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ATNS REGULATING ENVIRONMENT The ATNS Company is subject to various layers of regulation. It is the subject of all normal requirements placed on a commercial company. Because it is a parastatal, it is further subject to governance and other requirements contained in the Public Finance Management Act. Being in the aviation sector, the Civil Aviation Authority regulates its staff, procedures and equipment from a safety perspective. Since it is a monopoly, it is regulated from an economic perspective by the Regulating Committee for ACSA and ATNS. REGULATING COMMITTEE The Regulating Committee is established under the ACSA Act. The Committee is appointed by the Minister of Transport. It carries out its functions with an aim to restraining ATNS from abusing its monopoly position, to promote the reasonable interests of users, to promote the company’s efficient and profitable operation, to encourage timely improvement of infrastructure and to ensure that ATNS has a reasonable prospect of earning a commercial return. PERMISSION TO LEVY ATS CHARGES The Committee carries out its mandate largely through the issuing of a Permission to Levy ATS Charges. The Permission contains to categories of conditions. Firstly, it places a limit on the level of or revenue from ATS charges. Secondly, it prescribes minimum levels of service standards. The rationale is that best value for money will be obtained by encouraging higher service levels and lower prices. The company must at all times be in possession of a valid permission for it to levy charges. PRICE CAP The Act allows the Regulating Committee some discretion on how it sets the tariff levels. The Committee has elected to do this with reference to the level of inflation, i.e. future tariffs are pegged to x% below inflation. This form of price regulation is known as ‘price cap’ or ‘CPI-X’ regulation and is widely applied internationally. The value of X is the efficiency incentive which the company must work towards. In recent years, X has been set at a negative value (i.e. CPI + X) for ATNS to achieve a desired target rate of return. X is likely to be positive (CPI – X) in future. In the course of the existing Permission, ATNS restructured the regulated tariffs so that the original two-tariff system (approach and en route charges) has been replaced by a three-tariff system (aerodrome, approach and area charges). The X incentive applies to regulated tariffs only. However, when setting X, the Regulating Committee takes into account non-tariff revenues as well (project revenues, small airport contract revenues, etc.) which reduces the regulated revenue requirement (the so-called common till approach). SERVICE STANDARDS The Regulating Committee sets minimum service standards to ensure that service levels do not decline because of the price-cap pressure. These standards refer to commercial services only, such as delays (safety standards are regulated by the CAA). The Committee’s approach is to measure standards over time, requiring standards to improve continuously. PERMISSION CYCLE A Permission has a five-year life. It is issued in the third year of a current Permission, replacing the current Permission from the fourth year. Permissions therefore overlap by two years – to encourage predictable plans. The Committee monitors the Permission during its life. The major intervention it makes is to oversee the application of a correction factor to correct for any tariff changes out of line with actual CPI. The Committee issues an Approach Document at the start of the development of an application for a new Permission. The Approach Document sets out the issues the Committee requires to be emphasized in the application. The company applies for a new Permission in the third year of an existing one. ATNS is currently in the third year of the 2004/5-2008/9 Permission, and has applied for its 2007/8-2011/2 Permission. MAJOR CONSIDERATIONS IN THE 2007/8-2011/2 PERMISSION APPLICATION The following are some of the salient issues addressed in the Permission application: ATNS SUBMISSION ATNS submitted its Permission application in September 2006. Following the requirements of the Approach Document, the application was structured as follows: REGULATING COMMITTEE DETERMINATION The Regulating Committee has requested clarification on some aspects of ATNS’ submission. It is expected that the new Permission will be issued in the second quarter of 2007. Until such time, ATNS will keep regulated charges unchanged. FURTHER INFORMATION Further information on the Permission may be obtained from Mohammed Mayat, Executive Manager: Finance at
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