ICAO Strategic Objective Economic Development of Air Transport

ICAO Strategic Objective: Economic Development of Air Transport Infrastructure Management Programme and Users´ Charges Narjess Abdennebi Chief, Economic Analysis and Policy (EAP) Section AIR TRANSPORT BUREAU 27 February 2021 Page 1

Airports and Air Navigation Services Economics • Provision of policy guidance on the economic, financial, organizational and managerial aspects of the provision and operation of airports and air navigation services (ANS) • Development of ICAO policies on user charges • Promotion and implementation of relevant ICAO policies and guidance material • Monitoring regulatory and industry developments and trends, conducting studies and research on related issues • Dissemination of information on the financial situation of airports and ANS • Provision of technical support to other bodies inside and outside ICAO on matters of its expertise areas 27 February 2021 Page 2

ICAO´s activities in this Programme Mandate: Chicago Convention, Doc 9908, Report of the Conference on the Economics of Airports and Air Navigation Services (CEANS) and Assembly Resolutions • Monitor compliance with Article 15 of the Chicago Convention • Monitor and report on the financial situation of airports and ANSPs • Analyse the impact on the associated charges on users • Develop and update ICAO’s policies on charges for airports and ANS • Provide advice and develop guidance • Provide technical support 27 February 2021 Page 3

ICAO’s policies and guidance material • ICAO’s Policies on Charges for Airports and Air Navigation Services (Doc 9082) 9 th edition – 2012 • Airport Economics Manual (Doc 9562) 3 rd edition – 2013 • Manual on Air Navigation Services Economics (Doc 9161) 8 th edition Second half of 2013 • GNSS – ANSEP Report and Council Provisional Policy Guidance • Manual on Privatization in the Provision of Airports and Air Navigation Services (Doc 9980) 1 st edition – 2012 • Case Studies on Commercialization, Privatization and Economic Oversight of Airports and ANSPs: http: //www. icao. int/sustainability/Pages/Eap_ER_Databases_Case. Studies_ ANSPs. aspx 27 February 2021 Page 4

Updated policies on charges and economics manual February 2011: 4 th joint meeting of the Airport Economics Panel and the Air Navigation Services Economics Panel (AEP-ANSEP/4) ICAO’s documents have been updated with new editions of: • Doc 9082, ICAO’s Policies on Charges for Airports and Air Navigation Services • Doc 9562, Airport Economics Manual • Doc 9161, Manual on Air Navigation Services Economics *: expressed in Revenue Tonne-Kilometers 27 February 2021 Page 5

Pillars and basic Principles in Doc 9082 • Policies are not mandatory but States have a moral obligation to adhere to them: Conferences, Council, Assembly • Chicago Convention – Article 15 is the basis for key policies non-discrimination, cost-relatedness and transparency – – – Non-discrimination Avoid proliferation of charges and taxes Balance of interests between providers and users Fairness and equity in cost allocation and charging Economic oversight, performance management and consultation with users 27 February 2021 Page 6

Airport Economics Manual (Doc 9562) • Objectives of economic oversight • Possible forms of economic oversight, from light-handed to more robust approaches • Selecting appropriate forms of economic oversight • Implementation of economic oversight • Dispute resolution 27 February 2021 Page 7

Doc 9562 (cont. 1) Forms of economic oversight – from light-handed to more robust approaches: • Competition law • Fall-back regulation (or “market regulation”) • Institutional requirements (or “checks and balances”) • Price cap regulation (or “incentive-based” regulation): RPI – X • Rate of return regulation (or “cost of service”, or “cost plus” regulation) 27 February 2021 Page 8

Implementation of economic oversight • Surveys on status of implementation of ICAO’s policies on charges • Of 79 States that responded (representing 85% of world traffic), 60 per cent confirmed they have implemented economic oversight for airports and ANSPs • EU’s Directive on Airport Charges includes economic oversight (independent supervisory authority) • Economic oversight not implemented in many countries in other regions 27 February 2021 Page 9

Doc 9562 (cont. 2) Ø Airport ownership, governance, organizational structures – two main types : 1. government or public ownership and control, although many autonomous entities established 2. private interests involved in whole or in part in airport ownership and management Ø Depends on the situation in the State concerned 27 February 2021 Page 10

Doc 9562 (cont. 3) • Full privatization: sale of shares or IPO, stock exchange market • Private participation/involvement, four types: a) management contract b) lease (or concession) c) transfer of minority ownership d) private sector ownership and/or operation of parts of the activities of an airport 27 February 2021 Page 11

Manual on Air Navigation Services Economics (Doc 9161) • Guidance for ANSPs economic oversight and privatization: similar to that for airports • Parts C of Chapters 1 and 2 in Doc 9161 27 February 2021 Page 12

ICAO’s financing policies • The cost basis for air navigation services (ANS) charges • The cost recovery for (ANS) charges • Pre-funding of projects • Financing ANS Infrastructure • GNSS provision and operation 27 February 2021 Page 13

Financing ANS infrastructure Doc 9161 includes guidance on: • Traffic forecasts • Enlisting the services of experts • Economic and Financial analysis, including: • Cost Benefit Analysis • Business case • Economic impact analysis • Financing plan • Sources of financing • Special financing aspects of CNS/ATM systems implementation 27 February 2021 Page 14

ANSEP Report on GNSS ANSEP Report on financial, organizational and managerial aspects of GNSS provision and operation – Section 3, financing: • Funding sources • Cost recovery policy • Determination/allocation of GNSS costs • Compensation to States to cover costs of redundancies and/or relocation • Liability aspects 27 February 2021 Page 15

GNSS: 2007 provisional policy guidance Guidance on the allocation of the incremental costs of more advanced GNSS: • Basic GNSS services free of charge • Costs for more advanced GNSS services allocated for users who derive benefits • Transparent cost allocation • Civil aviation to pay only its fair share 27 February 2021 Page 16

Manual on Privatization in the Provision of Airports and Air Navigation Services (Doc 9980) • Information on developments in ownership and management of airports and air navigation services • Definitions and analyses of available options and possible implications • Issues to be examined by States when considering a change in ownership and management 27 February 2021 Page 17

Case Studies on Commercialization, Privatization and Economic Oversight of Airports and ANSPs • An informative tool for States, policy-makers, policy analysts, and air transport industry practitioners • Describes experiences from States in all regions and include different models of commercialization and economic oversight of airports and ANSPs • Currently covers 26 States • Management and operations of airports that are not economically viable – examples included in the Case Studies – a more comprehensive study will be carried out with the participation of all stakeholders 27 February 2021 Page 18

Users Charges Cost-recovery from users Doc 9082 • States may choose to recover less than full costs • Special considerations for States in developing regions • Gradualism towards full cost-recovery 27 February 2021 Page 19

Taxes and charges: basic rationale • Avoid discrimination • Consider economic contribution • Reduce, to fullest extent, taxes TAXES 27 February 2021 CHARGE Page 20

Cost basis for ANS charges Doc 9082 • Users to pay ANS costs properly allocable to them, including satellite services, provided for and implemented under ICAO Regional Air Navigation Plans • Includes notably costs related to: – Amounts for cost of capital and depreciation of assets – Maintenance, – Operation – Management and administration 27 February 2021 Page 21

Pre-funding of projects Doc 9082 In specific circumstances and with strict safeguards: • Effective economic oversight • Transparent accounting and no revenue diversion • Consultation and agreement with users • Limited in time and lower charges in long-term 27 February 2021 Page 22

Doc 7100: Tariffs for airports and ANS TARIFFS FOR AIRPORTS AND AIR NAVIGATION SERVICES TARIFS D'AÉROPORT ET DE SERVICES DE NAVIGATION AÉRIENNE MANUAL DE TARIFAS DE AEROPUERTOS Y DE SERVICIOS DE NAVEGACIÓN AÉREA Approved by the Secretary General and published under his authority Approuvé par le Secrétaire général et publié sous son autorité Aprobado por el Secretario General y publicado bajo su responsabilidad I INTERNATIONAL CIVIL AVIATION ORGANIZATION ORGANISATION DE L'AVIATION CIVILE INTERNATIONALE ORGANIZACION DE AVIACIÓN CIVIL INTERNACIONAl 27 February 2021 Page 23

Aeronautical charges online List of Airports and ANS charges in 187 States • • • Landing charges Fuel charges Environmental charges, etc. . A competitive intelligence tool A built-in search engine Monthly updates 27 February 2021 Page 24

Training courses on airport users charges + ACI/ICAO Airport User Charges • Professional Certificate course, face-to-face: 5 days • training course on international policies and practices for the establishment of airport charges • AMPAP-elective course (ICAO/ACI Airport Management Professional Accreditation Programme) • During 2011 -2013: 6 courses • 2 more are planned for late 2013 So far: 27 February 2021 303 participants from 95 States Page 25

Funding and financing issues 1. Funding of aviation infrastructure 2. Funding oversight functions 3. Financing the air transport system îTwelfth Air Navigation Conference (AN-Conf/12), held in Montréal from 19 to 30 November 2012 îSixth Worldwide Air Transport Conference (ATConf/6), held in Montréal from 18 to 22 March 2013 Plan of action for the 2014 -2016 period 27 February 2021 Page 26

Outcome of the Sixth Worldwide Air Transport Conference Ø Recommendations in the area of airport and air navigation infrastructure: • funding of oversight functions, including economic oversight of airports & ANSPs • modernization of the air transport system • infrastructure management 27 February 2021 Page 27

Background ATConf/6 Agenda Item 2. 7 Agenda Item 2: Examination of key issues and related regulatory framework 2. 7: Economics of airports and air navigation services a) modernization of the aviation system; b) funding of oversight functions; and c) infrastructure management. 27 February 2021 Page 28

Funding of oversight functions Doc 9082 reminds States that when considering the commercialization or privatization of airports or air navigation services providers (ANSPs), States are ultimately responsible for safety, security and economic oversight of these entities • ATConf/6 concluded that the ICAO guidance on funding of oversight functions at the airport/ANSP level continues to be relevant and should be kept current for use by States according to their needs. • New guidance on sustainable funding of Regional Safety Oversight Organizations (RSOOs) has been developed to be included in the Safety Oversight Manual (Doc 9734) • ICAO will develop guidance on the sustainable funding of the safety and security oversight functions at the State and regional level while monitoring the situation for economic oversight funding. 27 February 2021 Page 29

ATConf/6 Conclusions (2. 7. 3. 1/a)) • ICAO policies and guidance on funding air transport infrastructure through airport and air navigation services charges, through prefunding of projects and through the allocation of global navigation satellite system (GNSS) costs remain valid; 27 February 2021 Page 30

Funding of Infrastructure ATConf/6 concluded – Doc 9082, ICAO’s Policies on Charges for Airports and Air Navigation Services – Doc 9161, Manual on Air Navigation Services Economics can continue to be applied to fund air transport infrastructure 27 February 2021 Page 31

ATConf/6 Conclusions (2. 7. 3. 1/b)) • The relevance of the recently updated ICAO policies and guidance material contained in ICAO’s Policies on Charges for Airports and Air Navigation Services (Doc 9082) and the Manual on Air Navigation Services Economics (Doc 9161) should be assessed in the context of the modernization of the air transport system; 27 February 2021 Page 32

ATConf/6 Conclusions (2. 7. 3. 1/c)) • A multi-disciplinary working group should be established in order to consider the economic and operational challenges associated with the air navigation services upgrades in particular, and with financing the air transport system in general. 27 February 2021 Page 33

Financing the modernization of the aviation system ATConf/6 Recommendation 2. 7/1 b) ICAO, in cooperation with States, international organizations and the industry, will establish a multi-disciplinary working group • to consider the challenges associated with the establishment of operational and economic incentives, such as service priority, • to allow early benefits of new technologies and procedures, as described in the aviation system block upgrade (ASBUs) modules, • to support operational improvements, while maximizing safety, capacity and overall system efficiency, taking into account the specific needs expressed at ANConf/12 27 February 2021 Page 34

Suggested next steps Multi-disciplinary working group (1 st meeting : 20 August 2013) 1. Determine the parameters and definitions of, for example, service priority policies and ascertain the effectiveness of these policies 2. Consider how the policies might be applied in practice 3. Consider how the policies could be reflected in existing ICAO policies and other guidance material AEP/ANSEP determine if and how the existing guidance could be amended to incorporate the findings of the working group Next AEP/ANSEP: 24 to 28 November 2014 NB: The practices have to be consistent with ICAO’s policy on non-discrimination 27 February 2021 Page 35

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