Cost-efficiency - Czech Republic

Download Report

PRB monitoring

▪ The en route 2023 actual unit cost of Czech Republic was 50.62 €2017, -3.6% lower than the determined unit cost (52.51 €2017). The terminal 2023 actual unit cost was 226.54 €2017, -5.2% lower than the determined unit cost (239.04 €2017).

▪ The en route 2023 actual service units (2.0M) were -8.7% lower than the determined service units (2.2M).

▪ The en route 2023 actual total costs were -14 M€2017 (-12%) lower than determined, as all categories registered lower-than-planned costs. The gap was mainly a result of the underspend in other operating costs (-5.8 M€2017, or -24%), which the NSA attributed to the cost containment measures implemented in the areas of repairs, travel expenses, and software support.

▪ ANS CR spent 32 M€2017 in 2023 related to costs of investments for both en route and terminal charging zones, -11% less than determined (37 M€2017), primarily due to the postponement of some investment projects.

▪ The en route actual unit cost incurred by users in 2023 was 74.58€ (+18% above the 2023 DUC), while the terminal actual unit cost incurred by users was 316.01€ (+9.2% above the 2023 DUC). The difference between the AUCU and the DUC for the en route charging zone is primarily attributed to the inflation adjustment (+22 M€), while for the terminal charging zone, it is mainly due to lower than planned SUs (-9.7%).

▪ The en route regulatory result for ANS CR amounted to +19 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 196 109 128 NA
Determined costs 203 118 126 128
Difference costs -7 -8 2 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 2.0% 2.0% 2.0%
Determined inflation index NA 112.8 115 117.3
Actual inflation rate NA 14.8% 12.0% NA
Actual inflation index NA 128.2 143.6 NA
Difference inflation index (p.p.) NA +15.4 +28.6 NA

AUC vs. DUC

In 2023, the en route AUC was -3.6% (or -49.81 CZK2017, -1.89 €2017) lower than the planned DUC. This results from the combination of significantly lower than planned en route costs in real terms (-12.0%, or -364.3 MCZK2017, -13.8 M€2017) and significantly lower than planned TSUs (-8.7%). It should be noted that actual inflation index in 2023 was +28.6 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (-8.7%) 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

Actual real en route costs are -12.0% (-13.8 M€2017) lower than planned. This is the result of lower costs for the main ANSP, ANS CR (-12.0%, or -12.1 M€2017), the NSA/EUROCONTROL (-11.6%, or -1.4 M€2017) and the MET service provider (-14.4%, or -0.4 M€2017).

En route costs for the main ANSP at charging zone level

Significantly lower than planned en route costs in real terms for ANS CR in 2023 (-12.0%, or -12.1 M€2017) result from:
- Significantly lower staff costs in real terms (-9.6%), but higher costs in nominal terms (+12.9%), impacted by much higher-than-expected inflation rate;
- Significantly lower other operating costs (-28.6%), thanks to cost containment measures in the areas of repairs, travel expenses and software support;
- Significantly lower depreciation costs (-7.9%), reflecting deferred system upgrades and supplier delays in the DPS area, but also cash flow issues due to lower traffic levels leading to a reprioritisation of investment;
- Significantly lower cost of capital (-7.7%), as a result of “a gap in some investments and consequently lower asset base”;
- Lower deduction for VFR exempted flights (-2.3%).

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 62.96
Inflation adjustment 11.05
Cost exempt from cost-sharing -2.22
Traffic risk sharing adjustment 2.86
Traffic adj. (costs not TRS) 0.72
Finantial incentives 0.08
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -0.82
Application of lower unit rate 0.00
Total adjustments 11.67
AUCU 74.63
AUCU vs. DUC + 18.5%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments -2,940.3 -1.47
Competent authorities and qualified entities costs 190.2 0.09
Eurocontrol costs -1,658.8 -0.83
Pension costs -32.0 -0.02
Interest on loans 0.0 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing -4,441.0 -2.22

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2023 (1 787.50 CZK or 74.58 €) is +18.5% higher than the nominal DUC (1 509.01 CZK or 62.96 €). The difference between these two figures (+278.49 CZK/SU or +11.62 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+264.89 CZK/SU or +11.05 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-54.29 CZK/SU or -2.27 €/SU);
- the addition of the traffic risk sharing adjustments (+68.47 CZK/SU or +2.86 €/SU);
- the addition of the traffic adjustment (+17.17 CZK/SU or +0.72 €/SU) for the costs not subject to traffic risk sharing;
- the financial incentives (+1.88 CZK/SU or +0.08 €/SU); and
- the deduction of the other revenues (-19.63 CZK/SU or -0.82 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 13.0%.

Regulatory result (RR)

ANS CR net gain on activity in the Czech Republic en route charging zone in the year 2023

ANS CR reported a net gain of +243.7 MCZK, as a combination of a gain of +357.1 MCZK arising from the cost sharing mechanism, with a loss of -117.2 MCZK arising from the traffic risk sharing mechanism and a gain of +3.7 MCZK relating to financial incentives.

ANS CR 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 (+243.7 MCZK) and the actual RoE (+212.5 MCZK) amounts to +456.2 MCZK (14.0% of the en route revenues). The resulting ex-post rate of return on equity is 19.2%, which is higher than the 9.0% planned in the PP.