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Explore the UK experience in setting performance goals & targets for Air Navigation Service Providers (ANSPs) through economic regulation. Learn about incentive regulation, consultation with customers, balancing price and service incentives, and results achieved.
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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
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
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
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
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
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
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
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