Performance Review Commission 16 July 2012 Keld Ludvigsen Chairman Performance Review Commission Member of Performance Review Body Total Economic Value.

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16 July 2012

Keld LudvigsenChairman Performance Review CommissionMember of Performance Review Body

Total Economic Value (TEV) Symposium

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Performance Review Commission

A well known concept

‘To reduce the direct and indirect ATM-related costs per unit of aircraft operations.’Air Traffic Management Strategy For The Years 2000+ , Approved January 2000

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Context & background

The Total Economic Value (TEV)

•Is an attempt to monetarise direct and indirect ANS costs borne by airspace users

•Provides a consolidated view of estimated ANS-related costs

•Does not include safety in the calculations

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6.8 6.9 6.7 6.9

1.5 1.5 1.5 1.4

3.9 3.5 3.7 3.7

1.91.2 2.2 1.5

10.1 9.89.59.4

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 (P)

Bill

ion

[€2

01

0]

En-route & airport ATFM delays (Capacity)ANS-related inefficiencies gate-to-gate (Environment)Terminal ANS provision costs*En-route ANS provision costs Source: PRC analysis

Estimated ANS-related economic costs to airspace users (gate-to-gate)

ANS-provisioncosts

ANS quality of service related

costs Flight inefficiencies(taxi-out, en-route, terminal)

ATFM delays

Terminal charges

IFR flights (M)

* Note that terminal ANS provision costs only refer to 21 States

En-route charges

ANS-related economic costs

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The performance process and KPAs

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The PRB use of TEV so far

Target setting

Partially done for RP1 targets

No specific KPIs targets on TEV

Not mature for target setting

Would blur accountability

Assessment of PPsWas taken into account during first loop of PPs assessment

Partially done in the second loop of PPs assessment

Monitoring PPsOverall economic performance of service provision

Performance of one KPA/KPI deteriorates but overall performance improves

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What are the advantages of using the TEV?

• Consolidated view, easy to understand

• Enables to express all KPIs in monetary terms (except Safety)

• Visualises the relative weight of the different KPAs and priorities of policy objectives

• Provides a high level framework to illustrate interdependencies and trade-offs among KPAs over time

• Genuine opportunity for a State/FAB to contribute to the overall performance improvements while taking local circumstances and priorities into account.

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Methodological issues related to the TEV

• No commonly agreed methodology

• The TEV calculation is: • dependent on exogenous factors outside ANS control

• relies on assumptions for the monetarisation of ANS related inefficiencies

• Limitations in measuring precisely some ANS-related indirect costs

• Flight efficiency is primarily a network issue

• En-route KPIs are well established but ANS performance at airports is still a relatively new area

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Ability to drive the “right” behavior?

• Could reduce clear accountabilities for achieving performance improvements

• Could lead to the misconception that improvements in one area have to come at the detriment in another area

• Might lead to trade-offs between KPIs with different user groups

• Might be misused as a justification to trade-off between KPIs with ‘hard’ incentives and KPIs without ‘hard’ incentives

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Way forward

• A potential useful and powerful tool

• Need to better frame the TEV concept

• Build trust amongst all stakeholders

• Evolution not revolution

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Any questions?

Performance Review Commission 16 July 2012 Keld Ludvigsen Chairman Performance Review Commission Member of Performance Review Body Total Economic Value.

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