Performance Management – time for a rethink?

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As the end of the second reference period approaches, and as European ANSPs start preparing for RP3, a range of questions regarding the appropriateness of the performance management framework are being raised. Is it time for a rethink?

In my opinion ANSP performance regulation is a must and the industry must work to ensure that aviation growth and service improvement go hand in hand. However, the more closely I work with ANSPs the more I think the system is too complicated and not flexible enough. This results in scepticism and an inability to deliver the maximum benefits.

Preparations for RP3, starting in 2020, are based on a range of assumptions that are valid in 2018: traffic levels, demand profile, technology maturity, airspace user priorities, governmental strategies. ANSPs put a lot of effort in defining their strategies and consulting with Airspace Users.

The plan starts changing when the underlying assumptions evolve. And given how dynamic the wider economy is, they most certainly will. The challenge is greater the longer the reference period is; the plan will be more accurate if a shorter planning time horizon is adopted, but it will create more administrative burden as performance plans must be prepared, approved and consulted upon more frequently. The strict planning process results in ANSPs being torn between delivering the pre-agreed plans and developing the service in an agile way.

While the current framework provides a level of flexibility through the risk sharing mechanisms, experience gathered throughout RP2 showed that this is insufficient and often problematic. ANSPs report that the traffic risk sharing thresholds were exceeded on multiple occasions. ANSPs which saw traffic lower than planned are only able to partially recover the additional costs at N+2, which has a significant impact on liquidity. On the other hand, ANSPs which saw traffic higher than planned are struggling with the amount that must be repaid to Airspace Users at N+2.

Ultimately, the system should be improved to better allow ANSPs to respond to both short- and long-term traffic variations to ensure that the gap between capacity and demand is minimized. In my view, the following challenges remain:

  • Reference period duration. Currently the end and beginning of the reference period is seen as a big milestone, a change-over date. In reality, business continues as normal: both cost and benefits will likely span across different regulatory periods. I believe planning and reporting should encompass a wider period. If an investment is planned within one period it often gets "forgotten" in the following. But what about the benefits? Performance management frameworks should capture the ongoing benefit realisation to retrospectively assess if the investment really presented value for money, while providing adequate provision for the enablers and interrelations of investments. Similarly, cost of investment spanning across regulatory periods should also be clearly reported upon.
  • Performance plan flexibility. Existing performance plans are relatively inflexible. Introducing significant changes is challenging and requires re-opening the initial plan. One option to investigate would be the possibility of creating a plan with additional "what-if" options or gateways. E.g. with Brexit coming up there may be no impact on traffic flows but if appropriate agreements are not established traffic patterns may shift. To date no clarity on the final performance regulation content is available, hence planning is being carried out on a "no-change" basis. Perhaps preparing a simple alternative plan in parallel to the core plan could be a more efficient strategy? Nonetheless, the introduction of such a possibility would need to be carefully balanced with the regulatory and planning complexity. It is crucial that any additional complexity introduced produces real value to the ANSPs, NSAs as well as the Airspace Users.
  • Innovation. The need to adhere to a pre-agreed investment plan limits the ability for the ANSP to innovate and make full use of developing technologies. Provisions and incentives should be provided for ANSPs to undertake un-planned, innovative project to ensure full use of developments is made.

The key behind any change in the performance regulations is to ensure that it does not add unnecessary complexity. It is a planning and monitoring burden requiring significant ANSP and NSA resource, and additional effort can only be justified if it delivers a benefit to the airspace users and ultimately passengers. Processes should be streamlined to be simple, clear and form a solid basis for monitoring the progress of the industry.

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Maja Marciniak-Cork
Tel: +44 1252 451 651

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