LFV Annual report 2018 1
L F V 2018 C OMMENT S ON THE INC OME S T A TEMEN
T COMMENTS ON THE INCOME STATEMENT Unless otherwise stated, all amounts are shown in SEK (millions). Information in brackets concerns the previous year. The outcome the LFV group (LFV), after financial income and expenses is 5 MSEK (-78). The result after tax equivalent is 1 MSEK (-61). The performance trend in recent years has been strongly affected by low interest rates in the form of increased pension costs due to increasing pension liability and diminishing yield on liquid assets. Lower aviation revenues and lower financial costs attributable to pension liability are the main differences when compared with previous years. The profit for the year are well within the budgeted level, which was 6 MSEK. OPERATING REVENUE Operating revenue amounts to 3,156 MSEK (3,253), a reduction of 97 MSEK. Aviation revenue has reduced by 146 MSEK to 2,155 MSEK (2,301). Aviation revenue for the year was affected by -7 MSEK due to retroactive adjustments for 2017. Around 200 MSEK of the year’s aviation revenue is due to effects related to the financing of costs exempted from risk sharing (uncontrollable costs) within the charging system for en route air navigation services and Terminal Arlanda. En route charges and terminal fees are set by the European Commission for multi-year reference periods. The current reference period (RP2), refers to 2015–2019. Deviations from the established charges are only permitted in some specific cases. One deviation that is permitted is uncontrollable changes with respect to pension costs. Pension costs for both 2017 and 2018 have risen sharply due to the changing discount rate that is used for calculating pension liability. The parts of the pension cost increase that affect route charges and terminal fees were 158 MSEK lower in 2018 than in 2017, which has contributed to lower aviation revenue related to uncontrollable costs. LFV’s revenue for en route air navigation services is based on the number of service units, which has increased by 5.6 percent compared to 2017. The established route charges and terminal fees for 2018 were reduced by 3.9 and 46 4.3 percent respectively compared with the previous year. The increased traffic provides LFV with additional revenue for route charges, but with the applicable regulatory framework, there is a built-in traffic risk sharing mechanism. This means that LFV may retain the revenue in full for increases in traffic up to 2 percent compared with the performance plan for 2015–2019. For increases in traffic between 2–10 percent, LFV may retain 30 percent of the increased revenue. The remaining share benefits the airlines through reduced charges. For increases in traffic over 10 percent, LFV may not retain any part of the revenue. Traffic volumes accumulated up to 2018 were approximately 13 percent higher than the performance plan. The outcome from terminal fees was 16 MSEK lower than the previous year, mainly due to lower revenue correction for pension costs. For the terminal fees, the traffic risk sharing mechanism means that LFV may not retain any portion of the increased revenue from heavier than planned traffic. Compensation for local air navigation services at state-owned, military, municipal and private airports is higher than last year, which is mainly explained by greater revenue being received for assignments for the Swedish Armed Forces. Other operating revenue amounted to 942 MSEK (921). This includes compensation of 723 MSEK (712) from the associated company NUAC. An equivalent amount can also be found under Miscellaneous External Costs, as LFV purchases air traffic management services from NUAC at the same time as it receives payments for staff and services rendered. An allocation of 25 MSEK (0) was received for government commissions in 2018. During the year, LFV received EU grants relating to the financing of investment and development activities. In addition to grants from the EU, grants for research and innovation are also obtained from the Swedish Transport Administration for developing and improving the efficiency of air navigation services. Grant revenue amounted to 74 MSEK (73) in total. The value of work performed by the company for its own use is 35 MSEK (31). OPERATING EXPENSES Operating expenses amount to 3,013 MSEK (3,008). Staff costs amount to 1,636 MSEK (1,636). Compared with the previous year, these are thus largely unchanged. Wages and other staff costs have increased by 26 MSEK, which is mainly related to normal wage increases, whilst social contributions and pensions are 27 MSEK lower. Expenses in 2018 were particularly affected by the reduction in the discount rate that the National Government Employee Pensions Board (SPV) annually sets in November and which is applied when calculating the present value of earned pension rights and the enterprises’ pension liability. The discount rate has been further reduced, from -0.6 percent to -0.7 percent. Last year’s reduction of 0.1 percent entails a cost increase for LFV of around 136 MSEK (390), most of which – 110 MSEK (314) – is classified for accounting purposes as a financial cost, and 26 MSEK (76) as personnel costs. Just over 80 percent of the additional cost is financed through the charges system, whilst the remaining approximately -25 MSEK (-70) directly affects the results. Miscellaneous external costs amount to 1,220 MSEK (1,207), an increase of 13 MSEK over the previous year’s costs. There are a number of different external costs that have fluctuated over the years, but which, for LFV, have as a whole partly cancelled each other out. Operating costs have generally increased for the state-owned enterprise compared with 2017. For example, costs for air traffic controller training, IT, maintenance and consultations, travel, and customer losses have all increased. Meanwhile, costs for the company group are lower, because payments of 40 MSEK