Cost-efficiency - Norway

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PRB monitoring

▪ The en route 2023 actual unit cost of Norway was 49.37 €2017, -5.2% lower than the determined unit cost (52.10 €2017). The terminal 2023 actual unit cost was 198.06 €2017, +14% higher than the determined unit cost (173.37 €2017).

▪ The en route 2023 actual service units (2.33M) were slightly higher (+0.5%) than the determined service units (2.32M).

▪ The en route 2023 actual total costs were -5.7 M€2017 (-4.7%) lower than determined. This reduction was largely driven by lower staff costs (-8.7 M€2017, or -11%). According to the NSA, the lower staff costs were due to wage growth that did not meet expectations and an increase in project activity. With more project activity than determined, costs related to these projects, such as the time staff dedicated to developing new assets, were reclassified from staff costs to capital costs.

▪ Avinor ANS spent 27 M€2017 in 2023 related to costs of investments for both en route and terminal charging zones, -11% lower than determined (31 M€2017). This reduction was attributed to the reduction in actual depreciation costs compared to determined figures (-4.9 M€2017, or -35%), owing to the postponement of the new ATM system and a smaller than anticipated impact from leases.

▪ The en route actual unit cost incurred by users in 2023 was 50.16€ (+7.1% above the 2023 DUC), while the terminal actual unit cost incurred by users was 173.41€ (+10% above the 2023 DUC). The difference between the AUCU and the DUC in terminal charging zone is primarily attributed to the inflation mechanism (+3.1 M€).

▪ The en route regulatory result for Avinor amounted to +12 M€, or 11% 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 237 128 136 NA
Determined costs 236 130 133 136
Difference costs 1 -2 4 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 2.0% 2.0% 2.0%
Determined inflation index NA 111.2 113.4 115.6
Actual inflation rate NA 6.2% 5.8% NA
Actual inflation index NA 117.7 124.5 NA
Difference inflation index (p.p.) NA +6.5 +11.1 NA

AUC vs. DUC

In 2023, the en route AUC was -5.2% (or -25.41 NOK2017, -2.72 €2017) lower than the planned DUC. This results from the combination of lower than planned en route costs in real terms (-4.7%, or -53.3 MNOK2017, -5.7 M€2017) and slightly higher than planned TSUs (+0.5%). It should be noted that actual inflation index in 2023 was +11.1 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (+0.5%) falls inside the ±2% dead band. Hence gain of additional en route revenues is fully retained by the ANSPs .

En route costs by entity

Actual real en route costs are -4.7% (-5.7 M€2017) lower than planned. This is the result of lower costs for the main ANSP, Avinor (-6.9%, or -7.6 M€2017), the MET service provider (-36.9%, or -0.5 M€2017) and the other ANSP (KJE, -14.5%, or -0.1 M€2017) and higher costs for the NSA/EUROCONTROL (+30.2%, or +2.5 M€2017).

En route costs for the main ANSP at charging zone level

Significantly lower than planned en route costs in real terms for Avinor in 2023 (-6.9%, or -7.6 M€2017), while the costs were slightly above the plan in nominal terms (+0.8%) resulting from:
- Significantly lower staff costs (-10.8%) in real terns, while, in nominal terms costs were -2.1% below the plan, reflecting lower than planned growth in wages as well as “increased project activity compared to plan, which moves costs from staff cost to cost of capital”;
- Significantly higher other operating costs (+30.2%), resulting from a combination of a write-off of an investment project as well as higher than planned travel costs, reversed provisions and higher than planned costs of service contracts for systems.
- Significantly lower depreciation (-36.7%), resulting from a combination of lower than planned effect of leases (IFRS16) and lower than planned depreciation of fixed assets.
- Significantly higher cost of capital (+25.6%) explained by increase in project costs related to the new ATM system as detailed above.
- Significantly higher deduction for VFR exempted flights (+143.6%).

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 46.82
Inflation adjustment 3.49
Cost exempt from cost-sharing -0.09
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) -0.02
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues 0.00
Application of lower unit rate 0.00
Total adjustments 3.39
AUCU 50.21
AUCU vs. DUC + 7.2%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments -2,367.7 -1.02
Competent authorities and qualified entities costs 63.3 0.03
Eurocontrol costs 2,104.9 0.90
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 -199.5 -0.09

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2023 (572.27 NOK or 50.16 €) is +7.1% higher than the nominal DUC (534.23 NOK or 46.82 €). The difference between these two figures (+38.04 NOK/SU or +3.33 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+39.87 NOK/SU or +3.49 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (-1.62 NOK/SU or -0.14 €/SU); and
- the deduction of the traffic adjustment (-0.21 NOK/SU or -0.02 €/SU) for the costs not subject to traffic risk sharing.
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 10.7%.

Regulatory result (RR)

Avinor net gain on activity in the Norway en route charging zone in the year 2023

Avinor reported a net gain of +60.9 MNOK, as a combination of a gain of +54.9 MNOK arising from the cost sharing mechanism, with a gain of +6.0 MNOK arising from the traffic risk sharing mechanism.

Avinor 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 (+60.9 MNOK) and the actual RoE (+74.3 MNOK) amounts to +135.2 MNOK (11.2% of the en route revenues). The resulting ex-post rate of return on equity is 18.6%, which is higher than the 10.2% planned in the PP..