ATM cost-efficiency targets a guide for European ANSPs and NSAs

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Abstract

Right now, ANSPs are starting to prepare their business plans covering the 2015-2019 period, and to identify how they can contribute to future EU-wide cost efficiency targets. This white paper helps answer some of the questions that ANSPs and NSAs need to answer. Questions like:

  • What lessons have we learnt from RP1?
  • How do we disaggregate cost-efficiency targets from EU-wide level to national and entity levels?
  • What extra information will ANSPs need to divulge in RP2?
  • How should we approach the development and testing of the traffic forecast?
  • What kind of revenue sensitivity to traffic levels should we expect?
  • How do we close the performance gap?

Based on our understanding of the ATM industry and using an illustrative ANSP performance model, our paper suggests that ATCO productivity improvements have a key role to play as they appear to be the most efficient lever to generate cost-efficiency gains. However, each ANSP is different and it is unlikely that acting on only one cost item would be sufficient.

It is also worth noting that cost reduction initiatives often carry with them transition costs, which might increase the unit rate in the short term. As the revised Performance Scheme makes a specific reference to restructuring costs (Annex IV, Principles for assessing performance plans and targets), a window may be open to address some challenging restructuring issues during RP2. However, the regulators will need to accept specific business cases in which ANSPs can demonstrate the net benefits of those restructuring projects.

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