Cost-efficiency - Sweden

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PRB monitoring

▪ The en route 2023 actual unit cost of Sweden was 93.28 €2017, +38% higher than the determined unit cost (67.58 €2017). The terminal 2023 actual unit cost was 180.30 €2017, +32% higher than the determined unit cost (136.86 €2017).

▪ The en route 2023 actual service units (2.7M) were -18% lower than the determined service units (3.2M), mainly due to shifted traffic flows caused by Russia’s war of aggression against Ukraine.

▪ The en route 2023 actual total costs were higher than determined (+29 M€2017, or +13%). The difference was mainly driven by LFV staff cost (+25 M€2017, or +22%) and cost of capital (+3.6 M€2017, or +86%). The gap in staff costs is largely due to higher pension costs, indexed to inflation, which increased more than anticipated. Additionally, higher-than-planned salary increases following salary negotiations effective from October 2023 also contributed to the overall cost increase. According to the NSA, the cost of capital reflects the impact of high inflation on the valuation of pension debt, which is being used for financing instead of loans. The PRB highlights that the difference in en route pension costs for LFV (+30 M€2017, or +77%), intended to be claimed as cost exempt from the cost-sharing mechanism, could lead to double counting with the inflation adjustment and with the significantly higher valuation of the pension plan in the cost of capital (+2 M€2017, or +134%). Consequently, the PRB recommends that the NSA re-evaluates the reported adjustments for both en route and terminal in compliance with the Regulation.

▪ LFV spent 21 M€2017 in 2023 related to costs of investments for both en route and terminal charging zones, +12% higher than determined (19 M€2017). The primary factor behind this difference was a significant overspend in the cost of capital related to the cost of new and existing investments (+1.9 M€2017, or +65%). This gap was mainly due to the growth in average interest rates, which increased from 1.84% to 4.68%.

▪ The en route actual unit cost incurred by users in 2023 was 91.17€ (+44% above the 2023 DUC), while the terminal actual unit cost incurred by users was 181.26€ (+38% above the 2023 DUC). The difference between the AUCU and the DUC is strongly affected by the difference between the determined and actual SUs.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 496 246 292 NA
Determined costs 502 240 245 232
Difference costs -6 7 48 NA
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 4.8% 2.2% 1.7%
Determined inflation index NA 112.4 114.9 116.9
Actual inflation rate NA 8.1% 5.9% NA
Actual inflation index NA 116 122.8 NA
Difference inflation index (p.p.) NA +3.5 +7.9 NA

AUC vs. DUC

In 2023, the en route AUC was +38.0% (or +247.56 SEK2017, +25.7 €2017) higher than the planned DUC. This results from the combination of significantly lower than planned TSUs (-17.9%) and significantly higher than planned en route costs in real terms (+13.3%, or +280.8 MSEK2017, +29.1 M€2017). It should be noted that actual inflation index in 2023 was +7.9 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (-17.9%) falls outside the ±10% threshold foreseen in the traffic risk sharing mechanism. The resulting loss of en route revenues is therefore shared between the ANSPs and the airspace users.

En route costs by entity

Actual real en route costs are +13.3% (+29.1 M€2017) higher than planned. This is the result of higher costs for the main ANSP, LFV (+17.3%, or +28.3 M€2017), the NSA/EUROCONTROL (+14.8%, or +4.0 M€2017) and the MET service provider (+2.8%, or +0.1 M€2017) and lower costs for the other ANSPs (ACR, ARV and SDATS, -13.3%, or -3.3 M€2017).

En route costs for the main ANSP at charging zone level

Significantly higher than planned en route costs in real terms for LFV in 2023 (+17.3%, or +28.3 M€2017) result from:
- Significantly higher staff costs (+22.4%) reflecting “higher than planned pension costs stemming from a higher indexation than anticipated” and, to a lesser extent, higher than planned salary increases following conclusion of Swedish salary agreement valid from October 2023.
- Lower other operating costs (-1.6%) in real terms, reflecting entirely the impact of the inflation index (+7.9 p.p.) since, in nominal terms, the costs are above the plan (+5.2%), which is explained by”inflation, energy prices, Swedish salary agreements and weaker Swedish krona”.
- Higher depreciation (+2.4%), and
- Significantly higher cost of capital (+85.9%), reflecting “an effect of the high inflation that affects the valuation of the pension debt (that is used for financing instead of loans)”

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

AUCU components (€/SU) – 2023
Components of the AUCU in 2023 €/SU
DUC 63.35
Inflation adjustment 4.24
Cost exempt from cost-sharing 14.45
Traffic risk sharing adjustment 8.98
Traffic adj. (costs not TRS) 1.94
Finantial incentives 0.56
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -2.22
Application of lower unit rate 0.00
Total adjustments 27.96
AUCU 91.31
AUCU vs. DUC + 44.1%
Cost exempt from cost sharing by item - 2023 €'000 €/SU
New and existing investments 1,619.6 0.61
Competent authorities and qualified entities costs 990.4 0.37
Eurocontrol costs 2,559.1 0.96
Pension costs 33,189.2 12.45
Interest on loans 173.0 0.06
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing 38,531.3 14.45

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2023 (1045.06 SEK or 91.17 €) is +43.9% higher than the nominal DUC (726.16 SEK or 63.35 €). The difference between these two figures (+318.91 SEK/SU or +27.82 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+48.61 SEK/SU or +4.24 €/SU);
- the impact of adjustments resulting from the costs exempted from cost-sharing mechanism (+164.09 SEK/SU or +14.32 €/SU);
- the addition of the traffic risk sharing adjustments (+102.95 SEK/SU or +8.98 €/SU);
- the addition of the traffic adjustment (+22.21 SEK/SU or +1.94 €/SU) for the costs not subject to traffic risk sharing;
- financial incentives (+6.45 SEK/SU or +0.56 €/SU); and
- the deduction of the other revenues (-25.40 SEK/SU or -2.22 €/SU).
The share of the regulatory result in the AUCU (before the deduction of other revenues) is 1.6%.

Regulatory result (RR)

LFV net gain on activity in the Sweden en route charging zone in the year 2023

LFV reported a net gain of +15.0 MSEK, as a combination of a gain of +75.3 MSEK arising from the cost sharing mechanism, with a loss of -77.5 MSEK arising from the traffic risk sharing mechanism and a gain of +17.2 MSEK relating to financial incentives.

LFV 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 (+15.0 MSEK) and the actual RoE (+2.4 MSEK) amounts to +17.5 MSEK (0.8% of the en route revenues). The resulting ex-post rate of return on equity is 3.8%, which is higher than the 0.5% planned in the PP.