Cost-efficiency - Czech Republic

Download Report

PRB monitoring

▪ The en route 2024 actual unit cost of Czech Republic was 46.06€2017, which was equal to the determined unit cost (46.06€2017). The terminal 2024 actual unit cost of Czech Republic was 208.62€2017, +3.2% higher than the determined unit cost (202.20€2017).

▪ The en route 2024 actual service units (2.4M) were -6.2% lower than the determined service units (2.5M), mainly due to the ongoing effects of the shifted traffic flows caused by Russia’s war of aggression against Ukraine.

▪ The en route 2024 actual total costs were -7.1M€2017 (-6.2%) lower than determined. The gap was mainly a result of the underspend in other operating costs (-3.4M€2017, or -22%) for ANS CR, which the NSA attributed to “cost containment measures”.

▪ ANS CR costs of investments were 30M€2017 in 2024 for both en route and terminal charging zones, -14% less than determined (35M€2017), as the NSA indicated that “some of the system upgrades were postponed”.

▪ The en route actual unit cost incurred by users in 2024 was 59.21€ (+11% above the 2024 DUC), while the terminal actual unit cost incurred by users was 257.26€ (+8.4% above the 2024 DUC). The difference between the AUCU and the DUC is mainly driven by the difference between the determined and actual SUs for both the en route and terminal charging zones, as well as the positive inflation adjustment.

▪ Czech Republic’s RP3 performance plan included justifications for a deviation to achieve the RP3 capacity targets. The main measures included the recruitment and training of new ATCOs and a number of investments to increase capacity. Czech Republic has not submitted a detailed report of the capacity-related measures implemented. However, the number of ATCOs in operation at the end of RP3 is below the plan, and costs for new major investments are lower than determined. Czech Republic should reimburse to airspace users the excess funds received by ANSPs for measures not implemented.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 196 109 128 141
Determined costs 203 118 126 128
Difference costs -7 -8 2 13
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 2.0% 2.0% 2.0%
Determined inflation index NA 112.8 115 117.3
Actual inflation rate NA 14.8% 12.0% 2.7%
Actual inflation index NA 128.2 143.6 147.5
Difference inflation index (p.p.) NA +15.4 +28.6 +30.1

AUC vs. DUC

In 2024, the en route AUC was in line with the planned DUC. This results from the combination of significantly lower than planned TSUs (-6.2%) and significantly lower than planned en route costs in real terms (-6.2%, or -187.4 MCZK2017, -7.1 M€2017). It should be noted that the actual inflation index in 2024 was +30.1 p.p. higher than planned.

En route service units

The difference between 2024 actual and planned TSUs (-6.2%) falls outside the ±2% dead-band, but does not exceed the -10% threshold foreseen in the traffic risk sharing mechanism. The resulting loss of en route revenues is therefore shared between the ANSP and the airspace users (see the main ANSP loss in Box 11).

En route costs by entity

The 2024 actual real en route costs are -6.2% (-7.1 M€2017) lower than planned. This is the result of lower than planned costs for the main ANSP, ANS CR (-5.6%, or -5.7 M€2017), the NSA/EUROCONTROL (-5.7%, or -0.7 M€2017) and the MET service provider (-29.3%, or -0.7 M€2017).

En route costs for the main ANSP at charging zone level

Significantly lower than planned en route costs in real terms for ANS CR in 2024 (-5.6%, or -5.7 M€2017) result from:
- Higher staff costs (+2.3%), reflecting the impact of high inflation in 2022 and 2023 (14.8% and 12.0% respectively),
- Significantly lower than planned other operating costs (-22.0%), mainly due to “cost containment measures”,
- Significantly lower than planned depreciation (-11.8%), reflecting the fact that “some of the system upgrades were postponed”,
- Significantly lower than planned cost of capital (-8.5%), mainly due to”a gap in some investments and consequently lower asset base”,
- Significantly higher than planned deduction for VFR exempted flights (+17.4%).

RP3 summary

When considering the whole of RP3 (2020-2024) for Czech Republic en route charging zone, actual TSUs are -4.2% lower than planned, while actual costs in real terms are -8.0% lower than the determined costs (some -1 120.4 MCZK2017 or -42.6 M€2017). As a result, the weighted average actual unit cost over RP3 (1 498.69 CZK2017 or 56.96 €2017) is -4.0% lower than planned in the PP (1 561.34 CZK2017 or 59.34 €2017).

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

AUCU components (€/SU) – 2024
Components of the AUCU in 2024 €/SU
DUC 53.53
Inflation adjustment 9.63
Cost exempt from cost-sharing -2.00
Traffic risk sharing adjustment 1.46
Traffic adj. (costs not TRS) 0.41
Finantial incentives -0.07
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -3.63
Application of lower unit rate -0.13
Total adjustments 5.68
AUCU 59.21
AUCU vs. DUC + 10.6%
Cost exempt from cost sharing by item - 2024 €'000 €/SU
New and existing investments -3,909.1 -1.66
Competent authorities and qualified entities costs 476.8 0.20
Eurocontrol costs -1,221.2 -0.52
Pension costs -64.3 -0.03
Interest on loans 0.0 0.00
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing -4,717.8 -2.00

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2024 (1 484.88 CZK or 59.21 €) is +10.6% higher than the nominal DUC (1 342.43 CZK or 53.53 €). The difference between these two figures (+142.45 CZK/SU or +5.68 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+241.55 CZK/SU or +9.63 €/SU);
- the impact of adjustments resulting from the costs exempted from cost sharing mechanism (-50.14 CZK/SU or -2.00 €/SU);
- the addition of the traffic risk sharing adjustments (+36.65 CZK/SU or +1.46 €/SU);
- the addition of the traffic adjustment (+10.40 CZK/SU or +0.41 €/SU) for the costs not subject to traffic risk sharing;
- financial incentives (-1.78 CZK/SU or -0.07 €/SU);
- the deduction of other revenues (-91.06 CZK/SU or -3.63 €/SU); and
- application of a lower unit rate as foreseen in Art. 29(6) in year 2024 (-3.17 CZK/SU or -0.13 €/SU); and
The share of the regulatory result (see items 10 to 14) in the AUCU (before the deduction of other revenues) is 5.9%.

Regulatory result (RR)

ANS CR net gain on activity in the Czech Republic en route charging zone in the year 2024

ANS CR reported a net loss of -18.5 MCZK, as a combination of a gain of +82.3 MCZK arising from the cost sharing mechanism, with a loss of -96.6 MCZK arising from the traffic risk sharing mechanism and a loss of -4.2 MCZK relating to financial incentives.

ANS CR overall regulatory result (RR) for the en route activity

Ex-post, the overall RR taking into account the net loss from the en route activity mentioned above (-18.5 MCZK) and the actual RoE (+212.5 MCZK) amounts to +194.0 MCZK (5.8% of the en route revenues). The resulting ex-post rate of return on equity is 7.7%, which is lower than the 8.4% planned in the PP. See also Note 1 in Box 10 above.

RP3 summary

When considering the whole of RP3 (2020-2024), ANS CR generated a cumulative gain in respect of cost sharing of +1 034.5 MCZK, as actual total costs for RP3 were lower than planned. The traffic risk sharing mechanism generated a loss of -252.5 MCZK. Adding the loss of -0.4 MCZK to be retained by the ATSP in respect of financial incentives and the actual RoE (+973.7 MCZK over RP3) leads to an overall regulatory result of +1 755.2 MCZK, which corresponds to an average ex-post rate of return on equity of 14.7% (compared to 8.2% initially planned in the PP). See also Note 1 in Box 10 above.

Note 1: Ex-post RR does not take into account the application of the lower unit rate as per Art. 29.6 (loss in revenues corresponds to -7.5 MCZK or -0.3 M€ for 2024).