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Finance

The Covid-19 crisis has created immense challenges – and opportunities – for all aviation stakeholders. Nicole Leyre, Chief Financial Officer (CFO) at Skyguide, believes that refocusing activities on accelerating the implementation of digital and automated open-architecture technologies will enable the company to develop new levels of scalability and flexibility. It will also allow Skyguide to better manage highly volatile market conditions.

SKYGUIDE : What are the financial consequences of Covid-19
to Skyguide?
NICOLE LEYRE Covid-19 has had a huge impact on Skyguide’s revenues. In terms of traffic, we expect that en-route and international airport traffic levels – which together represent 80% of our revenues – will fall 70% in 2020 and 30% in 2021 over 2019 levels. Unfortunately, because we have very limited flexibility in our operational framework we cannot adapt our capacity and costs in line with this reduced demand. This will translate into huge losses in the next two years, assuming we do not apply the risk-sharing mechanism with our users, as foreseen in the European regulation.

 

 

Without the help of our State shareholder we would be running out of money. We are very fortunate that the Confederation has agreed to a capital increase and to the implementation of a short-term credit line to manage the cash shortage. However, this recapitalisation does not come for free and we are required to implement stringent measures to improve our structural cost.

An important part of these improvements will be possible with the introduction of the Virtual Centre, by consolidating activities into a single system and by implementing the location independence concept of a single sky. It will also deliver the flexibility that we are currently missing to cope with the crisis.

 

How should Skyguide’s corporate framework be re-framed to ensure finance and operations remain sustainable in highly volatile market conditions?
NL The definition of a new target operating model and the implementation of the Virtual Centre are two key elements to ensuring Skyguide’s sustainability. Covid-19 has underlined the fact that we are in an era of volatility, uncertainty, complexity and ambiguity – or VUCA. We have defined our 2035 vision and have built a strategy for achieving it. Implementing a new streamlined Operating Model will bring clarity and efficiency. Moving to a location-independent Virtual Centre based on open-architecture systems and using data from independent Air Data Service Providers (ADSPs) will give us the scalability and flexibility to manage even highly volatile peaks and troughs of demand.

 

How should we reform the current European performance reporting system, especially in terms of negotiating a new RP4 framework?

NL We need to reshape European regulations so they reward ANSP investments in new, more efficient, digital technologies such as virtual centres, which stress service delivery over ownership of assets. RP4 should also reward ANSPs who provide an improved service for the entire network, not just for their own airspace.

If we design systems to calculate the best trajectory for the aircraft and let the system manage the route across the whole network, we will start to make the Single European Sky vision a reality. Currently, controllers are focused on the ATM picture just within their own sectors.

 

We should also consider introducing a European remuneration scheme which supports this strategy and which gives the right incentives to work as a network. Different possibilities are at stake and have to be further studied.

 

What are the dangers and consequences to service provision of not making these changes?

NL The danger in the long term could be that ANSPs are marginalised and could even disappear. If ANSPs are not able to move from air traffic control to air traffic flow management, airlines will look for other ways to fly safely, efficiently and in an environmentally responsible way without using ANSP services.

Technology is evolving at a high speed. Navigation, surveillance and communications are now all possible via satellites and 5G services are entering the market. Drones could be major disruptors, bringing a change to operational procedures and to the aviation mindset.

So transforming Skyguide’s operating model is a must. Implementing the Virtual Centre is a must. With this, we can decrease our costs and deliver a safer and better service to our customers, securing the company’s future.