One of the principle functions of the Commission is to regulate the level of revenues that the Irish Aviation Authority may collect in aviation terminal service charges levied on users at Cork, Dublin and Shannon airports.
What are Aviation Terminal Service Charges?
Aviation terminal service charges (ATSCs) are air traffic control charges relating to the provision of air terminal services for landing and departing aircraft from Dublin, Cork and Shannon airports.
The IAA separately charges airlines for en-route air navigation services, but the level of these charges are not subject to regulation by the Commission.
How are Aviation Terminal Service Charges Regulated?
When setting a cap on the charges that the IAA may levy, the Commission’s aim is to facilitate the development and operation of cost-effective terminal services that meet international standards. In doing so, the Commission has regard to a number of factors, including the charging principles of the International Civil Aviation Organisation and of Eurocontrol, the level of investment needed to meet current and prospective needs of airlines, and the efficient and effective use of all resources by the IAA.
In regulating ATSCs , the Commission has, to date, chosen to employ price-cap regulation. Price-cap regulation is a form of incentive regulation. The Commission announces in advance a cap on the total revenues per tonne of maximum take-off weight that the IAA may collect. This cap lasts for a period of four or more years. If the IAA can successfully reduce its costs below the level of the cap, it keeps the value of these savings until the cap is reset. At the time of the next price cap, the Commission will consider the level of costs that the IAA was able to realize when setting the next price cap. Consequently the IAA and airlines share the benefits of any cost savings that the IAA is able to realize. The incentives for the IAA to realize costs savings ultimately should benefit airlines as well as the IAA.
The price cap is derived from a series of inputs known as ‘regulatory building blocks’ which are calculated by the Commission at the time of a price cap determination. These building blocks are
- The regulatory asset base (“the RAB”) which in any given year is the sum of existing capital stock and a forecast of efficiently incurred new capital stock
- A return on an efficient capital stock
- Plus a depreciation charge on that capital stock
- Plus an estimate of efficiently incurred future operating expenditures
What is the Current Cap on Aviation Terminal Services Charges?
The current formula specifying the total revenues that the IAA may collect varies according to the actual total tonnes of MTOW using aviation terminal services at Cork, Dublin and Shannon airports. Consequently, it is only once total traffic is known, at the end of the price cap, that the Commission will know for certain the cap for that year on revenues that the IAA may collect. However, if traffic volumes at Dublin, Cork and Shannon airports in 2010 are as forecast at 7,857,000 tonnes then the price cap would be €3.36 per tonne of departing aircraft in 2010. This includes an allowance for the new air traffic control tower at Cork Airport which opened on 20 October 2009.
The Commission checks that the IAA has complied with the price cap annually and publishes a compliance report each year. This report is also an opportunity for the Commission to indicate what the price cap in current prices will be for the forthcoming year.