1. International Civil Aviation Organization Financial Support from the World Bank Dr. Charles E. Schlumberger Lead Air Transport Specialist The World Bank 26. October 2011

2. 2 Outline  The World Bank Air Transport Portfolio  The Pacific Aviation Investment Program  Support for the Pacific Aviation Safety Office Financial Support from the World Bank

3. 3 The World Bank Air Transport Portfolio  30 major projects in all regions of IBRD and IDA  28 active IFC investments and several advisory mandates  total active portfolio financed by loans or grants of IBRD and IDA is at US$569 million  IFC air transport investment portfolio is at US$ 679 million  Overall, the WBG air transport portfolio volume is at US$ 1.247 billion Financial Support from the World Bank

4. 4 The Pacific Aviation Investment Program The Pacific Aviation Investment Program is a grant of US$ 147.47 million (US$ 73.66 million Phase 1; US$ 73.81 million Phase 2) It will focus on three main areas:  (i) infrastructure investments;  (ii) aviation sector reform;  (iii) strengthening the operations and management of regional airports. Project title (Insert, Header & Footer)

5. 5 The Pacific Aviation Investment Program  Component A: Aviation Infrastructure Investments (US$ 118.42 million) – Airports, ATC to meet ICAO SARP  Component B: Aviation Sector Reform (US$ 12.10 million) – CAA, PASO (US$ 2.4 million)  Component C: Strengthening Airport Operations and Management Capacity (US$ 7.86 million)  Component D: Project Support (US$ 9.09 million) Project title (Insert, Header & Footer)

6. 6 Support for the Pacific Aviation Safety Office – Regional Context the Pacific Island Countries are characterized by:  small populations scattered over many islands  in one of the most remote and geographically dispersed countries in the world Aviation plays a vital role in providing national, regional, and international connectivity  tourism is a high contributor to the national GDPs  air transportation allows export of high-value, time- sensitive products such as fresh fish, flowers, marine plants, etc.  sea transportation is often not a viable alternative for passenger transport Financial Support from the World Bank

7. 7 Support for the Pacific Aviation Safety Office – Institutional Context Financial Support from the World Bank PASO was established in 2004 to provide safety and security oversight in the aviation sector for all PIC countries, as individual states have limited resources  PASO provides services in 5 areas: airworthiness, flight operations, aerodromes, aviation security, and personnel licensing For many states PASO is the link with ICAO and acts as the only technical advisory body Non-profit organization, services provided on a cost- recovery basis  Subscription fees cover fixed costs  Variable fees cover costs associated with inspections and other activities

8. 8 Support for the Pacific Aviation Safety Office - Options for PASO’s Scope Financial Support from the World Bank

9. 9 Support for the Pacific Aviation Safety Office – Funding of the Organization Model 1 (current situation): membership fees + service fees paid by member countries  Places a financial burden on the countries budgets, and hence creates a disincentive to use PASO’s services  For different reasons countries may fail to secure funding Model 2: safety levy paid by passengers  PASO’s costs would be funded through implementation of a fee per passenger, or safety levy  Eliminates financial burden on member countries  Creates incentive to engage PASO, as countries would not have to make any payments  Different implementation options Financial Support from the World Bank

10. 10 Support for the Pacific Aviation Safety Office – Options for Restructuring Option 1: Front-office funded with membership fees Option 2: Current situation Option 3: Programmed oversight funded with safety levy  Option 3A: HQ in Port Vila, Vanuatu  Option 3B: HQ in Wellington, New Zealand  Option 3C: HQ in Nuku’alofa, Tonga  Option 3D: HQ in Apia, Samoa Option 4: Full Technical Regulator funded with safety levy Financial Support from the World Bank

11. 11 Support for the Pacific Aviation Safety Office – Assessing the Safety Levy Financial analysis carried out to determine alternative ways to implement a safety levy Projection of PASO’s full cost structure  Direct operating expenses: technical team salaries, travel expenses  Overhead: administrative team salaries, office expenses Current traffic volumes for first year, conservative projection of future traffic Resulting safety levy requirements per departing international passenger Safety levy requirements cover first year operating expenses, generates surplus to capitalize PASO in following years Financial Support from the World Bank

12. 12 Support for the Pacific Aviation Safety Office – PASO Members’ Traffic Levels Financial Support from the World Bank

13. 13 Support for the Pacific Aviation Safety Office – Safety Levy 1 st Year (AUD) Project title (Insert, Header & Footer) Option 1: Only international passengers pay the safety levy

14. 14 Support for the Pacific Aviation Safety Office – Safety Levy 1 st Year (AUD) Project title (Insert, Header & Footer) Option 2: International and domestic passengers pay the same

15. 15 Support for the Pacific Aviation Safety Office – Safety Levy 1 st Year (AUD) Project title (Insert, Header & Footer) Option 3: International passengers pay 2x than domestic passengers

16. 16 Support for the Pacific Aviation Safety Office – Safety Levy vs. Airport Charges Project title (Insert, Header & Footer)