022 actual service units (2,071K) were slightly higher (+1.1%) than the determined service units (2,048K).

▪ The en route 2022 actual total costs were 7.1 M€2017 (-5.9%) lower than determined. The decrease was mainly driven by lower staff costs (-8.5 M€2017, or -11%) largely due to the restructuring of the organisation.

▪ Avinor ANS spent 28.1 M€2017 in 2022 related to costs of investments, -1.5% lower than determined (28.6 M€2017). The NSA explained that costs related to leases were by mistake double-counted in the determined costs, and some projects being delayed compared to planned.

▪ The en route actual unit cost incurred by users in 2022 was 55.12€, while the terminal actual unit cost incurred by users was 181.06€.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 237 128 NA NA
Determined costs 236 130 133 136
Difference costs 1 -2 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 6.2% NA NA
Actual inflation index NA 117.7 NA NA
Difference inflation index (p.p.) NA +6.5 NA NA

AUC vs. DUC

In 2022, the en route AUC was -7.0% (or -38.27 NOK2017, -4.1 €2017) lower than the planned DUC, resulting from significantly lower than planned en route costs in real terms (-5.9%, or -66.6 MNOK2017, -7.1 M€2017) and higher than planned TSUs (+1.1%). It should be noted that actual inflation index in 2022 was +6.5 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (+1.1%) 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 -5.9% (-7.1 M€2017) lower than planned. This is the result of lower costs for the main ANSP, Avinor (-5.9%, or -6.5 M€2017), the MET service provider (-23.7%, or -0.3 M€2017), the other ANSP (KJE, -31.9%, or -0.2 M€2017) and the NSA/EUROCONTROL (-1.0%, or -0.1 M€2017).

En route costs for the main ANSP at charging zone level

Significantly lower than planned en route costs in real terms for Avinor in 2022 (-5.9%, or -6.5 M€2017) result from the combination of:
- Significantly lower staff costs (-10.7%), mainly due to “the restructuring of the organization. The support staff costs are reduced as these recourses (HR, finance, legal, communication etc.) have been moved to the mother company Avinor AS. As a consequence, staff support costs are instead accounted as an intercompany purchase/other operating costs.”
- Significantly higher other operating costs (+22.4%), due to the organizational restructuring (see above), higher energy prices and travel expenses after the end of Covid-19;
- Significantly lower depreciation (-11.3%), reported to be due to the overestimation of planned depreciation in the RP3 performance plan, which will be reimbursed to airspace users through the mechanism of costs exempted from cost sharing in 2024;
- Significantly higher cost of capital (+7.7%), “due to a higher share of the investments that is allocated to the en-route cost base than estimated in the determined costs”; and,
- Significantly higher deduction for VFR exempted flights (+64.2%).

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

AUCU components (€/SU) – 2022
Components of the AUCU in 2022 €/SU
DUC 58.73
Inflation adjustment 2.61
Cost exempt from cost-sharing -0.16
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) -0.05
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -0.09
Application of lower unit rate -6.06
Total adjustments -3.75
AUCU 54.98
AUCU vs. DUC -6.4%
Cost exempt from cost sharing by item - 2022 €'000 €/SU
New and existing investments -343.3 -0.17
Competent authorities and qualified entities costs -108.9 -0.05
Eurocontrol costs 126.5 0.06
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 -325.6 -0.16

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2022 (556.45 NOK or 55.12 €) is -6.2% lower than the nominal DUC (592.96 NOK or 58.73 €). The difference between these two figures (-36.51 NOK/SU or -3.62 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+26.33 NOK/SU or +2.61 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-0.23 NOK/SU or -0.02 €/SU);
- the deduction of the traffic adjustment (-0.50 NOK/SU or -0.05 €/SU) for the costs not subject to traffic risk sharing;
- the deduction of the other revenues (-0.90 NOK/SU or -0.09 €/SU); and
- application of a lower unit rate as foreseen in Art. 29(6) in year 2022 (-61.21 NOK/SU or -6.06 €/SU); and
The share of regulatory result in the AUCU (before the deduction of other revenues) is 13.0%.

Regulatory result (RR)

Avinor net gain on activity in the Norway en route charging zone in the year 2022

Avinor reported a net gain of +83.2 MNOK, as a combination of a gain of +70.7 MNOK arising from the cost sharing mechanism and a gain of +12.6 MNOK arising from the traffic risk sharing mechanism.

Avinor 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 (+83.2 MNOK) and the actual RoE (+60.6 MNOK) amounts to +143.8 MNOK (12.2% of the en route revenues). The resulting ex-post rate of return on equity is 24.2%. See also Note 2 above.

Note 1: Ex-ante and ex-post RoE are computed based on the notional gearing of 60% debt used in the RP3 PP. The actual gearing of Avinor should be reported.
Note 2: Ex-post RR should be seen in the light of the decision of the State of Norway to set the unit rate 2022 at a lower level (Art. 29(6)) than the one resulting from the RP3 PP. This decision generated losses of -127 MNOK for entities providing services in the en route charging zone (-106 MNOK for Avinor), which will be covered by the State of Norway.