Cost-efficiency - Sweden

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PRB monitoring

▪ The en route 2022 actual unit cost of Sweden was 89.61 €2017, 11% higher than the determined unit cost (80.42 €2017). The terminal 2022 actual unit cost was 166.24 €2017, 7.0% lower than the determined unit cost (178.80 €2017).

▪ The en route 2022 actual service units (2,472K) were 9.3% lower than the determined service units (2,724K).

▪ The en route 2022 actual total costs were slightly higher than determined (+2.5 M€2017, or +1.1%). The decrease in staff cost due to lower pension costs (-8.9 M€2017, or -6.6%) was partly offset by increases in all of the other cost categories.

▪ The NSA explained that the significant increase in cost of capital (+5.0 M€2017, or +59%) was due to higher inflation rates than planned increasing the valuation of the pension debt.

▪ LFV spent 27 M€2017 in 2022 related to costs of investments, 30% higher than determined (21 M€2017). The NSA explained that it was mainly due to a write-down of the investment project TopSky and a higher than planned value of pension debts that was used to finance investments.

▪ These significant differences in investment costs amount to 5.5 M€ in nominal terms, which Sweden intended to charge to airspace users through the cost sharing mechanism. The PRB invites the NSA to investigate the eligibility of such costs and to ensure proper consultation with airspace users on this topic.

▪ The en route actual unit cost incurred by users in 2022 was 84.22€, while the terminal actual unit cost incurred by users was 180.34€.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 496 246 NA NA
Determined costs 502 240 245 232
Difference costs −6 7 NA NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 4.8% 2.2% 1.7%
Determined inflation index NA 112.4 114.9 116.9
Actual inflation rate NA 8.1% NA NA
Actual inflation index NA 116 NA NA
Difference inflation index (p.p.) NA +3.5 NA NA

AUC vs. DUC

In 2022, the en route AUC was +11.4% (or +88.62 SEK2017, +9.2 €2017) higher than the planned DUC. This results from the combination of significantly lower than planned TSUs (-9.3%) and higher than planned en route costs in real terms (+1.1%, or +23.8 MSEK2017, +2.5 M€2017). It should be noted that actual inflation index in 2022 was +3.5 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (-9.3%) falls outside the ±2% dead band, but does not exceed the ±10% threshold foreseen in the traffic risk sharing mechanism. The resulting loss of en route revenues is therefore shared between the ANSPs and the airspace users, with the main ANSP (LFV) bearing a loss of -6.5 M€2017.

En route costs by entity

Actual real en route costs are +1.1% (+2.5 M€2017) higher than planned. This results from the combination of higher costs for the NSA/EUROCONTROL (+13.1%, or +3.5 M€2017) and the main ANSP, LFV (+1.2%, or +1.9 M€2017), and lower costs for the other ANSPs (ACR, ARV and SDATS, -11.5%, or -2.7 M€2017) and MET service provider (-3.2%, or -0.2 M€2017).

En route costs for the main ANSP at charging zone level

Higher than planned en route costs in real terms for LFV in 2022 (+1.2%, or +1.9 M€2017) result from the combination of:
- Significantly lower staff costs (-6.1%), driven by lower than planned pension costs. In addition, “staff costs were reduced by the revenues for staff participating in projects or other things not financed by en route charges”;
- Higher other operating costs (+3.1%), mainly due to higher energy prices and maintenance costs;
- Significantly higher depreciation (+18.0%), resulting mainly from (i) a write down of Ett System Topsky, and (ii) RTS Swedavia, which had higher total investment and shorter depreciation time; and,
- Significantly higher cost of capital (+62.0%), “as an effect of the high inflation that affects the valuation of the pension debt (that is used for financing instead of loans).”

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

AUCU components (€/SU) – 2022
Components of the AUCU in 2022 €/SU
DUC 79.82
Inflation adjustment 2.16
Cost exempt from cost-sharing 0.50
Traffic risk sharing adjustment 3.84
Traffic adj. (costs not TRS) 1.14
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues −3.16
Application of lower unit rate 0.00
Total adjustments 4.49
AUCU 84.30
AUCU vs. DUC +5.6%
Cost exempt from cost sharing by item - 2022 €'000 €/SU
New and existing investments 626.4 0.25
Competent authorities and qualified entities costs 285.3 0.12
Eurocontrol costs 3,044.3 1.23
Pension costs −2,761.2 −1.12
Interest on loans 44.9 0.02
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing 1,239.7 0.50

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2022 (894.73 SEK or 84.22 €) is +5.5% higher than the nominal DUC (847.93 SEK or 79.82 €). The difference between these two figures (+84.22 SEK/SU or +4.40 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+23.00 SEK/SU or +2.16 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (+4.46 SEK/SU or +0.42 €/SU);
- the addition of the traffic risk sharing adjustments (+40.78 SEK/SU or +3.84 €/SU);
- the addition of the traffic adjustment (+12.15 SEK/SU or +1.14 €/SU) for the costs not subject to traffic risk sharing; and,
- the deduction of the other revenues (-33.60 SEK/SU or -3.16 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is -3.3%.

Regulatory result (RR)

LFV net gain on activity in the Sweden en route charging zone in the year 2022

LFV reported a net loss of -101.7 MSEK, as a combination of a loss of -29.3 MSEK arising from the cost sharing mechanism and a loss of -72.3 MSEK arising from the traffic risk sharing mechanism.

LFV overall regulatory results (RR) for the en route activity

Ex-post, the overall RR taking into account the net loss from the en route activity mentioned above (-101.7 MSEK) and the actual RoE (+2.3 MSEK) corresponds to a loss of -99.4 MSEK (-5.8% of the en route revenues). The resulting ex-post rate of return on equity is -18.4%.

Note 1:** The analysis presented for LFV is affected by two factors:
a) LFV reports a financing of asset base at the level of some 77% of debt in 2022, corresponding to its pension liabilities, which are remunerated at the inflation rate.
b) Information reported in the en route reporting tables of LFV includes also the costs for CNS infrastructure owned by the airport operators.