Provision of air navigation services at airports

Terminal air navigation services (TANS)

One crucial aspect in the aviation industry is cost. In most cases, European ANSPs that provide both en-route services and terminal services follow a network approach to pricing and do not separate the cost of provision of services by service, sector and airport served. They follow a cross-subsidisation model to cover losses from the offering of services to airports with low demand. The Irish Aviation Authority (IAA), for example, generates a substantial income from the transatlantic en-route traffic and subsidises the cost for the services to regional airports like Donegal and Connemara airports. Another example is the Polish Air Navigation Services Agency (PANSA), which cross-subsidises the loss of terminal navigation services to airports with low traffic from the profits of airports with high traffic. Arblaster (2018) suggests that economic theory and regulatory agencies support the avoidance of cross-subsidisation. The lack of cost breakdown and the cross-subsidy policy can be barriers to introducing competition in tower control services and a reduction in incentive for cost efficiency.

Airlines complain about the high costs of en-route charges and terminal charges. Cost efficiency is quite critical for an airline - as well as for an airport -to compete and survive in such a competitive market (O’Connell et al., 2020). Most of the ANSPs do not separate the cost of terminal service provision and

Air traffic control policy advancements 89 en-route service provision, and even if they do, the information is not available. In a location-specific pricing principle, remote and regional airports are allocated lower common costs for terminal services because they are price sensitive for carriers in comparison to primary airports (Arblaster, 2018).

Another controversial issue is the connection of ownership and institutional structure on ANSP cost efficiency. Dempsey-Brench and Volta (2018) found that ownership is not directly impacting either the ANSPs’ cost structures nor their cost efficiencies. They also highlighted the need to increase the average size of the ANSPs in order to decrease the cost and lead to agglomeration, as oudined in the SES initiative.

The Dempsey-Brench and Volta (2018) study is one of the few looking into the cost structure of ANSPs and the ownership type. Nevertheless, the lack of separation for en-route costs and terminal costs does not allow for the effective study of TANS and en-route ANS ownership cost efficiency. PWC (2001) in their commissioned study of terminal charges for air traffic control services in 2001 reported that airspace users were concerned about the charging scheme and that there was a lack of transparency in cost information. Nevertheless, that smaller regional airports have higher costs due to low aircraft movement volume is well known.

The major concerns behind the transition of TANS provision are the negotiations about equipment and staffing. Arblaster (2018) highlighted that the initial sunk investment and the access to qualified staff and assets (e.g. CNS infrastructure) can act as barriers of entry into the provision of terminal navigation services. Usually, the ANS equipment belongs to the airport authority and is leased to the TANS provider. As far as staffing is concerned, there is high insecurity in the number of locally qualified ATCOs that will transfer to the new provider and the additional cost of training replacement staff (Steer Davies Gleave, 2017).

ENAIRE is the fourth biggest ANSP in Europe, but in 2009, it noted a 9 per cent reduction in traffic. The Spanish government, after the privatisation of the national airports company (AENA), separated the ATC and deregulated its aerodrome control services in order to lower the 1,700 ATCOs’ costs that were 97 per cent higher than the European average, according to an ACE report (PRU, 2011). The staffing cost in Spain makes up 71 per cent of ATM-CNS costs, whereas in the rest of Europe, they average 63 per cent (Comendador et al., 2012). This also makes the productivity per ATCO (that is measured as cost per hour) appear low.

According to CAPA (2011), Spain planned to privatise TANS in 47 airports but in the end decided to tender only 13 airports, most of which are in major holiday destinations and handle 25 per cent of aircraft movements in Spain. Law 9/2010, Royal Decree 1516/2009, Royal Decree 931/2010, Ministerial Order FOM/1841/2010 and Royal Decree 1001/2010 constitute the basis of the ANSP TANS deregulation in Spain. FerroNATS was awarded the management of nine out the 12 control towers. Thompson et al. (2016) noted that NSL had a proportionate drop in profit relative to revenue, due to lowering theprice charged to effectively compete in winning the TANS contacts. The Spanish government hoped that the reduced cost of providing TANS would attract more aircraft operators to the regional tourism-dependant airports.

The Spanish ATCOs union, USCA, opposed this change. ATCOs are highly skilled labour that enjoy significant market power that many times is exercised via strikes. From 2010 to 2015, there were 95 strikes, totalling 176 strike days (French air traffic controllers went on strike on 95 days), and there were in total 223 days of disruptions (PWC, 2016). ATCOs went on strike and closed the Spanish airspace. ENAIRE filed sanctions against 61 Barcelona ACC ATCOs for the closure of the airspace but dropped them in 2016.

USCA (2016), representing over 90 per cent of the 2,400 controllers working in Spain, criticised the second collective agreement for the privatised towers. The 83 per cent of ATCOs working in those 13 towers had initially rejected the agreement and requested improvements in the working conditions, specifically resting periods (USCA, 2016).

As far as the UK TANS is concerned, the Civil Aviation Authority concluded that the market conditions for a competitive environment in TANS did not exist - a situation that changed after 2011, when TANS was ‘liberalised’ in the airports that were subject to SES performance regulation (Thompson et al., 2016). In 2013, there were 62 organisations certified to provide TANS in the UK (CAP 1004, 2013). Luton Airport conducted the first public tender process for TANS in 2011 and awarded the contract to NSL (i.e. NATS terminal services). Table 5.3 is an overview of the TANS renegotiations and tenders in the UK.

In 2013, Birmingham airport decided to fully insource the TANS under the newly formed Birmingham Airport Air Traffic Ltd (BAATL). The fact that Birmingham airport owned all the relevant TANS equipment at the airport eliminated the need for negotiations and led to an easy transition with no significant impacts on the safety levels (Steer Davies Gleave, 2017). Secondment agreements with NATS Services Ltd (NSL) resolved the staffing concerns and offered increased flexibility to the transition process. The report conducted by Steer Davies Gleave for CAA in 2017 did not reveal any costs related to the change of provider.

In 2014, Gatwick Airport ATC services were opened to tender. According to CAP 1293 (2015), there were 14 providers interested, five submitted pre-qualifying questionnaires, from which Gatwick Airport selected four, three (including NATS) of which eventually submitted compliant bids. A DFS subsidiary, Air Navigation Solutions Ltd, won the contract and started offering services on 1 March 2016.

When a TANS provider is selected, technical operational aspects and economic aspects need to be taken into consideration (Comendador et al., 2012). Monopolistic, revenue-driven entities tend to have little incentive to ensure fees are kept as low as possible while the labour-intensive nature of ANSPs contradicts the minimisation strategy of privatisation to keep costs low, as safety

Table 5.3 Renegotiations and tenders for TANS in the UK

Source: CAP 1293 (2015)

levels are the highest priority and reductions in the workforce may implicate safety levels.

In the UK, airport operators negotiate the TANS cost with the provider and then pass the charges to the aircraft operators as part of the overall airport charge (Thompson et al., 2016). Airport operators can also subsidise the cost of TANS if they wish. In the Republic of Cyprus, for example, the aircraft operators do not pay for TANS, to make the airports more attractive to airlines and support the tourism development of the island.

In summary, creating competition for TANS in airports (main or regional) can have economic and in some cases operational benefits that can benefit airlines, passengers and airport operators. Nevertheless, as recommended by the International Federation of Air Traffic Controllers’ Associations (IFATCA, 2017), organisations that provide ATM services beyond state borders should clearly define the operational and legal implications of providing these services, and controllers should be trained in the implications.