ANSPs team up with Spanish production companies to bid for Spanish ATC

Spain's plans to deregulate its airports and air traffic control are part of a steady trend towards ATC privatisation in Europe. It is no coincidence that NATS and LFV are bidding for the Spanish contracts, as both ANSPs' home markets have already been partially privatised.

Spanish Government to partially privatise AENA, hive-off ATM

In Dec-2010, Spanish authorities announced plans to partially privatise the national airports company, AENA. The sale of 49% of the company is expected to raise at lease EUR9 billion, funds that are needed to help Spain through the lingering sovereign debt crisis.

AENA manages 47 airports, including airports in Madrid and Barcelona, and has partnership holdings in 16 Latin American airports and London Luton. In the interim, management of Spain's two largest airports - Madrid Barajas and Barcelona El Prat - will be put out to tender to private operators under a 40-year licence. Under the airport privatisation plan, AENA's airport and air traffic control units will be separated.

Spain plans to privatise 39 airports and air traffic control at all 47. The airport privatisation tenders will be offered under three individual packages, which can be granted to different suppliers.

Under the initial phase of the plan, the Spanish Government has decided on a limited tender for air traffic control services at 13 airports, including the major holiday destinations of Alicante, Lanzarote and Fuerteventura. Between them, these airports handle nearly 19% of Spanish passenger traffic and 25% of its aircraft movements.

Spanish airports to be privatised under ATC plan

Airport	Passengers	% Change Y-oY	Aircraft movements	% Change Y-oY
A Coruña	1,101,208	3.0%	17,378	7.0%
Alicante	9,382,935	2.7%	74,474	0.3%
Fuerteventura	4,173,686	11.6%	39,437	8.3%
Ibiza	5,040,800	10.2%	56,988	6.4%
Jerez De La Frontera	1,042,136	-3.5%	33,395	-22.9%
La Palma	992,363	-4.9%	19,256	-2.5%
Lanzarote	4,938,632	5.0%	46,668	8.7%
Madrid-Cuatro Vientos	295	28.8%	44,622	-19.0%
Melilla	292,608	-0.4%	8,935	-3.4%
Sabadell	0	---	37,661	-14.3%
Sevilla	4,224,718	4.3%	54,492	-2.0%
Valencia	4,934,272	3.9%	77,802	-4.1%

Source: AENA

The tender process will take approximately six to seven months, while preparing the new controllers for Spanish ATM will take another three. The bid process will be finalised by the end of Aug-2011, after which AENA intends to announce which consortium will receive the contract to run the 13 towers. Spain will open up control tower operations at other airports from 2012.

The imperative for privatisation

AENA has been struggling for years to combat the high air traffic control provision costs in the country, which are well above European averages and the highest of any major air travel market in the EU. In 2009, the country poured EUR450 million into a programme to update its ATC system and engaged in a fierce cost-cutting campaign, following the traffic slump in Spanish aviation in 2008 and 2009. However, high controller wages and fixed investment costs have hobbled attempts to reduce costs over the system.

AENA aircraft movements: 2002 to 2009

Source: Centre for Asia Pacific Aviation and AENA

In 2008, AENA's total ATM costs were EUR1.3 billion, while its gate-to-gate costs were EUR1.2 billion, the highest of any ANSP in the EU. The Spanish ANSP's operations accounted for 16% of Europe's total air traffic control costs, despite it handling only 10.5% of total European composite flight-hours.

European ATM costs 2008

Source: EUROCONTROL

AENA's air traffic controller costs in 2008 were the highest in Europe, at EUR688.3 million, mostly thanks to overtime, an ageing controller workforce and high pension costs. This was more than double that of the French ANSP DSNA, which employed almost 700 more air traffic controllers.

Air Traffic Controller Costs by ANSP: 2008

ANSP	ATCOs in ops	ATOCs in other roles	Total workforce	ATCO in ops costs (EUR)	Cost per ATCO (EUR)
AENA	2,005	146	3,973	688,268,000	343,276
DFS	1,716	20	4,789	271,344,000	158,126
DSNA	2,662	382	8,734	297,065,000	111,595
ENAV	1,206	211	2,764	171,321,000	142,057
NATS	1,377	176	5,006	167,712,000	121,795

Source: EUROCONTROL

AENA has moved to bring controller wages more in-line with other ATCs, but is facing opposition from USCA, the Spanish air traffic controllers union. A collective agreement negotiated between AENA and USCA in 2010 called for the reduction of controller salaries to EUR480 million p/a, for 2300 controllers. At the same time it maintained a guaranteed average annual salary of EUR200,000 until 2013 for operational air traffic controllers. USCA members opposed the plan, with 92.5% of voting members opposing the ratification of the new agreement, citing "intolerable differences".

Despite the ongoing problems with costs, the combination of improving traffic and reform efforts at AENA has been successful in driving the company back towards break-even operations. In late 2010, AENA cut its break-even forecast from 2014 to 2012.

NATS partners with Ferrovial

Partially privatised already, UK-based NATS is eager to expand its operations into more markets. The company has signed an agreement with Ferrovial, through Ferrovial Services, to bid for the air traffic control services in Spain. NATS has extensive experience with trans-Atlantic operations, which is hopes it will be able to leverage for Spanish contracts.

FCC in alliance with LFV

Spain's Fomento de Construcciones y Contratas (FCC) announced it has formed an alliance with LFV to bid for Spain's air traffic control contracts.

FCC has established subsidiary NAVSA (Navegación y Servicios Aeroportuarios SA) to engage in air traffic control and aviation services. FCC will establish a joint venture with LFV in which NAVSA will own 65% and LFV 35%. NAVSA has been established explicitly to target the opportunities from the ATC privatisation process.

FCC is involved in the aviation industry through its subsidiary Flightcare which operates ground handling at 14 airports in three European countries. ILFV and Flightcare/NAVSA have signed an alliance agreement to jointly draft a bid for air traffic control services at the 13 airports under tender.

End to union unrest in sight

The Spanish airport privatisation plan is a contentious one, particularly for AENA's heavily unionised controllers. Wildcat strikes by controllers over working conditions and the privatisation plan plagued air traffic control operations in the country over 2010, costing airlines an estimated EUR100 million. Negotiations between AENA and USCA are ongoing, albeit against a background of a low-level industrial unrest and continued ATCO agitation.

The two parties have been unable to reach a firm agreement on a new collective agreement for ATCOs, although AENA is confident that most basic issues have been resolved and that only minor issues like working hours and salary allocation remain to be finalised. In early Feb-2011, the Spanish ATCO union stated controllers hope to return to normal operations by the end of Feb-2011 and announced that no further industrial action has been planned.