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Presented by Harry Bush CB Group Director Economic Regulation UK Civil Aviation Authority

PERFORMANCE GOALS AND TARGETS AS PART OF ECONOMIC REGULATION OF ANSPs The UK experience of economic regulation. Presented by Harry Bush CB Group Director Economic Regulation UK Civil Aviation Authority. CONTENTS. Incentive regulation – price and quality Getting there the process

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Presented by Harry Bush CB Group Director Economic Regulation UK Civil Aviation Authority

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  1. PERFORMANCE GOALS AND TARGETS AS PART OF ECONOMIC REGULATION OF ANSPsThe UK experience of economic regulation Presented by Harry Bush CBGroup Director Economic RegulationUK Civil Aviation Authority

  2. CONTENTS • Incentive regulation – price and quality • Getting there • the process • assembling the evidence • A balanced view on price and service incentives • some principles • applying them in practice • The importance of customer consultation • Results and lessons

  3. INCENTIVE REGULATION –PRICE AND QUALITY • UK issues • high cost • project overruns • delay performance in 2002 • Regulation incentives • efficiency – RPI-X • better service quality – delay performance • Consultation with customers a key element

  4. GETTING THERE: • The process • 1½ years • could it be shortened? • transparency • several rounds of consultation • Assembling the evidence • scrutinising the company business plan • efficiency studies • benchmarking • with wider industry • with other ANSPs – Eurocontrol data

  5. A BALANCED VIEW ON INCENTIVES: PRINCIPLES • Pricing • trade off between • bearing down in short-term given risks and uncertainties • realising benefits from over-performance later • Service • criteria for incentives • scope for management influence • capable of measurement • assess potential for unintended consequences

  6. A BALANCED VIEW ON INCENTIVES: PRACTICE • Delay performance • introduced at PPP in 2001 • strengthened in 2003 • amended 2006 – further strengthened and additional weighting to early flights and longer delays • issues: • does NATS have sufficient control • should it better reflect costs of delay to airlines • Timely capex • potential for “trigger” incentives tied to milestones • precedent in airports regulation • CAA considered fully • decided against: • price cap already incentivised timely capex to deliver efficiency and service • measurement issues • alternative possibilities – review of project management capability

  7. THE IMPORTANCE OF CUSTOMER CONSULTATION • A theme of CAA regulation • Service and Investment Plan • future capacity plan, manpower plan and service and delay targets • performance of existing projects and details of future investment programme/projects • Operational Partnership Agreement • joint NATS/airline working on airspace and traffic management issues • NATS appears to have become more responsive to customer needs through consultation processes

  8. RESULTS • Prices reducing in real terms by 3.4% p.a. from 2006 to 2010 • NATS attributable delay per flight reduced from 2.5 mins in 2002 to 24 secs in 2006 • Improved consultation with stakeholders/customers • How much of this is due to regulation • other factors – eg: traffic recovery from 2001 : completion of Swanwick • but • regulation provides a framework for • transparency • incentives • building of trust with customers

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