2011-09-20 Slovak Republic - PRB Assessment report · PRB assessment report of Performance Plans...

Performance Review Body

EUROCONTROL

PRB assessment report of Performance

Plans for RP1

Slovak Republic

Prepared by the Performance Review Body (PRB)

of the Single European Sky

20 September 2011

PRB assessment report of Performance Plans for RP1 Slovak Republic

EUROCONTROL

COPYRIGHT NOTICE AND DISCLAIMER 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 http://www.eurocontrol.int/prc. The PRU’s e-mail address is [email protected].


TABLE OF CONTENTS 1 SLOVAK REPUBLIC ......................................................................................................................... 3

1.1 INTRODUCTION .............................................................................................................................. 3 1.2 CURRENT SITUATION AND LEVEL OF PERFORMANCE ................................................................... 3 1.3 COMPLIANCE CHECKS ................................................................................................................... 5 1.4 SAFETY.......................................................................................................................................... 6 1.5 ENVIRONMENT............................................................................................................................... 7 1.6 CAPACITY ...................................................................................................................................... 7 1.7 COST-EFFICIENCY ......................................................................................................................... 9 1.8 INTERRELATIONS BETWEEN PERFORMANCE TARGETS............................................................... 14 1.9 ADDITIONAL COMMENTS ............................................................................................................. 15 1.10 ASSESSMENT CONCLUSIONS ...................................................................................................... 16

ANNEX 1: TECHNICAL ASSESSMENT DASHBOARD .................................................................... 18

ANNEX 2: PERFORMANCE PLAN CHECKLIST................................................................................ 19

ANNEX 3: INVESTMENTS RELATED TO IP1 OF THE ATM MASTERPLAN............................... 22

ANNEX 4: LIST OF UNCONTROLLABLE COSTS............................................................................. 23


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1 Slovak Republic

1.1 Introduction 1.1.1 The Slovak Republic’s Performance Plan was received on 30th June 2011 in English. It

was signed by the NSA and the Ministry of Transport.

1.1.2 The Slovak Republic’s Performance Plan provides performance targets set at a national level for three accountable entities:

Air Traffic Services of the Slovak Republic (LPS) as the designated ANS provider;

Slovak Hydrometeorological Institute (SHI) as the designated MET service provider;

Civil Aviation Authority of the Slovak Republic (LU SR)as the nominated NSA.

1.1.3 EUROCONTROL costs are included in the calculation of determined costs but they are not considered an accountable entity; nor is Bratislava Airport MR Stefanik (BTS) which should provide airport related data.

1.1.4 The Slovak Republic is part of the Functional Airspace Block Central Europe (FAB CE) alongside Austria, Bosnia and Herzegovina, Czech Republic, Croatia, Hungary and Slovenia. The PRB notes that for RP1 the FAB CE States have decided to prepare performance plans at a national rather than FAB level.

1.1.5 The Slovak Republic’s Performance Plan covers the airspace contained in the Bratislava FIR.

1.1.6 According to Article 13 of the performance scheme Regulation1, 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

1.2.1 The global economic crisis led to a decline of -4.8% in GDP in 2009, but 2010 saw a rebound to positive 4.0% growth. Growth is also forecasted for 2011 but at a lower rate than 20102.

1.2.2 The Slovak Republic’s price inflation was 0.9% in 2009, reflecting the economic downturn. For 2010 it remained lose to this level3 however IMF forecast an increase of 3.4% in 20114.

1.2.3 The Slovak Republic is a member of the Euro-zone.

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1 Commission Regulation (EU) No 691/2010 of 29 July 2010 laying down a performance scheme for air navigation services and network functions.

2 Source: European Economic Forecast (Spring 2011). 3 Source: Eurostat HICP all items. 4 Source IMF April 2011 Forecast, Average.


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Figure 1: Key macro-economic indicators

1.2.4 The Slovak Republic’s Government bond rate5 decreased in 2010 however will grow closer to the 2009 level in 2011.

1.2.5 The Slovak Republic’s Performance Plan includes macro-economic figures sourced from Eurostat and IMF that differ slightly from those presented in Figure 1. GDP differs by 0.1% in 2009 and 2010, and 0.3% in 2011. Price inflation is 0.3% lower in Figure 1 than the Slovak Republic’s Performance Plan in 2010 and 0.1% lower in 2011.

1.2.6 LPS is the sole designated ANS provider in the Slovak Republic.

1.2.7 LPS is a small ANSP with costs contributing 0.7% of the EU29 gate-to-gate ATM/CNS provision costs in 2009 as shown in Figure 2. LPS have made significant improvements to ATC capacity and have reduced delay costs substantially over 2005-2009. LPS’s traffic complexity levels are mid-range however its seasonality is high.

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Figure 2: LPS's Key Figures (ACE 2009)

1.2.8 Figure 3 shows that IFR traffic in Slovak airspace declined in 2009, before recovering to the expected 2009 level by 2010 (i.e. a one year shift of traffic in 2010). The Feb./May 2011 STATFOR Forecast expects the IFR movements for the remainder of the period to grow at a slower rate than forecasted in 2008.

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Figure 3: STATFOR February 2008 base case and Feb./May 2011 Base case forecasts

1.2.9 The Slovak Republic’s Performance Plan is based on the STAFOR February 2011 Base case forecast. It is noted that the traffic forecast is dependent upon measures to improve routes within SE-axis region and that the successful migration to the “shortest route” scenario would lead to lower traffic growth.

5 Source European Central Bank long term bond rates (10 years) collected for convergence reasons, monthly

average, for 2011, 5 months only.


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1.2.10 In the Slovak Republic state administration for civil aviation involves the Ministry of Transport, Construction and Regional Development of the Slovak Republic (MoT SK) and the Civil Aviation Authority of the Slovak Republic (CAA SK). The CAA of the Slovak Republic (LU SR) is an independent institution established by the Civil Aviation Act No 143/1998 Coll. and fulfils the role of National Supervision Authority (NSA). Besides of other functions in area of civil aviation the LU SR is responsible for safety performance monitoring.

1.2.11 The Slovak Republic has established a State Safety Programme (SSP), extracts of which are provided as an Annex to the Slovak Republic’s Performance Plan. The Slovak Republic has been measuring a safety KPI defined as the acceptable level of safety (ALoS) for incidents of the severity A and B for a number of years and has therefore already established, sufficient data flows for safety monitoring. In addition, relevant data are evaluated bi-annually for the EUROCONTROL‘s Annual Summary Template (AST). The MoT and AAIIB are responsible for collecting safety occurrences in aviation (including ATM).

1.2.12 According the Slovak Republic’s Performance Plan, the MoT is promulgating a “Just culture” policy - however, according to LSSIP (2011-2015) the requirement that Just Culture environment should be supported at least at stakeholders level is late, with implementation deadline of December 2011.

1.2.13 In addition, formal interfaces and working arrangements between ANSPs, the AAIB and Regulatory Authorities to facilitate and ensure the flow of reports and data and their assessment will be established by the end of 2011. AAIB will be a National Focal Point for safety data.

1.2.14 As shown in Figure 4, ATFM delays have been observed over the period, especially in 2005 (year of commissioning of a new ATM system) and in 2007 (mainly due to a strike in February 2007). ATFM delays have been contained at relatively low levels since 2008.

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Source: CFMUSlovak Republic

Figure 4: Historical ATFM delays per cause

1.2.15 The level of ATFM en-route delays between 2006 and 2010 (with the exception of 2007) is generally stable around the order of 0.1 min/flight. ATC Capacity/Staffing appears to represent the main cause for the total ATFM delays

1.2.16 According to ACE 2009 report, LPS gate-to-gate economic and financial unit costs have remained high and were the fourth highest in Europe in 2009, in spite of an improvement in delay costs and in ATCO productivity (although ATCO productivity remained low). This is mainly due to high support costs which account for a large proportion of LPS’s ATM/CNS costs and which have continued to increase over the period.

1.3 Compliance checks 1.3.1 The Slovak Republic’s Performance Plan contains most of the information required by

the legislation. However, the following required information is not provided:


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Confirmation that information regarding the stakeholder consultation was provided three weeks in advance;

Explanation of interdependencies and trade-offs between KPIs; and

Measures to be put in place to achieve safety, capacity and cost-efficiency targets, and contingency plans if targets not met during the reference period.

1.3.2 In several other areas the Slovak Republic’s Performance Plan contains incomplete information – full details are provided in Annex 2.

Slovak Republic’s Performance Plan should be updated to contain the missing information listed in Section 1.3.

1.4 Safety 1.4.1 The Slovak Republic has established a State Safety Programme (SSP).

1.4.2 The Slovak Republic’s Performance Plan mentions the following PIs and corresponding targets and thresholds:

Acceptable Level of Safety (ALoS) of incidents of severity A and B (according to the ESARR 2). Although targets and thresholds are set for each year of RP1 their precise meaning is not clear.

Effectiveness of Safety Management (EoSM), Just Culture (JC) and application of Risk Assessment Tool (RAT) indicators will be monitored during RP1. No targets are set, There is no indication that RAT tool/methodology or JC monitoring are currently in use, although it is noted that PRR2010 states that RAT is used by the service provider.

ALoS/TLS is established (Table in section 2.1.1)

1.4.3 The PRB has the following safety observations with respect to the Slovak Republic’s Performance Plan:

According to 691/2010, the Slovak Republic should monitor Effectiveness of Safety Monitoring, Just Culture and the application of the RAT Methodology during RP1. Both the State and its NSA are accountable entities for the Effectiveness of Safety Monitoring and Just Culture indicators, but this is not stated in the National Performance Plan.

EoSM: The Slovak Republic’s Performance Plan includes references to requirements but does not mention the current level or targets.

RAT: The Slovak Republic’s Performance Plan notes that the severity classification indicator will be applied, however, it does not include how it will be implemented, measured or what is its current level.

Just Culture: The Slovak Republic’s Performance Plan states that the indicator will be used, however, does not include how it will be implemented, measured or what is its current level.

1.4.4 Key points on SAFETY:

The PRB appreciates the work done for the SSP and invites the Slovak Republic to continue their efforts for a timely implementation.

The description of ALoS at both State and ANSP level should be clarified, particularly the metrics used as an indicator and the computation method for the target value

The Performance Plan should next to the references to safety KPI’s mention their


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current level

With due regards to independence of AIB, the PRB encourages the Slovak Republic to apply the RAT methodology for analyzing and investigating ATM safety occurrences in all entities (not just the ones mentioned in 691/2010).

The performance monitoring and annual reporting during RP1 should include the performance of the State and its NSA with regard to Effectiveness of Safety Management and Just Culture.

The Slovak Republic 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 would like a clear description of the NSA monitoring capability and process.

PRB invites Slovak Republic to clarify whether sufficient NSA qualified staff and organisational structure will be available to fulfil NSA Safety tasks during RP1 (particularly for the assessment of changes in ATM), taking full advantage of the FAB structures and resources.

1.5 Environment 1.5.1 The Slovak Republic’s Performance Plan does not contain environment PIs or targets. No

measures to improve environmental performance are described.

1.6 Capacity

1.6.1 Figure 5 presents the delay targets proposed by the Slovak Republic 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 2011.

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OKXX

Source: CFMU; Performance PlanSlovak Republic

Figure 5: Capacity targets overview

1.6.2 Delay level check in 2014: The capacity target for 2014 in the Slovak Republic’s Performance Plan (0.19 minutes en-route ATFM delay per flight) is equal to the reference values provided by capacity planning process of EUROCONTROL, but the intermediate values in 2012 and 2013 are higher than the corresponding reference values The reference values are less stringent than the delay level experienced by the Slovak Republic in the recent years.

The Slovak Republic’s Performance Plan is assessed as passing the “Delay level” check.

1.6.3 The main justification provided for the 2012 and 2013 the national targets being less ambitious than the indicative reference values is the introduction of a new operational


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building which is planned to take place from Autumn/Winter 2012 to Spring 2013 and the corresponding shadow mode operation during the transition.

1.6.4 ANSP Capacity planning (LSSIP (2011-2015): Figure 6 illustrates the evolution of ANSP capacity planning in the past four years and compares it to the required capacity reference profile in the LSSIP 2011-2015.

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Figure 6: Evolution of ANSP capacity planning (LSSIP) vs. required capacity

1.6.5 Although reviewed in line with the slowing down of the traffic increase, LPS is still consistently increasing its capacity in line with the STATFOR High Growth Scenario.

1.6.6 Figure 7 compares the required reference profile for the period 2011-2015 to the ANSP capacity plans (LSSIP 2011-2015).

1.6.7 The 2011-2015 capacity plan shows a constant surplus of capacity compared to the required reference profile. -30%

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Figure 7: Planned vs. required capacity (LSSIP 2011-2015)

1.6.8 There is some variability between the “current” and the “shortest” routes baselines scenario. In 2014 the difference will be around 4.6%, i.e. 114 movements per hour in the “current routes” scenario vs. 109 for the reference profile.

1.6.9 The predicted level of delay for 2014 as published in the NM NOP, calculated taking into account the Capacity Plan submitted by the ANSP, is 0.02 minutes/flight, indicating that no structural lack of capacity is foreseen for Bratislava ACC.

1.6.10 The capacity plan of LPS SR during the RP1 provides sufficient capacity to cope with any traffic growth scenario.

The ANSP’s latest available capacity plan (LSSIP 2011-2015) is consistent with the required reference profile.


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1.6.11 Key points on CAPACITY:

A. The Slovak Republic has not experienced any significant capacity problems since 2008.

B. The capacity performance target set out in the Slovak Republic’s Performance Plan is in line with the required reference value in 2014.

C. The Slovak Republic is sensitive to significant changes in route utilisation patterns by airspace users. The ANSP capacity plans (LSSIP 2011-2015) project a surplus of capacity, even when the traffic variation between current and shortest routes scenarios is considered.

D. Although the intermediate targets for 2012 and 2013 are less ambitious than the corresponding indicative reference values (due to the move to a new operations building), the increase of delays might be less significant than currently foreseen when considering the past records, the current performance, the traffic seasonality and the LPS SR plans.

1.7 Cost-efficiency 1.7.1 Figure 8 presents the cost efficiency targets proposed by the Slovak Republic for each

year of RP1 together with the historical values since 2009.

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Components of determined unit rate 2009 2010 2011 2012 2013 2014 2009-14 2011-14Eurocontrol EUR 3.3 3.3 3.0 3.0 2.8 2.7 -4.0% -3.4%ATSP EUR 51.5 51.0 49.0 50.9 49.9 47.9 -1.4% -0.8%MET EUR 1.4 1.3 1.3 1.5 1.7 1.6 2.7% 7.6%CAA/NSA EUR 0.4 1.1 1.0 1.1 1.0 0.9 16.1% -2.3%Total EUR 56.6 56.7 54.3 56.5 55.4 53.1 -1.3% -0.7%

Figure 8: Cost-efficiency target overview

1.7.2 Traffic forecast checks: As shown on Figure 9, the submitted traffic forecast corresponds to the previous STATFOR forecast published in February 2011, which is significantly higher than the STATFOR May 2011 base case scenario (by some +1.6 percentage point every year 2012-2014).

1.7.3 For 2011, two figures have been given in the Plan: 902,000 TSUs on Page 4 under traffic assumptions (i.e. +5.4% compared to 2010) and 944,000 TSUs on , as the assumption used for the cost-efficiency target table (i.e. +10.3% compared to 2010). For consistency purposes the PRB has retained 902,000 TSUs as it corresponds to the same series as the forecast for 2012-14 (STATFOR February 2011 base case scenario). This is


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higher than the STATFOR May base case scenario which suggests an increase of +4% compared to 2010. Incidentally, this tends to give a better profile to the en-route DUR over the 2011-2014 period.

1.7.4 The evolution observed to date indicates that actual traffic in the first seven months of 2011 is +4.1% (excluding April data due to the Volcanic ash crisis in 2010) higher compared to the same period in 2010, which seems to be more in line with the figure for 2011 from the STATFOR May 2011 forecast (+4.0%) than the February forecasts (+5.4%).

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Total en-route service units ('000) 2010 2011 2012 2013 2014 2009-14 2011-14Performance Plan 856 902 945 982 1 022 5.9% 4.3%STATFOR May 11 base 856 890 930 966 1 005 5.5% 4.1%STATFOR May 11 high 856 901 957 1 013 1 071 6.9% 5.9%STATFOR May 11 low 856 880 904 928 954 4.4% 2.7%STATFOR Feb 11 base 856 902 945 982 1 022 5.9% 4.3%STATFOR Sep 10 base 849 932 967 997 1 028 6.0% 3.3%

Figure 9: Traffic forecasts

Slovak Republic’s Performance Plan is assessed as not passing the “Traffic forecast” check.

1.7.5 Economic assumptions checks: As shown on Figure 10, The inflation assumptions used in the Slovak Republic’s Performance Plan are identical to the IMF April 2011 average inflation forecast for every year 2011-14.

Inflation 2010 2011 2012 2013 2014 2009-14 2011-14Performance Plan 0.7% 3.4% 2.7% 2.9% 2.8% 2.5% 2.8%IMF April 2011 average 0.7% 3.4% 2.7% 2.9% 2.8% 2.5% 2.8%Difference (percentage points) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Performance Plan (index, 2009=100) 100.7 104.1 106.9 110.0 113.1IMF April 2011 average (index, 2009=100) 100.7 104.1 106.9 110.0 113.1

Figure 10: Economic assumptions

Slovak Republic’s Performance Plan is assessed as passing the “Economic assumption” check.


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1.7.6 Unit rate trend checks: As summarised in Figure 11, forecast annual reduction in the en-route determined unit rate is below the the EU target over 2011-14 (-0.7% compared to -3.5% p.a.). It is also below for the 2009-2014 period (-1.3% compared to -3.2% p.a.).

Units 2009 2010 2011 2012 2013 2014 2009-14 2011-14Total determined costs (nominal terms) '000 EUR 43 454 48 820 50 953 57 054 59 863 61 360 7.1% 6.4%Inflation % % 0.0% 0.7% 3.4% 2.7% 2.9% 2.8%

Inflation index (2009 = 100) 100.0 100.7 104.1 106.9 110.0 113.1 2.5% 2.8%Total determined costs (real terms) '000 2009 EUR 43 454 48 481 48 940 53 364 54 435 54 276

% n/n-1 % 11.6% 0.9% 9.0% 2.0% -0.3% 4.5% 3.5%Total en-route SUs 000 SUs 768 856 902 945 982 1 022

% n/n-1 11.5% 5.4% 4.8% 3.9% 4.1% 5.9% 4.3%En-route determined unit rate (national currency in real terms) 2009 EUR 56.61 56.66 54.26 56.47 55.43 53.11

% n/n-1 % 0.1% -4.2% 4.1% -1.8% -4.2% -1.3% -0.7%2009 Exchange rate 1 EUR= 1.0000 En-route determined unit rate (Euro in real terms) 2009 EUR 56.61 56.66 54.26 56.47 55.43 53.11

% n/n-1 % 0.1% -4.2% 4.1% -1.8% -4.2% -1.3% -0.7%EU-wide target 2009 EUR 57.88 55.87 53.92 -3.2% -3.5%

Figure 11: Determined unit rate trend

1.7.7 Moreover, traffic growth is strong in the Slovak Republic (average growth over 2009-2014 of 5.9% p.a. compared to an EU average of +3.2%). If the EU-wide target was adjusted to reflect this difference, the PRB computes that it would be increased to -4.5% p.a. on average for 2009-2014. As such adjusted EU-wide target would be more stringent, Slovak Republic’s planned reduction in the determined unit rate would be even further away from the adjusted EU-wide cost-efficiency target for 2009-2014 (-1.3% vs. -4.5 p.a.).

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Figure 12: Planned changes in en-route determined costs categories (2009-2014)

1.7.8 Figure 12 shows the planned changes in en-route determined costs categories over the period 2009-2014. The PRB notes that between 2009-2014 staff costs are planned to increase significantly by some 40% in real terms, an annual average of +7.1%, even if it is described in the Slovak Republic’s Performance Plan that a significant part of this staff cost increase occurs in 2010 (+23%) as a result of cost-containment measures adopted in 2009 in response to the economic crisis, and the creation of a provision for retirement benefits. The PRB computes that the gradual increases in staff costs account for more than 75% of the total increase in en-route costs over 2009-2014.

1.7.9 The PRB also notes that investment costs (depreciation and costs of capital) are planned to significantly increase in 2012 and 2013 due to the acquisition and commissioning of a new operational and administrative building (in operation in 2013). Similarly, the Slovak Republic’s Performance Plan reports that operating costs are planned to be significantly higher in 2012 because the new and old premises will be used in parallel during the transition period.


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1.7.10 The PRB notes that Slovak Republic’s ATSP has embarked on a significant capital expenditure programme (€68 million over 2010-2014 which amount to 147% of gate-to-gate costs in 2009, with a peak of €37 million in 2012) without specifying their contribution to, and impact on the national performance targets. Moreover, these figures seem to exclude any capex relating to the purchase of a new ATC system which is planned for 2015. The Slovak Republic’s Performance Plan does not provide any reference to specific business cases and or cost benefit analysis in support to the above capital investment programme. Furthermore, there are no indications that alternative solutions at a FAB CE level have been effectively pursued.

1.7.11 The PRB calculates that the total economic costs per SU (including the cost of en-route ATFM delays and the determined costs) will increase by +0.3% p.a. over 2009-2014. The PRB notes that the trend in the total economic costs per SU is significantly worse than the forecast annual reduction in the en-route determined unit rate of -1.3% p.a. over 2009-2014. In this context, the operational benefits from the new capex are not fully apparent.

Slovak Republic’s Performance Plan is assessed as not passing the “Unit rate trend” check.

1.7.12 Unit rate level checks: As shown in Figure 13, the Slovak Republic’s en-route determined unit rate is and remains higher than the average of the comparator States (Czech Republic, Hungary and Slovenia) throughout the period 2009-2014 (+13% higher in 2014).

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Figure 13: Determined unit rate level

1.7.13 LPS’s ATCO productivity is low (-20% below the comparator States in 2009) and support costs are high (support costs per composite flight-hour were +51% higher than the comparator States in 2009). Overall, there are no strong indications from the Slovak Republic’s Performance Plan that these elements have been effectively addressed in RP1. In fact, operating costs and investment costs are planned to increase throughout RP1 and the already high support cost ratio is likely to further increase.

Slovak Republic’s Performance Plan is assessed as not passing the “Unit rate level” check.

1.7.14 Return on equity checks: The RoE for its ATSP (LPS) is set at 8.5% on average for RP1. The PRB computes a risk premium of 4.3% relative to the 10-year Slovak Republic government bond rate of 4.2%. This 4.3% risk premium is significantly higher (by 1.7 percentage points) than the EU average for ATSPs (2.6%). The PRB also computes that the total asset base used to calculate the cost of capital is significantly higher (+38%) than the average of the comparator group and the EU average.


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Figure 14: Return on equity

Slovak Republic’s Performance Plan is assessed as not passing the “Return on equity” check.

1.7.15 Key points on COST-EFFICIENCY:

A. Slovak Republic’s Performance Plan is assessed as not passing the “traffic forecast” check. The submitted traffic forecast corresponds to the previous STATFOR forecast published in February 2011, which is significantly higher than the STATFOR May 2011 base case scenario (by some +1.6 percentage points every year 2012-2014). For 2011, the PRB understands that the traffic forecast used in the Performance Plan is +5.4% compared to 2010. This is higher than the STATFOR May base case scenario which suggests an increase of +4% compared to 2010. The evolution observed to date indicates that actual traffic in the first seven months of 2011 is +4.1% (excluding April data due to the Volcanic ash crisis in 2010), which seems to be more in line with the figure for 2011 from the STATFOR May 2011 forecast (+4.0%) than the February forecasts (+5.4%).

B. Slovak Republic’s Performance Plan is assessed as passing the “economic assumptions” check. The submitted inflation forecast is in line with the IMF April 2011 average inflation forecast for every year 2011-2014.

C. Slovak Republic’s Performance Plan is assessed as not passing the “en-route determined unit rate trend” checks. The PRB computes that the forecast annual reduction in the en-route determined unit rate is much worse than the EU target trend measured over 2011-14 (-0.7% compared to -3.5% p.a.). It is also worse over 2009-2014 (-1.3% compared to -3.2% p.a.).

D. The PRB notes that traffic growth is strong in the Slovak Republic (average growth over 2009-2014 of 5.9% p.a. compared to an EU average of +3.2%). All else equal, the PRB considers that this should provide greater potential to reduce the en-route determined unit rate in the Slovak Republic.

E. The PRB remarks that between 2009-2014 staff costs are planned to increase significantly by some 40% in real terms, an annual average of +7.1%, even if the Performance Plan describes that a significant part of this staff cost increase occurs in 2010 (+23%) as a result of cost-containment measures adopted in 2009 in response to


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the economic crisis, and the creation of a provision for retirement benefits.

F. The PRB also notes that investment costs (depreciation and cost of capital) are planned to significantly increase in 2012 and 2013 due to the commissioning of a new operational and administrative building (in operation in 2013). The Slovak Republic’s Performance Plan reports that operating costs are also planned to be significantly higher in 2012 because the new and old premises will be used in parallel during the transition period.

G. The PRB notes that the Slovak Republic’s ATSP has embarked on a significant capital expenditure programme (€68 million over 2010-2014 which amount to 147% of gate-to-gate costs in 2009, with a peak of €37 million in 2012,) without specifying their contribution to, and impact on the national performance targets. Moreover, these figures seem to exclude any capex relating to the purchase of a new ATC system which is planned for 2015. The Slovak Republic’s Performance Plan does not provide any reference to specific business cases and or cost benefit analysis in support to the above capital investment programme. Furthermore, there are no indications that alternative solutions at a FAB CE level have been effectively pursued, despite the fact that major synergies and rationalisation of investments are expected from the FAB CE initiative.

H. The PRB also calculates that the total economic costs per SU (including both the cost of en-route ATFM delays and the determined costs) will increase by +0.3% p.a. over 2009-2014. The PRB notes that the trend in the total economic costs per SU is significantly worse than the forecast annual reduction in the en-route determined unit rate of -1.3% p.a. over 2009-2014. In this context, the operational benefits from the new capex are not fully apparent.

I. Slovak Republic’s Performance Plan is assessed as not passing the “en-route determined unit rate level” check. The Slovak Republic’s en-route determined unit rate is and remains higher than the average of the comparator States (Czech Republic, Hungary and Slovenia) throughout the period 2009-2014 (+13% higher in 2014).

J. LPS’s ATCO productivity is low (-20% below the comparator States in 2009) and unit support costs are high (+51% higher than the comparator States in 2009). Overall, there are no strong indications from the Slovak Republic’s Performance Plan that these elements have been effectively addressed in RP1. In fact, operating costs and investment costs are planned to increase throughout RP1 and the already high support cost ratio is likely to further increase.

K. Slovak Republic’s Performance Plan is assessed as not passing the “return on equity” check. The return on equity (RoE) is set at 8.5% on average for RP1. The PRB computes a risk premium of 4.3% relative to the 10-year Slovak Republic government bond rate of 4.2%. This 4.3% risk premium is significantly higher (by 1.7 percentage points) than the EU average for ATSPs (2.6%).

1.8 Interrelations between performance targets 1.8.1 The Slovak Republic’s Performance Plan does not provide an assessment of the

interrelations between performance targets.

1.8.2 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.

Based on the information in the Slovak Republic’s Performance Plan, there are no significant issues regarding interrelations between the established performance targets.


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1.9 Additional Comments Monitoring Performance Plans 1.9.1 The Slovak Republic’s Performance Plan provides a description of the data sources to be

used to monitor the Safety, Capacity and Cost Efficiency KPIs defined in the Slovak Republic’s Performance Plan. Alert thresholds are set for each target. The NSA is responsible for defining corrective actions if the targets are not met – the corrective actions are not defined. The need to provide an annual report to the European Commission is noted.

Investments related to IP1 of the ATM Masterplan 1.9.2 In the letter of European Commission’s Air Transport Director dated 15th April 2011,

States were invited to provide, in their Performance Plans, detailed information on their investments planned for the period 2012-2014, in particular those associated with the 29 IP1 OI steps recognised as critical by the Single Sky Committee.

1.9.3 The Slovak Republic’s Performance Plan does not specifically address IP1 compliance, but does list five major capital projects (see Annex 3).

Slovak Republic’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 1.9.4 The Slovak Republic’s Performance Pan does not contain KPIs on the effectiveness of

airspace utilisation.

1.9.5 Slovak Republic is fully compliant with FUA regulation and no problems are currently outstanding. Only FUA Level 1 and 2 are addressed in the Slovak Republic’s Performance Plan, although Level 3 is fully and successfully implemented. No reference to the future cooperation in the context of FAB CE is provided.

Stakeholders’ views on NSA stakeholder consultation 1.9.6 The Slovak Republic’s NSA organised a consultation its draft performance plan on 29th

March 2011. The meeting was attended by representatives of the NSA, MoT Military, Local Airports and Airspace Users (IATA, Lufthansa, Austrian Airlines, VIP Wings). Airspace users provided in writing the key following clarifications:

What is the source for GDP data? The NSA indicated that national sources (Ministry of Finance, Institute of Fiscal Policy were used). The submitted performance plan uses IMF forecasts for inflation.

Why is a new operational and administrative building needed by the ANSP? The Slovak Republic’s Performance Plan was updated to indicate that the new building is required to replace obsolete temporary accommodation.

What measures are prepared in case capacity targets would not be achieved? The Slovak Republic’s Performance Plan was updated to state that the NSA will define measures if the target is not met.

Justification for the cost-efficiency target. The Slovak Republic’s Performance Plan was updated to include limited justification of the cost efficiency target.

Possibility to include a new table into a performance plan that would demonstrate the consistency of national targets with those of the EU and of four comparable countries as specified by the PRB. No such table was added.

Justification for the cost of capital calculation. The Slovak Republic’s Performance Plan was updated to include limited justification of the cost of capital.


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1.9.7 A further exchange of letters took place between airspace users and the NSA. The Slovak republic’s Performance Plan was duly updated to reflect Airspace User concerns.

The Slovak Republic’s Performance Plan was subject to consultation and was updated to reflect some of the comments received.

Uncontrollable costs 1.9.8 The Slovak Republic’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. No more details or justifications were provided. This list is summarised in Annex 4 to this report.

1.10 Assessment conclusions 1.10.1 An overview of the technical assessment of the Slovak Republic’s Performance Plan for

RP1 is presented in Annex 1 as a one page dashboard.

Conclusions on capacity 1.10.2 Overall, the Slovak Republic’s Performance Plan is assessed as making an adequate

contribution to the achievement of the EU-wide capacity target in 2014.

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 1.10.3 The PRB considers that the Slovak Republic has more potential to reduce its en-route

DUR than some other States, due to the relatively high level of its en-route costs per SU in 2009 (key point I in paragraph 1.7.15), the relatively high traffic growth (+5.9% p.a. 2009-2014) (key point D) and the low productivity performance of the ATSP (LPS) (key point J).

However, the level of the DUR presented in the Slovak Republic’s performance plan remains higher throughout RP1 relative to its comparator States (key point I) and the level of reduction in the en-route DUR is much lower than the EU-wide cost-efficiency target trend (key points C to H). The PRB considers that there is scope for further cost-efficiency improvements, in particular in the following areas:

- ATCO productivity and development of staff costs;

- Level and development of support costs

- Level of the risk premium used to compute LPS return on equity over RP1

- Rationalisation of investments and synergies within the FAB CE initiative.

1.10.4 On the basis of the above conclusions and key points in paragraph 1.7.15, Slovak Republic’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 Slovak Republic to revise its cost-efficiency target for RP1 in the light of the above comments.

Conclusions on compliance 1.10.5 In addition, the Slovak Republic’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.


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A clear description of the NSA safety performance monitoring process and capabilities.


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Annex 1: Technical assessment dashboard

Slovak Republic’s Performance Plan

Assessment criteria Details Conclusion

Cap

acit

y

Delay level check

En-route ATFM delay (minutes) per flight

2012 2013 2014

Reference values 0.24 0.22 0.19

Delay target in Performance Plan

0.30 0.32 0.19

ANSP’s Capacity Plan OK

Consistent in 2014

Traffic forecast checks

En-route Service units (‘000)

2012 2013 2014

STATFOR baseline (May 2011)

930 966 1005

Performance Plan 945 982 1022

Not Consistent

Economic assumptions checks

Average Inflation index (2009-=100)

2012 2013 2014

IMF 106.9 110.0 113.1

Performance Plan 106.9 110.0 113.1

Consistent

Unit rate trend checks

Yearly trend EU-wide

target Perf. Plan

target

2009-2014 -3.2% -1.3%

2011-2014 -3.5% -0.7%

Not Consistent

Unit rate level checks

Determined Unit Rate (€2009)

2014

Comparators

Performance Plan €53.11

Comparison with un-weighted average of

comparators +13%

Czech Republic

Hungary

Slovak Republic

Slovenia

Not Consistent

Cos

t-ef

fici

ency

Return on equity checks

Average return on Equity 2012-2014

8.5%

Risk premium 4.3%

Not Consistent


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Annex 2: Performance Plan checklist

Ref Requirement (option requirements shaded)

Check

(Yes / No / Incomplete

Notes / reference in plan

Scope of plan (dates, level) Yes Section 1.2.1

Entities covered Yes Section 1.3.2

ANSP (LPS)

MET (SHMU)

NSA (LU SR)

NSA responsible for drawing up plan Yes Section 1.3.1

Civil Aviation Authority of the Slovak Republic (LU SR)

Geographical scope of plan Yes Section 1.2.2

National or FAB plan Yes Section 1.1.1

National

1.1 Description of situation

For National Performance Plans, NSA or body responsible for providing the aggregation of performance targets for the FAB

No Not included

GDP forecast Yes Description of macroeconomic scenario Inflation forecast Yes

Section 1.4.2

Source: GDP: Varied

Inflation: IMF

Traffic forecast Yes Section 1.4.3

Status of aviation safety and Aviation State Safety Programme

Yes Section 1.4.4

1.2 Overall assumptions

Institutional context and governance Yes Section 1.4.1

Format and timing Yes Section 1.5

List of stakeholders consulted Yes Section 1.5

Issues raised Yes Section 1.5

NSA response to issues raised Yes Section 1.5

1.3 Stakeholder consultation

Confirmation that information provided 3 weeks in advance

No Not provided and does not appear to have been so

Effectiveness of safety management Yes

Application of severity classification Yes

2.1a

Just culture targets for each year Yes

Section 2.1.1, 2.2.1

Targets for Acceptable level of safety for incidents of the severity A and B only

2.2.1 outlines measures to be monitored during RP1

2.1b Minutes of en-route ATFM delay per flight Yes Section 2.1.2

2.1c Description of route design improvement process No Section 2.1.3

No env target for RP1


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Check



Determined en-route costs for each year Incomplete Section 2.1.4

Unclear whether en-route costs are nominal or real terms.

No breakdown by entity or nature. These are provided in 3.4.1, for ANSP costs, 3.4.2, for MET costs, 3.4.3, for NSA costs

Determined terminal costs for each year Incomplete Section 3.4.1.2, 3.4.2.2, 3.4.3.2

Provided for individual entities but not at summary level

En-route service units forecast for each year Yes Section 2.1.4

Determined unit rate for each year Yes Section 2.1.4

Description and justification of return on equity

Incomplete Section 3.4.1.3, 3.4.2.3, 3.4.3.3

No justification

Capex for each year Yes

Breakdown of projects Yes

2.1d

Description of investment needed to achieve targets

Description of relevance and coherence

Incomplete

Section 3.4.1.4 (ANSP)

Section 3.4.2.4 (MET)

No description of relevance for ANSP investments

Capacity Yes Section 2.2.2 Explanation of consistency with EU-wide targets

Cost efficiency Incomplete Section 2.2.4

Consistency with EU level explained but not the rate of reduction target

2.2

Explanation of any interdependencies and trade-offs No Not included

2.3 Explanation of carry-overs from previous years Yes Section 2.3

Capacity Yes Section 2.4.1

No capacity risk sharing or incentives

Traffic risk sharing keys

Yes Section 2.4.1.1, 2.4.2

2.4 Description of risk-sharing and incentives

Cost -efficiency

Identification of uncontrollable costs

Yes Section 2.4.1.2

No incentive schemes

ANSP (LPS SR) Yes Section 3.1, 3.2, 3.3, 3.4.1

Safety, capacity, env (no target), cost-eff

3.1

Individual performance targets for each accountable entity

MET (SHMU) Yes Section 3.4.2


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Check



NSA (LU SR) Yes Section 3.4.3

Includes EUROCONTROL costs

ANSP (LPS SR) Yes

MET (SHMU) Yes

3.2 Description of incentives for each entity

NSA (LU SR) No

Section 2.4 but only for ANSPs.

Not included for NSA

4 Description of civil-military dimension Yes Section 4

5 Analysis of sensitivity to external assumptions Incomplete Section 5.1

No quantitative analysis

Safety No Not included

Capacity No Not included

Environment No Not included

Measures to be put in place to achieve the targets

Cost-efficiency No Not included

Monitoring to ensure safety and business plans implemented

Yes Section 6.1

6 Implementation of the Plan

Contingency plans if targets are not met during reference period

Incomplete Section 6.2

No detail on contingency plans or corrective measures provided

Annex A: Reporting Tables and additional information Yes Provided in included spreadsheet

Annex B: Extracts from ANSPs Business Plans Yes Annex B

Annex C: Extracts from States Safety Programmes Yes Annex C

Annex D: Public consultation material No Not included

Performance plan submitted on time (by 30 June 2011) Yes Submitted 30 June 2011

Plan submitted in English Yes

Plan signed by a person with clear responsibility from the State Yes Signed by Director NSA and Director General DGCA


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Annex 3: Investments related to IP1 of the ATM Masterplan

Project

Planned total

CAPEX (M€)

Duration OIs / Enablers

Infrastructure Construction of

new building 29.875 - Not Provided

Infrastructure Construction of

Mosnik Site 2.229 - Not Provided

Communications Upgrades

Communications System

2.016 - Not Provided

Surveillance MSSR Mosnik 1.868 - Not Provided

ATM System Upgrade E2000 1.170 - Not Provided


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Annex 4: List of uncontrollable costs

Cost type specified in Article 11a(8)(c) of EC 1794/2006

Uncontrollable cost types listed in Performance Plan

Commentary and justification provided

(i) Unforeseen changes in national pension regulations and pension accounting regulations

Yes None

(ii) Unforeseen changes in to national taxation law

Yes None

(iii) Unforeseen and new cost items not covered in the national performance plan but required by law

Yes None

(iv) Unforeseen changes in costs or revenues stemming from international agreements

Yes None

(v) Significant changes in interest rates on loans

Yes None

2011-09-20 Slovak Republic - PRB Assessment report · PRB assessment report of Performance Plans...

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