International Civil Aviation Organization

World-wide CNS/ATM Systems

Implementation Conference

Rio de Janeiro, 11 – 15 May 1998

WW/IMP–WP/54

19/3/1998

Item 3

Agenda Item 3:	Financial matters

ECONOMIC AND FINANCIAL MATTERS

(Presented by 53 African Contracting States1)

Action Paper

SUMMARY

The paper outlines the special economic and financial circumstances of the AFI Region concerning the implementation of the CNS/ATM systems and seeks to convince the providers of air traffic and navigation services and international financing institutions and organizations to co-operate with Africa in the implementation phase of the CNS/ATM systems.

1.	Introduction

1.1	The AFI CNS/ATM systems implementation Plan was adopted by the AFI/7 Regional air navigation meeting in Abuja, Nigeria in May 1997. The implementation time frames for the various systems and concepts of the Plan give an operational overview of systems configuration during the transition and list activities required for an evolutionary and co-ordinated implementation towards the final objectives as contained in the system concept description.

1.2	The implementation phase of this plan will require substantial amounts of investment in infrastructure, equipment and training.

2.	Brief Overview of the African Air Transport Industry

2.1	The majority of African States are more and more giving attention to institutional and financial issues which have been identified as impeding the efficient performance of the African air transport industry in terms of inadequate and inefficient aeronautical infrastructure, fragmental airspace and airlines, underdeveloped route network, institutional and managerial instability, scarce funds for re-equipment and under-capitalization.

2.2	According to a study by IATA prepared for the AFI Planning and Implementation Regional Group, the total number of scheduled passenger flight movements for 1996, from and within the African Region, was 567,355. This only represented about 4% of the total scheduled movements world-wide.

2.3	With regard to 1997, the Airports Council International reported that during the first nine months of the year, African airports recorded growths in passenger and cargo traffic and the number of airport movements which were more than double the world average.

2.4	A 10.7% increase in the number of passengers handled by reporting airports in Africa during the first nine months of 1997 compared with the same period during the previous year, was more than 3% higher than the next best growth area, namely Latin America and Caribbean with 7.6%. Europe showed 7.1% increase while the rest of the world average a growth rate of under 4%.

2.5	The Airports Council International has further reported that nearly 14.5 million passengers were handled by Africa's main airports during the first six months of 1997, which represented an 8.2% increase over January/June 1996. The number of aircraft movements, however, reflected only a 3.3% increase while cargo handling slumped by 5.5%.

2.6	According to the IATA study referred to in para 2.2 above, the forecast average growth in scheduled passenger flight movements over the period 1996 to 2010 is a follows:

4.3% between 1996 to 2000

3.8% between 2000 to 2005

3.5% between 2005 to 2010

2.7	Although the primary objective of the CNS/ATM systems is to enhance flight safety, the CNS/ATM systems will increase capacity to cater for growth of the air transport industry in Africa at least cost.

2.8	The area in Africa that air navigation facilities should cover is vast and the future growth of the air transport industry in Africa will therefore be dependent on the implementation of the proposed CNS/ATM systems.

3.	Air Transport and the African Economy

3.1	The majority of African States are categorized as least developed, and are mainly land-locked. They also include Island States.

3.2	In many of the African States, the economic and political climate continues to change to being stable. As more States are implementing economic reforms, they are recording significant improvements in their economies. However, in contrast to the welcome improvements in the economies of many of the African States, several of them were adversely affected by internal conflicts.

3.3	Many of the African States are striving to sustain the economic reform programmes and to address the key constraints, which are mainly in the form of structural bottlenecks in infrastructure, skill shortages and weak institutions which have negatively affected the development of the African air transport industry.

3.4	Air transport has been recognized to play an increasingly important role in the socio-economic development of the African region. It serves both as a catalyst to the economic development of the region, and directly contributes to the growth of trade and tourism.

3.5	The new world economic environment and the necessity to move goods fast from production to consumption places, also continues to increase the need to develop air services in Africa.

4.	General Viability of the CNS/ATM Systems

4.1	The important contribution that the CNS/ATM systems make to flight safety places a responsibility on States to implement these systems. The global study conducted by ICAO as well as initial economic studies conducted indicate that the benefits of the CNS/ATM systems will exceed the costs of implementation. This does not mean that they will be viable for all African States. Therefore it is vital that Africa either as individual States or on a regional or sub-regional basis, with the assistance of ICAO, conduct cost-benefit studies as requested by the relevant ICAO recommendations.

5.	Sources of Funding and Cost Recovery

5.1	The CNS/ATM systems could be financed through the public or private sectors depending on the implementation arrangements, ownership structures and implementing agencies. The fact that several autonomous civil aviation agencies have already been established and that prospects exist for the establishment of new ones by African States is an important and positive development which should open up new opportunities for private sector funding. It is important that the autonomous entities should have sound financial management in order to enhance their credibility and that aeronautical charges are exclusively invested in the aviation sector in conformity with the Statements by the Council to Contracting States on Charges for Airports and Air Navigation Services (Doc 9082). Additional funding could be attracted by the effectiveness of cost recovery mechanisms to be put in place.

5.2	The various forms of financing identified thus far include: concessionary bilateral government to government funding, contributions from governments, commercial sources, accumulated excess of revenue over costs, bonds, equity financing and leasing. Individual African States, groups of States, regional and sub-regional organizations must choose the option best suited to their individual requirements. Some States have created a special investment fund to facilitate debt repayment. African States, however, recognize that some forms of guarantees will be required when considering financing through avenues such as debt financing, bonds and leasing.

5.3	The cost recovery through charges must be in conformity with basic ICAO airport and air navigation services cost recovery policy. The guiding principle is contained in Article 15 of the Convention on International Civil Aviation (Chicago Convention 1944) and is supplemented by the statements by the Doc 9082.

5.4	Co-operation among States on a regional or international basis may enhance the funding opportunity for those States with financial constraints. This may in turn enhance the possibilities for securing private sector funding for the implementation of the CNS/ATM systems.

6.	Action by the Conference

6.1	The listed States invite the Conference to adopt the following recommendation:

The Conference

Recognizing the important co-ordinating role of ICAO in the implementation of the CNS/ATM systems;

Considering that developing States are faced with significant economic constraints and that the current levels of air transport activities may not immediately be able to support the funding of the CNS/ATM systems;

Bearing in mind the existence of the ICAO LIM AFI RAN Meeting (1988) Recommendation on the establishment of autonomous civil aviation authorities, as well as the AFI7/RAN recommendations on institutional strategies for addressing air navigation deficiencies;

Recalling the request made by the 31st Session of the Assembly to the ICAO Council to evaluate a proposal to establish an International Aeronautical Monetary Fund for investment in airport and air navigation services infrastructure, including CNS/ATM components;

Aware that some areas in less developed regions may not have the potential to generate sufficient traffic, and therefore revenue, to be self-financing;

Convinced that multilateral mechanisms for joint billing and collection will improve recovery of costs of implementation and operating CNS/ATM systems components through user charges.

1)	Calls on financial institutions and developed States to extend concessionary funding for the CNS/ATM systems for at least the initial stages of implementation in the developing States. Such funding could be made available through bilateral programmes and Development Banks;

2)	Invites Contracting States, which have not yet do so, to create autonomous civil aviation entities, and to ensure that their autonomous civil aviation entities have sound financial management, autonomous and their income is dedicated to the aviation sector;

3)	Invites ICAO to expedite the studies of the proposal on the establishment of the International Aeronautical Monetary Fund presented to the 31st Session of the Assembly;

4)	Requests ICAO in collaboration with Contracting States to identify those areas in less developed regions where the implementation of CNS/ATM systems cannot be carried out on a self-financing basis and provide them with the required assistance through the Technical Co-operation mechanism;

5)	Calls on ICAO in co-ordination with Contracting States and other multilateral organizations to assist States in developing efficient billing and collection systems.

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