PRB assessment report of Performance Plans for RP1. Czech Republic. Prepared by the Performance Review Body (PRB) of the Single European Sky

Transcription

1 Performance Review Body EUROCONTROL PRB assessment report of Performance Plans for RP1 Prepared by the Performance Review Body (PRB) of the Single European Sky 20 September 2011

2 COPYRIGHT NOTICE AND DISCLAIMER EUROCONTROL This document is published by the Performance Review Commission (PRC) in its role as Performance Review Body (PRB) to assist the European Commission in the implementation of the Performance Scheme. It may be copied in whole or in part providing that the copyright notice and disclaimer are included. The information contained in this document may not be modified without prior written permission from the Performance Review Commission. The views expressed herein do not necessarily reflect the official views or policy of EUROCONTROL or of the European Commission, which make no warranty, either implied or express, for the information contained in this document, neither do they assume any legal liability or responsibility for the accuracy, completeness or usefulness of this information. Printed by EUROCONTROL, 96, rue de la Fusée, B-1130 Brussels, Belgium. The PRC s website address is The PRU s address is pru@eurocontrol.int.

3 TABLE OF CONTENTS 1 CZECH REPUBLIC INTRODUCTION CURRENT SITUATION AND LEVEL OF PERFORMANCE COMPLIANCE CHECKS SAFETY ENVIRONMENT CAPACITY COST-EFFICIENCY INTERRELATIONS BETWEEN PERFORMANCE TARGETS ADDITIONAL COMMENTS ASSESSMENT CONCLUSIONS...18 ANNEX 1: TECHNICAL ASSESSMENT DASHBOARD...20 ANNEX 2: PERFORMANCE PLAN CHECKLIST...21 ANNEX 3: INVESTMENTS RELATED TO IP1 OF THE ATM MASTERPLAN...25 ANNEX 4: LIST OF UNCONTROLLABLE COSTS...26

4 1 1.1 Introduction The s Performance Plan was received on the 28 th June 2011 in English. It was signed by the Flight Standards Division Director of the Civil Aviation Authority The Performance Plan provides performance targets set at a national level for: ANS CR as the designated ANS provider; and Czech Hydrometeorological Institute (CHMI) as the designated MET service provider In addition, other organisations included in the performance plan but with no targets or incentives are: Prague Airport for the provision of airport data; CAA/NSA (NSA CG) and EUROCONTROL costs for the calculation of determined costs The is part of the Functional Airspace Block Central Europe (FAB CE) alongside Austria, Bosnia and Herzegovina, Croatia, Hungary, Slovak Republic and Slovenia. The PRB notes that for RP1 the FAB CE States have decided not to prepare a performance plan at FAB level but at national level The Performance Plan covers FIR Praha and where applicable the following aerodromes: Praha, Brno, Ostrava and Karlovy Vary According to Article 13 of the performance scheme Regulation 1, the PRB has assessed this plan on the basis of the criteria laid down in Annex III of the same Regulation. 1.2 Current situation and level of performance The global economic crises led to a decline of -4.1% in GDP in 2009, but 2010 saw a partial recovery to 2.4% growth and that level of growth is forecast to reduce to 2% in The s price inflation was 0.6% in 2009, reflecting the economic downturn. In 2010 it grew to 1.5% and IMF forecast it to increase to 2.0% in The Czech Koruna has increased in value against the euro over the period The s Government bond rate 4 after reducing for GDP (%) -4.1% 2.4% 2.0% Price inflation (%) Exchange rate to Government Bond Rate % 0.6% 1.5% 2.0% % 3.9% 4.0% Figure 1: Key macro-economic indicators Commission Regulation (EU) No 691/2010 of 29 July 2010 laying down a performance scheme for air navigation services and network functions. Source: European Economic Forecast (Spring 2011). Source IMF April 2011 Forecast, Average. Source European Central Bank long term bond rates (10 years) collected for convergence reasons, monthly average, for 2011, 5 months only. 3

5 remained relatively stable over the period The s Performance Plan includes positive statements on the continued recovery of the national economy and strong GDP growth throughout RP ANS CR is the main ANSP operating in and is a mid-sized organisation with costs amounting to 1.5% of the EU29 gate-to-gate ATM/CNS provision costs in % of the en-route ATFM delays across the EU29 were experienced in Czech airspace. While traffic variability is intermediate, traffic complexity is relatively high in the Czech airspace. Gate-to-gate ATM/CNS costs 1.5% Flight-hours controlled by the ANSP 1.8% En-route ATFM delay 2.2% 98.5% Czech republic EU % Czech republic EU % Czech republic EU 29 Figure 2: ANS CR's Key Figures (ACE 2009) Figure 3 shows that IFR 1,000 traffic in Czech airspace 900 declined in It 800 returned to growth in however the May STATFOR Forecast does 500 not expect the IFR 400 movement to recover the originally expected traffic for 2009 before 2012 (i.e. a three years shift of traffic) IFR movements ('000) STATFOR MTF Feb vs. May ACTUAL Feb ( B ) May 2011 ( B ) Figure 3: STATFOR February 2008 base case and May 2011 Base case forecasts In the safety is a paramount aim. The transport policy of the Czech Republic states that In civil aviation, it is an aim to continue to ensure the widest applicability of international safety standards. The Czech aviation transport industry has an excellent safety record with incidents rates kept low despite the rise in traffic volume during the last decades. The key objective of ATM services provision is to assure safety. The aims to maintain or improve the level of safety of the services provided, regardless of the volume of air traffic. Safety is afforded priority over commercial, operational and other goals In May 2011, the Ministry of Transport,, published an amendment to its national L series regulation by which State Safety Programme (SSP) of the Czech Republic was introduced to national legislation system with applicability as of 2 June

6 As shown in Figure 4, the Czech Republic has experienced a sustained decline in ATFM en-route delay per flight over the period Capacity shortfalls alongside staff shortages despite high levels of overtime were the main causes of delay. ATFM en-route delay/ flight (min.) [Jan.- May] ATC Capacity/ Staffing [C,S] Weather [W] Traffic index (2005) ATC Other (strike, equipment, etc.) Other (special event, military, etc.) Figure 4: Historical ATFM delays per cause index According to ACE 2009 report, the has a mid-level determined unit rate. There have been decreases in unit employment costs in 2009 for ANS CR, mainly due to a significant decline in overtime. Overall cost effectiveness for ANS CR improved in 2009 despite of a decline in traffic. Service units remained level in 2009 (0%) and increased by a significant 8% in Compliance checks The s Performance Plan contains most of the information required by the legislation. However, the following required information is not provided: Explanations of interdependencies between targets. Description of the investments necessary to achieve the performance targets In several other areas the Plan contains incomplete information full details are provided in Annex 2. The s Performance Plan should be updated to contain the missing information listed in Section Safety A legal framework for the establishment of the SSP has been recently introduced by the Ministry of Transport. Its implementation and the elaboration of a State Safety Plan should follow soon The Czech Performance Plan contains the following information on safety PIs: ATM safety framework maturity survey is used by the ANSP and the CAA. Incidents are classified with severity A and B The implementation of the RAT methodology by the ANSP is planned between 2011 and However, there is no clarity if the AAIB is aligned. There is no indication that the 3 safety indicators proposed by 691/2010 will be monitored during RP Further, according to LSSIP , a national ALoS is not established. 5

7 1.4.4 The PRB has the following safety observation with respect to the Czech Performance Plan: A clear description is lacking on how results of the EUROCONTROL ATM maturity survey and the trend analyses on high-severity incidents, will be monitored during RP1. The planned NSA capability for oversight and safety performance monitoring is given, however not the current status (which is described in the LSSIP ). Safety regulatory audits and oversight of ATM related safety changes are not yet implemented. The procedure for issuing safety directives is not yet implemented Key points on SAFETY: The PRB invites the Czech NSA to complete the implementation of all procedures and ensure sufficient resources in order to fulfill oversight tasks under SES. In preparation for RP1, the PRB invites the to establish proper procedures for reviewing safety assessments of ATM changes. Clarification is sought whether the NSA will monitor ATM safety maturity and high-severity incidents during RP1. The PRB appreciates the legal framework for the implementation of the SSP as introduced on 02 June The PRB encourages the to timely implement the SSP in accordance with the legal framework. With due regards to the independence of AIB, PRB encourages to apply the RAT methodology for analyzing and investigating ATM safety occurrences in all entities (not just the ones mentioned in 691/2010). The is invited to use the opportunity of application of the RAT methodology (during ATM safety occurrence analysis and investigation) to develop new (or to review existing) safety performance indicators for monitoring purposes as early as possible during RP1. The PRB recommends the to monitor the three safety indicators in accordance with 691/2010 and the national high severity incident indicator. 1.5 Environment The s Performance Plan contains no specific environmental KPIs, however, a general objective to assure sustainable development of air navigation services while minimizing the negative impacts on the environment is defined along with a number of key activities in support of this objective (Page 12 of the performance plan) The intends to introduce incentives to support reduction of environmental impact of aviation during the first reference period. These incentives shall be applied only by ANS CR and in terminal navigation services. PRB welcomes the innovative approach of the to implement free route operations and encourages to implement the free route concept as part of FAB CE. 6

8 1.6 Capacity Figure 5 presents the delay targets proposed by the for each year of RP1 against the historical delays as well as the reference values provided by the Capacity planning process of EUROCONTROL in January En-route ATFM delay per flight (min.) Source: CFMU; Performance Plan Historic values Reference values Capacity target OK OK OK Figure 5: Capacity targets overview Delay level check in 2014: The capacity target for 2014 in the s Performance Plan (0.15 minutes en-route ATFM delay per flight) and the intermediate values in 2012 and 2013 are equal to the reference values attributed to the Czech Republic by the capacity planning process of EUROCONTROL. The s Performance Plan is assessed as passing the Delay level check ANSP Capacity Planning (LSSIP ): Figure 6 illustrates the evolution of ANSP capacity planning in the past 4 years and compares it to the required reference capacity profile in the LSSIP movements per hour Baseline (REF) - shortest routes (REF) - current routes (PLAN) (PLAN) (PLAN) (PLAN) Figure 6: Evolution of ANSP capacity planning (LSSIP) vs. required capacity The is sensitive to changes in route utilisation patterns by airspace users. Hence, the capacity requirement depends on whether airspace users continue to use the same route as today (current route) or if route utilisations shifts towards the shortest available route There is a significant variation between the two profiles (i.e. the current route profile requires some 12% more capacity in 2014) and the latest ANSP performance plans (LSSIP ) show an upward revision closer to the current route profile. 7

9 1.6.6 Figure 7 compares the shortest and the current reference capacity profile to the ANSP capacity plans for the period in the LSSIP It illustrates the magnitude of the possible variation which require some flexibility by the ANSP in terms of capacity planning. ANSP capacity plans vs. required reference profile (LSSIP ) 30% 20% 10% 0% -10% -20% Shortest routes scenario Current routes scenario -30% Figure 7: Capacity plan vs. required reference profile Shortfall Surplus Based on the latest ANSP capacity plans, a capacity surplus of some 10% is expected for the shortest route profile in 2014 but for the current route profile a small capacity shortfall is shown If all flights were to use the shortest route, a delay of 0.01 minutes per flight is predicted in This is better than the national target in the s Performance Plan but depends on shift of traffic demand towards the shortest route The ANSP Capacity Plan is slightly below the reference profile for the current routes scenario but significantly above the targeted value for the shortest routes scenario. A delay close to zero is expected if traffic demand shifts towards the shortest route in 2014 and only a small delay if traffic demand continues using the current route profile. ANS CR s latest available capacity plan (LSSIP ) is in line with the required reference profile and the performance target in the s Performance Plan Key Points on CAPACITY: A. Since 2006 capacity performance in the has been improving to a level in 2010 that is in line with the delay level required in B. The capacity performance target set out in the s Performance Plan is equal to the required reference value in 2014 and the indicative values in 2012 and C. Although the is sensitive to significant changes in route utilisation patterns by airspace users, the capacity plans for ANS CR in the latest LSSIP ( ) are in line with the required reference capacity profile and provide a degree of flexibility for alternative traffic demand which suggests that the improvement seen over the past years can be continued throughout RP1 and beyond. 1.7 Cost-efficiency Figure 8 presents the cost-efficiency targets proposed by the for each year of RP1 together with the historical values since

10 Determined unit rate ( ) Traffic and cost index (2009=100) ATSP Eurocontrol MET 100 CAA/NSA Service Units Real 2009 en-route cost Components of determined unit rate Eurocontrol EUR % -3.7% ATSP EUR % -2.2% MET EUR % -4.6% CAA/NSA EUR % 102.6% Total EUR % -1.6% Figure 8: Cost-efficiency target overview Traffic forecast checks: As shown in Figure 9, the submitted traffic forecast is equivalent to the STATFOR May 2011 base case every year of RP1 ( ). The figure for 2011 provided in the Performance Plan has however not been revised since November 2010 (it corresponds to a +3.0% traffic growth over 2010) and differs substantially from the STATFOR May 2011 base case (+5.8% over 2010) and the evolution observed to date (+8.0% for the period January to July 2011 or +5.3% if April is excluded from this calculation due to the volcanic ash crisis in April 2010) Although the PRB understands that it was decided to keep in the Performance Plan the November 2010 traffic figures for 2011 in order to clearly link it to the EU-wide targets basis, this however introduces a bias. The PRB deems important to consider the impact of this issue in the context of this technical assessment, and in particular when the changes in DUR between 2011 and 2014 are analysed. Indeed, the use of a lower SU forecast in 2011 mechanically increases the level of the DUR and, all else equal, contributes to a better DUR profile over the period. 9

11 Index of Service Units 2009= STATFOR May 11 base STATFOR May 11 high STATFOR May 11 low STATFOR Feb 11 base STATFOR Sep 10 base Performance Plan Total en-route service units ('000) Performance Plan % 4.4% STATFOR May 11 base % 3.5% STATFOR May 11 high % 5.1% STATFOR May 11 low % 2.4% STATFOR Feb 11 base % 3.3% STATFOR Sep 10 base % 3.1% Figure 9: Traffic forecasts The s Performance Plan is assessed as passing the Traffic forecast check Economic assumptions checks: As shown in Figure 10, the figures for 2011 and 2012 considered in the Plan are based on the latest inflation forecast from the Czech Ministry of Finance. The inflation rate is slightly higher than the IMF April 2011 average inflation forecast for 2011 (by 0.1 percentage point) and significantly higher the IMF forecast for year 2012 (by 1.2 percentage points). The PRB understands that the difference in 2012 is mainly due to an increase of the (reduced) VAT rate from 10% to 14%, estimated by the Ministry of Finance to impact 2012 inflation by 1.1 percentage point The inflation percentages applied for the 2013 and 2014 estimates are based on the 2% inflation target as defined by the Czech National Bank, These are identical to the IMF April 2011 average inflation forecast The PRB calculates that the cumulative difference in the forecast price base is +1.4 percentage points by 2014 and notes that the use of a higher inflation rate increases the forecast annual reduction of the real en-route DUR between 2011 and The PRB deems important to consider the impact of this issue in the context of this technical assessment, and in particular when the DUR trend and level are analysed. Inflation Performance Plan 1.5% 2.1% 3.2% 2.0% 2.0% 2.2% 2.4% IMF April 2011 average 1.5% 2.0% 2.0% 2.0% 2.0% 1.9% 2.0% Difference (percentage points) 0.0% 0.1% 1.2% 0.0% 0.0% 0.3% 0.4% Performance Plan (index, 2009=100) IMF April 2011 average (index, 2009=100) Figure 10: Economic assumptions 10

12 The s Performance Plan is assessed as passing this check, although the forecast used is significantly higher than the IMF April 2011 average inflation rate for year Unit rate trend checks: As summarised in Figure 11, the forecast annual reduction in the en-route DUR is much below the EU target for (-1.6% compared to -3.5%). If the trend in the en-route DUR was evaluated using the 2011 forecast as submitted by the in November 2010, uplifted to remove the effects of the one-off reduction in EUROCONTROL costs for 2011, the forecast annual reduction would be -1.7% p.a When assessed over the period, the forecast trend in the en-route DUR is a reduction of -2.5% p.a., significantly worse than the EU target trend measured over (-3.2% p.a.). Units Total determined costs (nominal terms) '000 CZK % 5.2% Inflation % % 0.0% 1.5% 2.1% 3.2% 2.0% 2.0% Inflation index (2009 = 100) % 2.4% Total determined costs (real terms) ' CZK % n/n-1 % 3.8% -0.9% 4.4% 1.8% 2.1% 2.2% 2.8% Total en-route SUs 000 SUs % n/n-1 8.3% 3.0% 7.2% 2.9% 3.3% 4.9% 4.4% En-route determined unit rate (national currency in real terms) 2009 CZK % n/n-1 % -4.1% -3.8% -2.6% -1.0% -1.2% -2.5% -1.6% 2009 Exchange rate 1 EUR= En-route determined unit rate (Euro in real terms) 2009 EUR % n/n-1 % -4.1% -3.8% -2.6% -1.0% -1.2% -2.5% -1.6% EU-wide target 2009 EUR % -3.5% Figure 11: Determined unit rate trend Moreover, normalising the forecast trend in the en-route DUR for the differences in traffic growth assumptions (i.e. applying STATFOR May 2011 base case figure for year 2011) would worsen the trend over (to -0.7% p.a.). Normalising for the differences in assumptions for inflation would also worsen the trend (to -2.3% over and -1.2% over ). The combination of both normalisations would result in an annual reduction of -2.3% p.a. over and -0.3% p.a. over , which is even further away from the EU-wide target trend The PRB notes that with the November 2010 data the DUR trend check would have been consistent (-3.8% p.a. for and -3.6% p.a. for ). However, the total en-route determined costs have been significantly revised upwards (+9 percentage points in real terms by 2014), much higher than the upwards revision of traffic (+2 percentage points by 2014). As a result, the DUR trend presented in the Performance Plan is significantly worse than the trend from the November 2010 data. 11

13 The PRB notes that the cost items which have been revised upwards the most between the November 2010 submission and the June 2011 Plan are the cost of capital (showing and increase of +78% compared to the November 2010 data or an additional CZK 123 million in 2014); the operating costs (+15% - additional CZK 89 million) and the staff costs (+4% - additional CZK 67 million). Index of Total Cost 2009= Staff costs Other operating costs Depreciation Cost of capital Figure 12: Planned changes in en-route determined costs categories ( ) The PRB notes that while the staff costs and operating costs are planned to continuously increase over , depreciation costs are planned to be some -25% lower by Such decrease corresponds to ANS CR s end of its depreciation cycle. Depreciation costs are likely to rise again in RP2 when the new investments will enter into operation The cumulative en-route capex reported in the s Performance Plan for the period amounts to 103 million. Although this is lower than for the previous five years period ( 120 million) where a major upgrade of the ATM systems was implemented, it is still significant as it represents some 100% of the total gate-to-gate costs in The main capex relates to the new ATM system (around 50 million, of which 34 million during RP1). However, as noted in the ACE 2009 Benchmarking report, it is noteworthy that four ANSPs which are part of FAB CE plan significant investments relating to the construction of new ACCs or to the upgrade of the ATM system. It is clear that all these local initiatives in the context of a FAB will not alleviate the current fragmentation of the European system The capacity target profile reported in the Performance Plan for RP1 is in line with the reference values provided by EUROCONTROL. In 2009, there were significant en-route ATFM delays in the (0.29 min of ATFM delays per flight). These reduced considerably in 2010 (to 0.15 min./flight). The capacity target for 2014 is 0.15 min./flight. The PRB calculates that the total economic costs per SU (including both the cost of en-route ATFM delays and the determined costs) will decrease by -3.8% p.a. over , i.e. significantly better than the planned annual reduction in the en-route DUR of -2.5% p.a. over However, given the large capex, the increases in operating costs and staff costs (recruitment and training of new ATCOs), the overall operational benefits are not particularly striking As far as uncontrollable costs are concerned, the is invited to clarify the impact of the changes in pension scheme which are under preparation by the government and which are likely to be introduced in the course of the first reference period (cf. page 35 of the Performance Plan). The s Performance Plan is assessed as not passing the Unit rate trend check. 12

14 Unit rate level checks: As shown in Figure 13, the en-route DUR in 2014 is forecast to be 39.66, -23% less than the average of the three comparator States (Hungary, Slovak Republic and Slovenia) The PRB notes however that ATCO hourly employment costs are significantly above the average of the comparator States (in 2009 they were +12% above the unweighted average of the comparator States). Determined unit rate ( ) Hungary SlovakiaRepublic Slovenia Unweighted peer group average (excl. ) Figure 13: Determined unit rate level Unit support costs remain an area for improvement as they are some +9% higher than the European average. Overall, there are no strong indications from the Performance Plan that these elements have been effectively addressed in RP1. The s Performance Plan is assessed as passing the Unit rate level check Return on equity checks: The RoE for ANS CR is set at 7.37% on average for RP1, based on a KPMG study commissioned by the FAB CE States. The PRB computes a risk premium of 3.4% relative to the 10-year government bond rate of 3.9%. This 3.4% risk premium is higher (+0.8%) than the EU average for ATSPs (2.6%). 12% Return on equity / state long term bond rate 10% 8% 6% 4% 2% HungaroControl Unweighted peer group average ANS CR Unweighted EU average Slovenia Control LPS 0% Total assets per SU Average return on equity State long term bond rate, Nov Apr 2011 average (EU avg. excluding GR, IE, PT) Figure 14: Average Return on Equity and asset base per SU The PRB also notes that the RoE was significantly revised upwards between November 2010 and June 2011, from 4.5% to 7.37%, leading, all else equal, to additional en-route costs during RP1 in the magnitude of CZK 314 million ( 12 million). 13

15 The s Performance Plan is assessed as not passing the Return on equity check Key Points on COST EFFICIENCY: A. s Performance Plan is assessed as passing the traffic forecast assumptions check for RP1. The submitted traffic forecast is equivalent to the STATFOR May 2011 base case every year of RP1 ( ). However, the figure for 2011 provided in the Performance Plan has not been revised since November 2010 (it corresponds to a +3.0% traffic growth over 2010) and is substantially lower than the STATFOR May 2011 base case (+5.8% over 2010) and the evolution observed to date (+8.0% for the period January to July 2011 or +5.3% if April is excluded from this calculation due to the volcanic ash crisis in April 2010). The PRB deems important to consider the impact of this issue in the context of this technical assessment, and in particular on the DUR trend over Indeed, the use of a lower SU forecast in 2011 mechanically increases the level of the DUR and, all else equal, contributes to a better DUR trend over the period (see key point E below). B. s Performance Plan is assessed as passing the economic assumptions check, although the forecast used is significantly higher than the IMF April 2011 average inflation rate for year The figures for 2011 and 2012 considered in the Plan are based on the latest inflation forecast from the Czech Ministry of Finance. The inflation rate is slightly higher than the IMF April 2011 average inflation forecast for 2011 (by 0.1 percentage point) and significantly higher the IMF forecast for year 2012 (by 1.2 percentage points). The PRB understands that the difference in 2012 is mainly due to an increase of the (reduced) VAT rate from 10% to 14%, estimated by the Ministry of Finance to impact 2012 inflation by 1.1 percentage point. The annual inflation percentages applied for 2013 and 2014 are based on the 2% inflation target defined by the Czech National Bank and are identical to the IMF April 2011 average inflation forecast. C. The PRB calculates that the cumulative difference in the forecast price base is +1.4 percentage points by 2014 and notes that the use of a higher inflation rate increases the forecast annual reduction of the real en-route DUR between 2011 and The PRB deems important to consider the impact of this issue in the context of this technical assessment, and in particular for the analysis of the DUR trend (see key point E below) and level (see key point K below). D. s Performance Plan is assessed as not passing the DUR trend check. The forecast annual reduction in the en-route DUR is much worse than the EU target trend measured over (-1.6% compared to -3.5%). The PRB also notes that, if the trend in the en-route DUR was evaluated using the 2011 forecast as submitted by the in November 2010, uplifted to remove the effects of the one-off reduction in EUROCONTROL costs for 2011, the forecast annual reduction would be -1.7% p.a., i.e. slightly better than the trend presented in the Performance Plan but still much worse than the EU-wide target trend. E. Moreover, normalising the forecast trend in the en-route DUR for the differences in assumptions for traffic growth, i.e. applying STATFOR May 2011 base case figure for year 2011 (see key point A above) would further worsen the trend over (to -0.7% p.a.). Normalising for the differences in assumptions for inflation (see key point C above) would also worsen the trend (to -1.2% over ). The combination of both normalisations would result in an annual reduction of -0.3% p.a. over , that is even further away from the EU-wide target trend. F. When assessed over the period, the forecast trend in the en-route DUR is a reduction of -2.5% p.a., significantly worse than the EU target trend measured over 14

16 (-3.2% p.a.). G. The PRB notes that with the November 2010 data the DUR trend check would have been consistent (-3.8% p.a. for and -3.6% p.a. for ). However, the total en-route determined costs have been significantly revised upwards (+9 percentage points in real terms by 2014), much higher than the upwards revision of traffic (+2 percentage points by 2014). As a result, the DUR trend presented in the Performance Plan is significantly worse than the trend from the November 2010 data. H. The PRB observes that the cost items which have been revised upwards the most between the November 2010 submission and the June 2011 Performance Plan are the cost of capital (showing an increase of +78% compared to the November 2010 data or an additional CZK 123 million in 2014); the operating costs (+15% - additional CZK 89 million) and the staff costs (+4% - additional CZK 67 million). I. The cumulative en-route capex reported in the s Performance Plan for the period amounts to 103 million. Although this is lower than for the previous five years period ( 120 million) where a major upgrade of the ATM systems was implemented, it is still significant as it represents some 100% of the total gate-to-gate costs in The main capex relates to the new ATM system (around 50 million, of which 34 million during RP1). As noted in the ACE 2009 Benchmarking report, it is noteworthy that four ANSPs which are part of FAB CE plan significant investments relating to the construction of new ACCs or to the upgrade of the ATM system. It is clear that all these local initiatives in the context of a FAB will not alleviate the current fragmentation of the European system. J. The PRB notes that depreciation costs decrease significantly between 2009 and 2012 and are planned to be some -25% lower in 2014 than in Such decrease corresponds to ANS CR s end of its depreciation cycle. Depreciation costs are likely to soar in RP2 when the new investments (see I above) will enter in operation. K. s Performance Plan is assessed as passing the DUR level check. The en-route DUR in 2014 is forecast to be 39.66, -23% less than the average of the three comparator States (Hungary, Slovak Republic and Slovenia). The PRB notes however that ATCO employment costs are significantly above the average of the comparator States (in 2009 they were +12% above the unweighted average of the comparator States). Unit support costs remain an area for improvement as they are some +9% higher than the European average. Overall, there are no strong indications from the Performance Plan that these elements have been effectively addressed in RP1. L. s Performance Plan is assessed as not passing the return on equity check. The RoE for its ATSP (ANS CR) is set at 7.37% on average for RP1, based on a KPMG study commissioned by the FAB CE States. The PRB computes a risk premium of 3.4% relative to the 10-year government bond rate of 3.9%. This 3.4% risk premium is higher (by 0.8 percentage point) than the EU average for ATSPs (2.6%). The PRB also notes that the RoE was significantly revised upwards between November 2010 and June 2011, from 4.5% to 7.37%, leading to additional en-route costs during RP1 in the magnitude of CZK 314 million (some 12 million). 1.8 Interrelations between performance targets The s Performance Plan does not provide an explicit description of the interrelations between performance targets The Performance plan does not provide any indication that the achieved level of safety could not be maintained in relation to performance targets set for RP1. 15

17 Based on the information in the s Performance Plan, there are no significant issues regarding interrelations between the proposed performance targets. 1.9 Additional Comments Monitoring Performance Plans The mechanisms for performance monitoring are described in Section 6 of the Czech Republic s Performance Plan. This includes identification of forms of data for monitoring safety, capacity and cost efficiency. Monitoring will be performed on a quarterly basis with full evaluation performed annually. It is also indicated that the NSA will convene a meeting to devise the necessary measures if a warning mechanism indicates a risk that a target will not met. No corrective measures are defined ex-post According to the s Performance Plan, the monitoring of capacity is ensured through: CFMU monthly reports on the development delays, Report on delays in development compared with the preceding year, Set warning mechanisms and monitoring According the s Performance Plan safety monitoring is ensured through: reports on the events from the mandatory reporting system events; reports from the voluntary reporting system events; final reports of investigations of events; final reports of audits / inspections conducted by NSA; any received input having an impact on safe operation (message from passengers and other reports that are not included in the mandatory system of reporting events, etc.); annual reports from operators in civil aviation; evaluation of AST The analysis is then carried out to: identify trends; identify whether the observed data and information may be correct, clarify or permit; the identification of possible failure; identify the most possible failures; identify options to reduce risk According to a review of LSSIP, national legislation, and the CAA and AAIB websites by the PRB: The AAIB is in charge of the mandatory occurrence reporting system (ref. 2003/42) and to investigate the occurrences received. In parallel, an electronic voluntary report is maintained by the AAIB. Safety data are shared and exchanged between the NSA and the AAIB. Safety occurrences are monitored and published annually by the CAA. 16

18 1.9.6 A safety report released to PRC by the ANSP shows that ATM related safety occurrences have been monitored since However, according to LSSIP , the NSA does not monitor safety performance against an ALoS According the performance plan cost-efficiency monitoring is ensured through quarterly assessment of actual costs and service units. Investments related to IP1 of the ATM Masterplan In the letter of European Commission s Air Transport Director dated 15 April 2011, States were invited to provide, in their Performance Plans, detailed information on their investments planned for the period , in particular those associated with the 29 IP1 OI steps recognised as critical by the Single Sky Committee The s Performance Plan does not specifically address IP1 compliance, but does list major capital projects (see Annex 3) with links established to the ATM Master Plan. It is noted that these projects do not account for substantial elements of the CAPEX during RP1. s Performance Plan should be updated to include more precise information on investments relating to IP1 OIs of the ATM Master Plan. Military dimension of plan The s Performance Plan does not contain KPIs to monitor the effectiveness of airspace utilisation is fully compliant with FUA regulation; however at Level 3, the cross border coordination is hampered by the lack of state level agreement at level 1 and 2. The s Performance Plan mentions the planned establishment of the joint civil-military coordination group (JCMCG) at FAB CE level which should address this issue. NSA stakeholder consultation The s NSA held three consultation meetings on the 26 th May at international level and on 2 nd and 22 nd June at a national level. A draft plan was distributed three weeks before the first meeting. A detailed description of the first meeting and associated correspondence is provided in the Performance Plan this includes a list of invitees but no list of attendees. The Performance Plan states that no new issues were raised by stakeholders at the national meetings but that the fact that the unit rate in remained frozen during the economic depression during 2009 to 2010 provided mitigation for a less ambitious national target than the EU-wide costefficiency target The main issues raised by IATA at the first meeting were:. Use of different traffic forecast to the STATTFOR May 2011 Baseline. The Performance Plan was updated to use STATFOR.. Use of a different inflation forecast to the IMF forecast. The NSA explained that they considered the national forecasts to be more accurate given local conditions. A lack of ambition in terms of the cost efficiency target taking account of factors such as cost of living, airspace complexity and the cost structure of the ANSP. On the basis of change assumptions the DUR was revised slightly downwards in the submitted Performance Plan. The high level of capex included. The NSA added additional justification for the planned capex. The s Performance Plan was subject to public consultation. Changes were introduced in line with the comments received. 17

19 Uncontrollable costs The s Performance Plan provides a list of the costs which are considered as uncontrollable as required by Article 11a(8)(c) of the charging scheme Regulation. This list is summarized in Annex 4 to this report Assessment Conclusions An overview of the technical assessment of the s Performance Plan for RP1 is presented in Annex 1 in the form of a one-page dashboard. Conclusions on capacity Overall, the s Performance Plan is assessed as making an adequate contribution to the achievement of the EU-wide capacity target in The PRB recommends that all FAB CE partners evaluate the capacity situation within the FAB and develop intra-fab solutions to resolve any remaining capacity shortfall. Conclusions on cost-efficiency The PRB acknowledges the efforts made by the to improve both the enroute delays and en-route unit cost in the period 2008 to The forecast en-route unit costs provided in November 2010 showed continuous planned cost-efficiency improvement for RP1 and a decreasing trend in line with the EU-wide target trend However, the determined costs and DURs for RP1 have significantly been revised upwards since November 2010 (key point G in paragraph ) and the level of reduction in the en-route DUR presented in the Performance Plan is much lower than the EU-wide cost-efficiency target trend (key points D to F). The PRB considers that there is scope for further cost-efficiency improvements in the, in particular in the following areas: level of ATCO employment costs and support costs; level of the return on equity and associated risk premium; rationalisation of investments and synergies within the FAB CE initiative, including training On the basis of the above analysis and key points in paragraph , s cost-efficiency target is assessed as not being consistent with, and adequately contributing to, the EU-wide cost-efficiency target. The PRB therefore invites the to revise its cost-efficiency target for RP1 in the light of the above comments In addition, the is invited to provide clarifications on the impact of uncontrollable costs, linked to the changes in pension scheme under preparation by the government of the that are likely to be introduced in course of RP1 as mentioned in the Performance Plan. Conclusions on compliance In addition, the s Performance Plan should be complemented by the following missing elements: The missing information listed in Section 1.3. More precise information on investments and relation with IP1 OIs of the ATM Master Plan. 18

20 Clarification of the impact of the changes in pension scheme which are under preparation by the government and which are likely to be introduced in the course of the first reference period. 19

21 Annex 1: Technical assessment dashboard s Performance Plan Assessment criteria Details Conclusion En-route ATFM delay (minutes) per flight Capacity Delay level check Reference values Delay target in Performance Plan Consistent in 2014 ANSP s Capacity Plan OK En-route Service units ( 000) Traffic forecast checks STATFOR (May 2011) Consistent Performance Plan Economic assumptions checks Average Inflation index (2009-=100) IMF Performance Plan Consistent despite higher assumptions than IMF Cost-efficiency Unit rate trend checks Yearly trend EU-wide target Perf. Plan target % -2.5% % -1.6% Not Consistent Determined Unit Rate ( 2009) 2014 Comparators Unit rate level checks Performance Plan Comparison with un-weighted average of comparators -23% Hungary Slovak Republic Slovenia Consistent Return on equity checks Average return on Equity % Risk Premium 3.4% Not Consistent 20

22 Annex 2: Performance Plan checklist Ref Requirement (option requirements shaded) Check (Yes / No / Incomplete Notes / reference in plan 1.1 Description of situation Scope of plan (dates, level) Yes Section Entities covered Yes Section NSA (The Civil Aviation Authority of the Czech Republic) ANSP (Air Navigation Services of the Czech Republic (ANS CR)) MET (Czech Hydrometeorological Institute (CHMI)) NSA responsible for drawing up plan Yes Section The Civil Aviation Authority of the Czech Republic Geographical scope of plan Yes Section FIR Praha together with aerodromes Praha (LKPR), Brno (LKTB), Ostrava (LKMT) and Karlovy Vary (LKKV) National or FAB plan Yes Section National For National Performance Plans, NSA or body responsible for providing the aggregation of performance targets for the FAB Yes Section National Supervisory Authorities Coordination Committee (NSA CC) with further endorsement by FAB CE Council 1.2 Overall assumptions Description of macroeconomic scenario GDP forecast Inflation forecast Yes Yes Section 1.2.1, Table 2,3 Source: Ministry of Finance CR Traffic forecast Yes Section 1.2.2, Table 3 Flight movements STATFOR February 2011 forecast Status of aviation safety and Aviation State Safety Programme Yes Section Not much detail Institutional context and governance Yes Section Stakeholder consultation Format and timing Yes Section 1.3 List of stakeholders consulted Yes Section 1.3, Annex D Issues raised Yes Section 1.3, Annex D NSA response to issues raised Yes Section 1.3, Annex D 21

23 Ref Requirement (option requirements shaded) Check (Yes / No / Incomplete Notes / reference in plan Confirmation that information provided 3 weeks in advance Yes Section a Effectiveness of safety management Incomplete Section 2.1a Application of severity classification Just culture targets for each year Yes No Discussion of measures for improvement but no safety targets for RP1 Severity classification p12 2.1b Minutes of en-route ATFM delay per flight Yes Section 2.1b, Table 6 2.1c Description of route design improvement process No Section 2.1c No environmental targets for RP1 Includes measures to improve env. protection but no details 2.1d Determined en-route costs for each year Yes Section 2.1d, Table 8 (nominal); Section 2.2 Table 13 (real). Determined terminal costs for each year Yes Section 2.1d, Table 10 Nominal, national currency En-route service units forecast for each year Yes Section 2.1d, Table 7 STATFOR May 2011 forecast Determined unit rate for each year Yes Section 2.1d, Table 8 See also Table 13 in section 2.2 Nominal, real values mentioned in text above table Description and justification of return on equity Yes Section 2.1d, 3.1 for ANS CR and CHMI (separate sub-sections) Description of investment needed to achieve targets Capex for each year Breakdown of projects Description of relevance and coherence Yes Yes Yes Section 3.1 ANS CR: Table 20, 21 CHMI: Table 26, Explanation of consistency with EUwide targets Capacity Yes Section 2.2, Table 11 Cost efficiency Incomplete Section 2.2, Table 13 Given the target is not achieved, explanation is not adequate Explanation of any interdependencies and trade-offs No Not included 2.3 Explanation of carry-overs from previous years Yes Section 2.3, Table 15 22

24 Ref Requirement (option requirements shaded) Check (Yes / No / Incomplete Notes / reference in plan 2.4 Description of risksharing and incentives Capacity Yes Section 2.4 Traffic and cost risks sharing shall apply in accordance with Article 11 of Regulation (EU) No 691/2010 Cost - efficiency Traffic risk sharing keys Identification of uncontrollable costs Yes Section 2.4 Traffic risk sharing at 70 % level in accordance with Article 11a-1 (c, d) of Regulation (EU) No 1191/2010 Yes Section Individual performance targets for each accountable entity ANSP (ANS CR) Yes Section 3.1 Capacity (refers to Table 6) and costefficiency (Table 16, 17 (terminal), 18 (by service)) MET (CHMI) Yes Section 3.1 Cost-efficiency only Table 22, 23 (terminal), 24 (by service) NSA Yes Section 3.1 Cost-efficiency only. Table 29, 30 (terminal), 31 (by service) 3.2 Description of incentives for each entity ANSP (ANS CR) MET (CHMI) NSA Incomplete Incomplete Incomplete Sections 2.4 and 3.2, however does not explain what incentives they actually have to meet the targets. 4 Description of civil-military dimension Incomplete Section 4 Steps to implement for FUA but no description 5 Analysis of sensitivity to external assumptions Yes Section 5 6 Implementa tion of the Plan Measures to be put in place to achieve the targets Safety Yes Section 2.1a Capacity Yes Section 2.1b No quantitative terms or calculation included Environment Yes Section 2.1c Cost-efficiency No Measures not included Monitoring to ensure safety and business plans implemented Yes Section 6 Alert thresholds applied using Article 2, Commission Decision of 21 February

25 Ref Requirement (option requirements shaded) Check (Yes / No / Incomplete Notes / reference in plan Contingency plans if targets are not met during reference period No Section 6 No description of actions included Annex A: Reporting Tables and additional information Yes Annex A Includes investments for ANS CR and CHMI Annex B: Extracts from ANSPs Business Plans Yes Annex B ANS CR and CHMI Business Plan extracts Annex C: Extracts from States Safety Programmes Yes Annex C Annex D: Public consultation material Yes Annex D Performance plan submitted on time (by 30 June 2011) Plan submitted in English Yes Yes Plan signed by a person with clear responsibility from the State Yes Front page Signed by Flight Standards Division Director 24

26 Annex 3: Investments related to IP1 of the ATM Masterplan Project Planned total CAPEX Duration OIs / Enablers (M CZK ) Surveillance Primary Radars years CTE-S4a Surveillance MSSR Replacement year CTE-S5 L01-01, L01-04, L02-02, L02-03, L02-04, L02-05, L02-06, ATM New ATM System years L02-09, L03-03, L05-01, L05-02, L05-03, L05-04, L06-01, L08-02, L09-01 Communications VCS Replacement years CTE-C9 Communications G-G IPv6 Switch 75 3 years GGSWIM-51 Communications AMHS 10 2 years L01-03, L01-04, L02-03, L02-04, L03-02, L03-03, L04-01, Communications Radio Communications Replacement TS years L02-09 AIS AIS to AIM transformation 23 3 years L01-02, L01-03, L01-04 ATM New Simulator 40 2 years HUM ATM - - EFS for Prague TWR Aviation Academy Buildings Ostrava Airport Buildings years L ,3 4 years years - 25