Volume risk sharing for aircraft over 5 tonnes
Airways are proposing improvements to the risk sharing mechanism in its Pricing Framework (Section 5.2 of the Pricing Framework - July 2012) and the associated provisions of its Standard Terms and Conditions for the Provision of Airways’ Services (i.e. clause 6).
The risk sharing mechanism in Airways’ Pricing Framework was designed to account for unforeseen variations in the volume of air traffic. The current mechanism works effectively when volume variations are moderate, but the exceptional growth experienced in the 2015/16 year highlighted that the mechanism is not effective when volume variations are large.
The proposal includes the following improvements to the volume risk sharing mechanism to provide a more equitable outcome:
- In the first two years of a pricing period Airways will reforecast the following year’s revenue.
- If the forecast for the following year indicates that revenue will lie outside a range of +/- 2% of the target pricing revenue, then a price reset will be triggered for that following year.
- If a price reset is required, this reset will be based on the forecasted volumes for the affected year rather than the prior year’s revenue.
The full details of the proposed changed are included in the document Volume risk sharing for aircraft over 5 tonnes.
Airways encourages your feedback on the proposal by emailing email@example.com. The consultation period starts on 13 February 2017 and the final day for submissions is 6 March 2017.