CANSO Announces NAV Charges Likely to Rise as Economic Crisis Continues

CANSO has announced that the economic crisis is continuing to affect ANSPs badly, citing an 8.3% drop in global IFR movements for the first six months of 2009, while early revenue predictions for the same period are -10% below the previous year.

CANSO’s data indicate that 38 of the 42 reporting ANSPs controlled significantly fewer movements in June 2009 then in the same month last year. ISAVIA, the ANSP for Iceland, was the worst affected having controlled close to 39% fewer IFR movements than in the corresponding period last year.

A drop in IFR movements of this magnitude is of major concern to the world’s ANSPs. Many ANSPs have launched aggressive internal cost reduction programmes in an attempt to keep pace with the fall in air travel. However, in most cases, the unprecedented reduction in revenues far exceeds the ANSPs ability to lower their operating costs. As a result, ANSPs find themselves unable to avoid a rise in the cost per movement. For ANSPs without financial reserves or credit lines, this will translate into increases in navigation charges at a time when aircraft operators can least afford these.

CANSO recognises that this is a highly undesirable situation, giving the association reason to draw attention to the shortcomings of the classic “Cost Recovery System” in which many ANSPs are forced to operate. At their Annual Meeting in June 2009 CANSO Members agreed that this long established ATM funding mechanism is due for review and overhaul if it is to support aircraft operators in times of crisis. ANSPs point out that the cost recovery system was never designed with negative growth in mind, as it drives charges up when traffic falls and visa versa. Though the system has distinct positive aspects, it creates serious price instability and thus harms the interests of both service providers and aircraft operators.

Commenting on the crisis, CANSO Secretary General Alexander ter Kuile said “These are difficult times for the entire aviation industry and many ANSPs continue to be badly affected. CANSO applauds the many efforts of its Members to reduce their cost-base in an attempt to keep charges level. But we have to face the facts; in many cases the fall in air traffic and revenues far exceeds the ANSPs ability to match this with cost reductions. As a result, navigation charges will rise in many countries. This is highly frustrating for everyone in aviation and CANSO repeats its call for a review of the ATM funding principles in the affected states. To avoid a recurrence, ANSP management must be fully empowered to take all necessary decisions; be free to control all costs; and have access to basic financials instruments. ANSPs are ready to accept greater financial risk, if governments endorse appropriate governance, sound financial management and a fair balance between risk and reward. If we are to overcome the impact of this economic crisis, it is up to states and industry to agree and implement appropriate solutions.”

(c) Centre for Asia Pacific Aviation. Date posted: 27-Jul-09