Cost-efficiency - Latvia

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Terminal charging zone

Unit cost (KPI#1)

Actual and determined data
Total costs - nominal (M€) 2020-2021 2022 2023 2024
Actual costs 12 6 7 7
Determined costs 12 6 7 7
Difference costs 0 0 0 0
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 10.0% 3.9% 3.1%
Determined inflation index NA 119.7 124.3 128.1
Actual inflation rate NA 17.2% 9.1% 1.3%
Actual inflation index NA 127.5 139.2 141
Difference inflation index (p.p.) NA +7.8 +14.8 +12.8

AUC vs. DUC

In 2024, the terminal AUC was +22.4% (or +29.09 €2017) higher than the planned DUC. This results from the combination of significantly lower than planned TNSUs (-21.3%) and lower than planned terminal costs in real terms (-3.7%, or -0.2 M€2017). It should be noted that the actual inflation index in 2024 was +12.8 p.p. higher than planned.

Terminal service units

The difference between actual and planned TNSUs (-21.3%) falls outside the ±10% threshold foreseen in the traffic risk sharing mechanism. The resulting loss of terminal revenues is therefore shared between the ANSP and the airspace users (see the main ANSP loss in Box 11).

Terminal costs by entity

Actual real terminal costs are -3.7% (-0.2 M€2017) lower than planned. This is the result of lower costs for the main ANSP, LGS (-4.2%, or -0.3 M€2017) and the MET service provider (-26.6%, or -0.04 M€2017) and higher costs for the NSA (+23.7%, or +0.1 M€2017).

Terminal costs for the main ANSP at charging zone level

Lower than planned terminal costs in real terms for LGS in 2024 (-4.2%, or -0.3 M€2017) are affected by the impact of inflation index (+12.8 p.p.) since, in nominal terms, the costs were slightly above planned (+3.4%). The variation in real terms results from:
- Higher staff costs (+3.0%) due to “higher than planned inflation, collective agreement changes, and higher sick-leaves”,
- Significantly higher other operating costs (+20.0%) explained by “unplanned expert opinion for Riga Enhanced ATM Infrastructure Development (REACT) project as required by auditors”,
- Significantly lower depreciation (-15.1%) reflecting delays in above-mentioned REACT project,
- Significantly lower cost of capital (-13.4%) resulting from lower than planned asset-base.
- A deduction of costs for VFR exempted flights (-0.1 M€2017) while none were foreseen in the PP.

RP3 summary

When considering the whole of RP3 (2020-2024) for Latvia terminal charging zone, actual TNSUs are -13.8% lower than planned, while actual costs in real terms are -3.0% lower than the determined costs (some -0.9 M€2017). As a result, the weighted average actual unit cost over RP3 (195.28 €2017) is +12.6% higher than planned in the PP (173.40 €2017).

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

AUCU components (€/SU) – 2024
Components of the AUCU in 2024 €/SU
DUC 150.40
Inflation adjustment 11.77
Cost exempt from cost-sharing -9.15
Traffic risk sharing adjustment 28.59
Traffic adj. (costs not TRS) 4.68
Finantial incentives 3.31
Modulation of charges 0.00
Cross-financing 0.00
Other revenues -24.51
Application of lower unit rate -16.23
Total adjustments -1.55
AUCU 148.85
AUCU vs. DUC -1.0%
Cost exempt from cost sharing by item - 2024 €'000 €/SU
New and existing investments -402.5 -10.66
Competent authorities and qualified entities costs 57.0 1.51
Eurocontrol costs 0.0 0.00
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 -345.5 -9.15

The actual terminal unit cost incurred by airspace users (AUCU) in respect of activities performed in 2024 (148.85 €) is -1.0% lower than the nominal DUC (150.40 €). The difference between these two figures (-1.55 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+11.77 €/SU);
- the impact of adjustments resulting from the costs exempted from cost sharing mechanism (-9.15 €/SU);
- the addition of the traffic risk sharing adjustments (+28.59 €/SU);
- the addition of the traffic adjustment (+4.68 €/SU) for the costs not subject to traffic risk sharing;
- financial incentives (+3.31 €/SU);
- the deduction of other revenues (-24.51 €/SU); and
- application of a lower unit rate as foreseen in Art. 29(6) in year 2024 (-16.23 €/SU).
The share of the regulatory result (see items 10 to 14) in the AUCU (before the deduction of other revenues) is 3.3%.

Regulatory result (RR)

LGS net gain/loss on activity in the Latvia terminal charging zone in the year 2024

LGS reported a net loss of -0.4 M€, as a combination of a loss of -0.2 M€ arising from the cost sharing mechanism, with a loss of -0.3 M€ arising from the traffic risk sharing mechanism and a gain of +0.1 M€ relating to financial incentives.

LGS overall regulatory result (RR) for the terminal activity

Ex-post, the overall RR taking into account the net loss from the terminal activity mentioned above (-0.4 M€) and the actual RoE (+0.5 M€) amounts to +0.2 M€ (2.5% of the terminal revenues). The resulting ex-post rate of return on equity is 1.6%, which is lower than the 5.0% planned in the PP.

RP3 summary

When considering the whole of RP3 (2020-2024), LGS generated a cumulative gain in respect of cost sharing of +0.3 M€, as actual total costs for RP3 were lower than planned. The traffic risk sharing mechanism generated a loss of -0.6 M€. Adding the gain of +0.1 M€ to be retained by the ATSP in respect of financial incentives and the actual RoE (+2.9 M€ over RP3) leads to an overall regulatory result of +2.7 M€, which corresponds to an average ex-post rate of return on equity of 5.3% (compared to 5.6% initially planned in the PP). See also Note 1 in Box 10.

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 -0.2 M€ for 2023 and -0.6 M€ in 2024).