​​Financing of Aviation System: CNS/ATM - Economic Aspects


It has been repeatedly stated that the technical obstacles to CNS/ATM systems implementation have been overcome and that the main challenges being faced by States are currently of an organizational and financial nature. Policy guidance in these two areas is largely in place. Moreover, most of the basic practical guidance required relating to organizational options, cost/benefit analysis, financial control, cost recovery and financing has been developed, but will need to be reviewed and expanded as required. Furthermore, while the cost/benefit work demonstrates the economic viability of CNS/ATM systems, States and other service providers need to develop sound business cases to convince funding institutions to invest in these systems. It is clear therefore that more effort needs to be made by ICAO to assist a large number of States both in implementing available guidance and in developing business cases. Inadequate organization of air navigation services operation and lack of sound financial management procedures may undermine the confidence of the financial community to provide these States with the financing required to implement CNS/ATM systems components.
The implementation and operation of major CNS/ATM systems components require, with rare exceptions, international cooperation because of the magnitude of investments involved and the capacity that will be provided. Assistance is, however, required in many regions to establish such cooperative ventures as well as other cooperative or joint ventures which can greatly benefit States.

ICAO Policy

The Statement of ICAO Policy on CNS/ATM Systems Implementation and Operation, adopted by the Council in March 1994, specifically addresses CNS/ATM systems cost recovery policy stating that such cost recovery must be in conformity with Article 15 of the Convention on International Civil Aviation (the Chicago Convention) and ICAO's Policies on Charges for Airports and Air Navigation Services (Doc 9082), the essence of which are equity and balance in the interests of providers as well as users of air navigation services.
A fundamental characteristic of CNS/ATM systems (except for airborne equipment) is that they are provided as part of the air navigation facilities and services, and hence the same basic economic principles apply to them as to other such facilities and services. What sets CNS/ATM systems apart technically from most other air navigation facilities and services is the improved technology and the extension of capacity they offer but that is a difference in degree not in substance. Consequently, policy guidance developed by ICAO on organizational and cost recovery aspects of air navigation services also applies to CNS/ATM systems.
The World Wide CNS/ATM Systems Implementation Conference, which was held in Rio de Janeiro, 11 to 15 May 1998, developed a number of recommendations addressing financial matters pertinent to the implementation and operation of CNS/ATM systems, including organizational and cooperative aspects.

Guidance Material

ICAO has published two documents addressing economic issues of particular relevance to implementation and operation of CNS/ATM systems. The first is the Manual on Air Navigation Services Economics (Doc 9161), prepared by the Secretariat with the assistance of the Air Navigation Services Economics Panel (ANSEP). The Manual provides guidance on organizational structures, international cooperation, financial management, financing air navigation services infrastructure, cost basis for charges, and setting of charges and their collection. Aspects of these subject matters which are of special relevance to CNS/ATM systems provision are identified and addressed throughout the Manual. 
The other document is ANSEP's Report on Financial and Related Organizational and Managerial Aspects of Global Navigation Satellite Systems (GNSS) Provision and Operation (Doc 9660), published in 1996. The report focusses on such organizational and managerial aspects of GNSS provision as GNSS components being multinational facilities or services, ownership and control considerations, and competition; and financial aspects, including funding sources, cost recovery policy, determination and allocation of GNSS costs, compensation or assistance to States to cover costs of redundancies and/or relocation/retraining, cost recovery methodology, and liability aspects. The report also contains five recommendations, all of which have been approved by the ICAO Council, dealing with guarantees by States in the context of servicing and repayment of loans, cooperation among States in cost recovery, financial imperatives for accelerating the procedures for amendment of regional air navigation plans, the methodology for allocating GNSS costs attributable to civil aviation among user States, and the role of ICAO in financial and administrative aspects of GNSS implementation.
A document, published in 1995, which has also been found very useful is the Economics of Satellite-based Air Navigation Services - Guidelines for cost/benefit analysis of communications, navigation and surveillance/air traffic management (CNS/ATM) systems (Circular 257-AT/106), which contains the cost/benefit guidance material developed by ICAO focussing on the methodological approach of Net Present Value being applied on a step-by-step tabular basis which may be undertaken manually or through computer spreadsheets. For a more detailed description of the guidance material on Cost/Benefit Analyses please refer to the Forecasting and Economic Planning Programme.


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