Recent years have witnessed an acceleration in the trend for Air Navigation Service Providers (ANSPs) to commercialise their operations. What does this mean for others in the aviation ecosystem?
Chris Brown and Kieran O'Brien of our Aviation team explore below.
Since the pandemic, ANSPs have been increasingly exploring ways to diversify their revenue streams to build resilience and enhance financial independence. We've noticed a growing number of clients inquiring about how commercialising their services can unlock new opportunities, leveraging the unique skills and resources they already possess.
While traditional areas such as training and safety case work remain within reach for commercialisation, the most significant interest is coming from regions experiencing rapid economic growth. This marks a notable shift, as ANSPs traditionally focused on their core regulatory roles are now more open to exploring non-core, commercially viable ventures.
Commercialisation: the new norm for ANSPs
Air Navigation Service Providers (ANSPs) are a critical actor in the aviation ecosystem, ensuring the safe and efficient movement of aircraft around the globe. There are some 160 globally, each responsible for controlling air traffic in its own airspace, as well as offering crucial information services to pilots and airlines on flight-critical factors such as weather conditions or airspace restrictions.
They also maintain and operate communication, navigation, and surveillance (CNS) systems that are indispensable for aircraft positioning as well as communication between pilots and air traffic control. As such, they function as a kind of nervous system for the entire sector, and are its first and most important line of defence against collisions and delays.
Like much else in aviation, ANSPs are evolving quickly. Whilst the first generation of ANSPs were government-owned and led, the 1990s saw the first pioneers begin to commercialise their operations. NAV CANADA and DFS Deutsche Flugsicherung GmbH began transitioning from the legacy government-operated models to more autonomous, commercially-oriented entities, and were followed by the part privatisation of the UK’s NATS (National Air Traffic Services) in the early 2000s, and Italy’s ENAV in 2016.
Recent years have seen this trend accelerate, driven by a confluence of factors including:
Increased air traffic volumes, which have put pressure on ANSPs to enhance their efficiency and capacity.
Global regulators such as the International Civil Aviation Organisation (ICAO) have nudged ANSPs to adopt more efficient and competitive services through commercialisation.
Technological advancements such as improved air traffic management systems, satellite-based navigation, and data-driven decision-making tools, which have provided an incentive to invest for improved service quality and efficiency.
Governance and accountability are often improved by commercialisation, since commercialised ANSPs tend to have a greater focus on performance and customer satisfaction, creating a greater emphasis on financial transparency, robust management, and high standards of safety and service quality.
Budget constraints are the operational reality for many ANSPs, in a climate of rising costs and squeezed government finances. Such constraints demand innovative thinking from ANSPs about raising new sources of revenue to fund investment into infrastructure and service improvement, most of which require commercialisation as a precondition.
Pioneer examples such as NAV CANADA, DFS, and NATS have proven the potential for ANSPs to commercialise successfully, providing a helpful precedent for others to follow.
NATS is divided into two companies: NATS En Route Ltd (NERL) and NATS Services Ltd (NSL). NERL, regulated by the CAA, focuses on airspace modernisation and technological advancements to meet traffic demand and improve efficiency, while also supporting global aviation's environmental goals. Their R&D facility collaborates with institutions like The Turing Institute and University of Cambridge to create a digital twin of UK airspace.
NSL offers air traffic services, consultation, and products globally, leveraging data to support tools like Intelligent Approach and Demand Capacity Balancer (DCB), enhancing problem-solving and commercial opportunities. The industry's environmental targets are also driving the evolution of new airspace users like eVTOLs, presenting fresh commercial opportunities for both NERL and NSL. Increased capacity demand, new markets, new industry environmental goals, and increased technological capabilities all play their part in increased commercialisation.
The diversification dividend
ANSPs provide a wide range of important services from a deep pool of expertise and talent, and as such have a range of options open to them for diversifying their revenue streams, including:
- Charges and fees for core services such as air navigation and air traffic management (though of course these will remain constrained by regulators and local legislation to protect users from unfair and excessive charges).
- Consultancy and training in capabilities such as system design, safety management, and operational procedures.
- Technological solutions and licensing of advanced air traffic management technologies, such as software for air traffic control, surveillance systems, and communication tools.
- Air traffic data collection and analysis services.
- Public-Private Partnerships to fund infrastructure and technology upgrades (in return for revenue-sharing arrangements).
- Non-aeronautical services, such as leasing space for telecommunication towers, or meteorological services.
- Participating in international air traffic management projects and initiatives, such as the Single European Sky ATM Research (SESAR) program, can also provide funding and revenue opportunities through grants and collaborative projects.
Those ANSPs that commercialised early now have mature portfolios of commercial activity. For instance, DFS Deutsche Flugsicherung operates several foreign subsidiaries that generate unregulated income, including DFS Aviation Services Bahrain, which provides air traffic management personnel to Bahrain’s Civil Aviation Authority. DFS has also engaged in various joint ventures, such as one with Deutsche Telekom AG for Droniq GmbH, which aims to market and distribute UAV-related services in Europe.
Similarly, NATS operates a diversified portfolio of interests in Asia and the Middle East through regional subsidiaries and has made strategic acquisitions, including a stake in Searidge Technologies, a remote tower developer.
ENAV has participated in joint ventures such as D-Flight alongside Leonardo SpA and Telespazio, which was formed in 2018 to develop the U-Space platform for UAV services. Additionally, ENAV operates international subsidiaries like IDS AirNav and ENAV North Atlantic, managing foreign activities and acquisitions while selling commercial solutions in foreign markets.
As other ANSPs have realised the potential for efficiency, revenue, and service quality gains in the face of relentlessly rising air traffic volumes, they have followed where these pioneers led. Some of the more notable examples include:
| 01 Austro Control (Austria): | commercial activities include air traffic management services, aeronautical data services, training and consultancy, and drone regulation. |
|---|---|
| 02 Air Navigation and Weather Services (ANWS - Taiwan): | commercial activities include air traffic management services, aeronautical information services, meteorological information and forecasting, training and consultancy, and cybersecurity. |
| 03 AEROTHAI (Aeronautical Radio of Thailand): | commercial activities include air traffic management services, aeronautical information services, communications, navigation and surveillance services and infrastructure, consultancy and training services, flight information and alert services, and international collaborations. |
| 04 PANSA (Polish Air Navigation Services Agency): | commercial activities include air traffic management services, aeronautical information services, flight inspection and calibration services, and training and consultancy. |
dans has a rich legacy of over 55 years of safe and efficient air navigation services for the world’s busiest international passenger airport (DXB, Dubai). Under the visionary leadership of His Highness Sheikh Ahmed bin Saeed Al Maktoum and the recent announcement about the Al Maktoum International Airport megaproject, Dubai is set to become the largest operating airline hub in the world in the future. This sharp growth will need to be supported by the availability and accessibility to best-in-class air navigation talent for Dubai.
While global ANSPs are using commercialisation as an instrument to increase their global soft power in aviation, commercialisation can also be a strong tool for attracting global talent and global partners required to deliver the high scale of growth aspirations for Dubai, with a focus on air navigation services, consulting as well as training.
Implications for others in aviation
With the model thoroughly proven and the drivers well established, the trend for ANSP commercialisation looks unlikely to abate. To conclude, we list some key implications by player type:
Airlines
- Commercialised ANSPs’ focus on efficiency and service improvements can translate to lower navigation charges for airlines, potentially reducing operational costs.
- With more flexible and responsive operations and a more customer-oriented approach, commercialised ANSPs are often in a position to provide more efficient routing and other services, helping airlines to reduce delays and drive efficiency.
ANSPs
- Pursuing a commercial strategy is a proven opportunity to realise service improvements and efficiencies as well as to secure financial independence and stability through new revenue streams.
- In today’s climate of rising costs and volumes, market liberalisation, and regulatory and policy impetus towards cost reductions (e.g. Single European Sky), commercialisation is increasingly attractive.
- Commercialisation is a multi-stage process requiring lengthy stakeholder consultation and deep cultural change.
- ANSPs that do commercialise have a wide range of options available to them for raising revenues, including air traffic engineering services, technological R&D, consultancy and training, and international partnerships.
- Commercialised ANSPs also have more flexibility to make operational decisions, invest in new technologies, and implement innovative practices to improve efficiency and service quality.
- Commercialised ANSPs need to adopt a marketoriented approach, focusing on customer satisfaction, competitive pricing, and efficient service delivery to maintain and attract business.
- To remain competitive and efficient, commercialised ANSPs must continually invest in advanced technologies and infrastructure improvements.
Regulators
- Must ensure that commercialised ANSPs maintain high safety standards, necessitating robust regulatory frameworks as well as monitoring and compliance.
- Transparency and performance review/ benchmarking are critical to ensure the delivery of expected benefits by commercialising ANSPs, since they are granted a monopoly service offering. Regulators must balance the commercial interests of ANSPs with the public interest in ensuring safe, efficient, and affordable air navigation services.
- ANSP commercialisation requires a clear institutional environment to succeed, including independent regulation and clear delineation of responsibilities and authority of all participants.
Policymakers
- To be effective, ANSPs need control over service levels and resources, including access to capital markets, and should have a mandate to develop continuous performance and cost efficiency improvements.
- Policymakers can support the commercialisation of ANSPs while ensuring they operate in the public interest, through policies on, e.g. pricing, investment, and technological innovation.
- Policymakers must ensure that the regulatory environment encourages investment in infrastructure and technology upgrades necessary to yield service gains.
- Policymakers should work with counterparts in other countries to harmonise regulations and facilitate the seamless operation of commercialised ANSPs across borders.
Airports
- Commercialised ANSPs can lower costs for airports through their adoption of advanced business practices and technologies and pursuit of more efficient operations and reduced delays.
- Airports often benefit from commercialised ANSPs’ innovation in air traffic management systems and customised services, improving overall service quality and passenger satisfaction.
- Commercialised ANSPs represent an opportunity for airports to gain new revenue streams, through revenue-sharing models and increased passenger traffic driven by more efficient air navigation services.
- Strategic partnerships with commercialised ANSPs can create shared investments in infrastructure and technology, enhancing airport capabilities and competitiveness.
- Effective coordination between airports, airlines, and commercial ANSPs is crucial to address any conflicts of interest that may arise and ensure smooth adaptation to changes brought about by commercialisation, e.g. changes in fee structures, service agreements, and operational protocols.
Get in touch
If you have any queries about the impacts of commercial Air Navigation Service Providers for your business, please get in touch.
Contact Chris Brown or Kieran O'Brien of our Aviation team today; we'd be delighted to hear from you.
Christopher Brown
Partner, Head of Strategy
KPMG in Ireland
Kieran O'Brien
Partner
KPMG in Ireland
