Cost-efficiency - Ireland

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PRB monitoring

▪ The en route 2023 actual unit cost of Ireland was 26.06 €2017, +4.2% higher than the determined unit cost (25.01 €2017). The terminal 2023 actual unit cost was 141.06 €2017, -16% lower than the determined unit cost (168.11 €2017).

▪ The en route 2023 actual service units (4.8M) were -1.5% lower than the determined service units (4.9M).

▪ The en route 2023 actual total costs were +3.8 M€2017 (+3.1%) higher than determined, driven by the NSA actual costs (16 M€2017), which were +123% above the determined costs (7.1 M€2017). The NSA has not provided an explanation for this significant increase. The PRB recommends that the NSA submit an updated Additional Information to the Reporting Tables, providing more comprehensive explanations for the differences between the actual and determined NSA costs.

▪ On the other hand, both AirNav and the MET provider reported underspends of -4.2% and -16%, respectively, compared to the determined costs for 2023. The underspend reported by AirNav was largely due to lower actual other operating costs compared to determined (-2.8 M€2017, or -10%), attributed to the impact of the inflation index (in nominal terms, other operational costs were lower than determined by -1.0%). Depreciation costs also registered an underspend (-2.3 M€2017, or -27%), a reflection of delays in investment implementation. These underspends were partially offset by a difference in staff costs (+2.1 M€2017, or +3.5%), primarily due to one-off payments to employees who had experienced pay reductions in 2021.

▪ AirNav Ireland spent 16 M€2017 in 2023 related to costs of investments for both en route and terminal charging zones, -26% lower than determined (21 M€2017), as investments have been delayed due to shortages in resource availability and challenges with sourcing contractors and service providers.

▪ The en route actual unit cost incurred by users in 2023 was 29.51€ (+12% above the 2023 DUC), while the terminal actual unit cost incurred by users was 163.34€ (-7.1% below the 2023 DUC).

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 205 119 136 NA
Determined costs 207 124 129 130
Difference costs -2 -5 7 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.9% 2.0% 2.0%
Determined inflation index NA 105.2 107.3 109.4
Actual inflation rate NA 8.1% 5.2% NA
Actual inflation index NA 112.5 118.3 NA
Difference inflation index (p.p.) NA +7.3 +11 NA

AUC vs. DUC

In 2023, the en route AUC was +4.7% (or +1.17 €2017) higher than the planned DUC. This results from the combination of higher than planned en route costs in real terms (+3.1%, or +3.8 M€2017) and lower than planned TSUs (-1.5%). It should be noted that actual inflation index in 2023 was +11.0 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (-1.5%) falls inside the ±2% dead band. Hence loss of en route revenues is borne by the ANSPs.

En route costs by entity

Actual real en route costs are +3.1% (+3.8 M€2017) higher than planned. This is the result of higher costs for the NSA/EUROCONTROL (+62.9%, or +9.1 M€2017) and lower costs for the MET service provider (-16.4%, or -1.1 M€2017) and the main ANSP, AirNav Ireland (-4.2%, or -4.2 M€2017).

En route costs for the main ANSP at charging zone level

Lower than planned en route costs in real terms for AirNav Ireland in 2023 (-4.2%, or -4.2 M€2017) resulting mainly from inflation index impact (+11.0 p.p.) since in nominal terms en route costs are higher than planned by +5.1%. Other drivers are:
- Higher staff costs (+3.5%), mainly due to “one-off payment to employees who were the subject of a pay reduction, implemented as a cost containment measure in 2021 during the COVID pandemic and 2% discretionary pension increase applied to pensions in payment and deferred pensions. There were also higher costs of overtime and higher general pay increases compared to the revised RP3 forecasts, which was partially offset by planned headcount being delayed by several months”;
- Significantly lower other operating costs (-10.2%), as mentioned above, due to inflation index impact since in nominal terms operational costs are lower than planned by -1.0%;
- Significantly lower depreciation (-27.1%), reflecting delays in the implementation of the investment programme due to shortages in resource availability in engineering and operations departments, as in 2022;
- Significantly lower cost of capital (-34.4%), resulting from the delays in investments; and
- Significantly lower deduction for VFR exempted flights (-9.3%).

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 26.42
Inflation adjustment 2.17
Cost exempt from cost-sharing -0.47
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) 0.07
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -0.30
Application of lower unit rate 0.00
Total adjustments 1.46
AUCU 27.88
AUCU vs. DUC + 5.5%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments -3,574.0 -0.74
Competent authorities and qualified entities costs 702.0 0.15
Eurocontrol costs 612.5 0.13
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 -2,259.4 -0.47

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2023 (29.51 €) is +11.7% higher than the nominal DUC (26.42 €). The difference between these two figures (+3.09 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+2.17 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (+1.16 €/SU);
- the addition of the traffic adjustment (+0.07 €/SU) for the costs not subject to traffic risk sharing; and
- the deduction of the other revenues (-0.30 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 1.9%.

Regulatory result (RR)

AirNav Ireland net gain on activity in the Ireland en route charging zone in the year 2023

AirNav Ireland reported a net loss of -0.7 M€, as a combination of a gain of +0.8 M€ arising from the cost sharing mechanism, with a loss of -1.6 M€ arising from the traffic risk sharing mechanism.

AirNav Ireland 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 (-0.7 M€) and the actual RoE (+2.2 M€) amounts to +1.5 M€ (1.3% of the en route revenues). The resulting ex-post rate of return on equity is 3.7%, which is lower than the 5.6% planned in the PP.