Cost-efficiency - Italy

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PRB monitoring

▪ The en route 2023 actual unit cost of Italy was 55.57 €2017, -10% lower than the determined unit cost (61.52 €2017). The terminal zone 1 2023 actual unit cost was 148.84 €2017, +0.3% higher than the determined unit cost (148.46 €2017), while the terminal zone 2 2023 actual unit cost was 163.41 €2017, -14% lower than the determined unit cost (189.46 €2017).

▪ The en route 2023 actual service units (11M) were 1.5% higher than the determined service units (10M).

▪ The en route 2023 actual total costs were -53 M€2017 (-8.3%) lower than determined, with reductions across all categories except for the cost of capital. The most significant reduction was in staff costs (-35 M€2017, or -9.8%). Despite this, in nominal terms, there was a difference of +1% in actual staff costs compared to the determined figures due to new hires and an agreement with trade unions. Other operating costs also saw a substantial underspend between actual and determined cots (-19.9 M€2017, or -13%), for which the NSA did not provide a detailed explanation.

▪ ENAV spent 142 M€2017 in 2023 related to costs of investments for both en route and terminal charging zones, +1.3% more than determined (140 M€2017). This gap was largely due to an overspend in the cost of capital (+29%, or +11 M€2017), which is primarily attributed to the growth in fixed assets and rising interest rates (from 1.86% to 5.0%). However, the reported average interest rate does not align with the genuine average interest rate that ENAV incurred in 2023, which was 3.83%. The PRB recommends that ENAV report the genuine average interest rate they experienced as the actual figure, in line with the Regulation.

▪ The en route actual unit cost incurred by users in 2023 was 71.14€ (+10% above the 2023 DUC), while the terminal zone 1 actual unit cost incurred by users was 179.31€ (+16% above the 2023 DUC) and 213.48€ (+7.5% above the 2023 DUC) for terminal zone 2. The difference between the AUCU and the DUC for all charging zones is primarily attributed to the inflation mechanism (+68 M€).

▪ The en route regulatory result for ENAV amounted to +119 M€, or 18% 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 1,186 645 669 NA
Determined costs 1,197 651 674 689
Difference costs −12 −6 −4 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.8% 1.2% 1.2%
Determined inflation index NA 105.3 106.6 107.9
Actual inflation rate NA 8.7% 5.9% NA
Actual inflation index NA 112.8 119.4 NA
Difference inflation index (p.p.) NA +7.4 +12.9 NA

AUC vs. DUC

In 2023, the en route AUC was -9.7% (or -5.95 €2017) lower than the planned DUC. This results from the combination of significantly lower than planned en route costs in real terms (-8.3%, or -53.2 M€2017) and higher than planned TSUs (+1.5%). It should be noted that the actual inflation index in 2023 was +12.9 p.p. higher than planned.

En route service units

The difference between the 2023 actual and planned TSUs (+1.5%) falls inside the ±2% dead band. Hence the gain of additional en route revenues is retained by the ANSPs .

En route costs by entity

The 2023 actual real en route costs are -8.3% (-53.2 M€2017) lower than planned. This is the result of lower than planned costs for the main ANSP, ENAV (-9.2%, or -50.1 M€2017) and the other ANSP (ITAF, -9.8%, or -5.0 M€2017), while the NSA/EUROCONTROL costs are higher (+4.1%, or +1.9 M€2017) than planned.

En route costs for the main ANSP at charging zone level

The 2023 actual real en route costs for ENAV are significantly lower than planned (-9.2%, or -50.1 M€2017), mainly due to a higher than planned inflation index in 2023 (+12.9 p.p.) and resulting from:
- Significantly lower than planned staff costs in real terms (-9.6%), but slightly higher in nominal terms (+1.3%), reported to be mainly due to “hirings, and agreements with the trade unions with regard to working hours flexibility, recovery of inflation of approximately 5.2%, and increase in salary of 2% per annum over 2023-2025”,
- Significantly lower than planned other operating costs (-22.3%) without explanations,
- Significantly lower than planned depreciation (-10.6%), no explanations is provided beyond the fact that the difference will be reimbursed to users,
- Significantly higher than planned cost of capital (+28.7%), mainly due to “the increase in the average interest on debt from 1.86% to 5.00% (including the debt risk premium equal to 3.83%)”

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 64.44
Inflation adjustment 5.64
Cost exempt from cost-sharing 0.46
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) −0.17
Finantial incentives 1.08
Modulation of charges 0.00
Cross-financing 0.00
Other revenues −0.31
Application of lower unit rate 0.00
Total adjustments 6.70
AUCU 71.14
AUCU vs. DUC +10.4%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments 1,345.0 0.13
Competent authorities and qualified entities costs −233.2 −0.02
Eurocontrol costs 2,114.7 0.20
Pension costs 0.0 0.00
Interest on loans 1,683.6 0.16
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing 4,910.2 0.46

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2023 (71.14 €) is +10.4% higher than the nominal DUC (64.44 €). The difference between these two figures (+6.70 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+5.64 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (+0.46 €/SU);
- the deduction of the traffic adjustment (-0.17 €/SU) for the costs not subject to traffic risk sharing;
- financial incentives (+1.08 €/SU); and
- the deduction of the other revenues (-0.31 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 16.5%.

Regulatory result (RR)

ENAV net gain on activity in the Italy en route charging zone in the year 2023

ENAV reported a net gain of +83.0 M€, as a combination of a gain of +62.9 M€ arising from the cost sharing mechanism, with a gain of +8.6 M€ arising from the traffic risk sharing mechanism and a gain of +11.5 M€ relating to financial incentives.

ENAV 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 (+83.0 M€) and the actual RoE (+36.2 M€) amounts to +119.2 M€ (18.3% of the en route revenues). The resulting ex-post rate of return on equity is 16.1%, which is higher than the 4.9% planned in the PP.