guidelines for state recovery from extraordinary situations · 4 state recovery from extraordinary...

Guidelines for State Recovery from

Extraordinary Situations

Contingencies, Response, and Recovery in case of Major Disruptions

Edition 1

October 2017

Issue 1.0 October 2017 © IATA (2017) 2

DISCLAIMER

The information contained in this document is subject to constant review and up-date. Although every effort has been made to ensure accuracy, the International Air Transport Association shall not be held responsible for loss or damage caused by errors, omissions, misprints or misinterpretation of the contents hereof. Furthermore, the International Air Transport Association expressly disclaims all and any liability in respect of anything done or omitted, or all the consequences or anything done or omitted in reliance of the contents of this publication. States and Air Navigation Service Providers (ANSPs) are ultimately responsible for providing air navigation services and in the event of disruption of those services, they are solely accountable for instituting measures to safeguard the provision of safe Air Navigation Services (ANS). This document serves as a guideline only and does not replace any ICAO Annexes or the State responsibility. No part of this document may be reproduced, recast, reformatted or transmitted in any form by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system, without the prior written permission from:

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DOCUMENT CONTROL This document will be reviewed on an annual basis, unless an ad-hoc or temporary revision is necessary.

Issue Number Date of Issue

1.0 Oct 2017


1 Table of Contents

1 Table Of Contents ....................................................................................................................................... 4

2 Executive Summary .................................................................................................................................... 6

3 Crisis Management And Operational Resilience ........................................................................................ 7

3.1 CONTINGENCY PLANS AND SERVICE CONTINUITY .................................................................................... 7 3.2 CROSS BORDER CONTINGENCIES & ROUTE STRUCTURE RESILIENCE....................................................... 8 3.3 CROSS-BORDER CONTINGENCIES & EMERGING COMMUNICATION, NAVIGATION, AND SURVEILLANCE

TECHNOLOGIES ................................................................................................................................................ 8 3.3.1 Sovereignty And Cross-Border Contingencies ............................................................................. 8 3.3.2 Airspace Over High Seas ............................................................................................................. 8 3.3.3 Full Or Partial Delegation Of Provision Of Air Navigation Services ............................................. 8 3.3.4 Technology And Third Party Service Provision ............................................................................ 9 3.3.5 Impact Of Emerging Technology On Contingency Response ................................................... 10 3.3.6 Introducing New Procedure Or Technology ............................................................................... 11

4 State Recovery From Extraordinary Situations ........................................................................................ 13

4.1 RE-EMERGING THE AVIATION SECTOR AFTER A MAJOR DISRUPTION (POLITICAL UNREST, SOCIAL UNREST, NATURAL DISASTER, ECONOMIC SANCTIONS) .................................................................................................. 13 4.2 EXECUTIVE-LEVEL ENGAGEMENT WITH A RECOVERING STATE .............................................................. 14 4.3 GAP ANALYSIS AND OPERATIONAL ENGAGEMENT.................................................................................. 14

4.3.1 Data And Information Collection & Gap Assessment ................................................................ 15 4.3.2 Development Of An Air Navigation Services (Ans) Plan ............................................................ 15

4.4 FINANCIAL INVESTMENT IN AVIATION RELATED INFRASTRUCTURE ........................................................... 16 4.4.1 Development Of A Financial Investment Roadmap ................................................................... 16 4.4.2 Practical Approaches To Procurement And Financing Of Atm Infrastructure ............................ 16

4.4.2.1 The Atm Financing Challenges ............................................................................................... 18 4.4.2.2 Bank Loans And Development Aid ......................................................................................... 19 4.4.2.3 International Donors ............................................................................................................... 23 4.4.2.4 Public-Private-Partnerships .................................................................................................... 24

4.5 IMPLEMENTATION PLAN, GUIDANCE, & MENTORSHIP.............................................................................. 24

5 Appendix A ................................................................................................................................................ 25

Hot Spots Across Traffic Flows And Impact On Route Structure Resilience ................................................... 25

5.1.1 Europe-Middle East-South East Asia Flow ................................................................................ 25 5.1.1.1 Simferopol Fir, The Black Sea, And The Turkey-Bulgaria-Romania Interface ....................... 26 5.1.1.2 Afghanistan ............................................................................................................................. 27 5.1.1.3 Turkey-Iran-Iraq Interface ....................................................................................................... 28 5.1.1.4 Cyprus-Egypt-Saudi Arabia Interface And The Sinai Peninsula ............................................ 29 5.1.1.5 Uae-Oman-India Interface ...................................................................................................... 31 5.1.1.6 Syria ........................................................................................................................................ 32

5.1.2 Africa – Indian Ocean Interface .................................................................................................. 32 5.1.2.1 Somalia ................................................................................................................................... 32 5.1.2.2 Interface Between Arabian Peninsula And East Africa .......................................................... 33

5.1.3 North America – South America Traffic Axis (Nam-Sam) .......................................................... 33 5.1.3.1 Cuba ....................................................................................................................................... 33 5.1.3.2 The Caribbean ........................................................................................................................ 34

6 Appendix B ................................................................................................................................................ 35

Iata Position On Most Capable Best Served .................................................................................................... 35

7 Appendix C ............................................................................................................................................... 42

Pre-Conditions For Initiating A State Recovery Project Post Political Unrest .................................................. 42


8 Appendix D ............................................................................................................................................... 43

Outline Of An Air Navigation Services Plan ..................................................................................................... 43

9 Appendix E ................................................................................................................................................ 44

Principles For Investment In Atm Infrastrucure Using Public-Private Partnerships ......................................... 44

10 Appendix F ............................................................................................................................................ 72

Case Studies For Crisis Response And Recovery In Situation Of Disruptions And Degredation Of Level Of Ans ................................................................................................................................................................... 72

10.1.1 Case Study – 1: Closure Of Fort Lauderdale Airport In 2017 .................................................... 72 10.1.2 Case Study – 2: Closure Of Istanbul Airport In 2016 ................................................................. 74 10.1.3 Case Study - 3: Closure Of Brussels Airport In 2016 ................................................................. 76 10.1.4 Case Study - 4: Chicago Acc Fire In 2014 ................................................................................. 79 10.1.5 Case Study - 5: Eyjafjallajökull Volcanic Ash In 2010 ................................................................ 81 10.1.6 Case Study - 6: The Toppling Of President Mubarak In 2011 ................................................... 86 10.1.7 Case Study - 7: Re-Opening Of Kosovo Upper Airspace For Civil Aircraft Operations ............. 88

11 Appendix G ............................................................................................................................................ 90

Best Practices For Crisis Management And Response ................................................................................... 90

12 Appendix H ............................................................................................................................................ 91

Best Practices For Crisis And Recovery Communication ................................................................................ 91

13 References ............................................................................................................................................ 92


2 EXECUTIVE SUMMARY Over the past years, the aviation industry and flying public have suffered from the consequences of major disruptions in air navigation and airport operations; from natural disasters, to political conflict, to civil unrest, the impact of such extraordinary situations are extensive. Safety and stability are prerequisites for a sustainable aviation industry. In some circumstances, the response to and the recovery from major disruptions did not consider aircraft movements nor passengers’ needs. In particular, a country recovering from, political unrest will have varying priorities, and the civil aviation sector may not be one of the top ten priorities. Aviation will come after hospitals, roads, municipality services, and logistics. During the crisis period itself, the immediate priority is to manage the crisis, and ensure the safety and security of the country and by extension the aviation sector. ICAO Annex 11 to the Chicago Convention requires Air Traffic Services Authorities to develop and promulgate contingency plans for implementation in the event of disruption or potential disruption, of air traffic services and related supporting services in the airspace for which they are responsible for. Such contingency plans should be developed in close coordination with the air traffic services authorities responsible for the provision of services in adjacent portions of airspace and with the affected airspace users. However, we often see contingency plans that do not look at operation resilience in case of crisis and are seldom tested for viability. There are several examples to show that crisis management is sometimes reactive and the recovery effort is designed after the act or does not follow the developed contingency plan. This document provides concepts that will help a State recovering from a major disruption to re-set its aviation sector and tools are that will enable the investment in infrastructure and resources after a prolonged period of airspace closure. The guidelines in this document are intended to set forth basic concepts that can be applied post an extraordinary situation to enable the recovery of Air Navigation Services (ANS) and a re-boot of the aviation sector. The document also emphasizes existing hot spots, contingencies, and the need for operational resiliency across regional interfaces and traffic flows. The document recognizes that the States and Air Navigation Service Providers (ANSPs) are ultimately responsible for providing air navigation services and in the event of disruption of those services, they are solely accountable for instituting measures to safeguard the provision of safe ANS. This document serves as a guideline only and does not replace the ICAO Annexes or the State responsibility.


3 CRISIS MANAGEMENT AND OPERATIONAL RESILIENCE

3.1 Contingency Plans and Service Continuity A contingency is a situation during which a system component fails for any reason or by virtue of an unusual event, natural or induced, that reduces capacity. A contingency plan will therefore include actions, associated timing and responsibilities, to be performed in response to a contingency situation (an operational disruption). Service continuity goes beyond the reactive contingency planning, and ensures the availability of suitable arrangements allowing alternative air navigation services of an agreed quality of service to be available when a long-term operational disruption occurs. Anticipating contingency scenarios and probable events during which there could be a disruption in the provision of air navigation services, and planning effective contingency response and service continuity is the basis of a system “resiliency mind set”. The goal should be event responses that maintain as much of a systems capacity, capability and efficiency as possible. Unplanned, ad-hoc responses characterized by closing or severely limiting system capacity must be considered an extreme measure of last resort. To facilitate resiliency within any air navigation system, the ANSP should work together with industry to develop a range of contingency scenarios, and then test and drill them with the airspace users to learn and strengthen response. In addition, ANSPs should consider additional levels of redundancy that would allow adjacent facilities to immediately take control of a stricken facility’s airspace in the event of a catastrophic or long-term failure. The concept of “hot spare”1 facilities should be more thoroughly examined much like the redundant operations centres maintained by the airlines. During an extraordinary situation, be it a natural disaster or political unrest, the State and ANSP react to that situation with measures to mitigate the losses and ensure continuity of services. In some cases the airspace is declared a no-fly zone in which case the country is avoided by international traffic. In that case, the tourism sector does not only decline but is completely lost. Loss of tourism and international traffic has drastic economic implications on a country, draining it of the resources needed to maintain a functional air navigation system, and even invest in the recovery of that system when the situation is lifted. We see examples of such situations in Libya and Afghanistan. In other instances, adjacent countries to a country suffering from civil conflict suffer from the economic impact. An example is the decline in international traffic over Jordan due to the political situation in Syria. Annex 11 to the ICAO Chicago Convention requires Air Traffic Services authorities to develop and promulgate contingency plans for implementation in the event of disruption, or potential disruption, of air traffic services and related supporting services in the airspace for which they are responsible for the provision of such services. Guidelines relating to contingency planning are included under Attachment C of Annex 11. While the development of the plans is mandatory, the exact content of these plans is left to the discretion of the States and their ANSPs. These plans do not often have pragmatic contingency scenarios that are constantly reviewed to reflect the applicable threats to that State or ANSP. For example, contingency plans in the case of air traffic controllers going on strike might not be the most probable scenario in Saudi Arabia, but it would be a high probability in Spain. Furthermore, the plans are seldom tested to learn how effective and viable they are in an operational context. This document includes use cases from contingency scenarios and lessons learned to help in the development of effective contingency plans.

1 A standby facility used as a failover to provide reliability. The hot spare facility is connected to the overall ATM system. When a key component of ANS fails, the hot spare becomes operation.


3.2 Cross Border Contingencies & Route Structure Resilience With long haul flights and new generation aircraft, airlines today are crossing two or more regions per flight. The high growth and expansion in airlines’ networks require a consideration of contingency scenarios along major traffic flows. It is important to look at the resilience of a route structure from regional and inter regional perspectives to ensure continuity of operation. Airlines and ANSPs need to look at traffic end-to-end and assess the resilience across the traffic axis rather than looking at routes within specific FIRs. To foster a continuous and seamless flow of traffic across regional boundaries, and from one FIR to another, it is important that similar procedures and services, and interoperable technologies are used. Appendix A of this document identifies hot spots across major global traffic flows, and addresses the lack of resiliency in the route structure and air navigation service provision.

3.3 Cross-border Contingencies & Emerging Communication, Navigation, and Surveillance Technologies

3.3.1 Sovereignty and Cross-border Contingencies

In some contingency situations where Air Traffic Management cannot be provided by the local ANSP, the delegation of the Air Traffic Control Service might be an option to be considered by the affected State. The delegation of Air Traffic Control Service provision is not a new concept. There are successful examples of this in various parts of the world. According to the ICAO Chicago Convention, each State has complete and exclusive sovereignty over the airspace above its territory. National sovereignty cannot be delegated. However, the responsibility for the performance of functional responsibilities, such as the provision of air traffic services, can be delegated to a third party. Such delegation of the provision of air traffic services is not a surrender of sovereignty, and will be subject to a contractual agreement and can be revoked at any time.

3.3.2 Airspace over High Seas

According to Annex 11 to the ICAO Chicago Convention, the portions of the airspace over the high seas or in airspace of undetermined sovereignty where air traffic services will be provided shall be determined on the basis of regional air navigation agreements. Moreover, Assembly Resolution 37-15 dictates that the limits of ATS airspaces, whether over States’ territories or over the high seas, shall be established on the basis of technical and operational considerations with the aim of ensuring safety and optimizing efficiency and economy for both providers and users of the services. ATS airspaces should not be segmented for reasons other than technical, operational, safety and efficiency considerations. Any delegation of responsibility by one State to another or any assignment of responsibility over the high seas shall be limited to technical and operational functions pertaining to the safety and regularity of the air traffic operating in the airspace concerned. Any Contracting State which delegates to another State the responsibility for providing air traffic services within airspace over its territory does so without affecting its sovereignty.

3.3.3 Full or Partial Delegation of Provision of Air Navigation Services

Delegation of air navigation services provision to a foreign organization or an ANSP, according to ICAO (ICAO Assembly in 2010 as contained in Resolution 37-15) does not impact the sovereign


competences, since airspace delegation and air navigation services will be subject to a contractual agreement and can be revoked at any time. Partial airspace delegation is a very typical set-up in regions where State boundaries are based on geographical features (such as coastlines, river lines etc.). Agreements for full or partial airspace delegation may be negotiated for (temporary) scenarios of Contingency Planning of Air Traffic Services such as national disasters, political or social unrest, earthquakes, and floods affecting ATC facilities. Third party service provision could serve as an interim solution while an extraordinary situation persists affecting the ground infrastructure needed to support air navigation services. An example of how States and ATC entities can work together can be seen in Africa. ASECNA (L’Agence pour la Sécurité de la Navigation Aérienne en Afrique et à Madagascar) is composed of 17 African Member States – Each Member State is represented in the Council of Ministers which exercises control over the Agency as the executive body of the organisation. The main objective of ASECNA is the provision of Air Traffic Services, which is funded through user charges and contributions by Member States. Another example exists in Central America in the form of COCESNA (Corporación Centroamericana de Servicios de Navegación Aérea). Skyguide in Switzerland provides air traffic services beyond Swiss airspace. Likewise, a part of the southern Swiss airspace is controlled by Italy. Bi-lateral agreements assure that the air navigation services are provided in accordance with the national law of the underlying State. Further to this, Belgium, Germany and the Netherlands have delegated the responsibility of Air Traffic Services for all or parts of their airspace to the Eurocontrol unit Maastricht UAC. Luxembourg for example has delegated its entire airspace to Belgium.

3.3.4 Technology and Third Party Service Provision

In addition to the political agreements for airspace delegation, communication, navigation, and surveillance technology play a fundamental role in the ability to manage traffic across geographic boarders. Technology exists today that enables cross boundary management of air traffic. Satellite based Communication, Navigation, and Surveillance (CNS) will be a game changer in air navigation service provision. Prior to the introduction of new technologies or investment in ATM infrastructure for the provision of Air Traffic Services across borders (third party service provision), due to the lack of ground infrastructure or in the case of a crisis, the following steps shall be undertaken;

1. A collaborative agreement is required between the delegating State and the entity that will

provide the service. Such an agreement will cover the technical (e.g. surveillance) and legal arrangements.

2. The State delegating its ATS service provision would ensure that required Communications, Navigation and Surveillance capabilities present within its state are made available to the delegated entity. Incremental costs, if applicable, should be subject to the usual IATA consultation on ATC charges. Additional information about IATA’s positions on communication, navigation, and surveillance technologies is included in the User Requirements for Air Traffic Services (URATS), Edition 3.0 - July 2017, which can be accessed using this link: http://www.iata.org/whatwedo/ops-infra/air-traffic-management/Documents/Requirements-URATS-CNS-technology_Edition%203_2017.pdf.

3. In ICAO Doc9082 there is a provision for charges of air navigation service wherever a State has accepted the responsibility for providing route air navigation services over another State, over the high seas, or in an airspace of undetermined sovereignty. In such a situation, the State

http://www.iata.org/whatwedo/ops-infra/air-traffic-management/Documents/Requirements-URATS-CNS-technology_Edition%203_2017.pdf




concerned may levy charges on all users for the services provided. A State may delegate to another State or to an organization the authority to levy such charges on its behalf.

The concerned States should find the appropriate kind of mechanism on a bilateral or regional basis for meetings between provider States and concerned airspace users, aiming to reach agreement concerning the facilities and services provided, the charges to be levied, and the methods of collecting these charges. The application of user charges should follow the ICAO principles for charging and airline consultation.

3.3.5 Impact of Emerging Technology on Contingency Response

In addition to new generation communications, navigations, and surveillance (CNS), there are emerging technologies and concepts that could change contingency response and ensure continuity during a major disruption of air navigation services. Cloud based principles in ATC communication will enable the virtual pooling of physically and geographically distributed control centers into unified logic units. Virtual control centers can be used as back up for system resilience. One of the main goals of using the Remote and Virtual Tower (RVT) concept is to provide contingency services at major airports, in the case of fire or other major disruptions, which could take place at the control tower building. RVT is not a new concept, it already exists today in Sweden, Ireland, Norway, Germany, Hungary, Canada, United Kingdom, and the United States. However, there are still challenges in achieving consolidation and using RVT as contingency in the case of major or prolonged disruptions of air navigation services. As an example, NATS UK has put into service a full safety certified remote airport contingency control room, the Virtual Contingency Facility (VCF), to improve the resilience of the airport in the event of an emergency. The VCF ensures that Heathrow can still operate at up to 70% of its flights if the main control tower were not able to function. Another example is the contingency trials within the SESAR framework at Landvetter Airport, during which unplanned events such as systems failure, fire or threat to the tower building can heavily reduce the capacity of the airport or force it to close. The trials showed that Remote Tower technology is a cost-efficient contingency alternative. Following the same footsteps, London City Airport is installing a "digital air traffic control tower" that will be operated by controllers sitting about 70 miles away using high-definition cameras and remote sensors. This new concept for air navigation service provision, which comes into effect in 2019, does not mean job downsizing, it will translate into a more efficient and effective air traffic management, while cutting costs by 20 to 30 per cent. RVT and Virtual ACCs can provide air navigation services in the case of a major disruption. However, both do not need to be geographically based or located in the country to support its air navigation services. A concept and business case have been developed for the use of remote tower technology in order to provide a sustainable and safe contingency solution for the air traffic control tower operation in Dubai Air Navigation Services (DANS) at Dubai International and Al Maktoum International at Dubai World Central. The utilization of remote tower technology will enable DANS to relocate their aerodrome contingency services to a remote location. Cloud computing and centralized data services will transform the business model for ANSPs, and how they develop their contingency plans. Response to ACC fires will in the future include a virtual ACC alternate supported by centralized data services that enable continuity of operations with only minor disruptions. This will be done faster and in a more cost effective manner. As ANSPs look at modernizing air navigation services they are always faced with challenges including reducing costs and meeting performance, safety and regulatory requirements. New technology and emerging concepts could provide an opportunity for ANSPs to improve their services, increase capacity, reduce their costs, and maintain safety.


While there are socioeconomic concerns about the introduction of emerging technologies and their impact on labor, the aviation industry will still need the Human-Machine-Interface. However, the role of the human in the equation will transform and evolve as new technologies are introduced. Robotics, cloud computation, big data, automation, and artificial intelligence could improve safety, but most importantly emerging technologies could provide more efficient ways to deliver air navigation services. The busiest air traffic control center also suffer from shortage of Air Traffic Controllers (ATCOs). Often, ATCOs working in these centers complain of excessive overtime needed to offset personnel. At the moment, the human intervention in the provision of air navigation services ranges from nominal, to off-nominal, to emergency situations. With automation and digitization, the human intervention might evolve to focusing on off-nominal and emergency situations while technology takes care of nominal situations. The journey to such an evolution in commercial aviation is still untapped, but it will starts with assessing use cases and learning from the introduction of new concepts to other affiliated industries, such as Unmanned Aerial Vehicles (UAVs). The key to success in the introduction of new technologies and automation is change management and putting together the team that will plan and implement the introduction of a new technology or concept.

3.3.6 Introducing New Procedure or Technology

ATM transformation may require not only the introduction of new technology, but also new processes and institutional changes. Historically, mandates were used to introduce new technologies, although not always supported by a positive business case. Without a collaborative approach to align the investment plans of airlines, airports and ANSPs, operational benefits will remain elusive and any new ATM program will not deliver its promised objectives. This section provides guidelines to the implementation of operational improvements, and how concepts like Best Efficiency, Best-Served (BEBS) or Most-Capable, Best-Served (MCBS) would support the introduction of new technologies with an economic benefit. The introduction of new procedures or technology starts with putting together a planning and implementation team. The team should include all vested stakeholders, including airspace users, airports, ANSPs, regulators, and the community. Once the team is put together, they need to select the service volume and define the strategic objectives. This step will include defining the KPIs, metrics, and the success criteria. Once the strategic objectives are defines, the desired solution should be designed, using technology and ASBUs2 as enablers of the desired operational improvement. Selection of a solution scenario and the enabling technology must meet a positive cost-benefit analysis in which the operational benefits must equal or outweigh their costs. Any negative cost-benefit option must be removed from the solution scenario. The following diagram in Figure 1, taken from the ICAO PBN3 Manual, illustrates how the strategic objectives help define the airspace concept which is enabled by communications, navigation, and surveillance.

2 Aviation System Block Upgrades

3 Performance Based Navigation


Figure 1: The Airspace Concept Flow Chart (Source: ICAO PBN Manual)

Using the methodology of PLAN-DESIGN-VALIDATE-IMPLEMENT, the team will develop an implementation plan which will include check points for assessment of the implementation against the strategic objectives, success criteria, and desired solution. After the implementation is complete, the team should conduct a post-implementation review to identify gaps and lessons learned for future projects. The introduction of new ATM capabilities and infrastructure may have a requirement for a change in on-board aircraft equipage. However this needs to be implemented in consultation with the airline operators, and supported by a positive cost-benefit analysis. One way of doing this is using the principles of MCBS. Typically, the most capable flights would be provided the opportunity to gain full advantage of their capability in order to maximize the overall efficiency of the ATM system and of the flight itself. This operational incentive approach will lead to a tipping point at which the majority of the fleet in the airspace volume have the required on board capability to meet the performance requirements. For the IATA position on Most Capable Best Served, refer to Appendix B.


4 STATE RECOVERY FROM EXTRAORDINARY SITUATIONS

4.1 Re-emerging the Aviation Sector after a Major Disruption (Political Unrest, Social Unrest, Natural Disaster, Economic Sanctions)

After surviving a major disruption, a State will need to reset its aviation sector. Depending on the nature or cause of disruption, the challenges facing a recovering State will differ. In the case of political unrest a State’s priority will be restoring safety and security to encourage the flying public and airline operators to resume flying over and into the country. In the case of natural disaster the focus is rebuilding infrastructure, while after social unrest or economic sanctions, the country’s would be to address its institutional policies and availability of skilled professionals. Whatever the cause of disruption is, airlines and States need to work with other affiliated sectors to ensure that negative perceptions of a travel destination are changed. In the age of social media and the awakening of a digitization revolution that is changing the passenger experience, the aviation sector needs to work with media and the travel sector for an effective recovery of its operational functions. Although the road to recovery can be long, the scale of the economic benefits from travel and tourism makes investing in the infrastructure worthwhile. Air Travel is a country’s first line of aid; providing relief, medicines, food, and vaccines. However, for a country recovering from an extraordinary situation, a plan should be developed to ensure that its aviation sector re-boots in a stepped approach going from the current state to the desired level of service. In the case of a political unrest, the priority is to first handle ongoing operation and to restore the flights that are already departed, then to restore the over-flights, and then to re-emerge the travel and tourism into the country. With a stepped approach strategy, investment in the different infrastructure will be incremental. As an example, a country recovering from political unrest will not need massive investment in duty free and airline lounges at the beginning, but as the aviation sector recovers and tourism re-emerges, a country can start looking at these areas for investment. Efforts to restore safety and security and reboot the tourism sector once the situation is normalized will include: tourists, the media, tourism businesses, and the governments of tourists. The main factors translating political turbulence into a decline in international tourism arrivals relate to media. Negative images of a tourist destination can persist for years and continue to affect a country, even if the political instability was normalized. Therefore, when setting a recovery plan with any State, consideration should be made to account for a progressive build-up and investment in its aviation infrastructure as the faith of the flying public is restored. Post a political or social unrest, private investment usually declines as investors lose confidence in the country’s security and stability. Furthermore, public investment is usually channeled to prioritized sectors, such as hospitals, schools, roads, etc. Aviation is a key enabler for the reconstruction of public and social sectors, because it enables access and mobility of goods and people. For a successful and effective recovery of the aviation sector in a country that is coming out of a political unrest situation, it is important that the following are ensured and available; 1. Governance, accountability, and effectiveness of the government in power or coming into power; 2. Personal security; and 3. Economic security. The World Bank’s Worldwide Governance Indicators (“WGI”) rank countries with respect to six aspects of good governance; 1. Voice & Accountability; 2. Political Stability & Absence of Violence 3. Government Effectiveness;


4. Regulatory Quality; 5. Rule of Law; and 6. Control of Corruption For the purpose of this guidelines document, the three following indicators will be used as a reference for a country recovering from political unrest; 1. Political Stability & Absence of Violence: perceptions of the likelihood that the government will be

destabilized or overthrown by unconstitutional or violent means, including political violence or terrorism.

2. Government Effectiveness: the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

3. Regulatory Quality: the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

These indicators are used by counties, and banks to assess development aid into the countries that are included in the analysis. The WGI cover 213 countries and territories. For the purpose of these guidelines, prior to initiating a state recovery project in any country post political unrest, the pre-requisites under Appendix C need to be fulfilled. The WGI are taken into consideration in the development of these pre-requisites.

4.2 Executive-Level Engagement with a Recovering State

Under the Convention on International Civil Aviation (Chicago Convention), States and States alone maintain sovereign authority over their airspace. Therefore, it is a State’s responsibility to address any potential risk to civil aviation in their airspace. Once the country and State are ready to reset their aviation sector, a high-level engagement visit will be organized to assess the situation and gain political commitment for the recovery of the aviation sector.

During such a visit a high-level group of executives will engage with the DG and/or concerned minister to discuss;

1. The current and future situation for the country; 2. Regulation and legislation (current and future plans); 3. Organization and structure of the aviation sector and linkages to other ministries in the

country; 4. Vision and future investment plans, including financial aids and grants.

Once the high-level visit is concluded and an agreement is reached at the political level, engagement at the operational level will commence. This engagement at the operational level will be based on a gap analysis conducted to assess where the State/ANSP is and where they need to be. The operational engagement will include the development of an Air Navigation Plan and the implementation of the plan.

4.3 Gap Analysis and Operational Engagement An operational engagement and gap analysis will be conducted to help the State/ANSP in developing its ANS plan and to define a roadmap for the financial investment in the ATM infrastructure. This will be followed with an implementation plan that the State/ANSP can use to recover its aviation sector.


The ANS plan, the financial roadmap, and the recovery implementation plan will vary from one State/ANSP to another depending on a number of variables, including; 1. The type of extraordinary situation the State/ANSP is recovering from 2. The political and socio-economic conditions of the country 3. The geographic location Pursuant to the executive level engagement, and the political commitment by the State/ANSP to proceed with a recovery project, an operational team will help the State/ANSP develop its ANS plan and financial investment roadmap. For the sake of this section, the operational engagement team will be referred to as the recovery project team, and will be composed of; 1. Representatives from IATA and the Regional Airline Association; 2. ICAO (Headquarters and/or region); 3. Representative from the top commercial airlines operating through that specific FIR (national and

operating into the FIR); and 4. Other stakeholders, or invited donors. To facilitate the gap assessment, the development of the ANS plan, the investment roadmap, a series of meetings and workshops will be held. However, the actual implementation of the ANS plan and the financial investment roadmap will remain with the State/ANSP.

4.3.1 Data and Information Collection & Gap Assessment

The recovery project team will collect the information required from the recovering State/ANSP to conduct the gap assessment, and identify the differences between what is available today, and what needs to be available in the next 5-10 years (short to medium term). The gap assessment will look at the following areas;

1. Traffic growth (overflying and flying into)

2. Regulatory framework

a. Maturity of country legislation & aviation regulations

b. Compliance with ICAO Standards and Recommended Practices (SARPS)

c. Universal Safety Oversight Audit Program (USOAP) Results

3. Communication, Navigation, and Surveillance technology and infrastructure

4. Air Traffic Management Concepts (ATFM, CDM, etc.)

5. Airport operations and infrastructure

6. Business Model (e.g. separation of ANSP from the government/regulator)

4.3.2 Development of an Air Navigation Services (ANS) Plan The development of an ANS plan will build on the gap assessment to identify how to improve the ANS capacity and capability from what exists today to the future desired and planed air navigation service provision, including the needed the infrastructure, expertise, capabilities, and the operational and economic parameters. The overall analysis will also include the set-up, status-quo and cooperation of the neighboring States/ANSPs. This exercise will deliver an implementation plan report that defines the steps the State/ANSP need to follow and implement to get from the current situation to where they want to be as per the ANS Plan. The recovery project team will help the State/ANSP develop the plan,


however, the State/ANSP will be responsible for the implementation. An outline of an ANS plan is included under Appendix D to this document.

4.4 Financial Investment in Aviation Related Infrastructure

4.4.1 Development of a Financial Investment Roadmap

Using the developed gap assessment and ANS plan, an investment roadmap will be developed with the State/ANSP. Where needed, the recovery project team will facilitate meetings and workshops to discuss options for financial investment in ATM infrastructure with the State/ANSP, and ensure that ICAO principles for user charges are followed. The financial investment roadmap will include existing and future investment and costs, as well as public and private funding available for the State/ANSP. The State/ANSP will use the roadmap to implement the plan and proceed with the investment in their infrastructure. The financial investment roadmap will include the following parameters; 1. Traffic forecast – historical & forecast 2. Revenue and cost data - historical & forecast 3. Revenue segments – commercial/aeronautical 4. Financial structure and any shareholder commitments 5. Unit costs and productivity metrics and targets 6. Capital, borrowings, interest costs, and depreciation 7. Fee structure and validity 8. Master planning – short, mid and long term 9. Operating Expenses (OPEX) and Capital Expense (CAPEX) plans 10. Growth and risk factors – internal and external 11. Grants and funds made available to the State and in specific to the aviation sector

The investment road-map will include phases that mirror the restoration of confidence in the safety and security of the aviation sector. Phase I will focus on investment in infrastructure and resources that support overflights. Phase II will focus on investment in infrastructure and resources that support restoration of flights into the country. In some cases, a recovering State might need to jump immediately to Phase II.

4.4.2 Practical Approaches to Procurement and Financing of ATM Infrastructure

Infrastructure, such as transport, water and sanitation, energy and communications, is fundamental in achieving economic growth, poverty reduction and human development.4 As local and regional economies develop, production systems require scaling up infrastructure to connect developing countries with global value chains that in turn spur further economic growth. However, with developing country populations expected to grow continuously in the decades ahead, and with high rates of urbanization, there is wide recognition that current resources are insufficient to fill the infrastructure investment gaps of these countries. This document, however, deals with States that are recovering from extraordinary situations – and though some States may be halfway between developed and developing, many are located in developing regions of the world. Listed below are various avenues that a recovering State can explore

4 Source: Mwase and Yang, 2012; Agénor and Moreno-Dodson, 2006; Straub, 2008.


to finance investment in new infrastructure such as ATM – bank loans and development aid (i.e. grants), international donors, and private-public partnerships (“PPPs”). While a State can use one or all of these avenues to support some or all of the investment in specific infrastructure initiatives, this section and Appendix C to this document focuses on PPPs as a key structural vehicle for procuring, constructing, operating and financing ATM infrastructure owing the financial challenges and amounts, operating expertise and management know-how required in recovering States. It could be possible that development banks provide independent investment support in concert with a PPP project, or support for participation by the public and/or private sector partners. With recovering States facing infrastructure bills in the billions of dollars, mobilizing private resources represents an important avenue to finance the investment gap. Although expenditures from the public sector are important and enabling sources of funding to the extent they are available, private participation has the potential to maximise available resources as well as to provide expertise and innovation for development and operations. At the same time, given the intrinsic risks of infrastructure investments, tighter global financial regulation, and a generally poor enabling environment in developing and (especially) recovering States, strong and innovative strategies need to be devised to support private sector involvement in infrastructure projects in recovering States.

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4.4.2.1 The ATM Financing Challenges

States recovering from extraordinary situations should possess adequate Air Traffic Management (“ATM”)5 facilities and procedures for two key reasons: First and foremost, the safe operation of national, regional and enroute air traffic movements must be ensured; and second, the recovery and development of a country’s economy needs a strong air transport sector to support passenger and cargo movements. Undertaking the modernization of a publicly operated ATM system, let alone replacing it outright, represents a considerable financial hurdle for most States. Notwithstanding the twin imperatives of safety and economic development, the challenge for States recovering from extraordinary situations to invest in ATM infrastructure may be difficult if not impossible based on traditional funding approaches and funding sources. States recovering from extraordinary situations will face varying degrees of funding obstacles. The following six obstacles likely constitute the main barriers with respect to ATM funding: 1. The State Treasury is severely depleted and the State holds little capital liquidity. 2. The overall, traditional economic base and associated revenue producing infrastructure,

including aviation infrastructure, has been damaged. There are varying cases here: a. Infrastructure has had varying degrees of damage, but certain sectors or larger swaths of

the economy are on the road to recovery. In cases such as these, the availability of adequate capital to support national infrastructure projects which are funded entirely by government may be years away – a horizon that will likely subvert the timely critical upgrade/replacement of a safe ATM system.

b. Infrastructure has been severely damaged, with economic capacity and output reduced to a mere trickle.

3. The State is incapable on its own of raising sufficient capital from private and public markets. 4. The State’s political apparatus is dysfunctional, with results ranging from:

a. Insufficient bureaucratic knowledge and political experience, to b. A largely non-supportive structure, with the political system rife with biased, corrupt,

fraudulent, or partisan behavior. 5. Countries recovering from extraordinary situations (civil or political) will likely have an extensive

set of competing priorities, with ATM ranking lower than other more elementary needs such as supplies of clean drinking water, food distribution, hospitals, schools and roadworks.6

6. Full safety and security may not have fully returned to the recovering State post-extraordinary situation.

Pursuing and setting up alternative approaches to ATM financing is likely impossible under several of the obstacles listed above – specifically, obstacles’ 2.b, 4.b and 6. In most environments, all other obstacles noted above should not, in isolation, constitute roadblocks to funding but rather, a collective set of risk-based challenges that should be surmountable given the right combination of funding sources, available and willing funding parties, financing structure, and

5 In this Financing section of the Framework, Air Traffic Management collectively implies the totality of Air Navigation Services (ANS), including ATM, Air Traffic Service (ATS), Aeronautical Information Service (AIS) and Aeronautical Communications (COM).

6 “A country recovering from political unrest will often have varying priorities, and the civil aviation sector may not be one of the top 10 country priorities”. Source: “Global and Regional Developments related to ATM and SAR”, ICAO MIDANPIRG Air Traffic Management Sub-Group, Cairo, Egypt, May 2017.


suitable funding conditions. As noted earlier, there are several avenues available to recovering States to fund build-outs and modernization of ATM infrastructure. The scale of the infrastructure undertaking and condition of the target State will likely dictate if one or more financing mechanisms would represent the most practical and realistic solution to support the required procurement and financing of ATM infrastructure.

4.4.2.2 Bank Loans and Development Aid

1. Banks

Multilateral development banks (“MDBs”) are international financial institutions which specialize in providing low-interest loans, grants, credits and financial expertise to developing nations. The largest and best known is the World Bank which, along with other members, form the World Bank Group. World Bank” refers to two Washington-based institutions run by 185 member countries: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The IBRD serves middle-income countries with a per capita income from $1,025 to $6,055, while the IDA helps the world’s 81 poorest countries, with incomes of less than $1,025 per capita. Many developing countries seem risky to private investors because of economic or political instability. IBRD loans are public and publicly guaranteed debt extended by the World Bank Group, guaranteed by countries that are members of IBRD which effectively eliminates this risk. According to development economist Claudio de Moura Castro, “What makes [World Bank loans] attractive in the first place is the financial architecture that allows poor countries to borrow at about the same rates that rich countries do.” The Bank provides services in three ways:

Long-term loans – These are normal loans provided to developing nations made at market interest rates.

Credits – These very long-term loans are provided at well below market interest rates and are funded largely by direct contributions from donor governments.

Advice and technical assistance – The World Bank also provides development expertise and economic research, as well as evaluations of existing financial institutions.

The IBRD raises money on world capital markets by selling bonds to investors. The amount of capital raised varies from year to year but is currently in multiple billions of US Dollars. IBRD bonds have a triple-A rating (PDF), according to Standard and Poor’s rating service, due to guarantees on loans from shareholding countries. The IDA on the other hand is funded by direct transfers from the richest member countries in thrice-yearly replenishments of the fund. The United States is the largest contributor historically. Such donations account for over two-thirds of the IDA’s funding; its remainder is provided by repayments from borrowers and investment income. Other key MDBs who work closely with the World Bank to coordinate their development strategies include the following:

African Development Bank (AfDB) – Established in 1964, this MDB has over 50 African members and 24 non-African members. Capital is around USD 4 billion. The bank nearly collapsed in the mid-1990s, after corruption, mismanagement, and internal disputes caused Standard and Poor’s to reduce the bank’s bond rating.


Asian Development Bank (ADB) – Created in 1966, the ADB has nearly 70 members, including almost 50 from the region and 19 from other parts of the globe. It provides development aid and advice to Asian and East Asian countries, and to Afghanistan for reconstruction efforts. The bank may focus more on knowledge and financial assistance for middle-income countries based on the success of the so-called ‘Asian Tiger’ economies.

European Bank for Reconstruction and Development (EBRD) – This bank is owned by over 60 countries and was created in 1991 to help ex-Soviet countries transition to market economies. It has since invested billions of dollars in the region and has helped several countries meet the standards for European Union accession.

Inter-American Development and Bank (IADB) Group – Created in 1959 and owned by 47 member countries, the IADB promotes development in Latin America. Compared to the World Bank, at 50 percent smaller countries have a much greater share of voting power, which is based on ownership of the capital stock.

There are also several "sub-regional" multilateral development banks. Their membership typically includes only borrowing nations. The banks lend to their members, borrowing from the international capital markets. Because there is effectively shared responsibility for repayment, the banks can often borrow more cheaply than could any one member nation. These banks include:

Caribbean Development Bank (CDB)

Central American Bank for Economic Integration (CABEI)

East African Development Bank (EADB)

West African Development Bank (BOAD)

Economic Cooperation Organization Trade and Development Bank (ETDB)

Eurasian Development Bank (EDB)

New Development Bank (NDB), which operates in the “BRIC” countries of Brasil, Russia, India and China

The EADB was established in 1967 under the treaty of the then East African Cooperation between Kenya, Tanzania, and Uganda. In 2008, following the admission of Burundi and Rwanda into the new East African Community (EAC), Rwanda was admitted. The EADB plays a threefold role of lender, adviser, and development partner, offering a broad range of financial services in the member states. Its main objective is to strengthen socio-economic development and regional integration. The EADB is headquartered in Kampala, Uganda. The BOAD was established in 1973 to serve the nations of Francophone and Lusophone West Africa. It is organised by the Central Bank of West African States and its eight member governments: Benin, Burkina-Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo. The BOAD is funded by member states, foreign governments and international agencies, and is headquartered in Lomé, Togo. Presently, the BOAD is focused on funding three development goals: poverty reduction, economic integration and promotion of private sector activity. The bank disburses long- and medium-term loans, previously available only to BOAD member governments and public institutions, to private businesses involved in development projects of regional importance as well as lines of credit to finance micro-credit projects and small to medium private enterprises. The BOAD also funds debt-relief programs to member governments with the agreement that funds are instead diverted to health programmes, education, and infrastructure improvement projects. Despite their broadly successful track record of channelling finance to developing countries at attractive financial terms and accompanied by developmental knowledge and technical assistance, many MDBs face operational limitations that prevent them from maximizing the potential of their unique organizational model. Underlying many of these limitations is the key issue of governance: MDBs are often battlegrounds between different groups of


shareholding countries—frequently (though not always) split between borrower countries on the one side and non-borrowers on the other.

2. Infrastructure finance

Among sources of financial support for infrastructure provision in developing countries, MDBs have been among the most prominent. The basic model of an MDB – a cooperative bank operating among a group of countries to support development with financing and knowledge – helps fill huge existing infrastructure gaps worldwide. However, the scale of this role will largely depend on the ability of MDBs to adapt their operational policies and governance arrangements to a fast-evolving global economic and political context. In light of the overwhelming needs for infrastructure finance in emerging and developing economies and the limitations facing alternative flows of financing, there is a clear role of MDBs to continue and in fact increase their activities. The reasons are multiple as follows:

The development payoff of infrastructure projects in terms of improved living standards and potential to catalyze greater economic activity and poverty reduction is tremendous.

The nature of MDBs – as cooperative banks created by national governments – gives them numerous important operational advantages (financial and otherwise) that can be applied to effectively support infrastructure provision.

Due to their broad membership and scope of activities, MDBs have a unique ability to transfer knowledge of best practices in terms of efficiency, effectiveness, and sustainability – critical limitations for many infrastructure projects.

MDBs face a differentiated risk profile compared to private sector entities, and are thus able to take on risky projects with high potential benefits, not only with their own financing but also to provide comfort to private investors, and thus leverage much greater resources in the interests of infrastructure development.

Simultaneously, existing MDBs face numerous significant constraints to their operations that limit their ability to support greater infrastructure provision. The constraints facing MDB financial management include access to capital markets, capital structure and financial instruments that combine to reduce the ability of many MDBs to take advantage of their unique financial model. Similarly, an array of business practices hampers many MDBs from effectively and flexibly delivering developmental services. Many borrower countries are loath to accept long approval times, heavy bureaucracy, and external policy impositions, even if they value the attractive financial terms and developmental knowledge offered by MDBs. Underlying many inherent constraints is the overriding issue of MDB governance. Many existing MDBs face important splits between non-borrower and borrower country shareholders, with the former in many cases holding dominant voting power. Non-borrowers have tended to view MDBs as useful organizations for broader developmental goals, but with a strong inclination to impose rules and policies that protect their own interests even if this may hamper MDB effectiveness. In addition, these governance tensions reduce the legitimacy with which some MDBs operate, with many countries viewing major MDBs as tools of the major industrialized economies. Other MDBs run by borrower nations, such as the CAF (development bank of Latin America), Central American Bank for Economic Integration, or the PTA Bank in southern Africa, tend to have business practices much more attractive to borrowers, but also greater difficulty accessing financial resources and limitations of knowledge provision and quality control. The history of MDBs has shown that governance, finances, and operations are all


inter-linked, and have the potential to be either mutually reinforcing or to create tensions that can undermine the effectiveness of an MDB. Several types of project loan guarantees are offered by all the major MDBs; however, guarantees constitute only a small proportion of total financing operations undertaken by the world’s leading MDBs. A key problem limiting loan guarantee usage is the fact that even though guarantees are not funded (unless they are called, which is very rare), they must still be backed by the same amount of MDB equity capital as a regular loan according to typical treasury policies, which makes them expensive and unattractive to clients. The pricing issue is particularly problematic as the financial uplift offered by MDB guarantees is limited due to the nature of borrowers receiving the guarantee and the perceptions and incentives of private lenders. Loan syndication is a useful instrument in infrastructure finance to bring external resources into private sector transactions that an MDB designs and administers. Syndication generally can take two forms, either as an A/B loan program – wherein the MDB is the lender of record, and the external financer simply provides a set amount of resources as part of the overall loan package via the MDB – or as a parallel loan – wherein the MDB and the external source each conclude separate loan agreements with the borrower, on a project designed and administered by the MDB. Syndication offers numerous benefits: borrowers obtain much larger volumes of resources than otherwise possible, external financers can rely on MDB knowledge in an area where they would like exposure but cannot adequately assess and hedge risk, and the MDB increases its development impact while using less equity capital. The EBRD and especially the IFC (a member of the World Bank Group) have strong and growing loan syndication programs. Co-financing is another infrastructure financing tool. It is similar to syndication, but for a portfolio of loans rather than by individual project. Unlike syndication, co-financing can involve sovereign as well as non-sovereign loans. An MDB agrees to develop a portfolio of loans in a given sector or geographic region, and the third party commits funds to be paired with MDB resources for loans.

3. Development aid

Development aid, also called Official Development Assistance (“ODA”) is defined as government aid designed to promote the economic development and welfare of developing countries. Loans and credits for military purposes are excluded. Aid may be provided bilaterally, from donor to recipient, or channelled through a multilateral development agency such as the United Nations or the World Bank. Aid includes grants, "soft" loans (where the grant element is at least 25% of the total) and the provision of technical assistance. The OECD maintains a list of developing countries and territories; only aid to these countries counts as ODA. ODA can take the form of loans or grants. Recipient countries view loans as different from grants because they carry the burden of future repayment. This induces policymakers to use funds wisely and to mobilize taxes or, at least, to maintain current levels of revenue collection. In contrast, grants are viewed as free resources and could therefore substitute for domestic revenues. If a large share of these loans is provided on highly concessional terms, and loans are frequently forgiven, policymakers may come to view them, over time, as roughly equivalent to grants. Some recent initiatives have called for a shifting of foreign aid toward grants while increasing overall assistance to developing countries. These initiatives are driven, in part,


by the belief that excessive lending has led to massive debt accumulation in many developing countries and has not helped them reach their development objectives. From this perspective, aid should be motivated primarily by humanitarian objectives and thus take the form of grants. It is thought that such an approach would both help recipient countries develop their economies and improve their prospects for achieving debt sustainability. In response to these initiatives, some donor countries have expressed concern that a significant shift to grants would make it difficult for the IDA to maintain lending at the existing level. They also fear that such a shift could dampen public support in donor countries for transfers to developing countries. Often overlooked is the fiscal impact a shift of foreign aid from loans to grants may have on recipient countries. If higher grants lead to lower domestic revenues, this policy shift may lead to greater aid dependency and make budget planning more difficult. The question of loans versus grants aside, over the past three decades, non-traditional donors such as China, have emerged. The increasing importance of non-traditional donors has meant that the economic and political stronghold of western countries in sub-Saharan Africa has diminished. China is now the largest non-traditional contributor of aid to sub-Saharan African countries. The attraction of non-traditional aid is that the recipient nations receive neither outright development loans or grants, but instead agree to a more of trade-off between development and access. China and some other nations also cancel foreign debt as another instrument of foreign policy strategy, an attractive option for many developing nations and potentially, for some States recovering from extraordinary situations. Africa, for example, presents China with economic opportunities. While initial motives for Chinese aid was to strengthen diplomatic ties, the resource motive became an important factor. China views natural resource possibilities in sub-Saharan Africa as a means of boosting Chinese domestic economic growth has further driven China’s interest in sub-Saharan Africa’s natural resources. Typically, China will invest in a target nation’s infrastructure – industrial, tourism, transport, mining and energy projects – in exchange for access to and extraction rights for the country’s natural resources. For example, China built the new cargo and passenger terminals at Maputo International Airport (IATA: MPM, ICAO: FQMA) in Mozambique, along with other public transport works such as roadways.

4.4.2.3 International Donors

Donors provide a good venue for a country to recover after political unrest. However, there are key conditions for such a venue to be successful;

1. Donors should not impose their own institutional models and policy preferences on the

recipient country. 2. Donors should work with the recipient country and utilize their knowledge base and

existing infrastructure. 3. Donors should ensure that their support and involvement in the recipient country is

bound by a specified period of time and does not serve as a long-term substitute for the mobilization of domestic resources.

Either bilateral or multilateral donors could provide support the restoration of the aviation sector in a recovering state. Managing a cooperation with multilateral donors will require additional coordination to ensure that all donors are aligned with the state’s goals during the recovery phase.


It is very important to include a monitoring process when using donors. The monitoring responsibility could be assigned to an independent assessor working for or on behalf of an international organization.

4.4.2.4 Public-Private-Partnerships

A focused overview of public-private partnerships for aviation in general and the ATM sector in specific is General principles for investment in ATM and project funding are included under Appendix D to this document.

Appendix C focuses on the use of a structured infrastructure financing arrangement called a public-private partnership (hereinafter also referred to as “PPP” or “P3”) to support varying aspects of the design, finance, construction, operation and maintenance of ATM systems7. A PPP represents a practical solution for States which are recovering from extraordinary situations and whose financial capacity is limited. While it is not the intention to preclude from this discussion the feasibility of using banks, international donors or development aid, target States truly need “the full package” of support that private partners would bring, along with agility (speed-to-market). This would not just come in the form of financial support, but also technical support (i.e. design, construction, management and operations). That said, ancillary financial support from MDBs may potentially deliver the debt component required for certain PPPs that are outlined further in Appendix E.

4.5 Implementation Plan, Guidance, & Mentorship

Once the ANS Plan and financial investment roadmap are completed, an implementation plan will be developed, which will include the milestones, timelines, and resources required to fulfil each milestone. The implementation plan will be supplemented by a process for communication, feedback loop, guidance and mentorship for implementation, and regular consultation meetings. The implementation plan will identify the following; 1. Prerequisites and actions by the State/ANSP 2. The roles and responsibilities of the recovery project team 3. Training needs and requirements 4. Peer-to-peer mentorship (ANSP to ANSP and Regulator to Regulator) 5. Success criteria and project check-points The State/ANSP will be responsible to carry out the actions agreed under the implementation plan and avail the resources and investment needed for its success. The implementation plan may not be over a short period of time, depending on the conditions that the State/ANSP are recovering from. There will be checkpoints for feedback during the implementation. Under the banner of ICAO’s initiative for No Country Left Behind, partnerships for sustainable aviation development amongst States, other UN organizations, donors and financial institutions, can play a fundamental role in the recovery of the aviation sector post a political or civil unrest. These partnerships will be essential to the infrastructure modernization and other essential capacity-building activities. To facilitate such partnerships, ICAO has begun to host annual World Aviation Forums. Making use of these fora, and with the assistance of international organizations will facilitate partnerships between the recovering State and other ANSPs for ANSP-to-ANSP mentorship and guidance.

7 There are multiple possible permutations of a PPP, the most extensive of which sees the private partner conduct all of the design, finance, build, operate and maintain phases of the infrastructure involved.


5 Appendix A

HOT SPOTS ACROSS TRAFFIC FLOWS AND IMPACT ON ROUTE STRUCTURE RESILIENCE

5.1.1 Europe-Middle East-South East Asia Flow

The Middle East is strategically situated between Europe, Africa, and South East Asia. Over the past five years, this region has experienced political turmoil which has affected the operation of international air traffic. In addition to the region being susceptible to political unrest and friction, the route structure is already suffering from restrictions and capacity limitations which hinder a continuous traffic flow in the event of partial or total disruption of Air Traffic Services. Operational bottle necks include lack of infrastructure, airspace restrictions, lack of flexibility, the existing route structure, varying separation standards across FIRs, and lack of consistent coordination among States cross that traffic axis.

Figure 2: Currently avoided Airspace and Hot Spots in the Middle East

The fact that this traffic axis has several hot spots, has a lot of constraints, and is not resilient in terms of route structure, makes it is difficult to accommodate flights efficiently today. Traffic across the interface between Europe and the Middle East continues to grow at a high rate. The Middle East’s air travel is expected to grow at a rate of 6% per annum on average over the next two decades. In 5-10 years it will be almost impossible to accommodate the air traffic if the situation does not change. The Contingency Routing Scheme for Asia, Middle East, and Europe (CRAME) serves as a good example of how contingency scenarios and play books can be designed to cover multi-regional interface and provide contingency route schemes for international traffic. CRAME provides alternative routings for various scenarios in the event of a major disruption to the aviation sector in the Middle East causes restriction or closure of the airspace to international civil aviation or where operators wish to avoid airspace due to a perceived risk. CRAME is supported by EUROCONTROL Network Manager through proposals for additional routes, scenarios, impact assessments, etc.


In addition to a contingency routing scheme, the route structure resiliency must be addressed through a revision of the route structure end-to-end. Airlines need more depth in routing options and capacity, not just as a contingency. Restrictions across the traffic axis need to be addressed, such as access to military airspace, varying separation standards across FIRs, lack of flexible routing, and the need for air traffic flow management.

Figure 3: Current situation in the South-Eastern Europe and the Middle East (Source: Eurocontrol NEST Tool)

5.1.1.1 Simferopol FIR, the Black Sea, and the Turkey-Bulgaria-Romania Interface

In 2014, the Russian Federation published of a series of notices to airmen (NOTAMs) modifying the Simferopol FIR which is under the responsibility of Ukraine, and communicated their intent to provide air traffic services (ATS) within this airspace. The dispute in Simferopol FIR has led airlines to avoid overflying it. When the dual control of this airspace came into effect, some 500 flights daily were circumnavigating the Simferopol FIR due to safety reasons. The total additional daily cost to airlines from circumnavigating the Simferopol FIR, adding 20 minutes of flight time, was estimated to add EUR 688,000 in fuel related expenses and EUR 369,000 in non-fuel related operating expenses. Safety concerns were raised by ICAO in their State Letter, Ref: EUR/NAT 14-0243.TEC (FOL/CUP), dated 02 April 2014. On 18 August 2015, another ICAO State Letter, Ref: EUR/NAT 15-0420.TEC (FOL/CUP), was issued with an update on the safety of civil aircraft operating in the Simferopol FIR. This was the result of the work done in cooperation with EUROCONTROL Network Manager in assessing the essential requirements and the key routes that needed to be made available in this context. The letter referenced the procedures promulgated by Ukraine to in an effort to support safe operations on a limited number of air traffic services (ATS) routes in the western part of the Simferopol FIR. On February 17, 2015, EASA issued a Safety Information Bulletin, inviting airlines to consider the use of air traffic services (ATS) routes L851 and M856 when planning flights within the Simferopol FIR. However, since the situation remains unchanged, where more than one ATS provider may be controlling flights within the Simferopol FIR, it is unlikely that airlines will return to routes over the Black Sea, unless a solution is worked out on which agreement can be reached by all parties involved.


Figure 4: Simferopol FIR

Annex 11 to the ICAO Convention prescribes that those portions of the airspace over the high seas where air traffic services will be provided shall be determined on the basis of regional air navigation agreements, which are agreements approved by the Council usually on the advice of regional air navigation meetings. Furthermore, the ICAO Assembly has resolved that the limits of ATS airspaces, whether over States’ territories or over the high seas, shall be established on the basis of technical and operational considerations with the aim of ensuring safety and optimizing efficiency and economy for both providers and users of the services. However, to this date, the dispute in the Black Sea, which is high seas airspace, remains unresolved. Since the dispute in Simferopol FIR started, airlines have been taking measures to avoid the airspace. This initially resulted in an overload of Ankara FIR, which affected the interface and traffic flow across Bulgaria and Romania. Combined with the critical situation at the interface with Syria (affecting the South Eastern part of Turkey), the traffic overload via Ankara FIR was forced into a very narrow corridor. In 2016, following intensive negotiations run by EUROCONTROL Network Manager, the interface between Turkey, Romania, and Bulgaria was re-organized to accommodate the additional traffic, and relief the Ankara ACC. However, the risk of overload of the Ankara FIR will continue to exist until the situation is the Simferopol FIR is resolved.

5.1.1.2 Afghanistan

The unique geographical location of Afghanistan makes it a critical FIR across the traffic axis connecting Europe to South East Asia. The transition of Air Navigation Services (ANS) in Afghanistan from the military to Afghan civil authorities has been on-going over the past three years. Due to its geographic location, any restriction in Afghanistan airspace or disruption would have very serious implications on flights between Europe and Asia.


Figure 5: Daily Traffic in Afghanistan Airspace (Source: ICAO)

Afghanistan’s fragile and conflict-affected situation remains the overriding concern in re-building the country’s air transport sector. In addition, the Afghan airspace capacity is currently very limited due to the lack of infrastructure. Despite support and availability of international donors, there is still work to be done to have a base-line air navigation service in place. The priority for Kabul FIR is to guarantee operations continuity and level of service. For over two decades the country has suffered from unrest which has in turn depleted it from skilled professionals and weakened its institutional capacity. To re-boot the country’s air navigation system, several elements need to be put in place by the Afghan Air Navigation and Civil Aviation organizations, ranging from updating of legislation and regulations to rebuilding of infrastructure, as well as the recruitment and training of air traffic controllers and civil aviation inspectors. The guidelines included in this document could be used to assist a country like Afghanistan to recover its aviation sector and air navigation services.

5.1.1.3 Turkey-Iran-Iraq Interface

With the current situation across the traffic axis between Europe, the Middle East, and South East Asia, the Turkey-Iran-Iraq crossing remains the only strong interface enabling the continued flow of traffic across the three regions. A hypothetical scenario of airspace closure over Turkey or Iran will result in almost 530 overflights daily that would need to be re-routed to go through Egypt. The current route structure and infrastructure across the Egypt-Saudi Arabia interface, will not sustain such a scenario. This activity is supported by EUROCONTROL Network Manager through proposals for additional routes, scenarios, impact assessments, etc.


Figure 6: Daily Traffic across Turkey-Iraq-Iran (Source: ICAO)

Two new airways through Iraq, came into effect on 27 April 2017, yet the airspace is not showing a lot of over-flying traffic, due to the flight restrictions imposed by regulatory bodies on airlines operating over Baghdad FIR. Work still needs to be done to lift over-flight restrictions and restore faith of the flying public in operating through and into Iraq. The country will also need to rebuild its infrastructure and invest in the training of controllers to fully recover its air navigation services.

5.1.1.4 Cyprus-Egypt-Saudi Arabia Interface and the Sinai Peninsula

Nicosia FIR is surrounded by FIRs of 6 States, namely Athena FIR, Cairo FIR, Tel Aviv FIR/UIR, Beirut FIR, Damascus FIR, and Ankara FIR/UIR. Nicosia ACC has been experiencing high traffic growth and high increase in the average delay per flight. Most of these delays are attributed to ACC staffing. The inability to avail the required number of sectors during peak traffic periods is directly attributed to Air Traffic Controllers (ATCOs) efficiency and working schedules. In Q1 2017, Cyprus came in third for en-route delays after France and Portugal. This is also combined with an increase in overflying traffic, and frequent military activity, all of which, add to the complexity of the situation and affects the operation through Nicosia FIR. Contrary to the requirements of ICAO Annex 11 there is no direct contact between the Ercan Control, Ankara and Nicosia. To mitigate the safety risks associated with such a situation, IATA issued an information bulletin in 2006, highlighting a communications / control procedures in Nicosia. While the information bulletin was developed as provisional information, pending improvement of the airspace organization and of the ATS and COM services by the authorities concerned, it is still valid and used as-of 2017.


Figure 7: Daily Traffic across Cyprus-Egypt-KSA (Source: ICAO)

Egypt’s strategic geographic location makes it an important FIR and gateway between Europe and the Middle East. With an interface with Nicosia FIR and Riyadh FIR, Cairo FIR is important for traffic flow, not only because of location, but because of the economic and political instability the country has been experiencing since 2011. Combined with a route structure that is not resilient and has a lot of restrictions, the Cyprus-Egypt and the Egypt-Saudi Arabia interfaces are weak links affecting the flow of traffic between Europe and the Middle East. This weak link also adds to the challenge in the Middle East in case of any additional airspace closure or restriction. Furthermore, airlines are avoiding the Sinai Peninsula after a Russian passenger plane crashed in 2015. This precautionary step to avoid Sinai is adding to an already congested Middle East airspace as airlines now navigate their way through a smaller area. This activity is supported by EUROCONTROL Network Manager through proposals for additional routes, scenarios, impact assessments, etc


Figure 8: Egypt Sinai Peninsula Airspace

5.1.1.5 UAE-Oman-India Interface

The Gulf area has seen significant rise in traffic growth, not just for in-bound flights but also over-flights, and transit flights. In addition to local airline operators that growing at a very high rate, investment in airport infrastructure is on the rise to accommodate the influx of passengers. In 2016, the Airports Council International recently ranked Dubai as the third busiest airport in the world. Despite major expansion in airline operation and airport expansion, the region’s airspace and air traffic capability, have not kept up with the region’s ambition. The interface between UAE, Oman, and India requires operational improvements and better connectivity for seamless flow of traffic.

Figure 9: Daily Traffic across UAE-Oman-India Interface (Source: ICAO)


Oman formally launched its new ACC in 2017, which now enables them to handle 1,500 flights daily. The UAE has been in the forefront of investment in airspace design and airport expansion. To allow for seamless and efficient flow of traffic, there is a need for a collaborative approach to solutions and coordination across FIR boundaries. The congestion across the interface between UAE, Oman, and India is a bottleneck that affects the overall traffic flow between three regions.

5.1.1.6 Syria

The Syrian civil war is still an on-going conflict since 2011, with military activity and a divided country. Several incidents were reported whereby civil aircraft unexpectedly found themselves in close proximity to munitions and missile firings within the Damascus FIR. Due to the country’s situation and safety risks, airlines have seized flying over or into Syria. The airspace in Syria will not re-open until the situation on the ground is normalized. Once the country’s civil conflict is resolved and military activity seizes, the aviation sector will require a re-boot, especially that most of the country’s infrastructure has been destroyed. In addition, the country has been depleted of resources, especially with the migrants’ movements from Syria to other countries.

5.1.2 Africa – Indian Ocean Interface

5.1.2.1 Somalia

A critical hot spot that requires attention is the interface between Somalia, Oman and India, particularly because of the situation in Mogadishu FIR. The Civil Aviation Caretaker Authority of Somalia (CACAS) has been serving as the caretaker for Somalia's airspace since the early 1990s, following the outbreak of the civil conflict. Somalia is working on reassuming control of its airspace, but still Mogadishu FIR is classified as a Class G Airspace. In addition to the country recovering from a long period of civil conflict, it yet has to fully recover its aviation sector and air navigation services. The lack of infrastructure, operations continuity, availability of resources, and a baseline air navigation service, pose not only efficiency but safety concerns that need to be addressed. Between 2016 and 2017 there has been an increased number of safety incidents, including Large Height Deviations (LHD). While work is being done with the Somalian government to address these safety concerns in the short term, there needs to be a long term strategy for the recovery of the aviation sector in Somalia.

Figure 10: Daily Traffic over Somalia (Source: ICAO)


5.1.2.2 Interface between Arabian Peninsula and East Africa

The Yemeni Civil War is still an ongoing conflict since 2015, and at the moment there are two factions claiming to constitute the Yemeni government, which by extension creates a dispute over the airspace and civil aviation. Along with the military activity that has accompanied the civil unrest within Yemen, the airspace and the country’s main airports have been closed. This situation in Yemen is not only devastating for its people, but it also adds another restriction to flights departing from the Middle East, particularly between the Arabian Peninsula and East Africa. Flights to the Seychelles islands from the United Arab Emirates are taking between 45 minutes to an hour longer as a result of the closure of Yemen’s airspace. Flights between the Arabian Peninsula and some countries in East Africa such as Kenya and Tanzania have also been affected. The unrest and military activity has destroyed the country’s infrastructure, and sharpened intra-Yemeni regional, political and sectarian divides. Even after the situation is normalized, the road to lasting peace and in-country stability will be long and difficult. Until the country stabilizes and the situation is normalized, flights over and into Yemen will not resume. Once the situation is normalized, the country will need to look at the recovery of its aviation sector, not only to resume flights but to enable aid and transport of medicines and goods into the country. Another hot spot across the interface between the Arabian Peninsula and East Africa, in the triangle between Saudi Arabia, Eritrea, and Ethiopia. For about 25 years, Eritrea’s border with Ethiopia has been a disputed region. Eritrea is strategically located across the Red Sea from Yemen and Saudi Arabia. Its narrowest point is just 29 kilometers from Yemen. The non-resilient route structure, combined with the political friction add constraints to flights across this triangle, and between the two regions. Furthermore, in 2011, flights to East Africa were severely disrupted as ash from an Eritrean volcano spread across the region and headed towards Saudi Arabia.

5.1.3 North America – South America Traffic Axis (NAM-SAM)

5.1.3.1 Cuba

After more than 50 years of no international relations, air traffic between the US and Cuba started to resume in 2016. The situation in Cuba represents a country recovering from an economic restriction and recovery after sanctions have been lifted. With Cuba opening up to trade with the US, air travel is on the rise to ensure the mobility of business travelers, tourists, and goods. Because of the size of Cuba, the majority of aircraft departing Miami for destination in the Caribbean or South America will cross the Havana FIR.

Figure 11: Daily Traffic over Cuba (Source: ICAO)


The implementation of Air Traffic Flow Management (ATFM) in Havana Center could help accommodate growing traffic as U.S. carriers begin scheduled passenger service into Cuba. However, the biggest obstacle to post-sanctions growth may be the delay in Cuba’s embrace of private enterprise. A very good example of that is the liberalization of the aviation sector that could enable Cuba to train and retain enough traffic controllers to handle the influx of air traffic. In Cuba, the total contribution of Travel & Tourism to GDP was USD 8,868.3 Million, in 2016, and is forecast to rise by 2.8% in 2017. Yet remuneration of aviation professionals falls below that of other transport sectors. In fact, taxi drivers in Cuba make more in one day than a lot of other professionals make in a month. In a country that has almost no private sector for over fifty (50) years, reemerging corporatization and changing remuneration schemes will take time, but it a needed change. While this is not a situation in which a natural disaster or war destroyed the country’s infrastructure, yet recovery from sanctions and embargo will include transformation in the aviation sector to accommodate the expanded air travel anticipated. Over 50 years there has been a strong government influence on the aviation sector which often creates a culture that is resistant to change. Corporatization or liberalization of the air navigation services will bring ATM in Cuba into the 21st century, and encourage a more customer-focused provision of navigation services. It will also enable the ANSP to be independent and offer competitive remuneration schemes to attract aviation professionals to be air traffic controllers.

5.1.3.2 The Caribbean

Air traffic is growing in the Caribbean at a rate of 8% per annum. Air traffic management infrastructure must ensure it can handle such growth. Air traffic management in the Caribbean is complex and requires extensive coordination among air navigation partners. The region includes 10 air navigation service providers managed by separate sovereign nations, and have varying separation standards between the different FIRs. The region also experiences varying tropical weather patterns. Combined with the complexity of airports infrastructure, the current situation results in schedule uncertainty and flight delays. Consolidation of air navigation service provision in the Caribbean and provision of ANS across national borders would address some of these infrastructure challenges. In addition, enhancing communication, and the implementation of performance-based navigation (PBN) throughout Latin America and the Caribbean, would introduce significant efficiencies. There are several initiatives launched in the Caribbean to improve ATM infrastructure. Yet there is slow progress in overcoming challenges and progressing implementation.


6 Appendix B

IATA POSITION ON MOST CAPABLE BEST SERVED 1 Introduction 1.1 The principle of First-Come-First-Served has served the aviation community well for many years.

However, this principle has become increasingly problematic, especially in periods of technological transition when there are still significant numbers of less capable users. For airlines, the most important objective is to have an ATM system that has the greatest capacity, commensurate with the demand, and for it to operate with the best possible efficiency. The First-Come-First-Served principle is not compatible with this objective.

1.2 Recently, the expression “Best Equipped Best Served” has been used to describe a mode of operations where those aircraft operators that have invested in modern aircraft equipage would be allowed to take full operational advantage of their investment. Enabling operations under this principle is more difficult than it may appear at first; mostly due to the complexity caused by mixing aircraft capabilities within dense airspace and the consequential workload increase on air traffic control. Also, “best equipped” is not the best indicator of a flight’s capability. Several other elements such as flight planning capability, crew training, etc. must also be considered.

1.3 IATA prefers to support a migration towards Most Capable Best Served with the intent of optimizing the efficiency of airspace operations. Under this principle, those operations, supported by technology, qualified personnel, and systems on the ground and in the air, that provide the best operational benefit and incentivize evolution towards agreed-upon objectives would be preferred. Typically, the most capable flights would be provided the opportunity to gain full advantage of their capability in order to maximize the overall efficiency of the ATM system and of the flight itself. “Most Capable” is a term that regroups aircraft equipage, crew training, operational certification, flight planning capability and the ability to efficiently and seamlessly convey the pertinent capability to ATM.

1.4 It is important to discuss this concept as it will set the tone for the evolution of ATM and is directly

linked to the economic debate (who pays for the ATM/avionics investment and how) and ANSP performance improvement. Although the debate is currently primarily focused on NextGen and SESAR, determining which flights are Best Served has a global application. It is therefore critically important that there be common agreement on the definition, understanding and application of Most Capable Best Served. Different State or regional applications of Best Served would cause significant problems for international carriers.

1.5 In any operational concept where flight capabilities play a significant role, it is of critical importance

that the entire design and implementation process be transparent and harmonized with other similar initiatives so as to not distort business cases and flight operations.

1.6 Internal airline processes leading to equipage decisions are governed by benefits to that airline.

Other than mandated equipage, investments will be made only on those that meet the criterion of a demonstrated positive benefit over cost ratio. In operational terms, the airline must be allowed to derive an operational advantage from the new equipage as compared to the baseline equipage that will offset the cost to equip over a reasonable period.


2 MCBS Principles

2.1 The choice of operating under a Most Capable Best Served concept requires an understanding of

overarching principles that must be followed for a successful outcome. IATA supports the principles contained in the ICAO Global ATM Operational Concept as described in ICAO Doc 9854.

2.2 It is critically important to international aircraft operators that service level concepts be globally harmonized and that the services themselves be interoperable.

2.3 What is currently referred to as “Best Equipped Best Served” should be a concept of operations that

allows more capable flights to operate in a manner that makes best use of an airlines investment (equipage and training) through a performance or service improvement. Note: IATA prefers the statement Most Capable Best Served. Whichever term is finally chosen to represent this concept, IATA is fully supportive of efforts that provide a return on the operators’ investment whilst providing a safer and more efficient ATM system.

2.4 This concept rests on the following pillars:

Collaborative Decision Making regarding Airspace Management and the required capabilities. Equipage incentives, whether financial or operational or a combination thereof. Regulator willingness and ability to certify advanced aircraft capabilities Equitable access to airspace, viewed on a longer time scale

3 Objective

3.1 For decades, airlines have been equipping their aircraft with advanced capabilities in the hope that they would reap operational advantages from these capabilities to offset their cost. Unfortunately, these benefits have been very slow to materialize.

3.2 In the current environment of diverse capabilities it is appropriate to, at some point, provide operational advantages to those aircraft operators that have advanced capabilities. We have reached a point where it is no longer acceptable to cater to the lowest common denominator and wait for all users to be equipped before effecting the transition to improved operations.

3.3 In IATA’s view, the objective of Most Capable Best Served is to maximize operational efficiency

through collaboration. This view is in harmony with that of the aviation community at large as reflected by ICAO and its Key Performance Areas8.

3.4 Most Capable Best Served introduces elements of equipage incentives and funding which will be

discussed later.

3.5 It is envisaged that Most Capable Best Served will incentivize the user community to equip but this should be seen as a means, not as the primary objective.

8 Access and equity; Capacity; Cost-effectiveness; Efficiency; Environment; Flexibility; Global interoperability; Participation by the ATM community; Predictability; Safety; Security


4 Variables

4.1 The following factors affect the strategic decision whether or not to operate a Most Capable Best Served environment: Proportion of capable aircraft (critical mass) Air traffic throughput Impact on the airspace user network operations Classes of users Time Availability of equipage Value of equipage ATM Infrastructure Capability (CNS/Systems) and Requirements Environmental Impact Benefit / Cost

5 Most Capable Best Served (MCBS)

5.1 When does better service to more capable flights come into play?

5.2 In First Come First Served, it is possible for a “First Come” flight to cause penalties to several

others because of its position in the queue. The net result is not acceptable in terms of overall system efficiency and operating cost.

5.3 We consider it equally not acceptable to cause overall system inefficiencies or increased operating

costs to the majority of aircraft operators in a given service volume in order to accommodate a small number of First Adopters.

5.4 IATA believes that the ATM system needs to be examined case-by-case, service-volume-by-

service-volume. For each service volume, one first determines if there are opportunities for increased efficiency, then whether flight capability is a determining factor and finally whether a suitable proportion of operators has the desired capability to justify moving forward.

5.5 Any implementation of Most Capable Best Served must not introduce workload or other hazards

that are not properly mitigated, if required.

5.6 The following sections will describe the phases involved in implementing Most Capable Best Served operations.



6 Implementation of Mandated Equipage

The figure below shows a transition from a stable environment through some operational incentive steps to a new stable state where a new capability has been agreed to by stakeholders or, more likely, has been mandated.

Figure 12: Progression towards Mandated Equipage



6.1 Initial Equipage Phase

6.1.1 In the early phase of the process, operators are equipping and developing capability

naturally. The reasons for this natural equipage would likely be: introduction of new aircraft; aircraft equipped to meet a mandate in another area are operating in this area, etc. No formal opportunity is available to gain advantage from the advanced capability.

Some incidental advantages may occur ad hoc.

6.2 Operational Incentives Phase 1 6.2.1 This phase begins once Collaborative Decision Making (CDM) involving the stakeholders

indicates that the growing capability shows probable operational benefits in the service volume and that there is reason to incentivize further capability development.

6.2.2 At this point, there is a decision whether or not equipage should be mandated and the value of incentives. These incentives may simply be a mandate or it may be appropriate to provide financial or operational incentives as well. Financial incentives can be problematic unless they take the form of reduced air navigation charges. Other techniques such as loan guarantees are typically restricted to locally registered aircraft and therefore have the potential to upset the market balance in their favor.

6.2.3 In this phase, there are not enough capable flights to justify penalizing less capable flights

but providing preferential treatment to capable flights, as an incentive, should be considered. The following should be applied: No operational penalty is imposed on less capable flights. Most Capable flights are allowed to gain an operational advantage from their capability

on a non-interference basis. Financial incentives through lower charges should be available to all “most capable”

users

6.3 Operational Incentives Phase 2 6.3.1 As the equipage rate increases, a threshold proportion of flights is capable of the desired

behavior and it becomes acceptable to provide best service to these capable flights, to the potential detriment of the less equipped flights. ICAO principles of access to service as described above must nevertheless be respected. The overall system efficiency for the service volume indicates that less-capable flights

are impeding system throughput. The airspace concept is revised to favor the desired flight capability and procedures are

updated accordingly. The less-capable flights still have access to the service volume, but the access is not to

the more desirable flight levels or trajectories. If delays are necessary due to excess demand, the non-capable flights would be the first ones impacted.

Reduced access to airspace or services for flights not meeting the required capability threshold should be limited to those timeframes judged necessary.

6.4 New Stable State

6.4.1 At this point, the new equipage requirement is standard, possibly by mandate. There is no

longer a requirement to provide preferred treatment to capable flights. Non-capable flights are either excluded from the service volume or require special approval.


7 Financial Incentives

7.1 As previously mentioned, financial incentives may be considered when it is desirable to accelerate

the adoption of new equipage. Financial incentives can be used in combination with operational incentives and may serve to offset a negative cost-benefit for aircraft operators.

7.2 General considerations for the use of financial incentives are:

There must be a proven overall cost benefit of the new technology before moving forward.

No financial penalty should be imposed on less capable flights. Financial incentives through lower charges should be available to all “most

capable” users. Financial incentives must be published and of a transparent nature. Financial incentives should not be cross-subsidized through other users but

rather result from lower operational / capital costs at the ANSP (cost based). Financial incentives must be time limited to be followed by a mandate of the

new technology.

8 Key Considerations

8.1 Each implementation of Most Capable Best Served would be geared to a logical ATM service volume and would consider the operator capabilities within that airspace.

8.2 Any airspace, whether or not Most Capable Best Served principles will be applied, must be planned collaboratively from the outset. All stakeholders: service providers, regulators and airspace users must be involved in all phases in order to ensure optimal results.

8.3 MCBS can be considered for implementation in any service volume where operational efficiencies

are sought and a significant proportion of aircraft have the desired capability.

8.4 Consideration would be given to linking Most Capable Best Served airspace volumes in order to avoid introducing operational inefficiencies into major traffic flows.

8.5 Air Traffic Controller workload is often cited as a reason to not implement Most Capable Best

Served. Experience has shown that controllers generally tend to initially resist change but are very capable of embracing new environments, especially when they are part of the process. Small proportions of optimized procedures flown in quiet periods provide experience and operational benefits. It is likely that the proportion of approvals would grow given some experience and acceptable levels of traffic. The objective is not 100% approval during the “non-interference” phase (see section 6.2above) but every bit helps.

8.6 Consideration must be given to the safety and controller workload factors introduced by new mixed

aircraft capability environments. If workload becomes an issue or safety levels may be compromised, it may be appropriate to temporarily limit access to the airspace in order to mitigate the risks.

8.7 Financial and operational capability incentives should be considered when designing the operation.

Financial incentives have the potential to create a market imbalance, these should be carefully considered to avoid such an imbalance.

8.8 Aircraft equipage will occur when there is a positive business case to do so. Such a business case

can result from direct operating cost advantages, from financial incentives, or both.


8.9 The entire process must be transparent and timelines well established from the outset for proper

planning.

9 Conclusions

9.1 It is necessary for the ATM System to deliver maximum capacity, commensurate with demand. While providing this optimum capacity, the ATM System has to do so with the greatest possible efficiency. This most likely requires the best possible use of aircraft capabilities.

9.2 IATA recommends that the term Most Capable Best Served in place of Best Equipped Best Served.

9.3 It is appropriate to provide operational advantages to more capable flights in either of the following

cases: An operational advantage, e.g. a more advantageous flight profile, is approved

if this can be done safely and without causing a disadvantage to other flights. This is likely in less dense operations where the more capable flights are in a minority.

In the case where the more capable flights form a distinct majority and overall system efficiencies will result. In this case, the advantage should be provided and less capable flights should receive less favorable trajectories.

9.4 Global implementation of a harmonized Most Capable Best Served operations concept is of critical importance to international aircraft operators, especially airlines.

9.5 The Most Capable Best Served concept is an effective tool in managing the evolution towards a new equipage level which is reached either by mandate or by consensus.



7 APPENDIX C

PRE-CONDITIONS FOR INITIATING A STATE RECOVERY PROJECT POST POLITICAL UNREST An assessment of the situation will be carried out with the candidate State for a recovery project. In addition to reviewing the WGIs for that specific country, the following need to be ensured for a State recovery project to be initiated; 1. There is one recognized government in power

2. There is one recognized civil aviation authority and/or ministry that has jurisdiction over the aviation

sector, and which can demonstrate accountability and responsibility over the civil aviation sector 3. There is continuity in the focal point within the civil aviation authority or the ministry for the duration

of the recovery project

4. The State, represented by its ministry and civil aviation, can guarantee the security of all its personnel

5. The government of the recovering state can provide information that would ensure economic security for investors

6. The State/government can provide enough and satisfactory intelligence and information about the containment of unrest, violence, or terrorism in its country

7. The civil aviation authority and/or ministry are able to provide necessary information and assurance that the civil aviation sector is independent from any political pressure

8. The State/government can provide sufficient information and intelligence to other civil aviation authorities to restore confidence in over-flights and flights into the recovering country


8 APPENDIX D

OUTLINE OF AN AIR NAVIGATION SERVICES PLAN

1. Introduction

2. Scope 3. Strategic Objectives

a) Safety b) Capacity c) Efficiency d) Environment e) Access to Airspace

4. Plan (short, medium, and long term)

a) Airspace Structure

High Level

Low Level

Airports o International o Domestic

b) Traffic demand [nature, volume and characteristics]

High Level airspace

Low Level Airspace

Airports c) Communications [describe type, characteristics, coverage]

Ground – Ground

Air – Ground d) Navigation [describe type, characteristics, coverage]

Ground-based

Space-based e) Surveillance [describe type, characteristics, coverage] f) Air Traffic Management

ATM Units [describe location, volume of responsibility, numbers of controllers providing service, qualifications, etc.]

ACC

Terminal

Control Towers

Advisory

Air Traffic Flow Management

AIM

ATM Systems [describe where utilized, general capabilities, etc.]

Neighboring FIRs g) Meteorology [describe types of MET services provided, by whom and how they are delivered]

5. Service Levels [describe levels of service provided by ATM including separation standards]


9 APPENDIX E

PRINCIPLES FOR INVESTMENT IN ATM INFRASTRUCURE USING PUBLIC-PRIVATE PARTNERSHIPS

1. Overview of public-private partnerships

A public-private partnership is a cooperative arrangement between a public sponsor and one or more private sector entities that typically involves a long-term infrastructure contract. While governments have historically used a mix of public and private endeavors, the past few decades have seen a trend towards governments across the globe making greater use of various PPP arrangements.

The origin of PPPs arose from pressure to change the standard model of public procurement when concerns about the level of public debt, which grew rapidly during the macroeconomic dislocation of the 1970s and 1980s. Governments sought to encourage private investment in infrastructure, initially on the basis of accounting fallacies arising from the fact that public accounts did not distinguish between recurrent and capital expenditures. Initially, some viewed the private provision of infrastructure as a way of providing infrastructure at no cost to the public; that view is now generally abandoned. However, interest in alternatives to the standard model of public procurement persisted and channeled growth in PPPs.

PPPs are essentially a mechanism for government to procure and implement public infrastructure and/or services using the resources and expertise of the private sector. Where governments face ageing or a lack of infrastructure and require more efficient services, a partnership with the private sector can help foster new solutions. PPPs combine the skills and resources of both the public and private sectors through sharing of risks and responsibilities. This approach enables governments to benefit from the expertise of the private sector, and allows them to focus instead on policy, planning and regulation by delegating day-to-day operations. Specific types of PPPs can also and bring in needed finance

PPP relationships commonly include the sharing of certain risk elements, development of long-term relationships between the public and private sectors, and the use of private finance. Depending on the derivative structure, the private entity partner may finance, construct, or manage a project in return for a promised stream of payments directly from government or indirectly from users over the projected life of the project or some other specified period of time.

It is generally regarded that a private-sector organization that takes responsibility for most service provision aspects of a given project yields an improved allocation of risk while maintaining public accountability for essential aspects of service provision. In a PPP contract, the private party provides a public service or project for a public authority and assumes substantial financial, technical and operational risk in the project.

A PPP enables the public sector to harness the expertise and efficiencies that the private sector brings to the delivery of certain facilities and services that have traditionally been procured and delivered by the public sector. Government is also motivated by the absence of debt, as PPPs may be structured such that the public-sector body seeking to make a capital investment does not incur any borrowing. Rather, borrowing for the PPP is incurred by the private sector vehicle implementing the project.

Conversely, PPPs give the private sector access to secure, long-term investment opportunities. Private partners can generate business with the relative certainty and security of a government contract. Payment is provided often through a concession, either a contracted fee for service in the form of an availability payment for example, or through the collection of user fees. In whichever the form it takes, the revenue stream may be secure for as long as 50 years or more. The private partners profit from PPPs by achieving efficiencies, based on their managerial, technical, financial and innovation capabilities.


What distinguishes a PPP from traditional public procurement of infrastructure services is the fact that, in the case of PPPs, the building and operating stages are bundled. Hence, the private firm has strong incentives in the building stage to make investments with regard to the ensuing the operating and maintenance stages. In some cases, the private sector is paid user-based concession fees, whereby the cost of using the asset or service is borne exclusively by the users of the service and not by the taxpayer9. In other cases, as discussed further below, the public sponsor compensates the private partner through so-called availability payments.

Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make the project economically viable. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by guaranteed annual revenues for a fixed time period. In all cases, the partnerships include a transfer of significant risks to the private sector. An optimal risk allocation is the main value generator for the PPP.

2. Private Finance Initiative (PFI)

Investment in ATM infrastructure in recovering nations will most likely require a private partner to provide capital funding through a combination of debt and equity. Plain ‘vanilla’ PPP structures may not be suitable as a primary source of funding, and as such the use of an alternate PPP structure such as a Private Finance Initiative (“PFI”) will be required.

A PFI is a sub-set of the broader PPP procurement approach, with the main defining characteristic being the use of project finance10 in order to deliver the public services. A PFI is simply a way of creating a PPP in which the private partner funds public infrastructure. With PFI, the responsibility for providing public services is transferred from the public to the private sector for a considerable period of time.

Whereas a PFI involves an infrastructure project being funded by private sector equity and debt, and then being paid for by the public sector ‘customer’ through monthly payments over the life of the project, a vanilla PPP project would not necessarily require or have such private sector funding. An example of a PPP (without private sector investment) would be public and private sector parties who create a joint venture company for a land regeneration project, with each party contributing one or more of land interests, expertise/people and funding but without any set formula or structure.

In PFI projects, the private sector develops, finances and maintains an asset used in the delivery of public services. In return, the public sector pays a monthly charge that covers both the repayment of the capital investment and the ongoing service costs. This transforms government departments from being owners and operators of assets into the purchasers of services from the private sector.

Capital investment made by the private sector in a PFI is done on the basis of a contract with government to facilitate the delivery of public sector infrastructure and/or services according to a specification defined by the public-sector partner. The cost of providing the service is borne wholly or in part by the government. Owing the infrastructure project involved, the PFI market is typically limited to large size contractors.

9 The fully allocated cost of ATM services in a PPP could be spread between users (i.e. airlines) and taxpayers, depending on the degree of user charges self-sufficiency.

10 Project finance is the financing of long-term infrastructure and public services based on a non-recourse or limited recourse structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. In a P3, the public sponsor normally underwrites the debt. Limited recourse debt resides between secured and unsecured bonds, and the creditor has limited claims on the loan in the event of default.


Developed initially by the governments of Australia and the United Kingdom, and also used extensively in Spain, the PFI represents a means of increasing accountability and efficiency for public spending, and enables government to keep larger debts off-balance-sheet.

Beyond developing the infrastructure and providing finance, private sector companies operate and often maintain the public facilities, sometimes using former public sector staff who have had their employment contracts transferred to the private sector.

Key principles of PFI include the following:

Purchase services, not assets

Value for money to the public sector

Project risk management between the public and private sectors

Utilizing and incorporating private sector know-how and expertise; and

Incorporating whole life-cycle costing in infrastructure projects

3. Contracting Approaches

PPPs must carefully examine their long-term development objectives and risk allocations in order to be effective procurement vehicles. The legal and institutional framework in the target country also needs to support this new model of service delivery and provide effective governance and monitoring mechanisms for PPPs. A well-drafted PPP agreement for the project should clearly allocate risks and responsibilities.

The PPP in Infrastructure Resource Center for Contracts, Laws and Regulations (“PPPIRC”)11 is an online knowledge repository operated by the World Bank Group. It provides useful tools for facilitating an enabling legal environment for PPPs and to understand regulatory issues impacting PPPs. The PPPIRC also provides sample and annotated contracts, and bidding documents from different sectors for PPP projects.

A PPP can cover many types of long term contracts with a wide range of risk allocations, funding arrangements, governance mechanisms, and transparency requirements.

PPPs can have a higher degree of contractual complexity and rigidity that are not found in other sources of private sector finance. However, in the context of this Framework, the challenging fiscal environment which recovering States face does not lend credence to feasible sources of alternate private financing. Other sources would likely either be unavailable or available at an unsustainable rate of return.

With PPPs in general, including PFI projects, a private sector consortium forms a special company called a Special Purpose Vehicle (“SPV”). It is the SPV that signs the contract with the government and with subcontractors to develop, build, maintain and operate the asset for the contracted period. A SPV is a usual requirement by lenders in order to provide finance through project finance techniques.

The consortium is owned by a number of private sector investors, usually including a construction contractor, services providers such as maintenance firms, equity investor(s), and often a bank (debt). In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV. The consortium's funding will be used to build the facility and accompanying systems, and to undertake maintenance and capital replacement during the life-cycle of the contract. Once the contract is operational, the SPV may be used as a conduit for contract amendment discussions between the customer and the facility operator.

The SPV will pass through most of the rights and obligations to a downstream structure of contracts, allocating responsibilities, obligations, risks, and cash flows from the SPV to the different private actors. The downstream structure of project contracts is handled by the private partner and relates to

11 See: https://ppp.worldbank.org/public-private-partnership/.

https://ppp.worldbank.org/public-private-partnership/


transferring and allocating risks among different agents. These downstream contracts are often referred to as “back-to-back contracts” as they are intended to mirror the obligations and risks included in the PPP contract.

The main types of different agreements surrounding the SPV of a PPP are:

Shareholders agreements (especially with financial investors)

Financial or debt agreements

Construction/Engineering, Procurement and Construction (“EPC”) contracts and similar

Operating and Maintenance (“O&M”) contract or contracts

Insurance contracts and guarantees

The Construction/EPC and O&M contractors, or related investment companies, are also often shareholders in the capital structure of the SPV. This is the interesting aspect of equity investment in a PPP – the dual nature of the private parties involved. It is quite typical in project finance that the private parties are both service providers to and contracted with the newly created SPV entity, and shareholders of that entity.

There may be other shareholders that are, in essence, financial investors with no role in the project other than acting as equity providers. It is not generally necessary to be a shareholder in order to act as a contractor (although some governments may require this in some projects).

Creating a SPV brings the following benefits for the parties:

With project finance techniques structured in the SPV there is better control of the credit risks. Project finance techniques allow equity investors to limit their exposure to risk, and they provide high leverage without the need for investors to (generally) provide corporate guarantees. Furthermore, the finance is commonly regarded as ‘off balance sheet’ from the holding perspective of the equity investors.

The public party also benefits from the existence of a SPV, as it means that the public authority’s partner will only be dedicated to the specific PPP contract. It is common for both the public party (through the Request for Proposals and the contract) and lenders to prohibit the SPV from developing other projects so that its only object is the delivery of the PPP works and services. RFPs commonly require the creation of a SPV.

The typical PFI provider is organized into three legal entities: a holding company (often called “Topco”) which is the same as the SPV, a capital equipment or infrastructure provision company (called “Capco”), and a services or operating company (called “Opco”). The main contract is between the public-sector authority and the Topco. Requirements then flow down from the Topco to the Capco and Opco via secondary contracts. Further requirements then flow down to subcontractors, again with contracts to match.

Depending on the type of project, PFI contracts normally have a lifespan of 25-30 years, although contracts less than 20 years or more than 40 years exist. During the life of the contract, the consortium will provide certain services which were previously provided by the public sector. The consortium is often paid for the work over the course of the contract on a ‘no service-no fee’ performance basis.

The public authority will design an ‘output specification’ document that sets out what the consortium is expected to achieve. If the consortium fails to meet any of the agreed standards it should lose an element of its payment until standards improve. If standards do not improve after an agreed period, the public-sector authority is usually entitled to terminate the contract, compensate the consortium where appropriate, and take ownership of the project.

Termination procedures are highly complex, as most projects are not able to secure private financing without assurances that the debt financing of the project will be repaid in the case of termination. In most termination cases the public sector is required to repay the debt and take ownership of the project. As such, termination is in practice considered a last resort.


Whether public interest is protected by a particular PFI contract is highly dependent on how well or badly the contract was written and the determination and capacity of the contracting authority to enforce contractual performance.

4. Financing

A key motivation for governments considering PPPs is the possibility of bringing in new sources of financing for funding public infrastructure and service needs. It is important for target countries to understand the main mechanisms for infrastructure projects, the principal investors in developing countries and in countries recovering from extraordinary situations, sources of finance (limited recourse, debt, equity, etc.), the typical project finance structure, and key issues arising from developing project financed transactions.

In the infrastructure sector, complex arrangements and contracts that guarantee and secure the cash flows make PPP projects prime candidates for project financing. A typical PPP example would be an airport terminal financed and constructed by a private developer and then leased to the airport authority. The private developer then acts as landlord, providing housekeeping and certain other non-aeronautical services while the airport authority itself provides both aeronautical and ancillary non-aeronautical services.

Financing costs will generally be higher for a PPP than for traditional public financing, because of the private sector’s higher cost of capital and expectations of appropriate risk: reward returns. However, extra financing costs can be offset by private sector efficiency, with savings resulting during delivery of the project or service, and from the better risk allocation over the long run.

Where the private partner invests capital, for example in a PFI structure, PPP projects may be criticized because private investors obtain a rate of return that is higher than the government's bond rate, even though most or all of the income risk associated with the project was borne by the public sector. However, since the public sector often has constraints on borrowing, PFI projects can be beneficial by not putting debt directly on government books. Measuring PPP benefits from the standpoint of public debt reduction versus value for money (i.e. per the private rate of return) may be more valid from the government’s perspective. Some governments will utilize a public-sector comparator for assessing the financial benefit of a PPP and the optimal level of private sector involvement.

On PPP projects where the cost of using the service is intended to be borne exclusively by the end user, the PPP is, from the public sector's perspective, an “off-balance sheet” method of financing the delivery of new or refurbished public sector assets. On PPP projects where the public sector intends to compensate the private sector through availability payments12 once the facility is established or renewed, the financing is “on-balance sheet” from the public sector’s perspective. In the latter case, however, the public sector will regularly benefit from significantly deferred cash flows.

Advantages of availability payments include the following:

Guaranteed, long-term budget certainty (payments will never exceed the maximum availability payment) for the public owner.

Payments only begin at start of project operation, incentivizing the private partner to provide faster delivery, especially for greenfield projects, and to fulfill the requirements for substantial completion.

The private operator is focused on meeting a specified standard or service (with consequences).

12 An availability payment is a payment for performance made irrespective of demand. Availability payments can be an attractive financing and project delivery alternative for projects which, for reasons related to policy, public perception and/or profitability, are not feasible or advisable under a user-fee based concession.


The public partner maintains complete control over user fees, if any.

Maintenance and future capital renewal and replacement are fully funded, and there are typically lifecycle cost efficiencies realized.

Payments may not be viewed as debt owed by the public entity (viewed as a binding obligation), subject to budget appropriations).

Cash flows are more stable than with user-fee concessions or shadow tolls (see below), thus:

The cost of capital is lowered.

Debt service coverage ratio requirements are lower.

There is little risk of unexpected private sector windfall.

Private sector risk is lower, enhancing feasibility in risk-adverse markets.

Some challenges with availability payments can include the following:

Project lacks stand-alone financial viability.

The public sector needs to control project cost exposure.

Public concerns over long term concession projects.

There is a need to attract robust competition from private bidders.

PPP approach needs to provide Value for Money in transferring risk to Private Sector.

Prior to the financial crisis of 2007-2009, large PFI projects were funded through the sale of bonds and/or senior debt,13 though since the crisis funding by senior debt has become more common. Smaller PFI projects, which constitute the majority, have typically been funded directly by banks in the form of senior debt. Senior debt is generally slightly more expensive than bonds, which the banks would argue is due to their more accurate understanding of the credit-worthiness of PFI deals.

Refinancing of PFI deals is common. Once construction is complete, the risk profile of a project may come in lower than anticipated, which may in turn facilitate access to cheaper debt such as bonds. In a two-step sense, the construction stage is financed using bank debt, and then bonds for the much longer period of project operation.

Banks who fund PFI projects are repaid by the consortium from the money received from the government during the lifespan of the contract. From the point of view of the private sector, PFI borrowing is considered low risk because public sector authorities are very unlikely to default. In fact, under International Monetary Fund (IMF) rules, national governments are not permitted to go bankrupt.14 Repayment depends entirely on the ability of the consortium to deliver the services in accordance with the output specified in the contract. That said, parties getting involved in any kind of PPP involving project finance should get the right advice. Project finance is complex and involves significant transaction costs.

In terms of obtaining capital, of course private equity is more expensive than debt as private investors seek a higher rate of return (variable with the perceived risk) as they would be second in line behind debt providers in the event of insolvency. However, while high leverage (debt) can reduce project financing costs, it can also create additional risk.

13 Senior debt takes priority over other unsecured or otherwise more ‘junior’ debt owed by the issuer. Senior debt has greater seniority in the issuer's capital structure than subordinated debt, which is debt owed to an unsecured creditor that can only be paid, in the event of a liquidation, after the claims of secured creditors have been met.

14 There have been exceptions, such as the restructuring of Argentina’s foreign sovereign debt.


In a PFI and project finance environment, some degree of public financial or other support is sometimes required to attract lenders.

The two diagrams below explain the profiles and sources of leveraged (debt) financing versus equity financing in PPPs, including a reference to who some of the key players would be.15

Figure 13: Profiles of leveraged (debt) financing versus equity financing in PPPs

5. Risks

As noted earlier, in addition to ensuring a country’s legal and institutional framework is capable of supporting PPP service delivery through adequate governance and monitoring processes, a properly constructed PPP contract must properly define and set out the risks and responsibilities of all parties.

15 Source: “PPP Project and Financing Source”, UN Economic and Social Commission for Asia and the Pacific, Aug 2014.


A number of key risks need to be taken into consideration as well. These risks should be allocated and managed to ensure the successful financing of a project. The party that is best placed to manage these risks in a cost-effective way may not necessarily always be the private sector. However, there are a number of mechanisms and products available in the market for project sponsors, lenders and governments to mitigate some of the project risks.

For example, with regards to foreign exchange risk, hedging and futures contracts may mitigate some currency fluctuation risk faced by the private (and most often foreign) partner. In cases where the host country’s monetary currency is not widely traded (i.e. no hedging/futures contracts are available) or pegged to another nation’s currency, a proxy contract may be a feasible way of hedging exposure to currency fluctuations if the proxy currency is correlated reasonably close to the project’s national currency. For example, the Namibian Dollar is pegged to the South African Rand. The price of raw material inputs can also be considered as a form of financial risk.

Other risks include political risk, especially in developing countries because of the possibility of dramatic overnight political change, and technical risk such as construction difficulties. In certain cases, insurance coverages from international financial institutions can offset risk elements.

The investment of private partners in PPPs is often desirable but may also end up being undesirable. In the latter case for example, if the private partner’ injects insufficient investment into the ongoing operation of an asset or service to reduce operating costs (and hence boost profits), service quality can suffer). This promotes a debate over the risk: return trade-off of PPPs and whether a particular situation justifies the preference for a PPP versus traditional project procurement. In most cases, though, a rigorous contract between the parties (i.e. between the public sponsor and private consortium’s SPV) that specifies all financial and non-financial requirements and recourses, including service level agreements, can mitigate counterparty risk (i.e. non-compliance and non-performance) over the life of the contract.

6. Different PPP Structures

There are a wide range of PPP structures, with key variables covering which of the public or private sector parties handles the following regarding the proposed asset/facility/infrastructure:

Ownership

Financing

Design and construction

Operation and/or management

Maintenance Design-Build-Operate (“DBO”) and Built-Operate-Transfer (“BOT”) projects are types of public-private partnerships that are output focused. DBO and BOT projects typically involve significant design and construction as well as long term operations, for new build (greenfield) or projects involving significant refurbishment and extension (brownfield). DBO and BOT typically see government owning and financing projects, with the private sector compensated for operating the asset/facility under either an operating agreement (DBO) or a commercially-driven concession (BOT).

DBO and ‘vanilla’ BOT structures will likely not suffice in assisting States recovering from extraordinary situations because the public sector would own and normally finance construction of new assets.

PPP schemes where the private partner builds an infrastructure facility (using equity or debt financing sources and according to specifications either agreed to or designed by the government), operates the facility under a long-term concession contract, and then transfers the facility to the government at the end of the contract period include DBFOM, DBFO, and BOOT structures. The private firm recovers its cost and some return either by imposing user fees to the public or through fixed payments from the government.


It can be difficult to classify the ownership of the fixed asset built under arrangements that will involve the transfer of the asset by the private partner to the government at the end of the PPP contract period. Since the private firm holds the legal title to the facility, the legal ownership of fixed assets clearly belongs to the private firm, but the economic ownership of such assets is often less clear.

In Design-Build-Finance-Operate-Maintain (“DBFOM”) contracts, the private contractor will develop the infrastructure with its own funds and funds raised from lenders at its risk (that is, it will provide all or the majority of the financing). The contractor is also responsible for managing the infrastructure life cycle (assuming life-cycle cost risks) in addition to current maintenance and operations. To carry out these tasks, the contractor (the private partner in the PPP context), will usually create a SPV.

As derivatives of DBFOM, when operations are not included in the scope of the contract, the contract is then referred to as a “DBFM”, and when finance is not included, the structure is DBOM.

With DBFM, the private sector designs, builds and finances an asset and provides hard facility management or maintenance services under a long-term agreement. DBFM and DBFOM are typical candidates for project finance.

DBFOM and DBFM contracts, and other equivalents such as BOT, Build-Own-Operate-Transfer (“BOOT”), Build-Transfer-Operate (“BTO”) and other similar vehicles are the only type of contract (in terms of scope) that fulfill all of the conditions required to be a private finance PPP. However, whether a DBFOM and related contracts are regarded as true private finance PPPs depends upon the effectiveness of risk transfer and the nature of the links between the performance and revenue. For example, some DBFOMs may represent a DBOM with financing provided by the private party without the investors taking on any material risk. If there is no material risk transfer to the investors, the project will provide a similar value for money (“VFM”) outcome to a DBOM rather than a DBFOM contract.

Other structural variations include Build-Own-Operate (“BOO”), Design-Build-Operate-Transfer (“DBOT”), and Design-Build-Finance-Operate (“DBFO”). DBFO can imply equivalency with DBFOM structures (operations and maintenance portions included).

With BOO, the private sector entity assumes an even greater degree of risk and responsibility by maintaining ownership of the infrastructure upon its completion. This framework is used when the physical life of the project coincides with the concession period. A BOO scheme involves large amounts of finance and long payback period.

Given the large number of PPP structures, further details on a selection will be further discussed below. a. Concessions

Concessions form part of many distinct PPP structures such as BOT, DBFOM and DBFO.

A Concession gives a concessionaire the long term right to use all utility assets conferred on the concessionaire, including responsibility for operations and some investment. Asset ownership remains with the public authority and the authority is typically responsible for replacement of larger assets. Assets revert to the authority at the end of the concession period, including assets purchased by the concessionaire. In a concession, the concessionaire typically obtains most of its revenues directly from the consumer (or in the context of this Framework, an airline user) and so it has a direct relationship with the consumer.

A concession covers an entire infrastructure system (so may include the concessionaire taking over existing assets as well as building and operating new assets). The concessionaire will pay a concession fee to the public authority which will usually be ring-fenced and put towards asset replacement and expansion. A concession is a specific term in civil law countries, where projects that are more closely described as BOT projects are called concessions.

Main features of concessions are as follows:


A concession gives a private concessionaire responsibility not only for operation and maintenance of the assets but also for financing and managing all required investment.

The concessionaire takes risk for the condition of the assets and for investment.

A concession may be granted in relation to existing assets, an existing utility, or for extensive rehabilitation/expansion of an existing asset.

A concession is typically for a period of 25 to 30 years (i.e. long enough at least to fully amortize major initial investments).

Asset ownership typically rests with the awarding authority and all rights in respect to those assets revert to the awarding authority at the end of the concession.

Consumers and end users are usually the customer and main source of concessionaire revenues.

Often the concessionaire will operate existing assets from the concession’s outset, so immediate cashflow is available to pay the concessionaire, set aside for investment, service debt, etc.

Unlike many management contracts, concessions are focused on outputs, such as the delivery of a service in accordance with performance standards. There is less focus on inputs; for example, the concessionaire is left to determine how to achieve agreed performance standards, although there may be some requirements regarding frequency of asset renewal and consultation with the awarding authority or regulator on such key features as maintenance and renewal of assets, increase in capacity and asset replacement towards the end of the concession term.

Some infrastructure services are deemed to be essential, and some are monopolies. Limits will probably be placed on the concessionaire – by law, through the contract or through regulation – on tariff levels. The concessionaire will need assurances that it will be able to finance its obligations and still maintain a profitable rate of return and so appropriate safeguards will need to be included in the project or in legislation. It will also need to know that the tariffs will be affordable and so will need to do due diligence on customers.

In some countries, there may be sectors where the total collection of tariffs does not cover the cost of operation of the assets let alone further investment. In these cases, a clear basis of alternative cost recovery will need be set out in the concession, whether from general subsidies, from taxation or from loans from government or other sources.

Within the context of common law systems, the closest comparable legal structure is the BOT, which is typically used for the construction of a facility or system.

b. Design-Build-Operate (DBO) and Design-Build-Operate-Maintain (DBOM)

DBO and DBOM structures are very similar to a BOT. A brief description is as follows:

Financing and ownership of the new/renovated assets resides with the public partner.

The incentives for the contractor to properly perform the work and deliver high construction quality may be limited. However, due to the absence of risk capital, the DBO and DBOM contracts may not be considered PPP except for one alternative view. That view takes into consideration the construction and maintenance risks that are transferred to the private contractor. From the standpoint of those two risks, which are considerable on their own merits, along with terms of scope and potential efficiencies, DBO and DBOM contracts may be close enough in concept to be considered as PPP contracts. In this sense, some countries regard DBO and DBOM as PPPs.

With a DBO, the private sector designs, builds and operates the assets to meet certain agreed outputs, while with DBOM the private partner is also responsible for maintenance the asset.

Maintenance work under a DBOM is usually pre-contracted and paid for directly by the government at a pre-agreed price.

An integrated single contract covers the private sectors agreement with the public authority for the design, construction and operation of the asset/facility. This contracting vehicle is different than the concession structures of BOT, DBFO, DBOT, and BOOT PPPs (i.e. not operated on a pure commercial basis, but rather, the private partner is paid an operating fee).


The documentation for a DBO is typically simpler than a BOT or Concession as there are no financing documents and will typically consist of a turnkey construction contract plus an operating contract, or a section added to the turnkey contract covering operations.

The private partner takes no or minimal financing risk on the capital.

The private partner will typically be paid a sum for the design-build of the plant, payable in instalments on completion of construction milestones, and then an ongoing fee during the contracted operating period.

The private partner operator is responsible for the design and the construction as well as operations. If parts of the asset need to be replaced during the operations period prior to the end of its assumed life span, the operator is likely to be responsible for replacement.

c. Build-Operate-Transfer (BOT)

The BOT approach has extensive application in non-PPP and PPP infrastructure projects. In the BOT framework, a third party such as the public authority, delegates to a private sector entity to design and build infrastructure and to operate and maintain these facilities for a certain period.

The facility will be then transferred to the public administration at the end of the concession agreement without any remuneration of the private entity involved (in common law countries, a number of projects are called concessions, such as toll road projects, which are new build and have a number of similarities to BOTs). Throughout the contract period, note that ownership remains with the public authority.

A BOT project is typically used to develop a discrete asset rather than a whole network and is generally entirely new or greenfield in nature (although refurbishment may be involved). In a BOT Project the project company or operator generally obtains its revenues through a fee charged to the public partner rather than tariffs charged to consumers/end-users.

Main features of BOT projects are as follows:

In a BOT project, the public-sector grantor grants to a private company the right to develop and operate a facility or system for a certain period (the "Project Period"), in what would otherwise be a public-sector project.

Usually covers discrete, greenfield new build projects.

The public authority retains ownership.

The public authority holds responsibility for financing the facility/infrastructure, and public ownership remains throughout the contract. A host government may also provide support in the form of land and/or changed laws.

The private sector designs, builds and operates the public facility, operating it commercially for the project period, after which the asset/facility is transferred to the public authority.

d. Design-Build-Finance-Operate (DBFO)

When a project involves construction or significant renovation, the private entity designs and builds the infrastructure, finances the construction costs, provides associate services through a long-term concession arrangement and typically returns the infrastructure to the public-sector entity at the end of the arrangement. Essentially, financing risk is added to the risks allocated to the private sector entity in this arrangement.

DBFO is a project delivery method very similar to BOOT (noted below) except that there is no actual ownership transfer. Moreover, the contractor assumes the risk of financing until the end of the contract period and is entitled to retain all revenues generated by the project and is the owner of the facility. The owner then assumes the responsibility for maintenance and operation. A disadvantage of DBFO is the difficulty with long term relationships and the threat of possible future political changes which may not agree with prior commitments.

This model is extensively used in specific infrastructure projects such as toll roads. The private construction company is responsible for the design and construction of a piece of infrastructure for the


government, which is the true owner. Moreover, the private entity has the responsibility to raise finance during the construction and the exploitation period. The cash flows serve to repay the investment and to compensate its shareholders. The cash flows take the form of periodical payments to the government for the use of the infrastructure. The government has the advantage that it remains the owner of the facility and at the same time avoids direct payment from the users. Additionally, the government avoids increasing its debt load and spreads out the cost for the infrastructure over the years of operation.

Main features of DBFO projects are as follows:

DBFO structures are suited to projects that involve a significant operating content.

Versus, BOT, the DBFO attracts private sector finance and related debt discipline.

Debt financing – projects are often funded to a big extent by commercial debt. The bank will be expected to finance the project on "non-recourse" basis meaning that it has recourse to the special purpose entity and all its assets for the repayment of the debt. The SPV might have other lenders such as national or regional development banks.

As it relates to new build, there is no revenue stream from the outset. Lenders are therefore anxious to ensure that project assets are ring-fenced16 within the operating project company and that all risks associated with the project are assumed and passed on to the appropriate actor. The operator is also prohibited from carrying out other activities. The project operator is therefore usually organized as a SPV.

SPV shareholders will often include companies with construction and/or operation experience. It is also essential to include shareholders with experience in the management of the appropriate type of projects, such as working with diverse and multicultural partners, given the particular risks specific to these types of projects.

There is increased risk transfer, which provides a greater incentive for private sector contractors to adopt a whole-life costing approach to the design. The structure delivers more predictable and consistent cost profiles.

The revenues are often obtained from a single "offtake purchaser" such as a government who purchases project output from the project company (this is different from a pure concession where output is sold directly to consumers and end users).

The revenues generated from the operation phase are intended to cover operating costs, maintenance, repayment of debt principal (which represents a significant portion of development and construction costs), financing costs (including interest and fees), and a return for the shareholders of the SPV.

Lenders provide non‑ recourse or limited recourse financing and will, therefore, bear any residual risk along with the project company and its shareholders.

The project company assuming considerable risk. A project company may require some form of guarantee from the government which is incorporated into an implementation agreement.

In order to minimize residual risk (lenders typically only want to bear a limited portion of the project’s commercial risk) the lenders will insist on passing the project company risk to the other project participants through contracts, such as the construction, operation and maintenance contracts.

e. Design-Build-Finance-Operate-Maintain (DBFOM)

As noted earlier, in a DBFOM contract the private contractor will develop the infrastructure with its own funds and funds raised from lenders at its risk. The contractor is also responsible for managing the infrastructure life cycle costs in addition to current maintenance and operations.

16 A ring fence is a protection-based transfer of assets from one destination to another, usually through the use of offshore accounting. A ring fence is meant to protect the assets from inclusion in an entity’s calculable net worth or to lower tax liability.


DBFOM, as well as DBFM, BOOT and certain types of BOTs, are the only type of contract in terms of scope that fulfill all of the conditions required to be a private finance PPP. However, whether a DBFOM contract may be regarded as a true private finance PPP depends upon the effectiveness of risk transfer and the nature of the links between the performance and revenue, as some DBFOMs may represent a DBOM with financing provided by the private party without the investors taking on any material risk. If there is no material risk transfer to the investors, the project will provide a similar value-for-money outcome to a DBOM rather than a DBFOM contract.

DBFOM contracts can be based on either user payments (i.e. a user-pay PPP or a concession), or on government availability payments (i.e. government-pay PPP or similarly structured PFI). The latter case applies to cases where there is no revenue from users (i.e. if there are no final users to be charged), or the potential revenue is insignificant in comparison with the capital needs (i.e. rail projects), or the infrastructure is available to users at no charge (i.e. non-toll roads). For the purposes of this Framework, and subject to cases where the public authority deems a DBFOM the appropriate PPP structure, we assume that new or modernized ATM facilities will have the ability to raise sufficient user-funded revenues to be a user-pay PPP or concession based contract.

When authorities decide to charge for the use of infrastructure, the potential revenue to be generated by such a public asset or infrastructure may be used in several ways. It may be used as revenue for the general budget, as a source of funds for the funding needs of the particular sector, or even earmarking the revenues to the specific system that generates them (for example, water supply system revenues in a city, tariff revenues generated by a public metro operator in a city, or toll revenues generated by the government’s own highways.

The future revenues to be generated by a new investment/asset may be earmarked to the specific project investment, assigning those revenues to a specific new company.

Funds coming from users may be sufficient to cover Operating and Maintenance (O&M) expenses and long-term maintenance with a surplus that can then be used as a source to repay the financing of the construction of the asset.

A contractual assignment by a public administration to a private party of future/potential revenues associated with the public use of public infrastructure as a means to fund the procurement of the infrastructure and related services is a user-pays PPP. User-pays PPPs are also known as concession schemes, especially in civil code-based countries.17

A user-pays PPP used to finance, deliver and manage infrastructure is a form of contract whose scope includes DBFOM in an integrated manner, in which the financing is private (and usually regarded as private finance under many national accounting standards) and in which the source of revenue is totally or mainly in the form of the right to commercialize the use of the asset: all or most revenues come from the users.

In these contracts (in the context of procuring new infrastructure or significant upgrades), as opposed to conventional procurement, the private partner will not only construct (and likely design) the facility, but will also operate and maintain the asset under a long-term contract (in addition to financing it at their own risk).

The private partner will recover the investment (directly in equity or indirectly with investment of funds raised in the form of debt) at their cost and risk from the user payments. The private partner will remain the economic owner of the asset during the life of the concession contract. This means that the private partner will have to maintain and renew the asset at its own expense and risk, without the ability to make claims on the public party (with exceptions inherent to a proper risk allocation scheme).

17 In civil law countries, a concession may be applied to both DBFOM contract types and service contracts, or contracts granting the right to operate an existing asset. For existing assets, common law countries also use the term ‘lease’.


If and when the expected revenues surpass the revenue needed to support the financing of the project, the user-pays PPP structure will likely include a payment from the private party to the procuring authority in the form of an upfront fee and/or a deferred fee that may take different forms. f. Build-Own-Operate-Transfer (BOOT)

A BOOT structure differs from BOT in that the private entity owns the works. During the concession period the private partner owns and operates the facility with the prime goal to recover the costs of investment and maintenance while trying to achieve higher margin on project. Upon reaching the end of the contractual concessions period, the private partner then transfers that ownership to the public-sector entity. Thus, the private sector assumes the risks and responsibilities related to property ownership that extend beyond those allocated under a DBFO scheme.

The specific characteristics of BOOT make it suitable for infrastructure projects like highways, roads mass transit, railway transport and power generation and as such they have political importance for the social welfare but are not attractive for other types of private investments. BOOT, like BOT, is a method found extensively in countries which desire operations and ownership transfer in the PPP structure.

Key aspects and advantages of BOOT projects include:

The private entity owns and operates the asset/facility.

The private partner transfers ownership to public entity when the concession contract ends.

Encouragement of private investment

Injection of new foreign capital to the country

Transfer of technology and know-how

Project completion within the contracted time frame and planned budget

Provision of additional financial source for other priority projects

Removal of the burden on public sector budgets for infrastructure development



g. Schematics of common types of PPP structures

Varying phases and structures of PPPs are as follows:18

Figure 14: Phases of PPPs

Ownership and financing of various PPP structures are portrayed in the schematic below:19

Figure 15: Ownership and Financing of PPPs


18 Understanding Public Private Partnerships, Auditor General of British Columbia, Victoria, BC, Canada, 2011.

19 Different Models of PPPs, PPP Resource & Research Centre, Kuala Lumpur, Malaysia, 2007; and AirTrav Inc., Toronto, Canada, Jul 2017.


h. Sample money and contractual flows in PPP structures

User charges – a typical PPP structure in which the end user pays charges to the SPV is shown below, along with the position of contracting agreements and the direction of money flows.20

Figure 16: An example of PPP structure – User Charges

20 Sources: “The APMG Public-Private Partnerships Certification Program”, The APM Group Ltd. and World Bank Group. “DBFOM” in the diagram means Design, Build, Finance, Operate and Maintain”, a user-pay structure.

1. PPP Contract


Availability payments – a typical PPP structure in which the government partner remits availability payments to the SPV is shown below, along with the position of contracting agreements.21

Figure 17: An example of PPP structure – Availability Payments

Availability Payments provide an alternative, flexible way to allocate project risks. The table below provides indicative examples of user pay versus availability payment models.22

Design Build Operate Maintain Finance Traffic Collection

DBOM User payment

DBFOM Availability payment

DBFO User payment Responsibility of the public sector partner

Responsibility of the private sector partner

Figure 18: Availability Payments for PPPs


21 Source: “PPP Project and Financing Source”, UN Economic and Social Commission for Asia and the Pacific, Aug 2014.

22 Source: Availability Payment Mechanisms For Transit Projects, KPMG LLP, 2009; modified for use by AirTrav Inc., July 2017.


7. Considerations for the Aviation Sector

a. Imperative for private participation

Transport is a key driver of economic and social development. In developing and recovering economies, transport enables economies to be more competitive. Transport infrastructure connects people to jobs, education, and health services, and facilitates the supply of goods and services. Modernizing transport is not just about ATM systems, but also airports, seaports, roads, railroads and urban transportation systems, and all play an essential role in development. Incomplete and inadequate transportation infrastructure can mean the difference between sustainable progress and persistent under-development.

The need for access to large amounts of land and space to build transportation facilities makes them expensive, long-term and politically sensitive undertakings. As a result, many transport projects require significant government support. However, experience has shown that private capital, expertise, and commercial discipline can make a measurable difference in the delivery of critical transport services.

Unlike other sectors, there is in fact a long tradition of private investment in transportation projects, with many examples of airports, railways, tunnels and bridges financed by a combination of private and public funding through PPP and non-PPP structures alike. Airports, while historically financed with public funds, have seen more private sector involvement over the last 20 to 30 years.

When governments are faced with the mounting expense and often poor efficiency track records of publicly funded, subsidized transport operations, they increasingly look to the private sector for input in the development of new transportation schemes and investment into existing systems. In developing countries, where governments are seeking to rapidly increase transportation capacity, the costs are prohibitive and a private sector partner represents an attractive option to share costs and risks. Well-structured PPPs are one approach that can, under the right circumstances, help governments in developing and non-OECD countries meet their critical transport challenges.

Subject to being done right, private investment in airports and even ATM providers can root out inefficiency and introduce customer oriented management styles. Engaging a private partner creates focus on service and commercial performance by holding the firm accountable for its contribution to service improvements, rewarding it for controlling costs, and introducing a businesslike approach to billing and collection. b. Aeronautical revenues

ATM-related fees for air navigation services (“ANS”) are normally regulated and set by a country’s civil aviation authority (“CAA”). ANS fees cover services such as terminal control of airport movements (i.e. takeoff and landing), area control and enroute navigation, and where applicable, oceanic related communications. While strict regulation limits the potential for improved efficiency of ANS revenues, these fees are generally (but not always) US dollar based, making for valuable foreign exchange revenues.

Airports also have a wide range of aeronautical (and non-aeronautical) revenues available to them, such as landing fees, terminal charges, loading bridge fees, aircraft parking, and flight/gate information display systems.

ATM costs are recovered through air navigation charges; as with airport charges, the structure and level of ATM charges are subject to international agreements and conventions. For example, in Europe, ATM charges are subject to the Eurocontrol Multilateral Agreement, under which charges are adjusted annually, so as to recover the full costs incurred by each member state.

Given the need for all parties and in particular private parties to clearly understand the revenue landscape in a PPP agreement, regulation must be well defined and provide investors with a clear expectation of how fees and charges will evolve (or expected to evolved) throughout the term of their involvement. This will include the definition of regulatory targets and the criteria for adjusting fees and charges year after year. Regulation may assume that commercial activities will compensate for the all ATM expenses, or only a defined portion thereof.


Where a concession contract governs an airport PPP (and assumedly, for an ATM PPP), the concession contract could contain a price cap mechanism to restrict the maximum permitted rate of increase in airport (or ATM) charges. In contrast to cost of service regulation, the price cap approach offers strong incentives to the concessionaire to be cost-efficient, reducing the need for the intrusive regulation that appears to characterize arrangements in the Côte d’Ivoire. In places like Australia, ‘light-handed’ monitoring by the Australian Competition and Consumer Commission (“ACCC”) tries to ensure that private airport operators provide quality service and do not escalate airport charges excessively.23 c. Cost to users

In many airport PPPs and, it is assumed, also for ATM PPPs, reforms and upgrades of facilities and services will also mean an increase in fees and charges to airlines, passengers, and cargo. When developing regulation, the expectations of private investors for return on investment need to be balanced against the concerns of the users regarding cost.

In an effort to attract investment, some governments may allow the private partner to increase fees and charges prior to any reforms. This encourages bidders to increase their offers for the acquisition of shares or decrease government concession fees, transferring the benefit of lower sale prices or concession fees from the user to the government. Curbing the desire to protect users from higher fees and charges is a challenging equilibrium for the government when designing the deals. d. Demand and revenue risk management

Experience in other types of transport infrastructure projects have identified widely differing approaches to the treatment of demand and revenue risk in concession structured projects.

Some concession contracts allocate demand and revenue risk entirely to the project promoter. Elsewhere, a range of contractual mechanisms has been devised to share revenue risk between the public authority and the private project partner.

Contractual mechanisms where revenue risk remains with the contractor take one of two forms:

1. The concessionaire pays either a one-time only fee or an annual concession fee to the government that is fixed in real terms, or, if the project is unprofitable, the concessionaire receives a fixed payment from government. Projects are awarded to the concessionaire offering the highest (least negative) fee.

Examples of this type of agreement include the Argentine airports concession, where there is a constraint on the maximum level of charges that can be set by the concessionaire, and the original concession agreement for the Channel Tunnel Rail Link in the United Kingdom, where the market was judged to be competitive, and so no constraint on charges was imposed; or

2. The concessionaire retains project revenue for a fixed term and the contract is awarded to the bidder offering the lowest level of user charges.

Fixed fee or revenue retention contracts provide the strongest possible incentives for the concessionaire to perform effectively. The potential difficulties which they introduce have been demonstrated with the Channel Tunnel concession. Fixed price bids for the project were sought at a time when future demand was highly uncertain. Realized demand initially ended up far lower than that projected by the bidder, and

23 In March 2017, the chairman of Australia’s competition authority called on the government to give the ACCC regulatory power over the country’s largest airports, in particular to limit prices increases, warning that a current lack of oversight has allowed the country’s airports to increase prices without improving service quality. See: http://www.abc.net.au/news/2017-03-07/airport-charges-must-be-controlled-by-acc-powers-labor-says/8330026.

http://www.abc.net.au/news/2017-03-07/airport-charges-must-be-controlled-by-acc-powers-labor-says/8330026

http://www.abc.net.au/news/2017-03-07/airport-charges-must-be-controlled-by-acc-powers-labor-says/8330026


the agreement has had to be abandoned, at considerable expense to both the concessionaire and to the UK Government.

The Channel Tunnel outcome exemplifies the ‘winner’s curse’ problem characteristic of this type of bidding process, since the winning bid was based on a highly optimistic view of the level of future demand for the project. It can be argued that the level of demand uncertainty in airport and ATM development projects is generally less significant than for projects such as the Channel Tunnel or roads, where there may be far closer substitutes available, and where realized demand may be greatly affected by competitor response.

Several contractual devices are available for sharing demand and revenue risk. Airports concession projects can have variants of this approach, including:

The concession agreement is based on cost of service regulation. Given price inelastic demand for airport (and generally speaking, ATM) services, this approach would enable the concessionaire to increase charges in real terms to whatever extent was necessary to restore financial equilibrium, allowing market risks to be fully transferred to airport users.

A government minimum revenue guarantee. This approach is conceptually similar to devices such as minimum offtake agreements, observed in concession contracts in the power sector. Winning bidders for some airport projects seek the lowest guaranteed level of revenue and the lowest average landing fee.

Concession fees variable with airport revenue, where the concession fee payable contains both a fixed and a variable element, the latter expressed as a proportion of total revenue accruing through passenger terminal operations. Winning bidders would likely offer the highest expected concession fee revenue, with the revenue being evaluated across a range of demand scenarios.

Variable concession lengths, whereby if the present value of concession revenue reaches a certain pre-determined level before the maximum term of the concession, which is specified, the concession is terminated. This approach leaves some residual revenue risk with the concessionaire, but the maximum concession length is usually based on a pessimistic view of future traffic levels, so that this residual risk is very limited in practice.

Shadow tolling, found in concession-based DBFO PPPs in the UK, sees the concessionaire’s revenue varies with the level of traffic. However, bids are expressed in terms of a declining block tariff structure, such that the marginal rate of shadow toll payment falls with successively higher levels of traffic. The variation in revenue is restrained, broadly matching the variation in operating costs with traffic at the margin. Although this approach has so far only been used to support concession projects involving non-tolled facilities, it may be feasible for projects such as airport runways. In this case, a public-sector airport operator would retain landing charge revenues, and the concessionaire would be remunerated through the shadow toll mechanism.24

The impact of revenue risk sharing measures on the terms potential private parties are willing to offer, given expected market conditions, will depend upon the precise nature of the measure. Two effects can, in principle, be identified.

1. Any such action reduces the specific risk in a project, either by curtailing downside risk, or by capping both downside and upside risk. Although changes in diversifiable risk should not affect the

24 A shadow toll is a contractual payment made by a government per driver using a road to a private company that operates a road built or maintained using private finance funding. Payments are often based on the number of vehicles using a section of road, often over a 20- to 30-year period. Shadow tolls often are used on roads where the level of traffic using the infrastructure is considered too low for a direct toll system. A private sector developer/operator accepts certain obligations and risks - such as construction, operations and most specifically traffic - and receives periodic shadow toll payments in place of, or in addition to, real/explicit tolls paid by users.


terms on which markets are willing to supply capital to a project, a reduction in specific risk may reduce the required rate of return sought by potential concessionaires.

2. Measures such as minimum revenue guarantees, that underwrite downside risks without capping upside risk, increase the expected private net present value of the project, although the expected social net present value is unchanged. In itself, this would tend to improve the private sector’s willingness-to-pay for the project, given expected market conditions, etc.

The potential downsides of contingent contracting and bidding mechanisms may weaken the private contractor’s incentives to perform effectively. As well, bid evaluation procedures may be more complex than under fixed fee/term contracting, since bids may need to be evaluated across a range of demand scenarios.

Cases may exist when examining prospective PPPs in airports or ATM services where the underlying aviation operations are unprofitable in the short to medium term. This could result in the expected present value of future aeronautical revenue streams to be less than the expected present value of future operating costs, including both current and capital expenditures. This could potentially be the case where ATM services are provided in States recovering from extraordinary situation. Local air traffic and enroute air movements may be slow to develop due to pending economic development, or the time required to deliver new ATM infrastructure and training which would impede increased use of a State’s national air space.

One approach to offset this lack of initial profitability could see an ATM service or airport offered to the private sector with an element of government subsidy, injected either through a negative concession fee mechanism, or subject to the financial situation of a State, a grant towards the cost of a capital project (could also be in the form of a land grant, deferred taxes, etc.) While this approach has been applied elsewhere in the transport sector, for example in the provision of unprofitable rail or bus services, it has not been used in either the ATM or airport sector. A test case in aviation may help prove this approach’s worth. e. Delivering the infrastructure: governance

In ATP or airport PPPs, a monitoring system should be put in place to ensure the concessionaire carries out the agreed-upon refurbishments, upgrades, and associated tasks. Typically, the investments that are the responsibility of the private sector within the PPP agreement fall into two categories: those necessary to comply with the international standards and recommended practices dictated by the International Civil Aviation Organization (ICAO), and those necessary to accommodate growth.

A monitoring body that oversees the provision of the infrastructure according to the agreement must to be in place on day one of a PPP. The body must be financially independent and technically empowered, with the authority to oversee and enforce the compliance of the contract. The success in the effective monitoring of the contract will depend on the institutional strength of the country and the relative power of the airport or air navigation service provider (“ANSP”)25 operator vis-à-vis the regulator. With regards to ATM charges, comments about the relative power of the ANSP apply more to cases where either the ANSP is split from the Department of Transport, and/or where the private partner in the PPP is responsible (directly or via subcontract) for the operation and maintenance of the ATM system.

Private sector participation (“PSP”) in infrastructure development still requires government to play a key role in planning, policy, and regulation. Infrastructure industries, including those in aviation, have tended to remain in the public sector as they have components that are natural monopolies; i.e. the costs are lower with only one provider and the services are often essential (airports, ANS/ATM). These infrastructure monopolies also typically have a relatively high proportion of capital costs, have long-lived

25 In most countries, the ANSP is part of the national Department of Transport (“DOT”) or CAA, or operated by a separate State owned entity.


assets with low unit variable costs, and exhibit significant economies of scale. It had been a common judgement that state ownership of such monopolies, rather than state regulation of privately owned assets, was likely to deliver the best outcomes. Governments should allow the private sector to provide infrastructure services to the maximum extent possible – with governments concentrating on planning, policy and regulation, and with the private sector effectively investing capital and improving the efficiency and quality of such services.

As difficult periods for States recovering from extraordinary situations unwinds, it is still important that States consider the comparative advantages of the public and private sectors and the critical role of improved regulation and governance – including transparency, enforcement of contracts, and the adoption of viable commercial tariff structures. The strengths and weaknesses of the process that is used to implement infrastructure investments and the opportunities and risks of new approaches need to be addressed (i.e. the case for expanding the emphasis on customer focused and privately managed concessions). There is a need to develop financially viable versions of these models, ideally backed by the security of customer accounts rather than government guarantees or public sector assurances.

To be clear, and as intoned on the first pages of this Appendix C, promoting and establishing a PPP in developing countries and States recovering from extraordinary situations may be problematic on many fronts. The challenges facing the application of PPPs include:

Lack of support infrastructure facilities in the country.

Inadequate human resources to effectively apply a PPP.

Insecurity as a result of civil war.

Collapse of public institutions to support PPP,

Lack of adequate financial, technical and managerial capabilities to enable the growth in PPP.

Challenges of managing the local/national economy. Various NGOs and international financial institutions such as the World Bank Group may be able to help support the public sector’s share of PPPs. For example, the World Bank Group has indicated that it supports the financing of the government’s share of PPP deals in Africa and structural reforms of State Owned Enterprises (SOE).26

8. Examples of PPPs and Related Approaches

a. Airport and Select ATM Privatizations

It is important to note that all PPPs are at least partial privatizations, which typically involve limited scope and some form of a lease. However, not all Privatizations are PPPs.27

In most countries, the airport industry structure tends to fall into one of the following categories:

A highly-concentrated industry structure in which a national airports, CAA or corporation owns and operates all major civil airports.

A more fragmented industry structure, characterized either by local or regional authority ownership of airports, or by a combination of state and local authority ownership.

26 Air Transport Services in Africa, World Bank Group, ICAO Safety Symposium, Dakar, Senegal, May 2014.

27 US Airport Public-Private Partnerships, Airport Revenue News Annual Conference and Exposition, March 2017.


In between these two extremes, there are cases where privatization has been, or will be, accompanied by some degree of industry re-structuring. Two examples are listed below, one in Côte d’Ivoire and the other in Argentina.

Côte d’Ivoire – Prior to privatization, a national CAA owned and operated airports and ATM facilities throughout the country. Following the creation of a concession to govern Abidjan Airport in 1996, the remaining airport and ATM activities were transferred to a newly created state corporation, SODEXAM.

Argentina – In this country, airports and ATM facilities used to be operated by the Argentina Air Force. In 1998, 33 of the country’s principal airports, including Buenos Aires, were transferred to a single private sector concessionaire in 1998, Aeropuertos Argentina 2000, while the remaining airports (many of which were heavy loss-makers) were transferred to the regional governments concerned. As discussed earlier, the transfer of ANS service to EANA in 2016 may resemble a quasi-privatization. b. Concessions in Airport PPPs

The majority of actual or planned cases of private sector participation in airports involve concession contracts. Earlier examples of airport concession in Abidjan, Côte d’lvoire (Ivory Coast), Manila, Philippines, and Bogotá, Columbia are summarized briefly below.

Since ATM services generate aeronautical revenues similar to airports, it is assumed that a user-pay concession model could be part of a PPP structure (unless the lack of guaranteed revenues requires some other payment form, including government guarantees or subsidies, or government availability payments.

Abidjan, Côte d’lvoire – Responsibility for the operation and development of Abidjan Felix Hophôuet-Boigny Airport (IATA: ABJ, ICAO: DIAP) was transferred through a 15-year concession agreement signed in July 1996 between the Government of Côte d’lvoire and AERIA, a SPV controlled by Société d’Exploitation et de Gestion Aéroportuaire (SEGAP). Under the concession agreement, AERIA committed to a four-year investment program, covering a major expansion of the international passenger terminal and associated parking apron and taxiway areas together with runway reinforcement and extension. AERIA financer the investments from airport user charges and other airport revenues; it also paid concession fees to the Ivorian authorities, amounting to approximately 20 percent of turnover, largely to finance the operation of unprofitable interior airports in Côte d’lvoire.

Manila, Philippines – At Ninoy Aquino International Airport, the concessionaire Philippine International Air Terminal Company (PIATCO) was selected to construct and operate a new international passenger terminal over a 25-year concession period. The Manila International Airport Authority (MIAA), a public corporation, continued to own and operate other airport assets, including the two existing passenger terminals and runways. Under the concession contract, PIATCO increased international passenger charges levied on airlines from the initial level determined by the Ministry of Transport and Communications. PIATCO also paid a two-part concession fee to MIAA, consisting of a sum fixed in real terms, and a variable fee, expressed as a proportion of total revenues from international passenger charges and other commercial activities. This two-part structure introduced a degree of revenue risk sharing into the agreement.

Bogotá, Columbia – In the Bogota El Dorado International Airport (IATA: BOG, ICAO: SKBO) project, the concessionaire, Compania de Desarollo Aeropuerto El Dorado (CODAD) was contracted to construct and maintain a new runway and taxiway facilities over the 20-year concession period. However, it was also responsible for maintaining the existing runway, taxiways and parking areas, and was remunerated by revenues from airport landing charges. The airport passenger terminal facilities continued to be operated by Aeronautica Civil (Aerocivil), the government agency responsible for operating other airports and ATC facilities in Colombia. The concession agreement permitted the concessionaire to double landing charges on completion of the new facility. Thereafter, charges were increased in line with domestic inflation. Unlike the Manila concession, the agreement does not require the concessionaire to make any payments to the Colombian Government.


c. Other PPPs in Airports and ATM

Airports provide access to and interlink regional, national and international markets, and ATM infrastructure supports those aims. Investment in both airport and ATM infrastructure is essential to economic development, job creation, attracting foreign investment and creating new commercial opportunities for the local economy. A selection of airport PPPs in the developing and developed world are listed below, along with some related developments in the ATM sector.

Traditionally, airports have been owned, managed and operated by the public sector but there has been a worldwide trend towards private sector involvement with varying degrees of private ownership and management, including the use of PPP models.

Starting in the mid-nineties, a wave of airport ownership and management reform took place in many countries around the world. Following a number of landmark cases, like the privatization of the British Airports Authority, and influenced by the spread of PPP models in the development of seaport terminals, governments began to recognize the potential benefits of private sector participation in airport operations and management. Private sector involvement represented an effective way of updating infrastructure and improving services without expending fiscal resources. At the same time, airports were no longer seen as public utilities but as commercial enterprises, presenting new opportunities for funding development.

In the ATM sector, however, private involvement including privatization efforts, has been much less prevalent. While there has been strong interest in and experience of private sector financing and operation of airports, there have been few corresponding developments in the provision of ATM (ANS) services despite common concern regarding the difficulties of financing investment to upgrade enroute ANS facilities, given constraints on public expenditure, and the perceived inefficiency of many state-owned ATM/ANSPs.

Over 10 airports in the United States, through PPPs, have been privatized through the transfer of ownership or management (or both). The airport community has generally found PPPs appealing, as have foreign investors. Despite the success in this space, aviation officials in the U.S. are uncertain if the Federal Aviation Administration (“FAA”) will broaden the PPP scope28 to cover ATM infrastructure and services (based on assertions from President Trump that he supports privatization of the American ATM system).

While more of the discussion below will focus on airport PPPs and airport privatizations, references to ATM service PPPs and related transactions are made where available.

ATM developments – The majority of PPPs, privatizations or governance changes involving ATM have seen the ANS function separated from the national CAA or Department of Transport into a new government agency of corporate quasi-public entity. In one case, the ANSP became a private, not-for-profit entity. A few examples include the following:

NATS – In 1996 National Air Traffic Services (“NATS”) of the United Kingdom was re-organized into a limited company and became a wholly owned subsidiary of the CAA. This was done due to concerns that as a service provider, NATS should be operated at some distance from its regulator, the CAA. A PPP structure was then proposed for NATS, with 51 percent of the ANSP transferred to the private sector in 2001. Due to the decline in air traffic following the attacks of September 11, 2001, £130 million of additional investment was required, with £65m coming from each of the UK government and British Airports Authority (BAA)29, who received 4% of the company in return. As noted below in the footnote, BAA itself was bought by a firm specializing in DBFOM style PPP agreements.

28 The FAA’s Airport Privatization Pilot Program was established in the 1996 Reauthorization Act (RA).

29 BAA plc was bought in 2006 by a consortium led by Ferrovial, S.A., a Spanish firm specializing in the design, construction, financing, operation and maintenance (“DBFOM”) of transport, urban and services


NAV CANADA – The Canadian Air Navigation System was sold in 1996 to NAV CANADA, a non-profit corporation with a 15-member Board comprising representatives of airlines, government, general aviation interests, and the air traffic controllers’ union. It is allowed to set user charges to recover costs, but any surpluses must either be used to retire debt or to enhance ATM services and infrastructure. NAV CANADA is required to set its charges at levels projected to cover its costs. However, it maintains a rate stabilization account so that it need not raise or lower fees every year in response to changes in air traffic.

Corporatization of ATM services – Three types of corporatizations are listed here. First is the transformation of an existing authority into a public corporation (i.e. Airways New Zealand became a State-owned enterprise in 1987 after having been a division of the New Zealand Ministry of Transport). Second is the transfer of ATM assets from an authority to an existing corporation (i.e. in Malaysia, ATM assets were transferred to ownership under the State airport corporation, Malaysia Airports Holdings, although today ATM falls under the Malaysia Department of Civil Aviation). Third, is the transfer of ATM assets from an authority to a new corporation. A recent example of this was in 2016 when Empresa Argentina de Navegación Aérea S.E. (EANA) took over full management of Argentina’s Air Traffic Service, including all functions such as ATM, ATS and AIS. EANA is an Argentinian Ministry of Transport company.

An important aspect of ATM is the need for an interface between civil and military use of the airspace. In some countries, this interface is secured by having all ATM services provided by the military authorities. Elsewhere, civil ATC operates within designated controlled airspace, and the military authorities provide ATM services to both military and civil aircraft in so-called uncontrolled airspace. The existence of a strong defense interest in the provision of ATM services, which can affect many aspects of the specification and operation, has sometimes been held to preclude full privatization of ATM assets, other than those supplying ATM services at airports.

Other airport PPPs – A selection of additional airport PPPs in the developing world is listed below. In particular, several projects reference Africa. Similar to the Middle East and Asia (though perhaps not at the same magnitude), the aviation industry has growth rapidly in Africa.

Kigali, Rwanda – new international airport

In 2016 the Government of Rwanda signed a PPP contract with Portugal-based construction firm Mota-Engil in order to carry out the new Bugesera International Airport project. The new airport, which will be located in southeastern Rwanda, near the town of Nyamata in Bugesera District (25 kilometres south of central Kigali). The project aims to leverage the tourism sector in the country, as airport capacity from the existing airport (IATA: KGL, ICAO: HRYR) is not matching the growth in aircraft movements and passenger traffic. The new airport will become Rwanda’s largest International Airport, serving commercial flights destined to and from the greater Kigali metropolitan area and will act as a hub for Rwandair’s growth strategy and for other commercial airlines serving the region.

The total cost of the new airport is expected to be USD 818 million, with the first phase of construction starting mid-2017 and with completion scheduled by December 2018. Mota-Engil will design, build, finance, operate and maintain (DBFOM) the project through a 25-year concession contract, with an optional extension of 15 years. The first phase of the project, with an estimated cost of USD 418 million, will see the construction of new passenger and cargo terminals as well as a 4.2 km runway for large commercial airplanes. The second phase, valued at US$400 million, would comprise a second runway and more terminals for additional capacity.

Skukuza, Kruger National Park, Republic of South Africa – updated Skukuza Airport

infrastructure. The company was renamed Heathrow Airport Holdings Limited in 2012 to reflect its main business after it had been forced to divest London-Gatwick and London-Stansted airports.


In 2013 SanParks announced it had appointed Skukuza Airport Management Company to improve the runway and terminal buildings at Skukuza Airport (IATA: SZK, ICAO: FASZ) in order to enable airline services, and to operate the airport for the next 10 years. In return of the investments made for improvements, Skukuza Airport Management Company is able to levy airport charges. Skukuza Airport Management Company is a PPP comprising regional airline SA Airlink, Lion Sands and Federal Air and SANParks, the South African National Parks Company.

This PPP was formed specifically to oversee the refurbishment and enhancement of Skukuza Airport, and is taking the form of a DBOM structure. Skukuza Airport Management Company took over the operation of the airport in September 2013, and commenced with the alterations and improvements essential to bring the airport to the international standard required to allow the operation of scheduled airline passenger services.

Addis Ababa, Ethiopia – aviation maintenance training

In 2007 Ethiopian Airlines announced a joint cooperation with Lufthansa Technical Training and GTZ to upgrade aircraft maintenance training capacity and quality standards in Ethiopia. Ethiopian planned to cooperate with Lufthansa Technical Training, the Engineering Capacity Building Program and two TVET colleges, in a training project for aircraft technicians in Ethiopia. The cooperation is organized as a PPP. Ethiopian Airlines is 100 percent owned by the Government of Ethiopia.

To meet increasing demand and its own rapid growth, Ethiopian Airlines is transforming its training services by establishing the Ethiopian Aviation Academy. With this PPP initiative, there were plans within three years that Ethiopian Aviation Academy would be able to increase its maintenance training capacity by three-fold per year while improving the quality of training to world standards. According to officials, the PPP was planned to enhance the safety of the aviation industry in Ethiopia and Africa and at the same time promote economic development in Ethiopia.

Abidjan, Côte d’lvoire

In January 2015, ground handling company National Aviation Services (NAS), a subsidiary of National Aviation Services company Agility, signed its first contract in West Africa, increasing its operational network to 16 stations in nine countries. Under the 10-year contract, NAS is providing ground handling services at Abidjan International Airport as a part of a PPP with the Government of Cote d’Ivoire. The ground handling contract includes passenger services, ramp handling, cargo management and warehousing as well as other related airport services.

Dakar, Senegal

In 2007 construction started on a greenfield (new site) project, Aéroport International de Blaise Diagne, which will accommodate three million passengers per year. The project cost was estimated at EUR 525 million and while late opening, is in the final stages of construction. Located near the town of Diass, Senegal, it will serve as the new airport for the capital city, Dakar. This is a PPP project, structured as a BOOT model, and will run for a period of 25 years. A significant portion of the financing cost will be recovered through an airport departure tax entitled the Airport Departure Payments Financing Facility. Private investors are from France (BNP Paribas Bank) and Morocco and the management partner is Fraport AG Frankfurt Airport Services Worldwide of Germany (with Fraport’s contracted organized under the entity, Contrac Flughafen Konzessions).

Pan Africa – investments in different types of aviation infrastructure

The World Bank Group is heavily active in African aviation along with International Finance Corporation (“IFC”). IFC is member of the World Bank Group and is the largest global development institution focused on the private sector in developing countries. The World Bank and IFC both understand that commercial aviation has expanded considerably the past 10 years in Africa, largely thanks to growing economic stability and security in many countries, a large population with low air share service, a massive geographical area, and some cases of air traffic liberalization.

Not long ago, the majority and the heaviest traffic routes of most commercial airlines in Africa ran north-south to support Europe to select African country services. Today, routes have become omni-directional, especially with the growth of large hub carriers (i.e. Ethiopian Airlines at Addis Ababa, Kenya Airways at


Nairobi, Egyptair at Cairo, Royal Air Maroc at Casablanca, and South African Airways at Johannesburg), numerous regional and low cost carriers, plus the development of enroute traffic between the Mideast

and South America (i.e. Dubai, UAESão Paulo, Brasil). Four of those carriers belong to one of the world’s leading three global alliances: Ethiopian, Egyptair and South African are all in STAR Alliance, while Kenya is in SkyTeam. No African airline is in the Oneworld alliance.

This growth in the continent’s aviation footprint has created a growing need for new and enhanced ATM infrastructure and systems. As the following table shows, World Bank/IFC has strong interest in many aviation sub-sectors across numerous priority (and receptive) countries in Sub-Saharan Africa:30

Figure 19: World Bank/IFC Categorization of Sub-Sahara Africa

Sub-Saharan Africa is the most specific example of a region with many developing countries and many corresponding pressing needs. Governments are very unstable and the financial situation is very poor with high rates of inflation and low incomes. In the Sub-Saharan region, the World Bank had 380 projects listed by year 2014. Nigeria has been a leading country with 13% of all PPP projects, with 45 other countries also using this project method. Most countries list an average of six to eight projects each. Beyond Nigeria, other active countries in the region are South Africa, Tanzania, Ghana and Kenya – together with Nigeria this group of countries cover 36% of all PPPs. Many of the projects are for new greenfield structures in the telecommunications sector, where there is still in shortage of adequate infrastructure.

However, as per the World Bank/IFC table above, a growing number of PPPs in Sub-Saharan Africa are occurring within the transport sector. Africa needs to develop integrated transport systems to provide the continent with safe, reliable, efficient and affordable infrastructure and services. Given the capital-intensive nature of transport infrastructure, adoption of PPPs make sense, as would be a focus on concession models which allow the transport system to fund itself for sustainability.

30 Source: Air Transport Services in Africa, World Bank Group, ICAO Safety Symposium, Dakar, Senegal, May 2014.


Aviation in Africa is generally on the same lower level as other industries. One notable exception is South Africa, the continent’s most developed country. The rest of the region still needs further development to achieve high standards found in the developed world. Private interest in airports is growing as well and governments are seeking opportunities to apply private sector experience and financial investments to their infrastructure needs.


10 APPENDIX F

CASE STUDIES FOR CRISIS RESPONSE AND RECOVERY IN SITUATION OF DISRUPTIONS AND DEGREDATION OF LEVEL OF ANS 10.1.1 Case Study – 1: Closure of Fort Lauderdale Airport in 2017

Description of the event On 1/6/2017, a 26 year old male passenger arrived in KFLL on an itinerary from Alaska. At approximately 12:55 pm he picked up his checked baggage which contained a 9mm pistol and ammunition. He loaded the pistol and fired at random into the crowded baggage area. Once he exhausted the ammunition he walked to the exit, dropped the gun and laid face down on the floor where he was arrested unharmed approximately 1 minute later. Five people were killed and eight were wounded in the shooting.

Response by airport, airlines, and authorities (aviation and law enforcement)

As soon as shots were fired, airport police closed off the airport and immediately cleared the terminals onto the airport tarmac. About 8,000 people collected on the tarmac many of them having abandoned their hand luggage in the terminals. Thirty seven (37) people were injured in the panicked evacuation of the terminals. Broward Co Airport Authority closed the airport and all air traffic was held in place or pushed off the gate and taxied to remote parking with people on board. Aircraft that were taxiing in or out were stopped on the taxiways where they remained for almost 6 hours. The airport police, the FBI and Broward County Sherriff and local law enforcement closed off the roads into the airport and searched the terminals.

Implications on airline and airport operations

The airport operation was completely shut down and in the hands of multiple law enforcement entities. The airport operations center was aware of the plight of the passengers and crew being held off gate on the tarmac but were unable to do anything about it until they were cleared move to by law enforcement.

About 5 hours after the shooting the decision was made to bus all the people from the tarmac to the nearby cruise ship terminals at Port Everglades to match them with their baggage and out-process them. This further delayed the departure of two cruise ships scheduled for that afternoon. At approximately 3 hours into the event, the flights stranded on the tarmac began to run out of food, water and supplies. These flights had over 1,500 people on them. As time went on the lavatories became over-full as well and fuel to keep the APUs and air conditioning running became a concern. Approximately 5 hours from the actual event, the airport authority was able to get lavatory trucks out to service the flights and bring them additional water and emergency tarmac rations. Soon after the airlines were allowed to bring the flights into the gates and deplane the passengers who were bussed to Port Everglades for out-processing. Once the terminals had been fully


cleared of passengers abandoned baggage and swept for possible other shooters (there were none) the airport was re-opened at approximately 5 am the next morning.

Lessons Learned Multi-jurisdictional law enforcement issues in response to an event of this nature can significantly impact the handling of the event. In this case it was unknown whether the shooter was part of an organized terror attack or a lone gunman until many hours after the actual shooting event.

Recommendations Commercially certified airports (in the United States Part 139 airports), should have a robust contingency plan that deals with various forms of threats and attacks and law enforcement’s response to them.



10.1.2 Case Study – 2: Closure of Istanbul Airport in 2016

Description of the event On 28 June 2016 18:50 UTC a terrorist attack occurred at Ataturk International Airport, Istanbul, Turkey during which 44 were killed and 239 were wounded. Turkish Ground Services lost 3 of their staff during the attack.

As a result, Ataturk Airport was closed and all operations ceased and after 24 hours it was opened with limited facilities but at full ATM capabilities.


Most of the Istanbul-bound flights diverted to Izmir or Ankara. Following the attack the FAA suspended all Turkish flights into and out of the United States for about five hours, and resume operations accordingly.

Turkish Airlines Crises Management Team together with the ANSP and all the stakeholders gathered immediately, regular teleconferences were held between partners.

EUROCONTROL Network Manager provided support to airline operators in facilitating the information on diversion options.


The implications on Turkish Airlines alone was in the magnitude of 29 diversions. 3466 passengers were affected because of diverted flights. Only 2313 flights out of 2703 flights were executed. About 28,000 passengers were unable to fly to their planned (ticketed) destinations. Additionally, 61 new flights were rescheduled to manage the worldwide operation. On 94 flights the aircraft types were changed to wider body to accommodate stranded passengers.

Lessons Learned Although real crisis can never occurs exactly as planned, all probable scenarios need to be taken into consideration during training and when airlines and airport exercise their crisis response plans. Furthermore, if the respective destination has no crew layover then the risk of exposure is reduced.

Recommendations It is essential to prepare a practicable airport and airline emergency plan with probable scenarios that could face an airport in order to be able to respond quickly, efficiently and effectively. While every contingency scenario cannot be anticipated and prepared for, a strong emergency preparedness program can assist in limiting the negative impact of these events, including liability and other post-emergency issues.

This Emergency Response Plan should be developed to facilitate the timely and appropriate response to emergencies occurring on or in the immediate vicinity of the Airport. The principal goals of this plan should be to render necessary assistance and minimize further injury and damage to persons and property involved in accidents or emergency situations at the Airport.

Since States and Air Navigation Service Providers are ultimately responsible for providing air navigation services, in the event of risk of disruption of those services special precautions should be taken. In


order to secure continuity of these services, special agreements between states/sectors should be prepared.

Also, contingency plans should be developed in close coordination with the ANSP’s for the provision of services in adjacent sectors of airspace and with the affected airspace users. Regular drills and exercises should be organized. Contingency plans should consider operation resilience in case of crisis and should be checked by the all related departments for viability.



10.1.3 Case Study - 3: Closure of Brussels Airport in 2016

Description of the event On 22 March 2016 the airport's departures hall of Brussels National Airport was severely damaged by two terrorist bomb blasts. At the time of the terror attack, there was no awareness of any specific threat against Aviation, Airports or Airlines. The airport was closed until 3 April 2016, when it reopened with temporary facilities at less than 20% of its previous capacity. The airport was completely closed to passengers for 12 days following the attack.


Immediately after the terror attack in the terminal of Brussels airport, authorities temporarily halted air traffic to the airport and evacuated the terminal buildings. A Brussels Airport Crisis Cell was immediately established. The airport was closed to passenger traffic and the reopening date was postponed several times.

EUROCONTROL Network Manager called the European Aviation Crisis Coordination Cell and facilitated a gradual restart of some operations at Brussels airport while collecting, consolidating and disseminating information related to the overall situation at Brussels airport and on additional measures being taken at other European airports as a result of the Brussels terrorist attacks.

On 29th March, an operational test was performed. The official reopening date was scheduled to be announced on 30th March. A post-reopening target of 800–1,000 passengers per hour was projected, compared to pre-bombing traffic of 5,000 passengers per hour. The delay in the reopening was attributed to extensive damage to the building's infrastructure related to the structural damage/structural integrity of the pillars and the overall building. A temporary terminal was planned for use after the reopening. When the airport initially softly reopened, only the home base carrier Brussels Airlines was initially allowed to serve the airport, but other airlines would be allowed to return later.

On 30 March, plans to reopen the airport were cancelled again due to a strike by airport police due to a dispute over inadequate security. The dispute was resolved, and the airport was later scheduled to be reopened on 3rd April. Upon reopening, passengers were only allowed to enter a temporary departure hall. Preliminary security checkpoints were implemented at the roadway to the airport. Only car and taxi traffic were allowed to enter but public transit remained suspended.

Implications on airline/airport operations Flights bound to Brussels Airport were either cancelled or diverted to nearby airports in Belgium such as Brussels South Charleroi Airport (CRL), Ostend–Bruges (OST), Amsterdam Schiphol (AMS), Cologne-Bonn (CGN), Dusseldorf (DUS) or Frankfurt (FRA). All public transport in the capital was shut down as a result of the attacks, which additionally affected one metro railway station. Railway stations in Brussels were evacuated and closed.

Immediately the Brussels Airport was put under strict Airport Slot Coordination (- in case of no approved slot, flight plan was suspended


in the Eurocontrol Network Manager IFPS database) and a strict PPR requirement for non-scheduled flights to any other Belgium airport has been put into place. Initially only Cargo/Ferry/GAT flight were allowed to operate - no authority for any other flight was given. Those Cargo/GAT/Ferry Flights could only operate to/from Brussels Airport with access via the GAT Terminal on the opposite end of airport and they required permission that needed to be requested in advance – a challenge was also the crew access protocol, to allow operating Crew to access the airport through the GAT Terminal, that was not prepared for such a contingency plan.

On 29th April (38 days after the terror attack), airport passenger throughput in the heavily damaged terminal was still the limiting factor, resulting in maximum 22 departures/hour (normal situation was 44 departures/hour). The curb site (in front of the terminal) was not available for cars (meet and greet was abandoned). 100 % security checks were performed by the police well before the Terminal building. Passenger flying to African destinations were offered to bring their luggage to a facility outside the Airport (i.e. BRU Cargo facility) one day before their flight to avoid capacity issues in the Terminal. Departing passenger were required to show a valid travel document to be allowed to enter the Terminal Building.

BRU Airport Operator has worked on several options to gradually return to a normal situation, dependent on approval by Belgium Security Council, the Federal Police and the Fire Fighting department. The slot coordinator requested Airline operators to adhere correctly to the assigned slots, in order to avoid further disruptions in this already very constraint situation. Many airlines appeared to forget to return the slots when they cancel flights.

On 24th May (63 days after the terror attack), the airside capacity of the airport (runway capacity) was still set to 22 departures/hour, caused by the maximum capacity at Brussels Airport due to limited check-in and security throughput. Brussels Airport did its utmost to be back to normal capacity by the end of June 2016. The plan was structured to restrict the number of departures of passenger flights to 28 departures/hour and Airlines Scheduling department had been informed by 19 May 2016 for further planning purposes with the next critical milestone for the period after 26th of June, as most Airline operators at Brussels Airport then entered into their peak schedules of the summer period facing the requirement for full capacity of their fleet operations.

Brussels airport fully re-opened in June 2016, however, operating only a basic service, as all facilities were not fully renovated.


Lessons Learned Eurocontrol Network Manager did a great job on setting up daily conference calls for the Airline Operators to get a picture of the situation and to coordinate any steps.

Brussels airport, which contributes some €3bn annually to the Belgian economy, has not released any figures on the economic impact of the shutdown. However, Brussels Airlines, the national flag carrier, said it was losing €5m daily following the blasts. (Quote: "We have nearly 20,000 passengers departing each day, instead of the normal 40,000.").



10.1.4 Case Study - 4: Chicago ACC Fire in 2014

Description of the event On September 26, 2014 at approximately 5:00am, Brian Howard, an FAA contractor working for Harris Corporation, reported to work at ZAU (the FAA’s Chicago Centre). It is believed he gained access to ZAU using his ID card through a side door carrying two gas cans. Once inside he went to his duty station in the main FTI (Federal Telecommunications Infrastructure) equipment room in the basement of the centre. He soaked rags in gasoline and wrapped the main power transfer conduits with them and put more gas soaked rags in key places in the equipment racks.

At approximately 5:20 am he set the rags on fire and attempted suicide (by cutting his wrists). The fire alarms in the room worked properly and the first responders were able to save Mr Howard. He was taken into custody and transported under guard to a local hospital then, once stable, to jail. The fire burned for some time and the building was evacuated. ZAU’s airspace was declared “ATC Zero” by the FAA.

Once the fire was put out it was discovered that the damage to the FTI was extensive and that air traffic services would not be able to resume for weeks or more. It became apparent that the FTI resources that were damaged were absolutely key and that Mr. Howard had specifically targeted areas where his efforts would cause the greatest impact. For example, all of the key FTI systems in the room were redundant, but in most cases the redundant equipment, power couplings and other back up components were (physically located) within inches of the primary system. Thus, in the short time the fire burned out of control, it destroyed or damaged beyond repair many of the primary systems and the backup systems. Many of the systems not damaged by the fire were heavily damaged by the firefighting efforts.


With the declaration of ATC Zero by ZAU the ATCSCC issued stop to all traffic arriving or departing airports in ZAU’s airspace. Initially, over 2,000 flights were held on the ground as the FAA assessed the situation. Most of these flights were cancelled once it became clear that the event would last for some time to come.

Due to the extensive damage to the building, it took the FAA over a week to clean up the site and assess the full extent of the damage. Once the determination had been made the FAA was able to put together a dependable timeline for restoration of ATC services from ZAU. Once extensive repairs were made the facility was re-opened and ATC services restored from ZAU on October 13th.

But while the airspace closed and while clean up and assessment was taking place, the questions immediately became how and when some level of ATC services could be resumed.

Communications to the airlines and other system users was centralized at the ATCSCC (ATC System Command Centre) and set to a cadence of regular teleconferences. It became quickly apparent that the FAA


did not have a plan to maintain continuity of service levels in the event of catastrophic event such as this one. They had an order that allowed them to resume partial service from the same facility, but in this case the actual building was unusable. As the days went on they settled on sending the controllers from ZAU to the surrounding centres and TRACONS where they were able to extend temporary jurisdiction for parts of ZAU’s airspace and provide a steadily increasing level of service. A significant level of service had been established within 14 days of the event. Just prior to full restoration of service on October 13th, the FAA was dependably running over 80% of the normal traffic levels within ZAUs airspace.

The airlines and other system users ramped up as service levels (and capacity) increased.

Implications on airline and operations Cost to the airlines, and more importantly, the flying public, were significant. Air service to KORD and KMDW was hit the hardest though many other airports in the Midwest were delayed or had reduced air service for the duration of the event.

Loss of ATC services brought air traffic movement to a halt at KORD, KNDW, KROC etc. These airports were able to slowly resume flights up until ZAU was able to provide ATC services again.

Lessons Learned In the wake of this event there was a significant amount of learning and changes to the way that the FAA handled catastrophic events in the NAS:

1. The FAA learned that their service continuity plan was obsolete and could not cover many potentially catastrophic events via any other means than closing the airspace until repairs could be made.

2. The FAA learned there is value to drills of their contingency and continuity plans at all a level. It appears they have also learned to put in process to review and update all plans that were in their various facilities. This was evident in that the FAA established a directorate at the headquarters level charged with formulation and maintenance of their recovery.

Recommendations ANSPs should take heed of this event and:

1. Focus on service resumption in catastrophic loss of service events such as this one.

2. Consider contingency plans that allow airspace to be divested to other adjacent ATC facilities as a means to restore at least partial service more quickly.

3. Consider system redundancies that are physically collocated as potential weaknesses.

4. Strongly consider regular drills to validate that their contingency and service continuity plans are working as designed. These drills should be designed to be as realistic as possible.


10.1.5 Case Study - 5: Eyjafjallajökull Volcanic Ash in 2010

Description of the event The 2010 eruptions of the volcano Eyjafjallajökull in Iceland caused enormous disruption to air travel in western and northern Europe over an overall period of six days from 14th – 20th April 2010. Volcanic ash was thrown up to a height of 30,000 feet, spreading across a huge area in Europe, particularly over the UK, and as far down as Spain and Northern Africa.

The ash plume from Iceland’s Eyjafjallajökull volcano led to the progressive closure of about 20 European countries closing their airspaces to commercial jet traffic, creating the highest level of air travel disruption since the 2nd World War. As a consequence this led to the disruption of some 100,000 flights and affected approx. 10 million air travelers because of the ash cloud, which has moved into continental Europe.

Authorities were taken by surprise and had from their perspective no choice but to shut their airspaces in lack of data about how dangerous ash clouds really are to aircraft and what density of ash clouds aircraft can safely sustain.

In detail 104,000 flights were cancelled during the 8‐day crisis. That is 48% of expected traffic over 8 days, peaking at 80% on 18th April.

This volcanic activity had been so disruptive to air travel because of a combination of various factors:

- Severe and prolonged volcanic disruption combined with the fact, that the volcano was directly under the jet stream;

- Weather conditions that meant the ash cloud remained over Europe;

- Volcanic Ash risk management guidance for Europe based on a strict precautionary principle.

The eruption was declared officially over in October 2010, when snow on the glacier did not melt. – Overall, there are 50 active volcanoes located in Iceland.


The ash cloud spreading to the South and the East from Eyjafjallajökull in Iceland triggered the progressive closure of much of European airspace by the respective national authorities.

State Authorities faced difficulties due to the absence of data outlining the ash tolerance of aircrafts. Furthermore, there was a lack of consensus among international safety regulators, airlines, aircraft engineers and manufacturers as to what constituted a safe concentration of ash. The absence of guidelines, or limits, for engine use in ash conditions have made it difficult to judge safety risks associated with the cloud disrupting travel, pointing out that there is no knowledge what the acceptable ash concentration level is.

Due to the unclear situation of volcanic dust concentration, the aviation authorities hesitate to open the airspace for IFR flights under ATC


responsibility. With "controlled VFR" all the responsibility is shifted to the pilots and airline managers. ATC provides guidance and clearance, but the pilots are in the responsibility to watch out for other aircraft and the volcanic smog layers.

It was the role of EUROCONTROL to communicate and coordinate

these closure (and re‐opening) decisions and to coordinate the flow of traffic.

Amongst the flights which actually took place during the crisis were more than 5,000 additional flights put on by scheduled and charter carriers. These additional flights were for one or more of three reasons:

- to reposition aircraft;

- to reposition crews; and

- to accelerate the repatriation of stranded passengers.

Implications on airline and operations The 2010 eruption of Iceland's Eyjafjallajökull volcano had a huge impact on air travel as more than 300 airports in about two dozen countries, and a correspondingly large airspace, were closed in Europe during 15-21 April 2010. At the peak of the crisis, more than 75% of flights were cancelled. The airspace closures affected 10.5 million passengers, 8.6 million of whom were temporarily stranded.

IATA has estimated a financial impact from scheduled services over the whole period, which cumulated to an estimated US$1.7 billion revenue loss. The global GDP losses, resulting from the prolonged inability to move people or goods, are estimated at approximately 4.7 billion US$ dollars.

Thousands of passengers at airport departure and transit lounges were camping out in any available space that they could find while waiting for news on the resumption of flights. Many of the stranded passengers turned to other forms of transport to get home from holidays and business trips. This put considerable strain on the European train and ferry network. Hotel prices in some of the major continental cities soared, while in other places hotels were unusually empty. Particular problems were experienced by people, whose economic means were limited and who found themselves unable to afford accommodation, yet they were not supported by the air carriers from whom they had purchased tickets. It was thus common to find such people sleeping in airport terminals. In parallel serious overcrowding occurred at railway stations and on long-distance trains. Most stranded passengers experienced substantial delays and had to pay significant additional costs to reach their destinations. In addition to those being stranded, some travelers also encountered issues with their visas, being unable to leave the airport terminal building to seek for accommodation. This was compounded by the fact that the duration of the airspace closure remained uncertain.

Lessons Learned Europe is now equipped to respond to an ash crisis with a graduated rather than a one size fits all approach.


Two very concrete changes were made:

- The creation of a new EU aviation crisis cell, to manage a crisis in real time through the EUROCONTROL Network Manager

- The new European guidelines for managing volcanic ash (for Member States and airlines)

A new European Crisis Cell (EACCC) has been established for such/similar situation with the aim to provide a very efficient a structure for "hands on" effective co-ordination of a crisis in real time. It can meet on a daily basis or more often if necessary.

The crisis cell constitutes the central European entity that can facilitate and co-ordinate collaborative decision making, whereby responses can be decided quickly and problems can be solved in real time as they emerge. This is located at and run by EUROCONTROL Network Manager.

As a learning result the ICAO Volcanic Ash Contingency Plan for Europe was revised (final adoption December 2010), supplemented by the elaboration of new operational guidelines for the 'Management of Flight Operations with Known or Forecast Volcanic Cloud Contamination'.)

In practice, the new European approach provides a graduated response to ash, not one size fits all.

- Airlines submit safety risk assessments for their operations.

- Member State Safety Authorities can then give permission (or not) to operate, based on the safety risk assessments submitted.

Under the new rules, Member States have a much more precise tool available to them to assess risk. They are able to authorize large numbers of flights – with correct safety risk assessments from airlines – in forecast low density blue zones, as well as in many forecast medium density grey zones. There is also a possibility to authorize flights even in forecast high density (red zones) although this was not the case so far.

The end result is that, whilst fully respecting safety requirements, airspace closures have been minimized during this crisis. To give some idea of the scale of the difference, during the first crisis, 8,000 flights were cancelled. During the first two days of the Grimsvötn volcano eruption in 2011 crisis (1 year later), 500 flights were cancelled. The Grimsvötn volcano eruption was the largest eruption in Iceland for 50 years.

Globally, the aviation industry has developed additional guidance for safe, efficient flight operations in the event of a volcanic eruption. The International Civil Aviation Organization (ICAO) International Volcanic Ash Task Force (IVATF) is leading this effort. The industry is accumulating and reviewing the world’s best practices for addressing airspace control during a volcanic eruption and developing


recommendations that accommodate all global situations.

In the aftermath of the Eyjafjallajökull eruption, ICAO’s European and North Atlantic (EUR/NAT) Office merged the existing EUR/NAT volcanic ash contingency plans, as part of an effort to harmonize the procedures globally. A key enhancement was the decision to control airspace as is done by other airspace control authorities: After an initial eruption, the volcanic ash cloud is treated like a meteorological event and advisory and SIGMET information is provided to operators to allow them to determine how best to avoid operations in the volcanic ash cloud. This approach proved successful in other areas of the world.

ICAO’s IVATF is furthermore working to consolidate successful practices from around the world to provide enhanced volcanic ash contingency procedures and improve the accuracy and consistency of the VAAC advisories.

At the time of the eruption of Eyjafjallajökull in 2010, European regulators had little experience and regional coordination was poor. Right now decision making has moved away from “Zero Tolerance” to a “Tolerable Threshold”.

In addition, ICAO has issued Doc 9974 — FLIGHT SAFETY AND VOLCANIC ASH – Risk management of flight operations with known or forecast volcanic ash contamination. – This manual was co-branded by ACI, CANSO, IATA, ICAO, ICCAIA, IFALPA and IFATCA and it will be updated through the ICAO Operations Panel as further experience and knowledge arises on related hazards.

Recommendations In the event of air transport disruptions, there should be coordinated crisis response strategies, which provide a substitutive mode of transport. Moreover, it is important to prepare flexible strategies in order to have a clear idea of the options available to minimize disruptions, for example, in the event of air traffic grounding, political and business meetings could be conducted in a virtual manner through video links. In any case, it is necessary for businesses with substantial international components to plan for situations where air transportation could be unavailable, and design alternative arrangements.

There is more work required on volcanic ash cloud composition, predictive models of cloud dispersion and fallout, combined with better real-time data provision to verify the accuracy of the predictions and to assess thresholds for safe, restricted or prohibited flights. There is still a pressing need to investigate much more about the specific effects on aircraft and engines.

Through ICAO the various regions have started to conduct on a regular basis volcanic ash exercises. Guidance material for conducting volcanic ash exercises in ICAO regions was introduced in 2010 in ICAO Doc 9766 – Handbook on the International Airways Volcano Watch (IAVW), Appendix F – Guidance for Conducting Volcanic Ash Exercises in ICAO Regions, involving all stakeholders concerned.

Air Transport disruptions in the field of Meteorology are not only subject


to potential limitations because of volcanic eruptions – similar meteorological impact on ATM can also be caused by large scale weather deviations such as typhoons or monsoonal rain belts – contingency plans, contingency cells and (regional) coordination units need to be set-up in shortest of time in such situations.

Recommendations for the global/regional ATM environment:

- Review current Contingency plans; assist States/regions in establishing plans

- Review flight planning info dissemination

- Enhance operational information exchange mechanism;

- Create awareness mechanisms - such disruptions can occur anytime.

Communication and Coordination are essential. – It is therefore fundamental to develop further through ICAO the:

- Identification of tools and procedures to help foster more collaborative decision-making and consistent responses to volcanic eruptions, wherever they occur.

- Collecting the requirements of a future system-wide information management (SWIM) environment, a recommendation that ICAO provisions be amended to enable the availability of volcanic ash advisories in a digital form.



10.1.6 Case Study - 6: The Toppling of President Mubarak in 2011

Description of the event In 2010 a wave of protests and demonstrations across the Middle East and North Africa led to the "Arab Spring". It had started in Tunisia on 18 December 2010 and then moved on to Egypt. By the end of February 2012, rulers of following countries had been forced from power: Tunisia, Egypt, Libya and Yemen. In Egypt, President Hosni Mubarak resigned on 11 February 2011 after 18 days of massive protests, ending his 30-year presidency.


Security measures where increased immediately effecting airport operations. Flights to and from Cairo where operated after an internal risk assessment was conducted. The two major revolutions in Egypt are categorized under Mass Politically Motivated Protest and/or Domestic Politics. This is identified to be an indirect threat to Civil Aviation Assets/OPS, because of the disturbance it causes for Airports and subsequently the Airlines.


Airside and landside security precaution level was increased. Civil Aviation, Airport and Aircraft Operator Security Programs were updated. The toppling of President Mubarak resulted in decline in tourists by nearly a third year-on-year, to 9.5 million from 14 million, all because of a perceived risk to overfly and into a conflict zones. The biggest risk was lack of control and command of weaponry on the ground. In addition, security measures at the airports were questionable during that time. The media played a major role in putting the turmoil Egypt in the spotlight. While the perceived country insecurity might have been more acute than the actual one, the flying public were canceling their travel plans based on assumptions about the security risk in the country.

Civil Aviation (airport and/or airline) remains attractive to threat actors and any disturbance such as political unrest. If the respective destination has no crew layover then the risk of exposure may be lower however company staff, passengers and company assets are still at risk. Cairo International Airport is the second-largest airport in Africa after Johannesburg, handling about 16 million passengers a year, most of which are tourists. During the unrest period, airlines were still flying in and out of Cairo, but some have had to rearrange their schedules due to the unrest and curfews put in place by Egyptian authorities.

Lessons Learned Probably one of the key lessons learned in the toppling of President Mubarak is the power of media and social media and the influence they have on the flying public. While Egypt was not declared a no-fly zone, it was being avoided by the flying public. The World Tourism Organization (WTO) estimated that 14.1 million international tourists travelled to Egypt in 2010, contributing $12.5 billion. This dropped by 45.3% in the first three months of 2011 because of the local unrest. Economies that depend heavily on the tourism sector must develop


strategies that can successfully protect that industry. The early recovery of the tourism sector is not only necessary for the tourism sector itself, but is also necessary for the state of the entire economy. The longer it takes for tourism to recover, the longer it will take for the economy to recover. A full recovery plan comprised of a partnership with media, governments, international organizations, and the private sector is key to restoring faith of the flying public in the security of a country that has suffered internal unrest.

In the wake of the digital age and virtual communication, governments, airports, airlines, and tour operators need to promote tourism online. If an incident occurs at a busy airport or popular travel destination, eyewitnesses or participants can now capture and share images of the event, upload videos or post comments via their mobile devices before the concerned airline, airport, or even the civil aviation is fully aware of what has happened. Once any story breaks on social media, the chance to provide factual information or even reverse the negative influence of non-factual posts is minimized. The aviation industry should use social media channels, such as Twitter and Facebook, to reach the news media and the public quickly and to provide updated information during any crisis situation or contingency.

Recommendations Tourists have been avoiding Egypt due to a perceived risk related to in-country instability and lack of adequate police protection, which has been broadcasted by the media since the start of the Egyptian Revolution in 2011. In a country where the tourism sector needs to recover, the government must work with its aviation stakeholders and partners to restore the faith of the flying public. Governments in such situations should collect critical data to make informed decisions. Partnering with law enforcement and media helps in protecting tourists and promoting the in-country security and safety measures. Governments must develop a crisis management plan and an aviation recovery plan to ensure that air travel and tourism resume gradually as foreign travelers start flying into the country.

From an airline operation’s perspective, the measure for protection is threat and risk assessment and sharing of intelligence. Awareness of political conditions at destinations and the countries itself and how protective measures are set when a region is informally known as conflict zones will help to mitigate the risk. Having such intense and reliable process in place will be able to set the criteria for protecting asset and operation.


10.1.7 Case Study - 7: Re-opening of Kosovo Upper Airspace for Civil Aircraft Operations This Case Study is used to illustrate how third party service provision can be used as a response to a major operations disruption and as means to resume operations over a previously declared no-fly zone.

Since the end of the Kosovo war in 1999, the upper airspace over Kosovo was managed by NATO. No civil aircraft operations were permitted through that upper airspace, until 2014, when the upper airspace (Flight Level 205 to Flight Level 660) over Kosovo was re-opened for civilian traffic overflights after 15 years of seizure. The re-opening of the airspace was based on a decision by the North Atlantic Council, during which the offer the Government of Hungary was accepted for it to act as a technical enabler through its air navigation service provider. The airspace remains under NATO/KFOR authority and Hungarocontrol acts as the technical enabler for the provision of air navigation services to the civilian air traffic overflights. Hungarocontrol has been highly active in developing all the necessary operational and technical components to assure the safe provision of air navigation services, with the introduction of innovative solutions for non-adjacent multiple cross-border operations. The re-opening of the airspace led to shorter flight routes and thus generate savings for airspace users in terms of flight efficiency in the magnitude of 370,000 less nautical miles flown on annual basis, resulting in an estimated reduction of 75,000 tons of CO2 emissions. The re-opening of Kosovo upper airspace and the services provided by Hungarocontrol required close coordination and collaboration between NATO, Eurocontrol NM, Hungary, Albania, Serbia and Montenegro, Macedonia, Greece, Bulgaria, Slovenia and Austria. In 2012, a political decision was made by NATO to delegate service provision on their behalf to Hungary. Between 2012 and the actual re-opening in 2014, Eurocontrol NM and NATO engaged all affected and involved ANSPs in meetings and discussions. In this manner the adjacent States were part of the discussion, and the solution development.

Figure 20: Route Network Changes Related to the Opening of Kosovo Upper Airspace


Key lessons learned from the re-opening of Kosovo upper airspace are; 1. With the right technology, and the right mindset, third party service provision provides a tool

for resuming international air traffic. 2. Apart from the technical solutions and necessary agreements that need to be signed,

reaching an understanding for third party service provision requires collaboration, communication, and a mature framework.

3. Third party service provision would not only enable flights to resume, but could also enable flight efficiencies and seamless operations.

4. Training and change management are key enablers to the success of third party service provision.



11 Appendix G

BEST PRACTICES FOR CRISIS MANAGEMENT AND RESPONSE

In accordance with ICAO Annex 11, an air navigation service provider must have an Air Traffic Management (ATM) Contingency Plan detailing arrangements to ensure the continued safety of air navigation in the event of partial or total disruption of air traffic services. The Contingency Plan must provide the ATS procedures and contingency route structure that will allow the continuity of operations in case ATS disruptions. In addition to domestic or intra-State contingencies, there needs to be inter-State and sub-regional or regional contingency plans that ensure continuity of operations along traffic axis and minimize disruptions to flight operations. Contingency plans must be based on practical and probable scenarios. They must be well communicated and exercised to ensure that everyone understands the roles and responsibilities. To develop contingency plans, Air Navigation Service Providers can refer to CANSO’s Emergency Response Planning Guide. Airlines can also refer to the IATA Emergency Response Best practices Handbook which is developed under the IATA Emergency Response Planning Task Force. In addition to having a reliable and effective contingency plans, accessibility to and sharing of information is a necessity particularly to assist airline operators in making operational decisions. The terrible accident of MH17 in 2014, underlined not only the risk posed by overflying conflict zones, but also the need for timely dissemination of information to allow airlines to safely plan and operate their flights. The availability of regional coordination or information sharing centers could assist airlines in having access to reliable information during a disruption event, or crisis. In addition to flow management, Eurocontrol’s Network Manager Operations Centre provides crisis and contingency management for flights across Europe. The European Aviation Crisis Coordination Cell (EACCC) was established to coordinate the management of responses to disruptions in the European ATM network. A particular focus of the EACCC is sharing information with airspace users and service providers, in a timely manner. Additionally, the Network Operations Portal (NOP) provides real-time information on air traffic operations, enabling airlines to anticipate or react to events more effectively. In 2014, the Middle East ICAO Contingency Coordination Team (CCT) was launched with the purpose of effectively addressing major aviation security and operational challenges in the region, which would require urgent action and cross border cooperation. The Middle East does not currently have a centralized Command Center or Network Manager, therefore, the CCT has proven to be a crucial alternative means of managing information exchange during crisis.


12 Appendix H

BEST PRACTICES FOR CRISIS AND RECOVERY COMMUNICATION Communication and information flow are crucial during a crisis. The first rule of crisis communication is to “Be first. Be right. Be credible.” In an age ruled by digitization, breaking news appear first on Twitter or Facebook, giving the flying public the power to define events based on how they are experiencing them, before an airline can validate the event or provide facts. After the Asiana Airlines OZ214 accident at San Francisco in 2013, the first photo was posted on Twitter in less than one minute by a passenger. In addition, the use of Social Media and its accessibility have reduced the response time needed for organizations to make public and formal statements. Almost one third of the world’s population uses social media. Internet enabled smart phones have become a necessity not a luxury. It is expected that by 2020 80% of adults (worldwide) will own a personal smart phone. People are able to take photos, post videos and comments, stream on-line news and chat using social media in real time almost all the time. On board WiFi is becoming a standard service which means that even when passengers are in “flight mode” they still have access to social media. Researchers surveyed and questioned Twitter users in Japan two weeks after the Tohoku earthquake and devastating tsunami of March 2011. The research revealed that while people were using Twitter to communicate about their situation, whether they are safe or affected by the event, there were a lot of “retweets” of people who repeated inaccurate information. The research resolved that use of Twitter could be improved if official hashtags were announced during the event to ensure the reliability of information shared through this social media platform.31 Airlines, airports, air navigation services providers, and regulators should have a social media communication strategy embedded in their crisis and emergency response plans. IATA has developed Guidelines for Crisis Communications in the Digital Age, which can be downloaded using the link: http://www.iata.org/publications/Pages/crisis-communications-guidelines.aspx. In addition to being used during a crisis situation, Social Media plays a very crucial role in the recovery of tourism and air travel post-crisis. After a major disruption, especially if it was caused by apolitical unrest or an act of violence or terrorism, the main priority is the rebuilding of trust, confidence and the rehabilitation of the reputation of that destination. Physical damage to infrastructure can be restored over time, but recovering the reputation of a travel destination is more challenging. This is particularly so because the reputation of a travel destination is primarily based on the perception of the flying public. Recovery can be defined as bringing the conditions of the affected area back to a certain level of acceptability through the implementation of a strategy and a plan. In addition to the recovery project that would be implemented for infrastructure and processes, Media and Social Media should be used to restore the faith and confidence of the flying public as well as industry stakeholders, such as foreign regulators, and investors.

31 Source: Inderscience Publishers

http://www.iata.org/publications/Pages/crisis-communications-guidelines.aspx


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