Cost-efficiency - Germany

Download Report

PRB monitoring

▪ The en route 2024 actual unit cost of Germany was 60.20€2017, +0.5% higher than the determined unit cost (59.89€2017). The terminal 2024 actual unit cost was 224.09€2017, +12% higher than the determined unit cost (199.79€2017).

▪ The en route 2024 actual service units (14.3M) were -9.7% lower than the determined service units (15.9M).

▪ The en route 2024 actual total costs were -87M€2017 (-9.2%) lower than determined. The difference is mainly driven by the staff costs of DFS (-64M€2017, or -11%). However, in nominal terms, the actual staff costs showed an increase of +15M€2017 (+2.2%). According to the NSA, this is mainly attributable to collective wage settlements and necessity to increase capacity provisions.

▪ DFS costs of investments were 93M€2017 in 2024 for both en route and terminal charging zones, -24% less than determined (122M€2017). According to the NSA, this reduction was a result of a significantly lower actual cost of capital (-63%), which is largely due to lower interest rates, affected by the pension scheme’s interest balance and the ANSP’s net interest income . The NSA stated that this gap will be considered in the unit rates for the following reference period. In addition, depreciation costs were lower than planned (-22%). The NSA attributed this difference to the decision not to implement the new iCAS system in Langen ACC.

▪ The en route actual unit cost incurred by users in 2024 was 75.99€ (+17% above the 2024 DUC), while the terminal actual unit cost incurred by users was 254.29€ (+17% above the 2024 DUC). The difference between the AUCU and the DUC for both charging zones is primarily attributable to the inflation adjustment and lower than planned SUs.

En route charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 1,877 1,000 1,025 1,054
Determined costs 1,935 977 1,010 1,034
Difference costs -59 23 15 21
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 1.1% 1.5% 1.7%
Determined inflation index NA 107.2 108.8 110.6
Actual inflation rate NA 8.7% 6.0% 2.5%
Actual inflation index NA 116.4 123.4 126.4
Difference inflation index (p.p.) NA +9.1 +14.5 +15.8

AUC vs. DUC

In 2024, the en route AUC was +0.5% (or +0.31 €2017) higher than the planned DUC. This results from the combination of significantly lower than planned TSUs (-9.7%) and significantly lower than planned en route costs in real terms (-9.2%, or -87.4 M€2017). It should be noted that the actual inflation index in 2024 was +15.8 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (-9.7%) 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

Actual real en route costs are -9.2% (-87.4 M€2017) lower than planned. This is the result of lower costs for the main ANSP, DFS (-9.8%, or -75.6 M€2017), the other ANSP (MUAC), -7.1%, or -7.5 M€2017), the MET service provider (-26.2%, or -2.9 M€2017) and the NSA/EUROCONTROL (-2.4%, 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 DFS in 2024 (-9.8%, or -75.6 M€2017) result from:
- Significantly lower staff costs (-10.6%), mainly due to inflation index impact (+15.8 p.p.) as in nominal terms staff costs are higher than planned by +2.2%, due to the 2023-2026 wage collective agreement, compensation for the inflation and extraordinary payments for additional shifts and overtime partially compensated by -122 operational FTEs than planned and lower pension costs.
- Significantly higher other operating costs (+13.3% or +29.5% in nominal terms), as a result of inflation, higher prices of gas, more external staff employed than expected and training needs,
- Significantly lower depreciation (-20.1%), due to the decision not to implement iCAS in Langen and related projects, along with some maintenance activities,
- Significantly lower cost of capital (-41.3%) mainly due to * “the coverage gap for interest on pensions, which is recalculated annually based on differences between planned and actual interest rates”*. The 2024 cost of capital exclude the income of commercial papers, which had previously been included in the actual costs of 2021 and 2022.

RP3 summary

When considering the whole of RP3 (2020-2024) for Germany en route charging zone, actual TSUs are -6.4% lower than planned, while actual costs in real terms are -5.8% lower than the determined costs (some -269.1 M€2017). As a result, the weighted average actual unit cost over RP3 (80.11 €2017) is +0.7% higher than planned in the PP (79.53 €2017).

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

AUCU components (€/SU) – 2024
Components of the AUCU in 2024 €/SU
DUC 65.18
Inflation adjustment 8.71
Cost exempt from cost-sharing -1.40
Traffic risk sharing adjustment 3.61
Traffic adj. (costs not TRS) 0.47
Finantial incentives -0.30
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -0.29
Application of lower unit rate 0.00
Total adjustments 10.81
AUCU 75.99
AUCU vs. DUC + 16.6%
Cost exempt from cost sharing by item - 2024 €'000 €/SU
New and existing investments -17,518.8 -1.22
Competent authorities and qualified entities costs -2,171.1 -0.15
Eurocontrol costs 791.6 0.06
Pension costs -3,149.8 -0.22
Interest on loans 0.0 0.00
Changes in law 2,016.0 0.14
Total cost exempt from cost risk sharing -20,032.1 -1.40

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2024 (75.99 €) is +16.6% higher than the nominal DUC (65.18 €). The difference between these two figures (+10.81 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+8.71 €/SU);
- the impact of adjustments resulting from the costs exempted from cost sharing mechanism (-1.40 €/SU);
- the addition of the traffic risk sharing adjustments (+3.61 €/SU);
- the addition of the traffic adjustment (+0.47 €/SU) for the costs not subject to traffic risk sharing;
- financial incentives (-0.30 €/SU); and
- the deduction of other revenues (-0.29 €/SU).
The share of the regulatory result (see items 10 to 14) in the AUCU (before the deduction of other revenues) is 3.5%.

Regulatory result (RR)

DFS net gain/loss on activity in the Germany en route charging zone in the year 2024

DFS reported a net gain of +31.1 M€, as a combination of a gain of +71.8 M€ arising from the cost sharing mechanism, with a loss of -36.4 M€ arising from the traffic risk sharing mechanism and a loss of -4.2 M€ relating to financial incentives.

DFS overall regulatory result (RR) for the en route activity

Ex-post, the overall RR comprises only the net gain from the en route activity mentioned above (+31.1 M€) amounts to 3.5% of the en route revenues, as the RoE for DFS has been set to zero. The resulting ex-post rate of return on equity is 2.7%.

RP3 summary

When considering the whole of RP3 (2020-2024), DFS generated a cumulative gain in respect of cost sharing of +238.6 M€, as actual total costs for RP3 were lower than planned. The traffic risk sharing mechanism generated a loss of -86.7 M€. Adding the loss of -8.4 M€ to be retained by the ATSP in respect of financial incentives leads to an overall regulatory result of +143.6 M€ (the RoE for DFS has been set to zero), which corresponds to an average ex-post rate of return on equity of 3.5%.

Note 1: The proportion of financing through equity for 2021A and 2022A should be corrected to reflect the actual share, in spite of the specific composition of the asset base and the significantly higher than planned cost of capital reported to be due to “the negative development of the commercial papers”. For the purpose of the analysis, it has been set at the level of the 2021D and 2022D presented in the revised draft performance plan.