Cost-efficiency - Norway

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PRB monitoring

▪ The en route 2024 actual unit cost of Norway was 48.07€2017, -2.5% lower than the determined unit cost (49.29€2017). The terminal 2024 actual unit cost was 207.69€2017, +26% higher than the determined unit cost (164.70€2017).

▪ The en route 2024 actual service units of Norway (2.5M) were in line with the determined service units.

▪ The en route 2024 actual total costs were -2.8M€2017 (-2.3%) lower than determined. This difference is driven by lower staff costs for Avinor ANS (-6.4M€2017, or -8.3%) and depreciation costs (-3.4M€2017, or -26%). However, in nominal terms, the actual staff costs show an increase of +1.5% compared to planned. The NSA noted that depreciation costs are lower than planned mainly due to delays to the new ATM system and a change in estimating the value of leases resulting from IFRS16.

▪ Avinor ANS costs of investments were 33M€2017 in 2024 for both en route and terminal charging zones, +4.5% higher than determined (31M€2017). This was driven by higher cost of capital resulting from increased interest on debts, which led to higher costs for the new ATM system.

▪ The en route actual unit cost incurred by users in 2024 was 48.87€ (+11% higher than the 2024 DUC), while the terminal actual unit cost incurred by users in 2024 was 175.46€ (+18% higher than the 2024 DUC). These differences between the AUCU and the DUC for both en route and terminal charging zones are primarily attributed to the positive inflation adjustment.

▪ The en route regulatory result for Avinor ANS amounted to +15M€, or 13% of the 2024 revenue.

▪ Norway 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 237 128 136 142
Determined costs 236 130 133 136
Difference costs 1 -2 4 6
Inflation assumptions 2020-2021 2022 2023 2024
Determined inflation rate NA 2.0% 2.0% 2.0%
Determined inflation index NA 111.2 113.4 115.6
Actual inflation rate NA 6.2% 5.8% 2.8%
Actual inflation index NA 117.7 124.5 128
Difference inflation index (p.p.) NA +6.5 +11.1 +12.3

AUC vs. DUC

In 2024, the en route AUC was -2.5% (or -11.41 NOK2017, -1.22 €2017) lower than the planned DUC. This results from the combination of lower than planned en route costs in real terms (-2.3%, or -26.2 MNOK2017, -2.8 M€2017) and slightly higher than planned TSUs (+0.2%). It should be noted that the actual inflation index in 2024 was +12.3 p.p. higher than planned.

En route service units

The difference between actual and planned TSUs (+0.2%) falls inside the ±2% dead-band. Hence, the gain of additional en route revenues is kept by the ANSPs (see items 10 to 14).

En route costs by entity

Actual real en route costs are -2.3% (-2.8 M€2017) lower than planned. This is the result of lower costs for the main ANSP, Avinor (Continental) (-4.5%, or -5.0 M€2017) and the MET service provider (-6.0%, or -0.1 M€2017) and higher costs for the other ANSP (KJE, +95.0%, or +0.6 M€2017) and the NSA/EUROCONTROL (+20.8%, or +1.7 M€2017).

En route costs for the main ANSP at charging zone level

Lower than planned en route costs in real terms for Avinor in 2024 (-4.5%, or -5.0 M€2017) result from:
- Significantly lower staff costs (-8.3%) in real terms due to the impact of the inflation index (+12.3 p.p.). In nominal terms, staff costs exceeded the plan (+1.5%), which is reported to reflect higher expenditure on “OPEX projects, due to a substantial increase in project activity” and changes in accounting policies resulting in the reclassification of some expenses as staff costs instead of other operating costs.
- Lower other operating costs (-5.3%), also reflecting the impact of inflation index, as nominal costs exceeded planned figures (+4.7%), partly due to higher costs for insurance and energy.
- Significantly lower depreciation (-25.9%) resulting from a combination of lower than planned effect of leases (IFRS16) and lower than planned deprecation of fixed assets,
- Significantly higher cost of capital (+55.4%), explained by an “increase in project costs related to the new ATM system” and “increased interest on debts”.
- Significantly higher deduction for VFR exempted flights (+150.7%).

RP3 summary

When considering the whole of RP3 (2020-2024) for Norway en route charging zone, actual TSUs are +0.8% higher than planned, while actual costs in real terms are -2.7% lower than the determined costs (some -145.6 MNOK2017 or -15.6 M€2017). As a result, the weighted average actual unit cost over RP3 (556.75 NOK2017 or 59.69 €2017) is -3.5% lower than planned in the PP (576.73 NOK2017 or 61.83 €2017).

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

AUCU components (€/SU) – 2024
Components of the AUCU in 2024 €/SU
DUC 44.16
Inflation adjustment 3.61
Cost exempt from cost-sharing 1.11
Traffic risk sharing adjustment 0.00
Traffic adj. (costs not TRS) -0.01
Finantial incentives 0.00
Modulation of charges 0.00
Cross-financing 0.00
Other revenues 0.00
Application of lower unit rate 0.00
Total adjustments 4.71
AUCU 48.87
AUCU vs. DUC + 10.7%
Cost exempt from cost sharing by item - 2024 €'000 €/SU
New and existing investments 1,349.6 0.54
Competent authorities and qualified entities costs 88.1 0.04
Eurocontrol costs 1,297.5 0.52
Pension costs 0.0 0.00
Interest on loans 18.0 0.01
Changes in law 0.0 0.00
Total cost exempt from cost risk sharing 2,753.3 1.11

The actual en route unit cost incurred by airspace users (AUCU) in respect of activities performed in 2024 (567.83 NOK or 48.87 €) is +10.7% higher than the nominal DUC (513.07 NOK or 44.16 €). The difference between these two figures (+54.76 NOK/SU or +4.71 €/SU) is due to:
- the positive inflation adjustment resulting from higher than planned inflation (+41.91 NOK/SU or +3.61 €/SU);
- the impact of adjustments resulting from the costs exempted from cost sharing mechanism (+12.92 NOK/SU or +1.11 €/SU); and
- the deduction of the traffic adjustment (-0.07 NOK/SU or -0.01 €/SU) for the costs not subject to traffic risk sharing.
The share of the regulatory result (see items 10 to 14) in the AUCU (before the deduction of other revenues) is 12.1%.

Regulatory result (RR)

Avinor net gain/loss on activity in the Norway en route charging zone in the year 2024

Avinor reported a net gain of +83.2 MNOK, as a combination of a gain of +81.1 MNOK arising from the cost sharing mechanism, with a gain of +2.1 MNOK arising from the traffic risk sharing mechanism.

Avinor 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 (+83.2 MNOK) and the actual RoE (+90.6 MNOK) amounts to +173.8 MNOK (13.5% of the en route revenues). The resulting ex-post rate of return on equity is 19.6%, which is higher than the 10.2% planned in the PP. See also Notes 1 and 2 in Box 10 above.

RP3 summary

When considering the whole of RP3 (2020-2024), Avinor generated a cumulative gain in respect of cost sharing of +189.8 MNOK, as actual total costs for RP3 were lower than planned. The traffic risk sharing mechanism generated a gain of +50.1 MNOK. Adding the actual RoE (+328.6 MNOK over RP3) leads to an overall regulatory result of +568.5 MNOK, which corresponds to an average ex-post rate of return on equity of 17.6% (compared to 10.2% initially planned in the PP). See also Notes 1 and 2 in Box 10 above.

Note 1: Ex-ante and ex-post RoE are computed based on the notional gearing of 60% debt used in the RP3 PP. The actual gearing of Avinor should be reported.
Note 2: Ex-post RR does not take into account the application of lower unit rates as per Art. 29.6 in 2020-21 and 2022 (loss in revenues for Avinor corresponds to -489 MNOK for 2020-2021 and -106 MNOK for 2022