Review of compliance with the charging scheme of the single European sky in Poland : executive summary.
Date: 2019-09-20
Institutions: Directorate-General for Mobility and Transport
Subjects: Poland, Single European Sky, air freight rate, air safety, air space, air traffic control, airport, common transport policy, provision of services

Review of compliance with the 
Charging Scheme of the Single 
European Sky in Poland 

Study contract No MOVE/E3/SER/2018-526/SI2.791553 

Final Report 

Winsland and Integra 
July – 2019 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Mobility and Transport 
Directorate E — Aviation 
Unit DG MOVE E3 — Single European Sky 

Contact: Valentine Barasz 

E-mail:  MOVE-E3-SINGLE-SKY-UNIT@ec.europa.eu 

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Review of compliance with the 
Charging Scheme of the Single 
European Sky in Poland 

Final Report 

Study contract No MOVE/E3/SER/2018-526/SI2.791553 

Directorate-General for Mobility and Transport  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Review of compliance with the Charging Scheme of the Single European Sky in Poland 

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Luxembourg: Publications Office of the European Union, 2019 

ISBN 978-92-76-09296-4 
DOI: 10.2832/323916 

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Review of compliance with the Charging Scheme of the Single European Sky in Poland 

Executive Summary 

Aim 

The  aims  of  this  study  are  firstly  to  review  whether  the  revised  performance  plan  of 
Poland is being implemented as planned; and secondly to verify compliance of the cost 
base for air navigation services. The second aim is to address the recommendation made 
by the European Court of Auditors in 2017 concerning the inspection coverage of the 
charging scheme. 

Background to the Revised Performance Plan 

The revision of the Polish part of the Baltic FAB Performance Plan for RP2 was driven in 
part by a decline in heavy aircraft transiting the airspace consequent on the geopolitical 
events in Ukraine diverting significant volumes of heavy overflight traffic further south. 
The  regional  conflict  resulted  in  Ukrainian  airspace  being  closed  and  saw  airlines 
avoiding  Ukrainian  airspace  which  resulted  in  a  significant  move  of  traffic  out  of  the 
neighbouring FIRs from July 2014. In the case of Poland, this resulted in a decline of 
service units in excess of 10%, the trigger level enabling request for a revision of the 
plan  for  RP2.  Hence  service  units  were  significantly  lower  than  the  STATFOR  traffic 
forecasts used as the basis of determining enroute service unit (TSU) forecasts for RP2. 

At the same time the volume of light traffic increased. The consequence of this was a 
change in the mix of traffic and consequently a reduction in revenues. 

The key rationale for revision of the Performance Plan was that the original plan had 
over-estimated  enroute  service  units  due  to  the  geopolitical  situation,  and  this  was 
unlikely to change in the remainder of RP2. Addressing PANSA’s predicted shortfall in 
cash flow required the plan to be adjusted to generate sufficient revenue to cover the 
determined costs. Furthermore, costs were increasing as the number and complexity of 
movements was increasing in spite of service units falling. 

The  application  for  revision  of  the  Performance  Plan  was  made  on  the  basis  of  a 
substantial and exceptional change in the assumptions used in the Original Performance 
Plan.  Following  the  PRB’s  advice,  the  Commission  allowed  Poland  to  revise  its  cost 
efficiency  targets  for  the  last  three  years  of  RP2  for  Enroute  only,  in  Commission 
Implementing Decision (EC) 2017/1985 of 31 October 2017. 

Changes to the Performance Plan 

PANSA  initially  responded  to  the  changing  traffic  with  a  series  of  changes  targeting 
capacity  and  safety  issues.  In  the  short  term  PANSA  responded  by  a  combination  of 
rostering, sectorisation (the introduction of vertical sector splits) and airspace changes 
with some changes to capital projects. The changes also included: 

•  a high level of staff commitment to address the challenges; 
•  an additional investment of 381 MPLN in technical systems; 
• 

recruitment of 60 ATCOs by the end of 2019. 

Furthermore,  the  inflation  assumptions  in  RP2  plan  had  proved  to  be  significantly  at 
variance with the Original Performance Plan. Deflation meant nominal costs exceeded 
real  costs  with  a  consequence  of  downward  adjustments  to  unit  rates  required  in 
subsequent years. 

In  the  medium  term  the  PANSA  view  was  that  revision  of  the  original  adopted 
Performance Plan for RP2 was required. The revised plan entailed more investment in 
people and systems with a consequential increase in determined costs by PLN 251.6M 
(12.8%)  in  the  last  3  years  of  RP2.  The  revenues  generated  under  the  Original 
Performance Plan were insufficient to cover these costs. Thus, the differential between 
the  actual  and  planned  inflation  rate  for  2017-2019  also  needed  to  be  addressed  to 
avoid significant cash flow issues.   

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Accordingly, PANSA sought a revision of the inflation index in the revised RP2 plan. 

Planning  issues  had  caused  a  significant  under  spend  in  Capex  in  RP1  and  were 
continuing into RP2. Moreover, the analysis of operational needs, including safety issues, 
showed an urgent need for additional infrastructure and systems improvements. Staff 
determined costs were over budget for 2017, caused by a failure to take account of the 
risk of losing the court case on ATCO labour rates and a failure to account for the overall 
increase in staff numbers in PANSA. 

In  light  of  the  above,  the  prospect  was  for  revenues  falling  below  plan  whilst  the 
determined  costs  (in  both  nominal  and  real  terms)  would  exceed  the  plan.  Given 
PANSA’s ownership structure, the capacity to raise funds to cover the shortfall in cash 
flow was limited. Hence, without a change in the Performance Plan, PANSA was faced 
with the prospect of a significant liquidity issue. In response, Poland recast its business 
and Performance Plans and applied for a revision of the Performance Plan for RP2. 

Looking separately at the components contributing to the determined costs: 

Traffic forecasts 

IFR enroute movements in the Warsaw FIR grew 24.3% during the first four years of 
RP2  over  2014.  The  increase  in  service  units  was  18.7%  over  the  same  period.  The 
Original  Performance  Plan  forecast  a  23.7%  increase  in  service  units  (2018  forecast 
compared  with  the  2014  actual).  The  revised  plan  reduced  this  forecast  to  a  12.4% 
increase over 2014. Thus, the traffic and service units have grown, but not at the pace 
envisaged in the original plan. Hence PANSA would not have collected sufficient revenue 
to  cover  the  originally  planned  determined  costs  let  alone  the  increased  determined 
costs discussed below. Based on this, the revision of the plan was required. 

Further,  the  traffic  mix  and  heavily  loaded  routes  have  changed.  Thus,  whilst  it  may 
appear operational pressure is released through the slower traffic growth, the reality is 
traffic  volumes  continued  to  grow  and  complexity  has  increased  over  RP2  to  date. 
Accordingly, PANSA’s priorities are to maintain and enhance system capacity, reliability 
and safety during the balance of RP2 and beyond. This will naturally drive the PANSA 
business and Performance Plans and the associated staffing and investment plans which 
drive determined costs. 

Staffing 

The Revised Performance Plan included an upward revision of staff costs of 11% for the 
period 2017-2019, driven primarily by remuneration increases (from a court decision), 
along with an increase in APP and ENR ATCO numbers.  

Actual staff costs have been close to those in the Revised Performance Plan. In 2017 
additional staff bonus and overtime payments were offset by savings from fewer ATCOs 
being employed than planned. The main factors that increased staff costs in 2018 were 
actuarial  provision  relating  to  leave  liability  and  overtime  payments,  again  partially 
offset  by  fewer  ATCOs  and  trainees.  For  2019  the  ATCO  numbers  will  continue  to  be 
below plan but offsetting this will be the continued overtime and training costs, and cost 
increases  imposed  by  new  regulations  adding  to  the  costs  of  training  (ATSEP  and 
language training). 

In terms of increasing the number of ATCOs in the ACC, there is an issue in future years 
to meet the demands created by traffic growth, airspace changes and European ATM 
Master  Plan  related  changes.  At  the  moment,  the  shortage  of  ACC  ATCOs  is  being 
compensated for by other overtime, restriction of holidays in the summer period and 
reduced training. These measures are not sustainable in the long term. In the light of 
this, PANSA needs to increase ACC ATCO numbers in the coming years. 

In summary, staff costs in the Revised Performance Plan are higher than in the original 
plan as although PANSA has fewer ATCOs in the revised plan, the wage costs of each 
ATCO are higher than in the Original Performance Plan.  

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 Review of compliance with the Charging Scheme of the Single European Sky in Poland 

Actual costs are in line with the Revised Performance Plan. 

Other Opex 

The  revised  ‘Other  Opex’  had  minor  changes  only  between  the  original  and  Revised 
Performance Plans. Actual expenditure has been below plan. The savings stem in part 
from delays in the Capex programme impacting mission costs and also from savings, 
especially in cost of material and supplies and savings in insurance costs. 

Capex and Depreciation 

Overall Capex is running behind plan in terms of expenditure and timeline and will likely 
close  out  RP2  between  85%  and 90%  of  plan  in  terms of  expenditure.  This  is  a  vast 
improvement on the near 50% equivalent in RP1. 

The  Capex  plan  drives  the  depreciation  costs.  A  consistent  under  spend  of  planned 
Capex is a concern to users, particularly as the cost of depreciation for projects that are 
planned  but  not  executed  are  paid  by  users  in  charges,  but  not  returned  in  rebated 
charges. 

The revised RP2 plan for PANSA focussed heavily on investment in systems resilience, 
as such major elements are not directly related to ANS delivery in the RP2 period, but 
benefits are recognised in future reference periods. The reality of ANS systems is that 
they do not fit neatly into a five-year timeframe.  

The revised investment plan is 55% higher than the original. PANSA appears on course 
to deliver the key elements of this Revised Performance Plan, to the extent that factors 
it  can’t  control  allow.  These  include  system  availability  (i.e.  whether  the  required 
systems are physically available when planned – radars, for example, can have a two-
year lead time) and vendor performance (i.e. whether vendors can provide, install and 
test a system in accordance with a planned timeline). 

Each element of the plan has been examined. Aside from some elements of the Tower 
and Campus investments, what is planned appears justified. Our view is that there may 
have been potential at the time of the revision to reduce Capex expenditure by delaying 
implementation  of  some  Communications  and  Surveillance  infrastructure  (assuming 
contracts allowed this). Thus, these projects may not all have needed to be undertaken 
in  the  timeframes  adopted.  As  indicated  above,  the  Towers  service  specification  is 
driving potentially unnecessary expenditure (for example ILS or even ATC at low volume 
airports) and would benefit from future review of what tower services are required and 
what the options are for providing them. We note some expenditure on towers has been 
withheld, but also note the overall level of expenditure on towers will exceed the budget 
for RP2.  

Equally there are questions as to whether the Campus projects (equating to 29% of the 
RP2  Capex  budget)  are  optimised.  Given  expenditure  in  RP2  is  limited  and  most  will 
occur in RP3 and beyond, this provides an opportunity for future review. These elements 
would  benefit  from  detailed  business  cases  that  thoroughly  examine  the  benefits, 
options, contingencies and risks. 

Cost of Capital 

Aside from 2019, the cost of capital under the Revised Performance Plan is in line with 
the revised expenditure under the Capex plan.  

The asset base is also in line with the revised plan.  

The  cost  of  capital  and  the  asset  base  did  not  increase  as  planned  in  either  2017  or 
2018, reflecting Capex under spend in 2017 and 2018 of -12% and -26% respectively. 
Thus, the determined costs were arrived at by using a different cost of capital for 2019 
for enroute, to ensure that the unit rate at the end of RP2 was lower than that at the 
end of RP1.  

This  consideration  has  implications  for  cash  flow  in  2020  in  that  the  purpose  of 

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 Review of compliance with the Charging Scheme of the Single European Sky in Poland 

depreciation and the associated recovery of costs of capital is to generate earnings to 
be applied to future Capex. PANSA will face a shortfall as a consequence of understating 
Cost of Capital in 2019. 

Compliance with Articles 14 and 15 of the Service Provision Regulation 

The  study  has  compared  practices  in  Poland  with  the  key  principles  for  the  Charging 
Scheme  as  defined  in  the  Service  Provision  Regulation  Articles  14  and  15.  We  have 
found that Poland generally follows the principles and rules defined in Articles 14 and 
15. 

PANSA’s  costs  are  allocated  to  cost  centres  through  the  ANSP  financial  management 
system based on 23 main charging keys including: movements, equipment used by a 
service, staff numbers and revenues. The keys enable a statistical basis to allocate costs 
between services. However, the allocation of costs between terminal and enroute risks 
moving some costs from terminal into enroute and vice-versa. As with other ANSPs, the 
allocation  of  costs  between  enroute  and  approach  is  partly  subjective  as  significant 
assets are shared between the two services. In a similar vein, the allocation of indirect 
costs  has  a  subjective  element.  Allocation  is  done  using  distribution  keys  which  may 
introduce a certain level of error. 

Our concern for Poland is that aerodrome control services are not all charged against 
terminal, and approach and departure charges are not aligned to service boundaries. 
This  risks  costs  belonging  to  terminal  services  being  charged  against  enroute.  Whilst 
this does not appear to be consistent with the Regulation, we note that the methodology 
used was developed before RP2 and consulted on with airspace users. PANSA disagrees 
with  our view  that  there  is  cross subsidisation for  the  reasons  detailed  in  section  11, 
concerning the 20km rule. 

Despite this, we consider that Poland has made a reasonable attempt to ensure costs of 
service are recovered from the users of those services. They are conscious of the need 
to avoid cross subsidisation and strive to avoid this. They have relied on ICAO pricing 
principles and EUROCONTROL CRCO guidance. Accordingly, there may be minor cross 
subsidy, but as a consequence of the interpretation of the CRCO guidance rather than 
a deliberate strategy. 

Conclusion 

Our view is that the revised plan has substantially been implemented or is on course for 
implementation by the end of RP2, with some exceptions as discussed in the report. 

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Review of compliance with the Charging Scheme of the Single European Sky in Poland 

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ISBN 978-92-76-09296-4   

DOI: 10.2832/323916