International Civil Aviation Organization

World-wide CNS/ATM Systems

Implementation Conference

Rio de Janeiro, 11 – 15 May 1998

International Civil Aviation Organization

World-wide CNS/ATM Systems

Implementation Conference

Rio de Janeiro, 11 – 15 May 1998

WW/IMP–WP/17

25/2/98

Item 2.2

Agenda Item 2:	Institutional issues

2.2	Co-operative and sub-regional approaches, including multinational air navigation facilities and services

INTERNATIONAL CO-OPERATIVE VENTURES

(Presented by the Secretariat)

Information Paper

SUMMARY

This paper in support of action paper WW/IMP-WP/4, is presented for information only. It describes various international co-operative ventures: international operating agencies; joint charges collection agencies; multinational facilities and services; and various joint financing-type arrangements, including the Danish and Icelandic Joint Financing Agreements, the North Atlantic Height Monitoring Arrangement and the SADIS Cost Allocation and Recovery scheme, as well as the possible application of joint financing-type arrangements to CNS/ATM systems implementation. The text is based on Chapter 2 of the ICAO Manual on Air Navigation Services Economics (Doc 9161/3).

1.	Introduction

1.1	With their capacity to meet air navigation services requirements of many States in a much more cost-effective manner than they could achieve on their own, major CNS/ATM systems components are typical examples of facilities and services where international co-operation is highly desirable, and may in some instances, offer the only realistic approach. International co-operation in the provision of air navigation services can take many forms, some particularly relevant ones being described below.

2.	International operating agencies

2.1	General

2.1.1	An important characteristic of some autonomous authorities operating air navigation services is that the scope of their functions has an international dimension not found in authorities operating airports only. This development has been evidenced in circumstances where problems have arisen in the provision of air navigation services, in particular route facilities and services, because of technical factors and operational constraints that could not be adequately solved without international co-operation. This has led to the establishment of autonomous international authorities, usually referred to as international operating agencies, to which the operation of air navigation services, notably route facilities and services, has been assigned.

2.1.2	The international aviation community has followed these developments with interest which is reflected by the Council as it "encourages international co-operation in the provision and operation of air navigation services where this is beneficial for the providers and users concerned." (Statements by the Council to Contracting States on Charges for Airports and Air Navigation Services (Doc 9082/5), paragraph 27). Also, operating agencies are referred to in ICAO Assembly Resolutions A22-19 "Assistance and advice in the implementation of Regional Plans" and A16-10 "Economic, financial and joint support aspects of implementation".

2.2	Scope and functions

2.2.1	An international operating agency in this context is a separate entity assigned the task of providing air navigation services, principally route facilities and services, within a defined area on behalf of two or more sovereign States. The services they provide are usually in the categories of air traffic services (ATS); aeronautical telecommunication service (COM, comprising aeronautical fixed service (AFS), aeronautical mobile service (AMS) and radio navigation aids); search and rescue (SAR, essentially rescue co-ordinating centres); and aeronautical information service (AIS); but can extend to meteorological services for air navigation (MET) as well. These agencies are also responsible for the operation of charges collection systems for services provided.

2.2.2	Examples of international operating agencies are the Agence pour la Sécurité de la Navigation Aérienne en Afrique et à Madagascar (ASECNA) in Africa (which operates airports as well as air navigation services), Corporación Centroamericana de Servicios de Navegación Aérea (COCESNA) in Central America and the European Organization for the Safety of Air Navigation (EUROCONTROL) in Europe.

2.3	Advantages

2.3.1	Experience indicates that international operating agencies have contributed, often significantly, to improved efficiency in the provision of facilities and services at lower cost to both providers and users. Among the advantages offered are more efficient use of personnel, facilities and equipment, as well as savings in research and development, given the avoidance of duplication at the national level, and through achievement of economies of scale. This has special relevance for States with less advanced economies where trained personnel and financial resources are scarce and where aviation must compete with other sectors of the economy. Operating agencies levying route facility charges may usually be more successful in the collection of amounts due for overflights owing to the larger geographical areas usually covered by their activities. Moreover, since such agencies represent a number of States, they tend to be in a stronger negotiating position in their financial and commercial dealings and may therefore be able to secure more advantageous terms.

2.4	Establishing the agency

2.4.1	The size and composition of an agency's membership, and hence its geographical scope of operation, will primarily depend on political, economic, demographic and geographic considerations. The scope of its activities will also be influenced by these factors and the extent to which new and improved facilities may be required in some States to serve present and future traffic.

2.5	Organizational arrangements

2.5.1	The circumstances that lead to the creation of an international operating agency, as well as many other factors will influence its structure. Since these will differ significantly from case to case, it is not practicable to prescribe any specific pattern of organizational arrangements for such agencies in general. However, certain basic common features have normally emerged. For example, the overall policies governing the agency's functions, operations and financial affairs, as well as decisions on fundamental matters such as capital investments and the appointment of key staff, are likely to be the responsibility of a board of management composed of representatives of the Member States. Similarly, the chief executive will usually be responsible to the board ultimately responsible for the general administration of the agency. From the outset, sound and well-defined financial and economic policies and practices need to be established relating to cost recovery and financial control, including accounting and budgeting procedures. Recruitment of agency personnel will also require careful consideration. See moreover the text on agreement(s) in paragraph 4.5 below on Multinational Facilities and Services.

3.	Joint charges collection agencies

3.1	Scope and functions

3.1.1	Another effective, if less encompassing, means for States to benefit from international co-operation in their provision of air navigation services would be to participate in the operation of a multinational or joint charges collection agency. This is because States individually operating route facilities and charging for the services rendered, will be involved in considerable accounting work, and may also encounter collection difficulties where there is a substantial volume of overflying traffic. Such an agency would collect route air navigation services charges on behalf of all of the participating States, including those which are overflown. Since the majority of aircraft are likely to land in the territory of at least one of the participating States, this would tend to ease the collection of air navigation services charges. The agency would then transfer to each participating State the charges revenue collected on its behalf. Added to each charge levied for each participating State would be a small fee or percentage to cover the State's share of the agency's costs. A joint charges collection agency should also benefit the users (or aircraft operators) because the collection costs attributable to each participating State should be lower than it would otherwise incur itself and need to recover from the users. Another factor to be considered is the additional prospect of further economies resulting from the employment of better trained staff and improved procedures.

3.1.2	In view of their potential benefits, regional collection agencies may have particular appeal to States wishing to carry out technical functions (air traffic control, etc.) themselves. Such agencies are also much less complex to establish in terms of equipment, staff and other requirements than an international operating agency. As to personnel, the agency could be staffed by nationals from States contracting to the agency thus allowing them to develop new expertise and employment.

3.1.3	ICAO is prepared upon request to assist States in establishing joint charges collection agencies, including purchase of necessary equipment and training of nationals from the participating States to operate the agency. The cost of ICAO's assistance could be recovered inter alia from the charges.

3.2	Financing aspects

3.2.1	The costs involved to the participating States should be minimal. Start-up funds required for the acquisition of premises and data processing and other necessary equipment as well as pre-operational training, co-ordination and administration should normally not pose a major problem since they could be obtained through a financing institution, including a commercial bank. The loan would be repaid over a few years, with instalments and interest being included in the agency cost element that would be added to and recovered through the route air navigation services charges billed and collected by the agency on behalf of the contracting States. For the agency to be cost-effective several States would need to be involved. Separate agencies could be established in different regions.

3.3	Importance of States controlling collection of their charges

3.3.1	Considering that route air navigation services charges are an essential source of revenues, it is important that the States concerned themselves remain fully in control of the charges collection function and be in the position to dispose immediately of the funds collected as they themselves deem necessary. Such control is exercised not only when a State bills and collects the charges itself but also when it joins forces with other States to establish a collection agency serving all the participating States. Of particular note is that some of the data available are a valuable asset, which should be treated as being confidential and which the States concerned alone should control and dispose of. Similarly, confidentiality should apply to amounts of charges billed to individual operators or amounts outstanding.

3.3.2	The situation may arise where a State would consider contracting the collection of route air navigation services charges to an agent or organization that is not government controlled or operated. In such circumstances the State should ensure that the contract with the agent stipulate that the agent's fees and costs not be deducted from the charge collected on behalf of the State but added to each charge levied on the users (aircraft operators concerned). This ensures that the State receives the revenue from charges collected without any deduction, instead of an amount reduced by the agent's fees and costs which cannot be quantified in advance, and which thereby impede proper financial planning and budgeting by the State. The collecting agent or organization is reimbursed not by the State concerned, but by the users who are the essential beneficiaries of the air navigation services being charged for. This is also the practice recommended in paragraph 3.1.1 above with regard to covering the costs of joint charges collection agencies, and is in fact the practice applied in the case of existing State owned and controlled joint collection activities. The costs attributable should be transparent.

3.4	Currency aspects

3.4.1	With a joint collection agency the funds collected can be transferred immediately to an account of the participating State which it could hold either at a bank (or another similar financial institution) in its own territory or in any other State it may designate. This collection approach may also ease access by the participating State to convertible currency. In that context, it should be noted that although the Council Statements in Doc 9082/5 recommend in paragraph 38 that under normal circumstances user charges should be expressed and payable in the local currency of the State concerned, the Council also "Recognizes that when route air navigation services charges are billed on a regional basis (i.e. on behalf of several States or by a jointly operated agency), it may be advantageous to both users and providers to denominate and pay charges in a single convertible currency."

4.	Multinational Facilities and Services

4.1	Background developments

4.1.1	A multinational ICAO air navigation facility or service is usually defined as a facility or service included in an ICAO regional air navigation plan for the purpose of serving international air navigation in airspace extending beyond the airspace serviced by a single State in accordance with that regional air navigation plan. Over the years States have provided one another with various services such as air traffic control, communications and meteorological information. States have usually not charged one another for these services, because the service flow has essentially been bilateral and generally considered to be in balance. Even where there were imbalances, the effort involved in determining the cost share to be charged to a neighbouring State was considered disproportionate to the costs involved. Instead, the provider State concerned would normally include that cost share in its cost base for route facility or other similar charges levied on the users (aircraft operators) flying within the airspace for which it was responsible.

4.1.2	This approach continues to be the general practice, but technological developments and the high levels of investments involved are bringing about a fundamental change reflected in a growing interest and need for multinational facilities and services. These are being introduced where certain functions that States now carry out themselves can be provided more efficiently and at a lower cost by a single multinational unit operated by one or several States. Indeed, in certain situations, such as in the implementation of the CNS/ATM systems, a multinational facility may largely be the only feasible alternative. With regard to multinational facilities and services in general it remains important, however, to avoid the duplication of services and the associated higher charges on users which would occur if a State participated in the provision of a multinational service while also duplicating that service at the national level.

4.2	Equity aspects

4.2.1	Equity in the sharing of the costs of a multinational facility or service and in the recovery of the costs through user charges is important. A multinational facility operated by one State but providing services used by two or more States at costs considerably over and above those that would be incurred to solely meet the requirements of the State operating that facility, may give rise to inequity in two areas if some form of cost sharing is not arranged. To the State providing and operating the facility, there is inequity from having to defray capital and running costs in excess of those that State would otherwise incur to meet its own requirements. Where that State would seek to recover its costs through user charges, users within the airspace for which the State is responsible would be asked to pay for costs of services not properly attributable to them. These users would thereby, in effect be required to subsidize services provided for other traffic by another State. This would be contrary to ICAO policy.

4.2.2	Any State sharing in the costs of operating a multinational air navigation facility or service can include the relevant costs involved in the cost base for charges, such as air navigation services charges, that it levies.

4.3	Implications for States and ICAO technical planning bodies

4.3.1	Because of the financial and managerial implications involved, the approach by technical planning bodies to the possible implementation of multinational facilities and services may be expected to differ from that applied to facilities or services to be implemented by a single State. Regarding the latter, technical planning bodies essentially focus on the technical aspects of the facilities and services that the State concerned must implement to meet its obligations under the respective regional air navigation plan, to serve international civil traffic within the airspace for which it alone is responsible. Provided these facilities or services meet international standards, aspects relating to their financing and management remain an internal matter for that State.

4.3.2	However, a different approach is required in the case of multinational facilities and services because the primary reason for their establishment is to enable two or more States to carry out the services for which each has accepted responsibility under the regional plan more efficiently and in a more cost effective manner than each of them could achieve on its own. Consequently it is to be expected that the States concerned will wish to evaluate, at least in broad terms, the financial aspects of such facilities before agreeing to their incorporation in the regional plan and before committing themselves to using them.

4.3.3	For this reason, basic financial implications will need to be considered by technical planning groups at such a stage in their deliberations when it is believed that the best or even only solution to a problem involves recommending the establishment of a multinational facility or service. To leave aside basic financial implications until after these groups have finalized their recommendations could lead to delays if one or more of the States expected to participate in the operation of the multinational facility concerned raises objections (for example, to the financial share it would be expected to pay for). Such delays in implementing technical solutions could possibly compromise safety or efficiency in the area concerned while new solutions acceptable to all the States involved were being sought.

4.4	Guidance material developed

4.4.1	ICAO has been active from the outset in the development of guidelines on the financial, managerial and organizational aspects that need to be addressed in the development and processing of a proposal for a multinational facility or service. To that effect the introductory segment of the European and African regional air navigation plans already contain such guidelines and the ICAO Council has decided that such guidelines should be attached to the introduction to all ICAO regional air navigation plans.

4.4.2	The guidelines on the financial, managerial and other contractual aspects that should normally be considered in respect of the operation of a potential multinational facility or service are identical in each plan. They include an outline of the basic provisions that would need to be considered for inclusion in an agreement between the States participating in the establishment and operation of a multinational facility or service.

4.5	Agreement

4.5.1	The participation of States in the provision of a multinational facility/service is based on the assumption that any State having supported and agreed to the implementation of such a facility/service and making use of it, should also shoulder its respective share of the costs involved. Having done this, the participating States would need to formalize the terms under which the multinational facility/service is to be provided in an agreement. A primary aim of the agreement should be to ensure that the costs involved are shared amongst the participating States in a fair and equitable manner.

4.5.2	The agreement could either take the form of a formal international treaty or an "administrative agreement". Both forms establish an international obligation but a treaty requires the signature of the head of state or government and will also require the ratification or approval of the national legislative assembly, which, as a rule, is a time-consuming process. An "administrative agreement", on the other hand, is at a lower level of requirement in respect of formalities and procedures than a treaty, can be signed by a minister or director of civil aviation or some other authorized person, and could be concluded by an exchange of letters or notes.

4.5.3	It has been recommended that, whenever possible, the agreement be established in the form of an "administrative agreement" rather than a formal international treaty because this would allow the agreement to come into force with minimum delay and also permit greater flexibility in incorporating any subsequent modification required. It is recognized, however, that in some States constitutional or legal circumstances may require the approval of the legislative assembly for financial obligations to be accepted by the State, particularly if these are of a substantial magnitude and/or extend over a period of time. Whatever form is used, the agreement(s) should be structured to provide for easy subsequent amendments as developments may require. To this end, material of detail which is more likely to require modifications, and which will not affect the basic provisions of the agreement, should be contained in annexes or appendices.

4.6	Basic provisions

4.6.1	The various basic provisions that would normally have to be covered in the agreement include the following: objective of the agreement; obligations of States party to the agreement; definition and description of the facility/service; establishment and operation of the facility/service; legal responsibility; liability aspects; managerial aspects (including governing bodies and decision making arrangements, organization, and staffing and consultation); financial aspects (including cost determination, cost sharing, budgeting, authority to approve the budget and financial auditing); taxation and other government levies; procedures for settlement of disputes; and accessions, withdrawals, amendments to and termination of the agreement.

4.6.2	With regard to the provision addressing the establishment and operation of the facility/service, it should be added that the agreement should specify who will establish and operate the facility/service concerned, namely whether this is to be done by one State, two or more States, an existing international organization, an existing national or international agency, or a new agency to be established specifically for this purpose. The decision as to who should provide the facility/service could be influenced, in particular, by the anticipated capital investment and annual costs involved, as well as the extent to which the alternative providers (i.e. a participating State or States, international organization or agency) have been engaged in the function(s) concerned.

4.7	Status of guidelines

4.7.1	The guidelines developed by ICAO for inclusion in the regional air navigation plans do not constitute a draft model agreement nor clauses since circumstances related to the planning, implementation and operation of individual multinational facilities/services may vary considerably. However, the guidelines have been given careful review by legal experts within and outside ICAO. Consensus of legal opinion is that there are no insurmountable legal obstacles to the implementation of multinational air navigation facilities and services as defined in the guidelines.

5.	The Danish and Icelandic joint financing agreements

5.1	The basis for the joint financing concept is that certain air navigation facilities and services may be too costly for a State to provide and operate alone for the benefit of international civil aviation at large. This is recognized in the Chicago Convention where Chapter XV lays down the basic principles for "joint support" action if a State applies to ICAO for financial or technical aid or if the Council acts on its own in offering assistance to remedy a situation that might impair the safe, efficient and economical operation of international air services.

5.2	Two Agreements concluded under Chapter XV, one with Denmark, the other with Iceland, are currently in force. The Agreements cover the operation and financing of facilities and services provided by Denmark and Iceland for civil aircraft flying across the North Atlantic, north of the 45°N latitude. These services comprise air traffic control, communications and meteorology. Financial responsibility is assumed by a group of 23 States whose Governments contract to the relevant Agreements, including the two provider States.

5.3	The responsibility for the administration of the Agreements rests with the ICAO Council and the Secretary General, on behalf of the Contracting Governments. An ICAO Council Committee - the Joint Support Committee - advises in carrying out ICAO responsibilities under the Agreements.

5.4	The Joint Support Committee ensures that the procedures established in the Agreements are followed. It also examines the financial and technical aspects of new requirements necessary for the proper and efficient operation of the services and makes appropriate recommendations to the Council.

5.5	The Secretary General is responsible for generally supervising the operation and administration of the Agreements. The ICAO Secretariat carries out the day-to-day administrative functions involved. The administrative functions essentially consist of analysing cost estimates provided by Denmark and Iceland and actual costs; evaluating requests for new capital expenditures or resources; preparing the assessment levels for Contracting Governments; determining the level of user charges; and arranging for the investment of funds and payments to the provider States.

5.6	All civil aircraft flying across the North Atlantic north of 45°N latitude, whether or not their governments participate in the Agreements, pay through a user charge the cost of the air traffic control, communication and meteorological services, which are described as costs allocable to civil aviation. The remainder of the costs, namely those not allocable to civil aviation, are shared amongst the 23 Contracting Governments parties to the Agreements (including Denmark and Iceland) on the basis of the number of individual crossings by their aircraft.

6.	Arrangement on the joint financing of a north atlantic height monitoring system

6.1	At the request of six States providing air navigation services for the North Atlantic (Canada, Iceland, Ireland, Portugal, the United Kingdom and the United States) ICAO assumed in 1994 the responsibilities associated with administering a height monitoring system programme on the North Atlantic that became operational in 1995. This programme has been designed to monitor 1000 feet reduced vertical separation minima prior to its implementation. The joint financing concept used for the Danish and Icelandic agreements has been adapted to take into account the modalities inherent to this programme, bearing in mind that the participating provider States requested an effective and flexible joint financing arrangement.

7.	SADIS cost association and recovery (SCAR) scheme

7.1	ICAO has developed the Satellite Distribution System Cost Allocation and Recovery (SCAR) scheme and, upon request of the governments concerned, provides administrative services for the SADIS Cost Recovery Administrative Group for the European Region (ESCRAG), which audits the costs of the SADIS services and assesses the annual contribution to be made by each State participating in the scheme. Originally intended for the distribution of certain aeronautical meteorological data the SADIS has since its became operational in 1996 been expanded to cover other aeronautical information as well. The United Kingdom operates the SADIS which is financed on a voluntary basis by 11 European States, (including the United Kingdom), with the cost share of each participating State being determined on the basis of IFR traffic in its airspace. As the SADIS services are available to and used by not only States in the European region but also States in Africa, the Middle East and Western Asia as well, it is expected that States in these regions as well as additional States in Europe will join in this voluntary cost sharing scheme.

8.	Possible application of the joint financing concept to cns/atm system implementation

8.1	Joint financing-type arrangements would lend themselves well to the implementation of a number of CNS/ATM systems components in situations where it is, for example, very costly for a State to act alone or where an existing regional organization (ASECNA, COCESNA, EUROCONTROL etc.) does not act on the State's behalf. Such components include integrity monitoring and wide area augmentation systems required in connection with the GNSS, and could also include ground earth stations (GES) and sharing in the use of communications satellite transponders.

8.2	Under a joint financing-type arrangement actual provision and operation of the CNS/ATM components concerned could be carried out by one State on behalf of other participating States, or contracted to a commercial operator or service provider. Alternatively a group of States could jointly operate and provide the facilities and services concerned. In the first two instances, ICAO's role in joint financing would be similar to that under the Danish and Icelandic Joint Financing Agreements or the other two types of arrangements referred to in paragraphs 6 and 7 above. Where a group of States would operate the facility jointly, ICAO's role could however be expanded, particularly during the implementation phase, for example to include organizing the recruitment of staff, such construction as may be required, and various associated activities. Regardless of who actually provides and operates the facilities or services concerned, in all instances the participating States under each scheme would exercise full control through a governing joint support-type committee to whom the ICAO joint financing Secretariat would report.

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