opening the norwegian market for air navigation services (ans) to competition
TRANSCRIPT
Management and technology consultants
Norwegian Civil Aviation Conference
Opening the Norwegian market for
Air Navigation Services (ANS) to
competition
3rd February 2016
1
• Aim and scope of the market under consideration
• Brief overview of key topics
• Interactive discussion on targeted questions
Agenda
2
• Aviation consultancy focusing on Air Traffic Management and
airports
• analytical rigour and in-depth market understanding
underpins all our work
• at the forefront of some of the industry’s most exciting
developments
• Customers include: air navigation service providers, airports,
regulators, government agencies, manufacturing industry and
investors
• Offices in the UK (Headquarters), Dubai and Slovakia. We work
mainly within Europe, but also across the world
• Part of Egis: a $1bn global infrastructure consultancy,
engineering and operations group based in France
About Helios
3
Aim of the study
Part 1Which services, when and where
Part 2How – ie ‘conditions precedent’
To improve the cost effectiveness of air
navigation services whilst maintaining the
standards of servicesAim
4
Scope of ANS under consideration
services to
be opened to
competition
5
0
5
10
15
20
25
30
OS
LO
BE
RG
EN
ST
AV
AN
GE
R
TR
ON
DH
EIM
TR
OM
SØ
MO
SS
/RY
GG
E
SA
ND
EF
JO
RD
TO
RP
BO
DØ
ÅL
ES
UN
D
KR
IST
IAN
SA
ND
HA
RS
TA
D N
AR
VIK
HA
UG
ES
UN
D
MO
LD
E
KR
IST
IAN
SU
ND
AL
TA
KIR
KE
NE
S
BA
RD
UF
OS
S
FL
OR
Ø
HA
MM
ER
FE
ST
SV
ALB
AR
D
BR
ØN
NØ
YS
UN
D
ØR
ST
A V
OL
DA
MO
I R
AN
A
ST
OK
MA
RK
NE
S
LE
KN
ES
VA
DS
Ø
SA
ND
NE
SS
JØ
EN
SO
GN
DA
L
FØ
RD
E
MO
SJØ
EN
SV
OLV
ÆR
LA
KS
ELV
AN
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YA
RØ
RV
IK
NA
MS
OS
SA
ND
AN
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ST
OR
D
SK
IEN
VA
RD
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NA
RV
IK
BÅ
TS
FJO
RD
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SE
N
HO
NN
ING
SV
ÅG
ME
HA
MN
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RO
S
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IK
BE
RLE
VÅ
G
VÆ
RØ
Y
FA
GE
RN
ES
NO
TO
DD
EN
ØR
LA
ND
Millio
ns
Total
Total
The current situation
• Avinor Flysikring designated to provide
• APP services to Dec 2024
• TWR services to Dec 2017
• Avinor AS designated to provide AFIS to
its airports until Dec 2017
• Flysikring is a dominant supplier of ANS
Pa
sse
nge
rs
www.askhelios.com
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Key topics
7
Employment costs for ATCOs
in OPS 38%
Payment for regulatory and
supervisory services
0%
Eurocontrol costs3%
Non-staff operating costs
18%
Depreciation costs5%
Cost of capital 3%
Support staff costs33%
• Staff are the dominant cost in ANS
• A new provider is likely to seek
savings in both staff and overhead
costs
Cost
Flysikring
service
cost
Flysikring
service
cost
New provider
service cost
New provider
overhead
Flysikring
overhead
Flysikring
overhead
Cost
reduction
Total system
cost before
competition
Potential
total system
cost after
competition
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A system cost saving might not be enough to
eliminate the need for subsidy
Currently
absorbed
within
Avinor
Flysikring
ANS
Cost
New Provider
costRevenue
recovery from
users for ANS
System cost
saving for
Norway
Subsidy
Mechanism
Needed
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Boundary?
• Norwegian language is currently a requirement
• Transition period likely to be required (eg 6-12 months)
• Mechanisms needed for transfer/purchase of Operations
Manual/handbook
• Airspace/service boundaries need to be defined
• In Sweden, APP goes up to FL95
Operational aspects
ENR
APP
TWRDistance?
Height?
10
• The current model is for 50% of APP costs to be allocated to
ENR cost base
• It can continue in the context of competition but will require
regulatory oversight
Approach cost allocation
TWR APP ENR
Recovered from airport
SubsidyEnroute
fees
ANS service costs
Recovered by ANS
provider
50% of APP cost
charged to airport
50% of APP cost
charged to ENR
Recovered from
airspace users (TNC)Recovered by Airport
operator
11
• Currently, Avinor Flysikring AS is a
wholly-owned subsidiary of Avinor AS
• Structure might discourage some
potential bidders
• Must avoid cross-subsidy between the
commercial and the monopoly business
• CAA will need additional resources to
oversee this
Institutional structure
12
Surveillance
Data ProcessingFlight Data
Processing
Airport ATC
Tower
Flight
Plans
• New provider needs equipment defined
(and their responsibility for it) to set price
• Airport should own ANS-specific assets
to eases transfer of ANS supplier
• Options are:
• to lease equipment or pay access charge
• allow supplier to propose alternative
options
• Not using the national FDP may
increase coordination costs for the
national ENR provider
• Responsibilities for asset procurement
and improvement must be in the tender
Assets & infrastructure
Surveillance
13
• In Norway, Military has
limited ANS competence
• But several airfields are
of strategic importance
Military requirements
• Does new provider have competence & ability to provide
military services in heightened alert
• May require security clearance to ‘Secret’ level
• Background check on foreign providers
• Foreign provider could cause issues for state security or UN
14
• Incoming provider may rely on transfer of employees –the ‘market’ is limited by requirement to speak Norwegian
• Remote towers may reduce difficulties in attracting controllers to more remote/Northern locations
• Arrangements may need to be put in place to lease controllers during a transition
• Incumbent may also seek to recover sunk training costs, eg
• National ANSP could supply ATCOs to new provider with ‘transfer fee’
• CAA could take over liability for ATCO recruitment and training
• Contingency measures need to be in place to maintain service provision (eg staff don’t transfer or new provider withdraws abruptly)
• Employment rights are complex (eg pensions) and limited by national and EU laws
Personnel
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TWR
• No airspace changes needed
• Good for Remote Towers
• May not be sufficiently attractive at small airports
APP
• Boundary hard to define - likely to mean airspace changes
• Could unbundle TWR/APP efficiencies
• Difficult to cover costs without TWR
TWR & APP
• Attractive to the market
• Efficiencies in multi-license APP/TWR
• Potential to package airports together (combined APP)
• Could unbundle centralised APP efficiencies
• Complicated procurement
• Could split existing TMAs
AFIS
• Lower safety risk
• Accelerate changing busy AFIS to ATC
• Jeopardises Flysikringinvestment in Remote Technology
• May not have sufficient scale to attract bidders
Services
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• Packages of multiple airports will increase
scale and attract bidders
• Better competition (cost, innovation) - bigger
players likely to bid
• Supports a phased approach possible
• Can pool together resources needed for
procurement
• The tendering requires significant knowledge
of ANS on the airport side – can be difficult
for small airports
• The incumbent might not reduce costs until it
loses a contract
Procurement/tendering
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Tender process
Initiation of Tender
Process ManagementTender Planning
Contract Negotiation
Tender Specification and Documentation Evaluation process
Transition to operation
1 to 2+ years in total
www.askhelios.com
18
Open discussion
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Who will save costs if the market is opened to
competition?
A new provider will undoubtedly offer a
lower price service to the airport, but in
the very short term this could be
outweighed at a national level by increased
costs elsewhere (eg to strengthen CAA)…
20
Should requirement to speak Norwegian be
removed?
As long as safety is not compromised,
relaxation of the Norwegian language
requirements would increase the supply of
ATCOS…
21
Would an RT solution be acceptable?
RT provides further cost benefits, and
removes the issues around staff
location or re-location, but it tends to
tie-in the airport…
22
How long should a contract be?
Long enough to give an incoming
provider the opportunity to innovate,
improve and recover its costs. The
minimum will probably be five years…
23
Will the introduction of competition improve
safety?
A new provider has everything to prove
and everything to lose, they will arguably
focus on safety even more than the
incumbent…
24
Would staff be willing to transfer?
The incumbent provider could make
transfer unattractive and make it
difficult for the new provider –
damaging cost saving potential…
25
Where should the boundary between services
be?
This should be considered not only
from the operational perspective but
also for financial and legal reasons. The
incumbent should offer guidance on
this…
26
Who should own ANS assets at the airport?
Can all assets be easily
transferred to the airport…
27
Are airports ready to tender?
The airports will need competence
in ANS in order to run the tender
process smoothly…
28
How will it impact quality of service at the
airport?
A healthy competitive customer/supplier
relationship will promote better service
quality and innovation to enhance the
overall value to the airport.
29
How long would a new ANSP need to takeover
over the service after contract signature?
6-12 months would seem reasonable,
but it will depend on the behaviour of
both suppliers and how quickly any
issues/disputes are resolved (eg by the
CAA)
www. a s k h e l i o s . c o m
30
Any more questions
www.askhelios.com
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Management and technology consultants
James Hanson - Project Manager
Tel: +44 1252 451 654