15 May 2019

How ANSP business model developments can contribute to the defragmentation of the European ANS landscape S. Buyle*, W. Dewulf, F. Kupfer, E. Onghena, H. Meersman, E. Van de Voorde FABEC & FAB CE Research Workshop, Budapest, 14th – 15th May 2019 15 May 2019

Outline Introduction Methodology Business model variables Results Conclusions Introduction Methodology Variables Results Conclusions

Challenges IFR movements in Europe predicted to grow by 15% in next seven years in the base scenario (EUROCONTROL seven-year forecast, Feb. 2019) EUROCONTROL predicts that 190 thousand flights cannot be accommodated by 2022 due to capacity constraints (EUROCONTROL seven-year forecast, Feb. 2016) Sector reforms initiated by SES and SESAR initiatives Increased competition Increased pressure on cost structures Increased incentives for innovation Introduction Methodology Variables Results Conclusions

Questions What are the strategic options for ANSPs? Which are the current business models observed? How fragmented is the European ANS landscape in terms of business models? Introduction Methodology Variables Results Conclusions

Factors & factor scores Methodology Factors & factor scores Strategic choices Asset choices Factor analysis for mixed data Typology Governance choices Strategy outcomes Introduction Methodology Variables Results Conclusions

Business model variables (1/2) Operational scope Marketable service offer Military ANS integration International ANS service offer Collaboration forms Number of alliances by type Number of joint-ventures by type Innovation strategy Number of Horizon 2020 projects Remote tower operations Factor inputs Labour to capital ratio Make-or-buy choices Outsourcing MET services Ownership structure Percentage of government owned shares Percentage of private owned shares Corporate structure Government department / Airport operator / Independent entity Introduction Methodology Variables Results Conclusions

Business model variables (2/2) Cost structure Cost share of staff costs Cost share of non-staff operational costs Cost share of depreciation costs Cost share of capital costs Unit cost of terminal services (€/movement) Unit cost of en-route services (€/flight km) Revenue structure Revenue share of terminal services Revenue share of en-route services Revenue share of marketable services Unit revenue of terminal services (€/movement) Unit revenue of en-route services (€/flight km) Introduction Methodology Variables Results Conclusions

Factor interpretation % of var explained High scoring ANSPs Low scoring ANSPs Innovativeness 26,25% NATS, DFS, Skyguide, ENAV, LFV HCAA, DCAC Cyprus, DHMI, M-NAV, MATS Collab. & technology invest. 13,73% LFV, Avinor, Naviair, IAA Sakaeronavigatsia, Skyguide, ARMATS, MoldATSA, UkSATSE En-route efficiency 10,15% EANS, IAA, LGS Skeyes, LVNL Outsourcing 7,77% ENAV, NATS, Skyguide, DSNA SMATSA, LFV, AustroControl Mixed alliances vs. commercial focus 5,73% LVNL, Croatia Control, Oro Navigacija, IAA HCAA, SMATSA, EANS, ANS CR, LPS Introduction Methodology Variables Results Conclusions

Innovativeness Correlations sign. at 1% ANOVA contrasts sign. at 1% En-route share -0,908 Not marketable -2,353 Terminal share -0,906 Marketable 2,353 Marketable share 0,907 National -1,830 Labour ratio -0,419 International 1,830 Gov. shares -0,547 Independent 2,001 Priv. shares 0,547 No remote towers -1,184 H2020 projects 0,630 Remote towers 1,184 Depreciation cst sh. 0,431 ANSP JVs 0,685 Supplier JVs 0,549 Mixed JVs 0,610  NATS, DFS, Skyguide, ENAV, LFV  HCAA, DCAC Cyprus, DHMI, M-NAV, MATS % of variance explained: 26,25% Introduction Methodology Variables Results Conclusions

Collaboration and technology investment Correlations sign. at 1% ANOVA contrasts sign. at 1% Capital cost share -0,437 No remote towers -1,093 Staff cost share 0,496 Remote towers 1,093 Terminal unit cost -0,764 Terminal unit rev. ANSP alliances 0,564 Mixed alliances 0,642  LFV, Avinor, Naviair, IAA  Sakaeronavigatsia, Skyguide, ARMATS, MoldATSA, UkSATSE % of variance explained: 13,73% Introduction Methodology Variables Results Conclusions

En-route efficiency Correlations sign. at 1% ANOVA contrasts sign. at 5% Capital cost share 0,707 No remote towers -0,582 Staff cost share -0,631 Remote towers 0,582 En-route unit cost -0,724 En-route unit rev. -0,759  EANS, IAA, LGS  Skeyes, LVNL % of variance explained: 10,15% Introduction Methodology Variables Results Conclusions

Outsourcing Correlations sign. at 1% ANOVA contrasts sign. at 5% Gov. shares -0,640 Civil only 0,590 Priv. shares 0,640 Military integrated -0,590 Mixed JVs 0,543 MET in-house -0,643 MET outsourced 0,643 Gov. department 1,393 Independent -0,722  ENAV, NATS, Skyguide, DSNA  SMATSA, LFV, AustroControl % of variance explained: 7,77% Introduction Methodology Variables Results Conclusions

Mixed alliance participation vs. comm. focus Correlations sign. at 1% ANOVA contrasts sign. at 5% Labour ratio -0,557 Not marketable 0,443 Mixed alliance 0,494 Marketable -0,443  LVNL, Croatia Control, Oro Navigacija, IAA  HCAA, SMATSA, EANS, ANS CR, LPS % of variance explained: 5,73% Introduction Methodology Variables Results Conclusions

Typology (1/2) Factor Developing ANSPs Basic ANSPs Basic+ ANSPs Innovativeness Low Average Collab. & technology invest. Very low Average to high En-route efficiency High Outsourcing High to very high Mixed alliances vs. commercial focus ANSPs UkSATSE, Sakaeronavigatsia, ARMATS, MoldATSA, Albcontrol LGS, DHMI, BULATSA, DCAC Cyprus, MATS, ROMATSA, Slovenia Control ANS Finland, M-NAV, DSNA, PANSA, NAV Portugal, IAA, Oro Navigacija, Croatia Control, LVNL, Avinor Introduction Methodology Variables Results Conclusions

Typology (2/2) Factor Market driven ANSPs Innovators Professionals Innovativeness High Very high Collab. & technology invest. Low Average En-route efficiency Average to high Outsourcing Low to very low Mixed alliances vs. commercial focus ANSPs SMATSA, ANS CR, LPS, HungaroControl, Skeyes Austro Control, LFV, Naviair, EANS NATS, ENAIRE, ENAV, Skyguide, DFS Introduction Methodology Variables Results Conclusions

Conclusions No one “European ANSP business model”, multiple business models exist European ANSPs differ mainly based on Level of technical and business model innovation Level of collaboration and technology investment Introduction Methodology Variables Results Conclusions

Faculty of Business and Economics, Drs. Sven Buyle Faculty of Business and Economics, Department of Transport and Regional Economics sven.buyle@uantwerpen.be