Malta Performance Plan for Air Navigation Services

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1 Malta Performance Plan for Air Navigation Services Reference Period 1 1 st January 2012 to 31 st December 2014 National Supervisory Authority Civil Aviation Directorate Transport Malta

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3 Document Approval The National Performance Plan for Reference Period 1, as revised, has been prepared by the Air Navigation Services Unit within the Civil Aviation Directorate (Transport Malta) in accordance with the Single European Sky Performance Scheme Regulation (EC) No. 691/2010. The Minister for Infrastructure, Transport and Communications, as the Minister responsible for civil aviation, agrees to the adoption of the Malta National Performance Plan for Air Navigation Services. Authority Name and Signature Date Minister for Infrastructure, Transport and Communications Austin GATT 9 th January

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5 Executive Summary Introduction This document is Malta s National Performance Plan (NPP) for Air Navigation Services (ANS). The NPP covers the First Reference Period (RP1) of the Single European Sky (SES) Performance Scheme which runs from 1 st January 2012 to 31 st December Context of the NPP The NPP has been developed as part of Malta s commitment to the improvement of safety and economic performance of Air Traffic Management (ATM) in general. The NPP is a result of the full collaboration of the Civil Aviation Directorate (CAD) with the Air Navigation Service Providers (ANSPs) that have been certified. Malta recognises that RP1 starts the transition from a full cost recovery scenario to an incentive-based regulation of costs, capacity and quality of service. The NPP addresses the requirements of the agreed Performance Scheme and the EU-wide targets. In setting targets and incentives in Key Performance Areas (KPAs), Malta strives to achieve the right level of challenge while ensuring safe operations and avoiding undue risks to the provision of services. Although in Malta there is no provision of services by the military, Malta is committed to cooperate with other military authorities in providing services to military aircraft for better management of the airspace over its Territory and the airspace within the Malta Flight Information Region (FIR). There is no military ANSP providing services in the Malta FIR. However, Malta is committed to implementing the Flexible Use of Airspace (FUA) concept to the extent possible. Malta is cooperating with other EU Member States (Cyprus, Greece and Italy) in establishing a Functional Airspace Block (FAB) which is called BLUEMED. However, the four States have decided that, since BLUEMED is not yet formed, each State should submit its own NPP with a view to developing a FAB Performance Plan for the Second Reference Period (RP2). The NPP has been developed in the context of the present economic conditions and the unrest in the Mediterranean region resulting from the political situations in Egypt, Tunisia and, in particular, the civil war in Libya. They reflect the recent downturn in civil traffic operating in the Malta FIR which is predominantly a north/south flow. Although this may be a temporary situation, one cannot predict with a degree of certainty how long it will take to be resolved. Although the No Fly Zone over Libyan Airspace sanctioned by the United Nations Security Council (UNSC) has now been lifted, the recovery to normal traffic levels will require considerable effort and time. 3

6 Targets and incentives The NPP sets out Malta s performance targets for en-route capacity and cost efficiency. It also demonstrates their contribution and consistency with the EU-wide performance targets that were published in the Official Journal of the European Union on 23 rd February 2011 (2011/121/EU). The NPP allocates accountability for meeting the performance targets between Malta Air Traffic Services Ltd. (MATS), the Meteorological Office (MET) which forms part of Malta International Airport plc. (MIA) which is the aerodrome operator and the CAD as the National Supervisory Authority (NSA). In developing the NPP and in particular these targets, the CAD has considered the interests of users in relation to the range, availability, continuity, cost and quality of services. The CAD has taken into account the different elements of the total economic en-route costs including the costs of capacity provision and ATFM delays and has also consulted users. The CAD has also considered the fact that financial incentives will encourage efforts to improve performance. When setting these targets, the CAD has taken into account historical and forecast traffic data as well as the total costs of service provision. Performance Indicators The Performance Scheme does not require any national targets for safety or the environment during RP1 although an EU-wide target has been set for environment. However, safety and environment indicators will be monitored by Malta and the European Commission respectively. Implementation of the NPP during RP1 The CAD, as the NSA, will monitor the performance of MATS and MET against the set targets on a regular basis with a view to submitting an annual report to the European Commission. Preparation for RP2 Since the BLUEMED FAB will be established by the end of 2014, Malta will be collaborating with its BLUEMED partners in producing a FAB Performance Plan for RP2. Consultation In developing the NPP, the CAD has consulted with all interested stakeholders. The draft NPP was circulated for comments by stakeholders. Details of the stakeholder consultation process and the comments received from stakeholders are shown in Annex D. 4

7 Contents Document Approval... 1 Executive Summary Introduction The Situation Purpose and scope of the NPP The current economic state of affairs Overall assumptions for RP GDP and inflation data Traffic forecast Malta s approach to safety Institutional context for ANS provision Strategic context of the NPP Stakeholder consultation National Performance Targets and Alert Thresholds Performance Targets and Alert Thresholds Introduction Safety Capacity Cost-efficiency Environment The safety KPIs The capacity KPI The cost-efficiency KPI Determined en-route costs per year Determined en-route ANS costs in real terms Real en-route determined unit rate Terminal ANS costs En-route service units per year Return on equity Capital expenditure Investments and projects The environment KPI Alert Thresholds for RP Consistency with EU-wide targets Safety Effectiveness of safety management Application of the severity classification scheme Reporting of Just Culture Capacity Cost-efficiency Environment Interrelations and trade-offs. 25 5

8 2.3 Carry-overs from previous years Parameters for risk sharing and incentives Contribution of the Accountable Entities Accountable entities Malta Air Traffic Services Ltd. (MATS) Share in the national targets and individual performance targets Safety Capacity Environment Cost-efficiency Incentive mechanisms to be applied The Meteorological Office (MET) Share in the national targets and individual performance targets Cost-efficiency Incentive mechanisms to be applied The Civil Aviation Directorate (CAD) Share in the national targets and individual performance targets Safety Capacity Environment Cost-efficiency Incentive mechanisms to be applied Civil-military dimension of the NPP FUA Level FUA Level FUA Level Analysis of sensitivity and comparison with previous performance plans Sensitivity to external assumptions Comparison with previous performance plans Implementation of the NPP. 37 Annex A - Reporting Tables.. 39 Annex B Extracts from ANSPs Business Plan Annex C Extracts from State Safety Programme 51 Annex D Public Consultation Material D.1 Stakeholder consultation of the first draft NPP D.2 Stakeholder consultation meeting and approval process 54 6

9 List of Tables Table 1 - Accountable entities for National Performance Targets in RP Table 2 - Traffic volumes in the Malta FIR 10 Table 3 - Total service units between January and the end of April Table 4 - STATFOR data of total service units.. 12 Table 5 GDP and inflation data Table 6 - Accidents and serious incidents in the Malta FIR Table 7 - Performance Targets for the safety KPA during RP Table 8 - Performance Targets for the capacity KPA during RP Table 9 - Performance Targets for the cost-efficiency KPA during RP Table 10 - Performance Targets for the environment KPA during RP Table 11 - Determined en-route ANS costs in nominal terms by nature.. 20 Table 12 - Determined en-route ANS costs in real terms 20 Table 13 Real en-route determined unit rate.. 21 Table 14 National costs for terminal ANS in nominal terms Table 15 Planned expenditure by MATS between 2011 and Table 16 - Alert Thresholds for RP1 24 Table 17 Carry-overs from the years before RP1 26 Table 18 Delay values between 2008 and Table 19 - Determined en-route ANS costs for MATS by nature Table 20 - Determined en-route ANS costs for MATS by service Table 21 - Determined en-route ANS costs for MET by nature.. 29 Table 22 - Determined en-route ANS costs for MET by service Table 23 - Determined en-route ANS costs for the NSA by nature Table 24 - Determined en-route ANS costs for the NSA by service.. 32 List of Figures Figure 1 - Area in which MATS provides services Figure 2 Malta Air Traffic Services Ltd. organisation chart

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11 1. Introduction 1.1 The situation Purpose and scope of the NPP The main purpose of the SES Performance Scheme is to promote improvements in the provision of European ANS by setting performance targets at EU level and committing EU Member States to set national or FAB targets. The Performance Scheme requires an NSA to produce a NPP which sets targets, incentives and penalties in four KPAs, namely safety, capacity, cost-efficiency and the environment. Targets are not set for all the four KPAs for RP1 but the NPP explains how the set targets might be achieved and the associated mechanisms. The Performance Review Body (PRB) has been established to monitor the development of the Performance Scheme. This document sets out Malta s NPP for ANS during RP1 ( ) and has been prepared by the Air Navigation Services Unit within the Civil Aviation Directorate (Transport Malta) in accordance with the Performance Regulation (Regulation (EC) No. 691/2010 laying down a performance scheme for air navigation services and network functions and amending Regulation (EC) No. 2006/2005 laying down common requirements for the provision of air navigation services) and guidance material for national/fab performance plans issued by the PRB in December The NPP covers the Malta Flight Information and Upper Information Regions for RP1. For RP2 ( ) it expected that a FAB Performance Plan will be developed in conjunction with the other BLUEMED States which will cover the airspace of the entire BLUEMED FAB. In accordance with the Performance Regulation, the NPP establishes targets for capacity and cost-efficiency in relation to en-route ANS. The entities which are accountable for contributing towards achieving these set targets are the following: (a) (b) (c) MATS, which has been certified for the provision of ATS, CNS and AIS and which has also been designated as the ATS provider in the Malta Flight Information Region; MET, which has been certified for the provision of meteorological services to air navigation and which has also been designated as the MET provider in the Malta Flight Information Region; and The CAD, which is a Directorate within the Authority for Transport in Malta and which is the National Supervisory Authority (NSA). 9

12 Table 1 shows how each of the three entities are accountable for each of the two Performance Targets National Performance Target Accountable Entities Capacity in en-route Malta Air Traffic Services Ltd. (MATS) Cost-efficiency of en-route ANS Malta Air Traffic Services Ltd. (MATS) The Meteorological Office (MET) The Civil Aviation Directorate (CAD) Table 1 - Accountable entities for National Performance Targets in RP1 The NPP also defines some Performance Indicators (PIs) in the four KPAs, where possible. Furthermore, the NPP gives an insight of future plans in order that ANSPs may meet the requirements of RP2 although, given the current situation in the Mediterranean basin, it is very difficult to foresee what the future scenario will be like The current economic state of affairs The current unrest in some North African States and, in particular, the civil war in Libya has severely affected the volume of traffic that normally transits through the Malta FIR both in the north/south and in the east/west flows. For the past few years, MATS has registered a constant increase in the volume of traffic in the Malta FIR. Table 2 shows the changes in traffic volumes between 2000 and , , , , Table 2 - Traffic volumes in the Malta FIR 10

13 During 2010, the volume of en-route traffic in the Malta FIR increased by 17% and the predictions were that this trend would be maintained. With the establishment of the No Fly Zone over Libya on 31 March 2011 as a result of UNSC Resolution 1973 (2011), the status of the Libyan Territorial airspace and the Tripoli FIR has changed into a tactical military airspace. In addition, operations by NATO under Operation Unified Protector have necessitated the use of most of the Malta FIR by military traffic for transit, in-flight refuelling and other military operations. This has negatively impacted civil aircraft traffic volumes in the Malta FIR. Due to the declaration of this No Fly Zone, the period between January 2011 and March 2011 is not indicative of the current situation. Chargeable service units (CSUs) for the period January to October 2011 have decreased by 4% when compared to the same period last year. Meanwhile, military traffic has increased substantially to the extent that Malta ACC has had to operate on maximum en-route configuration for almost ten hours daily in order to offer its full support to NATO s Operation Unified Protector. In fact, non-csus have increased to 13% during 2011 when compared to the yearly average of 3%. Additional staff has also been called in to cater for this increase in military traffic. Consequently, MATS costs with respect to wages, especially overtime, have increased. Table 3 shows data obtained from EUROCONTROL on the monthly follow-up of CSUs. JAN FEB MAR APR MAY JUN JUL AUG SEP OCT ,687 30,790 36,743 37,810 35,351 35,665 41,858 48,251 44,396 42, ,029 39,343 50,078 29,192 28,389 27,196 35,319 44,017 38,713 41,839 Increase/ Decrease (-) 3,341 8,553 13,335-8,618-6,963-8,469-6,539-4,234-5,684-1,125 % Movement 10% 28% 36% - 23% - 20% - 24% - 16% - 9% - 13% - 3% Table 3 Chargeable service units between January and the end of October 2011 Historical data (Table 2) demonstrates clearly that while the situation was normal, even during the recent global recession, there was positive cost-efficiency throughout and traffic increased constantly. There was also a constant increase in performance, as can be verified in the Performance Review reports of the last few years. Although the level of traffic has dropped, this has not affected the TSUs in the same way due to a very strong growth in March However, there has been a decrease of the percentage CSUs compared to the TSUs. For the months January to October 2011, less than 87% of the TSUs were chargeable compared to the usual 97%. 11

14 Table 4 shows STATFOR data (May 2011) of the TSUs for 2010 with the estimated base forecasts of MATS between 2011 and 2014, as at November Total service units , , , , ,164 % change 3% 8.5% 8% 3.2% Table 4: Estimates of total service units 1.2 Overall assumptions for RP1 In the development of the NPP, while both actual and forecast official data for the yearly inflation has become available, some assumptions have been necessary GDP and inflation data GDP in million euros and projected growth rates obtained from official Government sources and inflation data (official actual and forecast data) obtained from IMF publications, are shown in Table A 2010 A 2011 F 2012 F 2013 F 2014 F Nominal GDP m m 4.7% 4.5% 4.8% 4.7% Real GDP m 2.4% 2.3% 2.6% 2.8% Inflation 1.8% 2.0% 2.7% 2.3% 2.4% 2.4% Table 5 - GDP data and inflation forecasts Traffic forecast One very important assumption has been in forecasting traffic. While STATFOR data has been considered, this was deemed to be quite optimistic and for the purpose of establishing the determined unit rate for the years , the original STATFOR forecasts that were issued in September 2011 were revised downwards. 12

15 1.2.3 Malta s approach to safety At present, Malta is in the process of developing its State Safety Plan. This is expected to be ready by the end of The CAD continuously monitors aviation safety performance and continues to improve safety performance monitoring. Accidents and serious incidents involving aircraft operated by Maltese operators in the Malta FIR are rare events. Table 6 shows statistics of accidents and serious incidents involving both civil and military aircraft occurring in the Malta FIR during the past few years. Year Serious incident Accident Table 6 - Accidents and serious incidents in the Malta FIR Institutional context for ANS provision The CAD is a Directorate within the Authority for Transport in Malta which has been established as a body corporate to assume the functions of all modes of transport (land, sea and air). The relevant Act has been published with effect from the 1 st January Consequently, the present arrangements are not expected to change during the course of RP1. The CAD falls under the Ministry for Infrastructure, Transport and Communications. The CAD has been designated as the NSA and is responsible for the regulation of ANSPs. In Malta, all air traffic management services (air traffic control for en-route, approach, tower and ground as well as flight information service and alerting service) are provided by MATS. Search and Rescue services are provided by the Armed Forces of Malta. MATS is a 100% Government-owned limited liability Company set up on the 27 th March It assumed control of all air traffic and technical services on the 1 st January By agreement with ENAV (the Italian Air Traffic Services Provider), MATS also provides en-route services to all aircraft in the portion of the Rome FIR encompassed by the blue line and the Malta FIR boundary in Figure 1 which shows the area in which MATS provides services. In this airspace, which forms part of the Malta West Sector, MATS uses the same procedures and communications as those used in the Malta FIR. Since the Italian island of Lampedusa to the south west of Malta is located within the Malta FIR, MATS also provides these services to en-route traffic over this part of the Italian territory as well as to traffic climbing out of, or descending into, Lampedusa. These services are provided under an agreement between ENAV and MATS which is approved by the respective civil aviation authorities. 13

16 Figure 1: Area in which MATS provides services There is only one international aerodrome in Malta, Malta International Airport situated at Luqa. The aerodrome operator is Malta International Airport plc. (MIA) The Company was registered on the 16 th May 1991 and commenced operations on the 1 st January MET, which forms part of MIA, provides meteorological information for air navigation to civil, military and general aviation at Malta International Airport and also issues forecasts and warnings for the Malta Flight Information Region. Malta s en-route unit rate comprises an element of cost for regulatory functions provided by the CAD, services provided by MATS and those provided by MET Strategic context of the NPP Malta is committed to the success of the SES programme, particularly those of the SES II package which are intended to improve ATM performance the Performance Scheme, Network Management and FABs. Malta is also committed to the overall improvement of European ATM. 1.3 Stakeholder consultation In developing the NPP, the CAD has consulted with all interested stakeholders. Although no formal meetings with stakeholders have been held as a result of lack of interest from these stakeholders to an invitation issued by the CAD, some comments have been received. Minor amendments have been made to the original proposed NPP following those comments that were received during the consultation period. Other comments, notably those from Air Malta and from IATA have also been addressed. Comments from IATA on the determined unit rate were considered as not being reasonable due to consistently low unit rate for Malta for many years. IATA also commented on additional staff for the CAD. IATA was informed that additional staff is necessary to cater for the ever increasing work of the NSA and for succession. Details of the stakeholder consultation process, the list of stakeholders consulted, the comments received from stakeholders and the actions taken by the CAD following these comments are shown in Annex D. 14

17 2. National Performance Targets and Alert Thresholds 2.1 Performance Targets and Alert Thresholds Introduction Safety National performance targets for three of the four KPAs (safety, capacity and costefficiency) have been set and these should be achieved during RP1. KPIs for environment will also be monitored during RP1. As shown in Table 1, Section 1.1.1, MATS is accountable for the capacity and cost-efficiency KPAs during RP1 while MET and the CAD are accountable for the cost-efficiency KPA only. Table 7 shows the Performance Targets for the safety KPA during RP1. KPA KPI Performance Target Safety Effectiveness of Safety Management Application of the Severity Classification Scheme Reporting of Just Culture Achieving full compliance in all study areas with Level 4 of the EUROCONTROL Safety Maturity Survey Methodology. Use of the Risk Analysis Tool for ATM occurrences of significance, based on best practices and lessons learnt. Full review of the current occurrence reporting system and investigation process. Table 7 - Performance Targets for the safety KPA during RP Capacity MATS does not generate delays except under unforeseen circumstances. Any delays that may be experienced are imposed by third parties and are beyond the control of MATS. Table 8 shows the Performance Targets for the capacity KPA during RP1. KPA Capacity KPI En-route ATFM delay in minutes per flight from all causes Performance Target Table 8 - Performance Targets for the capacity KPA during RP1 15

18 2.1.4 Cost-efficiency Table 9 shows the Performance Targets for the cost-efficiency KPA during RP1. KPA KPI Performance Target Cost-efficiency National determined unit rate for en-route navigation services MATS undertakes to increase its cost efficiency by controlling its chargeable costs while at the same time continuing with its continuous investment in human and capital resources. MATS commits itself to review and scrutinise its chargeable costs in order to further control its expenditure, other things being equal. In the case of MET, costs are expected to remain at approximately the same levels throughout RP1. The CAD is expecting a material increase in operating costs and staff costs due to employment of more staff. The CAD is also expecting to make some structural changes to the premises in The cost relevant to en-route will be allocated accordingly. Today, Malta s unit rate is very competitive. However, this is expected to increase. Malta is the cheapest in its comparator group and is far better that the -3.5% for the EU-wide cost-efficiency target. Table 9 - Performance Targets for the cost-efficiency KPA during RP Environment Table 10 shows the Performance Targets for the environment KPA during RP1. KPA KPI Performance Target Environment Horizontal en-route flight efficiency Free routing on certain routes from 2013 onwards. Continuous climb and continuous descent procedures, as well as RNAV procedures in the Malta TMA, are planned from 2012 onwards. Table 10 - Performance Targets for the environment KPA during RP1 16

19 2.1.6 The safety KPIs Malta has an excellent safety record. The CAD, as Regulator, and MATS, as ANSP, insist on maintaining the present high safety standard and continuously strive to improve safety performance. As stated in Section above, Malta expects to have a State Safety Plan in place by the end of However, Malta gives great importance to safety and the CAD applies a total system approach by continuously monitoring all areas. The NSA applies a continuous oversight process over the two ANSPs by a series of audits and inspections. Since the certificates given to both ANSPs are valid for a period of six years, an audit plan spanning this six-year period of validity has been prepared. Audits and inspections are spread out over this period so that all areas are covered during the first three years with a full audit planned during the fourth year. During the fifth year, audits and inspections are carried out in any area that is identified as requiring further attention with a view to conducting another re-certification audit during the sixth year. Inspections are carried out at on-aerodrome (meteorological office, control tower, radar site and navigational aids) and off-aerodrome sites (navigational aids and radar site). The NSA ensures that any issues arising out of audits and inspections are rectified by the ANSPs. The NSA continuously monitors all changes to procedures and systems and ensures that the necessary certification processes have been carried out. According to the latest safety maturity survey conducted in 2010, MATS has achieved a very good level of maturity indicating that MATS is on the threshold of achieving Level 4 of safety maturity. The results of the EUROCONTROL Safety Culture survey which was conducted between February and August 2011, gave rise to action plans which will be implemented during RP1. The use of the Risk Assessment Tool methodology has already been implemented by MATS and all MATS Safety Investigators have been trained on the application of the tool by EUROCONTROL in February This tool is undergoing improvement on a continuous basis by EUROCONTROL and feedback is taken on board by MATS to improve the process. MATS receives all upgrades to the tool and these are forwarded to MATS investigators for feedback. All reports meeting the criteria of ATM occurrences as outlined in ESARR 2 are being assessed by the tool. MATS is also reviewing their current occurrence reporting system with a view to improving it even further. In addition, Malta already enjoys a high level of maturity in Just Culture in which front line operators are encouraged to report incidents. Those reporting will not be punished for actions, omissions or decisions taken by them that are commensurate with their experience and training. However, gross negligence, willful violations and destructive acts are not tolerated. 17

20 The principles of Just Culture are applied within MATS on an ongoing basis. Surveys, awareness sessions are held on a regular basis in order to continuously improve Just Culture awareness within the organisation. This is an ongoing process. Improvements to the feedback mechanisms on occurrence reporting have been made. The CAD also applies the principles of Just Culture and encourages all those who are involved in any type of incident to report the occurrence so that all records are kept up to date and trends may be identified. The CAD ensures that the identity of all those who submit reports is not disclosed and also ensures that ANSPs do not take disciplinary action against those who submit voluntary reports when it is evident that there has not been any wilful violation, destructive act or gross negligence. Safety levels for CNS have also been established. These are audited by the NSA. Operational safety monitoring and data collection is being done both by MATS and by the NSA. However, operational safety levels will be established as soon as the traffic situation returns to normality because the present traffic levels may not give a good indication of the situation. The CAD, as the NSA appointed by the State as being responsible for the oversight of service provision in Malta, continuously monitors ATM occurrences (operational and technical), as well as other occurrences which are reported by other Units within the CAD and third parties. The NSA keeps record of all ATM occurrences in the ECCAIRS database in accordance with European Regulation. All occurrences are analysed and any necessary actions that may be required are also recorded. Minor occurrences are investigated by the NSA when necessary while serious incidents or accidents are investigated by the Bureau of Air Accident Investigation (BAAI) which is an independent body under the Ministry for Infrastructure, Transport and Communications. Effective communication between the BAAI, the CAD and the ANSPs is in place. The ANSP has its own internal investigation process and investigates occurrences in line with ESARR 2 rev 3.0 Malta s safety policy will not be compromised at any stage even when changes are to be implemented towards increasing capacity, cost-efficiency and the environment. The safety policy already requires any change to be justified and when necessary, the relevant risk assessment has to be carried out by involving all interested parties. The CAD continuously monitors ANSPs so that safety is assured at all times The capacity KPI Malta ACC has sufficient capacity to meet expected demands during RP1. MATS does not generate delays except when unforeseen circumstances such as system outages would necessitate contingency measures to be applied or due to other circumstances that are beyond the control of the service provider, like adverse weather conditions. Although aircraft operating in the Malta FIR have experienced delays, these normally originate from outside of the Malta FIR and are generated by third parties. Malta does not have any capacity problems so far and none are expected during RP1. 18

21 2.1.8 The cost-efficiency KPI The ANSP has little say over the actual amount of CSUs due to Malta s geographical location at the southern border of the EU and also due to the fact that other neighbouring States are not bound to the same charging regulation as EU Member States are. However, it is in a position to exercise control over the chargeable costs. Consequently, the ANSP is committing itself to carrying out a scrutiny exercise of its controllable costs and to closely monitor these costs so as not to upset the competitive unit rate that Malta has set in the past years. This will be done without hindering the continuous efforts being made by MATS in providing a safe and efficient service while adhering to the on-going programme of continuous investment in its human and capital assets. This commitment to monitor costs is also being made keeping in mind the adverse impact caused by the imposition of the No Fly Zone over Libyan airspace as a result of which no civil traffic was allowed to overfly, depart from or land in Libya. Additionally, the predominant traffic flow in the Malta FIR is on a north/south axis and only military traffic was allowed to operate in the No Fly Zone. The reduction of civil traffic within the Malta FIR has been very significant and it is thought that recovery to the normal traffic levels may be slow. STATFOR data for Malta is considered too optimistic because this data incorporates traffic levels experienced during February and March 2011 which do not reflect a true picture of traffic for the rest of 2011 due to the Libyan crisis. Consequently, traffic levels will be re-assessed during 2012 with a view to revising the situation and obtaining a more sensible traffic forecast. As indicated above in Section 1.2.1, one important assumption that was taken into consideration was that concerning inflation. Official inflation figures have been obtained from IMF official publications. Malta s unit rate has been consistently competitive for a number of years. Between 2007 and 2011, Malta decreased its unit rate by 34%, including a 19% decrease for Effective cost control at MATS has resulted in a cost reduction of 12% between 2007 and 2011 but the forecasted reductions in operating costs in 2010 were too optimistic. The actual costs for 2010 were significantly higher than those projected for As a result of the 19% reduction in the unit rate and to a lesser extent the 4% loss of traffic due to the Libyan conflict, the year 2011 is expected to end up with an operating cash loss of 23% for MATS. The main drivers contributing towards an increase in costs for the years 2012 to 2014 were the following: (a) higher operating costs due to training for 10 new controllers and increased insurance premium as well as other increases in utility services; (b) staff costs resulting from the recruitment of 10 new controllers, the filling of managerial posts (Head ATC Systems, Head Standards & Performance, Head ASM and Head HR) and the conclusions of negotiations with trade unions including adjustments for increases in the cost of living; (c) depreciation costs which are planned to increase due to significant capital expenditure; and (d) cost of capital which is planned to increase due to the above-mentioned capital expenditure which is planned to be financed entirely from bank borrowing at commercial rates which, inevitably, increase interest costs. 19

22 2.1.9 Determined en-route costs per year Table 11 shows the determined en-route ANS costs in nominal terms as per December 2011 Revised Performance Targets. ANS en-route costs by nature 2010 F 2010 A 2011 F 2012 F 2013 F 2014 F Staff Other operating costs Depreciation Cost of capital Exceptional items Total costs Total Staff Other op. % n/n-1 % n/n-1 % n/n % 38.5% 2.0% 1.3% -7.3% -21.1% 8.6% 6.0% -19.1% 41.8% --2.0% 1.3% Table 11 - Determined en-route ANS costs in nominal terms by nature Determined en-route ANS costs in real terms Table 12 shows the conversion of the determined en-route costs from nominal terms into real 2009 terms. Total determined costs in nominal terms 2010 F 2010 A 2011 F 2012 D 2013 D 2014 D Inflation % 1.9% 2.0% 2.7% 2.3% 2.4% 2.4% Inflation index (100 in 2009) Total determined costs in real 2009 terms Table 12 - Determined en-route ANS costs in real terms

23 Real en-route determined unit rate Table 13 shows the real en-route determined unit rate at 2009 prices in euros. Total costs In real terms Total en-route service units Real en-route determined unit rate (at 2009 prices) 2009 A 2010 A 2011 F 2012 D 2013 D 2014 D % n/n % % 24.32% -7.66% -4.02% EU-wide target Table 13 Real en-route determined unit rate Terminal ANS costs Malta has one international airport. In 2010, the number of commercial air transport movements (take-offs and landings) amounted to 32,488. Having less than 50,000 movements per year, Malta does not apply terminal charges and continues to apply this threshold in order to exempt its air navigation service providers in accordance with Article 1(5) of Regulation (EC) No. 1794/2006 laying down a common charging scheme for air navigation services. For the purpose of the NPP, Table 14 gives a breakdown of the terminal ANS costs per entity in nominal terms as per December 2011 Revised Performance Targets A 2010 A 2011 F 2012 D 2013 D 2014 D MATS MET CAD (NSA) Total terminal costs Table 14 National costs for terminal ANS in nominal terms 21

24 En-route service units per year Data for en-route service units per year for 2010 with base forecasts between 2011 and 2014 is shown in Section (Table 4) Return on equity A return on equity of 4.8% is considered to be a reasonable return on investment. However, if the possibility of a reduction in the cost of capital arises, this will be revised Capital expenditure Between 2011 and 2014, MATS plans to spend about 11 million in capital expenditure, distributed as shown in Table m 4.7m 2.6m 0.3m Table 15 Planned expenditure by MATS between 2011 and Investments and projects (a) MATS plans to make operational and technical improvements as well as structural changes to the premises. The following investments are planned: (i) 4.8 million towards the installation of two Mode S radars procured in 2009 as part of the surveillance strategy of MATS for the short to long term. Works on one of the radars started in late 2011 while in regard of the second radar, MATS is still waiting for land allocation from the local planning authorities. This investment is required for MATS to be conformant with EU Regulations and to enable MATS to adopt a multi-sensor picture at the controller positions thus enabling the application of a minimum radar separation of 5NM in the en-route and terminal sectors; (ii) 6.5 million towards an ATM System upgrade planned to start in 2011 and to end in 2013 to replace the more important elements of the system such as the Flight Data Processor. The current ATM system is approaching the end of its life cycle and significant upgrades are required to make the system capable of meeting the immediate and long term ATM requirements. This also stems from a EUROCONTROL report on the improvement of the ATM system in Malta; (iii) 1 million towards the procurement of a new Voice Communication System for Malta ACC which is planned to replace the existing system in 2013 and which will cater for new developments. Although the current system is very reliable, it has been in use for more than 17 years. Consequently, in technological terms, it will soon become obsolete and requires replacement; 22

25 (iv) (v) 250,000 towards the procurement of a new en-route VOR station in 2012 to replace the present VOR whose performance has started to deteriorate. The current VOR is about 20 years old. Upon the advice of the manufacturer and based on calibration results, the equipment is approaching the end of its life cycle. Given the geographical situation, a replacement is considered as being a priority; and 630,000 towards the construction and the finishing of a substantial extension to the Technical Section facilities in 2011 and An extension to the Technical Section is required to house new ATM system equipment. In order to better utilise its workforce, MATS has centralised the Technical Section and all outstations are now remotely manned. This has necessitated more space to house the centralised staff. (b) (c) MET is in the process of installing an automated weather observing system. This should be completed in 2012 at a cost of 250,000. At present, MET does not plan to make any further major investments during RP1. However, as a result of the planned establishment of the BLUEMED FAB, there may be the need for MET to make some investments during RP1 in order to harmonise all MET services. At the moment, these have not been identified. The CAD has started a recruitment process to increase its staff compliment from the present 25 to about 40 in Consequently, the CAD plans to make serious structural alterations to its premises in order to accommodate this additional staff as well as to improve the present buildings for reasons of health and safety. A budget of 200,000 has been allocated for these structural alterations The environment KPI Many direct routings have already been implemented between Malta and Italy and further improvements in the route network are planned. The Free Route Network programme, originally planned for 2012, has been put on hold due to the Libyan crisis. Continuous climb and continuous descent procedures, as well as RNAV procedures in the Malta TMA, are being devised with a view to improving traffic efficiency, fuel burn, noise, gaseous emissions, cockpit workload and controller workload. 23

26 Alert Thresholds for RP1 The alert thresholds for each KPI are shown in Table 16. KPA Safety Capacity Costefficiency KPI Effectiveness of Safety Management En-route ATFM delay in minutes per flight for Malta from all causes National determined unit rate for en-route navigation services Alert Threshold Level 3 Level 3 Level The National determined unit rate must not be less than 20 and not higher than 35 Table 16 - Alert Thresholds for RP1 2.2 Consistency with EU-wide targets Safety An overview of the activities that Malta plans to conduct in the separate KPAs in order that effective monitoring of performance against the established KPIs may be conducted, has been briefly mentioned in Sections 2.1.2, 2.1.3, and Effectiveness of safety management The EUROCONTROL Safety Maturity Survey Methodology will be applied and full compliance with Level 4 will be achieved Application of the severity classification scheme ATM occurrences of significance will be analysed by using the Risk Analysis Tool Reporting of Just Culture The ANSPs, the NSA and the BAAI already adopt the principle of Just Culture Capacity MATS does not generate delays as a result of its practices or lack of resources. Aircraft operating in Malta may occasionally experience delays which are imposed on MATS by third parties. However, there may be instances due to weather or other causes that are beyond the control of MATS, which may necessitate the imposition of a delay. MATS will ensure that such delays are kept to the bare minimum and only if absolutely necessary. 24

27 2.2.3 Cost-efficiency Historically, the en-route unit rate for Malta has been well below the European average. The present unit rate for Malta is very competitive and even well below the EU-wide target for cost-efficiency. Although some costs are expected to increase due to an increase in staff both within MATS and the CAD as well as due to other factors such as urgently needed capital expenditure and other investments, Malta will continue to make all efforts to ensure that it can offer the users a competitive unit rate and the CAD will closely monitor developments in the overall performance during RP1. However, this depends greatly on the financial and socioeconomic environments. Furthermore, although Malta expects an increase in unit rate of 24% during 2012, the unit rate is expected to decrease again to a more competitive level by the end of RP1. In addition, the expected increase in the CSUs will result in a positive effect in cost-efficiency Environment A lot of effort has already been made to implement more direct routes both within the Malta FIR and across the Malta/Rome FIR boundary and the Malta/Tripoli FIR boundary. RNAV procedures in the Malta TMA are expected to be implemented in 2012 with a view to reducing aircraft flying time and fuel burn. Additionally, with the introduction of RNAV in the Malta TMA, continuous descent and continuous climb procedures will be adopted. These will also give additional benefits to the environment such as reduced noise and gaseous emissions Interrelations and trade-offs Each of the KPAs covered in the NPP cannot be considered on their own because performance in one KPA will affect performance in the other KPAs. A balance should be found between the investment costs and the cost of any delays. This should be easy to achieve since Malta has a lot of spare capacity. Since the targets for the capacity and cost-efficiency KPAs are consistent with the EU-wide targets, no trade-offs are being proposed. 25

28 2.3 Carry-overs from previous years Table 17 provides an overview of carry-overs (in thousands of euros) from the years before RP1. Carry-over from To 2008 To 2009 To 2010 To 2011 To 2012 To 2013 To 2014 To 2015 To RP Total Table 17 Carry-overs from the years before RP1 2.4 Parameters for risk sharing and incentives No incentive schemes are proposed for capacity, safety and environmental impact in RP1. Similarly, no incentives are proposed in RP1 for airspace users. Furthermore, no incentives in relation to cost-efficiency are being proposed during RP1 although all the accountable entities will make every effort to maintain the increase in cost levels lower than the increase in CSUs. As far as risk sharing is concerned, Malta is excluding all uncontrollable costs related to the following: (a) (b) (c) (d) (e) unforeseen changes in national pension regulations and pension accounting regulations; unforeseen changes in national taxation law; unforeseen and new cost items not covered in the NPP but required by law; unforeseen changes in costs and revenues stemming from international agreements; and significant changes in interest rates and loans. 26

29 3. Contribution of the Accountable Entities 3.1 Accountable entities The accountable entities in relation to the NPP comprise: (a) (b) (c) Malta Air Traffic Services Ltd. (MATS), in its role of ANSP; The Meteorological Office (MET), in its role of MET service provider for air navigation; and The Civil Aviation Directorate (CAD), in its role of NSA. 3.2 Malta Air Traffic Services Ltd. (MATS) Share in the national targets and individual performance targets Safety Table 7, Section shows the safety targets that MATS will be accountable for during RP Capacity MATS is the only entity that will be accountable for meeting the capacity targets. Malta does not have any capacity problem and none is expected. Today s capacity is sufficient to meet the 2014 requirement even in a high traffic scenario. Table 18 shows historical data of actual delays for the years 2008 to Actual delay 2009 Actual delay 2010 Actual delay Reference value for Table 18 Delay values between 2008 and Environment No targets will be set on environmental impact. MATS will be the only entity that will be accountable for implementing any initiatives that will improve flight efficiency. 27

30 Cost-efficiency Details of the determined en-route costs are provided in Tables 19 and 20. MATS (ANSP) 2010 F 2010 A 2011 F 2012 F 2013 F 2014 F Staff Other operating costs Depreciation Cost of capital Exceptional items Total costs Table 19 - Determined en-route ANS costs for MATS by nature MATS (ANSP) 2010 F 2010 A 2011 F 2012 F 2013 F 2014 F Air Traffic Management Communication Navigation Surveillance Search and rescue Aeronautical information Meteorological services Supervision costs Other State costs Total costs Table 20 - Determined en-route ANS costs for MATS by service 28

31 3.2.2 Incentive mechanisms to be applied No incentive mechanism will be applied to MATS during RP1 in relation to safety and environment since no targets have been set. In addition, no specific incentives have been applied to MATS in relation to capacity. In regard to the cost-efficiency target, no incentives are being proposed. However, MATS will make every effort to maintain the increase in cost levels lower than the increase in CSUs. 3.3 The Meteorological Office (MET) MET is only accountable for the cost-efficiency KPA. Apart from the installation of an automated weather observing system which should be completed in 2012, MET does not plan to make any further major investments during RP1 apart from any necessary investment that would be necessary as a result of the planned establishment of the BLUEMED FAB in order to harmonise all MET services. MET costs are expected to remain at approximately the same levels throughout RP1 except increases subject to national inflation Share in the national targets and individual performance targets Cost-efficiency Details of the determined en-route costs are provided in Tables 21 and 22. MET (ANSP) 2010 F 2010 A 2011 F 2012 F 2013 F 2014 F Staff Other operating costs Depreciation Cost of capital Exceptional items Total costs Table 21 - Determined en-route ANS costs for MET by nature 29

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