Cost-efficiency - Denmark

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PRB monitoring

▪ The en route 2024 actual unit cost of Denmark was 66.40€2017, +25% higher than the determined unit cost (52.97€2017). The terminal 2024 actual unit cost was 157.46€2017, +13% higher than the determined unit cost (139.13€2017).

▪ The en route 2024 actual service units (1.6M) were -12% lower than the determined service units (1.8M), mainly due to shifted traffic flows caused by Russia’s war of aggression against Ukraine.

▪ The en route 2024 actual total costs were +10M€2017 (+10%) higher than determined. This was mainly driven by higher staff costs for NAVIAIR (+8.8M€2017, or +19%). The NSA explains that this is due to wage increases resulting from a collective agreement for all government employees, the execution of an agreement with the ATCO union, as well as a high level of extra shifts. The NSA did not provide sufficient information on the reason for these additional shifts, which contrasts with the significant reduction in service units compared to the plan.

▪ NAVIAIR costs of investments were 19M€2017 in 2024 for both en route and terminal charging zones, -7.0% less than determined (20M€2017). According to the NSA, this reduction is due to reduced depreciation resulting from “fewer and postponed investments, and later date of entry into operation than planned”.

▪ The en route actual unit cost incurred by users in 2024 was 64.52€ (+16% above the 2024 DUC), while the terminal actual unit cost incurred by users was 162.15€ (+10% above the 2024 DUC ).

▪ The en route regulatory result for NAVIAIR amounted to -11M€. The loss is mainly attributable to the application of the cost risk sharing mechanism, in particular the negative difference between determined and actual costs to be borne by the ANSP.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 190 100 111 118
Determined costs 190 96 98 99
Difference costs 0 4 12 18
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.4% 1.5% 1.6%
Determined inflation index NA 104.2 105.7 107.4
Actual inflation rate NA 8.5% 3.4% 1.3%
Actual inflation index NA 112.5 116.3 117.8
Difference inflation index (p.p.) NA +8.2 +10.5 +10.4

AUC vs. DUC

In 2024, the en route AUC was +25.4% (or +99.90 DKK2017, +13.43 €2017) higher than the planned DUC. This results from the combination of significantly lower than planned TSUs (-12.0%) and significantly higher than planned en route costs in real terms (+10.4%, or +72.8 MDKK2017, +9.8 M€2017). It should be noted that the actual inflation index in 2024 was +10.4 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (-12.0%) falls outside 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

Actual real en route costs are +10.4% (+9.8 M€2017) higher than planned. This is the result of higher costs for the main ANSP, NAVIAIR (+12.0%, or +9.5 M€2017) and the NSA/EUROCONTROL (+4.0%, or +0.4 M€2017) and lower costs for the MET service provider (-2.7%, or -0.1 M€2017).

En route costs for the main ANSP at charging zone level

Significantly higher than planned en route costs in real terms for NAVIAIR in 2024 (+12.0%, or +9.5 M€2017) result from:
- Significantly higher staff costs (+18.8%), explained by i) higher than expected “wage increases due to collective agreement regarding all government employees”, ii) effects from a capacity-oriented collective agreement with ATCOs made in 2023, and iii) a high level of extra shifts,
- Higher other operating costs (+2.9%), reflecting the impact of inflation and higher training costs,
- Significantly lower depreciation (-10.5%) reflecting “fewer and postponed investments, and later date of entry into operation than planned”,
- Significantly higher cost of capital (+20.8%), resulting from a combination of higher interest rates and a higher than planned asset base,
- No deduction through exceptional costs which was included in the PP (negative amount) to reduce the level of en route cost-base.

RP3 summary

When considering the whole of RP3 (2020-2024) for Denmark en route charging zone, actual TSUs are -8.9% lower than planned, while actual costs in real terms are +2.8% higher than the determined costs (some +97.1 MDKK2017 or +13.1 M€2017). As a result, the weighted average actual unit cost over RP3 (617.30 DKK2017 or 83.01 €2017) is +12.9% higher than planned in the PP (546.92 DKK2017 or 73.54 €2017).

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

AUCU components (€/SU) – 2024
Components of the AUCU in 2024 €/SU
DUC 55.50
Inflation adjustment 4.26
Cost exempt from cost-sharing -0.63
Traffic risk sharing adjustment 4.03
Traffic adj. (costs not TRS) 1.17
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues 0.18
Application of lower unit rate 0.00
Total adjustments 9.01
AUCU 64.52
AUCU vs. DUC + 16.2%
Cost exempt from cost sharing by item - 2024 €'000 €/SU
New and existing investments -1,394.7 -0.89
Competent authorities and qualified entities costs 329.9 0.21
Eurocontrol costs 72.8 0.05
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 -992.0 -0.63

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2024 (481.10 DKK or 64.52 €) is +16.2% higher than the nominal DUC (413.89 DKK or 55.50 €). The difference between these two figures (+67.21 DKK/SU or +9.01 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+31.73 DKK/SU or +4.26 €/SU);
- the impact of adjustments resulting from the costs exempted from cost sharing mechanism (-4.71 DKK/SU or -0.63 €/SU);
- the addition of the traffic risk sharing adjustments (+30.07 DKK/SU or +4.03 €/SU);
- the addition of the traffic adjustment (+8.75 DKK/SU or +1.17 €/SU) for the costs not subject to traffic risk sharing; and
- the addition of other revenues (+1.38 DKK/SU or +0.18 €/SU) which reflect the recovery of overestimated amounts of funding received from Union assistance programmes returned to airspace users in the previous years.
The share of the regulatory result (see items 10 to 14) in the AUCU (before the deduction of other revenues) is -11.3%.

Regulatory result (RR)

NAVIAIR net gain/loss on activity in the Denmark en route charging zone in the year 2024

NAVIAIR reported a net loss of -120.1 MDKK, as a combination of a loss of -92.6 MDKK arising from the cost sharing mechanism, with a loss of -27.4 MDKK arising from the traffic risk sharing mechanism.

NAVIAIR 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 (-120.1 MDKK) and the actual RoE (+35.4 MDKK) amounts to -84.7 MDKK (-13.4% of the en route revenues). The resulting ex-post rate of return on equity is negative (-12.0%).

RP3 summary

When considering the whole of RP3 (2020-2024), NAVIAIR generated a cumulative loss in respect of cost sharing of -146.2 MDKK, as actual total costs for RP3 were higher than planned. The traffic risk sharing mechanism generated a loss of -66.7 MDKK. Adding the actual RoE (+183.1 MDKK over RP3) leads to an overall regulatory result of -29.8 MDKK, which corresponds to an average ex-post rate of return on equity of -0.8% (compared to 5.0% initially planned in the PP).