Addendum to THE ITALIAN PERFORMANCE PLAN. for Air Navigation Services

Transcription

1 Addendum to THE ITALIAN PERFORMANCE PLAN for Air Navigation Services Reference Period

2 Document Approval The Addendum to the National Performance Plan for Reference Period 1 has been prepared by the Ente Nazionale per l Aviazione Civile (ENAC) in accordance with the Single European Sky Performance Scheme Regulation (EC) No. 691/2010 and the data submitted by ENAV SpA.. The Ministero delle Infrastrutture e dei Trasporti, as the Ministry responsible for Civil Aviation, agrees to the adoption of the Addendum to the Italian National Performance Plan for Air Navigation Services. ENAC has been authorised to sign and transmit to the European Commission the Italian National Performance Plan with letter M_TRA TRAER USCITA dated 5th May

3 Executive Summary The Italian Performance Plans (IPP) for the first reference period (RP1: ) has been adopted by the Italian State and sent to the European Commission (EC) on the 30 th of June Following the Performance Review Body (PRB) assessment of the Plan against the assessment criteria listed in Annex III of the EC Regulation n. 691/2010 (Performance Scheme Regulation) and the ad-hoc meeting of the Single Sky Committee on 24 October 2011, Italy has been requested to provide the EC with an update of some points of the National Performance Plan as presented in June 2011, in accordance with Article 13(4) of the Performance Scheme Regulation. This documents is the Addendum to the Italian Performance Plan (AIPP) for en route Air Navigations Services. The Addendum to the Italian Performance Plan covers the first Reference Period (RP1: ) and it is developed at National level, in compliance with the provisions of the Commission Regulation n. 691 of 29 July ENAC, the Italian Civil Aviation Authority, has been designated as National Supervisory Authority and it is responsible for the preparation of the Addendum to the Plan. The Addendum to the Plan is agreed by the Ministero dello Sviluppo Economico, delle Infrastrutture e dei Trasporti. The accountable entities for the achievement of the declared targets are: ENAC, the Italian CAA; ENAV, the Company for Air Navigation Services; ITAF, the Italian Air Force. The Addendum to the Plan is mainly focused on the KPAs of capacity and cost efficiency. A synopsis of the capacity and cost efficiency targets Italy is committed to achieve and the related values is reported in the table below: KPA Table A - Italy s revised national targets for RP Capacity En-route ATFM delay (minutes per flight) Cost-efficiency KPI Determined en-route unit rate (2009 prices in national currency) National targets 71,38 69,13 66,78 For the scope of the IPP, all issues related to airport and terminal area are subject to NSA monitoring (during RP1 no national target is defined in these domains). Italy confirms its intention to apply one incentive scheme on capacity to ENAV, in addition to the risk sharing mechanism foreseen by the EC Reg. n. 1191/2010. For what concerns capacity, Italy in recognition of the link between the high standards of quality of service provided and given the excellent level of operational performance already achieved and expected in the coming years by ENAV, will recognize to ENAV a bonus or a penalty for each of 3

4 the years of the reference period. A new mechanism is proposed and it is explained and detailed in the document. For what concerns the KPA of Safety, Italy includes in this Addendum the minor specifications related with the PRB assessment report of Performance Plans for RP1 of the 20 th September On 28 September 2011, the PRB formally presented this report at the Single Sky Committee meeting (SSC/43). 4

5 INDEX Executive Summary INTRODUCTION The situation General aspects REVISED CAPACITY TARGET AT NATIONAL LEVEL Introduction Background Capacity target Scenarios SAFETY REVISED COST EFFICIENCY TARGET (NATIONAL LEVEL) The revised cost-efficiency target Key figures for the revised Cost-Efficiency target Changes and justifications for the revised cost-efficiency target Italy terminal costs Carry-overs from the years before RP Information on uncontrollable costs ENAV CONTRIBUTION TO THE NATIONAL TARGETS ENAV S.P.A determined en route ANS costs Return on Equity and Cost of Capital ENAV en route cost efficiency target for RP ENAV terminal ANS costs Investments Capacity Safety ITAF CONTRIBUTION TO THE NATIONAL TARGETS ENAC SHARE IN THE NATIONAL TARGETS PARAMETERS FOR RISK SHARING AND INCENTIVES Incentive scheme on capacity Index of Tables Table 1 Accountable entities for the Performance Plan... 8 Table 2 Comparison between the EU wide and the national target in the Key Performance Area of Capacity Table 3 Italy s national capacity targets

6 Table 4 Brindisi ACC - Contribution to the National capacity target Table 5 Milano ACC - Contribution to the National capacity target Table 6 Padova ACC - Contribution to the National capacity target Table 7 Roma ACC - Contribution to the National capacity target Table 8 Revised Italy s en route cost-efficiency target for RP Table 9 - National costs, total service units and national determined unit rate as presented in June Table 10 IMF Inflation rates for Italy Table 11 National costs, total service units and national determined unit rate for the revised cost efficiency target Table 12 National revised cost efficiency target and related yearly efficiency level Table 13 EUROCONTROL costs as increased in the scope of the calculation of the 2012 enroute unit rate Table 14 National revised determined en route costs breakdown per entity (in nominal terms in national currency) Table 15 National revised determined en route costs Breakdown by nature (in nominal terms in national currency) Table 16 Service Units for 2011: the forecast trend Table 17 Commercial traffic trend (Jan-Nov 2011 vs. Jan-Nov 2010) Table 18 En route service units forecast used for the calculation of the Italian en route revised cost-efficiency target Table 19 En-route service units forecast in the different planning: a comparison Table 20 - National costs for terminal ANS Breakdown per entity (in nominal terms in national currency) Table 21 - Carry-overs from the years before RP1 - under (-) and over (+) recoveries (in nominal terms in national currency) Table 22 - Carry-overs from the years before RP1 as modified by CRCO and shown in the new reporting tables Table 23 ENAV - Determined en route ANS costs in nominal and real terms Table 24 ENAV en-route RP1 cost variation compared with the IMF inflation rates Table 25 ENAV - Determined en route ANS costs by nature (in nominal terms in national currency) updated in November Table 26 ENAV - Determined en route ANS costs by service (in nominal terms in national currency) Table 27 ENAV - Complementary information on the cost of capital en route (in nominal terms in national currency) Table 28 ENAV - Information on the en route cost of capital as reported in the IPP of June Table 29 ENAV - Information on the en route cost of capital as reported in the IPP of December Table 30 ENAV Revised cost efficiency targets for RP Table 31 ENAV Revised cost efficiency targets for RP1 and yearly decrease Table 32 ENAV Cost efficiency targets for RP1: a comparison Table 33 ENAV Cost efficiency in the period : a comparison Table 34 ENAV - Terminal ANS costs in national currency Table 35 ENAV Components of terminal ANS costs in national currency Table 36 ENAV - Terminal ANS chargeable costs in national currency Table 37 Investments IP1 related

7 Table 38 ITAF en route costs in the period by nature Table 39 ITAF en route costs in the period by services Table 40 ITAF terminal costs in the period by nature Table 41 ENAC En route costs for RP Index of Figures Figure 1 Reference values and capacity target Figure 2 SU forecasts and actual data: a comparison Figure 3 Incentive scheme, Italy capacity target for Reference Period 1, year Figure 4 Incentive scheme, Italy capacity target for Reference Period 1, year Figure 5 Incentive scheme, Italy capacity target for Reference Period 1, year

8 1. INTRODUCTION 1.1 The situation The Addendum to the Italian Performance Plan covers the first Reference Period (RP1: ) with focus on en-route Air Navigations Services and it is developed at National level, in compliance with the provisions of the Commission Regulation n. 691 of 29 July ENAC, the Italian Civil Aviation Authority, has been designated as National Supervisory Authority and it is responsible for the preparation of the Plan. The Addendum to the IPP is agreed by the Ministero dello Sviluppo Economico, delle Infrastrutture e dei Trasporti. The accountable entities for the achievement of the declared targets are confirmed as per June 2011 NPP: ENAC, the Italian CAA; ENAV, the Company for Air Navigation Services; ITAF, the Italian Air Force. Italy confirms its decision of deferring to the next Reference Period (RP2) the terminal from the application of the Performance Scheme. 1.2 General aspects For the provision of Air Navigation Services to General Air Traffic (GAT) in Italy, ENAV S.p.A is the Company designated by the Italian State. In accordance with the European Community Regulation 550/2004, article 7, paragraph 5, the Italian Air Force is authorized to provide ATS, CNS and MET Services to General Air Traffic (GAT) without certification. Air Traffic Services (ATS) are provided by ITAF or ENAV S.p.A. within the Air Space respectively assigned by National Law (DPR 484/81). ENAV provides MET services to those airports where it provides ATS. At the moment, no change is expected in this scenario during the first Reference Period. Entities / Performance areas Safety Environment Capacity Cost-Efficiency ENAC Yes N.A. N.A. Yes 2 ENAV S.p.A Yes Yes Yes Yes ITAF N.A 3. N.A. N.A. Yes 4 Table 1 Accountable entities for the Performance Plan 2 Not subject to traffic risk. 3 ITAF contributes to the monitoring of safety performance through regular reporting to ENAC of ATM related events. 4 Not subject to traffic risk. 8

9 ITAF, the Italian Air Force, is the ANSP authorised by Italian State to provide services without certification pursuant article 7, comma 5, of SPR. In particular, for en route it provides MET and APP Services for GAT. The role of ITAF for terminal is going to be reduced alongside the number of military airports. According to EC Reg. 1794/2006 (as amended by Reg. 1191/2010) ITAF is subject to cost risk but not to traffic risk. ITAF has a mainly rigid structure of costs, because: the cost of military staff is determined by the State as for all other military personnel by a specific law, its assets are also used for military purposes and operational configurations are driven by defence needs. At the same time the opening and or closure of new Air Traffic Service units manned by ITAF is always done through Ministerial decrees or other legislative acts. 9

10 2. REVISED CAPACITY TARGET AT NATIONAL LEVEL 2.1 Introduction The Performance Scheme should contribute to the sustainable development of the air transport system by improving the overall efficiency of the air navigation services through the key performance areas of Safety, Environment, Capacity and Cost-Efficiency consistently with those identified in the Performance Framework of the ATM Master Plan. In accordance with the Commission Regulation (EU) No 691/2010 of 29 July 2010, all National supervisory authorities shall draw up performance plans containing Key Performance Areas, indicators and targets consistent with the Commission decision of 21 st February 2011, setting the European Union-wide performance targets and alert thresholds for the provision of air navigation services for the years Those plans shall be assessed by the PRB, assisting the European Commission in the implementation of the Performance Scheme. In the same Regulation the use of incentives is envisaged with the aim to drive the behaviour of stakeholders towards improving performance at a National, Functional Airspace Block (FAB) and European level. Article 11 of the Regulation defines the details of the incentive scheme. 2.2 Background Italy s Performance Plan, submitted on 30th June 2011, contains elements related to the Key Performance Areas of Safety, Environment, Capacity and Cost-efficiency, in consistency with the EU Performance Scheme and the EU wide targets. The Performance Review Body (PRB) assessed Italy s Performance Plan for Reference Period 1 ( ) and provided detailed comments and recommendations on 20th September Taking into consideration the PRB remarks, Italy has performed a thorough analysis of the available data resulting in a revised proposal for the set up of an incentive scheme related to Capacity, aimed at keeping a high quality of the service and fostering further improvements in the Capacity performance area. 2.3 Capacity target In the last years Italy has provided good quality of service in terms of safety, capacity and flight efficiency while putting in place measures to improve the cost efficiency. Last 3 years have seen operations being influenced by the drop in traffic, the general economic downturn, political and social tensions in the Mediterranean area while securing investments in technology (mainly SESAR related) and human resources, in order to be compliant with SES initiatives and to prepare the path for the future. In the new European context, the implementation of the performance scheme shall clearly recognize the interdependencies existing among the different Key Performance Areas and among the different Indicators within the same KPA. 10

11 Capacity levels for Italy have been agreed trough the Capacity Planning process within Eurocontrol. Available data for 2011, as presented at PC36 (Brussels, 6-7 December 2011) show that the enroute ATFM delay was 1,64 minutes for summer period and around 1,27 minutes for the whole year. Here following there is a comparison between the EU wide and the national target in the Key Performance Area of Capacity. Capacity Target (mins ENR delay per flight) EU Wide 0,70 0,60 0,50 Italy 0,14 0,14 0,12 Table 2 Comparison between the EU wide and the national target in the Key Performance Area of Capacity Italy national targets on Capacity have been assessed as in consistency with and providing adequate contribution to the achievement of EU-wide performance targets. Figure 1 Reference values and capacity target The assessment on Capacity by the PRB also mentioned: 11

12 A. Italy has provided good capacity performance since The reference value provided for Italy allows more delay than is currently experienced in Italy, which can be considered a deterioration in capacity performance. B. No justification has been provided in the performance plan as to why the current high level of capacity performance cannot be maintained. C. Italy s Performance Plan aims to meet the required contribution toward the EU-wide target. D. Although ANSP capacity plans have been revised downwards as a result of actual traffic growth and lower traffic forecast, the latest ANSP capacity plans from LSSIP appear sufficient to meet the required performance during RP1, if traffic is in line with the baseline STATFOR February 2011 forecast. E. A financial incentive scheme has been proposed, by which ENAV will be entitled to receive a bonus of 1% of the determined cost for every year in which the target has been achieved and a penalty of 1% of the determined cost if the delay exceed 0.5 minute per flight (i.e more than three times the target). In view of the historic performance of Italy; current and previous capacity plans; and predicted traffic growth, the PRB would agree with stakeholders concerns about whether or not the appropriate balance has been struck between performance meriting a bonus and performance which incurs a penalty. F. The NSA proposes an alert threshold for capacity which is within +/- 1% of the baseline traffic growth. While it can be understood that there is a limit to the flexibility to adapt to unforeseen traffic growth, the current proposal to open the revision of the target for such a small variation of traffic appears inappropriate. G. The Performance Plan does not explicitly state that ENAV S.p.A is the sole accountable entity for the capacity target. When addressing the Capacity Area for the Reference Period 1, the following elements shall be duly considered for their impact on performance results: 1. the four Key Performance Areas are strictly interlinked, thus the measures undertaken in one area have an impact on other areas (e.g., cost efficiency and capacity); 2. Traffic forecast unpredictability; STATFOR traffic and CRCO Service Units forecast have recently showed that the actual values were always very close to the extreme edges of the uncertainty window (either high or low); 3. while the traffic is not increasing as expected, thus ensuring the adequate overall capacity, it has to be highlighted that the behaviour of the airlines is changing with an increasing attitude to concentrate in some busy parts of the day; this will result in capacity constraints at certain times of the day, it will be important therefore to give due consideration to the peak hours which can produce, despite the overall capacity, thousands of minutes of delay per day; 4. the general economic downturn and the specific Italian context will represent an additional risk for general strikes in all sectors, including air transport; 5. investments in ATM technology and in particular in SESAR will continue in a context of overall costs reduction to be put in place for the achievement of the cost-efficiency targets; 6. in the coming years stakeholders will be involved in the deployment of new systems and procedures stemming from SESAR, it shall be taken into account for the required systems transition programmes and staff training (including ATCOs), that will impact on Capacity; 12

13 7. performance results of the network and individual ANSPs will be influenced by Network Manager activities 5, at this stage is not easy to evaluate those interactions; 8. the influence of factors exogenous to ANSPs, as weather, general industrial actions, and the role played by stakeholders not subject to performance scheme (Airspace Users, Airports 6, Military); 9. ENAV national collective agreement expired at the end of 2011 the, therefore negotiations with the Unions will take place to define a new three year contract. This activity will be complex especially due to the overall difficult economic context and the cost-cutting measures to be put in place for the achievement of the cost-efficiency performance targets, as a consequence the risk of strikes, especially in 2012, is high; will see the implementation-phase of the FAB BLUE MED, where ENAV is one of the key actors; this will progressively determine a paramount shift in the processes, procedures and organization of ENAV. Having all this in mind, in addition with the considerations for external factors that may affect the ATM level of performance (included the social/institutional evolutions in the Mediterranean Area), the NSA maintained a prudential approach and, considering challenging but still acceptable the targets assessed during the European Capacity Planning Process and decided to confirm the National Capacity Targets for Reference Period 1. As a consequence ENAV is undertaking - among others - the following activities: - the optimization of the ATS scenarios, with particular reference to the ATS route network that is under ENAV s responsibility (Flight Efficiency Plan); - the rationalization of operational scenarios and the proactive management of the ACCs sectors lay-out; - the continuous modernization of the ATM technology; - the implementation and the optimization of the overall services provided in the Terminal Areas, in the Approach Zones and in the airports; - the continuous improvement of the recruitment and training techniques, dealing with operational people, which are particularly effective to let them understand the airspace users needs and deliver a sustainable development of aviation in general. 2.4 Scenarios In considering the hypothesis of the National Performance plan, different scenarios have been evaluated based on historical data and foreseen scenarios (probability and frequency occurrences). The evaluated scenarios for 2014, based on the baseline STATFOR air traffic forecast, give the combination of the following level of delay: A. based on historical ENR all ATFM delay reasons data since 2003: 1) the worst possible case for each delay reasons high level of delay KPI 0,43 5 Changes are possible based on the current methodology for allocating the responsibilities of delays (e.g. the most penalizing unit principle), the expected improvement from other areas represent an additional element of variability which increases the risks. 6 The airport capacity was considered as a potential bottleneck of the whole ATM system, in fact EUROCONTROL noted that the reliability of STATFOR forecasts depends on the airports capacity values not subject to performance targets for the RP1 and not, by and large, under the responsibility of the ANSP who are, vice versa, subjected to the en route capacity target. 13

14 2) the average ENR ATFM delay case high level of delay KPI 0,17 3) the worst exogenous reasons performance + the most possible for ATC reasons very high level of delay KPI 0,22. B. based on historical ENR all ATFM delay reasons data since 2007: 1) the worst possible case for each delay reasons high level of delay KPI 0,25 2) the best case low level of delay KPI 0,07 3) the worst exogenous reasons performance + the most possible for ATC reasons adequate level of delay KPI 0,12 4) the worst exogenous reasons performance + the critical scenario for ATC reasons more than an adequate level of delay KPI 0,15. The evaluation of the abovementioned hypothesis confirmed that the targets proposed by EUROCONTROL, in the Capacity planning process (0,14, 0,12 and 0,12 for the years respectively), are challenging but still acceptable, thus representing the sustainable level of capacity in the given context. 2009A 2010A 2011 (Jan-Sep) Reference value from the capacity planning process of EUROCONTROL (en-route ATFM delay min per flight) 0,14 0,14 0,12 En-route ATFM delay prior to RP1 (en-route ATFM delay min per flight) 0,01 0,01 0,02 Initial Performance Plan (June 2011) National/FAB capacity target (enroute ATFM delay min per flight) 0,14 0,14 0,12 Revised Performance Targets (December 2011) National/FAB capacity target (enroute ATFM delay min per flight) Table 3 Italy s national capacity targets 0,14 0,14 0,12 As required by the PRB Assessment Report and reported in Table 1, Italy confirms that ENAV S.p.A. is the sole accountable entity for the achievement of the capacity target. For what concerns the targets defined at ACC level, Italy confirms the targets as reported in the National Performance Plan of June BRINDISI ACC 2009A 2010A 2011F 2012F 2013F 2014T En-route ATFM delay prior to RP1 (en-route ATFM delay minutes per flight) for the ACC 0,00 0,00 0,01 Reference value from the capacity planning process of EUROCONTROL (en-route ATFM delay minutes per flight) for the ACC 0,01 0,01 0,03 % n/n-1 0% 0% 200% En-route ATFM delay per flight (minutes per flight) for the ACC 0,01 0,01 0,03 Difference between the ACC contribution and the reference value for the ACC % n/n-1 0% 0% 200% Table 4 Brindisi ACC - Contribution to the National capacity target

15 MILANO ACC 2009A 2010A 2011F 2012F 2013F 2014T En-route ATFM delay prior to RP1 (en-route ATFM delay minutes per flight) for the ACC 0,002 0,01 0,04 Reference value from the capacity planning process of EUROCONTROL (en-route ATFM delay minutes per flight) for the ACC 0,06 0,09 0,09 % n/n-1 50% 50% 0% En-route ATFM delay per flight (minutes per flight) for the ACC 0,06 0,09 0,09 % n/n-1 50% 50% 0% Difference between the ACC contribution and the reference value for the ACC Table 5 Milano ACC - Contribution to the National capacity target PADOVA ACC 2009A 2010A 2011F 2012F 2013F 2014T En-route ATFM delay prior to RP1 (en-route ATFM delay minutes per flight) for the ACC 0,02 0,01 0,17 Reference value from the capacity planning process of EUROCONTROL (en-route ATFM delay minutes per flight) for the ACC 0,14 0,10 0,10 % n/n-1-17,6% -28,6% 0,0% En-route ATFM delay per flight (minutes per flight) for the ACC 0,14 0,10 0,10 Difference between the ACC contribution and the reference value for the ACC % n/n-1-18% -29% 0% Table 6 Padova ACC - Contribution to the National capacity target ROMA ACC 2009A 2010A 2011F 2012F 2013F 2014T En-route ATFM delay prior to RP1 (en-route ATFM delay minutes per flight) for the ACC 0,00 0,00 0,15 Reference value from the capacity planning process of EUROCONTROL (en-route ATFM delay minutes per flight) for the ACC 0,09 0,09 0,06 % n/n-1-40,0% 0,0% -33,3% En-route ATFM delay per flight (minutes per flight) for the ACC 0,09 0,09 0,06 Difference between the ACC contribution and the reference value for the ACC % n/n-1-40% 0% -33% Table 7 Roma ACC - Contribution to the National capacity target For what concerns the incentive scheme applicable to the capacity KPA, Italy presents a new mechanism which is detailed and explained in paragraph 8. 15

16 3. SAFETY ENAC is working to better define the Performance Oversight Program, following the guidance being defined by the NSA Support Unit of Eurocontrol Performance Review Unit in cooperation with the NSA Coordination Platform. The effort is to achieve a level of performance oversight which is comparable to the other NSAs on the basis of a not less/not more concept, and based to the maximum extent possible on documents and data already produced by stakeholders for other purposes. A detailed document describing the Oversight Program will be define d within the month of January. The audit/survey frequency will be based on the availability of updated calculation of the Performance Indicators, For what concern the oversight of safety indicators, ENAC will follow the guidance issued by EASA. It is confirmed that the Italian State is accountable for the specific KPIs related to Just Culture. ENAC confirms that the formal procedure for safety reviews has been issued in September 2011 after some months of trial of the draft version. 4. REVISED COST EFFICIENCY TARGET (NATIONAL LEVEL) 4.1. The revised cost-efficiency target This section sets out the revised national target for the mandatory cost-efficiency KPI in RP1. According to the National Performance Plan, the entities accountable for the achievement of the national cost-efficiency performance target are: ENAC ENAV S.p.A. ITAF. EUROCONTROL costs are included in the national cost base. They are classified as uncontrollable costs. In application of the provisions of art.18 of the EC Regulation n.691/2010, in order to take into account its peculiar geographical location within the Mediterranean area recently characterized by socio-political turmoil that might have significant effects on the provision of air traffic services and on the financial stability of the ANSPs, Italy confirms an additional alert mechanism which foresees that in case of variations of costs (or revenues) which are originated by socio-political or financial factors that cannot be foreseen in advance by the State and that could have a severe impact on safety or on the level of service offered by the provider, Italy will consider the possibility to propose to the European Commission revised targets. For what concerns traffic, the exceptional situation that is still interesting the Mediterranean area is demonstrating that an alert threshold of 10% on traffic is too high for Italy because its effects could 16

17 be devastating for the financial stability of the providers that would lead to significant and dangerous detrimental effects on the level of safety and quality of the service offered. Moreover, considering that the traffic could have a significant increase after the end of the North African crisis, a lower alert threshold might provide the users with higher advantages. Italy, as requested by PRB, has performed a sensitivity analysis on the subject and has identified three possible threshold levels: 2,5%; 3%; 3,5% against the planned values of Service Units. Italy is available to accept any of the three options considering that the lower is the threshold the higher is the potential benefit for the users with the activation of the procedure for the revision of National Performance Plan. Therefore, as local alert threshold on traffic, Italy will activate the process for a revision of the National Performance Plan for any variation higher than the threshold chosen by the European Commission amongst the three proposed options. In brief, the threshold has to be considered as symmetrical (up and down) and foresees, when reaching the chosen threshold, the revision of the Plan as per article 18 of the EC Regulation n. 691/2010. The revised cost efficiency targets for Italy are as follows: Cost-efficiency KPI 2012 Target 2013 Target 2014 Target Italy real en-route determined unit rate (in national currency at 2009 prices) 71,38 69,13 66,78 Table 8 Revised Italy s en route cost-efficiency target for RP1 All the details on the variations introduced are reported in the following paragraphs Key figures for the revised Cost-Efficiency target National costs, total service units and national determined unit rate as presented in June 2011 Performance Plan were as follows: 17

18 Initial Performance Plan (June 2011) Total determined costs in nominal terms (in national currency) 2009A 2010A AAGR AAGR ,0% 1,8% Inflation % 1,6% 2,0% 2,1% 2,0% 2,0% Inflation index (100 in 2009) 100,0 101,6 103,6 105,8 107,9 110,1 1,9% 2,0% Determined costs in real terms (in national currency at 2009 prices) ,1% -0,2% Total en-route Service Units ,4% 2,4% Real en-route determined unit rate in national currency (at 2009 prices) 73,89 69,44 71,20 70,31 68,21 65,96-2,2% -2,5% Table 9 - National costs, total service units and national determined unit rate as presented in June 2011 For what concerns the revised planning, as confirmation of what reported in the IPP presented in June 2011, Italy has adopted a transparent approach in order to reconcile the calculation of the Unit rate with the cost efficiency performance indicator: Determined costs for 2009 and 2010 are actual data. Determined costs for the year 2011 are correspondent to the total costs as reported in Table 1, line 1.6 of the new Reporting Tables presented in November 2011 to the Enlarged Committee in its 94 th session. Determined costs for the years are as follows: o o o For what concerns ENAC (not including EUROCONTROL) and ENAV, costs are as per June 2011 NPP and as reported in November 2011 CRCO Reporting tables; For what concerns ITAF, costs are as per June 2011 NPP and therefore lower than the ones reported in November 2011 CRCO Reporting tables. EUROCONTROL costs for the first reference period increase compared to June 2011 NPP is the year-base. The inflation rates adopted for the calculation of the determined costs in real terms (expressed in EUR 2009) for the period , are those published by the International Monetary Fund in its April 2011 Outlook for Italy 7, as reported in the table below. 7 Values can be found at: y&ds=.&br=1&c=136&s=pcpipch&grp=0&a=&pr1.x=57&pr1.y=9 18

19 RP 1 Years 2010 A IMF Inflation rates 1,64% 1,95% 2,13% 2,00% 2,00% Table 10 IMF Inflation rates for Italy The revised cost efficiency target for the first reference period are calculated as follows: Revised Performance Targets (December 2011) Total determined costs in nominal terms (in national currency) 2009A 2010A AAGR AAGR ,1% 1,9% Inflation % 1,6% 2,0% 2,1% 2,0% 2,0% Inflation index (100 in 2009) 100,0 101,6 103,6 105,8 107,9 110,1 1,9% 2,0% Determined costs in real terms (in national currency at 2009 prices) ,1% -0,1% Total en-route Service Units ,2% 2,6% Real en-route determined unit rate in national currency (at 2009 prices) 73,89 69,44 72,44 71,38 69,13 66,78-2,0% -2,7% Table 11 National costs, total service units and national determined unit rate for the revised cost efficiency target As required by the Performance Scheme, the Determined Unit Rate for Italy shows a decreasing trend. In fact, despite the particular situation of the level of traffic for Italy and considering the contingent demand situation, Italy is able in any case to guarantee an average decrease of the Italian DUR of about the 2,7% per annum (in RP1), as reported in the table below: YEARS DUR ITALY ITALY Efficiency 2012F 71,38-1,5% 2013F 69,13-3,1% 2014F 66,78-3,4% Table 12 National revised cost efficiency target and related yearly efficiency level The average level of cost efficiency, compared to the one reported in the National Performance Plan presented in June, shows an improvement in the average yearly efficiency in the period (2,7% instead of 2,5%). Therefore, the contribution to the achievement of the EU wide targets has improved as the Italian DUR decreases - in the period of about 7,8% (instead of 7,4% as reported in the National Performance Plan presented in June). 19

20 4.3. Changes and justifications for the revised cost-efficiency target As mentioned in the previous paragraph, the entities accountable for the achievement of the national cost-efficiency performance target are: ENAC ENAV S.p.A. ITAF. In the scope of the revision of the cost efficiency target, ENAV, ENAC and ITAF costs for the reference period ( ) are the same as reported in the NPP presented in June. Instead, national costs for the calculation of the cost efficiency target have been slightly revised upwards due to the increase in EUROCONTROL costs. In particular, EUROCONTROL costs have recorded an increase of about 1,9 mln in the Reference Period, distributed as follows: EUROCONTROL Years Costs NPP (June 2011) Revised costs (CRCO November 2011) Delta (in Mln ) 2012 F 48,32 48,564 +0, F 48,613 49,55 +0, F 49,696 50,452 +0,756 Table 13 EUROCONTROL costs as increased in the scope of the calculation of the 2012 en-route unit rate Therefore, the total national costs to be considered for the calculation of the revised determined unit rate are as follows: ANS en-route cost per entity Currency 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D ENAV + ITAF EUR 552, , ,580 N.A N.A N.A % n/n-1 0,93% 4,75% N.A N.A. N.A. ENAV EUR N.A N.A N.A 531, , ,803 % n/n-1 N.A N.A. N.A. 1,83% 1,68% ITAF EUR N.A N.A N.A 60,361 60,862 62,465 % n/n-1 N.A N.A. N.A. 0,83% 2,63% MET EUR 0,00 0,00 0,00 0,00 0,00 0,00 % n/n-1 N.A N.A. N.A N.A. N.A. NSA+EUROCONTROL* EUR 50,535 51,887 46,941 51,722 52,756 53,706 Total determined costs in nominal terms % n/n-1 2,68% -9,53% 10,19% 2,00% 1,80% EUR 602, , , , , ,974 % n/n-1 1,07% 3,53% 2,14% 1,75% 1,78% *for 2009 and 2010, the values refer only to EUROCONTROL costs Table 14 National revised determined en route costs breakdown per entity (in nominal terms in national currency) 20

21 With reference to methodology adopted to define costs for the concerning period, it is important to highlight that: - the years 2009, 2010 and 2011 are based on the methodology applied until November 2011 to CRCO Reporting Table; for this reason ENAV and ITAF costs are aggregated for such years (as per the Table 1 ANSP ENAV worksheet); - for 2009 and 2010 values are actual and as per 2011 the full cost recovery applies; - from 2012 until 2014, according to EC Reg. 1794/2006 (as amended by Reg. 1191/2010) and EC Reg. 691/2010, the determined cost method is applied. In this case, ENAV costs and ITAF costs are shown separately. ANS en-route cost per nature Currency 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D Staff EUR 316, , , , , ,640 % n/n-1 1,67% 4,25% 1,79% 1,93% 1,89% Other operating costs * EUR 162, , , , , ,450 % n/n-1 0,35% -5,19% 3,97% 0,72% 2,33% Depreciation EUR 93, , , , , ,793 % n/n-1 8,76% 13,09% -0,56% 1,34% 1,14% Cost of capital EUR 28,900 21,580 26,090 28,090 30,090 30,090 % n/n-1-25,33% 20,90% 7,67% 7,12% 0,00% Exceptional items EUR 1,761 1,524 0,000 0,000 0,000 0,000 % n/n-1-13,47% N.A. N.A. N.A. N.A. Total determined costs in nominal terms EUR 602, , , , , ,974 % n/n-1 1,07% 3,53% 2,14% 1,75% 1,78% *for 2009, the value includes also EUROCONTROL costs Table 15 National revised determined en route costs Breakdown by nature (in nominal terms in national currency) Moreover, in the scope of the calculation of the en route determined unit rate, it is important to explicit the trend of traffic forecasts for In fact, traffic forecasts for 2011 have recorded a progressive level of detriment since September 2010, as shown in the table below: September 2010 (SUF) February 2011 (SUF) Service Unit Forecasts for 2011 May 2011 (SUF) October 2011 (internal forecast based on Jan-Oct actual data) Table 16 Service Units for 2011: the forecast trend November 2011 (internal forecast based on Jan-Nov actual data) +5,4% +3,5% -0,9% -2,3% -2,66% The peculiar situation of Italy (which is dramatically suffering from the North African crisis and from the uprising impact of the European economic crisis) does not allow to be as optimistic as STATFOR September update which is reporting for the Service Unit Forecast (SUF): For 2011, a -1,1% which however is not confirmed from the January - November actual data (-2,53%). For 2012 a +7,9% in terms of SU, that appears to be not achievable. In fact, first indications show that apart from the humanitarian corridors opened by NATO, the Libyan airspace is substantially closed for problems related to safety, out-of-date ATCOs licenses and to the equipments partially destroyed. The situation it is expected not to come back to normal operations probably until Spring next year. 21

22 ENAV, with the support of the Italian State, is taking several actions in order to provide with a factual contribution to reopen as soon as possible the Libyan airspace. On the 7 th of December 2011, ENAV and the Libyan Civil Aviation Authority (LCAA) have signed a Memorandum of Understanding which foresees the immediate delivery of training courses for Air Traffic Controllers and, afterwards, the provision of the support needed for the development of the Libyan air navigation services, the ground technology for the flight safety and system development for the air traffic management. In any case, so far the North African crisis seems to be still not solved, especially for countries as Egypt, as it appears from the latest events. The peculiar situation generated by the North African crisis and fed by the economic crisis that is interesting in particular the European area is revising upwards the level of uncertainties on the future demand and hence on traffic forecasts. Therefore, Italy expresses its appreciation for the PRB recognition of the fact that the traffic outlook remains very uncertain and volatile, and at the time of writing, it is very difficult to predict the length of the crisis and the magnitude of its impact during RP1 ( ) 8. Moreover, a comparison between the Forecasts used in November 2010 to determine the 2011 Unit Rate (showing a +5,1% increase in SU from 2010 Actual) and the actual data registered at the beginning of 2011 confirms that the situation is continuing to worsen, as shown in the figure below. Figure 2 SU forecasts and actual data: a comparison From a -0,3% in the 1 st semester 2011, traffic has progressively worsened up to -2,53% in the period January-November 2011 (actual versus the same period of 2010). At the moment, 2011 is forecasted 9 to close at -2,66% towards 2010 actual. 8 PRB assessment Report of Performance Plan for RP1 Italy, pg Forecasts are updated with actual data available and processed with an internal ENAV tool. 22

23 It is important to consider also that traffic patterns have significantly changed. The main impact for commercial traffic - is represented by the dramatic decrease in overflights, both in terms of SU and flights, as shown in the table below: Jan-Nov 2011 vs. Jan-Nov Commercial traffic Var. in % International National Overflights SU 0,53% 1,60% -12,22% Flights 2,82% 0,47% -8,09% Table 17 Commercial traffic trend (Jan-Nov 2011 vs. Jan-Nov 2010) It is important to underline that the North African crisis is foreseen to have its major impacts in 2012, which appears to have low margins for recovery in terms of traffic levels, while for the years 2013 and 2014 it is reasonable to assume that there are still areas for improvement. For what above, in the scope of the revision of its cost efficiency performance target, Italy is considering to adopt the following traffic forecasts: En-route total service units prior to RP1 8,155 8,629 8,399 Forecast total service units used for the determined unit rate STATFOR service units forecast (Baseline scenario) Date of STATFOR SU forecast: 2009 A 2010 A 2011 F 2012 F 2013 F 2014 F 8,525 8,781 9,071 Source: Internal analys % n/n-1 5,81% -2,66% 1,50% 3,00% 3,30% 8,145 8,621 8,546 8,643 8,878 9,165 May 2011 % n/n-1 5,84% -0,87% 1,14% 2,72% 3,23% Table 18 En route service units forecast used for the calculation of the Italian en route revised cost-efficiency target As it is possible to observe, the new value for 2011 is lower than the one used for the NPP adopted in June but higher for RP1, compared to the values used for the June NPP, as summarised in the table below: Service Unit Forecasts for RP NPP Revision +1,5% +3% +3,3% CRCO November ,5% +2,7% +3,2% NPP June ,1% +2,7% +3,2% Table 19 En-route service units forecast in the different planning: a comparison 4.4. Italy terminal costs Considering that Italy has deferred terminal to the second Reference Period, all the information reported are provided for monitoring purposes, as required by the EC regulations. 23

24 For what concerns the scheme of costs afferent to terminal, they are referred to ENAV, ITAF and to the CAA/NSA. With reference to the cost scheme, it is also important to underline that, from 2010, to national costs are added not only ENAV but also ITAF costs related to civil airport traffic. From 2011, to what above mentioned are added as well CAA/NSA costs. ANS terminal cost per entity/charging zone Currency 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D ENAV EUR 180, , , , , ,065 % n/n-1 4,2% 6,3% 4,7% 6,0% 3,0% ITAF EUR 0,000 24,495 22,524 25,280 25,848 26,614 % n/n-1-8,0% 12,2% 2,2% 3,0% CAA/NSA EUR 0 0 1,093 1,110 1,126 1,143 % n/n-1 1,5% 1,5% 1,5% Total terminal costs in nominal EUR 180, , , , , ,822 % n/n-1 17,8% 5,2% 5,4% 5,6% 3,0% * Data for 2009 and 2010 is actual. Data referred to is forecast. Table 20 - National costs for terminal ANS Breakdown per entity (in nominal terms in national currency) The planning proposed highlights an increase in costs in the concerned period due to the transition, scheduled in the next years, of military airports open to civil air traffic from ITAF to ENAV (according to Italian Law n.102). Details will be provided in ENAV Terminal costs section Carry-overs from the years before RP1 For what concerns the carry-over, the cost base for the calculation of the unit rate includes the recovery of the balance resulting from over or under recovery of previous years. The Adjustment mechanism of balance comprises: Balance of the period - regarding ENAV under or over-recovery of the year n-2 with reference to the unit rate (unit rate 2011 comprises the balance of the period 2009). Balance ITAF (Italian Air Force) and Balance EUROCONTROL regarding under or overrecovery of the year n-3 (unit rate 2011 comprises Balance ITAF/EUROCONTROL of the period 2008). This different behaviour is due to the fact that ENAV normally receives the closure of ITAF and EUROCONTROL after the closure of its own Balance Sheet. Concerning the forecast for 2011, due to decrease of traffic for the unrest situation in North African area, the balance of the year is expected in 50,792 million Euro (under-recovery). The balance calculation considers the balance ITAF for 2,947 million Euro (over recovery), the balance Eurocontrol for 0,946 million Euro (over-recovery) and the balance ENAV for 54,686 million Euro (under-recovery for traffic). For what concerns carry-overs from the years before RP1, in table 26 are reported data starting from the balance of the year 2004 up to 2010, as reported in ENAV balance sheet. 24

25 Carry over of under / over recoveries (in '000 euro) 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P Balance Year Balance Year Balance Year Balance Year Balance Year Balance Year Balance Year Balance Year Amounts carried over to year (i) Table 21 - Carry-overs from the years before RP1 - under (-) and over (+) recoveries (in nominal terms in national currency) Please note that the values reported in table 26 - as per the new Reporting Table 2 - En route (line 4.5) - for the years 2010 and 2011 are different from the values reported above since they have been modified by CRCO for the effect of the different principles applied for the calculation of the Unit Rate (from full cost recovery to determined cost method). 4.5 Over(-) or under(+) recoveries (1) : amounts carried over to year n ,6 15,8 28,0 63,2 12,4 Values in mln Euro Table 22 - Carry-overs from the years before RP1 as modified by CRCO and shown in the new reporting tables The recovery of the balance resulting from over or under recovery of previous years is included in the cost base for the calculation of the unit rate. Please note that the figures provided in this paragraph refer to the CRCO Reporting Tables sent in November 2011 in the scope of the definition of the 2012 en-route unit rate. Whereas all the changes in planning proposed in this document will be accepted by the EC, Italy will submit the new reporting tables and therefore also the data related to carry-overs will be updated Information on uncontrollable costs As far as the cost risk sharing is concerned, Italy confirms the exclusion from cost risk-sharing of all the costs that fall within the list of uncontrollable cost factors, as provided in Article 11a (8c) of the Common Charging Scheme Regulation: i. unforeseen changes in national pension regulations and pension accounting regulations; ii. unforeseen changes in to national taxation law; iii. unforeseen and new cost items not covered in the national performance plan but required by law; iv. unforeseen changes in costs or revenues stemming from international agreements; v. significant changes in interest rates on loans. For costs that fall within the uncontrollable costs the following provisions will apply: Where, over the whole reference period, actual costs are lower than the determined costs established at the beginning of the reference period, the resulting difference will be returned to airspace users through a carry-over to the following reference period. Where, over the whole reference period, actual costs exceed the determined costs established at the beginning of the reference period, the resulting difference will be passed on to airspace users through a carry-over to the following period. 25

26 The following principles will apply to cost risk sharing: Where, over the whole reference period, actual costs fall below the determined costs established at the beginning of the reference period, the resulting difference will be retained by the air navigation service providers and/or Member State or qualified entity concerned. Where, over the whole reference period, actual costs exceed the determined costs established at the beginning of the reference period, the resulting difference will be borne by the air navigation service providers and/or Member State or qualified entity concerned without prejudice to the activation of an alert mechanism in accordance with Article 18 of Regulation (EU) No 691/2010. EUROCONTROL costs are included in the national cost base. They are classified as uncontrollable costs. Financial resources for the provision of ANS from ITAF are directly drawn from state budget or from legislative acts or directives coming from political authorities over which neither ENAC nor ITAF have any control. Therefore, although the maximum attention is given to determine the costs according to the principles and requirements contained in SES regulation, any difference deriving from those political or administrative acts shall be considered as non controllable costs according to article 11a, comma 8 of charging regulation. It is also to be noted that the actions being taken by Italian Government to contrast the Euro area crises, are changing the institutional and administrative scenario, and this could lead to the issuance of directives or other administrative acts affecting both ENAC and ITAF on a financial and administrative perspective. 5. ENAV CONTRIBUTION TO THE NATIONAL TARGETS 5.1. ENAV S.P.A determined en route ANS costs The en- route costs used to calculate the unit rates from 2012 to 2014, are the same reported in the Italian Performance Plan. It is important to underline that ENAV costs in real terms are decreasing throughout the entire RP1, even if the traffic is planned to increase. Costs 2012F 2013F 2014F ENAV en-route determined costs in nominal terms 531, , ,803 Variation % 1,25% 1,83% 1,68% TOTAL ENAV COSTS (deflated) 502, , ,240 Variation % -0,86% -0,16% -0,31% Table 23 ENAV - Determined en route ANS costs in nominal and real terms 26

27 Additionally, it is worth to note that costs in nominal terms for the first reference period are anyway increasing less than the inflation rate foreseen by the IMF in April 2011, as reported in the table below: Table 24 ENAV en-route RP1 cost variation compared with the IMF inflation rates The rationale behind the choice of not changing the cost planning is threefold: In the period Jan-Oct 2011 vs. the same period of 2010, despite the significant drop in the chargeable traffic (-2,10%), the billed flights trend still show a positive result (+1,51%). These flights have to be anyway managed. The cost planning adopted by ENAV is already at its lowest limit and cannot be modified unless the introduction of medium and long term interventions. However, such interventions could significantly affect ENAV capability to respond to the traffic increase foreseen for 2013 and The current level of costs, in terms of Italian DUR, compared with the managed traffic is already among the lowest of its peer group (Big Five). In brief, the current process of planning and control adopted by ENAV has allowed to propose a cost planning for the period RP1 which substantially foresees only the recovery of inflation even considering an increase of traffic. In detail: ENAV Year (MLN, in nominal terms) YEAR 2011F 2012F 2013F 2014F COSTS 525,4 531,9 541,7 550,8 Variation % 1,24% 1,84% 1,68% INFLATION (IMF April 2011 Outlook) 2,10% 2,00% 2,00% ENAV Currency 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D Staff EUR 288, , , , , ,793 Other operating costs EUR 89,912 87,033 90,178 90,140 89,989 92,525 Depreciation EUR 88,412 95, , , , ,395 Cost of capital EUR 28,900 21,580 26,090 28,090 30,090 30,090 Exceptional items EUR 1,761 1,524 0,000 0,000 0,000 0,000 Total en-route costs EUR 497, , , , , ,803 DATA IN MLN 2009/2010: Table 25 ACTUAL ENAV DATA - Determined en route ANS costs by nature (in nominal terms in national currency) updated in November 2011 In consideration of the confirmation of ENAV costs for RP1 (compared to the costs presented in the IPP of June 2011), for 2011 is recorded a forecast equal to 525,369 mln Euro. The increase of about 3,28 mln is mainly related to the inflation rate recorded in 2011 which is higher than planned (about 3,3% considering November 2011 vs. November 2010, ISTAT data). Moreover, it is important to note that in Italy the inflation is recognized to the staff according to an automatic mechanisms which is foreseen in the national collective agreements. In any case, the forecast cost value reported for 2011 in table 25, are in line with the budget and unit rate cost values for As reported in the IPP, the allocation for air navigation services (i.e. ATM, COM, NAV, SOR, AIS, MET) has been done in a statistical way. During 2010, after an internal analysis, allocation criteria 27

28 have been updated within the framework of en route and terminal services costs among ATM, COM, NAV, SOR, AIS, MET. ENAV Currency 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D Air Traffic Management EUR 233, , , , , ,541 Communication EUR 72,205 51,519 54,703 55,387 56,402 57,352 Navigation EUR 43,088 26,186 27,805 28,152 28,668 29,151 Surveillance EUR 110,764 41,053 43,591 44,136 44,944 45,701 Search and rescue EUR 0,000 0,000 0,000 0,000 0,000 0,000 Aeronautical Information EUR 16,226 21,305 22,622 22,905 23,324 23,717 Meteorological services EUR 21,407 11,985 12,726 12,885 13,121 13,342 Supervision costs EUR 0,000 0,000 0,000 0,000 0,000 0,000 Other State costs EUR 0,000 0,000 0,000 0,000 0,000 0,000 Total costs EUR 497, , , , , ,803 Table 26 ENAV - Determined en route ANS costs by service (in nominal terms in national currency) 5.2. Return on Equity and Cost of Capital For what concerns the cost of capital, ENAV confirms that this is calculated as the product of: the sum of the average net book value of fixed assets used by the air navigation service provider in operation or under construction without considering the financed assets and the net current assets; the return on equity. ENAV Currency 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D Net book value fixed assets EUR 838, , , , , ,255 Adjustments to total assets EUR 0,000 0,000 0,000 0,000 0,000 0,000 Net current assets EUR 66,122 71,448 71,307 74,663 74,537 74,537 Total asset base EUR 904, , , , , ,792 Cost of capital pre tax rate % 3,2% 2,2% 2,7% 2,7% 2,9% 2,9% Return on equity % 3,6% 2,6% 2,7% 2,7% 2,9% 2,9% Average interest on debts % 2,2% 0,7% 0,0% 0,0% 0,0% 0,0% Table 27 ENAV - Complementary information on the cost of capital en route (in nominal terms in national currency) For what concerns the cost of capital, it is important to underline that: The cost of capital has not been revised in the scope of the 2012 unit rate calculation (November 2011). As confirmed by the PRB in its assessment, the Italian average RoE forecast over the period is much lower than any of the comparator States. For its calculation Italy has adopted the annual emission of BOT (instead of the long bond rate which would have been significantly higher in terms of interest rate). The average value used is of: 2,7% for the years 2011 and ,85% for the years 2013 and Considering the constant rise in interest rate that has interested Italy in the last 6 month (and related to the difficult economic situation of the Euro area and to the level of the State debt), the potential interest rate to be adopted by Italy could be definitely much higher than the one used in the scope of the June 2011 Performance Plan (+7,06%, Source: ECB data, long term bond rate for 28

29 Italy, November 2011). Please note that this would have had relevant impacts on the DUR level and therefore on the en-route unit rate as applied to the users. As required, the following tables report the information on the cost of capital and the calculation of the Return on Equity both for the IPP of June 2011 and the December 2011 one. Risk free rate Risk Premium Initial Performance Plan (June 2011) 10-year government bond rate over the period November 2010-April 2011 Average ,7% -1,9% Nominal Return on Equity 2,80% Pre-tax Table 28 ENAV - Information on the en route cost of capital as reported in the IPP of June 2011 Revised Performance Targets (December 2011) Average Risk free rate Average of the State Bond (BOT) interests rates, issued by the Ministry of Economy and Finance on the first semester of the concerning period. In particular: For the years 2011 and 2012, it has been considered the average of the BOT interest rates for the years For the years 2013 and 2014, it has been considered the average of the BOT interest rates for the years ,7% for the years 2011 and 2012 and to 2,85% for the years 2013 and 2014 Risk Premium % Return on Equity Nominal Pre-tax 2,80% Real, pre-tax, weighted average cost of capital Return on Equity from en-route reporting tables (section 3.6) ,70% 2,85% 2,85% Table 29 ENAV - Information on the en route cost of capital as reported in the IPP of December 2011 Therefore, ENAV confirms the calculation of the RoE and the cost of capital as per National Performance Plan presented in June

30 5.3. ENAV en route cost efficiency target for RP1 ENAV cost efficiency target is based on the same assumptions adopted for the definition of the national target. Therefore, considering ENAV cost planning and the new traffic forecasts as adopted at National level, ENAV revised cost efficiency targets for RP1 are as follows: ENAV 2011F 2012F 2013F 2014F DUR from planned costs 60,36 58,96 57,15 55,15 n/n-1% -2,33% -3,07% -3,49% Table 30 ENAV Revised cost efficiency targets for RP1 ENAV determined Unit Rate shows, in the period , an average decrease of - 3% per year. In particular, the yearly decrease is of: YEARS DUR ENAV ENAV Efficiency 2012F 58,96-2,3% 2013F 57,15-3,1% 2014F 55,15-3,5% Table 31 ENAV Revised cost efficiency targets for RP1 and yearly decrease The new performance levels show an improvement compared to the efficiency presented in June within the NPP and to the one achievable with the CRCO planning: ENAV COST EFFICIENCY IN REAL TERMS YEARS NPP CRCO NOVEMBER 2011 Revision of the NPP 2012F -1,36% -2,33% -2,33% 2013F -2,81% -2,81% -3,07% 2014F -3,43% -3,43% -3,49% Table 32 ENAV Cost efficiency targets for RP1: a comparison The improvement is also reflected in the efficiency in the period : ENAV EFFICIENCY IN THE PERIOD NPP CRCO NOVEMBER 2011 Revision of the NPP -7,42% -8,33% -8,64% Table 33 ENAV Cost efficiency in the period : a comparison It is important to observe that despite the very difficult situation of the traffic that has affected the Italian Air Navigation Service Provider, the contribution provided to the achievement of the National 30

31 target is substantial and improved, not only if compared to the plan presented in June but also if compared to November planning, achieving a 3% yearly average efficiency. It is worth to note as well that ENAV is the only entity subject to traffic risk and that might bear the costs of the traffic decrease whereas the assumptions on which the traffic forecasts are based will not occur ENAV terminal ANS costs ENAV terminal costs are equal to: ENAV Currency 2009 A 2010 A* 2011 F* 2012 D* 2013 D* 2014 D* Staff EUR 101, , , , , ,938 Other operating costs EUR 41,376 37,441 40,180 40,083 45,007 46,236 Depreciation EUR 36,582 39,227 44,795 44,881 45,644 45,875 Cost of capital* EUR 0,000 7,483 8,016 8,016 8,016 8,016 Exceptional items EUR 0,651 0,925 0,000 0,000 0,000 0,000 Total terminal costs EUR 180, , , , , ,065 Table 34 ENAV - Terminal ANS costs in national currency As in the IPP presented in June 2011, costs reported in the above table are ENAV total terminal costs. Therefore, they do not include the above mentioned funding, which are instead deducted from the cost base and therefore not charged to the users - when calculating the terminal unit rate. For the period , the components of ENAV terminal planned costs are as follows: TERMINAL NOMINAL COSTS ENAV costs 199, , , ,415 Staff costs for new airports 7,809 12,518 15,650 TOTAL ENAV COSTS 208, , ,065 Table 35 ENAV Components of terminal ANS costs in national currency The planning proposed highlights an increase in costs in the concerned period due to the transition, scheduled in the next years, of military airports open to civil air traffic from ITAF to ENAV (according to Italian Law n.102). In particular, these increases are related to staff costs of new air traffic controllers needed for managing the ANS on those airports. It is important to underline that, excluding these increases, the planning shows a substantial invariance of costs in real terms. The table below shows, instead, the terminal chargeable cost, (obviously, net of the State contributions). ENAV Terminal Chargeable costs 82,566 87,659 93, , , ,982 Table 36 ENAV - Terminal ANS chargeable costs in national currency 31

32 Please note that, as already highlighted during the consultation hearing on terminal charges held in November 2011 the Italian State, with the publication in the previous weeks of the Legge di stabilità, has de facto cancelled the majority of the contributions to terminal costs starting from the second half of At the moment is in place, with the competent national authorities, the assessment of the impacts of the new law on the terminal charges. Please consider that this national law does not have impacts on the level of total terminal costs but only on the chargeable costs (just because it cancels the State contributions). It is worth to remember that the Law n. 248/05 provided that the following costs were funded by the State (and still are until the 30 th of June 2012): Costs related to smaller airports. Part of the costs related to major airports. The 50% of the costs borne by the Company for the air traffic management of domestic and EU flights (50% of the unit rate) Investments For what concerns the investments, it is important to underline that: Italy (through ENAV, member of SESAR Joint Undertaking) fully supports SESAR programme by having an active role in the development of its concepts in order to obtain the main targets set by the programme itself. Furthermore, Italy is fully aligned with the requirements coming from the European ATM Master Plan and, in particular, is compliant with the IP1Deployment baseline specifications. ENAV represents a fundamental element in the delivery of the ATM service both at Italian and at European level. This role requires long term planning and investment decisions making in order to meet customer and business requirements. ENAV vision for ATM operation has been incorporated in its investment plan and it is aligned with the European ATM Master Plan. It is important to underline that the level of investments planned so far for RP1 allows to achieve a significant reduction of investments in RP2 and to achieve the on time implementation of the main targets set by the European ATM Master Plan. Therefore, investments in RP1 are propaedeutic to RP2. Details of the IP1 related investments are provided in the table below: 32

33 Name Schedule Description Scope Status AIP PLUS (AIXM implementation) The Project is about the definition of system requirements for processing new generation NOTAM (XNOTAM) and their parallel treatment with existing NOTAM Implement interoperability of local system with ADR. Implement Advanced Airspace Management (AAM). Implement Aeronautical information management Ongoing Link with ESSIP Obj. AOM19 AOP03 Link with IP1 OIs/Enablers AO-0101 AO-0103 AOM-0201 AOM-0202 AOM-0205 AOM-0401 AOM-0601 AOM-0801 DCB-0203 DCB-0204 Multilateration Systems (Bergamo, Venezia, Bologna, Torino) The Project aims at the implementation of Multilateration Systems for surveillance in airports already RADAR SMR provided Ongoing AOP04.1 AO-0201 eatms : Configuration Systems and Software generation The Program aims at completing the Configuration Management Systems in the tool chain supporting the SW ATM life cycle. The New technology allows the utilization of integrated systems for developing phase automation: from requirements definition to system test, assuring traceability between different level requirements. Ongoing ATC02.2 CM-0801 Implement ground based safety nets - Short Term Conflict Alert (STCA) SATCAS functional adjustment The Project aims at the installation, integration and deployment of new HW/SW Intel/Linux Ongoing ATC07.1 ATC12 ITY AGDL ITY-COTR SUR02 SUR04 TS-0102 CM-0201 CM-0202 CM-0203 AUO Flight : New ATM Platform The Project aims at realizing the first version of new generation ATM platform (4Flight) through a plan, compliant to SESAR requirements, shared with DSNA French Provider Ongoing ATC02.5 ATC02.6 ATC02.7 ATC15 CM-0801 TS-0305 PENS (Pan European Network Service) Pan European Network Service Ongoing COM09 CTE-C11a OLDI Migration from X.25 to IP The Project aims at modernizing OLDI communications migrating them over IP protocol Ongoing COM09 ITY-FMTP CTE-C11b TOTEM self briefing The Project enables several types of integration with CED AOIS, which will autonomously manage a series of processes necessary to flight planning (Meteo/AIS documentations and FPL Management) with no dependencies with ENAV personnel. Project aims at automating service providing functionalities (pre-flight phase), making informations and Meteo/AIS documentation available to all aeronautical users (licensed by ENAV), using Client/server and TCP/IP protocol communications facilities, removing current geographical constraints Ongoing INF04 IS

34 Name Schedule Description Scope Status Link with ESSIP Obj. Link with IP1 OIs/Enablers etod The project aims at implementing a tool to improve the data quality of Obstacle Charts surveys in the airports Ongoing ITY-ADQ IS-0202 IS-0203 IS-0204 FPL The project aims at implementing the distribution of FPL messages in ADEXP format via AOIS to the National FDPs according to the entry into force of Amendment 1 to Doc Ongoing FCM03 ITY-COTR CM-0201 DCB-0302 IS-0101 IS-0102 Data Link implementation (phase 2) The Project aims at completing the compliance of VHF Data Link Service for all ACC and some main Airports Ongoing ITY-AGDL AUO-0301 Radar Plan Mode S The Project aims at integration and deployment of Mode S Radar functionalities Ongoing SUR02 CTE-S5 CTE-S9 SW implementation Mode S Project aims at integration and deployment of Mode S Radar functionalities Ongoing SUR02 CTE-S5 CTE-S9 National ADS-B net The Project aims at realization of a National cooperative Surveillance net based on ADS- B technology working together with the radar net PSR/SSR Ongoing SUR05 CTE-S1 CTE-S9 ENET The Project aims at providing the national ground network services able to connect to PENS Ongoing COM09 CTE-C11a A-CDM 2012 The project will enhance the operational efficiency of airports and improve their integration into the Air Traffic Management Network (ATMN) providing a software support for information sharing and connecting all the involved stakeholders. Ongoing AOP05 FCM01 DCB-0301 DCB-0302 DCB-0207 DCB-0303 AO-0501 AO-0601 AO-0602 AO-0603 IS-0101 Table 37 Investments IP1 related ENAV new CEO, after the recent change in the management of the Company, has started in these days the revision of the Investment Plan expressing the will of carrying on the process of reduction of the level of investments, process already launched with the last investment plan as reported in June 2011 NPP. The new investment plan will be ready within the first months of Capacity Being ENAV the sole entity responsible for the achievement of the capacity target, ENAV targets on capacity are coincident with the National ones. Please refer to chapter 2 for all the details. 34

35 5.7. Safety The PRB assessment report requires for the indication of the use of RAT in ENAV S.p.A. The PRB underlines that according to PRR 2010, RAT is in use in ENAV. ENAV confirms that the RAT is in use. 6. ITAF CONTRIBUTION TO THE NATIONAL TARGETS In the tables below are reported ITAF costs, being ITAF only subject to cost risk. For the first reference period ( ) ITAF has confirmed the same costs as per June 2011 NPP. ITAF costs in the period show the trend as reported in the table below. ITAF CURRENCY Staff EURO 29,811 32,368 32,295 33,864 34,372 34,888 Operating costs EURO 19,389 23,910 20,096 21,528 21,851 22,179 Depreciation EURO 5,516 6,073 5,819 4,969 4,639 5,398 Cost of capital EURO 0,000 0,000 0,000 0,000 0,000 0,000 Other EURO 0,000 0,000 0,000 0,000 0,000 0,000 Total costs EURO 54,716 62,351 58,211 60,361 60,862 62,465 Table 38 ITAF en route costs in the period by nature ITAF CURRENCY Air Traffic management EURO 17,478 22,725 19,515 21,033 21,187 21,781 Comunication EURO 6,721 6,884 5,320 5,582 5,626 5,779 Navigation EURO 6,348 6,921 10,086 6,909 6,972 7,145 Surveillance EURO 2,233 2,570 2,092 2,205 2,197 2,299 Search and Rescue EURO 0,000 0,000 0,000 0,000 0,000 0,000 Aeronautical information EURO 0,000 0,000 0,000 0,000 0,000 0,000 Meteorological services EURO 21,936 23,252 21,198 24,632 24,880 25,460 Supervision costs EURO 0,000 0,000 0,000 0,000 0,000 0,000 Other State costs EURO 0,000 0,000 0,000 0,000 0,000 0,000 Total costs EURO 54,716 62,351 58,211 60,361 60,862 62,465 Table 39 ITAF en route costs in the period by services For what concerns ITAF terminal costs, they are charged starting from as per EC Reg. n. 1794/ Note that 2009 and 2010 data are as reported in ENAV balance sheet as well as in the reporting tables. As ENAV balance sheet is closed before ITAF closure of accounts, the difference between ITAF budget values (as per ENAV balance sheet) and ITAF actual values is considered in n See note

36 ITAF Currency Staff EUR 13,163 12,181 12,685 12,875 13,069 Operating costs EUR 9,429 8,310 9,790 9,937 10,086 Depreciation EUR 1,903 2,033 2,805 3,036 3,460 Cost of capital EUR 0,000 0,000 0,000 0,000 0,000 Other EUR 0,000 0,000 0,000 0,000 0,000 Total costs EUR 24,495 22,524 25,280 25,848 26,614 Table 40 ITAF terminal costs in the period by nature 7. ENAC SHARE IN THE NATIONAL TARGETS ENAC costs to be included in the calculation of the unit rate, have been determined coherently with the trend of accounting data of the previous years and have been included in the same amount in the provisional 2011 Balance Sheets of ENAC. ENAC is not reporting any change in its cost base and therefore it is confirming the data provided in June 2011 NPP. En route costs for the NSA are reported in the table below. Nominal Costs 2011F 2012F 2013F 2014F NSA 3,112 3,158 3,206 3,254 * Values are in million Euro and in nominal terms. Table 41 ENAC En route costs for RP1 8. PARAMETERS FOR RISK SHARING AND INCENTIVES The national/fab performance plans should describe the national targets as well as the measures, such as incentives schemes, aimed at driving the behaviour of stakeholders for the continuous improvement of performance at national level, providing for rewards, incentives/disincentives and/or corrective action plans. The incentives scheme, as part of the performance plan, shall be effective, proportional and credible. The implementation of an incentive scheme shall represent an advantage for all the stakeholders because it will: promote virtuous behaviours among all the stakeholders; foster the further improvement of the quality of the service keeping in due consideration the trade-off between the different key performance areas; ensure benefits to airspace users and passengers against a limited financial burden; represent a best practice to be used also by other States in Europe; promote a performance level higher than the required adequate contribution, thus providing additional margins for the achievement of the EU-wide targets; represent a first attempt to promote the performance based approach in the management of the en-route capacity. 36

37 The incentives scheme proposed by Italy is aiming at ensuring the provision of a high quality service with a bonus/malus system, applicable in case of achievement/non achievement of performance targets and incentives thresholds more ambitious than the performance targets, that will produce benefits, operational and economic, for airspace users and the European ATM system in the achievement of the EU wide performance targets. The incentives scheme will be kept as simple as possible for the first reference period, in order for all stakeholders to gain experience from the implementation of this new system. An incremental approach will be followed in the recognition of bonus/penalty in order to ensure the commitment of the ANSP in the continuous improvement of capacity results and to ensure the system is proportionate to the benefits for the users Incentive scheme on capacity The proposed incentives related to the achievement/non achievement of the capacity targets are of financial nature and developed in accordance with Article 12 of Regulation (EC) No 1794/2006 as amended by Regulation (EC) No 1191/2010. Italy, in order to promote the continuous improvement of the quality of service provided, will recognize to ENAV a bonus for each of the years, within Reference Period 1, in which the en route capacity target and the more ambitious incentive threshold are met. In the same way, if ENAV performance in terms of capacity will go beyond the national capacity target (respectively 0.14, 0.14 and 0.12 minutes average ATFM delay per en route flight), a penalty for each of the years within Reference Period 1 will apply. It has to be clarified that in this context only ATFM delays under the responsibility of ENAV (ATC- Capacity, ATC-Staffing, ATC-Equipment and ATC-Industrial Action where ENAV is accountable for) shall be counted. As represented in Figures below, 2012 Italy en route capacity target is 0.14 minutes/flight ATFM delay, arriving to 0.12 minutes/flight of delay in 2014, against an EU wide target of 0.5 minutes/flight (0,7 and 0.6 in 2012 and 2013 respectively). To give due consideration to the PRB recommendations, it was decided to set more ambitious levels of performance for the recognition of incentives to ENAV, therefore: 1. an incentive will be calculated based on the achievement of the performance target and recognized only in case the performance result is equal or better than the incentive threshold, that is 0.08 for 2012, 0.07 for 2013 and 0.06 for 2014; 2. no incentive will be recognized, although calculated based on the national target, in case the capacity performance is between the national target (e.g. 0.14/0.12 minutes/flight) and the incentive threshold (Dead band); 3. a penalty will be applied in case the capacity performance result is worse than the national performance target (e.g. 0.14/0.12 minutes/flight), only including all the ATFM delay reasons under ENAV responsibility; 37

38 4. a penalty will be applied in case the capacity performance result is worse than the European performance target (e.g. 0.5 minutes/flight), only including all the ATFM delay reasons. The calculation of the incentives is based on the assumption that any movements of 0,01 minutes of delay, if applied to the STATFOR baseline traffic forecast for Italy, should result in a delay-cost impact value for the Airspace Users, estimated in about 1,3/1,4 million 12 during RP1 and that any primary ATFM delay produced by Italy would turn into additional secondary delay for the EU-wide network, with additional unpredictable operational effects and additional costs for the Airspace Users. The incentives scheme will be symmetric and envisage a proportional application of bonus/penalty linked to the benefits derived from airspace users. On this base a bonus/penalty of (the half of 1,4 million ) will be recognized to ENAV for any 0,01 minutes of en-route ATFM delay plus/minus the national capacity target. For the Reference Period 1 the incentives scheme will be kept as simple and transparent as possible, therefore the following rules will be applied: - based on PRB recommendations, in order to set more ambitious levels of performance, bonuses will be recognized only in case the performance result is equal or better than the incentive threshold, that is 0.08 for 2012, 0.07 for 2013 and 0.06 for the application of the proportional scheme will provide - for the first Reference Period - for a maximum bonus/penalty of up to 8 millions per annum. Figure 3 Incentive scheme, Italy capacity target for Reference Period 1, year Based on European airline delay cost reference values - Final Report (Version 3.2) released by Department of Transport Studies University of Westminster, London, for Performance Review Unit EUROCONTROL, Brussels. It is to be considered that any reduction by 0,01 minutes of delay, if applied to the STATFOR baseline traffic forecast for Italy, should result in a delay-cost-saving value for the Airspace Users, estimated in about 1,3/1,4 million euros, during RP1 and that any primary ATFM delay produced by Italy could be reflected in a secondary delay for the EU-wide network, with unpredictable operational effects and additional costs for the Airspace Users. 38

39 Figure 4 Incentive scheme, Italy capacity target for Reference Period 1, year 2013 Figure 5 Incentive scheme, Italy capacity target for Reference Period 1, year