Wed 9 Nov 2011 – In a world first, the UK Civil Aviation Authority (CAA) and the UK’s air navigation service provider NATS have agreed annual efficiency targets that aim to reduce airline fuel costs by £120 million ($190m) and save 600,000 tonnes of CO2 over the next three years. NATS has developed a new ‘3Di score’ metric that is broadly related to the difference in airline fuel burn between the actual flight and an optimal or preferred flight trajectory. The metric sets a ‘par value’ based in units and NATS will be financially rewarded or penalised depending on performance achieved against the metric. A final consultation is now underway and is to be concluded in a month’s time, with 1 January 2012 as the start date. Airlines, faced with mounting fuel costs and the introduction of the EU ETS, have welcomed the incentivised targets.
Announcing the start of the month-long consultation, Iain Osborne, CAA Director of Regulatory Policy, said: “The aviation sector can only continue to grow, with all the social and economic benefits that brings, if it is environmentally sustainable. That’s why the collaboration between NATS and their airline customers working with the CAA to put in place this efficiency target is so welcome – it shows the potential for real environmental benefits when we work together.”
The 3Di metric is based on analysis of actual radar tracks since 2006, establishing an average efficiency level in terms of horizontal and vertical flight trajectories – how direct the route is and how smooth the climb and descent for every flight. The latest data for August 2011 shows a 12-month moving average flight efficiency score of 24.4.
Concerned about further upward pressure on the metric owing to an association between the score and traffic growth, NATS had earlier proposed a par value of 25.5 based on historic performance. However, after an earlier consultation with stakeholders, including airlines, the CAA has decided the incentive regime should be made more stretching and proposes a value of 24 units in 2012 and 2013, tightening to 23 units in 2014, based on the annual average of daily scores. The CAA says its proposals, which have been accepted by NATS, reflect a balance between potential efficiency improvements and the potential upward pressure on the metric from increases in traffic.
NATS has estimated that one unit of the metric is equivalent to 35,000 tonnes of fuel and 110,000 tonnes of CO2 in 2010. At an assumed current cost of £620 ($1,000) per tonne of fuel, this gives a fuel saving of £22 million ($35m) per unit reduction in the metric. On this basis, assuming NATS meets the par value target over the three-year period, the reduction in the par value from 25.5 to 24 units could be worth around £33 million ($53m) per year in 2012/13 (all external factors being equal to 2010), with the reduction to 23 units providing a benefit of around £55 million ($88) in 2014 at today’s prices, totalling around £120 million ($190m) overall.
The payment rate is proposed at £200,000 ($320,000) per unit with bonuses and penalties capped at 20% of the money at risk as this would avoid increasing payment rates on other metrics where NATS has recently been outperforming, such as on flight delay targets. These existing financial incentives have resulted in projected average delays per flight in 2011 to be 30% better than the headline target.
A flight efficiency regime had been envisaged under a price control decision set by the CAA in December 2010, which set aside a proportion of bonuses and penalties for this metric once the CAA had been assured the metric had reached sufficient maturity for it to be introduced. The CAA, however, considers the main benefit of the flight efficiency incentive regime will be reputational, with NATS seeking to avoid paying penalties and striving to outperform the par value.
Although based on the annual average performance, NATS will be publishing its performance against the par value on a monthly basis. The period during the Olympic and Paralympic Games in London next year will be excluded from the targets due to the significant changes in the volume and pattern of traffic anticipated, although the monthly reporting should continue, in order to demonstrate performance during a time when the UK’s air traffic system will be tested to its maximum.
This is the first metric of this type to be introduced with financial incentives in Europe, says the CAA. NATS Chief Executive Richard Deakin goes further. “This is another world ‘first’ for NATS,” he said. “We have pioneered environmental innovation in air traffic management and this metric, the first of its kind, is another great achievement. We also believe it could set a standard for Europe as part of the new European Performance Scheme which comes into play next year.”
He added: “Improved environmental performance is at the heart of NATS’ work to help create a sustainable future for the industry, which is essential if we’re to be allowed to grow. It also makes good basic business sense as fewer emissions mean less fuel burned – part of our continuing focus on providing the most efficient service to help reduce operating costs for airlines and for our own business. NATS is already working towards stretching targets to reduce ATM-related CO2, which we believe are in line with this new performance measure.”
By taking into account both vertical and horizontal flight inefficiency, the 3Di metric extends the commonly used Eurocontrol horizontal metric by considering inefficiency in flight climb, cruise and descent and does not impose a 40 nautical mile exclusion area around airports, which ensures that stacking close to airports is also taken into account.
The NATS metric was welcomed by the International Air Transport Association. “IATA fully supports the introduction of a 3D flight efficiency metric with the CAA’s proposed par value,” said IATA’s Assistant Director Laurie O’Toole. “Given the importance of flight efficiency to airlines, IATA will be urging the European Commission to consider introduction of a similar metric in the near future which will be of considerable economic value to airlines.”
Once the regime is in place, the CAA says it will work closely with NATS to ensure it is achieving the aims and will consider how it can evolve to drive further environmental benefits.
“The targets are massively challenging, particularly in the context of future growth of traffic, but NATS remains committed to delivering environmental performance improvements for our airline customers,” said NATS’ Head of Environmental and Community Affairs, Ian Jopson.
“It’s been a long process and taken a great deal of effort but we’ve delivered something that has not been done before – developing a metric like this from scratch is truly a world first for an air traffic control organisation.”
UK CAA Consultation Document (pdf)
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