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COMPetition for AIR traffic management

Periodic Reporting for period 4 - COMPAIR (COMPetition for AIR traffic management)

Reporting period: 2017-08-01 to 2018-01-31

Air transport is facing many challenges such as increasing demand, larger airports, increased network congestion which need to be reconciled with environmental issues. Hence there is a need for smarter solutions at service, operational and technical levels. One of the important actors in the aviation supply chain are the Air Traffic Management (ATM) service providers.
Since 2004, the European Union has invested in research and development in the area of ATM. The main objective of the EU is to reform the European ATM system in order to cope with sustained air traffic growth under safe, cost-efficient and environmentally friendly conditions. The Single European Sky (SES) initiative aims to re-structure the European airspace as a function of air traffic flows, create additional capacity and increase the overall efficiency of the ATM system. The European Commission set ambitious goals to be achieved by 2020, including a 3-fold increase in airspace capacity and a cost reduction of at least 50% in the provision of ATM services.
However, today’s progress towards SES objectives is perceived as slow.
In this context, the question of how to provide the appropriate organizational structures, institutions and incentives for new operational concepts and technologies to yield the expected results stands high on the European policy agenda. The introduction of competition has been proposed as a means to provide incentives for the realization of the high-level objectives of the SES, by speeding up the innovation cycle and the fostering of more efficient operations. On the other hand, competition does not prevent every market failure (e.g. negative externalities) and, depending on market conditions, liberalization can also have undesired outcomes, such as the emergence of oligopolies or monopolies. Besides, competition does not exist abstractly and is influenced by the legal and regulatory framework. Hence, the successful introduction of competition requires a comprehensive impact analysis to evaluate different regulatory approaches along a variety of dimensions.
The overall goal of COMPAIR was to study various institutional and market design approaches for introducing competition for en-route ATM services, in order to assess their potential contribution to the European Single European Sky objectives. The project was also required to propose a vision for the implementation of the most desirable institutional structures.
After extensive qualitative research, four introduction scenarios were defined. These cover short, medium- and long-term options. All scenarios were quantitatively assessed using different approaches, in order to make a sound estimate of their feasibility.
The project results suggest that introducing some form of competitive elements would likely lead to:
• Increases in ANSP cost efficiency,
• Lower charges by up to half current levels,
• Increases in technology uptake, and
• Decreases in the fragmentation of the European skies.
The project focused on four potential ways to introduce competitive elements in the ATM sector. These options are based on the initial ideas at the outset of the project proposal, which have been further fine-tuned based on literature review and stakeholder input. They were further quantitatively assessed using a range of methods such as econometric analysis, economic modelling, game-theoretic network modelling and agent-based modelling.
We noted that the form of ANSP ownership varies among countries and a large variation in the consultation processes of the stakeholders exists. Our econometric analysis found significant differences in cost and productive efficiency, suggesting a short-term potential for improvements.
For the medium term, COMPAIR focused on unbundling and tendering. Unbundling could start with separation of terminal air traffic services, followed by meteorological and aeronautical en route air traffic support services, and finally the outsourcing of en route air traffic control. Previous experiences with unbundling terminal control showed that cost reductions up to 40% are possible. COMPAIR’s analysis found that time-based tendering could lead to consolidation among ANSPs. This could mean a less fragmented European airspace, a faster uptake of technologies, and lower charges resulting from economies of scale and due to the bidding process that creates a competitive environment.
Finally, the long-term option focused on flight-centric, or sector less, operations. ATM providers would compete on a per-flight or per-airline basis, instead of regionally. It is however important to limit the maximum market share to prevent emergence of monopolies.
The results of the work and the intermediate steps were discussed during two project workshops, with the advisory board and policy makers, in face-to-face interviews, at several workshops organized by other projects and at international conferences. This was complemented by the set-up of project website and the use of social media.
The main goal of the COMPAIR project was to increase insight into potential institutional and market structures that may lead to an uptake of new technologies and more performance based business models. The expected impact of changing the institutional form in the ATM sector is vast.
Overall, the results of the different options with different models show that introducing competition for the market:
- increases cost and productive efficiencies,
- reduces charges by up to half the current levels, and
- encourages faster uptake of new technologies than is happening nowadays.
The next step is: How to introduce them? Although all four scenarios clearly have their merits; they all have their own impediments to be dealt with. In any case, the need for an institutional environment that supports competition is vital to support any of the proposed scenarios. “Environment” does not only include legal measures, but also the overall political, administrative and economic landscape that support investment in efficiency and competition in general.