PRB Corrigenda/Amendments Assessment of RP2 FAB Performance Plans following the ad-hoc SSC of 24 October 2014

Transcription

1 PRB Corrigenda/Amendments Assessment of RP2 FAB Performance Plans following the ad-hoc SSC of 24 October 2014 FAB UK-IRELAND Edition date: 12/12/2014

2 European Union, 2014 COPYRIGHT NOTICE AND DISCLAIMER This report has been prepared for the European Commission by the Performance Review Body of the Single European Sky, in its capacity as an advisory body to the European Commission. Reproduction is authorised provided the source is acknowledged. However, neither the European Commission, nor any person acting on its behalf, may be held responsible for the use which may be made of the information contained in this publication, or for any errors which may appear, despite careful preparation and checking.

3 Table of Contents 1 INTRODUCTION COST-EFFICIENCY IRELAND: OVERVIEW OF CORRIGENDA/AMENDMENTS SUBMISSION IRELAND: AMENDED OVERVIEW OF EN-ROUTE CHARGING ZONE ASSESSMENT, FOLLOWING CORRIGENDA/AMENDMENT SUBMISSION IRELAND: AMENDED OVERVIEW OF TERMINAL CHARGING ZONE ASSESSMENT, FOLLOWING CORRIGENDA/AMENDMENTS SUBMISSION CAPACITY

4 1 INTRODUCTION Following the ad-hoc Single Sky Committee meeting on 24 October 2014, States/FABs were invited to reconsider their version of the RP2 Performance Plan submitted for the 1 July 2014 deadline, in order to see how they could address the recommendations and observations made by the PRB As a result, a detailed corrigendum to UK-Ireland FAB Performance Plan for RP2 has been submitted via the EU-PRB SharePoint repository on 4 November In addition, Ireland which is part of the UK-Ireland FAB submitted detailed corrigenda/amendments to the RP2 Performance Plan via the EU-PRB SharePoint repository on 5 November This document reflects the changes to the content of the recommendations in the FAB assessment report (published on 6 October 2014) for Cost-Efficiency and Capacity, based on the relevant new information received This document, together with the relevant Comment Registry, is an integral part of the PRB assessment. 2 COST-EFFICIENCY 2.1 Ireland: Overview of corrigenda/amendments submission The submission included the following elements which have an impact on the RP2 cost-efficiency targets: An amended traffic forecast for en-route; Amended cost of capital (and therefore determined costs) for both en-route and terminal ANS. 4

5 Determined unit cost, (2009) En-route costs and service units index (2012=100) 2.2 Ireland: Amended overview of en-route charging zone assessment, following corrigenda/amendment submission The amended summary results of each check following the corrigenda submission are presented below, alongside the headline results of the original assessment. Overview The assessed monetised contribution provided by the proposed amendments for Ireland for the en-route cost-efficiency target in RP2 represents an equivalent of -3.4 M 2009 (determined using the amended DUC). This improvement is due to a reduction in DCs combined with a higher amended traffic forecast. 35 Amended (November) cost-efficiency target for RP2 - Ireland En-route DUC (Initial PP Jun 2014) En-route DUC (Amended PP Nov 2014) Determined en-route costs (Initial PP Jun 2014) Determined en-route costs (Amended PP Nov 2014) En-route TSU (Initial PP Jun 2014) En-route TSU (Amended PP Nov 2014) Figure 1: Amended en-route cost-efficiency target overview Initial Performance Plan (June 2014) Key figures: en-route 2014F 2015D 2016D 2017D 2018D 2019D Table 1: En-route cost-efficiency target CAGR Determined costs EUR m (nom) % 2.5% Inflation rate annual % change 0.6% 1.1% 1.2% 1.4% 1.7% 1.7% 1.4% 1.5% Inflation index 2009= Determined costs EUR m (2009) % 1.0% Service units '000s 3,886 3,983 4,050 4,113 4,185 4, % 1.7% Determined unit cost EUR (2009) % -0.7% Exchange rate (2009) EUR:EUR 1.00 Determined unit cost EUR (2009) % -0.7% Amended Performance Plan (November 2014) Key figures: en-route 2014F 2015D 2016D 2017D 2018D 2019D CAGR Determined costs EUR m (nom) % 2.6% Inflation rate annual % change 0.6% 1.1% 1.2% 1.4% 1.7% 1.7% 1.4% 1.5% Inflation index 2009= Determined costs EUR m (2009) % 1.1% Service units '000s 3,989 4,000 4,050 4,113 4,185 4, % 1.6% Determined unit cost EUR (2009) % -0.5% Exchange rate (2009) EUR:EUR 1.00 Determined unit cost EUR (2009) % -0.5% Total RP2 Difference between amended and initial en-route DUC % -1.0% -0.5% -0.5% -0.4% -0.4% Difference between amended and initial en-route DUC EUR (2009) Amended en-route TSUs '000s 4,000 4,050 4,113 4,185 4,262 Assessed monetised contribution EUR m (2009) CAGR CAGR 5

6 Index of en-route SUs (2011=100) Key points for Ireland en-route charging zone 1. Traffic forecast assumptions: with reservations with reservations but improvement Ireland STATFOR actuals STATFOR Feb 14 base STATFOR Feb 14 high STATFOR Feb 14 low STATFOR Sep 14 base PP RP1 Determined 2014 Intitial (June) PP RP2 Determined Amended (November) PP RP2 Determined Figure 2: Amended en-route service units overview Service Units ('000s) CAGR (%) Table 2: Amended en-route service units including STATFOR September CAGR (%) PP RP1 Determined Actuals, 2014, Initial (June) PP RP2 Determined % 1.7% Amended (November) PP RP2 Determined % 1.6% STATFOR Feb 14 base % 2.2% STATFOR Feb 14 high % 2.8% STATFOR Feb 14 low % 1.2% STATFOR Sep 14 base % 2.5% STATFOR Sep 14 high % 3.2% STATFOR Sep 14 low % 1.6% Initial (June) PP RP2 vs STATFOR Feb 14 base (%) -0.9% -1.4% -1.9% -2.3% -2.7% Amended (November) PP RP2 vs STATFOR Feb 14 base (%) -0.5% -1.4% -1.9% -2.3% -2.7% The CAGR is shown (rather than the CAGR) to reflect the fact that not all FABs/States will provide an updated forecast for 2014 Dec 2014 The planned number of en-route SUs provided for the Irish en-route charging zone over RP2 lies between STATFOR February 2014 low and base scenarios. The planned growth rate over the period is in line with STATFOR September 2014 low scenario (+1.6%). Compared to the initial information submitted in June 2014, Ireland has revised upwards the number of TSUs planned for 2014 (+2.6%) in order to reflect the latest information available (i.e. STATFOR September 2014 base case forecast). The number of TSUs planned for 2015 has also been revised upwards (+0.4%). All else equal, this adjustment contributes to slightly reduce the en-route DUC planned for Economic assumptions: 6

7 No changes Dec 2014 No corrigenda in relation to this area were received, therefore there are no changes to original assessment. 3. En-route DUC trend: Not passed Not passed No significant changes Dec 2014 Ireland en-route DUC is expected to remain fairly constant over the period (-0.4% p.a.). This is worse than the Union-wide cost-efficiency target trend (i.e. -3.3% p.a.). At face value, this is also worse than the en-route DUC profile initially provided by Ireland in June 2014 (-0.8% p.a. between 2014 and 2019). However, when interpreting these different trends, it is important to take into account the fact that the number of TSUs planned for 2014 has been revised an adjusted upwards to reflect the latest information. As a result, when considered over the period, which covers RP1 and RP2, the en-route DUC profile for Ireland (-1.2%) is in line with that reported in the Performance Plan submitted in June 2014 (-1.2%). 4. En-route DUC level: and improvement Dec 2014 Ireland en-route DUC is planned to amount to in 2019 and to be the fifth lowest in Europe. Compared to the initial information submitted in June 2014, Ireland has revised downwards the DCs planned for RP2. The reductions range from 1.2 M 2009 in 2015 to 0.5 M 2009 in 2019, and mainly reflect the reporting of a lower cost of capital. Overall, these reductions represent a monetary contribution amounting to 3.4 M 2009 over RP2. 5. En-route cost of capital: Not passed and improvement 7

8 Monetary value for ATSP RoE & maximum risk exposure, millions (2009) Monetary value for ATSP RoE & maximum risk exposure, millions (2009) Initial (June) PP RP2 IAA Amended (November) PP RP2 IAA D 2016D 2017D 2018D 2019D average Return on equity Max risk exposure D 2016D 2017D 2018D 2019D average Return on equity Max risk exposure Figure 3: Initial and amended en-route ATSP risk exposure Dec 2014 Note: The information provided in Annex C of the amended Performance Plan indicates that over RP2 the share of IAA financing through debt is expected to amount to 50%. However, Ireland also indicates in Annex C that no borrowings are anticipated in RP2. Furthermore, latest available actual information indicates that IAA had no debt in Therefore, the PRB understands that the gearing reported by Ireland is a notional figure and does not reflect genuine loans planned for RP2. For this reason, for the purposes of this analysis, it is proposed to consider that IAA is 100% financed through equity and that the RoE (%) is the same as the WACC (%) used to compute IAA cost of capital over RP2. If the assumptions used by the PRB for the purposes of this analysis are correct, then it is expected that Ireland modifies accordingly the information provided in its en-route and terminal Reporting Tables to enable a proper monitoring of the ex-post RoE during RP2. Finally, in order to ensure consistency in time series analysis, a similar treatment has been made to the data provided in the Performance Plan submitted in June For this reason, the data reported in the left-hand chart of Figure 3 slightly differ from the information provided in the PRB RP2 assessment report released on the 6 th October The WACC (%) used to compute IAA cost of capital (ranging from 7.1% in 2014 to 7.7% in 2019) has been revised downwards compared to the information provided in the initial Performance Plan (8.5% over RP2), and is now within the range of values computed using the methodology laid down in Annex C guidance. Over RP2, the monetary value of the Return on Equity (4.9 M 2009 p.a.) is higher than the maximum traffic risk exposure which will be borne by IAA over RP2 (4.4 M 2009 p.a.), but it is significantly lower than the figure computed according to the information provided in the Performance Plan submitted in June 2014 (5.7 M 2009 p.a.). Overall consistency assessment of Ireland en-route cost-efficiency KPIs Dec 2014 The assessed monetised contribution provided by the proposed amendments for Ireland for the en-route cost-efficiency target in RP2 represents an equivalent of -3.4 M 2009 (determined using the amended DUC). Taking into account the key points from the original assessment and the amended key points following the submission of amendments to the Performance Plan (in particular points 1, 4 and 5 above), Ireland en-route cost-efficiency target is assessed as being consistent with, and making an adequate contribution to the achievement of the en-route Union-wide costefficiency target over RP2. 8

9 Determined unit cost index (2015=100) 2.3 Ireland: Amended overview of terminal charging zone assessment, following corrigenda/amendments submission The amended summary results of each check following the corrigenda submission are presented below, alongside the headline results of the original assessment. Overview 104 Ireland D 2016D 2017D 2018D 2019D SES aggregated TANS DUC (Initial June) SES aggregated TANS DUC (Amended November) Ireland (Initial June) Ireland (Amended November) Figure 4: Amended terminal ANS cost-efficiency target overview Initial June Key figures: terminal 2015D 2016D 2017D 2018D 2019D Table 3: Terminal ANS cost-efficiency target CAGR (%) Determined costs EUR m (nom) % Inflation rate * annual % change 1.1% 1.2% 1.4% 1.7% 1.7% 1.5% Inflation index * 2009= Determined costs EUR m (2009) % Terminal SUs '000s % Determined unit cost EUR (2009) % Exchange rate EUR:EUR (2009) 1.00 Determined unit cost EUR (2009) % Amended November Key figures: terminal 2015D 2016D 2017D 2018D 2019D CAGR (%) Determined costs EUR m (nom) % Inflation rate * annual % change 1.1% 1.2% 1.4% 1.7% 1.7% 1.5% Inflation index * 2009= Determined costs EUR m (2009) % Terminal SUs '000s % Determined unit cost EUR (2009) % Exchange rate EUR:EUR (2009) 1.00 Determined unit cost EUR (2009) % The CAGR shown in the table is different from the main en-route comparator period ( ), the reason for this being the potential for changes to the size and composition of TCZs between 2014 and 2015 Total RP2 Difference between amended and initial terminal DUC % -1.3% -1.3% -1.1% -0.9% -0.9% Difference between amended and initial terminal DUC EUR (2009) Amended en-route TNSUs '000s Assessed monetised contribution EUR m (2009) The assessed monetised contribution provided by the proposed amendments for Ireland for the terminal cost-efficiency target in RP2 amounts to -1.4 M This improvement is due to 9

10 a reduction in the level of terminal ANS DCs. Key points for Ireland terminal charging zone 1. Traffic forecast assumptions: No changes Dec 2014 No corrigenda in relation to this area were received, therefore there are no changes to original assessment. 2. Economic assumptions: No changes Dec 2014 No corrigenda in relation to this area were received, therefore there are no changes to original assessment. 3. Terminal ANS DUC trend: Not passed Not passed but DCs have been revised downwards Dec 2014 Ireland terminal DUC is expected to slightly decrease over the period (-0.5% p.a.). This is worse than the SES aggregated terminal ANS DUC trend (-2.2% p.a.). This is also slightly worse than the profile initially provided by Ireland in June 2014 (-0.7% p.a. between 2015 and 2019). However, when interpreting these different trends, it is important to take into account the fact that the terminal DCs planned for RP2 have been revised downwards compared to the information provided in June 2014 (i.e. reductions of some M 2009 p.a.). Overall, these reductions represent a monetary contribution amounting to 1.4 M 2009 over RP2. 4. Terminal cost of capital: Not passed and improvement Dec 2014 The WACC (%) used to compute the cost of capital for Ireland TCZ over the

11 period have been revised downwards compared to the information provided in June 2014 and are in line with those used to compute the cost of capital for the en-route charging zone. Overall consistency assessment of Ireland terminal ANS cost-efficiency KPI Dec 2014 The assessed monetised contribution provided by the proposed amendments for Ireland for the terminal cost-efficiency target in RP2 amounts to -1.4 M Taking into account the key points from the original assessment and the amended key points following submission of corrigenda/amendments to the Performance Plan (in particular points 3 and 4 above), Ireland terminal ANS cost-efficiency target is assessed as being consistent with the criteria laid down in Annex IV of the performance Regulation. 11

12 3 CAPACITY The PRB has assessed the amended capacity targets, included into the corrigendum provided by UK-Ireland FAB, according to the criteria laid down in Annex IV of Commission Implementing Regulation (EU) No 390/2013 of 3 May The PRB considers that the UK-Ireland FAB Performance Plan is consistent with and does adequately contribute to the Union-wide targets. FAB reference value (NOP March 2014) FAB Target (Performance Plan 30 June 2014) Consistency check (Performance Plan 30 June 2014) Shortfall (Performance Plan 30 June 2014) FAB Target (Corrigendum to Performance Plan) Consistency check (Corrigendum to Performance Plan)