Article

Crisis funding: EUROCONTROL and Member States agree new ways to support the ATM network during volatile times

Bhev Chandrasena

"The common goal is a safe European airspace and we hope that the Funds can be a solidarity mechanism allowing Member States to help each other"

The COVID pandemic and the war in Ukraine have challenged the economic model of funding air traffic management services through route charges alone – the Agency has been working with Member States to develop new funding mechanisms to support Member States and their ANSPs during times of crisis, says Bhev Chandrasena, EUROCONTROL Chief Financial Officer responsible for the Central Route Charges Office and Finance.

On November 24, 2022, the 41 EUROCONTROL Member States gave the organisation a new task: the creation of voluntary solidarity funds to help Member States during air traffic crises created by factors beyond their control. On that same day, on the basis of this newly given task, the Member States asked the Agency to establish and manage two funds: a donation-based Fund for Ukraine and Moldova and a loan-based fund for Estonia, Latvia, Lithuania and Poland. These Funds have a potential maximum amount in excess of EUR 90 million. The monies collected will be used to cover staff and training costs as well as any other costs needed to ensure operational readiness for Ukraine and Moldova and continuity of services for the four Frontline States (Poland, Estonia, Latvia and Lithuania).

Arguably one of the biggest questions facing Europe's air traffic management service providers (ANSP) today: how to ensure the continued funding of vital safety-of-life services where fixed costs constitute a huge percentage of overheads and when traffic volatility is high during periods of crisis.

Number of flights over time

EUROCONTROL is becoming an important facilitator for ensuring the continuation of ATM service provision during these times of upheaval. While Member States will always have the final say, the Agency is now playing an increasingly critical role as a creative, independent "honest-broker" in helping States fund ANSP services when traditional routecharge income dries up.

"The key part to this," said Bhev Chandrasena, EUROCONTROL's CFO responsible for the Central Route Charges Office (CRCO) and Finance, "is the umbrella decision giving this new task to the organisation to establish voluntary solidarity funds. This lends itself to our core role, supporting airspace management services within the Single Sky ethos – 'we are all in it together.' This financial lever is one way to provide support to stakeholders during crises. As crises are coming more and more frequently than in the past, we have had to develop new policies and financial solutions to meet these requirements."

This new role for the Agency grew out of EUROCONTROL's actions during the COVID pandemic to ensure the financial support to ATM service provision when airline traffic all but disappeared – though concerted solidarity action at a EUROCONTROL level began as early as 2014, when Member States had agreed to cover Ukraine’s contribution to EUROCONTROL because of the first Russian invasion.

"When COVID struck, the Agency received calls from airlines who said they would be unable to pay their charges because they lacked income," said Bhev Chandrasena. "Some States and ANSPs were worried that without flights and route charges funding they would not be able to ensure the minimum services needed to support repatriation, humanitarian flights of cargo and medicines. So EUROCONTROL proposed two schemes – one to help the airlines and one to help the States and their ANSPs."

To support the airlines, States agreed to defer EUR 1.1 billion in route charges. To support the States and their ANSPs, EUROCONTROL organised a loan to be made available to the States to cover the loss of route charges income. The Agency negotiated with a consortium of banks for a loan of up to EUR 1.3 billion, to be repaid from the route charges collected on behalf of the States by EUROCONTROL when traffic levels gradually returned. Ten States took up the offer, allowing ATM services to be funded, with money dispersed to States and the loan paid back in full in March 2022. EUROCONTROL took on responsibility for the legal and administrative process, simplifying and speeding up the transaction process: participating States had to only sign a simple document to access this funding.

"The whole world was in shock and we needed a fast sustainable solution," said Bhev Chandrasena. The speed with which the Agency reacted and managed to raise EUR 1.3 billion, a significant amount of money, was remarkable. It allowed EUROCONTROL to support States and their ANSPs in sustaining operations throughout the continent for a considerable period.

"The COVID action was a leap forward with respect to the role of the Organisation; the States have now built on this with a new role for EUROCONTROL to act in times of crisis," said Bhev. "We know the funding of ATM services is within a specific framework; we know there are different schools of thought on the role of the States in terms of crisis and that there are different mechanisms in place. But States and their ANSPs need to ensure that air navigation services are provided. Following the COVID crisis, the world went straight into the Russian war in Ukraine. This forced the States to reassess their initial ideas of the role EUROCONTROL could play: providing a mechanism where solidarity can be expressed via its position in the aviation value chain as an independent, neutral entity."

The new solidarity funds will be financed through voluntary contributions from States, either through their route charges or via direct transfer. The States have agreed to finance the Funds with what represents a small (on average 0.6%) percentage of their 2022 route charge revenues. This will ensure the entire network can continue to always operate, or more precisely in the case of Ukraine, ensure operational readiness when air traffic recovers. "Through the fund," said Bhev Chandrasena, "money will be made available for Ukraine to help them rebuild their ANSP capacity, keep paying and training their controllers, retaining them while ensuring they are operational when the time is right."

He added: "EUROCONTROL's position is that we have a collective responsibility for our airspace. Any country's air travel market is interconnected to what's happening in neighbouring states, so by keeping the airspace open and working, we are contributing to the economy and wellbeing of all Member States. This has only been possible by taking the initiative and finding solutions for our Member States."

The debate in Europe about optimal ways to fund ATM services is already complex and will become increasingly more so over the next few years. But the COVID pandemic asked some fundamental questions about role the State should play if route-charge income is not enough to cover ANSP costs.

"During COVID, the option of doing nothing was simply not available to States," said Bhev Chandrasena, "which is why so many of them were happy that EUROCONTROL creatively proposed solutions."

With the establishment of new solidarity funds, EUROCONTROL will have more flexibility in helping the network remain operational during periods of crisis – with the States defining the limits of what can be funded.

"The logic of the fund is to deal with an air traffic crisis beyond a State’s control," said Bhev Chandrasena, "so they could not be used in the event of a controller strike, for example. If there is a crisis in one country, then that State can liaise with neighbouring or even other Member States. This will then go to a decision-making process, as any new fund will be subject to the approval of the States. But the contributions will always be voluntary and monitoring will always ensure that money goes to the right place.

"The common goal is a safe European airspace and we hope that the Funds can be a solidarity mechanism allowing Member States to help each other."

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