costs exempt from cost-sharing - transportstyrelsen

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Costs exempt from cost-sharing PRB advice on States’ RP1 (2012-2014)

submissions

Final Report 1.0 Edition date: 06.10.2015

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COPYRIGHT NOTICE AND DISCLAIMER

© European Union, 2015 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.

Table of contents

1 INTRODUCTION ............................................................................................................. 6

LEGAL CONTEXT .................................................................................................... 6 1.1

PURPOSE OF THIS DOCUMENT ........................................................................... 7 1.2

PRINCIPLES ............................................................................................................ 7 1.3

CRITERIA TO BE USED IN THE RP1 ASSESSMENT ............................................ 7 1.4

PART I: UNION-WIDE OVERVIEW ANALYSIS AND MAIN RESULTS ................................ 9

INTRODUCTION ...................................................................................................... 9 1.5

SUMMARY OF TOTAL EN-ROUTE COSTS SUBMITTED FOR EXEMPTION ..... 10 1.6

SUMMARY OF STATE BY STATE ASSESSMENT ............................................... 12 1.7

PART II: STATE BY STATE ASSESSMENT ....................................................................... 14

1 AUSTRIA ....................................................................................................................... 14

BACKGROUND ...................................................................................................... 14 1.1

ANALYSIS OF COSTS BY ITEM ........................................................................... 14 1.2

SUMMARY FINDINGS FOR AUSTRIA .................................................................. 17 1.3

2 BELGIUM-LUXEMBOURG ........................................................................................... 18

BACKGROUND ...................................................................................................... 18 2.1


SUMMARY FINDINGS FOR BELGIUM-LUXEMBOURG ....................................... 19 2.3

3 BULGARIA .................................................................................................................... 20

BACKGROUND ...................................................................................................... 20 3.1


SUMMARY FINDINGS FOR BULGARIA ............................................................... 23 3.3

4 CZECH REPUBLIC ....................................................................................................... 24

BACKGROUND ...................................................................................................... 24 4.1


SUMMARY FINDINGS FOR CZECH REPUBLIC .................................................. 25 4.3

5 FINLAND ....................................................................................................................... 26

BACKGROUND ...................................................................................................... 26 5.1


SUMMARY FINDINGS FOR FINLAND .................................................................. 28 5.3

6 FRANCE (EN-ROUTE) .................................................................................................. 29

BACKGROUND ...................................................................................................... 29 6.1


SUMMARY FINDINGS FOR FRANCE (EN-ROUTE) ............................................. 36 6.3

7 FRANCE (TERMINAL ANS) ......................................................................................... 37

BACKGROUND ...................................................................................................... 37 7.1


SUMMARY FINDINGS FOR FRANCE (TERMINAL ANS) ..................................... 43 7.3

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8 GREECE ........................................................................................................................ 44

BACKGROUND ...................................................................................................... 44 8.1


SUMMARY FINDINGS FOR GREECE .................................................................. 45 8.3

9 HUNGARY ..................................................................................................................... 46

BACKGROUND ...................................................................................................... 46 9.1


SUMMARY FINDINGS FOR HUNGARY ............................................................... 51 9.3

10 IRELAND ................................................................................................................... 52

BACKGROUND ...................................................................................................... 52 10.1


SUMMARY FINDINGS FOR IRELAND .................................................................. 53 10.3

11 LITHUANIA ................................................................................................................ 54

BACKGROUND ...................................................................................................... 54 11.1


SUMMARY FINDINGS FOR LITHUANIA ............................................................... 55 11.3

12 NETHERLANDS ........................................................................................................ 56

BACKGROUND ...................................................................................................... 56 12.1


SUMMARY FINDINGS FOR NETHERLANDS ....................................................... 63 12.3

13 NORWAY ................................................................................................................... 64

BACKGROUND ...................................................................................................... 64 13.1


SUMMARY FINDINGS FOR NORWAY ................................................................. 65 13.3

14 POLAND .................................................................................................................... 66

BACKGROUND ...................................................................................................... 66 14.1


SUMMARY FINDINGS FOR POLAND ................................................................... 68 14.3

15 PORTUGAL ............................................................................................................... 69

BACKGROUND ...................................................................................................... 69 15.1


SUMMARY FINDINGS FOR PORTUGAL .............................................................. 74 15.3

16 ROMANIA .................................................................................................................. 75

BACKGROUND ...................................................................................................... 75 16.1


SUMMARY FINDINGS FOR ROMANIA ................................................................. 76 16.3

17 SLOVAKIA ................................................................................................................. 77

BACKGROUND ...................................................................................................... 77 17.1


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SUMMARY FINDINGS FOR SLOVAKIA ................................................................ 79 17.3

18 SLOVENIA ................................................................................................................. 80

BACKGROUND ...................................................................................................... 80 18.1


SUMMARY FINDINGS FOR SLOVENIA ............................................................... 81 18.3

19 SWEDEN ................................................................................................................... 82

BACKGROUND ...................................................................................................... 82 19.1


SUMMARY FINDINGS FOR SWEDEN .................................................................. 88 19.3

20 SWITZERLAND ......................................................................................................... 90

BACKGROUND ...................................................................................................... 90 20.1


SUMMARY FINDINGS FOR SWITZERLAND ........................................................ 92 20.3

21 UNITED KINGDOM ................................................................................................... 93

BACKGROUND ...................................................................................................... 93 21.1


SUMMARY FINDINGS FOR UK .......................................................................... 101 21.3

ANNEX I : REVISED DRAFT GUIDANCE ON THE TREATMENT OF COSTS EXEMPT FROM COST-SHARING ..................................................................................................... 102

ANNEX II : COSTS EXEMPT REPORTED IN THE JUNE 2015 EN-ROUTE REPORTING TABLES FOR STATES THAT DIDN’T SUBMIT A DEDICATED NSA REPORT ............. 103

1 CYPRUS ...................................................................................................................... 103

2 DENMARK .................................................................................................................. 103

3 GERMANY .................................................................................................................. 103

4 ITALY .......................................................................................................................... 104

5 LATVIA ........................................................................................................................ 104

6 MALTA ........................................................................................................................ 104

7 SPAIN CANARIAS ...................................................................................................... 104

8 SPAIN CONTINENTAL ............................................................................................... 105

9 SUMMARY TABLE ..................................................................................................... 106

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1 Introduction

Legal context 1.1

1.1.1 The concept of ‘uncontrollable costs’, now referred to as ‘costs exempt from cost-sharing’, was introduced in the Charging Scheme Regulation (Regulation 1191/2010 amending Regulation 1794/2006) to exempt from the application of cost-sharing the difference between actual and determined costs which may be deemed to be out of the control of the ANSPs, Member States and qualified entities as a result of events or circumstances unforeseen at the time of preparation of Performance Plans (PP) as specified in the Regulation. According to Article 11a of Regulation 1794/2006, the National Supervisory Authorities (NSAs) were to determine a list of “uncontrollable cost factors” out of the list defined in the Regulation and provide it as part of their National/FAB Performance Plans.

1.1.2 On 3 May 2013, revised Performance Scheme (390/2013) and Charging Scheme (391/2013) Regulations were adopted by the Commission. The revised Charging Scheme Regulation includes, inter alia, a new requirement for NSAs to provide an annual report on costs exempt from cost-sharing (Article 14.2(f)), a role for the Commission to assess the NSAs’ submissions and decide if a Member State should not be allowed to apply the principle of costs exempt from cost-sharing in part or in whole according to its scrutiny and findings.

1.1.3 The Commission presented to the Single Sky Committee (SSC) in December 2013 (SSC53) and April 2014 (SSC54) a working paper on principles for the application of cost exempt from cost-sharing. Furthermore, the Commission launched in 2013 a study by Steer Davies Gleaves (SDG) on pensions presented to the SSC in April 2014 (SSC54). Following the SSC discussions on these issues, a SSC experts working group was set-up to further clarify the treatment of cost exempt from cost-sharing.

1.1.4 The SSC WG met five times and discussed a draft guidance paper on the costs exempt from cost-sharing. The latest version of the draft guidance was circulated on 08.05.2015 and is presented in Annex I.

1.1.5 In agreement with the Commission, when appropriate, the PRB used the draft guidance in its analysis as it provides valuable information and clarification for the treatment of costs exempt from cost-sharing.

1.1.6 Member States raised a number of issues of interpretation to the Commission concerning the date of application of certain provisions of Regulation 391/2013. Following these comments, the Commission provided some legal clarification on the application of the Regulations as stated in §1.1.7 below.

1.1.7 The Charging Regulation 391/2013 entered into force on 29 May 2013 and applies as from 1 January 2015. However, some provisions as listed in Article 22(2) apply as of the date of entry into force of that Regulation, i.e. 29 May 2013. These provisions include the process for scrutiny and reporting under Article 14(2)(b)-(f). Consequently, the first paragraph of Article 14 and points (a) and (g) of its second paragraph apply from 1 January 2015. This includes the criteria of cost factors eligible for exemption. Criteria of cost factors defined in Article 11a(8)(c) of the previous Charging Regulation 1794/2006 applied for the whole RP1 until the regulation was repealed with effect from 1 January 2015.

1.1.8 It is important to note that the draft guidance developed by the SSC WG on economic aspects was drafted on the basis of the criteria in point (a) of Article 14(2)(a) of the charging Regulation applicable to costs from RP2 onwards.

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When applied to cost-exempt from RP1, differences in the criteria between point (c) of Article 11a(8) of the old charging Regulation and the criteria in point (a) of Article 14(2) of the charging Regulation need to be taken into account.

1.1.9 The main difference between the two set of criteria is “pension costs relating to unforeseen market conditions”. This criterion is not foreseen in the Regulation 1794/2006 applicable for RP1.

Purpose of this document 1.2

1.2.1 In October 2014, the Performance Review Body (PRB) issued advice to the Commission on States’ 2012 and 2013 submissions received in June 2014. The PRB found that further information and a common agreement on the interpretation of the legal requirements were necessary in order to assess the submissions in a robust and objective manner. One of the main recognised challenges was in the area of pensions (difference between accounting accruals and cash payments). In the January 2015 SSC it was agreed to postpone the assessment of States’ 2012 and 2013 submissions in order to allow the SSC WG on economic questions to further clarify the treatment of costs exempt from cost-sharing and the management of ANS costs relating to pensions.

1.2.2 This report from the PRB provides assistance to the Commission in its review of the NSAs’ submissions. The PRB performed its analysis based on the NSA report on costs exempt submitted to the EC by 10 September 2015. The PRB did not analyse any costs exempt reported through other reporting material (i.e. en-route Reporting Tables).

1.2.3 The results presented in this report relate to 2012, 2013 and 2014. The complete series for RP1 is also presented, as foreseen in Art. 14.2(d) and (e) of the Charging Scheme Regulation. This report comprises two parts:

Part I: Union-wide overview analysis and main results;

Part II: Detailed analysis at State level.

Principles 1.3

1.3.1 The draft guidance paper as shown in Annex I included a number of key principles for exempting certain costs from the cost-sharing mechanism. In its assessment the PRB particularly considered the principles discussed in section 2.2 and 2.3 of the draft guidance.

Criteria to be used in the RP1 assessment 1.4

1.4.1 Following the legal clarification from the Commission, the criteria used to analyse the NSAs’ submissions for RP1 are those mentioned in Article 11a.(8)(c) of Regulation 1794/2006 amended by the Regulation 1191/2010:

“Article 11a.(8)(c)

points (a) and (b) may not apply to the difference between actual and determined costs which may be deemed to be out of the control of the air navigation service providers, Member States and qualified entities as a result of:

(i) unforeseen changes in national pension regulations and pension accounting regulations;

(ii) unforeseen changes in to national taxation law;

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

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

(v) significant changes in interest rates on loans”

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Part I: Union-wide overview analysis and main results

Introduction 1.5

1.5.1 As of 10.09.2015, 20 SES States (counting Belgium and Luxembourg as one) submitted a dedicated NSA assessment report on costs exempt from cost-sharing.

FAB STATE Submitted 2012 2013 2014

FAB CE

Austria Yes

Czech Republic Yes

Hungary Yes

Slovakia Yes

Slovenia Yes

UK-IR Ireland Yes

United Kingdom Yes

FABEC Belgium - Luxembourg Yes

France1 Yes

Germany No

The Netherlands Yes

Switzerland Yes

Baltic Poland Yes

Lithuania Yes

Blue Med Cyprus No

Greece Yes

Italy No

Malta No

Danube Bulgaria Yes

Romania Yes

Denmark-Sweden Denmark No

Sweden Yes

NEFAB Estonia No

Finland Yes

Latvia No

Norway Yes

SW Portugal-Spain

Portugal Yes

Spain No (Canarias &

Continental)

Table 1: Dedicated NSA costs exempt assessment report submitted to the PRB/EC

1.5.2 In addition to these 20 States, 7 States (8 en-route Charging Zones) reported costs exempt from cost-sharing in their June 2015 en-route Reporting Tables for charging purposes. The PRB has not analysed these but for completeness, the amounts reported in the en-route Reporting Tables for those 7 States are presented in Annex II.

1 France also submitted a dedicated NSA report relating to the Terminal ANS costs exempt from cost-sharing.

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Summary of total en-route costs submitted for exemption 1.6

Unit convention

Negative amounts (shown in red and in brackets) presented in this report indicate amounts to be reimbursed to airspace users. Positive amounts indicate costs to be recovered from airspace users. All amounts presented in Part I are expressed in € 2009 prices, a space is used as thousands separator and the “.” as decimal separator.

1.6.1 Table 2 below consolidates the costs submitted for exemption from cost-sharing (by factor/item). It is noted that Table 2 is solely populated with the amounts reported in the NSA reports on costs exempt.

1.6.2 Some submissions for costs exempt from risk sharing (positive values), are partially offset by submissions for reimbursement of cost exempt (negative values). Across the NSAs’ submissions the net amount is +37.3 M€2009 in 2012, +80.1 M€2009 in 2013 and -10.6 M€2009 in 2014 (some +106.8 M€2009 for the whole Reference Period). This represents 1% of the total en-route cost-base for those 20 States over the same period.

(In 2009 prices in '000 EUROs) 2012 2013 2014 RP1

Pension 48 419 86 380 3 754 138 553

Interest rates on loans (2 381) (4 291) (4 789) (11 461)

National taxation law 226 1 747 1 673 3 646

New cost item required by law (3 449) 899 (2 859) (5 409)

International agreements (5 481) (4 682) (8 359) (18 522)

Total costs exempted from cost-sharing 37 335 80 053 (10 580) 106 808

Table 2: Consolidated en-route costs submitted for exemption by cost category (20 States)

1.6.3 It is important at this stage to note that the 2013 value (+80.1 M€2009) is mostly driven by Austria’s submission for pension costs of +79.9 M€2009. Without this, the total for 2013 would reduce to +0.1 M€2009.

1.6.4 To put these amounts (106.8 M€2009) in perspective, it should be noted that, according to the analysis in the PRB RP1 Monitoring report, those 20 States incurred actual costs which are -518 M€2009 lower than the planned DCs from their Performance Plans.

1.6.5 In value terms, the large amounts are driven by the pension factor/item. All the other factors/items provide either reimbursements or small costs.

1.6.6 Table 3 summarises the preliminary advice of the PRB on the submissions made by the 20 Member States who submitted a dedicated report. The two categories are:

“Accepted” – in green; or “Declined” – in red.

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1.6.7 Table 3 shows that the largest amounts are “declined” for 2012, 2013 and 2014. The amounts declined are mostly pension costs related to “unforeseen market conditions” (see §1.4 above).

Table 3: Costs submitted by cost category and status of acceptance (20 States)

1.6.8 Figure 1 below illustrates the data in Table 3.

Figure 1: Costs submitted for each year by cost item and status of acceptance (20 States)

(In 2009 prices '000 EUROS)Currency

Classification Accepted Declined Accepted Declined Accepted Declined Accepted Declined

Pension 1 351 47 069 2 285 84 095 1 929 1 824 5 565 132 987 Interest rates on loans (2 381) - (4 291) - (4 789) - (11 461) - National taxation law 226 - 1 747 - 1 673 - 3 646 - New cost item required by law (3 449) - 899 - (2 859) - (5 409) - International agreements (5 481) - (4 682) - (8 359) - (18 522) - Total costs exempted from cost sharing

(9 734) 47 069 (4 042) 84 095 (12 404) 1 824 (26 179) 132 987

2012 2013 2014 RP1€ 2009 € 2009 € 2009 € 2009

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Summary of State by State assessment 1.7

1.7.1 Table 4 provides the breakdown of costs exempt by State by year with values and over RP1, either recommended to be “Accepted” or “Declined”.

Table 4: Costs submitted by Member State and status of recommendation by year (20 States)

1.7.2 It is important to note that the PRB takes a symmetrical and consistent approach in its methodology that may lead it to decline amounts in favour of the airspace users (negative amounts).

1.7.3 Figure 2 illustrates costs submitted by Member State and status of recommendation as presented in Table 4.

Figure 2: Costs consolidated by country and status of recommendation for RP1 (20 States)

(In 2009 prices '000 EUROS)Currency

Classification Accepted Declined Accepted Declined Accepted Declined Accepted Declined

Austria (38) - (142) 79 932 (414) 6 356 (595) 86 288 Belgium-Luxembourg (854) - (1 330) - (1 448) - (3 631) - Bulgaria (173) - (193) - (234) - (600) - Czech Republic 116 - 326 - 314 - 755 - Finland (11) - 344 - 387 - 719 - France (2 741) - (7 455) - (14 707) - (24 903) - Greece (795) - (1 620) - (2 388) - (4 803) - Hungary (930) - 570 - 440 - 80 - Ireland 51 - (77) - (823) - (849) - Lithuania 31 - 101 - 65 - 196 - Netherlands 2 119 1 301 2 878 (909) 2 191 2 106 7 188 2 499 Norway (262) - 96 - 612 - 447 - Portugal (3 582) 19 632 2 649 2 879 2 120 936 1 188 23 446 Poland 733 - 1 024 - 989 - 2 747 - Romania 913 - 187 - 796 - 1 896 - Slovakia (402) - (801) - (456) - (1 659) - Slovenia (6) - 40 - (97) - (63) - Sweden (1 082) 26 135 (1 513) 2 192 88 (23 218) (2 506) 5 109 Switzerland 917 - 1 192 - 2 726 - 4 836 - UK (3 739) - (317) - (2 567) 15 645 (6 623) 15 645

Total costs exempted from cost sharing

(9 734) 47 069 (4 042) 84 095 (12 404) 1 824 (26 179) 132 987

2012 2013 2014 RP1 Total€ 2009 € 2009 € 2009 € 2009

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1.7.4 Figure 3 underlines the importance of the pension costs item for Austria, The Netherlands, Portugal, Sweden and UK.

Figure 3: Costs consolidated by cost item for RP1 (20 States)

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Part II: State by State assessment

Unit convention

All amounts presented in Part II are expressed in national currency and nominal prices to ensure full alignment with NSA submissions. When possible the amounts are presented using a space as thousands separator and the “.” as decimal separator. Tables extracted from NSA submissions may differ from this unit convention.

1 Austria

Background 1.1

1.1.1 The report on costs exempt from cost-sharing was submitted by BMVIT, the Austrian NSA, on 17 August 2015. The amounts reported relate to pensions costs and EUROCONTROL costs under the international agreements item. No user consultation has been reported by the NSA.

1.1.2 Total costs reported in the NSA report by factor/item:

(In nominal terms in '000 national currency) 2012 2013 2014

Currency EUR EUR EUR

Pension 88 395 7 134

Interest rates on loans

National taxation law

New cost item required by law

International agreements (42) (157) (465)

Total costs exempted from cost-sharing (42) 88 238 6 669

Analysis of costs by item 1.2

Pension

Description of the cost item from NSA report Following the removal of the ability to apply the corridor method to Defined Benefits pension valuations according to International Accounting standards (IAS19) has led to actuarial losses.

Cost attributed to this item in the NSA report

Units EUR’000s

The justification from NSA report on why the cost item is considered to be eligible as exemption to the cost-sharing mechanism

A Defined Contributions Scheme is applied for all employees with starting date 01.01.1997. This pension scheme is a defined contribution scheme where the employer has to pay a defined amount monthly into a set of long term pension funds and the retired employee is entitled to have the accumulated amount and its interest. Additionally Austro Control has a defined benefit pension scheme, where a specific amount of benefit (linked to current salary) is offered to the employees (entering Company’s service

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 88.395 7.134

Total costs exempt from cost‐sharing claimed in respect of pension

Total claimed in respect of pension (RT 3.7)

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before 01.01.1997) at the time of retirement depending on the years of working duration. Therefore Austro Control and the employees contribute to a multi-employer pension plan/funds. Austro Control continues to bear the investment risk associated with this scheme. Undershooting the assumption would and does result in an obligation to make top-up payments. The IFRS method (IAS19) of accounting for employee benefit provisions was adopted in 2008.The use of the so called "corridor method" (according IAS 19) is no longer permitted after the end of the year 2012. The accumulated actuarial losses of M€ 126.278 by that date as a result of applying the corridor method. The M€ 88.395, which Austria reports as uncontrollable costs, are the en-route share of these costs (actuarial losses as at 31.12.2012 for employee benefits of total M€ 126.278). According to Austrian accounting law these costs have to be written off over 5 years as extraordinary expenses. In the IFRS reporting the whole amount of M€ 126.278 had to be entered in the balance sheet in 2013. In 2014 the discount rate decreased to 2% (year 2013: 3.5%) with an additional effect for pension costs. The amount not charged to en-route costs at the end of 2014 amounts M€ 95.529. Austria will distribute these costs over 14 years beginning in 2016 for the unit rate calculation to even the effects by distributing them over the longest possible period. The actuaries’ reports (on a yearly basis) are prepared using the projected unit credit method in accordance with IFRS principles and with an interest rate of 3.5% (long term rate of return of top rated corporates bonds). Annual increases in salaries of 2.25% and additional biennial increments are assumed, together with annual pension increase of 1.75%. For air traffic controllers, pensionable age has been taken as 56.5 years, and for all other employees - 59 years for women and 63 years for men. In addition to the provisions for termination and jubilee benefit obligations, Austro Control has to recognise for transitional benefits for air traffic controllers under collective agreements, pre-retirement transitional benefits and defined benefit pension plans. The assumptions are based on actuarial studies done by Mercer (Austria) and BVP - Pensionsvorsorge - Consult GmbH. These studies are done on a yearly basis and the results are audited by Certified Public Accountants (2013 and 2014: Deloitte). Determined costs Pension costs: 2012 and 2013 each M€ 12.7 - 2014: M€ 12.8 Termination benefits: 2012 - 2014 M€ 5.6 per annum Actual costs Balanced accounts for pension costs: 2012: M€ 13.3; 2013: M€ 16.9; 2014: M€ 16.8. Termination benefits: 2012: M€ 5.9, 2013 and 2014: M€ 5.8 each.

Actions reported by the entity to manage the cost risk associated with this item The Austrian NSA reports that Austro Control successfully reduced the negative effects of the decreasing discount rates for the calculation of the provisions for pensions: In 2012 there was no salary increase and the total increase of salaries in RP1 was well below inflation rates.

PRB analysis The analysis is performed for 2013 and 2014 distinctively as the amounts and the drivers are different.

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Analysis for 2013 The underlying event for pension costs as reported in the Austrian NSA report refers to unforeseen changes in “pension accounting law” and was reported by the Austrian NSA under the category “pension costs”. More specifically, the Austrian NSA refers to the removal of the corridor approach under IAS 19 provisions that could not have been foreseen at the time of drawing up the Performance Plan. In its §1.2, the draft guidance defines “unforeseen” as “an event, circumstance, or an outcome that could not be anticipated or predicted at the time of submission of the Performance Plan to the Commission”. It is therefore important to determine whether or not the revision of the IAS 19 could have been foreseen at the time of drawing up the Performance Plan. In April 2010, the IASB (International Accounting Standards Board) published for comments a document proposing amendments to IAS 19. One of the proposals was to remove the option to defer the recognition of gains and losses (so-called corridor approach). Following comments received, the IASB issued a revised version of the IAS 19 on 16 June 2011, removing the corridor approach. In December 2011, the EFRAG (European Financial Reporting Advisory Group) issued its endorsement advice letter to the European Union, supporting the amendments proposed by the IASB. On 5 June 2012, the European Union officially endorsed the amendments to IAS19 proposed by the IASB. The PRB understands that the Austrian NPP for RP1 was submitted on 30 June 2011. One key element is therefore to understand how much information relating to IFRS was known at the time of drawing up and finally submitting the PP. In addition to this “timing” element (see above), from the information provided it would appear that the decrease of the discount factor has been a driver for the increase in costs. Indeed, the PRB notes that, as reported in the actions taken by the entity to manage the cost risk, the drivers for the increase in costs are linked to “the decreasing discount rates for the calculation of the provisions for pension”. The PRB also notes that the interest rates for high quality corporate bonds significantly decreased during 2012 and 2013. As a result for 2013, it would appear that both elements of “timing” and “market conditions” played a role. Analysis for 2014

The pension costs reported in 2014 result from a decrease of the discount rate (long term rate of return of top rated corporate bonds) to calculate the pension obligation. However these changes in Pension costs are resulting mainly from “unforeseen market conditions”, which are not included in the criteria laid down in Article 11a(8)(c) of the Charging Regulation 1794/2006 (see §1.4 above) and hence, following the advice of the Commission’s legal service, are not eligible for exemption during RP1.

PRB findings In respect to the amounts reported for 2013 and based on information provided, the cost item is declined. The PRB suggests that the Austrian NSA should meet the PRB/EC to clarify the circumstances or events that triggered the variation between actual and determined costs. In respect to the amounts reported for 2014, based on the criteria laid down in the Charging

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Regulation 1794/2006 and the legal clarification issued by the EC, the cost item is deemed not eligible for exemption.

International agreements

Description of the cost item from NSA report The difference between planned and actual Eurocontrol costs stemming from a multilateral international agreement.



Forecast data by Eurocontrol has been used at the time of preparation of the plan: “Forecast of Eurocontrol costs of the provisional council as of December 7, 2011”. The Eurocontrol costs have been included in the NSA costs as "Other State Costs".

Actions reported by the entity to manage the cost risk associated with this item Eurocontrol costs cannot be influenced directly by Austria and are based on international agreements. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget.

PRB findings No further action is required.

Summary findings for Austria 1.3

1.3.1 The PRB is minded to consider that pension costs in 2013 are currently considered as not eligible. However the PRB suggests that the Austrian NSA should meet the PRB/EC to clarify the circumstances or events that triggered a variation between actual and determined costs.

1.3.2 The variation of pension costs resulting from unforeseen market conditions is deemed not to be eligible for 2014 as it is resulting from circumstances that are not included in Article 11a(8)(c) of the Charging Regulation 1794/2006, applicable for RP1.

1.3.3 Reimbursements relating international agreements are deemed to be eligible for 2012, 2013 and 2014.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Eurocontrol costs 11.502 11.736 11.949 11.461 11.579 11.484

Costs (+)/revenues (‐) from international agreements ‐42 ‐157 ‐465

Assumptions for costs or revenues stemming from international agreements

(Amounts in nominal terms in '000 national currency)

ANSP/Entity: Austria / NSA

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2 Belgium-Luxembourg

Background 2.1

2.1.1 The report on costs exempt from cost-sharing was submitted by the Belgian NSA (BSA-ANS) on 1 June 2015 for Belgium and Luxembourg. The amounts reported relate to Eurocontrol costs under the international agreements item. No specific user consultation has been reported by the NSA.




Pension




International agreements (927) (1 461) (1 598)

Total costs exempted from cost-sharing (927) (1 461) (1 598)

2.1.3 Note from the NSA report: ‘In last year's submission, the TEN-T subsidy received for the FABEC project was reported as negative uncontrollable cost. As a result of the PRU assessment in 2014, this item was removed from the uncontrollable cost items and reported as an "other revenue from public authorities (union assistance programmes).’


International agreement




Both the level of costs of the Eurocontrol Agency and the sharing key allocation between the Member States are considered as uncontrollable items. At the time that the NPPs for RP1 were submitted, the approved cost base and sharing keys were not yet known. In the determined costs of Belgium-Luxembourg, the Agency forecast of April 2011 was used (SCF/16 - Action 16/5 dd. 15/4/11), more specifically the scenario used a cost-allocation of PART I overheads set at 30%, as supported by the SCF. The allocation keys used in the forecast were 2.4903% for Belgium and 0.0961% for Luxembourg.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Cost base Eurocontrol Agency (part Belgium) 12.581 12.639 12.921 11.622 11.153 11.295

Cost base Eurocontrol Agency (part Luxembourg) 486 488 499 518 513 527

Costs (+)/revenues (‐) from international agreements 13.067 13.127 13.420 12.140 11.666 11.822



ANSP/Entity: Belgocontrol

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The difference between the determined costs and the actual costs are considered as negative uncontrollable cost items and will be reimbursed to the users. 2012: Actual sharing keys were 2.3196% for Belgium and 0.1034% for Luxembourg. The total Agency cost base was lower than foreseen in the Belgian-Luxembourg NPP. 2013: Actual sharing keys were 2.2261% for Belgium and 0.1023% for Luxembourg. The total Agency cost base was lower than foreseen in the Belgian-Luxembourg NPP. 2014: Actual sharing keys were 2.2332% for Belgium and 0.1041% for Luxembourg. The total Agency cost base was lower than foreseen in the Belgian-Luxembourg NPP.

Actions reported by the entity to manage the cost risk associated with this item Not applicable. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Belgium-Luxembourg 2.3

2.3.1 Reimbursements of costs relating to international agreements are deemed to be eligible for 2012, 2013 and 2014.

20

3 Bulgaria

Background 3.1

3.1.1 The report on for costs exempt from cost-sharing was submitted by the DG Civil Aviation Administration (Bulgarian NSA) on 15 June 2015. The amounts reported relate to pension costs (social insurance payments) and Eurocontrol costs under the international agreements item. No specific user consultation has been reported by the NSA.



Currency BGN BGN BGN

Pension (339) (22) 440





Total costs exempted from cost-sharing (368) (413) (493)

Note: the amounts under the “Pension” item appear to have been reported in the item “national taxation law” in the en-route Reporting Tables.


Pension

Description of the cost item from NSA report Social security payments for the State pension scheme included in the NPP have been lower than assumed. The decision as to the value of these parameters is made by the Bulgarian Parliament and is outside the control of ANSP, as highlighted at the time of submission of the NPP in RP1.


Units BGN’000s


It is a duty of employers in Bulgaria to make mandatory social security contributions for their hired employees to the Pensions Fund, the Supplementary Mandatory Pension Security (SMPS) Fund, to the General Diseases and Maternity (GDM) Fund, the Unemployment Fund, the Labour Accident and Professional Diseases (LAPD) Fund and for health insurance. Social security and health insurance contributions are defined under the Law on the Budget of State Social Security and the Law on the Budget of National Health Insurance Fund for each respective year. The contributions are split between the employer and employee in line with the requirements of the Social Security Code (SSC). The social security and pension plans, applied by BULATSA in its capacity as employer, are based on the Bulgarian legislation and are based on a defined contribution pension scheme. Under these plans, the employer pays a defined monthly contribution to the government fund.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐339 ‐22 440



21

The table below presents the contribution due from the employer for all social and health insurance funds. For some categories of personnel, working in specific conditions, additional universal and professional pension funds rates apply in addition to the total rate stated below and are the sole responsibility on of the employer. Please also consider that as stated in the table below the figure for the number of personnel represents the total number of employees of BULATSA. The amount stated as uncontrollable costs only relates to en-route as this activity is subject to risk sharing arrangements under the NPP for RP1. The costs considered as outside the control of the state as well as of the ANSP were initially described in item 2.4.1.2.6.3 and Table 24 of the NPP submitted in June 2011 and were further detailed in item 3.4 and Table 13 of the Addendum to the PP. The uncontrollable parameters and their justification were presented in the NPP. At the time of preparation of NPP in June 2011, there were discussions on the amendment of the: - maximum social security income (defined as parameter “b”); - rates of different social security components (defined as parameter “c”); - ratios for allocation of the different social security components between employer and employees (defined as parameter “d”). The decision on these parameters is taken on an annual basis by the Parliament and is proposed by the government usually as part of the adoption of the annual budget of the State. Neither the NSA, nor the ANSP have any influence on this process. In comparison with the actual data, in the 2012 and 2013 two opposite effects were recorded, as follows: - in respect of parameter “b” the actual 2012 and 2013 maximum social security income was lower than the planned amount. The total effect of this item amount to BGN -657 339 for 2012 and BGN -258 161 for 2013; - in respect to parameters “c” and “d” the actual 2012 and 2013 social security rates were higher than those included in the NPP. The effects of this item amount to BGN 244 296 and BGN 244 646, respectively; - as a result, the total net effect of these two items is BGN -413 043 for 2012 (incl. BGN -338 889.52 allocated to en-route) and BGN -25 715 for 2013 (incl. BGN -21 647 allocated to en-route). In respect of 2014, parameter “b” as well as "c" and "d" were higher than planned. The effects of these items amount to BGN 257 515 and 253 901, being in total BGN 511 416. Out of this amount, BGN 439 866.02 are allocated to en-route. As outlined in Table 24 of the NPP, the parameter “a” (number of staff) is under the control of the ANSP management, however it cannot be expected that ANSP staffing should vary with the variations of parameters “b”, ”c” and ”d” and accommodate all unfavourable developments against the ANSP determined costs. The allocation between en-route and terminal services is the same as applied at the planning stage.

22

Evidence and sources of the assumptions used for establishing the determined costs and actual data: http://ec.europa.eu/europe2020/pdf/nrp/cp_bulgaria_en.pdf http://www.nap.bg/en/ http://www.bulatsa.com/en/finance-and-accounting Annex 1 - Extracts from the Business plan of BULATSA 2010-2014

Actions reported by the entity to manage the cost risk associated with this item The number of staff is under the control of the management and is used as a tool to mitigate any unfavourable effects from the factors “b”, “c” and “d” above. However, it cannot be expected that ANSP staffing should accommodate all unfavourable developments against the ANSP determined costs.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. Following §5.7.3 of the guidance developed by the SSC WG on economic questions, changes to social security payments would qualify for costs exempt as they are a result of a decision by the Bulgarian Parliament. This kind of changes could also qualified under the category “Unforeseen changes in national taxation law” as stated in §5.11.1 of the guidance.





Units BGN’000s

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

EUROCONTROL costs 8.192 8.361 8.514 8.163 7.970 7.580




ANSP/Entity: BULATSA

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐29 ‐392 ‐933Total claimed in respect of international agreements (RT

23


Eurocontrol costs are entirely allocated to the en-route cost base in the NPP and presented under the title Other Operating Costs. Eurocontrol costs have been included in the NPP for RP1 according to a forecast presented by Eurocontrol, which Bulgaria accepted as a best estimate. The actual amounts of Eurocontrol costs are based on reports by Eurocontrol, which are sent every year to Member States.

Actions reported by the entity to manage the cost risk associated with this item No actions. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The PRB notes that the exchange rates presented are rounded and that the following exchange rates have been used to calculate the costs: Determined costs: 1.95515 for 2012, 1.95583 for 2013 and 1.95583 for 2014 Actual costs: 1.95536 for 2012, 1.95553 for 2013 and 1.95557 for 2014 The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rates are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Bulgaria 3.3

3.3.1 Bulgaria is invited to clarify the cost classification in its report with respect to pension costs as it appears to have been placed under the item “national taxation law” in the Reporting Tables.

3.3.2 Costs and reimbursements relating to pensions and international agreements are deemed to be eligible for 2012, 2013 and 2014.

Item 2012 NPP 2012 Actual 2013 NPP 2013 Actual 2014 NPP 2014 Actual

EUROCONTROL costs in EUR 4 190 000,00 4 174 571,00 4 275 000,00 4 075 395,00 4 353 000,00 3 876 353,00

Exchange rate 1,96 1,96 1,96 1,96 1,96 1,96

EUROCONTROL costs in BGN 8 192 078,50 8 162 789,15 8 361 173,25 7 969 557,18 8 513 727,99 7 580 479,64

(Uncontrollable costs) delta in BGN (29 289,35) (391 616,07) (933 248,35)

24

4 Czech Republic

Background 4.1

4.1.1 The report on costs exempt from cost-sharing was submitted by the CAA Czech Republic (Czech Republic NSA) on 1 June 2015. The amounts reported relate to Eurocontrol costs under the international agreements item. No specific user consultation has been reported by the NSA.



Currency CZK CZK CZK

Pension




International agreements 3 274 9 361 9 048

Total costs exempted from cost-sharing 3 274 9 361 9 048





Units CZK‘000s


Eurocontrol costs included in the Czech Republic NPP amounted to €’000s 6 700 (with the exchange rate of 24.52 CZK/€) for 2012, €’000s 6 836 for 2013 and €’000s 6 960 for 2014. The actual costs incurred were €’000s 6 676 (with actual exchange rate 25.10 CZK/€) in 2012, €’000s 6 821 (with actual exchange rate 25.95 CZK/€) in 2013 and €’000s 6 533 (with actual exchange rate 27.51 CZK/€) in 2014. If expressed in the national currency the total estimate across the three years of the RP1 NPP equals CZK’000s 502 601 while the actual costs amounted to CZK’000s 524 334 Therefore resulting in a difference of CZK’000s 21 684 over RP1. The main driver of this difference was the exchange rate fluctuation.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

3.274 9.361 9.048

Total costs exempt from cost‐sharing claimed in respect of international agreements

Total claimed in respect of international agreements (RT

3.11)

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A





ANSP/Entity: NSA

25

The Czech Republic cannot fully influence the actual cost or the exchange rate and thus these costs are considered as uncontrollable.

Units CZK‘000s

Actions reported by the entity to manage the cost risk associated with this item No measures could be effectively used to influence this particular cost item.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rates are not explicitly referred to in the guidance - but as a principle seem out of the control of the entity.


Summary findings for Czech Republic 4.3

4.3.1 Costs relating to international agreements are deemed to be eligible for 2012, 2013 and 2014.

2012 D 2012 A diff 2013 D 2013 A diff 2014 D 2014 A diff RP1 D RP1 A diffEUROCONTROL costs ('000) € 6 700 6 676 -24 6 836 6 821 -15 6 960 6 533 -427 20 496 20 029 -467exchange rate 24,52 25,10 0,58 24,52 25,95 1,43 24,52 27,51 2,99 - - -EUROCONTROL costs ('000) CZK 164 297 167 571 3 274 167 632 176 993 9 362 170 672 179 720 9 048 502 600 524 284 21 684

26

5 Finland

Background 5.1

5.1.1 The report on costs exempt from cost-sharing was submitted by Finland’s Transport Safety Agency (Finland’s NSA) on 1 June 2015. The amounts reported relate to Eurocontrol costs under the international agreements item. A consultation with users on 29 September 2014 has been reported by the NSA from which no comments were reported.




Pension




International agreements (12) 381 434

Total costs exempted from cost-sharing (12) 381 434



Description of the cost item from NSA report The difference between planned and actual Eurocontrol costs stemming from multilateral international agreement.


The justification from NSA report on why the cost item is considered to be eligible as

exemption to the cost-sharing mechanism The regulation states that "unforeseen changes in costs or revenues stemming from international agreements" may be considered as beyond the control of the entity. This relates to Eurocontrol costs that are included in the determined costs of Member States according to an agreed sharing key. The respective amounts in the determined costs of Member States are based on Eurocontrol agency business plans. The change in the sharing key was not anticipated when forecasts for the sharing key was used when preparing the RP1 NPP and in hindsight too low sharing key forecast was used for years 2013-2014. More precisely, this means that over the years 2013 and 2014 actual costs exceed the determined costs established at the beginning of the reference period. The

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A




ANSP/Entity: XXX

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐12 381 434



3.11)

27

Finnish Transport Safety Agency is of the opinion that the difference between actual and determined costs is actually the result of developments that are beyond the influence of the ATSPs. The resulting difference should be passed on to airspace users through a carry-over. As can be seen from the action paper PC/11/36/3, Finland's determined Eurocontrol costs were calculated using the sharing key of 0.696% (or from the attachments). This contribution is split into two parts (30% to be calculated by reference to the Gross National Product (GNP) of the Member States and 70% by reference to their route facility cost-base). With regard to the establishment of the 70% linked to the route facility cost-base, the final costs for the penultimate year (n-2) was used, as from the 2010 Budget exercise, which were known and approved when the budgetary sharing keys were established. However, Finland (Finavia) changed the allocation of ANS costs between en-route and Terminal ANS in 2011. This changed the en-route cost base significantly and as a consequence changed Finland's actual sharing key starting from 2013. As a result, Finland's actual Eurocontrol costs for 2013 and 2014 are higher than determined costs. There is also another element. The Eurocontrol budget is approved by Eurocontrol Member States collectively on a yearly basis. In this respect, if Eurocontrol Member States decide to lower the yearly budget, this should result in a reimbursement to airspace users of savings. Both of these elements are included in the calculations. The lower yearly budget lowers the actual cost and higher sharing key increases the actual costs. For 2013 and 2014 the actual costs are higher because of the sharing key effect exceeds the "budget" effect. Detailed calculations are provided in the next table:

A Member State alone cannot control the yearly budget or the calculation method of the sharing key. The change in the cost-base allocation (en-route/TANS) triggered the change in the actual sharing key. That was undetected at the planning stage and thus unplanned during the RP1 NPP preparation and the determined Eurocontrol costs were set too low for 2013 and 2014.

Actions reported by the entity to manage the cost risk associated with this item A Member State alone cannot control the budget or the calculation method for the sharing key. The increase of the Eurocontrol costs was unplanned in the NPP and there are no means to manage this cost risk.

Finland 2012 *1000 €EC costbase Sharing Key State cost

Determined 502 847,000 0,696 % 3498,000Actual 501 028,706 0,696 % 3485,657Resulting amount for exemption 12,343


Determined 513 056,000 0,696 % 3 569,000Actual 502 215,000 0,788 % 3 949,636Resulting amount for exemption -380,636


Determined 522 399,000 0,696 % 3 634,000Actual 505 787,191 0,804 % 4 068,046Resulting amount for exemption -434,046

28



Summary findings for Finland 5.3

5.3.1 Costs and reimbursements relating to international agreements are deemed to be eligible for 2012, 2013 and 2014.

29

6 France (en-route)

Background 6.1

6.1.1 The report on costs exempt from cost-sharing was submitted by France’s Direction du transport Aérien (DTA) (French NSA) on 1 June 2015. A revised version of the report was submitted on 8 September 2015. No specific user consultation was reported by the NSA.

6.1.2 In its introduction, the NSA made the following statement: «With regards to previous French report 2012 2013, this new 2014 report has been fully updated, including years 2012 and 2013 costs, taking into account the new principles and methodologies presented in the draft guidance on the treatment of cost exempt from cost-sharing drafted by SSC Working Group on Economic Aspects together with the PRB advice on States’ 2012 & 2013 submissions.”

6.1.3 The amounts reported relate to a number of items: pensions, interest rates on loans, national taxation law, new costs required by law and Eurocontrol costs.

6.1.4 It is noted that a M€ 1 threshold in total over the period has been applied by France for each cost category to determine the amounts to be recovered/redistributed. This approach is in line with the French NPP adopted for RP1.




Pension

Interest rates on loans (2 117) (3 771) (4 532)


New cost item required by law (2 075) (6 350)


Total costs exempted from cost-sharing (2 916) (8 009) (15 899)


Pension

Description of the cost item from NSA report The ANSP contributes to the "CAS Pensions" (a special budgetary account), which corresponds to a Pay-As-You-Go scheme. The CAS Pensions was planned by article 21 of the LOLF (organic law related to finance acts) and created by article 51 of 2006 Finance Act. More specifically, the ANSP contributes to 2 programs of the CAS Pensions: Program 741 (civil pensions) and Program 742 (State workers). References: - Loi organique n° 2001-692 du 1 août 2001 relative aux lois de finances. - Loi n° 2005-1719 du 30 décembre 2005 de finances pour 2006.

30


Units €’000s Note: no amounts are claimed as detailed analysis (see below) shows that the genuine amount is less than the M€ 1 threshold.


The Ministry of Finance decides on the contribution rate to Program 741 and the contribution to Program 742 each year. The contribution rates to P741 and the contribution to P742 are both deemed uncontrollable, as they are imposed on DGAC by the Ministry of Finance. Determined costs Pension costs are the sum of the contribution to P741 and P742. Contribution to P741 is equal to the product of the contribution rate times the contribution base. The sharing key for allocation of costs to terminal and en-route charges is the staff sharing key, which stems from historical data. Actual costs Contribution rate to program 741: 67.92% (2012); 71.75 % (2013); 75.14 % (2014). Contribution base to program 741 corresponds to gross salaries (i.e. not including bonuses). Program 741 The amount claimed corresponds to the difference between: - the pension cost, recalculated using the determined contribution base and the actual contribution rate, and - the determined pension cost, calculated using the determined contribution base and the determined contribution rate. Program 742 The amount claimed corresponds to the difference between: - the pension cost, recalculated using the actual contribution and the determined allocation keys, and - the determined pension cost, calculated using the determined contribution and the determined allocation keys. Detailed calculation

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

141.471 149.926 157.873 136.627 145.398 148.800

Pension assumptions for the "Pay‐as‐you‐go" pension scheme

ANSP/Entity: DSNA

Total pension costs in respect of "Pay as you go" scheme (in

nominal terms in national currency)

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 0 0Total claimed in respect of pension (RT 3.7)

31

Units €’000s Actual contribution rate to P741: - circular 1BLF-12-135 of 26/07/2012. - circular 1BLF-13-3167 of 13/06/2013. - circular 1BLF-14-3207 of 07/07/2014.

Actions reported by the entity to manage the cost risk associated with this item There is a M€ 1 threshold (in total over the reference period) below which there is no carry-over.

PRB analysis As a result of the application of the threshold, no amount is claimed by France. Therefore the PRB analysis is not necessary.


Description of the cost item from NSA report The interest rate of a loan is deemed uncontrollable as it depends on the market conditions to which the French Treasury Agency takes out that loan on behalf of the DGCA.


The justification from NSA report on why the cost item is considered to be eligible for

exemption to the cost-sharing mechanism The amount claimed corresponds to the difference between: - the cost of debt, recalculated using the determined debt amount and the actual average interest rate; and - The determined cost of debt, calculated using the determined debt amount and the determined average interest rate.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Contribution rate 67,92% 71,75% 75,14% 68,92% 74,60% 74,60%

Contribution base 198.994 199.921 201.100 189.432 185.689 193.974

Total costs 135.157 143.443 151.114 130.557 138.524 144.704

Difference ‐4.600 ‐4.919 ‐6.409

Total eligible 1.990 5.698 ‐1.093

Total claimed 0 0 ‐1.093

DGCA's contribution 10.510 10.780 11.205 10.428 11.699 14.084

Allocation key to ANSP 74,49% 74,42% 74,47% 73,19% 74,21% 73,22%

Allocation key to en‐route activities 80,65% 80,82% 81,00% 79,53% 79,17% 78,89%

Total costs 6.314 6.483 6.759 6.070 6.874 8.136

Difference ‐244 391 1.377

Total eligible ‐49 552 1.736

Total claimed ‐49 391 1.377

Total claimed ‐49 391 284

Total claimed outside deadband (1 M€ in total over RP1) 0 0 0

Detailed calculations

Program 741

Program 742

Total

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Total debt amount (national currency) for the charging zone 516.460 546.516 573.723 447.293 523.589 466.194

Average weighted interest rate % (Charging Regulations T1 ‐ 3.7) 3,30% 3,35% 3,40% 2,89% 2,66% 2,61%

Interest amount (national currency) 17.043 18.308 19.507 12.927 13.927 12.168

Interest rate assumptions for loans financing the provision of air navigation services


ANSP/Entity: DSNA

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐2.117 ‐3.771 ‐4.532Total claimed in respect of interest rates on loans (RT 3.8)

32

Tables for the calculation of the average cost of debt in 2012, 2013 and 2014, as well as the list of loans have been provided to the NSA.

Units €’000s

Actions reported by the entity to manage the cost risk associated with this item The interest rate of a loan is deemed uncontrollable as it depends on the market conditions to which the French Treasury Agency takes out that loan on behalf of the DGCA. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.9 relating to significant changes in interest rates on loans.



Description of the cost item from NSA report Creation of the intermediate VAT rate: loi n°2011-1978 du 28 décembre 2011 de finances rectificative pour 2011. Modification of the intermediate and normal VAT rates: loi n°2013-1510 du 29 décembre 2012 de finances rectificative pour 2012.


Note: no amounts are claimed as detailed analysis (see below) shows that the genuine amount is less than the M€ 1 threshold (determined in the RP1 NPP). The justification from NSA report on why the cost item is considered to be eligible for

exemption to the cost-sharing mechanism The VAT rate is out of the control of the ANSP and the ANSP cannot recover VAT. In 2011, when the RP1 NPP was planned, 2 VAT rates existed: the normal rate and the reduced rate. In 2012, an intermediate rate was created.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Debt amount 516.460 546.516 573.723 447.293 523.589 466.194

Interest rate 3,30% 3,35% 3,40% 2,89% 2,66% 2,61%

Cost of debt 17.043 18.308 19.507 12.927 13.927 12.168

Difference ‐4.116 ‐4.381 ‐7.339

Total eligible ‐2.117 ‐3.771 ‐4.532

Total claimed ‐2.117 ‐3.771 ‐4.532

Total claimed outside deadband (1 M€ in total over RP1) ‐2.117 ‐3.771 ‐4.532


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate % (intermediate) 5,50% 5,50% 5,50% 5,50% 7,00% 10,00%

Operating costs (VAT included) 1.025 1.019 1.026 1.211 1.175 1.428

Tax rate % (normal) 19,60% 19,60% 19,60% 19,60% 19,60% 20,00%


Assumptions for non‐recoverable tax incurred for the provision of air navigation services


ANSP/Entity: DSNA

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 0 0

Total costs exempt from cost‐sharing claimed in respect of unforeseen changes in national taxation law

Total claimed in respect of national taxation law (RT 3.9)

33

Around 98% of the ANSP expenses are subject to the normal VAT rate, and 1% to the reduced rate. In 2014, both the intermediate and the normal rates increased. The reduced rate has remained unchanged. The amount claimed corresponds to the difference between: - the tax amount, recalculated using the determined tax base and the actual tax rate; and - the determined tax amount, calculated using the determined tax base and the determined tax rate.

Units €’000s The VAT rate is out of the control of the ANSP.

Actions reported by the entity to manage the cost risk associated with this item There is a M€ 1 threshold (in total over the period) below which there is no carry-over.

PRB analysis As a result of the application of the threshold, no amount is claimed by France. Therefore the PRB analysis is not necessary.

New cost required by law

Description of the cost item from NSA report The index point is used as the basic index to calculate the wages of French civil servants.

Costs attributed to this item in the NSA report

Units €’000s The justification from NSA report on why the cost item is considered to be eligible for

exemption to the cost-sharing mechanism The amount claimed corresponds to the difference between: - the impact of the index applied to the cost base, recalculated using the determined base and the actual evolution of the index, and - the determined impact of the index applied to the cost base, calculated using the determined base and the determined evolution of the index.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate % 5,50% 5,50% 5,50% 5,50% 7,00% 10,00%


Tax amount 53 53 53 63 77 130

Difference 10 24 76

Total eligible 0 14 44

Total claimed 0 14 44

Tax rate % 19,60% 19,60% 19,60% 19,60% 19,60% 20,00%


Tax amount 16.459 16.371 16.478 19.452 18.879 23.322

Difference 2.993 2.508 6.845






Intermediate rate

Normal rate

Total

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 ‐2.075 ‐6.350

Total costs exempt from cost‐sharing claimed in respect of new cost items required by law

Total claimed in respect of new cost items required by law

(RT 3.10)

34

The value of the index applied to public servants depends on the Ministry of Public Service. It addresses all French public servants (more than 5 million). DSNA has no control at all on such a national decision which has a direct impact on its staff costs base. The index point has been frozen since 2011. The actual index point value has been the same since 2010 and has been set in the French Decree n°2010-761, 7th July 2010 (http://www.legifrance.gouv.fr/affichTexte.do?cidTexte =JORFTEXT000022447551&dateTexte=&categorieLien=id). This text also describes how the index applies. At the time of the RP1 NPP drafting process in 2011, the Ministry of Public Service was planning to raise this index by 1.5 points in 2013 and 0.5 point in 2014.

Units € ‘000s There was a political and economic decision by the Ministry of Public Service on behalf of French government to freeze the index value in order to contain French public administration staff costs as from year 2011.

Actions reported by the entity to manage the cost risk associated with this item There is a M€ 1 threshold (in total over the period) below which there is no carry-over. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.10 relating to “unforeseen new cost items not covered in the performance plan, but required by law”.



Description of the cost item from NSA report The Eurocontrol costs stemming from multilateral international agreement.


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Index point evolution 0 1,5 0,5 0 0 0

Impact of the index evolution on the cost base 0 2.075 6.350 0 0 0

Salaries 519.674 520.841 527.110 494.066 500.752 493.083

Difference in salaries ‐25.607 ‐20.089 ‐34.027

Total claimed for exemption 0 ‐2.075 ‐6.350

Total claimed outside deadband (1 M€ in total over RP1) 0 ‐2.075 ‐6.350


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Eurocontrol 80.815 81.305 83.116 79.661 78.316 76.318




ANSP/Entity: DSNA

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐799 ‐2.163 ‐5.016



3.11)

35


exemption to the cost-sharing mechanism The sharing key is out of the control of the ANSP. The amount claimed corresponds to the difference between: - the cost, recalculated using the determined budget and the actual sharing key; and - the determined cost, calculated using the determined budget and the determined sharing key.

Units €’000s


PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. However, costs exempt from cost-sharing should not only be applied on the changes in sharing keys but also on the decrease in the Eurocontrol budget as stated in §5.12.3 of the draft guidance: “…the budget is approved by Eurocontrol Member States collectively on a yearly basis (a Member State alone cannot control the budget). In this respect, if Eurocontrol Member States decide to lower the yearly budget, this should result in a reimbursement to airspace users of savings (lower actual costs then determined costs).” On this basis, the PRB considers that the genuine costs exempt from cost-sharing should be calculated as follow:

Units € ‘000s


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


Sharing key 16,06% 16,06% 16,06% 15,90% 15,63% 15,09%

Difference ‐1.154 ‐2.989 ‐6.798

Total eligible ‐799 ‐2.163 ‐5.016

Total claimed ‐799 ‐2.163 ‐5.016

Total claimed outside deadband (1 M€ in total over RP1) ‐799 ‐2.163 ‐5.016


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


Sharing key 16,06% 16,06% 16,06% 15,90% 15,63% 15,09%

Difference ‐1.154 ‐2.989 ‐6.798

Total eligible ‐1.154 ‐2.989 ‐6.798

Total claimed ‐1.154 ‐2.989 ‐6.798

Total claimed outside deadband (1 M€ in total over RP1) ‐1.154 ‐2.989 ‐6.798


36

Summary findings for France (en-route) 6.3

6.3.1 Reimbursements of costs relating to interest rates on loans and new costs required by law are deemed to be eligible for 2012, 2013 and 2014.

6.3.2 Reimbursements of costs relating to international agreements are deemed eligible but should be reviewed in order to include the decrease in the Eurocontrol budget and not only the change in sharing key.

37

7 France (Terminal ANS)

Note: the amounts submitted for France Terminal ANS are not included in the en-route consolidation presented in Part I for consistency purposes.

Background 7.1

7.1.1 The report on costs exempt from cost-sharing for Terminal was submitted by France’s Direction du transport Aérien (DTA) (French NSA) on 8 September 2015. No specific user consultation was reported by the NSA.

7.1.2 In its introduction, the NSA made the following statement: « With regards to previous French report 2012 2013, this new 2014 report has been fully updated, including years 2012 and 2013 costs, taking into account the new principles and methodologies presented in the draft guidance on the treatment of cost exempt from cost-sharing drafted by SSC Working Group on Economic Aspects together with the PRB advice on States’ 2012 & 2013 submissions.”.

7.1.3 The amounts reported relate to a number of items: pension, interest rates of loans, national taxation law and new costs required by law.

7.1.4 It is noted that a M€ 1 threshold in total over the period has been applied by France for each cost category to determine the amounts to be recovered/redistributed. This approach is in line with the French NPP adopted for RP1.




Pension 423 1 313 360

Interest rates on loans (522) (797) (1 044)




Total costs exempted from cost-sharing (99) 516 (684)


Pension

Description of the cost item from NSA report The ANSP contributes to the "CAS Pensions" (a special budgetary account), which corresponds to a Pay-As-You-Go scheme. The CAS Pensions was planned by article 21 of the LOLF (organic law related to finance acts) and created by article 51 of 2006 Finance Act. More specifically, the ANSP contributes to 2 programs of the CAS Pensions: Program 741 (civil pensions) and Program 742 (State workers). References: - Loi organique n° 2001-692 du 1 août 2001 relative aux lois de finances. - Loi n° 2005-1719 du 30 décembre 2005 de finances pour 2006.

38


Units €’000s

The justification from NSA report on why the cost item is considered to be eligible for exemption to the cost-sharing mechanism

The Ministry of Finance decides on the contribution rate to Program 741 and the contribution to Program 742 each year. The contribution rates to prog. 741 and the contribution to prog. 742 are both deemed uncontrollable, as they are imposed on DGAC by the Ministry of Finance. Determined costs Pension costs are the sum of the contribution to program 741 and program 742. Contribution to program 741 is equal to the product of the contribution rate times the contribution base. The sharing key for allocation of costs to terminal and en-route charges is the staff sharing key, which stems from historical data. Actual costs The Ministry of Finance sets the contribution rate to program 741 as well as the contribution to program 742 to take into account for each year. The sharing key for allocation of costs to terminal and en-route charges is the result of cost accounting on staff costs. Program 741 The amount claimed corresponds to the difference between: - the pension cost, recalculated using the determined contribution base and the actual contribution rate; and - the determined pension cost, calculated using the determined contribution base and the determined contribution rate. Program 742 The amount claimed corresponds to the difference between: - the pension cost, recalculated using the actual contribution and the determined allocation keys; and - the determined pension cost, calculated using the determined contribution and the determined allocation keys.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

30.071 31.495 32.745 30.702 32.947 34.495

Pension assumptions for the "Pay‐as‐you‐go" pension scheme

ANSP/Entity: DSNA



2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

423 1.313 360Total claimed in respect of pension (RT 3.7)

39

Detailed calculation

Units €’000s Actual contribution rate to P741: - circular 1BLF-12-135 of 26/07/2012. - circular 1BLF-13-3167 of 13/06/2013. - circular 1BLF-14-3207 of 07/07/2014.

Actions reported by the entity to manage the cost risk associated with this item There is a M€ 1 threshold (in total over the reference period) below which there is no carry-over.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. Following §5.7.2 of the guidance developed by the SSC WG on economic questions, changes to contribution rate due to a change in law would qualify for costs exempt as they are a result of a decision by the French Parliament.



Description of the cost item from NSA report The interest rate of a loan is deemed uncontrollable as it depends on the market conditions to which the French Treasury Agency takes out that loan on behalf of the DGCA.


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Contribution rate 67,92% 71,75% 75,14% 68,92% 74,60% 74,60%

Contribution base 42.297 41.998 41.711 42.569 42.077 43.711

Total costs 28.728 30.133 31.343 29.338 31.390 32.609

Difference 610 1.256 1.266

Total eligible 423 1.197 ‐227

Total claimed 423 1.197 0

DGCA's contribution 10.510 10.780 11.205 10.428 11.699 14.084

Allocation key to ANSP 74,49% 74,42% 74,47% 73,19% 74,21% 73,22%

Allocation key to en‐route activities 80,65% 80,82% 81,00% 79,53% 79,17% 78,89%

Allocation key to aerodromes not subject to terminal charge 11,42% 11,51% 11,59% 12,68% 13,86% 13,36%

Total costs 1.342 1.362 1.402 1.364 1.558 1.886

Difference 22 196 484

Total eligible ‐10 116 360


Total claimed 423 1.313 360

Total claimed outside deadband (1 M€ in total over RP1) 423 1.313 360


Program 741

Program 742

Total

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


Average weighted interest rate % (Charging Regulations T1 ‐ 3.7) 3,30% 3,35% 3,40% 2,89% 2,66% 2,61%

Interest amount (national currency) 4.200 4.324 4.492 3.191 3.527 2.892



ANSP/Entity: DSNA

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐522 ‐797 ‐1.044Total claimed in respect of interest rates on loans (RT 3.8)

40


The ANSP borrows money through the DGCA, which in its turn borrows through the French Treasury Agency. The DGCA has about 50 loans outstanding. Here is only presented the average annual cost of debt. Only part of the debt falls on the ANSP. The amount claimed corresponds to the difference between: - the cost of debt, recalculated using the determined debt amount and the actual average interest rate; and - the determined cost of debt, calculated using the determined debt amount and the determined average interest rate. Tables for the calculation of the average cost of debt in 2012, 2013 and 2014, as well as the list of loans have been provided to the NSA.

Units €’000s

Actions reported by the entity to manage the cost risk associated with this item There is a 1 M€ threshold (in total over the period) below which there is no carry-over. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.9 relating to significant changes in interest rates on loans.



Description of the cost item from NSA report Creation of the intermediate VAT rate: loi n°2011-1978 du 28 décembre 2011 de finances rectificative pour 2011. Modification of the intermediate and normal VAT rates: loi n°2013-1510 du 29 décembre 2012 de finances rectificative pour 2012.


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Debt amount 127.266 129.060 132.110 110.403 132.576 110.794

Interest rate 3,30% 3,35% 3,40% 2,89% 2,66% 2,61%

Cost of debt 4.200 4.324 4.492 3.191 3.527 2.892

Difference ‐1.009 ‐797 ‐1.600

Total eligible ‐522 ‐891 ‐1.044

Total claimed ‐522 ‐797 ‐1.044

Total claimed outside deadband (1 M€ in total over RP1) ‐522 ‐797 ‐1.044


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate % (intermediate) 5,50% 5,50% 5,50% 5,50% 7,00% 10,00%

Operating costs (VAT included) 215 219 210 265 244 275

Tax rate % (normal) 19,60% 19,60% 19,60% 19,60% 19,60% 20,00%




ANSP/Entity: DSNA

41

Note: no amounts are claimed as detailed analysis (see below) shows that the genuine amount is less than the M€ 1 threshold (determined in the RP1 NPP). The justification from NSA report on why the cost item is considered to be eligible for

exemption to the cost-sharing mechanism The VAT rate is out of the control of the ANSP and the ANSP cannot recover VAT. In 2011, when the RP1 NPP was planned, 2 VAT rates existed: the normal rate and the reduced rate. In 2012, an intermediate rate was created. Around 98% of the ANSP expenses are subject to the normal VAT rate, and 1% to the reduced rate. In 2014, both the intermediate and the normal rates increased. The reduced rate has remained unchanged. The amount claimed corresponds to the difference between: - the tax amount, recalculated using the determined tax base and the actual tax rate; and - the determined tax amount, calculated using the determined tax base and the determined tax rate.

Units €’000s

Actions reported by the entity to manage the cost risk associated with this item There is a M€ 1 threshold (in total over the period) below which there is no carry-over.

PRB analysis As a result of the application of the threshold, no amount is claimed by France. Therefore the PRB’s analysis is not necessary.


Description of the cost item from NSA report The index point is used as the basic index to calculate the wages of French civil servants.


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 0 0Total claimed in respect of national taxation law (RT 3.9)

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate % 5,50% 5,50% 5,50% 5,50% 7,00% 10,00%

Operating costs (VAT included) 215 219 210 265 244 275

Tax amount 11 11 11 14 16 25

Difference 3 5 14


Total claimed 0 3 9

Tax rate % 19,60% 19,60% 19,60% 19,60% 19,60% 20,00%


Tax amount 3.453 3.513 3.374 4.249 3.922 4.499

Difference 796 408 1.125






Intermediate rate

Normal rate

Total

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 0 0



(RT 3.10)

42


exemption to the cost-sharing mechanism The amount claimed corresponds to the difference between: - the impact of the index applied to the cost base, recalculated using the determined base and the actual evolution of the index; and - the determined impact of the index applied to the cost base, calculated using the determined base and the determined evolution of the index. The evolution of the index point of public servants depends on the Ministry of Public Service. It addresses all French public servants (more than 5 million). DSNA has no control at all on such a national decision which has a direct impact on its staff costs base. The index point has been frozen since 2011. The actual index point value has been the same since 2010 and has been set in the French Decree n°2010-761 7th July 2010 (http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000022447551&dateTexte=&categorieLien=id ). This text also describes how the index applies. At the time of the RP1 national performance plan drafting process in 2011, the Ministry of Public Service was planning to raise this index by 1.5 pts in 2013 and 0.5 pts in 2014. The forecast impact was computed using the Ministry of Budget simulation tool. To compute the cost of the increase in the index point, the tool uses the amount of total salaries of the previous year and multiplies it by the evolution of the index point.

Units €’000s Political and economic decision by the Ministry of Public Service on behalf of French government to freeze the index point in order to contain French public administration staff costs as from year 2011.


PRB analysis The costs reported in 2013 and 2014 were unforeseen. The submission is in line with the outlined in the draft guidance developed by the SSC WG on economic questions, and in particular §5.10 relating to “unforeseen new cost items not covered in the performance plan, but required by law”. However, the PRB notes that France offset the amounts to be reimbursed to the users with the increase of the salaries which is a controllable factor. Only the effect of the impact of the index point evolution should be taken into account.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Index point evolution 0 1,5 0,5 0 0 0

Impact of the index evolution on the cost base 0 436 1.317 0 0 0

Salaries 110.460 109.414 109.329 111.025 113.471 114.306

Difference in salaries 564 4.057 4.977

Total eligible 0 ‐436 ‐1.317

Total claimed 0 0 0



43

PRB findings France should reimburse to the users the variation of costs for this item in accordance with the guidance developed by the SSC WG on economic questions, and in particular §5.10 relating to “unforeseen new cost items not covered in the performance plan, but required by law”. Accordingly it is expected that an amount of 1.753 M€ will be reimbursed by the users.

Summary findings for France (Terminal ANS) 7.3

7.3.1 Costs relating to pension are deemed to be eligible for 2012, 2013 and 2014.

7.3.2 Reimbursements of costs relating to interest rates on loans are deemed to be eligible for 2012, 2013 and 2014.

7.3.3 France should reimburse the costs relating to the “new costs required by law” for 2013 and 2014.

44

8 Greece

Background 8.1

8.1.1 The report on costs exempt from cost-sharing was submitted by HANSA (the NSA) on 3 June 2015. The amounts reported relate to Eurocontrol costs under international agreements item. No specific comments from user consultation were reported by the NSA.




Pension





Total costs exempted from cost-sharing (866) (1 750) (2 544)



Description of the cost item from NSA report Eurocontrol costs in outturn have been different to forecasts.



exemption to the cost-sharing mechanism The implementation of the approved Eurocontrol budget and its resulting differences between the planned and actual data are outside the control of the State and therefore are considered to be eligible as exemption to the cost-sharing arrangements. Although the approval of the Eurocontrol budget is a collective decision, under the control of Member States, its proportioning between the individual countries as well as the implementation of the budget cannot be deemed as being under the control of the respective States and entities.

Actions reported by the entity to manage the cost risk associated with this item Nothing reported. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

EUROCONTROL costs 11.937,000 12.009,000 12.277,000 11.070,730 10.258,631 9.732,863

Costs (+)/revenues (‐) from international agreements ‐866,270 ‐1.750,369 ‐2.544,137



ANSP/Entity: NSA/STATE

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐866 ‐1.750 ‐2.544



45



Summary findings for Greece 8.3


46

9 Hungary

Background 9.1

9.1.1 The report on costs exempt from cost-sharing was submitted by Hungary’s NSA Division for Hungarian DGCA on 2 June 2015. The amounts reported relate to national taxation law, change in tax rate that was anticipated but did not materialise, Eurocontrol costs and CEATS contribution reimbursement under international agreements item. No specific user consultation has been reported by the NSA.



Currency HUF HUF HUF

Pension


National taxation law (123 255) 369 207 355 015


International agreements (176 351) (182 572) (210 707)

Total costs exempted from cost-sharing (299 606) 186 635 144 308


National taxation law (1)

Description of the cost item from NSA report Hungary anticipated an increase to a 2.5% rate for local tax each year of the RP1, but the Parliament did not change the regulation and the rate remained at 2.0%.



At the time of the creation of Hungarian NPP, Hungary expected a 2.5% rate for local tax each year of the RP1. The basis of the local tax is the revenue of the ANSP, with some adjustment items from the “material” costs. Hungary expected a 2.5% rate for local tax each year of the RP1, but the Parliament did not change the regulation and the rate remained at 2.0%. The amounts claimed is the difference between the planned and actual tax rate multiplied by the same tax base taking into account the traffic effect. Thus Hungary reports the actually realized difference due to the uncontrollable factor (difference, which was due to the different than planned level of traffic were taken into account).

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐123.255 ‐134.326 ‐146.457


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate % 2,5% 2,5% 2,5% 2,0% 2,0% 2,0%

Determined tax base on which the tax is applied 25.360.997 27.453.499 28.056.832 25.360.997 27.453.499 28.056.832

Tax amount 634.025 686.337 701.421 507.220 549.070 561.137

Difference ‐126.805 ‐137.267 ‐140.284

Traffic 95,3% 97,5% 110,1%

Taking into account the traffic effect ‐123.255 ‐134.326 ‐146.457

Assumptions for non‐recoverable tax incurred for the provision of air navigation services (Amounts in nominal terms in '000 national currency)

ANSP/Entity: HungaroControl

47

The actual level of revenue (which is the tax base in this case) does not have any impact on the amount claimed. This approach is in line with the request of European Commission.

The RP1 Hungarian NPP was based on the latest available assumptions about the legal framework, in this case a higher rate of local tax. This assumption was based on statements from the Mayor of Budapest, who is a leading member of the governing party. According to the Charging regulation the unforeseen changes in national taxation law are eligible as cost exempt from cost risk sharing. The source of the assumption applied in the Hungarian NPP is statement from the Mayor of Budapest. The source for the actual local tax calculation is the Act on local tax 1990. C. 40. § c), 87/2012. (XI. 30.) Főv. Kgy. Rendelet 3§ (2). The claimed amounts are stemming from uncontrollable factors; the controllable changes of the actual cost were not taken into account during the calculation.

Actions reported by the entity to manage the cost risk associated with this item HungaroControl cannot influence the rate of local tax. This tax is applied to all business entities, this is not a special tax levied on the aviation/ANS sector.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.11 relating to “Unforeseen changes in national taxation law” and the definition of “change in law”.


National taxation law (2)

Description of the cost item from NSA report As HungaroControl anticipated the termination of the early retirement contribution there were no planned costs included in the RP1 NPP for 2013 and 2014.


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate % 13,00% 0,00% 0,00% 13,00% 13,00% 13,00%

Determined tax base on which the tax is applied 3.890.163 3.962.731 3.873.331 3.857.475

Tax amount 0 0 503.533 501.472




2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 503.533 501.472Total claimed in respect of national taxation law (RT 3.9)

48


At the time of planning for RP1, Hungary assumed - based on the relevant law in place - that the so-called early retirement scheme would be terminated at the end of 2012. This cost item relates to pension contributions for early retirement. The basis of this contribution is a % of the wages and salaries of ATCOs (and to less extent some other employees eligible for early retirement). The law was amended at the end of 2012, and the early retirement scheme was extended until 31.12.2014.

A 13% early retirement contribution on the wages and salaries of ATCOs related to en-route service provision was incurred in 2013 and 2014. There were no early retirement contribution planned for 2013 and 2014.

The relevant act was amended at the end of 2012, and the early retirement scheme was extended to 2013 and 2014. According to the Charging regulation the unforeseen changes in national taxation law are eligible as cost exempt from cost risk sharing.

The claimed amount is equal to the actual amount paid as an early retirement contribution.

Source of the initial assumption is the Act on the Termination of Early Retirement Pension Schemes, on Benefits Provided Before the Legal Age Limit and on Service Emoluments 2011. CLXVII. 7. § (1) c) which has been amended on 30th of December 2012.

Source for the underlying data is the detailed business planning database of the NPP.

Actions reported by the entity to manage the cost risk associated with this item The legal framework including the early retirement scheme is outside the control of HungaroControl. In addition this is not a choice from the ANSP to be included in the scheme, but it is a State, mandatory scheme.

PRB analysis The costs reported in 2013 and 2014 were unforeseen. The submission is not fully in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.11 relating to “Unforeseen changes in national taxation law”. The tax rate should be applied on the determined tax base and not the actual tax base. Nevertheless, applying this methodology would lead to costs exempt higher than the difference between the actual costs and the determined costs (and therefore unfavourable to airspace users), as explained in the following table:

000 HUF 2013 A 2014 A

Tax rate 13,00% 13,00%

Determined tax base on which the tax is applied 3 873 331 3 857 475

Tax amount 503 533 501 472

000 HUF 2013 2014

Tax rate 13,00% 13,00%

Determined tax base on which the tax is applied 3.890.163 3.962.731

Tax amount exempted if applied on the determined costs 505.721 515.155

Actual costs 503.533 501.472

Difference 2.188 13.683

49

This approach is not fully consistent with §2.4.1 of the draft guidance: “…the costs claimed for exemption should not be higher than the difference between the actual costs concerning the specific cost item and the determined costs for this specific item. …” Therefore, the approach followed by Hungary is in favour of airspace users, is deemed reasonable and acceptable.


International agreements (1)

Description of the cost item from NSA report The Eurocontrol costs stemming from a multilateral international agreement.



exemption to the cost-sharing mechanism Hungary determines its national cost-base in national currency (HUF) therefore an exchange rate has to be applied for cost items determined in EUR. There are two different factors which determine the actual amount, the Eurocontrol cost expressed in euro and the EUR/HUF exchange rate. Eurocontrol cost figures were defined by Eurocontrol. The volatility of the Hungarian currency was very high during the preparation of the Hungarian NPP and 2011 autumn figures showed that the Hungarian currency’s exchange rate was totally unpredictable and the level was quite high. The actual Eurocontrol cost base was multiplied by the actual EUR/HUF exchange rate to calculate the claim. The actual exchange rate was calculated taking into account the related Eurocontrol invoices for paying Eurocontrol contributions (the exchange rate at which the invoices were paid).

Based on 391/2013 EU Charging Regulation Article 14 2. (a) (v) unforeseen changes in costs or revenues stemming from international agreements are eligible. The difference between the planned and actual Eurocontrol cost figures is eligible and HungaroControl has neither impact on Eurocontrol actual cost base (especially on the applicable sharing key) nor on the actual EUR/HUF exchange rate.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

1.1 EUROCONTROL costs (Euro) 5.383 5.492 5.592 5.364 5.247 5.055

1.2 Exchange rate (EUR/HUF) 315 315 315 296 295 307

Costs (+)/revenues (‐) from international agreements 1.695.645 1.729.980 1.761.480 1.585.687 1.547.408 1.550.773




2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐109.958 ‐182.572 ‐210.707Total claimed in respect of international agreements (RT

3.11)

50

Actions reported by the entity to manage the cost risk associated with this item This change reduces the burden of airlines. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The revenues reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys are not referred to in the guidance – but as a principle seem out of the control of the entity.



Description of the cost item from NSA report Reimbursement of overpaid CEATS contributions to Eurocontrol.



exemption to the cost-sharing mechanism HungaroControl received a credit note from Eurocontrol about the reimbursement of parts of previous contributions related to CEATS. The reimbursed amount of contribution was calculated at the corresponding actual exchange rate (at which it was deducted from the Eurocontrol contribution). HungaroControl had no influence on the reimbursement of this amount.

Actions reported by the entity to manage the cost risk associated with this item This change reduces the burden of airlines.

000 HUF 2012 A 2013 A 2014 A

EUROCONTROL costs ('000 EUR) 5 383 5 492 5 592

Exchange rate (EUR/HUF) 315 315 315

EUROCONTROL cost ('000 HUF) 1 695 645 1 729 980 1 761 480

EUROCONTROL costs ('000 EUR) 5 364 5 247 5 055

Exchange rate (EUR/HUF) 296 295 307

EUROCONTROL cost ('000 HUF) 1 585 687 1 547 408 1 550 773

‐109 958 ‐182 572 ‐210 707Determined

Actual

Difference ('000HUF)

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

CEATS contribution reimbursement ‐66.393

Costs (+)/revenues (‐) from international agreements ‐66.393




2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐66.393



3.11)

51

Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The revenues reported in 2012 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes in costs or revenues stemming from international agreements


Summary findings for Hungary 9.3

9.3.1 Reimbursements of costs for 2012, 2013 and 2014 relating to local taxes reported in the national taxation law item are deemed to eligible.

9.3.2 Costs relating to early retirement contribution reported in the national taxation law item are deemed to be eligible for 2013 and 2014.


52

10 Ireland

Background 10.1

10.1.1 The report for costs exempt from cost-sharing was submitted by IAA (the NSA) on 3 June 2015. The amounts reported relate to Eurocontrol costs under the international agreements item. No specific comments from user consultation were reported by the NSA.




Pension




International agreements 52 (79) (841)

Total costs exempted from cost-sharing 52 (79) (841)



Description of the cost item from NSA report The NSA element of the en-route RP1 (and RP2) determined cost includes the Ireland’s share of the Eurocontrol Agency cost-base and is not subject to traffic risk sharing. The Performance Scheme classifies costs subject to international agreements, such as membership of Eurocontrol, as also exempt from the cost-sharing mechanism (i.e. costs are passed through). This is supported by the Draft Guidance on the treatment of cost exempt from cost-sharing generated by the SSC WG tasked with this issue.



exemption to the cost-sharing mechanism The NSA applied the Draft Guidance on the treatment of cost exempt from cost-sharing generated by the SSC WG tasked with this issue. Based on our application of this guidance, and our interpretation of the relevant legislation and regulations, we are satisfied that the variances arising from payments made to Eurocontrol are exempt from cost-sharing under the "International Agreements" definitions. The actual costs reported in 2012, 2013 and 2014 were unforeseen, insofar as the values paid differed from the forecast costs as provided by Eurocontrol. These variances arose from changes in the Eurocontrol budget and adjustment of the allocation keys. Both of these causation factors were deemed uncontrollable and unforeseen. In each year the NSA is satisfied that the actual amount paid was genuinely incurred, and our validation exercises support this assertion.

Actions reported by the entity to manage the cost risk associated with this item In the particular circumstances outlined above, there was no practical mitigating or limiting

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Eurocontrol Costs 7.543.000 7.589.000 7.758.000 7.594.593 7.510.470 6.916.640



ANSP/Entity: NSA

52 ‐79 ‐841Total claimed in respect of international agreements (RT

53

actions open to the NSA, ANSP or qualified entity concerned. PRB analysis

The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Ireland 10.3


54

11 Lithuania

Background 11.1

11.1.1 The report on costs exempt from cost-sharing was submitted by Lithuania’s CAA (the NSA) on 2 June 2015. The amounts reported relate to Eurocontrol costs under the international agreements item. No specific comments from user consultation were reported by the NSA.



Currency LTL LTL LTL

Pension




International agreements 115 382 248

Total costs exempted from cost-sharing 115 382 248



Description of the cost item from NSA report Article 10 of the Eurocontrol Convention describes how annual contributions of the Contracting Parties to the budget of Eurocontrol shall be determined for each financial year, in accordance to the formula: 30% of the contribution in proportion to the value of the GNP of the Contracting state and 70% of the contribution in proportion to the value of the route facility cost base of the contracting state. The latter to be used for the calculation shall be the cost base established in respect of the last year but one preceding the financial year concerned. PC/32 endorsed using GDP instead of GNP as published by IMF and final costs for the (n-2) year instead of forecast. Eurocontrol costs, (contribution to the budget of Eurocontrol) included in the determined en-route costs for RP1, represent Lithuania's contribution to the Agency. There were no other determined costs for RP1 with regard to international agreements.



exemption to the cost-sharing mechanism Eurocontrol Secretariat distributed the paper DR/APP/BUP of 24-05-2011 with the Eurocontrol budget 2010-2016, allocation of the contribution for the contracting parties for 2012-2016 based on the 2011 sharing keys. For Lithuania the sharing key was 0.2408%. Please refer to the Paper on Information by correspondence submitted by the Agency SCF/16-Action No 16/5 of 15-04-2011. These data were used for the NPP submission by 1 July 2011, further the NPP was not revised in cost-efficiency area as was in line with Union

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A





ANSP/Entity: CAA

115 382 248Total claimed in respect of international agreements (RT

3.11)

55

wide RP1 targets just updated providing additional information in January 2012 considering the comments received from PRB. Contribution to the Agency as provided in May: €’000s 1 212 (2012) €’000s 1 220 (2013) €’000s 1 247 (2014) Exchange rate used for RP1 as 1 EUR = 3.45061 LTL Determined costs in LTL: LTL’000s 4 182 (2012) LTL’000s 4 210 (2013) LTL’000s 4 303 (2014) Reference to the documents: see above.

Actual costs for RP1 are higher than determined due to higher actual Eurocontrol costs attributed to Lithuania. The allocation keys according to which the total actual Eurocontrol costs for all states were apportioned amongst all contracting states were based on their macroeconomic figures and multilateral route charges system costs generated by the Contracting Parties. Actual costs: €’000s 1245 (2012) €’000s 1330 (2013) €’000s 1318 (2014) Exchange rate used was the official fixed rate as 1 EUR = 3.4528 LTL determined for joining the Eurozone. Actual costs in LTL: LTL’000s 4 297 (2012); LTL’000s 4 591 (2013); LTL’000s 4 551 (2014).

Actions reported by the entity to manage the cost risk associated with this item Lithuania joined the Eurozone as from 1 January 2015 what will mitigate the control under the exchange rate for RP2. Active participation in governing bodies of Eurocontrol will give a positive impact in possible risk mitigation and control over its budget.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rates are not explicitly referred to in the guidance but as a principle seem out of the control of the entity.


Summary findings for Lithuania 11.3


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12 Netherlands

Background 12.1

12.1.1 The report on costs exempt from risk sharing was submitted by the Netherland’s Ministry of Infrastructure and Environment on 30 June 2015. The amounts reported relate to pensions, interest rates on loans and national taxation law items. No specific comments from user consultation were reported by the NSA although report was submitted for information purposes to the users participating in the SCM on 1 June 2015.

12.1.2 Total costs claimed for exemption from cost-sharing by factor/item:



Pension 2 992 1 514 4 191

Interest rates on loans (40) (131)

National taxation law 648 677 646




Note: the value of the cost items submitted in the Reporting Tables is different from the NSA report on cost-exempt. In the en-route Reporting Tables, costs reported in “National taxation law” are reported in the item “New cost item required by law” for 2012 and 2013 and in the “pension costs” item for 2014.


Pension (1)

Description of the cost item from NSA report Introduction of pension recovery premium by the external independent civil servant pension fund Pension Fund (Stichting ABP Pensioenfonds), resulting in an increase in the employer’s contribution to pension premiums (incl. Early retirement) from 15.8% (assumed in the PP) to 18.870% (2012), 19.905% (2013) and 18.735% (2014).


Units €’000s

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

13.752 14.004 14.774 16.289 18.441 17.786

13.752 14.004 14.774 16.289 18.441 17.786

954 954 966 961 978 977

Pensionable salary (in nominal terms in national currency)

Pension assumptions for the "Defined benefits" pension scheme

ANSP/Entity: LVNL

Total pension costs in respect of "Defined benefits" scheme

(in nominal terms in national currency)

‐ in respect of regular cash payments

‐ in respect of non‐recurring gap‐bridging cash payment

% Discount rate applied / predicted

Duration of the pension obligation at end of year

% Asset value growth assumed

Value of pension assets (in nominal terms in national

currency)

Value of pension liabilities (in nominal terms in national

currency)

Net funding surplus / gap (in nominal terms in national

currency)

Number of pensionable staff

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

1.607 2.506 1.884



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Pensions of LVNL employees are managed/controlled by the independent pension fund ABP. The pension scheme is based on a "defined benefit" system. Both participating organisations (employers) and the participants (employees) contribute to the pension fund by paying premiums. Both the amount of the premium and the sharing key between employers and employees are determined by ABP. LVNL pays its own employers' pension fund contribution and transfers the employees' premiums to the pension fund to ABP every month. Just after the submission of the performance plan on 30th June 2011, the pension regulations were amended and pension premiums were increased compared with the assumed pension premiums in the RP1 NPP. The pension regulations were amended with effect as of 2012. The following premiums were set by the ABP:

Algemeen Burgerlijk Pensioenfonds (ABP) is the pension fund in the Netherlands for employees in the government, public sector and education. The Stichting Pensioenfonds ABP is an independent body with its own Board of Trustees. Social partners, represented by employers and employees, control ABP. They act independently from the organizations they represent and are responsible for ABP’s performance. LVNL is only one of many organisations, whose employees are mandatory participants in this pension fund. LVNL does not have any direct influence on the pension system, pension and premium policy, etc. of ABP. The Pension Chamber of the Council for Public Sector Personnel Policy, in which employers and employees in the public sector and education are represented, decides on the content of the pension scheme, which ABP transposes into pension regulations. ABP is responsible with regard to the decision making on pension contributions/premiums, etc., for civil servants and equivalents. All participants in the pension fund have to comply with ABP’s decisions without having any influence on the premium development. LVNL is entitled to accommodate the pension arrangements of its employees (civil servants and equivalents) at the independent pension fund ABP. The pensions are based on the defined benefits principle.

Pension premium 2011 2012 2013 2014

Performance plan 15,800% 15,800% 15,800%

Pension premium 01‐01‐2012 to 01‐04‐2012 17,330%




2012 2013 2014

Pension costs (incl. early retirement) 16.289.068 18.441.404 17.785.567

Controllable: wage increase correction factor 1,0050 1,0188 1,0037

‐81.040 ‐340.301 ‐65.564

Controllable: correction number of fte ‐118.651 ‐452.550 ‐200.247

Pension costs adjusted for controllable elements 16.089.378 17.648.554 17.519.757

Pension costs budgeted in performance plan

and adjusted for controllable elements 13.748.090 14.003.857 14.774.309

Net uncontrollable effect pension costs 2.341.288 3.644.697 2.745.448

Cost risk en route allocation 68,63% 68,76% 68,64%

1.606.826 2.506.094 1.884.476

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Evidence and sources Annual reports LVNL 2012, 2013 and 2014 are audited and approved by external and independent auditor/accountant. Pension premiums are set by independent pension fund ABP, see also premiums at www.abp.nl. Uncontrollable cost computation audited and approved by NSA.

Actions reported by the entity to manage the cost risk associated with this item None; mitigation measures were not feasible due to the mandatory external character of pension premiums.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.6 and §5.7 relating to changes Unforeseen changes in national pensions law.


Pension (2)

Description of the cost item from NSA report The pension costs incurred with respect to the defined benefits scheme have increased in 2012, 2013 and 2014 compared to forecast values due to a number of accounting assumptions.


Units €’000s


According to LVNL’s accounting principles which are compliant to IFRS all staff provisions are revised every year. Several elements are being reviewed, such as life expectancy, discount rates and the staff numbers concerned. For the two major provisions (pre-pensions regional ANS and jubilees) this calculation is being done by an independent actuary. All provisions are reviewed by an external accountant.

Uncontrollable elements provisions 2012 2013 2014

Changed interest rates ‐92 ‐318 ‐80

Addition to provision

Pension effects 16

Release of provision

Life expectancy changes 75

Actuarial result

Interest and other elements 1.462 ‐749 2.387

Uncontrollable costs 1.385 ‐992 2.307

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

1.385 ‐992 2.307



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Annual reports 2012, 2013 and 2014 are audited and approved by an external accountant. Calculations made by external actuary. Interest rate used for present value calculations is based on iBoxx (AA-rated) Uncontrollable cost calculation is audited and approved by NSA. Interest rates were estimated to calculate the interest added to the provision year on. Actuary results, specific additions and releases were not budgeted because they are completely unpredictable and therefore impossible to budget. Interest rates were estimated to calculate the interest added to the provision year over year. Allocation to en-route 2012: 68.63%, with exception of FLNA regio (50%). Allocation to en-route 2013: 68.76%, with exception of FLNA regio (50%). Allocation to en-route 2014: 68.64%, with exception of FLNA regio (50%).

Actions reported by the entity to manage the cost risk associated with this item None; mitigation measures were not feasible due to mandatory character of the provision scheme

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The PRB acknowledges that the breakdown provided increases the transparency and provides valuable information for the analysis. The PRB also notes that a systematic and consistent treatment has been applied by the Netherlands over RP1. Based on the information provided, the PRB understands that those costs relate to an early retirement scheme resulting from a managerial decision from the ANSP. The PRB notes that those costs are not only driven by a change in interest rates but also resulting from assumptions about other parameters (mortality, etc.). According to the criteria laid down in Article 11a(8)(c) of the Charging Regulation 1794/2006 (see §1.4 above), only pension costs resulting from “unforeseen changes in national pension regulations” and “pension accounting regulations” are exempted from cost-sharing.

PRB findings Based on the criteria laid down in the Charging Regulation 1794/2006 and the legal clarification issued by the EC, this cost item is deemed not eligible for exemption.

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Description of the cost item from NSA report The actual interest rate and the interest paid on these loans are substantially below the interest rate and the budgeted interest costs in the performance plan.


Units €’000s


The interest rate is being determined by the capital market, in particular the interest rate on government bonds, and completely out of the control of LVNL. Percentage used to calculate the interest in 2013 in RP1 PP: 3.94%; Percentage used to calculate the interest in 2014 in RP1 PP: 3.94%. Allocation en-route 2013: 68.76%. Allocation en-route 2014: 68.64% for the loan taken in 2013 and 100% for the loans taken in 2014 are related exclusively to AAA-replacement, which is allocated 100% to en-route.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Loan 1 description:

Debt amount Loan 1 5.000 5.000 5.000 5.000

Interest rate % 3,94 3,94 1,13 1,13%

Interest amount 82 197 24 57

Loan 2 description:

Debt amount Loan 2 462 462

Interest rate % 3,94% 0,67%

Interest amount 12 2

Loan 3 description:

Debt amount Loan 3 2.215 2.215

Interest rate % 3,94% 2,28%

Interest amount 58 34

Total debt amount (national currency) for the charging zone 0 5.000 5.000 0 5.000 7.677

Average weighted interest rate % (Charging Regulations T1 ‐ 3.7)

Interest amount (national currency) 0 82 267 0 24 92



ANSP/Entity: XXX

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 ‐40 ‐131

Total costs exempt from cost‐sharing claimed in respect of interest rates on loans

Total claimed in respect of interest rates on loans (RT 3.8)

2012 2013 2014 2014 2014

Loan 5.000.000 5.000.000 462.000 2.215.000

Start date 31‐07‐2013 31‐07‐2013 30‐04‐2014 30‐04‐2014

# months active in 2013 5 12 8 8

Interest rate performance plan RP1 3,94% 3,94% 3,94% 3,94%

Actual interest rate 1,13% 1,13% 0,67% 2,28%

Uncontrollable costs ‐58.542 ‐140.500 ‐10.072 ‐24.513

Cost risk en route allocation 68,76% ‐40.253 ‐96.608

Loans taken in 2014 exclusively for en route

iCAS investment ‐10.072 ‐24.513

Total effect significant change in interest ‐40.253 ‐131.192

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Evidence and sources Annual reports 2012, 2013 and 2014 audited and approved by external auditor/accountant. Loan agreement LVNL-Ministry of Finance. Uncontrollable cost calculation audited and approved by NSA.

Actions reported by the entity to manage the cost risk associated with this item LVNL arranged a funding agreement with the government in order to secure the funding of business operations and capital investments. The interest rate in itself cannot be managed actively by LVNL and is the result of developments on the capital market. However, LVNL manages the amount of funding needed by an active cash flow management. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.9 relating to “Significant changes in interest rates on loans”.



Description of the cost item from NSA report Unforeseen changes in social security regulations and employer contributions (health insurance, unemployment, disability and reintegration). Social security premiums were increased with respect to the assumed premiums in the PP.


Units €’000s The justification from NSA report on why the cost item is considered to be eligible for

exemption to the cost-sharing mechanism Dutch Government is the decision taking entity on tax issues and social premiums are part of the tax system in the Netherlands; ANSPs have to comply. Two amendments implemented by the Government applied as from 1st January 2012 are relevant. Part of the fiscal package 2012 and later years, was announced by the Government in autumn 2012. First the Dutch government decided to introduce a crisis levy of 16% on all incomes > € 150 000 to be paid by employers.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

648 677 646

Total costs exempt from cost‐sharing claimed in respect of unforeseen changes in national taxation law


16% Crisis fiscal surcharge on higher incomes, to be paid by employer

2012 2013 2014

Tax penalty 16% on incomes > K€ 150 400.690 334.523

Cost risk allocation 68,63% 68,76%

274.994 230.018

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Second, the Dutch government decided to adjust premiums for social security provisions. In these cases LVNL has no influence on the decision making. The annual report of LVNL has been approved by an independent auditor.

Note from NSA report: In 2012 the uncontrollable costs in respect of the social insurance premiums (other

Premium sickness assurance law 2012 Performance plan Actuals Cost risk

Maximum premium income ZVW 35.235 50.064

FTEs performance plan 954 954

Total maximum premium income ZVW 33.614.190 47.761.056

Social insurance premium 7,46% 7,10%

2.507.619 3.391.035 883.416

Cost risk en route allocation 2012 68,63% 606.289

Premiums other employees' assurances 2012 Performance plan Actuals Cost risk

Maximum premium income 49.000 50.064

FTE's performance plan 954 954

Total maximum premium income 46.746.000 47.761.056


3.487.252 3.147.454 ‐339.798

Cost risk en route allocation 2012 68,63% ‐233.203

Total cost risk 2012 373.085






2.524.426 3.759.817 1.235.391







3.510.625 2.925.380 ‐585.245








2.556.179 3.724.944 1.168.765







3.554.783 3.327.617 ‐227.166



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employees' assurances) were calculated with the wrong premium: 7.100% instead of 6.030%. This resulted in an error of €’000s 167 in the 2012 uncontrollable cost report which is adjusted in the uncontrollable cost calculation of 2013.

Actions reported by the entity to manage the cost risk associated with this item None; mitigation measures were not feasible due to the fiscal character of the cost increases.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.11 relating to “unforeseen changes in national taxation law”.


Summary findings for Netherlands 12.3

12.3.1 The pension costs due the introduction of pension recovery premium by the external independent civil servant pension fund (Stichting ABP Pensioenfonds) are deemed to be eligible for 2012, 2013 and 2014.

12.3.2 The pension costs item due to, inter alia, a change in financial market conditions is deemed not to be eligible for 2012, 2013 and 2014 as it is resulting from circumstances that are not included in Article 11a(8)(c) of the Charging Regulation 1794/2006, applicable for RP1.

12.3.3 Reimbursements of costs relating to interest rates on loans are deemed to be eligible for 2013 and 2014.

12.3.4 Costs relating to national taxation law are deemed to be eligible for 2012, 2013 and 2014.

12.3.5 It is noted that no Eurocontrol costs have been reported under the item “unforeseen changes in costs or revenues stemming from international agreements” by the Netherlands in contradiction with §5.12 of the draft guidance.

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13 Norway

Background 13.1

13.1.1 The report on costs exempt from cost-sharing was submitted by Norway’s CAA on 1 June 2015. The amounts reported relate to Eurocontrol costs under international agreements item. No specific comments from user consultation were reported by the NSA.



Currency NOK NOK NOK

Pension




International agreements (2 360) 884 5 740

Total costs exempted from cost-sharing (2 360) 884 5 740



Description of the cost item from NSA report Unforeseen changes in costs stemming from international agreements beyond the control of the entity.



Unforeseen changes in costs stemming from international agreements beyond the control of the entity. Differences between actual and determined Eurocontrol costs are considered as uncontrollable a total of NOK’000s 4 264 in RP1 carried over to RP2.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Eurocontrol costs (KNOK) 65.077 66.398 67.603 62.717 67.282 73.343




ANSP/Entity: CAA

‐2.360 884 5.740Total claimed in respect of international agreements (RT

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Actions reported by the entity to manage the cost risk associated with this item

Nothing reported. PRB analysis

The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rates are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Norway 13.3


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14 Poland

Background 14.1

14.1.1 The report on costs exempt from cost-sharing was submitted by Poland’s CAA on 29 May 2015. The amounts reported relate to Eurocontrol costs under international agreements item. Poland held a consultation meeting with air navigation charges for 2016 on 12 May 2015 where costs exempt for RP1 were discussed. The only comment received form users concerned some clarifications on the timing of the EC decision on costs exempt.



Currency PLN PLN PLN

Pension








Description of the cost item from NSA report The Eurocontrol costs stemming from multilateral international agreement.



exemption to the cost-sharing mechanism As mentioned in point 2.4, parameters for risk-sharing and incentives of the Polish NPP for RP1, any unforeseen changes in costs or revenues stemming from international bilateral or multilateral agreements concluded by Poland, including possible new costs that will have to be incurred by the entities covered by this Plan in accordance with these agreements, will be regarded as uncontrollable costs and will not be subject to the cost-risk mechanism as described in Article 11a of the Amended Regulation No 1794/2006. With regard to these costs any difference between actual costs and determined costs shall be passed on or returned to airspace users through a carry-over to RP2. Apart from Eurocontrol costs, there were no other determined costs for RP1 with regard to international agreements. Eurocontrol costs are treated as costs stemming from international agreement according to the content of the NPP for RP1 for Poland, which was approved by

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the EC. Eurocontrol costs included in the determined ER costs for RP1 represent the amount of Polish contribution to the budget (cost base allocated to Poland) of the Agency that is based on the following numbers: - total budget of the Agency that was communicated by the Eurocontrol Central Route Charges Office to the Enlarged Committee Members on 24.05.2011; - percentage share for Poland that was communicated by the Agency in October 2011 (1.933%). In order to present the Eurocontrol costs in PLN (national currency for Poland) in en-route Reporting Tables, which were a part of NPP for RP1 for Poland, for years 2012-2014 the exchange rate 3.8 was used for each year (exchange rate values forecasted for the period 2012-2014 took into account forecasts published by the main financial institutions in Poland). The nature of the agreement signed between Eurocontrol and States, including Poland, which refers to the above mentioned Eurocontrol costs, is described in the multilateral agreement relating to Route Charges (the text of the agreement is available at www.eurocontrol.int/sites/default/files/article/attachments/multilateral-agreement-relating-to-route-charges.pdf). The legal basis for including Eurocontrol costs in ER charges’ cost base is also Article 15 of Regulation no 550/2004/EC and Article 5.2.c of amended Regulation No 1794/2006.

The differences in Eurocontrol costs were unforeseeable at the time when the NPP for RP1 was drafted. In NPP for RP1 Poland used the latest estimates available at the time when the plan was drafted. At that time it was not possible to foresee the evolution of macroeconomic environment of all States, as well as its impact on Poland’s share in total Eurocontrol budget. The same is applicable to actual ANS costs of all Eurocontrol States. As calculation of State’s contribution to Eurocontrol budget is based on macroeconomic criteria as well as country’s share of en-route costs in total en-route costs of all States, the amount resulting for Poland is beyond control of Polish ANSPs or NSA/Member State. Also as the Eurocontrol budget is approved jointly by all the States, including those not covered by the performance scheme and determined costs method, Poland’s influence on this amount is very limited. The same concerns exchange rate which has a direct impact on the level of Eurocontrol costs in the Polish cost base and which is beyond control of accountable entities. For RP1 it has been accepted by the European Commission that Eurocontrol costs can be regarded as uncontrollable.

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Actions reported by the entity to manage the cost risk associated with this item Poland’s ability to manage these costs is very limited. It results from the following factors: - no direct impact on the amount of Eurocontrol costs allocated to the Polish cost base (as the share is based on macroeconomic figures and ANS costs of other States); - no influence of accountable entities on the level of exchange rates. Thus, it is difficult to take actions, which can reduce the probability of occurrence of these costs in the future. However in order to limit the risk, in the process of preparation of the PP for RP2 (part relating to Poland), the Polish CAA assessed the exchange rate and assumed the one which seems the most likely to occur in RP2. The CAA also actively voices its position in Eurocontrol governing bodies (SCF, PC) on discussion on Agency Budget for years of RP2 that the budget should not exceed amount agreed before RP2 which is the basis for calculation of determined costs for RP2. Beyond those mentioned above, no further actions are possible to be taken to mitigate the risk related to changes in Eurocontrol contribution.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rates are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Poland 14.3


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15 Portugal

Background 15.1

15.1.1 The report on costs exempt from cost-sharing was submitted by Portugal’s Autoridade Nacional de Aviação Civil - ANAC (the NSA) on 1 June 2015. The amounts reported relate to pension costs, new cost items required by law and Eurocontrol costs under the international agreements item. No specific comments from user consultation were reported by the NSA.




Pension 21 201 3 122 1 012



New cost item required by law (3 839) 2 972 2 972




Pension

Description of the cost item from NSA report Pensions costs, both cash contributions and costs in respect to the gap between Defined Benefits pensions schemes liabilities and assets, have been higher than forecast leading to a costs exempt claim. There are two defined benefits schemes: NAV SINCTA for ATCOs employed before 30.09.2007 and NAV COMPLEMENTOS for non-ATCOs who retired before March 2012. A Defined Contribution scheme was established for ATCOs and non ATCO new joiners after 30.09.2007. In addition NAV are liable for covering 60% of Social Security payments for retired ATCOs between 57 and 66 years old under the NAV / CTA-MT scheme.



During the planning for RP1, the actuaries used a number of assumptions about the Defined Benefits plans and NAV/ CTA MT social security payments requirements. These included assumptions – detailed in the justification – for the mortality rate, disability table, long-term inflation rate, total pension growth rate, official pension growth rate, discount rate, asset

70

growth and duration of the pension obligation. NAV Portugal has the following liabilities for post-employment benefits, all ruled by collective agreements signed with the Unions:

Defined benefit plans NAV SINCTA Pension Fund For ATCO employed before 30th September 2007, who are entitled to old-age, disability and surviving dependant’s pension supplements, calculated as the difference between the value of the pension that, in net terms, is equal to the net salary that the pensioner would receive if still working in the same position he/she had when retiring and the amount paid by Social Security or CGA (civil servants), as per explanation on following ages; NAV COMPLEMENTOS Pension Fund Non-ATCO employees, who were already retired or suitable for retirement on the date of establishment of the new defined contribution plans (March 2012), are also entitled to old-age, disability and surviving dependant’s pension supplements, calculated as described on following pages.

Defined contribution plans For ATCO employed after 30th September 2007, the company contributes with 8.17% of the monthly salary to the pension plan; for non-ATCO employees the company contributes with 5% of the monthly salary. These two plans are founded in individual employee accounts, managed by the same company that manages the defined benefit pension plans.

Other liabilities NAV/CTA-MT: covering 60% of old-age pensions paid by Social Security (non-civil servants) to retired ATCO ageing between 57 and 66 years (the normal age for access to old-age retirement). The two pension funds – NAV SINCTA and NAV COMPLEMENTOS – are financed by consistent reinsurance policies, recognised as plan assets under IAS19, and managed by FUTURO-Sociedade Gestorade Fundos de Pensões, S.A. – part of the Montepio Group, the largest mutual association and one of the largest financial institutions in the country – under the supervision of Instituto de Seguros de Portugal, the Portuguese Regulator for the insurance activity. Investment policies, which are part of the Pension Funds management contracts, have been defined by NAV Portugal (with the support of an external advisor for pension funds – Mercer) and Futuro SA. Actuarial valuations are performed by an independent actuary. The strategy for allocation of assets is established based on models, aiming to adapt the investments to the responsibilities of the pension plans, reason why the characteristics of the populations concerned, the duration of the liabilities –namely the distribution between liabilities with participants and liabilities with beneficiaries of the Funds - and the funding levels of the inherent responsibilities, were taken into account. In addition to the restrictions imposed by the legislation in force at each moment, the portfolio management is subject to other restrictions and prudential limits as regards the trading markets, applications expressed in currencies other than the Euro, the rating of the bond exposure and the investments in non-harmonized collective investment bodies.

71

The main sources for costs exempt from cost-sharing in RP1 are related with external factors, deemed outside the control of NAV Portugal, namely:

Discount rate; Normal age for retirement; Reinstatement of 2010 salary levels.

These are the details per year:

2012: Reduction in discount rate from 5.5% to 4.0 linked to market conditions. 2013: Further reduction in discount rate from 4.0% to 3.75% linked to market

conditions and postponement of retirement age to 66; also the reinstatement of 2010 salary levels for pensions calculation; allied with a new framework for pensions introduced in Portugal.

2014: Further reduction in discount rate from 3.75% to 2.50% continued reinstatement of 2010 salary levels as basis of pension calculations.

Unit €’000s National pension regulations: • Law No. 60/2005, December 29th - Defines the convergence mechanisms of the public social protection scheme with the social security general scheme, regarding retirement conditions and pension calculation; • Decree-Law No. 187/2007, May 10th – Protection scheme for old age and disability events in the social security general scheme (last update: December 31st, 2013); • Decree-Law No. 155/2009, July 9th – Establishes the conditions and financing for ATCO

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early retirement (non-civil servants); • Law No. 5/2009, January 29th - Defines the age limit for air traffic controllers operational service. Accounting regulations: • Portuguese Accounting and Financial Reporting Standard No. 28, which is based on International Accounting Standard IAS 19 - Employee Benefits.

Actions reported by the entity to manage the cost risk associated with this item The impacts of higher liabilities were in part mitigated by higher asset growth than forecast. Moreover the new framework for pensions introduced from 2013 was also used as new joiners now join a Defined Contributions scheme and the two Defined Benefits schemes are closed.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. Pension costs are resulting mainly from “unforeseen market conditions”, which are not included in the criteria laid down in Article 11a(8)(c) of the Charging Regulation 1794/2006 (see §1.4 above) and hence, following the advice of the Commission’s legal service, are not eligible for exemption during RP1.


New cost items required by law

Description of the cost item from NSA report Portugal had imposed a number of salary and benefits restrictions as a part of its actions in support of the “European Support Mechanism”, the RP1 PP used certain assumptions which were in practice amended by the introduction of State laws in 2011, 2012 and 2013.



The submission relates to two categories of costs assumption: the Christmas allowance was included in Determined Costs, but by law was not paid

in 2012; the reinstatement of 2010 salary levels: the reduction below these levels was

assumed in the Determined Costs to persist over the full 2012-2014 period. However by law the 2010 level was reinstated in both 2013 and 2014.

The justification is that the costs are outside the control of the entity, as they are the result of Government decisions designed to control the budget deficit and foreign debt.

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Evidence and sources:

Law No. 64-B/2011, December 30th - State Budget Law for 2012; Law No. 55-A/2010, December 31st - State Budget Law for 2011 (salary

reduction); Law No. 66-B/2012, December 31st - State Budget Law for 2013 (reinstatement of

salary levels). Actions reported by the entity to manage the cost risk associated with this item

No actions were available as related to Government budgetary policy. PRB analysis

The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.10 relating to new cost items not covered in the performance plan, but required by law.



Description of the cost item from NSA report The assumptions were based on latest available Eurocontrol budget and allocation a communicated in 2011. Actual costs have been lower than forecasted.


Units €’000s


The Eurocontrol costs are stemming from a multilateral international agreement the forecast and actuals are outside the control of an individual Member State - Portugal. Thus these costs are considered as uncontrollable. The amounts claimed as uncontrollable are calculated as a difference between the actual and forecast costs.

Actions reported by the entity to manage the cost risk associated with this item Measures taken by all Member States at the level of Agency’s decision making structures, but Portugal identifies that on their own they have limited influence. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen.

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The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget.

PRB findings No further action required.

Summary findings for Portugal 15.3

15.3.1 The pension costs item due to unforeseen market conditions is deemed not to be eligible for 2012, 2013 and 2014 as it is resulting from circumstances that are not included in Article 11a(8)(c) of the Charging Regulation 1794/2006, applicable for RP1.

15.3.2 Cost and reimbursements relating to new costs required by law and international agreements are deemed to be eligible for 2012, 2013 and 2014.

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16 Romania

Background 16.1

16.1.1 The report on costs exempt from cost-sharing was submitted by Romania’s Civil Aeronautical Authority (the NSA) on 29 May 2015. The amounts reported relate to Eurocontrol costs under the international agreements items. No specific comments from user consultation were reported by the NSA.



Currency RON RON RON

Pension




International agreements 4 485 950 4 093

Total costs exempted from cost-sharing 4 485 950 4 093



Description of the cost item from NSA report The Eurocontrol costs stemming from a multilateral international agreement.



exemption to the cost-sharing mechanism This cost item has the following properties: for the whole Eurocontrol area – the total costs for this item cannot exceed the

determined costs as there is no possibility for Eurocontrol to exceed its budget. Therefore carry overs are, as a whole (for the sum of the Eurocontrol States), in the benefit of the airspace users;

for individual states the actual costs for this item are evolving due to the following factors outside the control of the states/NSAs/providers:

- sharing keys between the states; - evolution of the exchange rate.

Forecast costs: 2012: €’000s 8 365 x 4.09484 = RON’000s 34 253.33 (April 2011 exchange rate applied) 2013: €’000s 8 416 x 4.09484 = RON’000s 34 462.17 (April 2011 exchange rate applied) 2014: €’000s 8 603 x 4.09484 = RON’000s 35 227.91 (April 2011 exchange rate applied)

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


Costs (+)/revenues (‐) from international agreements 4.485 950 4.093



ANSP/Entity: ROMATSA

76

Actual costs: 2012: €’000s 8 697,357 x 4.45407 = RON’000s 38 738.63 (average 2012 exchange rate applied) 2013: €’000s 8 019,018 x 4.41604 = RON’000s 35 412.30 (average 2013 exchange rate applied) 2014: €’000s 8 853,805 x 4.44114 = RON’000s 39 320.99 (average 2014 exchange rate applied) Carry over: 2012: 38 738.63 - 34 253.33 = RON’000s 4 485.30 2013: 35 412.30 - 34 462.17 = RON’000s 950.13 2014: 39 320.99 - 35 227.91 = RON’000s 4 093.08 For individual states the actual costs for this item are evolving due to the following factors outside the control of the states/NSAs/providers:

sharing keys between the states; evolution of the exchange rate. Actions reported by the entity to manage the cost risk associated with this item

Through the members in the Standing Committee of Finance, the Provisional Council and the Commission, Romania has insured that the total budget and cost base figures for Eurocontrol for each year are not higher than the determined costs. The table below show the determined, budgeted and actual Eurocontrol costs (cost base) for 2012, 2013 and 2014:

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rates are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Romania 16.3


kEUR

2012 2013 2014

Determined costs (cost-base, total allstates)*

503.269 506.320 517.593

Budgeted costs (cost base, total allstates)*

502.847 502.215 507.506

Actual cots (cost base, total all states)* 501.029 501.032 505.787

Economy to be carried over (all states)* 2.240 5.288 11.666

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17 Slovakia

Background 17.1

17.1.1 The report on costs exempt from cost-sharing was submitted by Slovakia’s Transport Authority (the NSA) on 9 June 2015. The amounts reported relate to interest rates on loans and Eurocontrol costs under the international agreements item. No specific comments from user consultation were reported by the NSA.




Pension

Interest rates on loans (425) (821) (525)



International agreements (12) (63) 23

Total costs exempted from cost-sharing (437) (884) (502)



Description of the cost item from NSA report Interest rates on loans have been lower than forecast leading to a suggested reimbursement to users.



During the planning for RP1 the interest rate was expected to be 7% taking into account the financial market situation at the time. Later, during negotiations with banks, the actual interest rate was agreed in contract at a lower level, but not fixed (margin + EURIBOR). The considerable difference between expectations and the actual interest rate agreed with banks

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐425 ‐821 ‐525

Total costs exempt from cost‐sharing claimed in respect of interest rates on loans


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Loan 1 description:

Debt amount Loan 1 24.759 22.854 20.315 25.372 23.446 16.924

Interest rate % 7% 7% 7% 2% 2% 2%

Interest amount 867 1.600 1.422 173 472 387


Average weighted interest rate % (Charging Regulations T1 ‐ 3.7) 7% 7% 7% 2% 2% 0%

Interest amount (national currency) 867 1.600 1.422 173 472 387



ANSP/Entity: LPS

Loan for the acquisition of new administrative‐operational building.

78

was a consequence of the radical change to the macroeconomic situation in Europe, which is beyond the control of the ANSP.

Actions reported by the entity to manage the cost risk associated with this item Not applicable. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.9 relating to “Significant changes in interest rates on loans”.



Description of the cost item from NSA report The assumptions were based on the latest available Eurocontrol budget when preparing the RP1 PP. The same principles and data sources apply to the presentation of actual data.


item/entry 2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

equity 55.932.111 € 55.096.370 € 59.318.570 € 55.932.111 € 55.096.370 € 66.203.762 €

debt 11.197.353 € 20.362.351 € 15.165.547 € 11.197.353 € 20.362.351 € 16.925.834 €

equity weight 0,83 0,73 0,79 0,83 0,73 0,80

debt weight 0,17 0,27 0,20 0,17 0,27 0,20

income tax 23,0% 19,0% 19,0% 23,0% 19,0% 0,19

risk free rate 4,2% 4,2% 4,2% 4,2% 4,2% 4,2%

equity beta 0,50 0,50 0,50 0,50 0,50 0,5

relevered beta 0,60 0,68 0,63 0,60 0,68 0,63

market risk premium 5,0% 5,0% 5,0% 5,0% 5,0% 5%

return on equity 7,2% 7,6% 7,5% 7,2% 7,6% 7,5%

weighted avg. interest rate 7,0% 7,0% 7,0% 2,0% 2,0% 2,3%

return on debt (after tax) 5,4% 5,7% 5,7% 1,5% 1,5% 1,8%

pre tax WACC 7,2% 7,5% 7,4% 6,3% 6,1% 6,4%

NBV fixed assets 44.508.106 € 53.030.671 € 50.798.351 € 44.508.106 € 53.030.671 € 50.798.351 €

adjustments total assets 0 € 0 € 0 € 0 € 0 € 0 €

net current assets 6.218.483 € 7.303.488 € 3.949.061 € 6.218.483 € 7.303.488 € 3.949.061 €

asset base 50.726.589 € 60.334.159 € 54.747.412 € 50.726.589 € 60.334.159 € 54.747.412 €

cost of capital 3.639.825 € 4.502.663 € 4.034.333 € 3.215.065 € 3.681.936 € 3.509.042 €

difference ‐424.760 € ‐820.727 € ‐525.292 €

To set a net amount of uncontrollable costs with regard to different interest rates (forecast vs actual) the cost of capital is calculated below with all other

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

EUROCONTROL COSTS 3.224 3.289 3.349 3.212 3.226 3.372




ANSP/Entity: NSA

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐12 ‐63 23



3.11)

79


The Eurocontrol costs result from a multilateral international agreement and Slovakia cannot fully influence the actual level of spending. Thus these costs are considered as uncontrollable. The amounts claimed as uncontrollable are calculated as a difference between forecast and actual costs.

Actions reported by the entity to manage the cost risk associated with this item Not applicable.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget.


Summary findings for Slovakia 17.3

17.3.1 Costs and reimbursements relating to interest rate on loans and international agreements are deemed to be eligible for 2012, 2013 and 2014.

2012 2013 2014

forecast3.224.000 € 3.289.000 € 3.349.000 €

actual 3.212.095 € 3.225.644 € 3.372.083 €

difference ‐11.905 € ‐63.356 € 23.083 €

80

18 Slovenia

Background 18.1

18.1.1 The report on costs exempt from cost-sharing was submitted by Slovenia’s acting Director on 29 May 2015. The total amount claimed covers Eurocontrol costs under the international agreements item. No specific comments from user consultation were reported by the NSA.




Pension




International agreements (6) 43 (106)


Note: the signs used in the NSA report (positive means reimbursement to users) are different from those used in this report. The signs have been modified for consistency purposes.



Description of the cost item from NSA report Eurocontrol contribution.



exemption to the cost-sharing mechanism All data taken from Slovenia en-route cost base, which are publicly available.

Actions reported by the entity to manage the cost risk associated with this item Nothing reported.



2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

EUROCONTROL contribution 1.747 1.783 1.815 1.741 1.826 1.709

Costs (+)/revenues (‐) from international agreements ‐6 43 ‐106



ANSP/Entity: SLOVENIA

81

Summary findings for Slovenia 18.3


82

19 Sweden

Background 19.1

19.1.1 The report on costs exempt from cost-sharing was submitted by Sweden’s NSA the Swedish Transport Agency on 1 June 2015. The amounts reported relate to pensions, new cost item required by law and Eurocontrol costs under the international agreements item.

19.1.2 The following comment from users is provided in the NSA report: “After the consultation the Airspace users asked for further information concerning LFV's pension cost due to the fact that the amount presented on the consultation did not correspond to the amount in the annual report. The Airport users therefore urge the STA to audit the numbers that LFV have reported as exempted cost related to the pension cost for 2014.”



Currency SEK SEK SEK

Pension 287 119 24 177 (256 606)



New cost item required by law 1 165 986 917

International agreements (13 048) (17 672) 60

Total costs exempted from cost-sharing 275 236 7 490 (255 629)


Pension (1)

Description of the cost item from NSA report The actuarial costs of the LFV Defined Benefits pension scheme were much higher than predicted in the National Performance Plan.


Units SEK‘000s


According to the Commission implementing regulation (EU) No 391/2013 cost-sharing arrangements shall not be applied regarding cost for which ANSP´s, Member states or qualified entities have taken reasonable and identifiable steps to manage but which may be deemed to be outside their control due to the following reasons: unforeseen changes in

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

310.486 326.411 323.553 581.240 266.958 295.700

1,3% 1,5% 1,7% 0,4% 0,5% 0,5%

5.113.000 5.494.000 5.848.000 4.027.000 4.411.000 4.334.000

562.232 580.333 576.033 532.598 471.985 541.024


ANSP/Entity: LFV










Number of pensionable staff Pensionable salary (in nominal terms in national currency)

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national pensions law, pension accounting law or pension costs resulting from unforeseen financial market conditions. As stated in the FAB PPDK-SE FAB for RP1 LFV claimed that pension cost increases/decreases related to discount rate changes as an uncontrollable cost. As changes in these rates are out of LFVs control and have a significant impact on LFVs pension costs. As LFV is obliged to have a pension liability at fair value for each year end, SPV calculates the value each state enterprise needs to have in their financial accounts at year end. All pension funding gaps need to be closed immediately. The real interest (discount) rate affects the calculated value of the pension liability. A low interest rate increases the obligated liability and vice versa. In the table provided above we have shown the different interest rates presented in the PP and actuals/forecast and the calculated debt at each interest rate and year end. The difference between these two liability levels depends on the different interest rates and is assessed as uncontrollable. Pensions for LFV-staff are based on a pension agreement for personnel employed by the state (PA03). The pension system is based on a defined benefits system. As a “state enterprise”, LFV has to account for the pensions liability in the balance sheet based on principles decided by The Swedish Pensions Agency (SPV). The annual changes in the liability and cash costs are affected by a number of circumstances that LFV cannot control; for example inflation, forecast interest rates, and expected average lifetimes. The forecast interest rate, which is one of the main components in calculating the pension liability, is decided annually by SPV on the basis of the development of market interest rates. There is an investigation ongoing within the state regarding the possibility of changing the way that pensions are handled for all state enterprises in Sweden. The proposed change would exclude the pensions assets and liabilities from the balance sheet and transfer to a fund administered by SPV. No decision has so far been made. LFVs pension costs in the PP and actuals are based on calculations made by SPV. Since the basis for pension liabilities and cash costs is decided by SPV and is depending on the development of market interest rates, inflation etc. it is an “uncontrollable” cost for LFV and variations compared to the plan will be recoverable. This implies that the final costs can be lower or higher than estimated. The cost allocation between en-route and terminal is decided by the Swedish NSA Transportstyrelsen. The pension costs are allocated according to principles decided for each cost centre (TWR, ACC etc.). The aggregated en-route allocation in the planning of RP1 was 75.5%. The actual aggregated en-route allocation for 2012 was 74.45% and 77.5% for 2013. The uncontrollable cost as calculated by the SPV amounts to SEK’000s 407.6 in 2012 and SEK’000s 143.5 in 2013 based on the change in interest and inflation. LFV has however also had other controllable factors influencing the pension costs meaning that the actual cost increase in 2012 amounts to SEK’000s 287.1, SEK’000s 24.1 in 2013 and SEK’000s -256.6 in 2014. In the planning for RP1 interest rates were forecast to increase as stated in the table above. Actual RP1 interest rates have dropped significantly due to the financial crises in Europe. See actual rates in table above.

Actions reported by the entity to manage the cost risk associated with this item LFV is working towards a solution to pay pension premiums instead of having the pension liability on its balance sheet. This would make the costs more predictable. In this event they

84

would not have big funding gaps to close immediately if interest rates change significantly. However, this is a decision for the Government and the earliest possible date for a change of the financing system is at the year end of 2015. It would still be a Defined Benefit Scheme.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The pension costs seem to be driven not only due to a change in interest rates but also resulting from other “controllable parameters”. Pension costs are resulting mainly from “unforeseen market conditions”, which are not included in the criteria laid down in Article 11a(8)(c) of the Charging Regulation 1794/2006 (see §1.4 above) and hence, following the advice of the Commission’s legal service, is not eligible for exemption during RP1. Note: as mentioned in 1.7.2, with regards to the 2014 costs, the PRB took a symmetrical and consistent approach in its analysis that lead it to decline amounts in favour of the users.


Pension (2)

Description of the cost item from NSA report The actuarial costs of the Swedish Maritime Association Defined Benefits pensions schemes were much higher than predicted in the National Performance Plan.


Units SEK


The Swedish Maritime Administration’s (SjöV) Pension Scheme is to the largest extent a Defined Benefit Scheme. Pensions for SjöV-staff are based on a pension agreement for personnel employed by the state. The pension system is based on defined benefits. As a “state enterprise”, SjöV has to

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 150.326 81.513 235.235 88.813 108.206

1,3 1,3 1,3 0,4 0,4 0,5

not reported not reported 2.614.992 2.587.840 2.602.518 2.567.677

not reported not reported 568.229 495.150 505.648 598.249Pensionable salary (in nominal terms in national currency)


ANSP/Entity: SjöV









currency)


currency)


currency)


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

188 189 166



85

account for the pensions debt in the balance sheet based on principles decided by The Swedish Pensions Agency. The annual changes in the liabilities and cash costs are affected by a number of parameters that SjöV cannot control; for example inflation, forecast interest rates, and expected average lifetimes. The forecast interest rate, which is one of the main components in calculating the pension liability, is decided annually by The Swedish Pensions Agency on basis of the development of market interest rates. It is noteworthy that when preparing information for RP1 SjöV wasn't aware of the possibility to report uncontrollable costs (In this case related to the changes in pensions costs and the impact of changes to real interest rates). This was something that came to their attention in autumn 2013. The costs items reported should be included because SMA has no possibility to effect the interest rate that is used when calculating the pension costs and liability. The determined costs are calculated and taken from Sweden’s official "Three year plan". From the three year plan they take the total costs for the function "Sea and Air rescue" and adjusted the costs for currency effects. To show costs related to air rescue and commercial aviation SjöV use the result that was reported in an assignment from the government called "Förslag till finansieringsmodell för sjö-och flygräddningstjänst". The result was that 16,16% relates to commercial aviation. The actual costs are calculated at a similar way as the determined costs. But to get the actual figures we look in our business system and take out the actual figures for the "Sea and Air rescue" function. After gathering the total figures they then do an allocation of costs using the agreed allocation key and report the actual figures. 2012 A - Calculation of uncontrollable interest 2012: Actual pension liability 2013 = 2 587 840 TKR Analysis: Outcome with actual interest 0,4% (uncontrollable) = 10 351 TKR Outcome with RP interest 1,3% (uncontrollable) = 33 642 TKR Uncontrollable interest = 23 291 TKR Allocation key to Sea and Air rescue in Sjöfartsverket = 5% = 1 165 TKR in uncontrollable interest. From Sea and Air Rescue 16,16% refers to air-rescue that is the important figure here = 188 TKR, figure to be reported. 2013 A - Calculation of uncontrollable interest 2013: Actual pension liability 2013 = 2 602 518 TKR Analysis: Outcome with actual interest 0,4% (uncontrollable) = 10 410 TKR Outcome with RP interest 1,3% (uncontrollable) = 33 833 TKR Uncontrollable interest = 23 423 TKR Allocation key to Sea and Air rescue in Sjöfartsverket = 5% = 1 171 TKR in Uncontrollable interest. From Sea and Air Rescue 16,16% refers to air-rescue that is the important figure here = 189 TKR, figure to be reported.

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2014 A - Calculation of uncontrollable interest 2014: Actual pension liability 2014 = 2 567 677 TKR Analysis: Outcome with actual interest 0,5% (uncontrollable) = 12 838 TKR Outcome with RP interest 1,3% (uncontrollable) = 33 380 TKR Uncontrollable interest = 20 542 TKR Allocation key to Sea and Air rescue in Sjöfartsverket = 5% = 1 027 TKR in Uncontrollable interest. From Sea and Air Rescue 16.16% refers to air-rescue that is the important figure here = 166 TKR, figure to be reported. The forecast interest rate, which is one of the main components in calculating the pension liability, is decided annually by The Swedish Pensions Agency on basis of the development of market interest rates. The interest rate is not under the ANSP or State control.

Actions reported by the entity to manage the cost risk associated with this item There has been an investigation made within the state regarding the potential to change the way that pensions are handled for all state enterprises in Sweden. The proposed change would be to exclude the pensions from the balance sheet and move them to a fund administered by The Swedish Pension Agency. No decision regarding the proposal has been made yet.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. Pension costs are resulting mainly from “unforeseen market conditions”, which are not included in the criteria laid down in Article 11a(8)(c) of the Charging Regulation 1794/2006 (see §1.4 above) and hence, following the advice of the Commission’s legal service, are not eligible for exemption during RP1.



Description of the cost item from NSA report A new requirement was introduced through a Swedish law to have three airports in a state of preparedness in case of emergency.


Units SEK


exemption to the cost-sharing mechanism According to the Regulation (2010:185), which provides instructions to The Swedish Transport Administration, the STA should from 2012 ensure that there is a national network of airports that maintain a basic level of preparedness to vital public transport to be performed in case of emergency. The Swedavia airports that may incur additional costs to

2012 D 2013 D 2014 D 2012 A 2013 A 2014 F

1 165 047 985 574 859 365



(RT 3.10)

87

LFV for this extra level of preparation are Åre Östersund Airport, Visby Airport and Sundsvall Airport. Swedavia’s costs at the airport (excluding ANS) are financed through an agreement with The Swedish Transport Administration. However costs associated with ANS services is charged to Swedavia from LFV who is the ANSP. These costs shall be financed through Terminal Navigation Charges (25 %) and en-route (75 %) charges. This system for airport preparation was not decided when the PP for RP 1 was determined. Hence the ANS costs can be considered as uncontrollable due to new cost required by law. The table below provide the sum charged from LFV as 100% of their cost. 75% of these are financed from en-route charges, and 25 % from TNC charges.

Swedavia had not, at the time of the determination of the PP for RP 1, sufficient knowledge about the costs that would arise from the demands of increased readiness.

Actions reported by the entity to manage the cost risk associated with this item No specific action has been taken regarding this subject. However for the second reference period this is no longer a new cost required by law, hence this will not be considered as uncontrollable in RP2.

PRB analysis The costs reported in 2012, 2013 and 2014 were unforeseen. The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.10 relating to “Unforeseen new costs items required by law”.



Description of the cost item from NSA report Eurocontrol costs actually incurred are different to planned as a result of a difference in allocation of costs.


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

EUROCONTROL 139.787 142.624 145.220 128.427 124.951 125.888




ANSP/Entity: Swedish Transport Agency

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐13.048 ‐17.672 60



88


For the first reference period the only part of the uncontrollable cost regarding international agreements is the exchange rate between EURO and SEK. Hence the calculation is based on the difference from the assumed exchange rate used in the PP and the actual exchange rate. This difference combined with the Eurocontrol cost is used to calculate any uncontrollable changes in the cost level. The calculation is made according to the following formula: change in cost = Actual cost in SEK - Determined cost in SEK. The annual membership contribution to Eurocontrol was calculated based on the budget from Eurocontrol and an estimated exchange rate between EUR and SEK. The estimated exchange rate was calculated from a five year average to 9.6166. The actual membership contribution to Eurocontrol is calculated from the actual exchange rate during a given year. The actual exchange rate is the average exchange rate during this year, and it is calculated the actual cost in SEK with the charged amount from Eurocontrol. For 2012 the average exchange rate was 8.7509, and for 2013 it was 8.6641.

Unit SEK Neither the membership fee contribution allocation key nor the exchange rate between EUR and SEK is possible to control for the Swedish Transport Agency.

Actions reported by the entity to manage the cost risk associated with this item Discussions regarding possible hedging of the currency exchange rate has occured. However this has not been considered as feasible due to the cost for this hedging in comparision to the relatively small amount of the cost.


The submission is in line with the draft guidance developed by the SSC WG on economic questions, in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys are not explicitly referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for Sweden 19.3

19.3.1 The costs and reimbursement of costs relating to pension are deemed not to be eligible for 2012, 2013 and 2014 as it is resulting from circumstances (unforeseen market conditions) that are not included in Article 11a(8)(c) of the Charging Regulation 1794/2006, applicable for RP1.

19.3.2 New costs required by law are deemed to be eligible for 2012, 2013 and 2014.

2012 2013 2014

Fastställd valutakurs i prestationsplanen 9,6166 9,6166 9,6166Prestationsplan Angivet belopp i Euro i prestationsplanen 14 536 312 14 831 000 15 101 000

Angivet belopp i SEK i prestationsplanen 139 789 898 142 623 795 145 220 277Fakturerat belopp från Eurocontrol 14 483 237 14 421 706 15 972 735Faktisk valutakurs 8,7509 8,6641 9,0955Actual cost 126 742 003 124 951 348 145 280 011

Differens Differens mellan Faktisk kostnad och PP -13 047 895 -17 672 447 59 735

Actual

89

19.3.3 Costs and reimbursements of costs relating to international agreements are deemed to be eligible for 2012, 2013 and 2014.

90

20 Switzerland

Background 20.1

20.1.1 The report on costs exempt from cost-sharing was submitted by Switzerland’s NSA FOCA on 29 May 2015. The amounts reported relate to Eurocontrol costs and a cross border agreement with France under the international agreements item. No specific comments from user consultation were reported by the NSA.



Currency CHF CHF CHF

Pension








Description of the cost item from NSA report Eurocontrol costs actually incurred are different to planned as a result of a difference in allocation of costs from Eurocontrol.


Units CHF’000s


For Eurocontrol cost, the "uncontrollable" element is a) the exchange rate €/CHF as well as b) the difference between the cost base and the contribution which is given back to the airspace users throughout the exemption from cost risk sharing provision.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

EUROCONTROL 13.026 13.105 13.397 11.987 11.503 12.097



ANSP/Entity: Skyguide

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

‐1.039 ‐1.602 ‐1.300



3.11)

91

Actions reported by the entity to manage the cost risk associated with this item The Swiss State gives the difference between the Eurocontrol and the contribution back to the users and tries to influence Eurocontrol costs in order to bring them into an evolution compatible with the CEF targets.


The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rate are not referred to in the guidance – but as a principle seem out of the control of the entity.



Description of the cost item from NSA report Cross border traffic revenues from services to France have been lower than predicted as a result of different exchange rates meaning the cost offset was lower than expected.



Cross-border services in France are settled within the framework of an international agreement between Switzerland and France. The amounts paid by France to Switzerland are settled in €; they include a lump sum plus an exchange rate risk sharing mechanism. The Swiss State set the RP1 Determined cost in Swiss francs using a 1.3 exchange rate assumption in the National Performance Plan. The exchange rate variances €/CHF (not compensated for by the risk sharing mechanism included in the agreement between France and Switzerland) are claimed as being exempt from cost risk sharing.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Cross border services ‐52.822 ‐55.723 ‐59.033 ‐50.399 ‐52.319 ‐53.615



ANSP/Entity: Skyguide

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

2.423 3.403 5.418



3.11)

92

For the international agreement with France, the "uncontrollable" element is the exchange rate €/CHF: difference between on one side the amounts converted in Swiss francs at 1.3€/CHF in the National Performance Plan (and stemming from the international agreement between France and Switzerland) and on the other side the amounts paid by France quarterly in € and converted at the applicable exchange rate (spot rate) at the time they have been paid.

Actions reported by the entity to manage the cost risk associated with this item Regarding the Agreement with France, covering 2011 to 2014, an exchange rate risk sharing mechanism has been introduced in the agreement, covering part of the risk (the remaining risk being claimed as a cost not submitted to cost risk sharing).

PRB analysis The variation of the exchange rate was foreseen, only the magnitude remained unknown. The cross-border services between France and Switzerland is resulting from an international agreement. The justification is not fully in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12.1 stating: “The costs claimed in this category would normally be limited to changes in the States obligations to contribute to the Eurocontrol budget.” Nevertheless, the submission seems in line with the Regulation 1794/2006 and is deemed to be eligible for exemption.


Summary findings for Switzerland 20.3

20.3.1 Reimbursements of costs relating to Eurocontrol costs are deemed to be eligible for 2012, 2013 and 2014.

20.3.2 Costs relating to changes to the cross border agreement with France are deemed to be eligible for 2012, 2013 and 2014.

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21 United Kingdom

Background 21.1

21.1.1 The report on costs exempt from cost-sharing was submitted by United Kingdom’s NSA CAA on 10 September 2015. The amounts reported relate to pension costs, a new costs item required by law and Eurocontrol costs under the international agreements item. No specific comments from user consultation were reported by the NSA.



Currency GBP GBP GBP

Pension 16 109



New cost item required by law 192

International agreements (3 697) (322) (2 835)

Total costs exempted from cost-sharing (3 697) (322) 13 466

Note: the amounts reported in the NSA report differ from Table 3 of the June 2015 en-route Reporting Tables. The PRB notes that UK intends to align the amounts reported in en-route Reporting Tables with those mentioned in the NSA report on costs-exempt.


Pension

Description of the cost item from NSA report NATS operates two pension schemes: a legacy defined benefit scheme which has been closed to new members since 2009 and a defined contribution scheme open to new members since 2009. The NATS Defined Benefit Pension scheme covers NERL, and its affiliate NATS (Services) Limited and was closed to new members on 1 April 2009. For legal reasons the scheme cannot be closed to staff who were members prior to that date. The amounts included in determined costs in respect of the defined benefit pension scheme were based on the forecast cash costs agreed with the trustees for 2012 and 2013 following the triennial valuation of 31.12.2009, in accordance with the governance of the scheme and national law. For 2014, the forecast of the cash costs assumed that markets would recover and that no deficit repair payments would be necessary.


Units £’000s


The tables below only relate to NERL’s economic share of the NATS Defined Benefit scheme. NERL bears the full cost risk of the defined contribution scheme so the detailed breakdowns are not applicable for this assessment. NERL does not operate a PAYG scheme.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

0 0 16.109



94

Determined costs NERL uses a model which extracts the actual pensionable pay (by individual) of each member of the Defined Benefit scheme from the payroll and allocates it across service lines (i.e. to en-route, terminal and other NERL services). The allocation of pensionable pay to service lines is achieved by applying the same % allocation which is used by NATS’ SAP cost allocation model when this allocates staff costs to service lines. Actual costs The attribution of pension costs between NERL and NSL is based on staff membership and actual pensionable pay. Further allocations were made by NERL to the UK Air Traffic Services and Oceanic charge controls. References in this template to NATS are to the group Defined Benefit Pension Scheme, while references to NERL are its economic share which is subject to the European Commission Charging regulation. The company’s defined benefit pension scheme’s funding position, along with the majority of similar UK defined benefit schemes, deteriorated significantly during 2011 due to the reduction in long term real interest rates (as derived from gilt yields) to historical low levels. This was caused by a combination of unforeseen financial market conditions including the Bank of England’s programme of Quantitative Easing to stimulate economic recovery and the financial crisis in the Eurozone. The effect of lower real interest rates is to increase pension liabilities and in turn create an additional funding deficit which, without mitigating action, would be materially higher than the deficit applying in 2009. These financial market conditions are outside the company’s control. Financial market conditions, including discount rates, determine the contribution rate (as a percentage of pensionable pay) required by the Trustees of the defined benefit scheme. The actual and assumed contribution rates for 2012 and 2013 were the same as these rates had been fixed for these years following the December 2009 valuation of the scheme. For 2014, the actual contribution rate set following the Trustees' 31 December 2012 valuation was higher than the RP1 Performance Plan due to the unforeseen financial market conditions described in attachment 2. The table below sets out the actual payroll and the payroll in the determined costs. The difference between these two lines is all assumed to represent controllable variances. The values below are for UKATS as a whole. NERL has calculated that of the UKATS amount of M£ 17.7, M£ 16.1 is recoverable from Eurocontrol customers.

95

Note: the table values for pension assets, liabilities and net funding gap reflect NERL's c. 75% economic share of the NATS Group's defined benefit pension scheme which reported a funding gap of M£ 382.6 at 31 December 2012 (assets: M£ 3 527.5, liabilities: M£ 3 910.1). The M£ 16.1 of costs exempt from cost-sharing is assumed to be recovered through the Regulatory Asset Base (RAB) over a 15-year period. An adjustment of M£ 2.6 is to be reflected in the 2016 Eurocontrol charging tables accordingly (See also attachment 2 - provided separately).

Actions reported by the entity to manage the cost risk associated with this item Ex ante mitigations A number of actions were taken by the company (NERL) before RP1 to mitigate the impact of pension costs to users as follows: Pension reforms undertaken in 2009 NERL was proactive in mitigating the rising cost and risk of the scheme through the following actions:

the defined benefit pension scheme was closed to new joiners with effect from 31 March 2009 (for legal reasons the scheme cannot be closed to staff who were members prior to that date);

from 1 January 2009, annual increases in pensionable salaries were limited to a maximum increase in the retail price index (RPI) plus 0.5%;

a lower cost defined contribution scheme was also introduced for new joiners; pension salary sacrifice arrangements were introduced with effect from 1 April 2009 in

order to save employer national insurance taxes, which reduces the overall cost of providing pension benefits.

The financial benefits of the changes to the pension arrangements introduced in 2009 arise over time due to both the lower cost of pension provision for new employees (under defined contribution arrangements) and lower contribution requirements for the existing pension scheme due to a direct improvement in the funding position. This improvement in funding position was reflected in the Trustees’ 2009 valuation and directly impacted on the assumptions made for RP1. The financial benefits of the reforms to customers compared to the position beforehand were estimated by NERL to be worth c. M£ 200 over the 5 years 2011 to 2015 and a further c. M£ 600 in the ten year period beyond from 2016, although these figures will vary depending on

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

92.591 92.378 74.153 92.591 92.378 91.813

36,7% 36,7% 37,6% 36,8% 36,7% 36,7%

9,4% 9,7% 0,0% 9,1% 9,3% 9,9%

5,2% 5,2% 5,2% 5,2% 5,2% 4,0%

26

7,3% 7,3% 7,3% 5,7% 5,7% 4,3%

2.645.625

2.932.575

‐286.950

2.983 2.861 2.741 2.867 2.766 2.588

200.685 198.980 197.215 198.520 200.568 195.967


currency)


currency)




ANSP/Entity: NERL UKATS









currency)

96

market conditions. These very difficult and sensitive reforms were introduced without a significant cost and with no disruption to the airline industry from major industrial action through NATS policy of Working Together with the staff and unions. Influencing Trustees 2009 valuation assumptions and its investment strategy

the company (NERL) held four consultation meetings with Trustees and /or their advisors during which all assumptions have been exhaustively reviewed from first principles;

the company’s (NERL) aim has been to ensure that whilst Trustees’ legal responsibilities are met, the package of assumptions agreed is not more prudent than is required;

encouraging Trustees to introduce an investment policy and strategy to progressively de-risk the defined benefit pension scheme.

Operating cost efficiencies to mitigate pension costs Notwithstanding the reforms, the company (NERL) also recognised that the costs of the defined benefit pension scheme in RP1 would continue to be significant and subject to volatility due to external factors. For this reason, and to help mitigate the impact of rising pension costs on the unit rate, in 2006 to 2010 the company (NERL) reduced its underlying operating cost base by M£ 45 from previously planned levels and also put forward further operating cost efficiencies in CP3/RP1. Pension entitlements

NERL has made no benefit improvements since 2001 (the year of the PPP) which would increase the cost of pensions, and nor does it intend so to do in future. Benefit improvements are completely incompatible with NERL’s long term strategy. This is evidenced by the closure to new joiners of the defined benefit pension scheme.

Mitigating actions during RP1 During RP1 the company (NERL) responded to the unforeseen change in financial market conditions with the following mitigations: Pension reforms undertaken in 2013 In response to the deterioration in financial market conditions in 2011, a mitigation plan was developed in 2012 to ensure that the burden would not fall on any single group of stakeholders and that any residual impact on customer charges represents only those unavoidable increases after all other mitigations are applied to the extent practicable. The main actions included:

a re-negotiation with trades unions of a reduction to the cap on the increase in pensionable pay introduced in 2009. This limits the increase in pensionable pay to CPI + 0.25% (compared with RPI + 0.5% previously). This had the benefit of reducing the size of the funding deficit when the Trustees performed their 2012 valuation;

a recommendation from the company (NERL), supported by its trades unions, to the pension scheme’s Trustees that the indexation of future service benefits be linked to CPI instead of RPI. This reduced the future service cost from 36.7% to 29.4%; and

Consultation with Trustees to establish funding assumptions for the 2012 valuation which ensure affordable contributions through the remainder of RP1 and RP2 taking

97

account of the strength of the employer’s covenant, the long-term nature of pension provision and the unusual market conditions today. These contributed to both a reduction in the funding deficit and to lower cash contributions during the RP2 period.

Following the actions taken above, the company (NERL) has been able to limit the impact of the deterioration in market conditions and so avoid higher pension costs and real increases in customer charges during RP2. The reduction of the cap on pensionable pay increases and future service indexation avoids cost increases in RP2 of M£ 200. Influencing Trustees 2012 valuation assumptions and its investment strategy NATS and Trustees implemented a liability driven investment (LDI) programme in 2012 in order to hedge the impact of changes in inflation and interest rates on the value of the scheme's obligations, which are sensitive to inflation and movements in yields in the gilt market. The strategy includes establishing trigger levels which define the rates of interest and inflation rates at which hedging transactions will be executed. In addition, and as an acceleration of the existing strategy, NATS and the Trustees agreed during 2014 to increase the level of hedging of interest rates and inflation to 50%, as measured on the Trustee funding basis. Swap transactions are executed with carefully scrutinised banks and collateral is provided in the form of index-linked gilts to protect against the unlikely event of default by a counterparty bank. At NATS' request, Trustees have also considered further de-risking over time to protect the scheme from the impact of volatility in the value of return-seeking assets. This would involve progressively converting from return-seeking assets into hedging assets to increase the level of matching of the scheme's liabilities. As changing the mix of assets changes the returns achieved, this would impact on contributions payable. The strategy will aim to maintain an appropriate balance between the potential impact on contributions and the reduction in volatility of return-seeking assets, and therefore reduced investment risk.

PRB analysis In order to substantiate its report, the UK provided additional information on a confidential basis to PRB/EC. For conciseness and confidentiality purposes, the information is not disclosed in this report. Nevertheless, the PRB took into account the information provided for its analysis. The PRB notes that no amounts were reported in 2012 and 2013 as the contributions were based on the forecast cash costs agreed with the trustees following the triennial valuation of 31.12.2009. The pension costs reported in 2014 were unforeseen. The PRB acknowledges that the material provided increases the transparency and provides valuable information for the analysis. The PRB takes note of the difficult and sensitive actions taken by NERL to mitigate the impact of its pension costs for the airspace users. Nevertheless, the pension costs are resulting from “unforeseen market conditions”, which are not included in the criteria laid down in Article 11a(8)(c) of the Charging Regulation 1794/2006 (see §1.4 above) and hence, following the advice of the Commission’s legal service, are not eligible for exemption during RP1.

PRB findings Based on the criteria laid down in the Charging Regulation 1794/2006 and the legal clarification issued by the EC, the pension costs item is deemed not eligible for exemption.

98

New costs required by law

Description of the cost item from NSA report The proposal here reflects a return of value from NERL to users for spectrum costs. At the time that the RP1 determined costs were set it was known that NERL was likely to be required to pay for access to radio spectrum under anticipated legislation. At the time the amounts were not known. In setting the determined cost a small allowance was made for radio spectrum costs (M£1.1 in 2008/9 prices in aggregate for the four years 2011-2014). It was however recognised that the liability for payments could be much larger if the spectrum for radar was included during the course of RP1. As a consequence of this uncertainty, the CAA made provision in the price control covering RP1 for a pass-through to be carried forward to future review periods and this was set out in the UK's performance plan (addendum) as what were then described as uncontrollable costs. Different NATS subsidiaries provide en-route and airport services with full legal and accounting separation. Spectrum costs represent the actual costs incurred and reported in NERL’s accounts on a financial year basis. This data has been extracted from the accounts and calendarised by taking relevant 25% and 75% shares of the financial year data. The data is presented in NERL’s audited Regulatory Accounts – see pages 20 (7.2 – Spectrum Charges on a financial year basis for CP3) and 24 (Spectrum cost variances which reports Costs Exempt for RP1 on a calendar year basis).


Units £’000s


At the time, the CAA envisaged that NERL would absorb 20% of any positive increase in costs up to a maximum loss to NERL of M£ 5 while in the event of a favourable variance 80 percent of the variance would be returned to users. On the basis of legal advice, the UK now believes that the regulations do not allow a partial pass through and the proposal is now that NERL pass back 100% of the variance to users. In practice NERL incurred less cost than assumed. A forecast of the difference between actual and assumed costs was reflected in the UK/Ireland FAB Plan as an adjustment to NERL’s regulatory asset base (RAB) from the start of RP2, and has therefore been reflected in RP2 charges. This adjustment is explained on pages 154 and 174 of the RP2 Plan.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

311 320 231 394 (255) 200



(RT 3.10)

99

NB (from NSA report): the actual amount for 2013 corrects for an over-estimate of costs in 2012. The actuals for 2012 and 2013 should therefore be considered in aggregate. The gross value is £’000s 523. The RP2 Performance Plan assumed a rebate of £’000s 684 in 12/13 average RPI prices, which is equivalent to £’000s 715 in 2014 RPI average prices. The UK considers that these costs to be "unforeseen new cost items, not covered in the performance plan, but required by law". In this instance the actual costs in RP1 were lower than the determined costs established at the beginning of the reference period and should consequently be returned to airspace users. This was reflected in the RP2 settlement based on estimates. The final calculations indicated a recovery of part of the estimate made in the RP2 settlement (see table above).

We propose that this relatively small balance is recovered in its entirety during the course of RP2.

Actions reported by the entity to manage the cost risk associated with this item Not applicable here as the effect is a reduction for users.

PRB analysis The costs reported in 2014 relating to variations occurred in 2012, 2013 and 2014 were unforeseen. The PRB understands that the cost variations have occurred for each year of RP1 but the accounting treatment lead to disclose an amount only in 2014. The variation of the Spectrum costs were foreseen in the UK performance plan, only the magnitude remained unknown due to a legal interpretation of the amounts to be returned to the users. The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.10 relating to new cost items required by law.


100


Description of the cost item from NSA report Costs stemming from international agreements, including Eurocontrol, are treated as uncontrollable due to the unpredictability of the sharing keys used to apportion the Eurocontrol costs across Member States, and the exchange rate.



Determined costs Dependent on sharing keys used to apportion the Eurocontrol costs across Member States and the exchange rate. Actual costs Dependent on sharing keys used to apportion the Eurocontrol costs across Member States and the exchange rate.

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Eurocontrol Agency Costs (Eurocontrol

Multilateral Agreement)47.083 47.368 48.423 43.386 47.046 45.588

Costs (+)/revenues (‐) from international agreements ‐3.697 ‐322 ‐2.835



Describe the new cost item not covered by the performance

2012 NPP Actual Diff (%)

Total Eurocontrol Cost Base (€m) 503,3 501,0 ‐0,50%

UK percentage share 10,59 10,67 0,80%

UK share of Eurocontrol cost‐base (€m) 53,319 53,481 0,30%

Average exchange rate (€1 =) 0,883 0,8112 ‐8,10%

UK share of cost‐base in local currency (£m) 47,083 43,386 ‐7,90%

(Under)/over recovery carried forward to ‐3,697















101

Actions reported by the entity to manage the cost risk associated with this item The UK has been an active participant in the governance of Eurocontrol costs. Since these are net negative amounts, the relevance of the actions taken to control this factor is of limited importance.


The submission is in line with the draft guidance developed by the SSC WG on economic questions, and in particular §5.12 relating to changes to the Eurocontrol budget. Differences in sharing keys and exchange rate are not referred to in the guidance – but as a principle seem out of the control of the entity.


Summary findings for UK 21.3

21.3.1 The submission for pensions costs due to unforeseen market conditions is deemed not to be eligible for 2014 as it is resulting from circumstances that are not included in Article 11a(8)(c) of the Charging Regulation 1794/2006, applicable for RP1.

21.3.2 New costs required by law are deemed to be eligible for 2014.

21.3.3 Reimbursements of costs relating to Eurocontrol costs are deemed to be eligible for 2012, 2013 and 2014.

102

Annex I : Revised draft guidance on the treatment of costs exempt from cost-sharing

SSC Working Group on Economic Aspects Revised draft (8.5.2015)

DRAFT Guidance on the treatment of cost exempt from cost-sharing

NOTE: This draft has been prepared only for the purposes of discussion within a working group of

the SSC. It does not reflect the formal position of either the SSC, DG MOVE or the European

Commission and remains subject to changes and legal revision.

Annex I - page a.1 (revised draft guidance on the treatment of costs exempt from cost-sharing)

SSC Working Group on Economic Aspects Revised draft (8.5.2015)

1 INTRODUCTION

Purpose and scope of guidance 1.1

The purpose of this document is to provide guidance on the treatment of cost exempt from 1.1.1

cost-sharing in accordance with Article 14(2) of Commission Implementing Regulation

(EU) No 391/2013 of 3 May 2013 laying down a common charging scheme for air

navigation services (the charging Regulation).

This document sets out the principles that will guide the Commission and the Performance 1.1.2

Review Body (PRB) in the assessment of reports from national supervisory authorities

(NSAs) in accordance with Article 14(2)(f) of the charging Regulation regarding the

variation of actual costs against determined costs resulting from relevant events or

circumstances set out in Article 14(2)(a)1 and in line with the provision of Article 14(2)(b)

of the charging Regulation. It will also help NSAs in preparing their reports on cost exempt

from cost-sharing.

This document should be read in conjunction with available guidance on the requirements of 1.1.3

International Accounting Standards (IAS) and IFRIC support documentation where IAS

and/or IFRIC are applicable and in line with article 12(1) of the service provision Regulation

(Regulation 550/2004).

The charging Regulation entered into force on 29 May 2013 and applies from 1 January 1.1.4

2015. However, certain provisions as listed in Article 22(2) apply as of the date of entry into

force of that Regulation, i.e. 29 May 2013. That list includes point (b) to (f) of Article 14(2)

of the charging Regulation. Consequently, the first paragraph of Article 14 and points (a)

and (g) of its second paragraph apply from 1 January 2015. In contrast, points (b) to (f) of

this second paragraph already apply from 29 May 2013.

The charging Regulation also repeals with effect of 1 January 2015 Commission Regulation 1.1.5

(EC) No 1794/2006 (the old charging Regulation). Thus, during RP1 the old charging

Regulation is still applicable. This is insofar relevant, as it seems reasonable to interpret that

during the period from 29 May 2013 until 31 December 2014 the criteria set out in point (c)

of Article 11a(8) of the old charging Regulation have to be applied in conjunction with the

further specifications set out in points (b) to (f) of Article 14 of the charging Regfulation.

While, there are certain notable differences (especially in relation to pension costs) between 1.1.6

the criteria in point (c) of Article 11a(8) of the old charging Regulation and the criteria in

point (a) of Artilce 14(2)(a) of the charging Regulation, overall these criteria broadly

correspond. Thus, both sets of rules can be applied in combination and that was also

intended behind the arrangement as set out in Article 22(2) of the charging Regulation.

It is important to note that this guidance and the examples below are drafted solely on the 1.1.7

basis of the criteria in point (a) of Artilce 14(2)(a) of the charging Regulation. When applied

to cost-exempt from RP1, differences in the criteria between point (c) of Article 11a(8) of

the old charging Regulation and the criteria in point (a) of Artilce 14(2)(a) of the charging

Regulation need to be taken into account, as appropriate.

Definitions 1.2

Unforeseen An event, circumstance, or an outcome that could not be anticipated

or predicted at the time of submission of the Performance Plan to the

Commission.

1 For RP1, relevant events and circumstances are laid down in Article 11a(8)(c) of Commission Regulation (EC)

No 1794/2006, see para 1.1.4 ff.


SSC Working Group on Economic Aspects DRAFT FOR SSC meeting (06/05/2015)

Uncontrollable Incapable of being controlled, or managed.

International

Accounting

Standards

For the purpose of this Guidance, ‘international accounting

standards’ shall mean International Accounting Standards (IAS),

International Financial Reporting Standards (IFRS) and related

Interpretations (SIC-IFRIC interpretations), subsequent amendments

to those standards and related interpretations, future standards and

related interpretations issued or adopted by the International

Accounting Standards Board (IASB).

Cost item Cost items have to be seen as influencing factors on cost categories.

Cost item relates to one specific occurrence, its influencing factors

and its economic consequences. For the treatment of cost-exempt,

only changes in the uncontrollable influencing factors are relevant.

Change in law A change in law encompasses all changes in legal acts as well as

obligations from established case-law and continuing legal practice,

irrespective of the nature of the actual field of law (civil law,

European law, etc). Given the different legal national frameworks in

which all cases are embedded, the underlying change should be

substantiated by the relevant entity in order to enable NSAs and

subsequently European Commission to perform the assessment and

give a reasoned opinion and result.

2 PRINCIPLES

Introduction 2.1

General principles for application of cost exempt from cost-sharing are outlined below, 2.1.1

along with some examples for their application.

Cost exempt from cost-sharing can be positive or negative 2.2

The amounts eligible for exemptions from cost-sharing can be positive (to be recovered 2.2.1

from airspace users) or negative (to be refunded to airspace users) or a combination of

elements of both.

This guidance mainly concentrates on the circumstances where ANSPs are seeking to 2.2.2

recover additional costs from airspace users. However, there will be a number of

circumstances where costs should be refunded to airspace users. Where ANSPs have

identified uncontrollable items in their Performance Plans, ANSPs have claimed for

uncontrollable items in previous years or NSAs are aware of circumstances that such events

arise they should be reported and treated as negative costs exempt and refunded to airspace

users.

Amounts eligible for application of exemptions from cost-sharing 2.3

The cost (risk) sharing is an incentive mechanism to stimulate cost efficient behaviours by 2.3.1

entities affected by this legislation. In line with Article 14(1)(a) of the charging Regulation

the air navigation service provider, Member State or qualified entity concerned2 has to bear

the difference between the actual costs and the determined costs in case the actual costs are

higher than the determined and may retain the difference in the opposite situation.

2 In the following text the word "entity" is used for one of the categoties of air navigation service provider,

Member State or qualified entity concerned as the case may be.



The cost-sharing mechanism shall not apply to the difference between determined costs and 2.3.2

actual costs with regard to cost items for which the entities concerned have taken reasonable

and identifiable steps to manage but which may be deemed to be outside their control (costs

exempt). The circumstances under which the exemption applies are laid down in article

14(2)(a) of the charging Regulation (or Article 11a(8)(c) of Commission Regulation (EC)

No 1794/2006).

Reasonable and identifiable steps that have been taken to manage a cost risk ("mitigation 2.3.3

actions") should be described by the NSA in its assessment report. However, there may be

cases where such actions cannot be taken (for example, an unforeseen increase in a tax rate).

The rationale explaining why no action could be taken for a specific case should be

explained by the NSA.

In line with Article 14 of Regulation 391/2013 a clear difference shall be made between 2.3.4

“controllable” costs and “uncontrollable” costs.

As explained in 2.3.1 above, any application of costs exempt from cost-sharing dilutes 2.3.5

incentives so it should not be seen as a routine cost recovery tool that should be applied, but

rather as an allowable risk control measure to ensure adequate resourcing of the entity when

the circumstances listed in the legislation occur. The purpose of the costs-exempt provisions

in the Regulation must be understood as a very restricted risk-coverage mechanism where

the whole risk is borne by the users.

Amounts eligible for exemption are those relating to the impact of the unforeseen change, 2.3.6

for example; a change due to unforeseen changes in national pensions law, on the

determined costs set in the Performance Plan. However it should be noted that the full

difference between actual costs and determined costs for the corresponding cost item is not

eligible, only the proportion of the costs which are unforeseen and uncontrollable, and thus

unplanned.

Reasonable and identifiable steps taken to manage difference 2.4

between determined costs and actual costs

In accordance with Article 14(2)(b) of the charging Regulation and as indicated in 2.3.6 2.4.1

above, the costs claimed for exemption should not be higher than the difference between the

actual costs concerning the specific cost item and the determined costs for this specific item.

Any action, with a causal link to the event outside the control of the entity, taken to reduce

the level of a specific cost item should be redistributed. An example of mitigation measures

is presented below in §2.4.7 ff..

The underlying prerequisite of the concept of costs exempt from cost-sharing is that the 2.4.2

entity concerned has taken reasonable and identifiable steps to control its costs in an

appropriate manner not only during the preparation of the performance plan but also during

the reference period. These requirements of pro-active cost control and risk management do

not contradict the notion of “uncontrollable” and “unforeseen”; but are seen as a prerequisite

for it.

Any application by the entity for assignment of costs exempt must demonstrate and disclose 2.4.3

the reasonable and identifiable steps taken to manage the difference between determined

costs and actual costs. It is the role of the NSA to assess the effort made by the entity to

mitigate its “uncontrollable” costs. The redistribution resulting from the mitigation measures

should not prevent the entity from controlling and mitigating its “uncontrollable” costs.

Where circumstances of negative cost exempt are found leading to a reimbursement to users, 2.4.4

it is practically rather impossible and therefore not required to show that reasonable and

identifiable steps to mitigate this cost change have taken place.

A cost saving should be considered as a mitigation measure where that saving is causally 2.4.5

linked and closely related to an uncontrollable cost in relation to the same cost item. Such a

saving may still require action by the service provider to be achieved but there should be a



good reason to conclude that there is a causal link; for example the saving is considered to

only have been possible because of the unforeseen circumstances or the increase in

uncontrollable costs.

In the case of negative “uncontrollable” costs, the service provider would not be allowed to 2.4.6

take offsetting cost increases into account unless these were a direct result of the unforeseen

circumstances with no action by the service provider (for example if there was an

unforeseen pension surplus, the service provider could not reduce the amount returned to

users by increasing pension benefits to employees).

EXAMPLE: an entity offers an occupational pension scheme to its employees. The pension 2.4.7

scheme is a defined benefit scheme managed by an independent board of trustees. The board

of trustees is responsible for setting the premiums, the investment strategy, and the

minimum funding requirements. In its Performance Plan submission, the ANSP consulted

the board of trustees to report the planned contributions to the scheme taking into account

the number of employees forecast, the return on assets, the current benefits, etc. The

determined pension costs reported in the Performance Plan were:

Year 1 Year 2 Year 3 Year 4 Year 5

Determined costs (in ‘000) 1,000 1,000 1,000 1,000 1,000

In year 3, a detailed actuarial valuation is performed in accordance with the local regulatory 2.4.8

requirements. In the study, the discount rate used to calculate the pension obligation

decreases and, as a result, the pension obligation increases significantly, leading to a funding

deficit. As a consequence, the board of Trustees decides to increase the level of contribution

to the scheme by changing the contribution rate to reach a minimum funding level.

The actual costs in Year 3 are the following: 2.4.9

Year 1 Year 2 Year 3 Year 4

(forecast)

Year 5

(forecast)

Actual costs (in ‘000) 1,000 1,000 2,000 2,000 2,000


Difference claimed for

exemption

0 0 1,000

The entity considers a claim for the exemption of a pension cost increase of 1,000 as this 2.4.10

cost increase was not foreseen in the Performance Plan and was imposed upon it by the

pension board.

In order to manage the cost risk, the entity decides to launch a dialogue with the social 2.4.11

partners in order to mitigate the impact of the pension costs increase. After a year, an

agreement is concluded and the pension benefits are lowered. As a result, the pension

obligation decreases and the board of trustees decides to adjust the level of the entity’s

contributions to the scheme from year 5.

The actual costs for year 1 to 5 are: 2.4.12


Actual costs (in ‘000) prior

mitigation measures

1,000 1,000 2,000 2,000 2,000



Impact of the mitigation

measures

-500

Actual costs (in ‘000) 1,000 1,000 2,000 2,000 1,500


Difference claimed for

exemption (in ‘000)

- - 1,000 1,000 500

The decrease in the actual costs resulting from the mitigation measures must be returned to 2.4.13

the users. In this case, in each of the years 3 and 4 an amount of 1,000 may be claimed for

exemption, while only an amount of 500 could be claimed for exemption in year 5.

Transparency and consistency 2.5

Amounts eligible shall be calculated consistently on an annual basis using the same 2.5.1

methodology used to draw up the Performance Plan concerned.

The amounts should be identified and presented in accordance with Annex VII.2 of the 2.5.2

charging Regulation to ensure a transparent, sound and robust scrutiny. Annex VII.2

comprises the minimum requirement and should be accompanied by sufficient additional

relevant information to enable the scrutiny process.

A claim not supported by evidence and presented as a mathematic difference between actual 2.5.3

and determined costs, without any detailed information about the assumptions used in the

Performance Plans, the application of International Accounting Standards or regulatory

accounting requirements (if and as far as applicable), the nature of the event or

circumstances and the details of the determined costs provided in the performance plan does

not fulfill the information requirements and cannot be assessed as eligible.

For example, regarding accounting requirements, those requirements and underlying 2.5.4

accounting policies must be explained in detail in the submitted Performance Plan, including

information on any regulatory accounting methodologies adopted by the Member State. This

information will form part of the material evidence to support the cost assumptions used in

the Performance Plan against which subsequent assessments will be made of the extent to

which actual costs are unforeseen and uncontrollable.

Costs exempt from cost-sharing must be presented consistently over time and in particular 2.5.5

throughout a reference period, so as to ensure that the net amount eligible for carry-over

reflects both positive and negative effects and are considered after the closure of the whole

reference period. Early disclosure of events expected to trigger exempt costs and related

costs are to be encouraged to inform the users at the earliest opportunity.

Calculation of costs and accounting requirements 2.6

Article 7 of the charging Regulation states that “the determined costs and actual costs shall 2.6.1

… [be] established in accordance with the accounting requirements laid down in Article 12

of Regulation (EC) No 550/2004”, which provides that accounts of air navigation service

providers shall comply with the international accounting standards adopted by the

Community. Where, owing to the legal status of the service provider, full compliance with

the international accounting standards is not possible, the provider shall endeavour to

achieve such compliance to the maximum possible extent.

Article 7 provides for the presentation and calculation of determined costs for charging 2.6.2

purposes, describing the reporting requirements by cost category (staff, other operating,

depreciation, cost of capital and exceptional costs). It should be noted that according to the

second paragraph of Article 7 of the charging Regulation, pension costs may be calculated



based on prudent assumptions based on the governance of the scheme, or on national law, as

appropriate. Those exemptions shall be detailed in the Performance Plan.

This legal requirement, contained at the end of Article 7(2), infers that where cost exempt 2.6.3

from cost-sharing are reported and established outside the full application of international

accounting standards (if and as far as applicable), details of the local provisions must be

provided within the Performance Plan and the NSA report along with details of relevant

effects, which make international accounting standards inapplicable. These should be

contained in the submitted Performance Plan as they are known at the time of planning and

changes over time reported to NSAs. This allows assessors to understand local conditions

and agreements. This may be in the form of Regulatory Accounting Guidelines (RAG)

issued by the controlling entity (NSA).



3 Overview of process for assessing costs exempt

The flow diagram below summarises the key steps for entities and NSAs in assessing costs 3.1.1

exempt:

Step 1: report of a cost difference to the Performance Plan by the entity.

Step 2: check whether the event, circumstance or outcome is covered by Article 14

(2)(a) of Implementing Regulation 391/2013.

Step 3: describe the item or factor as given by Article 14 (2)(a) which the cost

difference is linked to, and for example describe what is unforeseen and in the case of

interest rate what is significant.

Step 4: identify the assumption(s) used in the submitted Performance Plan related to

this cost.

Step 5: provide the justification for costs exempt, including:

o describing the event, circumstance or outcome;

o providing evidence it is out of the control of the entity;

o describing the actions considered but not taken by the entity; and

o describing the reasonable and identifiable actions taken to help manage the

cost risk.

Step 6: NSA(s) verification (see section 4.3):

o NSA-entity interaction, with independent checks on the justifications

provided.

Step 7: Decision by NSA(s) – value accepted, or rejected, or further information

requested.

Figure 1: Summary of process for assessing cost exempt



4 Role of the NSA

The NSA concerned is required to establish each year that the variation of actual costs 4.1.1

against determined costs and claimed as exempted from cost-sharing is actually the result of

relevant events, circumstances or outcomes, which are evidenced and justified. The NSA

needs to report on costs exempt from cost-sharing, along with supporting evidence,

assumptions and justification to airspace users and subsequently submit the outcome of its

assessment to the Commission. The Commission will review the report and will determine

within six months whether the variation in the actual costs and the related events, or

circumstances, are justified.

It is recognised that when reviewing RP1 costs exempt submissions the process may be 4.1.2

more difficult as the information presented in RP1 Performance Plans was not as detailed as

necessary to support the assessment. In these circumstances it is recognized that the NSA

will have an important and decisive role in seeking information from the entity and assess

the claim to the best of their capabilities.

Interaction with the regulated entities 4.2

The regulated entities must send their applications for cost exemption to the NSAs. The 4.2.1

format of the application should include the followings for each cost item:

i. a full description of the cost item; this should also include information on which

exemption section is being used.

ii. the cost attributed to this item in the Performance Plan for the relevant Reference

Period; this should include details on calculations used to determine the cost

allocation and any weighting calculations.

iii. the justification why the cost item is considered to be eligible this should provide

details of what assumptions were made during planning and whether collars or alert

levels were applied to define significant variations as a result of a financial risk

assessment.

iv. The underlying external events, circumstances or outcome outside the control of the

NSA, ANSP or qualified entity concerned that triggered a variation between actual

and determined costs related to this cost item. The details should include event

progression within the entity and why this became uncontrollable, as well as details

required below on what actions were used to mitigate the uncontrollable event.

Actions taken to manage the cost risk associated with this item and their resulting

effect. If no actions was taken, the rationale behind this decision.

The NSA should check the received documentation on its completeness of information for 4.2.2

each cost item for a specific year. In case of incompleteness, the NSA should request

additional information from the applying entities.

When all information is available, the NSA verifies the information. 4.2.3

NSA verification 4.3

Hereunder is presented a non-exhaustive list of elements to take into consideration when 4.3.1

verifying the applications submitted by entities:

Pensions: confirm any changes in pensions or pension accounting law and undertake

an independent assessment, with actuarial support if necessary to also help identify

any mitigation actions available to the entity to manage the cost risk.

Interest rates: applying the definition of significant, understand the financial structure

of the entity and the source of loans (government/ commercial), and understand the

source of the change that has occurred. Future possible mitigation actions to manage

the cost risk should be considered.



Changes in law/ taxation law: check the content and status of the law, and what was

assumed at the time of the Performance Plan, and whether the outcome in time and

impacts were different.

International agreements: check international governmental agreement (not a

commercial agreement between entities). Check whether the impacts were anticipated

in the Performance Plan.

Communication with the airspace users 4.4

Article 14 (2)(f) of the charging Regulation states “…It (NSA) shall inform airspace users 4.4.1

and report to the Commission about the outcome of its assessment on an annual basis…”.

The cost exempts consultation requirements are also covered by the more general provisions 4.4.2

for consultation in Article 9 of the performance Regulation:

“During the reference period, Member States shall, on an annual basis and in a coordinated

manner, invite the airspace users’ representatives to a consultation on any deviation from

the forecast, especially with regard to:…

(c) the implementation of the cost sharing mechanism set out in Article 14;

…”

NSAs should receive supporting information from entity applicants on request. NSAs 4.4.3

should inform airspace users about applications for costs exempt from cost sharing and the

result of the assessment assessment including justification and additional supporting

information (if not confidential). The communication of the final assessment of the NSA

may take place at the earliest opportunity. The NSA may choose the appropriate timing to

communicate with the stakeholders based on its assessment.

Airspace users should receive information explaining the cost items assessed as cost exempt.

Report to the Commission 4.5

Once its assessment is performed and communicated to the users, NSA must report to the 4.5.1

Commission about the outcome of its assessment on an annual basis.

The cost exempt will be included in the reporting tables and the additional information to be 4.5.2

provided to the Commission on the 1 June each year. A template of an NSA report is

presented in Annex.

The report will be then “scrutinised” and the Commission may decide that the Member 4.5.3

State(s) concerned shall not be allowed to apply the exemption for the costs, in part or in

whole according to its findings and in line with the provisions of Article 14(2)(f) of the

charging Regulation and the guidance presented in this document.

The Commission will ensure that consistency is applied across Member States on the 4.5.4

application of the costs exempt mechanism.

Carry over to the following reference period(s) 4.6

Amounts to be borne or returned to airspace users should be aggregrated over a reference 4.6.1

period and carried over to the following reference period(s) in line with Articles 14(2)(d)

and (e) of the charging Regulation.

The amounts carried over shall be specified by factors and described in the additional 4.6.2

information to be provided in accordance with Annex VI (Article 14(2)(g) of the charging

Regulation).

Annex VII of the charging Regulation provides the Reporting table to fill in order to report 4.6.3

the cost-exempt from cost-sharing. The Table 3 – Complementary information allows the

Member States to report the cost-exempt for each year and how they intend to recover

(return) the costs over the reference period. An example is presented below.



Figure 2: Excerpt from the Table 3 - complementary information

Summary of process 4.7

Figure 3: Summary of actions by the NSA

PART B : Complementary information on adjustments Amounts Total C/O Before After RP1 2015 2016 2017 2018 2019 After RP2

Costs exempted from cost sharing Year 2012 -6.713 -6.713 -6.713 -2.238 -2.238 -2.238 0

Costs exempted from cost sharing Year 2013 1.852 1.852 1.852 617 617 617 0

Costs exempted from cost sharing Year 2014 8.417 8.417 8.417 1.683 1.683 1.683 1.683 1.683

Costs exempted from cost sharing Year 2015 0 0 0 0





Total costs exempted from cost sharing 3.556 3.556 3.556 0 63 63 63 1.683 1.683



5 Guidance for the application of the cost-exempt

mechanisms (from RP2 onwards)

Introduction 5.1

This section is broken down into the specific areas of application and contains worked 5.1.1

examples.

Unforeseen changes in national pensions law, pension accounting law 5.2

or pension costs resulting from unforeseen financial market conditions

There is a significant degree of variation of pension systems in use in States across Europe 5.2.1

and across the European entities. It would be very difficult to analyse each pension scheme

in detail, but they can be grouped depending on their characteristics. A summary of the

various schemes applied across European entities is shown in Figure 4 below:

Figure 4: Framework for different pension schemes [Source: SDG, 2014]

Sometimes, three different pension schemes are applicable in the same entity, for instance a 5.2.2

general hybrid state pension, a mandatory independent pension fund on a hybrid base and a

fully financed pension fund provision on a defined benefit basis, included in the balance

sheet. Every pension scheme has to be scrutinised individually. That implies that a tailor-

made provision of data and information about each individual pension scheme and the

(possibly) related costs exempt is crucial in order for the NSA to assess the annual costs

exempt application and for the Commission/ PRB to review and scrutinise the reports.

This section provides guidance and illustrative examples, however it is accepted that each 5.2.3

State and entity will have individual circumstances related to national arrangements and

laws. It is primarily the responsibility of the NSA to work with, collect and verify

information from the entity to understand, describe and assess these circumstances and

apply the principles described in this guidance paper.



The Commission has a review role but will rely on the NSAs to undertake the assessment 5.2.4

analysis and present the evidence. This evidence should include relying on actuarial or

pension trustee information.

There are two main types of pension schemes: Defined Contribution (DC) and Defined 5.2.5

Benefit (DB) and these can be provided through the State, an independent third party

pension fund or via an occupational pension organised by the entity. Entities utilise one of

the schemes shown above, sometimes several of them in different categories and hybrid

schemes at the same time. Analysis and guidance on how to treat these schemes in the

framework of the charging scheme are presented below. However this guidance cannot by

its nature be comprehensive and where necessary, discussions between the Commission,

PRB, NSAs and stakeholders will sometimes be necessary to ensure a full understanding.

NSAs are expected to be familiar with or to take appropriate expert advice on their national 5.2.6

pension laws/scheme, actuarial reporting mechanisms employed by the entity, and to

understand the risks raised by the pension mechanisms used by their entities in the

Performance Plan.

Assistance in the application and understanding of the IFRS or national accounting 5.2.7

standards provisions specifically applicable to a given situation should be obtained from

suitable local accounting practitioners and advisors familiar with the local application of the

standards, if necessary.

Point (i) of Article 14(2)(a) of the charging Regulation states that pension costs are eligible 5.2.8

if they result from:

changes in national pension law ; or

changes in pension accounting law ; or

resulting from unforeseen financial market conditions.

Numerous parameters can influence the pension costs such as the level of salaries, the 5.2.9

mortality rate, etc. However, apart from changes in the laws mentioned only variations in

pension costs resulting from unforeseen financial market conditions can be eligible. Costs

resulting from other parameters (staff numbers, benefits rate accruing etc.) cannot be eligible

for exemption unless they are a result of changes to pension accounting or national pension

law. Other factors, such as the mortality rate, might be considered out of the control of the

entity but do not fall into the categories outlined above and each NSA will need to consider

the case here.

The market-related assumptions considered relevant for the accounting of pension costs are 5.2.10

the nominal discount rate and the return on assets.

Occupational: Defined Contributions schemes 5.3

Defined Contribution plans are defined in IAS 19 as post-employment benefit plans under 5.3.1

which an entity pays fixed contributions into a separate fund and will have no legal or

constructive obligation to pay further contributions if the fund does not hold sufficient assets

to pay all employee benefits relating to employee service in the current and prior period.

In these schemes, the entity usually has full control over the level of the contribution rate 5.3.2

provided. Often contributions will be provided by the entity and the employee. The level of

contribution is not directly affected by law or financial market conditions and upon

retirement, scheme members will receive their invested contributions but are not guaranteed

a specific level of benefit payment. Therefore the risk of the outcome of the scheme is held

with the employee.

In these circumstances, it is not expected that any occupational defined contribution claims 5.3.3

would meet the requirements of cost exemption and therefore have not provided any

additional guidance or examples. This definition is not intended to cover state run pension

schemes which are considered separately in section 5.7.



Occupational: Defined Benefits scheme 5.4

Occupational DB schemes are likely to represent the most challenging cases to collect 5.4.1

information and assess in relation to costs exempt from cost sharing. As described above the

NSA will take the lead by working with the entity to collect information to provide the

assessment that will then be subject to Commission scrutiny. It will be important to apply

the principles outlined above to establish that the factors are outside the control of the entity,

are related to changes in financial market conditions and that a consistent approach is taken

over time (in both an upwards and downwards direction). When presenting material NSAs

are encouraged to make best use of the transparency of annual accounts (or regulatory

accounts), actuarial studies and information provided by pensions trustees as well as

relevant assumptions made in the submitted Performance Plan.

In the event that the changes in circumstances result in the entity making the case for deficit 5.4.2

repair, or surplus return, the case for the claim must be explained clearly with supporting

evidence and documentation. This should include the timescales over which the repair, or

return might take place and an explanation for the time chosen.

Across the entities, there is a need to distinguish between entities that report costs as 5.4.3

specified under a Regulatory Accounting approach and those entities that use IFRS applying

the IAS 19 methodology or national accounting laws/standards and to determine the costs to

be charged to airspace users. In the former, ANSPs typically report cash contributions made

to the fund instead of accruals costs as determined under the IAS 19 provisions as well as

provisions for deficit repair (and potentially surplus return). As described above it is

recognised that applications for costs exempt must reflect the local accounting requirements

in the explanation for their application.

It is recognised that the case can be made for costs exempt related to either cash or accruals 5.4.4

costs, as long as the methodology is consistent with that presented in the State’s

Performance Plan.

Both generic methods have their own characteristics and are presented as examples below. 5.4.5

In both cases the principles outlined above should be followed. However as all schemes are

unique where a principle cannot be applied NSA’s should provide justification for the

variation or non-compliance with a principle.

The different sub characteristics and effects on the Costs Exempt process are examined in 5.4.6

more depth below.

Defined Benefits scheme using Regulatory Accounts approach 5.5

Beside their statutory accounts, some entities also prepare a set of accounts for regulatory 5.5.1

purposes. These accounts are prepared under Regulatory Accounting Guidelines (RAGs)

and are designed to provide a basis that provides a long-term contribution rate to the pension

scheme. However, the frequency of valuations of pension’s obligations undertaken by

actuaries or trustees may depend on local legal and regulatory requirements (e.g. every year,

every 3 or 5 years), and this can lead to differences between the determined costs and actual

costs incurred).

The objective of applying the regulatory accounts is to ensure greater stability in the 5.5.2

contribution rate paid for by users over time (smoothing over long periods to close the net

pension liability or surplus gap). The assumptions used to calculate the pensions deficit/

surplus can differ from IFRS (discount rates, population growth, etc.).

Therefore, when drawing up their Performance Plans, some entities report planned 5.5.3

contribution to the pension plan instead of the IAS19 accounting pension costs as calculated

under the actuarial method prescribed by IAS 19. As for DC schemes, the contribution is

expressed as a percentage of the salary which tends to vary over time.



The main difference with DC schemes is that the risk is borne by the entity and the 5.5.4

contribution rate is determined by the scheme provider, or the board of trustees.

A practical example and guidance are presented below to illustrate how to report costs-5.5.5

exempt from costs-sharing for a DB schemes when using a Regulatory Accounting

structure: An entity uses a method to determine the pension contributions to the pension

scheme. The contributions to the plan are expressed as a percentage of the salary and solely

funded by the employer. In the Performance Plan, the following determined costs are

reported:


Payroll (in ‘000) 10.000 10.000 10.000 10.000 10.000

Contribution rate 30% 30% 30% 30% 30%

Pension costs (in ‘000) 3.000 3.000 3.000 3.000 3.000

In Year 3, the entity or trustees performs a nationally mandated actuarial study to review the 5.5.6

contribution rate and the funding position of the scheme. Based on the actuarial report, the

new contribution rate determined by the study is now 33% due to the following factors:

Current contribution rate 30.0%

Change in career progression (controllable) +1.0%

Change in discount rate used to discount the obligation by reference to the

market (uncontrollable) +2.0%

New contribution rate 33.0%

The entity is required to implement the new rate as from Year 4. The actual costs in Year 4 5.5.7

compared to the determined costs are the following:

Actual payroll Year 4 (in ‘000) 11.000

Contribution rate 33%

Actual pension costs Year 4 (in ‘000) 3.630

Determined costs Year 4 (in ‘000) - 3.000

Difference (in ‘000) 630

The difference calculated results from “controllable” and “uncontrollable” items and should 5.5.8

therefore be subdivided to isolate the “uncontrollable” part.

Concerning the contribution rate, only the increase resulting from the change in discount 5.5.9

rate should be taken into account. The change in “career progression” should not be

accepted for exemptions, as it is considered under the control of the entity.

The new rate resulting from uncontrollable elements is the following: 5.5.10

Current contribution rate 30%

Change in discount rate used to discount the obligation by reference to the

market (uncontrollable) +2.0%

New contribution rate 32%

The increase in the payroll is also considered “controllable” and its impact should not be 5.5.11

taken into account. The new rate must be applied on the payroll used in the Performance

Plan. Therefore, the costs eligible for exemption in Year 4 are:



Payroll Year 4 (in ‘000) 11.000

Wage increase (controllable) -1.000

Payroll used in the Performance Plan (excluding costs resulting from controllable

factors)

10.000

Contribution rate excluding parameters resulting from controllable factors 32%

Actual pension costs Year 4 resulting from uncontrollable factors (in ‘000) 3.200

Determined costs Year 4 -3.000

Uncontrollable costs Year 4 (in ‘000) 200

In this example, the higher contribution rate is the result of a funding gap which will have to 5.5.12

be repaired and will have to be compensated over an agreed period of time. In recent

examples, decisions to repair deficits using regulatory accounts have taken place over 11

and 15 years respectively, while in others this has been over a much shorter period. Where

specified time periods are taken for deficit repair or surplus return, the basis for this decision

should be made transparent in the NSA report including the consistency with the overall

objective of smoothing changes in charges to users.

Defined Benefits scheme using IFRS (using IAS or National accounting 5.6

guidelines or law) methodology

The pension costs calculated under the IFRS (IAS 19 or national accounting standards/ laws 5.6.1

as applied in the Nordic countries for example) methodology can result in pensions costs

which significantly vary from one year to another. This volatility is inherent to the actuarial

method prescribed in IAS 19 to evaluate the benefit obligations. The obligation varies

according to a number of parameters which can be either determined by the entity (under

their control) or determined by external sources such as the financial market (outside of their

control).

The IAS 19 has been amended in order to improve the recognition of actuarial gains and 5.6.2

losses and the presentation of the financial statement. One of the main changes is the

withdrawal of the use of the so-called “Corridor Approach” in order to reduce the different

options to recognise actuarial gains and losses. This amendment has the potential to

significantly impact entities, which in the past were using the corridor approach to smooth

the effect of the volatility.

During the Reference Period entities reporting their pension costs using IFRS may encounter 5.6.3

volatility between their determined costs and their actual costs. Part of the volatility is

generated by external factors such as the discount rate or the changes to mortality rates as

well as others factors such as the benefits level accrued and investment policy of the fund.

In accordance with the General principles outlined above, entities who claim exemption 5.6.4

from cost-sharing must distinguish amongst differences arising from “controllable” elements

and differences arising from “uncontrollable” elements. In the case of a DB scheme, it can

be difficult to isolate the various elements in order to determine if it is “controllable” or not.

Listing the influencing factors may be necessary to make this assessment and occasionally

weighting may need to be applied to factors to recognise that there is within a single factor

some element of controllability. This assessment should be undertaken by the NSA, taking

into account the principles outlined in this paper, but also the local circumstances, laws and

rules, as well as specific documentation supplied by entities to support their claim.

The revised IAS 19 offers some help in identifying the different elements influencing 5.6.5

pensions cost factor which are under or outside the control of the entity as it follows the

same methodology in isolating all the “re-measurement” of components and requires entities

to disclose all “re-measurement” items in the Other Comprehensive Income (OCI).



These re-measurement items include: 5.6.6

gains and losses on the Defined Benefits Obligations;

gains and losses on plans assets (difference between the expected return on plan

assets and the actual returns);

any change in the effect of the asset ceiling;

gains and losses from benefits payments.

It should be noted that the Profit & Loss (P&L) charge will reflect a service cost component, 5.6.7

representing an increase in the pension obligation from an employee’s service to the entity

in the period as well as any past service cost adjustments, and a net interest component,

which is determined by applying the discount rate to the net defined benefit pension surplus

or deficit.

In its presentation requirements, IAS 19 requires entities to provide a table which reconciles 5.6.8

the movement from the opening balance to the closing balance for the assets and liabilities.

One of the items to disclose is effect of re-measurements showing separately:

the return on plan assets, excluding amounts included in interest costs;

actuarial gains and losses arising from changes in demographic assumptions;

actuarial gains and losses arising from changes in financial assumptions;

changes in the effect of limiting a net defined benefit asset to the asset ceiling,

excluding amounts included in interest costs. An entity shall also disclose how it

determines the maximum economic benefit available, i.e whether those benefits

would be in the form of refunds, reductions in future contributions or a combination

of both.

Hence, it is expected that these IAS disclosures are used as a starting point to identify the 5.6.9

items considered as controllable and those which are not.

Nevertheless, the reconciliation between the costs as recorded in IAS 19 and the determined 5.6.10

costs can be complex. Two major drawbacks arise when using the information disclosed

according to IAS 19 requirements:

The IAS 19 requires disclosing actuarial gains and losses arising from changes in

financial assumptions, as defined in its article paragraph 76(b). The financial

assumptions listed in §76(b) of IAS 19 are:

i. the discount rate (see paragraphs 83–86);

ii. benefit levels, excluding any cost of the benefits to be met by

employees, and future salary (see paragraphs 87–95);

iii. in the case of medical benefits, future medical costs, including claim

handling costs (i.e. the costs that will be incurred in processing and resolving

claims, including legal and adjuster’s fees) (see paragraphs 96–98); and

iv. taxes payable by the plan on contributions relating to service before

the reporting date or on benefits resulting from that service.

Usually, these elements are grouped in the reconciliation table under one line item

such as “Actuarial gains and losses arising from changes in financial assumptions”.

Hence, there is a mix of assumption due to financial market conditions (i.e. discount

rate) and “controllable” elements (i.e. benefits level).

In the IAS 19, some assumptions used in the calculation are recalculated on a yearly

basis, therefore the actuarial gains and losses represent the difference between the

assumptions used for the current period and the assumptions used for the previous

one. It does not represent the difference between the assumption used for the current

period and the assumptions used for the determined costs in the Performance Plan.



Excepting for the first year of the Reference Period, there is a cumulative effect to be

considered when reconciling the costs.

Nevertheless, most companies outsource the calculation of the pension liability to qualified 5.6.11

actuaries who are able to address the two disadvantages identified above. In their reporting,

they usually decompose the effect of the various parameters to explain the variation of the

Defined Benefit Obligation (DBO), the assets, and the discount rate.

They are also able to compare their calculation applying the assumptions used in the 5.6.12

Performance Plans as a starting point as compared to those reported in their IAS 19 report.

Hence, when reporting the basis of the costs exempt using the IFRS methodology, an 5.6.13

actuarial study supporting the claim for exemption should be provided to NSAs and include

the following elements:

The assumptions used in the Performance Plan to determine the costs;

A reconciliation table of the DBO and the assets according to the assumptions used in

the Performance Plan for each year of the reference period;

The assumptions used to determine the value of the DBO and the assets at year-end;

A table reconciling the DBO as forecast in the Performance Plan and the actual DBO

at year end. This table must isolate the variation due “financial market conditions” on

the DBO mentioned above from the other parameters considered as “controllable”;

A table reconciling the assets as forecast in the Performance Plan and the actual

assets at year end. This table must isolate the variation of the interest cost due to

“financial market conditions” as defined and mentioned above from the other

parameters considered as “controllable” and the actual return on assets.

Where a change in the DBO occurs which leads to a deficit repair or surplus return 5.6.14

obligation, that results from uncontrollable factors, the NSA should work with the entity to

agree the time period over which this is to be recovered or returned. The options available to

the NSA will be influenced by national legislation, as well as local practices. The underlying

principle should be to spread such costs over a reasonable time frame so as to minimise the

impact on user route charges. In cases described above these have taken place over 11 and

15 years respectively. However, in some Member States, pension funds are obliged to repair

deficits in a much shorter period due to the coverage ratio between the assets and the

obligations of the pension fund.

In this case a separate table explaining the costs proposed to be claimed or reimbursed to 5.6.15

users for each year must be provided.

State pensions schemes 5.7

These are pensions schemes provided by the State to an entity’s employees. They are 5.7.1

usually Defined Benefits schemes, which are either operated on a Pay-as-you-go basis or

through a funded asset scheme.

The contribution rate is usually set by the State, and therefore is not under the direct control 5.7.2

of the entity. Changes to the contribution rate are usually imposed by the State and relate to

decision about a state’s pensions scheme rather than in isolation to the entity.

In a number of Member States, the contribution rate covers other categories of post-5.7.3

employment benefit such as medical and unemployment insurance, early termination

benefits and allowances for resettlement. In many of these States it is not possible to split

out the components for each item and isolate the amount related to pensions costs. In other

states the government sets the social premium rates separately by law.

Decisions by the State to change the contribution rate can be due to unforeseen changes in 5.7.4

financial market conditions – for example lower returns on assets due to lower discount rates



as well as other changes happening at a State level such as mortality rates, demographic and

population changes.

State pension schemes are often hybrid and in some Member States every employer is 5.7.5

obliged to organise a supplementary pension for his employees, which can take the form of

an independent pension fund with a mandatory membership for the civil servants. Such an

independent pension fund sets the contribution rate taking the provisions of the national

pension fund law into consideration. For simplicity these independent pension funds are

considered as a state pension fund in this document.

When the contribution rate is set by the State with no intervention of the entity, this element 5.7.6

may be considered as “uncontrollable”, if the circumstances or the level of the charge could

not be predicted with confidence during planning. Nevertheless, when an entity controls the

other parameters of the contribution such as the level of salaries and the number of

employees, the impact of these elements must be isolated and considered as “controllable”.

Worked example. The following is a simple example of this mechanism. It is generic in 5.7.7

nature and is illustrative. However it should not be considered that this example

automatically qualifies for the application of Costs Exempt as the factors triggering the costs

exempt application have a bearing on its eligibility and are not stated in the example.

Pension costs as determined in the PP

Level of salaries (in ‘000) (a) 100,000

Number of pensionable staff 954

Contribution rate set by the State (b) 15%

Total of determined pension costs (in ‘000) (a × b) 15,000

The actual contribution made amounts to 22,000 resulting from: 5.7.8

Pension costs

Level of salaries (in ‘000) (a) 110,000

Number of pensionable staff 978

Contribution rate set by the State (b) 20%

Total of actual pension costs (in ‘000) (a ×b) 22,000

In this example, the entity controls the number of employees and the level of salaries and 5.7.9

should therefore only claim the difference resulting from the contribution rate changes. The

pension cost eligible for exemption would be equal to:

Pension costs

Level of salaries as set in the determined costs (in ‘000) (a) 100,000

Number of pensionable staff underpinning the determined

costs

954

Difference between actual and determined contribution rate

(20% - 15%) (b)

5%

Uncontrollable pension costs claimed (a × b) (in ‘000) 5,000

The breakdown in this simple example of the variation into “controllable” and 5.7.10

“uncontrollable” supports the claim and eases the scrutiny process and enhances

transparency. In some cases, there can be opposite variations between the different

parameters offsetting each other. It then becomes important to isolate these changes in order

to reconcile the figures. This general principle also applies to all DB schemes.



An example of information supporting the claim is presented below: 5.7.11

Pension costs

Actual pension cost 22,000

Wage increase correction factor and FTE increase factor

(controllable)

-2000

Total costs excluding costs resulting from controllable factors 20,000

Determined pension costs - 15,000

Uncontrollable pension costs claimed 5,000

Besides disclosing the relevant financial and actuarial data, the entity must justify its claim 5.7.12

by documenting any relevant information (text of national laws, guidance from Trustees,

etc.). It must also report the steps taken to mitigate the risk for example changes to future

benefits negotiated with employees and explain why the change could not be foreseen at the

time of the establishment of the Performance Plan, or explain why cost mitigation measures

could not be taken.

It is generally considered that the application of Article 14(2) for State schemes should be 5.7.13

relatively straightforward and it is not expected to give rise to particular technical difficulty

for the assessment and scrutiny, provided the underpinning assumptions and information on

the events that make this cost uncontrollable are available.

Hybrid plans 5.8

Hybrid plans are plans which combine features of Defined Contributions and Defined 5.8.1

Benefits plans. There is a wide variety of hybrid plans and it not possible to cover every

existing plan in this guidance.

Whenever possible, a pragmatic solution would be to treat the Hybrid plan as a DB or a DC 5.8.2

depending on the main features of the plans. Another approach is to separate the plan into

two schemes and apply the relevant guidance accordingly.

A “one size fits all” approach cannot be applied. Every pension scheme has to be scrutinised 5.8.3

individually. That implies that a tailor-made provision of data and information about each

individual pension scheme and the (possibly) related uncontrollable costs is crucial in order

to enable PRB and Commission to assess the annual costs exempt reports.



An analysis of the various possible schemes is presented in Figure 5 below: 5.8.4

Type Description Treat as

Self-annuitising Benefits accrue on a DC

scheme but the pension is

paid by the scheme, rather

than each member’s pot

being used to buy their

pension.

Treat as a DC scheme

Combination Both DB and DC benefits

accrue at the same time.

Treat each section as a

separate scheme

Sequential Both DB and DC benefits

accrue in the scheme but not

at the same time: for instance

members start in the DC

section and move into the

DB section after a specified

number of years.


separate scheme

DB or DC entitlement DB scheme with a DC

underpin, e.g. a scheme that

will pay a member the better

of their DB or DC benefit.


separate scheme

DC scheme with guaranteed

minimum payment underpin

DC scheme with guaranteed

minimum payment underpin.

Treat as a DB scheme

DB entitlement with DC

additional voluntary

contributions


separate scheme.


separate scheme

Figure 5: Analysis of Hybrid schemes. Source [SDG 2014]

Significant changes in interest rates on loans, which finance costs 5.9

arising from the provision of air navigation services

The charging Regulation states that only “significant” changes in interest rates on loans 5.9.1

financing the provision of air navigation services are eligible for the exemption. The concept

of “significant” could induce subjectivity in the assessment of the claim. However, when

NSAs consider a measure of significant, it is recommended that they consider using an

objective and relative measure, this might include considering the size of the change as well

as the materiality of the impact. NSAs may be able to draw upon independent measures used

for materiality used for other purposes (for example in audits). This measure of significant

should be applied consistently in each year of the RP. For clarity, the concept of

“significant” only applies to changes in interest rate in loans, not the other costs exempt

categories.

When assessing the claim, NSAs must take into account that when contracting a variable 5.9.2

interest rate loan, the entity’s management make a conscious decision on funding

methodology a deliberate risk on the level of their periodic reimbursement, the option of

taking out a fixed interest rate loan would have been available. It can be foreseen that the

rate will fluctuate; only the magnitude of the variation is unknown.



Some fluctuation can be expected during normal market conditions and are part of the risk 5.9.3

management borne by the entity. This is consistent with setting a threshold measure which

requires a significant change in interest costs to be triggered. These changes may be positive

or negative.

This is particularly the case where fixed interest rate financing or hedging instruments are 5.9.4

available as an offset against the interest rate volatility. By setting a threshold,

proportionality can be demonstrated linked to the principle of significant change. Ideally

these should be agreed with the NSA prior to acceptance of the Performance Plan.

There are a number of contributory factors in the calculation of the interest payable on a 5.9.5

loan. A simple example would include two factors:

The size of the loan; and

The rate at which interest is charged.

Under the principles of the regulation regarding costs exempt from cost-sharing, the only 5.9.6

difference between actual and determined costs that could result in an eligible cost exempt

from cost-sharing is a significant change in interest rate on planned loans (e.g. when the loan

is contracted with variable interest rates and/or a new loan is contracted during the

Reference Period with a different interest rate than assumed in the Performance Plan) due to

an unforeseen event (e.g. increase in country-related financial risk). Any unplanned change

in the size of the debt that the interest applies to is considered under the entity’s control and

therefore not exempt.

In addition an objective measure of significant should be applied to the change in interest 5.9.7

costs. This should be set by the NSA, ideally as part of the Performance Plan. As discussed

above using a relative measure such as a percentage of total costs or total revenues could be

considered by the NSA.

The table below provides worked examples of this application based on best practice 5.9.8

submission for 2012 and 2013. For the need of the example, it is assumed that a threshold of

2% of the total revenue was determined in the performance plan, in agreement with the

entity. In 2012, the actual costs was the following:

Example Debt

(millions)

Interest rate

(%)

Interest on debt

(millions)

Determined 10 3% 0.3

Actual 25 9% 2.25

Difference 15 6% 1.95

Unforeseen changes eligible for

exemption (uncontrollable) 6%

Resulting amount 10 6% 0.6

Threshold as determined in the PP (2%

of total revenue of 50M) 1

Amount claimed for exemption 0

In this example, the threshold is not reached, therefore the change is not considered as 5.9.9

“significant” based on the criterion set in the PP in agreement with the entity.

However as with other examples, the conditions at the time that exist for the entity must also 5.9.10

be considered. If a loan is applied for and a higher rate of interest is incurred than planned

explanations will need to be provided to explain the difference. It cannot be assumed that an

entity must accept a higher interest rate just because it’s offered without showing that it



looked for alternative sources of funding or finance restructuring, or negotiation as this

defeats the incentive mechanisms of cost control of the charging regulation.

Unforeseen new cost items not covered in the performance plan, but 5.10

required by law

New costs items required by law may in principle concern all costs that are required by a 5.10.1

new law or a change in the local, national or European legislation (for example a change to

the level of Value Added Tax introduced by a change in law) and that do not fall under the

category “unforeseen changes in national taxation law”, pension law” or “pension

accounting law”.

Such changes must be documented with the relevant legislation and the impact must be 5.10.2

clearly identified and cost impacts (positive and negative) shown along with differences

from the plan. When it impacts a cost already taken into account in the Performance Plans,

the determined costs must be used as a base to explain the difference with the actual costs.

They must represent actual costs and not assumptions of risk and contingency fund

allocations.

This clause might include two main examples. In the first example a completely new piece 5.10.3

of legislation might be introduced which was unforeseen and is outside the control of the

entity. In this example, the legislation, the timing of the introduction, and the quantified

impacts on the entity should be provided as evidence to the NSA so that it can undertake an

assessment. In a second, different example, the impact of a foreseen change in legislation

might be anticipated in the Performance Plan, however there is uncertainty regarding the

timing and the value of the change. In this case the assumptions used in the Performance

Plan should be transparent and highlighted in the costs exempt section of the reporting tables

as subject to change. The claim will be confined to the parameters provided in the final

piece of legislation, for example if a change of law was anticipated to be introduced in 2015

but in practice was not introduced until 2017 or a change in legislation was anticipated to

affect one category of staff, but in the final legislation covered two categories of staff.

As a general rule investments in new equipment and PCP would not be applicable for this 5.10.4

mechanism as these factors would be considered in the investment plan, where entities have

demonstrated over many years their ability to reprioritise projects within their budget

envelope. Moreover their implementation is wholly controllable by the entity. In the event

that such a project also included new technology and operational procedures to promote

integrated service provision, Article 7(4) of the charging Regulation regarding restructuring

costs covers these events.

Unforeseen changes in national taxation law 5.11

Unforeseen changes in national taxation law concern all costs that are required by a change 5.11.1

in the national taxation legislation. As for the item “new costs items required by law” (see

section 5.10), such changes must be documented with the relevant legislation and the impact

must be clearly identified and cost impacts shown along with differences from the plan.

When it impacts a cost already taken into account in the Performance Plans, the determined

costs must be used as a base to explain the difference with the actual costs.

This item might include two different situations. In a first example a completely new 5.11.2

taxation law might be introduced which was unforeseen and is outside the control of the

entity. In this example, the legislation, the timing of the introduction, and the quantified

impacts on the entity should be provided as evidence to the NSA so that it can undertake an

assessment. In a second example, the impact of a foreseen change in taxation law might be

anticipated in the Performance Plan, however there is uncertainty regarding the timing and

the value of the change. In this case the assumptions used in the Performance Plan should

be transparent and highlighted in the costs exempt section of the reporting tables as subject

to change. The claim will be confined to the parameters provided in the final piece of



legislation, for example if a change of law was anticipated to be introduced in 2015 but in

practice was not introduced until 2017.

The opposite situation might occur when the entity anticipated costs in its Performance Plan 5.11.3

due to a change in the national taxation law that was finally aborted. In this situation, the

entity must return the costs anticipated in the determined costs and document its application

with the relevant information as mentioned above.

Unforeseen changes in costs or revenues stemming from international 5.12

agreements

The focus of this section is on cross border costs; set up as an intergovernmental agreement. 5.12.1

It does not apply to normal cross border commercial business arrangements of service

provision. The costs claimed in this category would normally be limited to changes in the

States obligations to contribute to the Eurocontrol budget.

The regulation states that "unforeseen changes in costs or revenues stemming from 5.12.2

international agreements" may be considered as beyond the control of the entity. This relates

to Eurocontrol costs that are included in the determined costs of Member States according to

an agreed sharing key.

It is important to understand that the respective amounts in the determined costs of Member 5.12.3

States are based on Eurocontrol agency business plans (for RP2 the 2015-2019 business

plan). However, the budget is approved by Eurcontrol Member States collectively on a

yearly basis (a Member State alone cannot control the budget). In this respect, if Eurocontrol

Member States decide to lower the yearly budget, this should result in a reiumbursement to

airpace users of savings (lower actual costs then determined costs).



ANNEX – TEMPLATE FOR NSA REPORT (THIS TEMPLATE CAN BE APPLIED TO EACH

ENTITY).

Name, title and signature of representative

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Comments

NSA Report on costs exempt from cost-sharing

<If any>

Total costs exempted from the cost sharing arrangements - Article 14(2)(b) (by factor/item) - Charging Reporting Table 3

Signatories

Summary

Date of issue

Charging zone

NSA

(In nominal terms in '000 national currency)

3.7 Pension

3.8 Interest rates on loans

3.9 National taxation law

3.10 New cost item required by law

3.11 International agreements

3.12 Total costs exempted from cost sharing



(i) Pension

i) A full description of the cost item

General information on pension costs during RP1

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Number of employees contributing

Pension payments (in nominal terms in

national currency)

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


currency)


currency)




ANSP/Entity: XXX



- in respect of regular cash payments

- in respect of non-recurring gap-bridging cash payment





currency)

Pension assumptions for the "Defined contributions" pension scheme

ANSP/Entity: XXX

Total pension costs in respect of "Defined contribution"

scheme (in national currency)

% Contribution rate of the ANSP to pension scheme


Pensionable salary (in national currency)

Indicate in this box which type(s) of pension schemes are in place during RP1 ("Pay-As-You-Go", "Defined Contributions" Scheme and "Defined

Benefits Scheme).

Pay-as-you-go schemes usually refer to public unfunded schemes where the current contributions serve to pay current benefits of pensioners with an

intergenerational transfer. It is the responsibility of the State to provide its retirees with their pensions.

Defined contributions schemes refer to plans where the payments made into the plan are specified, but the benefits depend on the performance of

the investments. Investment risks and rewards are therefore assumed by contributors (i.e. employees) and not by the sponsor (i.e. employer).

Defined benefits schemes refer to plans guaranteeing a certain pay-out at retirement according to a formula typically related to the length of

employment and employee earnings. Entities operating defined benefit pension plans bear the risk for ensuring that the accumulated value of the

pension plan assets is sufficient to cover the liability.

For each scheme in place during RP1, provide the information requested below (chose the relevant table(s) on the basis of the applicable scheme(s).

Insert additional rows if you need to report more information. Duplicate the tables if you need to report on more than one entity. Delete unnecessary

tables for non-applicable schemes.

Charging Regulation (EC) No 1794/2006, as amended by (EU) No 1191/2010, Article 11a. 8.(c)

(i) unforeseen changes in national pension regulations and pension accounting regulations;

Charging Regulation (EU) No 391/2013, Article 14 2. (a)

(i) unforeseen changes in national pensions law, pension accounting law or pension costs resulting from unforeseen financial market conditions;

Pension assumptions for the "Pay-as-you-go" pension scheme

ANSP/Entity: XXX



% Contribution rate of the ANSP to Pension scheme

Number of pensioners




National pension regulations and accounting regulations

Assumptions

Evidence and sources for the assumptions used for establishing the determined costs and actual data

ii) The cost attributed to this item in the performance plan

Determined costs

Actual costs

iii) The justification why the cost item is considered to be eligible as exemption to the cost sharing arrangements

2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

v) Actions taken to manage the cost risk associated with this item

Total costs exempt from cost-sharing claimed in respect of pension - detailed data and calculations

Justification why the cost item is considered to be eligible as exemption to the cost sharing arrangements

Provide justification why the cost item is considered eligible as cost exempt from cost-sharing.

<Insert here a table with your detailed calculations of the costs exempt from cost-sharing in respect of pension>

Describe the actions taken ex-ante to manage the cost-risk associated with this item, as well as the actions taken to limit the impact of the

unforeseen change on the costs to be passed on to airspace users.

Justify why the “uncontrollable” element is considered outside the control of the entity concerned and explain which are the underlying events or

circumstances which triggered a change to this element.

• Describe how the amounts claimed for exemption to the cost-sharing arrangements have been computed/calculated, bearing in mind that amounts

eligible for exemption are only those relating to the impact of the “unforeseen change” out of the control of the entity concerned;

• Indicate clearly in a table (figures) to be inserted in the next box and in the explanations in this box:

a. The controllable determined elements which are considered for the calculation;

b. The element considered out of control of the entity, of which the variation triggers costs exempt from cost sharing. Indicate the planned value for

this element, as well as its actual value;

c. The amount claimed as exemption in respect of the “uncontrollable” element.

Note: if there are more than one “uncontrollable” element, present the calculation for each separately.

Total costs exempt from cost-sharing claimed in respect of pension


iv) The underlying events or circumstances outside the control of the NSA, ANSP or qualified entity concerned that triggered a variation between

actual and determined costs related to this cost item

Describe how the actual cost attributed to this item is computed/calculated, including the sharing key for allocation of costs to terminal and en-route

charges.

• Describe the relevant national pension regulations and accounting regulations that determined your approach to calculating pension costs, as part of

the determined costs in RP1.

• Describe any changes to the regulations (or new regulations) which occurred in RP1 or which are expected to occur still during RP1, and describe the

impact of these changes on the pension costs.

Present the relevant assumptions used as a basis for setting the determined costs for RP1 as well as a justification for these assumptions, including:

• for the PAYG and DC schemes: the entity responsible and the process for deciding the contribution rate;

• for the DB scheme:

- a description of basis of actuarial valuation (when last valuation done, when next foreseen, by whom, principles of prudence or fair value, etc.);

- a description of the pension fund investment strategy (mix of low and higher risk, by percentage), and who decides on the investment strategy;

- if a funding gap is being closed, description of over how many years and under what assumptions this gap is being closed.

Provide evidence and sources for these assumptions (e.g. extracts from the Business Plan, minutes of meetings, independent auditors’ reports, etc.)

and actual data at annex of the report and list in this box the different documents included in the annex in respect of this item.

Describe how the determined cost attributed to this item in the performance plan was computed/calculated, including the sharing key for allocation

of costs to terminal and en-route charges.



(ii) Interest rates on loans


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Loan 1 description:

Debt amount Loan 1

Interest rate %

Interest amount

Loan 2 description:

Debt amount Loan 2

Interest rate %

Interest amount

Loan 3 description:

Debt amount Loan 3

Interest rate %

Interest amount

Loan 4 description:

Debt amount Loan 4

Interest rate %

Interest amount

Loan 5 description:

Debt amount Loan 5

Interest rate %

Interest amount

Other loans description:

Debt amount - other loans (national currency)

Average weighted interest rate %

Interest amount (national currency)

Total debt amount (national currency) for the charging zone

Average weighted interest rate % (Charging Regulations T1 - 3.7)

Interest amount (national currency)

Assumptions


Provide evidence and sources for these assumptions (e.g. extracts from the Business Plan, minutes of meetings, independent auditors’ reports, etc.) and

actual data at annex of the report and list in this box the different documents included in the annex in respect of this item.

Present the relevant assumptions used as a basis for setting the determined costs for RP1 as well as a justification for these assumptions.

Charging Regulation (EC) No 1794/2006, as amended by (EU) No 1191/2010, Article 11a. 8.(c) and Charging Regulation (EU) No 391/2013, Article 14 2. (a)

(ii) significant changes in interest rates on loans, which finance costs arising from the provision of air navigation services;



ANSP/Entity: XXX




Determined costs

Actual costs


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A




Describe the actions taken ex-ante to manage the cost-risk associated with this item, as well as the actions taken to limit the impact of the unforeseen

change on the costs to be passed on to airspace users.

<Insert here a table with your detailed calculations of the costs exempt from cost-sharing in respect of interest rates on loans>

iv) The underlying events or circumstances outside the control of the NSA, ANSP or qualified entity concerned that triggered a variation between actual

and determined costs related to this cost item


charges.

Describe how the determined cost attributed to this item in the performance plan was computed/calculated, including the sharing key for allocation of

costs to terminal and en-route charges.





b. The element considered out of control of the entity, of which the variation triggers costs exempt from cost sharing. Indicate the planned value for this

element, as well as its actual value;





Total costs exempt from cost-sharing claimed in respect of interest rates on loans


Total costs exempt from cost-sharing claimed in respect of interest rates on loans - detailed data and calculations



(iii) New cost items required by law


Description

Evidence and sources


Actual costs


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


Total costs exempt from cost-sharing claimed in respect of new cost items required by law


(RT 3.10)

Total costs exempt from cost-sharing claimed in respect of new cost items required by law - detailed data and calculations


(iii) unforeseen new cost items not covered in the performance plan, but required by law;

Describe the new cost item not covered by the performance plan, but required by law.

Provide evidence and sources for this new item (e.g. extracts from the law, etc.) at annex of the report and list in this box the different documents

included in the annex in respect of this item.






charges.

Describe how the amounts claimed for exemption to the cost-sharing arrangements have been computed/calculated and provide for the calculations

in a table (figures) to be inserted in the next box.





<Insert here a table with your detailed calculations of the costs exempt from cost-sharing in respect of new cost items required by law>



(iv) National taxation law


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

Tax rate %

Determined tax base on which the tax is applied

Tax amount

Assumptions



Determined costs

Actual costs


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A






Provide evidence and sources for these assumptions (e.g. extracts from the Business Plan, minutes of meetings, independent auditors’ reports, etc.)

and actual data at annex of the report and list in this box the different documents included in the annex in respect of this item.

Describe how the determined cost attributed to this item in the performance plan was computed/calculated, including the sharing key for allocation

of costs to terminal and en-route charges.


charges.



Total costs exempt from cost-sharing claimed in respect of national taxation law - detailed data and calculations





b. The element considered out of control of the entity, of which the variation triggers costs exempt from cost sharing. Indicate the planned value for

this element, as well as its actual value;





<Insert here a table with your detailed calculations of the costs exempt from cost-sharing in respect of national taxation law>

Total costs exempt from cost-sharing claimed in respect of unforeseen changes in national taxation law



(iv) unforeseen changes in national taxation law

Assumptions for non-recoverable tax incurred for the provision of air navigation services


ANSP/Entity: XXX

• Present the relevant assumptions used as a basis for setting the determined costs for RP1 as well as a justification for these assumptions;

• Describe the nature of the tax and the basis on which it is applied;

• Decribe the change in the national tax law.



(v) International agreements


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A

<add as fit>

<add as fit>

<add as fit>

Costs (+)/revenues (-) from international agreements

Assumptions



Determined costs

Actual costs


2012 D 2013 D 2014 D 2012 A 2013 A 2014 A


Total costs exempt from cost-sharing claimed in respect of international agreements - detailed data and calculations


The EUROCONTROL costs stemming from multilateral internation agreement and the Slovakia cannot fully influence the actual spending. Thus these

costs are considered as uncontrollable.



Total costs exempt from cost-sharing claimed in respect of international agreements


3.11)


(v) unforeseen changes in costs or revenues stemming from international agreements



ANSP/Entity: NSA



Please report here any airspace users' comment resulting from the NSA assessment of costs exempt from cost-sharing

User's Comments on NSA Assessment


103

Annex II : Costs exempt reported in the June 2015 en-route reporting tables for States that didn’t submit a dedicated NSA report

1 Cyprus



Pension






2 Denmark


Currency DKK DKK DKK

Pension





Total costs exempted from cost-sharing (223)

3 Germany



Pension (247) (3 066)

Interest rates on loans (2 087) (2 524)

National taxation law 8 2


International agreements (454) 409

Total costs exempted from cost-sharing (2 781) (5 179)

104

4 Italy



Pension



New cost item required by law 6 294

International agreements 24


5 Latvia



Pension




International agreements (25) 27 (43)


6 Malta



Pension





Total costs exempted from cost-sharing (3)

7 Spain Canarias



Pension

Interest rates on loans 66 3 (79)




Total costs exempted from cost-sharing 87 (230) (431)

105

8 Spain Continental



Pension

Interest rates on loans 496 21 (559)

National taxation law 563 1 108 1 325



Total costs exempted from cost-sharing 883 (2 816) (4 821)

106

9 Summary table

Table 5 summarises per item the costs reported by the 7 Member States who did not submit a dedicated NSA Report on costs exempt but reported amounts in the June 2015 en-route reporting tables.

(In 2009 prices '000 EUROS) RP1 Total

Currency

Item Type Pension Interest rates on

loans National

taxation law

New cost item required

by law


Cyprus - - 1.675 - (316)

Denmark - - - - (28)

Germany (3.082) (4.317) 9 - (48)

Italy - - - 5.739 22

Latvia - - - - (38)

Malta - - - - (2)

Spain CAN - (9) 149 - (664)

Spain CON - (33) 2.750 - (8.890)

Total costs exempt reported in the en-route reporting tables

(3.082) (4.359) 4.584 5.739 (9.966)

Table 5: Costs exempt reported in the en-route reporting tables per country and cost item

costs exempt from cost-sharing - transportstyrelsen

Documents