Quo Vadis?

Klaus-Dieter Scheurle, chief executive of DFS Deutsche Flugsicherung, mulls the direction of regulation for air traffic control in Europe

Not many people believe that the ambitious goals of the SES can still be achieved following the present path in the European Union. The ideological conflict about regulation continues. This is reflected in the widely diverging statements made by politicians and aviation experts.

Recently, several FABEC air navigation service providers (ANSP) were criticised for overcharging its customers while allegedly failing to provide sufficient capacity. It was questioned how it was possible for DFS to win a contract in Edinburgh while simultaneously receiving funds from the German government.

The questions seem to be valid, until one has a closer look at the facts that are often influenced by different interest groups. It helps to look at the facts and figures to put the matter into perspective.

Thanks to the recent robust economy, the traffic volume in Europe, especially Germany, has gone up. DFS controlled over three million flights in 2015. By June 2016, DFS controlled 1.491 million flights, a 2.8 per cent increase.

DFS also improved its flight efficiency and delay numbers. In 2015, 98.2 per cent of flights reached their destination without delays caused by ATC (previous year: 97.7 per cent) – this is a new record in Europe. In absolute figures, the average delay in 2015, due to bad weather, capacity bottlenecks at airports or high traffic volume was 19.2 seconds. Only about seven seconds of these were caused by ATC.

Airspace

Direct routings were key. In 2015, the flown route was only 3.7 km longer than the direct route, a deviation of only 1.2 per cent. And this in very complex airspace where up to 10,000 flights are controlled daily. This value leaves scant room for improvement. Nevertheless, DFS continuously works to improve these numbers even more.

Overall capacity values were better than the FABEC targets with 0.10 minutes ATFM en route delay in 2015 and 0.40 minutes in 2016. In the last FABEC customer satisfaction survey, 84 per cent of our customers rated DFS good or very good.

Overall, DFS improved its market position and could lower charges in 2016 for landings, take-offs and en route. Airlines are paying 8.4 per cent less for en route and 12.3 per cent less for terminal services. These reductions are also due to a strict efficiency programme. The aim is to reduce the cost base by €100 million by 2019. In 2015 and the first half year of 2016, DFS achieved its targets. Along with general budget reductions, workforce costs were reduced significantly by natural staff turnover.

This, however, was not enough to offset the costs for occupational pensions. Because of the historically low interest rates, DFS must raise the provisions for pensions. DFS has a shortfall of roughly €1.7 billion. The state funds received are being passed directly on to the airlines in the form of lower charges.

The efficiency programme also focuses on technology. DFS is investing €100 million annually in more automated systems and more efficient operational concepts. In addition to its core business, DFS has a commercial division that offers air navigation services, training, consulting and system development internationally.

Transparency

The aim is to increase revenues by expanding this business, which is completely separate from the core business as is required by Germany’s transparency rules. No charges from ATC provision flow into it. In other words, no cross-subsidiarisation is taking place. To make the separation more transparent, this business will be bundled in a new subsidiary, DFS Aviation Services GmbH (DAS) in 2017. The British subsidiary ANS, which was awarded contracts for services at Gatwick and Edinburgh, will be grouped in DAS.

These facts show that price and service quality are well-received. It also shows the positive impression DFS has made with its operations and performance internationally.

It is, however, correct that the KPAs were not reached in all FABEC states. The Performance Plan set very ambitious targets in all four KPAs for the second reference period. The capacity targets of 0.48 (in 2015) and 0.49 (first half year of 2016) minutes of average ATFM en-route delay per flight were indeed not met with 0.7 and 1.22 minutes.

These – still considerably low levels of delay – were mainly caused by local events, new systems in some states, strikes and other uncontrollable factors such as weather, which has had an increasing effect recently. The European Commission (EC) has still not approved the plans and considers the unit rates an inadequate contribution towards the EU target. Some ANSPs, however, cannot lower their unit rates any further.

This is not the case in Germany. DFS is a top performer in nearly all KPAs. The challenge for DFS and most European ANSPs is the gap between the strict financial regulations of the EU and the large expenditures needed for technologies and personnel. The question is if the current regulation is following the right approach.

Targets

The regulation targets set by the EC are linked with traffic forecasts. These forecasts, however, have proven to be quite unreliable. In fact, traffic volatility impacts all four KPAs. The reference periods are extremely long in view of the unreliability of the forecasts. In addition, ANSPs have no influence on traffic numbers. This puts their financial viability at risk.

The current regulatory framework is obstructed by overlapping responsibilities among the EC, the Performance Review Body, the states and the national supervisory authorities. It aims primarily at reducing the cost-base but fails to recognise local circumstances and interdependencies between the KPAs. Inconsistencies also exist related to charges from 2015 and 2016 and the performance plans, as well as with the EC’s prolonged assessment of these plans, which risks a timely execution.

DFS Klaus-Dieter Scheurle

DFS Klaus-Dieter Scheurle

I strongly advocate a new approach for the third reference period: The capacity target has a considerable influence on the cost base. Thus, the right balance between capacity and costs has to be found, as well as an appropriate means of taking national and local requirements into account. Cost elements caused by national legal requirements should not be negotiable within the Performance Plan development.

We need a regulated market model based on realistic operational requirements at an adequate market-oriented cost, instead of one centralised European regulation.

 

 

 

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