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Industry Denounces ANSP Fee Rise

by Ulrika Lomas,, Brussels

22 April 2010

Despite IATA calls for all air navigation service providers (ANSPs) in Eurocontrol to freeze or reduce rates in 2010, no fewer than 19 states have proposed increases over 2009 levels. Adjusting for the amount of traffic handled, the greatest impact of the price rises will come in Poland (+18%), Romania (+17%), Austria (+14%), France (+6%), the UK (+5%) and Italy (+4%). In all, it will add USD360m to airlines' bills, IATA has estimated.

Fifteen other states have avoided increases, with seven – Bulgaria, Croatia, Finland, Greece, Malta, Moldova and Portugal – proposing reductions compared to 2009 levels.

“Regardless of recommendations to the contrary, some European ANSPs' unit rates were recently hiked to cover rising costs,” IATA said, urging that: “A robust, transparent framework must be implemented to determine future changes.”

Jeff Poole, IATA Director, Industry Charges, Fuel and Taxation, explained that a major problem lies with the cost recovery mechanism:

“Cost recovery is simply not something you see in proper commercial businesses,” he said. “It means an ANSP can incur whatever costs they like, and the airline has to pay their bill. There is absolutely no incentive to be efficient.”

Moreover, Poole argued the rises could translate into a long-term problem. Some ANSPs may continue to argue that under-recovery during the worst of the economic crisis means prices have to increase beyond costs. In addition, a return to economic growth could also act as an excuse to hike charges. “Improving efficiency is the key point,” said Poole. “If that principle holds, then prices will come down in both the short and long term.”

The Civil Air Navigation Services Organization (CANSO) has said the reduction in flights – which averages 6.3% in Europe – has simply outstripped the ANSP cost-cutting efforts, inevitably resulting in a cost increase per flight.

Guenter Martis, Director of European Affairs at CANSO, noted a further problem with staff retention, particularly prevalent in Eastern Europe. He said: “Controllers in [Eastern Europe] are looking elsewhere for employment as salaries are comparatively low. So the cost base is rising as ANSPs struggle to hang on to their staff.”

Martis described this as an industry problem, created by calls for greater mobility of staff. “We all supported the EU law that increased staff mobility as it was thought this would help decrease costs. But in fact, we all have to admit that the opposite is true.”

IATA has said there was some agreement between industry and ANSPs on a solution. “A robust performance framework, set up under the second package of the Single European Sky regulations (SES II), would provide a transparent guide to both ANSP efficiency and charges. The concept was adopted by the European Council in September 2009. The challenge now is implementation.”

“We fully support the idea of a framework,” said Martis. “This is being debated at various levels, and CANSO is a full participant in every discussion. We want a robust system because it would support the future growth of the business.”

IATA’s vision is to incentivize the financial and operational performance of ANSPs through regulation, governance and performance measurement/review in order to drive cost efficiency; ensure appropriate sharing of risk and reward; and encourage collaboration with industry partners. “Importantly, it must be clear that there are penalties for non-performance,” added Poole.

Debate aside, Martis concluded that ANSPs are doing all they can to assist airlines in developing a sustainable industry. “We fully understand the need to work together and are committed to finding solutions that benefit all partners,” he said.

Poole appreciates the efforts, but he noted that the proof is in the numbers. “The 19 proposals for rate increases indicate that there is still a gap between good efforts and acceptable results."

TAGS: business | Malta | Portugal | law | aviation | Bulgaria | Romania | fees | Austria | Finland | France | Greece | Italy | Moldova | Poland | regulation | Croatia

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