Cost-efficiency - Slovakia

Download Report

PRB monitoring

▪ The en route 2023 actual unit cost of Slovakia was 51.54 €2017, -13% lower than the determined unit cost (59.12 €2017). Slovakia does not have a terminal charging zone.

▪ The en route 2023 actual service units (1.1M) were +14% higher than the determined service units (1.0M).

▪ The en route 2023 actual total costs were -0.5 M€2017 (-0.9%) lower than determined. This was mainly due to an underspend in other operating costs (-2.2 M€2017 or -17%). However, the NSA did not provide explanations for this underspend.

▪ LPS SR spent 9.7 M€2017 in 2023 related to costs of investments, +31% more than determined (7.5 M€2017), primarily due to the higher prices for new assets, which have been affected by inflation.

▪ The en route actual unit cost incurred by users in 2023 was 69.92€ (+7.3% above 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 85 58 72 NA
Determined costs 93 59 62 64
Difference costs -7 -1 10 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.9% 2.0% 2.1%
Determined inflation index NA 110.9 113.1 115.5
Actual inflation rate NA 12.1% 11.0% NA
Actual inflation index NA 123.9 137.5 NA
Difference inflation index (p.p.) NA +13 +24.4 NA

AUC vs. DUC

In 2023, the en route AUC was -12.8% (or -7.57 €2017) lower than the planned DUC. This results from the combination of significantly higher than planned TSUs (+13.7%) and slightly lower than planned en route costs in real terms (-0.9%, or -0.5 M€2017). It should be noted that actual inflation index in 2023 was +24.4 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (+13.7%) falls outside the ±10% threshold foreseen in the traffic risk sharing mechanism. The resulting gain of additional en route revenues is therefore shared between the ANSP and the airspace users .

En route costs by entity

Actual real en route costs are -0.9% (-0.5 M€2017) lower than planned. This is the result of lower costs for the NSA/EUROCONTROL (-8.4%, or -0.4 M€2017), the main ANSP, LPS (-0.1%, or -0.1 M€2017) and the MET service provider (-1.6%, or 0.03 M€2017).

En route costs for the main ANSP at charging zone level

Consistent with planned en route costs in real terms for LPS in 2023 (-0.1%, or -0.1 M€2017) result from:
- Lower staff costs in real terms (-3.7%), but higher in nominal terms (+17.1%) due to inflation, which was negotiated in the union contract;
- Significantly lower other operating costs in real terms (-15.2%), but higher in nominal terms (+3.1%);
- Significantly higher depreciation costs (+31.4%) due to a €1.3M reduction for the 2023 unit rate calculation resulted from RP2 carry-over, but also higher inflation that impacted the pricess of the new assets;
- Significantly higher cost of capital (+32.7%) due to a higher value of the asset base and a higher than expected interest rate on the loan (EURIBOR 3M);
- Significantly higher deduction for VFR exempted flights (+54.7%).

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 65.14
Inflation adjustment 9.85
Cost exempt from cost-sharing -0.09
Traffic risk sharing adjustment -4.73
Traffic adj. (costs not TRS) -0.86
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -0.07
Application of lower unit rate 0.00
Total adjustments 4.10
AUCU 69.23
AUCU vs. DUC + 6.3%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments 0.0 0.00
Competent authorities and qualified entities costs 535.8 0.49
Eurocontrol costs -672.6 -0.62
Pension costs 0.0 0.00
Interest on loans 34.7 0.03
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing -102.2 -0.09

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2023 (69.92 €) is +7.3% higher than the nominal DUC (65.14 €). The difference between these two figures (+4.78 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+9.85 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (+0.59 €/SU);
- the deduction of the traffic risk sharing adjustments (-4.73 €/SU);
- the deduction of the traffic adjustment (-0.86 €/SU) for the costs not subject to traffic risk sharing; and
- the deduction of the other revenues (-0.07 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 9.1%.

Regulatory result (RR)

LPS net gain on activity in the Slovakia en route charging zone in the year 2023

LPS reported a net gain of +4.5 M€, as a combination of a gain of +2.0 M€ arising from the cost sharing mechanism, with a gain of +2.4 M€ arising from the traffic risk sharing mechanism.

LPS 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 (+4.5 M€) and the actual RoE (+2.4 M€) amounts to +6.9 M€ (10.0% of the en route revenues). The resulting ex-post rate of return on equity is 14.0%, which is higher than the 4.9% planned in the PP.