Cost-efficiency - Cyprus

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PRB monitoring

▪ The en route 2023 actual unit cost of Cyprus was 27.43 €2017, -6.5% lower than the determined unit cost (29.35 €2017). Cyprus does not have a terminal charging zone.

▪ The en route 2023 actual service units (2.07M) were -2.9% lower than the determined service units (2.13M).

▪ The en route 2023 actual total costs were -5.8 M€2017 (-9.3%) lower than determined, as all categories registered lower-than-planned costs. According to the NSA, this difference was largely due to a reduction in other operating costs (-2.7 M€2017, or -8.8%), primarily because of “a delay in the operation of the new ACC building in Kokkinotrimithia (for which additional operating costs had been forecast)”.

▪ DCAC Cyprus spent 4.8 M€2017 in 2023 related to costs of investments, -15% less than determined (5.7 M€2017), mainly due to the partial implementation of two key investment projects.

▪ The en route actual unit cost incurred by users in 2023 was 32.72€ (+3.7% above the 2023 DUC).

▪ The en route regulatory result for DCAC Cyprus amounted to +6.3 M€, or 14% of the 2023 revenue. This may indicate that the airspace users are charged for costs which have not materialised in 2023.

▪ The PRB will take into consideration the implementation of the RP3 performance plan when assessing the RP4 cost-efficiency targets.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 101 58 62 NA
Determined costs 105 60 67 71
Difference costs -3 -2 -5 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 5.3% 2.3% 2.0%
Determined inflation index NA 109.1 111.6 113.9
Actual inflation rate NA 8.1% 3.9% NA
Actual inflation index NA 112 116.4 NA
Difference inflation index (p.p.) NA +2.9 +4.8 NA

AUC vs. DUC

In 2023, the en route AUC was -6.5% (or -1.92 €2017) lower than the planned DUC. This results from the combination of significantly lower than planned en route costs in real terms (-9.3%, or -5.8 M€2017) and lower than planned TSUs (-2.9%). It should be noted that the actual inflation index in 2023 was +4.8 p.p. higher than planned.

En route service units

In 2023, difference between actual and planned TSUs (-2.9%) 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 ANSP and the airspace users.

En route costs by entity

The 2023 actual real en route costs are -9.3% (-5.8 M€2017) lower than planned. This is the result of lower than planned costs for the main ANSP, DCAC Cyprus (-13.9%, or -5.9 M€2017) and the MET service provider (-21.9%, or -0.9 M€2017), while costs for the NSA/EUROCONTROL are higher (+6.6%, or +1.0 M€2017) than planned.

En route costs for the main ANSP at charging zone level

Significantly lower than planned en route costs in real terms for DCAC Cyprus in 2023 (-13.9%, or -5.9 M€2017) result from:
- Significantly lower staff costs (-7.8%) reported to be mainly due to “an unforeseen change in the national pension law which affected public sector employees hired after 2011”,
- Significantly lower other operating costs (-20.2%), reported to be “mainly due to a delay in the operation of the new ACC building in Kokkinotrimithia (for which additional operating costs had been forecast)”,
- Significantly lower depreciation (-8.0%) reported to be mainly “due to a postponement or the partial implementation of two investments: one is regarding the implementation of an IP compatible voice-communication system at the ACC and other is regarding the partial implementation of surveillance equipment upgrades”,
- Significantly lower cost of capital (-25.4%), reported to be”mainly due to the postponement or the partial implementation of the above mentioned two investments”.

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 31.56
Inflation adjustment 0.93
Cost exempt from cost-sharing -0.41
Traffic risk sharing adjustment 0.15
Traffic adj. (costs not TRS) 0.28
Finantial incentives 0.23
Modulation of charges 0.00
Cross-financing 0.00
Other revenues 0.00
Application of lower unit rate 0.00
Total adjustments 1.18
AUCU 32.74
AUCU vs. DUC + 3.7%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments -1,049.1 -0.51
Competent authorities and qualified entities costs 706.1 0.34
Eurocontrol costs 362.9 0.18
Pension costs -877.3 -0.42
Interest on loans 0.0 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing -857.5 -0.41

The actual en route unit cost incurred by airspace users (AUCU) in respect of the activities performed in 2023 (32.72 €) is +3.7% higher than the nominal DUC (31.56 €). The difference between these two figures (+1.16 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+0.93 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-0.44 €/SU);
- the addition of the traffic risk sharing adjustments (+0.15 €/SU);
- the addition of the traffic adjustment (+0.28 €/SU) for the costs not subject to traffic risk sharing; and
- financial incentives (+0.23 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 10.5%.

Regulatory result (RR)

DCAC Cyprus net gain on activity in the Cyprus en route charging zone in the year 2023

DCAC Cyprus reported a net gain of +4.5 M€, as a combination of a gain of +5.1 M€ arising from the cost sharing mechanism, with a loss of -1.1 M€ arising from the traffic risk sharing mechanism and a gain of +0.5 M€ relating to financial incentives.

DCAC Cyprus 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 above mentioned (+4.5 M€) and the actual RoE (+1.8 M€) amounts to +6.3 M€ (13.5% of the en route revenues). The resulting ex-post rate of return on equity is 18.7%, which is higher than the 5.3% planned in the PP.