Paradise Lost?

Although a region with only moderate traffic, the South Pacific is an area where different commercial interests are competing for control of the upper airspace, writes Ian Thompson.

Issues in the management of en route air traffic over the South Pacific highlight problems that need to be overcome elsewhere in an effort to more efficiently manage oceanic airspace.

Three air navigation service providers (ANSP) deliver en route ATM services in the upper airspace of the South Pacific. Airways New Zealand provides services over the eastern portion overhead Samoa, Tonga, Cook Islands and Niue. Airports Fiji Limited (AFL) deliver services within the middle part overhead a portion of Kiribati plus Tuvalu, Vanuatu and New Caledonia. Airservices Australia provides services over the western portion of this airspace overhead the Solomon Islands and Nauru above 24,500ft.

Most Flight Information Regions (FIR) across the Pacific are a reflection of the political and colonial influences that existed in the 1940s and 1950s. They are also a reflection of the aircraft performance, navigation systems and air routes of the time. The Republic of Kiribati, for example, was formed in 1979 and spans 2,800nm east to west and lies beneath the boundaries of the Nadi, Auckland, Oakland and Tahiti FIRs.

These historic FIR boundaries are becoming less relevant as the sophistication of aircraft increases, enabling the use of user preferred routes (UPRs) which take account of wind conditions that can often change on a daily basis. They have also not been updated to reflect changes to national sovereignty. ATM surveillance, navigation and communication systems now provide opportunities for en route upper airspace to be rationalised to reduce service delivery costs.

The advent of commercialised ATM service delivery since 1987 has seen the large ANSPs explore opportunities to increase the volume of airspace for which they are responsible.  Pacific Island states have explored changing ATM service delivery arrangements in the airspace above their sovereign territories with the prospect of earning a share of the income generated from airline operations in this airspace. Most notably in 2002, Samoa, Tonga, Cook Islands and Niue negotiated a change in FIR airspace boundaries over eastern Polynesia to obtain a share of upper airspace air navigation services revenue. These new FIR boundaries resulted in Airways New Zealand replacing AFL as the ATM service provider over this area.

Stress

The loss of airspace over eastern Polynesia caused considerable financial stress to AFL. ATM service delivery in the upper airspace involves high fixed capital and operating costs to begin providing a service but very low marginal costs for additional airspace controlled. The change in FIR boundaries over eastern Polynesia resulted in AFL having a sharp reduction in oceanic revenue with the loss of airspace. AFL’s cost base, however, did not reduce.  Airways, on the other hand, has been able to increase its revenue from providing oceanic services over eastern Polynesia with minimal increase to its costs.

Following the change in FIR responsibilities for the upper airspace over eastern Polynesia, AFL commissioned a report from ICAO to determine an equitable revenue sharing framework for states in the Nadi FIR. ICAO’s Policies for Charges for Airports and Air Navigation outlines a framework where revenue is based on the costs attributable to each state to deliver the service. In the case of the Nadi FIR, this 2003 ICAO report found that AFL incurs 92.5 per cent of the costs for delivering services in the upper airspace of the Nadi FIR. Therefore, it receives this proportion of revenue. The other four states within the Nadi FIR receive a proportionate revenue share of the remaining 7.5 per cent.

This ICAO revenue sharing model, however, does not reflect the volume of airspace that each state contributes to the FIR or the number of aircraft flying over their sovereign territory. Both of these issues have been addressed in Airways’ agreement with the eastern Polynesian states. Airservices’ revenue sharing agreement with the Solomon Islands and Nauru also incorporates airspace volumes and traffic numbers.

The World Bank has been undertaking a number of aviation sector improvement and reform projects within the region for Tonga, Tuvalu, Kiribati, Samoa and Vanuatu. It identified that providing states, particularly those in the Nadi FIR, with an increased share of upper airspace revenue would help generate the financial means to maintain aviation infrastructure and provide safety oversight.

States that have Airservices and Airways provide ATM service delivery in their sovereign upper airspace receive substantially greater income than those nations who are within the Nadi FIR and receive services from AFL. Significantly, AFL does not have the revenue base to match the income distributed to states by Airways and Airservices.

Remuneration

Over the past three years, AFL has increased the en route air navigation charges in the Nadi FIR to match those of Airways within the Auckland FIR. One of the reasons for the price rise has been to increase the level of remuneration to the Pacific Island states within the Nadi FIR.

Although the states are receiving more, the methodology for the revenue share remains unchanged. As a result, the income earned by states in the Nadi FIR remains substantially lower than those with upper airspace services provided by Airservices and Airways. Three states within the Nadi FIR are still agitating for an increase in their share of upper airspace revenue from AFL, in line with that provided by Airways and Airservices.

The two major ANSPs in the region hold contrasting commercial aspirations. Airservices has adopted a passive approach in the region but continues to provide ATM services to the Solomon Islands and Nauru for historical reasons. It concentrates on domestic activities, although it supports countries in its ‘neighbourhood’, namely Indonesia and Papua New Guinea.

Airways, on the other hand, has ambitious commercial goals. For many years, it has provided a range of support activities to many Pacific Island nations. These have included providing technical support and infrastructure, aeronautical information services, calibration activities and operational air traffic controllers. In a project for the World Bank, it has recently completed the introduction of VSAT (Very Small Aperture Terminal) for aviation communications between Tonga, Samoa, Tuvalu, Kiribati and Vanuatu. VSAT also provides the connectivity to relay ADS-B surveillance data from the ground stations to air traffic control centres at Nadi, Auckland and Brisbane. Airways is held in high regard throughout the region.

In 2012, Airways embarked on a transformational strategy to double revenue and achieve a three-fold increase in value by 2020. Airways Global Services (AGS) leads their commercial activities. It operates internationally, often linking with complementary organisations to provide services to ANSPs. They also recognise the global ANSP trend that favours outsourcing activities and are seeking to establish service functions to meet these needs.  Airways, however, have financial limitations in the level of risk capital that can be invested to generate new business opportunities.

Arrangement

Airways has recently signed a memorandum of understanding with the Mitre Corporation. Although still embryonic, the arrangement sees Airways being an avenue to commercialise the outcomes from ATM research activities undertaken by Mitre. Airways will help trial research outcomes and assist it to be shaped for use by ANSPs.

One of the most significant opportunities for Airways to grow its revenue base is by extending its oceanic services in the Pacific upper airspace. It is eager to assume these services over Kiribati, Tuvalu and Vanuatu. These airspace gains would almost certainly be at the expense of AFL, however.

For more than 20 years, a number of reports have been prepared about how to cost effectively provide ATM services in the Pacific upper airspace. It has been mooted that all countries across the Pacific ocean collectively provide their en route airspace to enable more efficient ATM service delivery arrangements to be delivered. This enlarged upper airspace would involve 16 sovereign countries and five FIRs, the four FIRs in the South Pacific plus Oakland. The studies found considerable operational and financial benefits would arise from creating a unified upper airspace across the South Pacific region. Lowering operational costs to airline users while increasing returns to participating states is achieved through increasing the geographical area of the upper airspace. The larger the geographical size of the airspace, the greater the financial returns, due to lower marginal costs.

Despite the overwhelming benefits that are possible from unifying a greater geographical area of airspace and establishing a single ATM service delivery mechanism no agreement for these new arrangements has been achieved. Parochial political interests apparently have a vested interest in maintaining existing airspace arrangements. ICAO has shown no interest in overhauling legacy oceanic airspace arrangements that are no longer appropriate to the operations of modern long range jet aircraft either.

The imminent availability of satellite-based ADS-B surveillance services by Aireon in 2019 has the potential to increase the pressure to change legacy airspace boundaries and existing ATM service delivery arrangements. These changes can most easily take place within oceanic airspace. While such opportunities exist in the Pacific to reduce service delivery costs, there are similar possibilities elsewhere, including over the Atlantic Ocean. Experience from initiatives to reduce ATM service delivery costs over the Pacific highlights the important role that ICAO has in leading the overhaul of legacy oceanic boundaries and overcoming parochial political and commercial interests.

1 Comment

  1. Interesting topic and a discussion that needs to be had. Interesting that AFL raised its charges to the same level as New Zealand, despite having a lower labour cost base, which is the dominant component of most ANSPs cost bases. If the argument is about high capital costs with not enough traffic (read airspace under management) then perhaps the investment in capital equipment should not have been made. AFL could have outsourced its airspace services to another ANSP in exchange for revenue. After all, isn’t the argument all about not having sovereign managed airspace for colonial and historic reasons?

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