Cost-efficiency - Croatia

Download Report

PRB monitoring

▪ The en route 2024 actual unit cost of Croatia was 28.74€2017, -29% lower than the determined unit cost (40.48€2017). Croatia does not have a terminal charging zone.

▪ The en route 2024 actual service units (3.0M) were +35% higher than the determined service units (2.3M).

▪ The en route 2024 actual total costs were -3.6M€2017 (-3.9%) lower than determined. This is mainly due to lower other operating costs (-3.3M€2017, or -20%), followed by lower depreciation and cost of capital for Croatia Control. The NSA attributed this to the deferral of investment projects, which resulted in lower maintenance costs, as well as to lower-than-expected expenditures.

▪ Croatia Control costs of investments were 13M€2017 in 2024, -4.9% less than determined (14M€2017). According to the NSA, this is mainly due to the postponement of investment projects.

▪ The en route actual unit cost incurred by users in 2024 was 36.58€ (-15% below the 2024 DUC), mainly affected by higher than planned service units.

▪ The en route regulatory result for Croatia Control amounted to +14M€, or 13% of the 2024 revenue.

▪ Croatia should ensure that any excessive regulatory result, including excess funds received by the ANSP due to the inflation mechanism, is either reinvested to improve the quality of services delivered to airspace users or reimbursed to them.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 162 87 97 108
Determined costs 171 86 94 97
Difference costs -9 0 4 11
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.1% 1.9% 2.2%
Determined inflation index NA 104.3 106.3 108.7
Actual inflation rate NA 10.7% 8.4% 4.0%
Actual inflation index NA 116.4 126.2 131.3
Difference inflation index (p.p.) NA +12.1 +19.9 +22.6

AUC vs. DUC

In 2024, the en route AUC was -29.0% (or -11.74 €2017) lower than the planned DUC. This results from the combination of significantly higher than planned TSUs (+35.3%) and lower than planned en route costs in real terms (-3.9%, or -3.6 M€2017). It should be noted that the actual inflation index in 2024 was +22.6 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (+35.3%) 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 airspace users (see the main ANSP gain in Box 11).

En route costs by entity

Actual real en route costs are -3.9% (-3.6 M€2017) lower than planned. This is the result of lower costs for the main ANSP, Croatia Control (-5.9%, or -5.0 M€2017) and higher costs for the NSA/EUROCONTROL (+21.6%, or +1.4 M€2017).

En route costs for the main ANSP at charging zone level

Significantly lower than planned en route costs in real terms for Croatia Control in 2024 (-5.9%, or -5.0 M€2017) result from:
- Slightly lower staff costs (-0.6%), due to the impact of inflation index (+22.6 p.p.) since in nominal terms, staff costs, were above planned by +20.0% “predominantly driven by an addition to the CCL collective agreement (signed at the end of 2023, with the first full-year impact in 2024) and the adjustment of labour expenses to partially align with inflation trends (…) and traffic growth coupled with higher than planned pension costs”.
- Significantly lower other operating costs (-19.6%), due to lower-than-planned expenses related to capital expenditure, maintenance, and other items, which offset inflationary pressures on raw materials and energy.
- Significantly lower depreciation (-9.5%), due to postponed CAPEX from previous years and ongoing efforts to address technical staffing constraints.
- Significantly lower cost of capital (-6.9%), driven by reduced average fixed assets from delayed investment projects and a decrease in non-current assets due to higher-than-planned interest-bearing assets.
- Significantly lower deduction for VFR exempted flights (-37.5%).

RP3 summary

When considering the whole of RP3 (2020-2024) for Croatia en route charging zone, actual TSUs are +25.1% higher than planned, while actual costs in real terms are -6.4% lower than the determined costs (some -27.7 M€2017). As a result, the weighted average actual unit cost over RP3 (39.28 €2017) is -25.2% lower than planned in the PP (52.53 €2017).

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

AUCU components (€/SU) – 2024
Components of the AUCU in 2024 €/SU
DUC 43.13
Inflation adjustment 5.11
Cost exempt from cost-sharing 0.59
Traffic risk sharing adjustment -8.55
Traffic adj. (costs not TRS) -1.49
Finantial incentives -0.33
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -1.88
Application of lower unit rate 0.00
Total adjustments -6.55
AUCU 36.58
AUCU vs. DUC -15.2%
Cost exempt from cost sharing by item - 2024 €'000 €/SU
New and existing investments -666.8 -0.22
Competent authorities and qualified entities costs 1,445.2 0.47
Eurocontrol costs -64.5 -0.02
Pension costs 1,077.1 0.35
Interest on loans -4.2 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing 1,786.7 0.59

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2024 (36.58 €) is -15.2% lower than the nominal DUC (43.13 €). The difference between these two figures (-6.55 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+5.11 €/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 (-8.55 €/SU);
- the deduction of the traffic adjustment (-1.49 €/SU) for the costs not subject to traffic risk sharing;
- financial incentives (-0.33 €/SU); and
- the deduction of other revenues (-1.88 €/SU).
The share of the regulatory result (see items 10 to 13) in the AUCU (before the deduction of other revenues) is 11.9%.

Regulatory result (RR)

Croatia Control net gain/loss on activity in the Croatia en route charging zone in the year 2024

Croatia Control reported a net gain of +9.2 M€, as a combination of a gain of +6.5 M€ arising from the cost sharing mechanism, with a gain of +3.7 M€ arising from the traffic risk sharing mechanism and a loss of -1.0 M€ relating to financial incentives.

Croatia Control overall regulatory result (RR) for the en route activity

Ex-post, the overall RR taking into account the net gain from the en route activity mentioned above (+9.2 M€) and the actual RoE (+4.7 M€) amounts to +14.0 M€ (12.8% of the en route revenues). The resulting ex-post rate of return on equity is 22.0%, which is higher than the 7.5% planned in the PP.

RP3 summary

When considering the whole of RP3 (2020-2024), Croatia Control generated a cumulative gain in respect of cost sharing of +32.5 M€, as actual total costs for RP3 were lower than planned. The traffic risk sharing mechanism generated a gain of +11.1 M€. Adding the loss of -2.0 M€ to be retained by the ATSP in respect of financial incentives and the actual RoE (+21.3 M€ over RP3) leads to an overall regulatory result of +62.9 M€, which corresponds to an average ex-post rate of return on equity of 19.5% (compared to 6.6% initially planned in the PP).

Note: Croatia joined the euro area on 1 January 2023. On that date the euro replaced the Croatian kuna at the fixed exchange rate of €1 = HRK 7.53450. This may result in slight differences in determined and actual costs comparing to previous monitoring reports.