A quality service from

civil air navigation services organisation

THE SIX HIDDEN COSTS OF

ANSP REVENUE MANAGEMENT
A platform for transforming an ANSPs
revenue generation model

White Paper
February 2013

In association with

Contents
Summary 3

flightyield.aero

The revenue challenge

The six hidden costs of inefficient revenue management

How significant are these hidden costs?

A new approach to revenue management

Making efficient revenue management a reality

Fresh thinking on next generation systems

FlightYield Architecture

Benefits of the FlightYield service

10

About the FlightYield Partners

12

Contact FlightYield

12

Summary
The revenue management approaches of many ANSPs are not keeping pace with the
transformation of commercial aviation.
A new way of managing revenue is critical to the future growth of ANSPs, but the first
step for many is to improve the fundamentals of the way they collect their income.
ANSPs must be able to address to The Six Hidden Costs of revenue management:
1. Inflexible policies and subsequent pricing models
2. Incomplete data instead of real-time data
3. Data entry errors caused by large-scale manual processing
4. Invoice delays and the resultant cash flow impacts
5. Invoice disputes and the resolution process
6. Payment delays
Addressing these costs can deliver significant operational and financial benefits.
It also means ANSPs can develop new revenue collection approaches: where
charging is more granular and transparent, is more efficient and new methods like
performance-based pricing can be introduced.
FlightYield is a revenue management service that is being used by ANSPs to address
the Six Hidden Costs and build a platform for improving revenue management.

flightyield.aero

The revenue challenge

For any Air Navigation Service Provider (ANSP), the
management of their revenues is a growing and increasingly
complex challenge.
Demands are many, varied, and often loudly expressed by a
range of stakeholders including airlines, airports, regulators,
governments and the public.
Safety can never be compromised, but ANSPs are expected
to increase capacity, reduce delays, address environmental
impacts, and adhere to changing global standards, all while
delays, address environmental impacts, and adhere to
changing global standards, all while meeting demands for
lower costs.
The last 30 years has seen low cost airlines, global
privatisation of airports, increasing commercialisation of
ANSPs, and significant changes in technology. However, the
pricing mechanisms and systems used to provide revenue for
ANSPs has not kept pace with these important developments.
As a result, ANSPs are poorly equipped to balance demands
from airspace users with the investments required to meet
those demands.
ANSP charging schedules are typically one-size-fits-all,
established every three to five years in a contested dialogue
between stakeholders. This approach constrains ANSP
financial sustainability, with limited opportunity for win-win
outcomes or the ability to fund investments that could be of
financial or operational benefit to all airspace users.
Also, limited development of charging mechanisms and
systems has commonly resulted in charging processes
which are not fully integrated or transparent as well as being
inefficient and error-prone.
Improved and integrated airspace usage charging
mechanisms, processes and systems need to be introduced
by those who understand the complexities and relative
demands of the industry.

flightyield.aero

SAFETY
Capacity
Flexibility
Efficiency
Environment
Regulation

LOWER
COSTS

This will achieve a balance between the demands on ANSPs

and the investments needed to meet those demands. This
should be achieved while reducing revenue collection costs,
eliminating errors, providing increased transparency and
customer service, and reducing the time taken between
Revenue
collection
&
infrastructure use and
related revenue
receipt.

debt management

Just as airlines and telecommunication providers have

developed sophisticated yield management systems to
provide user choice and optimise return on investments,
ANSPs need a modern, sophisticated, and purpose built
solution to optimise yield on ATC investments and on the
airspace asset being managed by them.

Fully
For many ANSPs however,
theintegrated
first priority must be to get
&
transparent
their revenue management operating effectively, avoiding
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what we have identified
asto
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Sixprocess
Hidden Costs of
inefficient revenue management.
Configurable &
efficient processing

Automated data
collection & processing

The six hidden costs of inefficient

revenue management
Many ANSPs are not equipped to manage their existing
revenue effectively. Systems are often based on spread
sheets, using static flight plan/schedule data, and involving
significant manual data entry and processing.
Many of these systems are not only incapable of supporting
more complex charging models; they are not fully integrated
and are inefficient and error-prone, helping generate what we
call the Six Hidden Costs of inefficient revenue management.
1. Inflexible policies may prevent the ANSP from raising a
charge for a service element, even though this element
has required significant investment or has resulted in
considerable benefit to airspace users e.g. PBN. This
restriction may continue until the next pricing round, or
could be permanent, if the pricing discussion does not
allow for investment or performance based outcomes.
2. Incomplete data such as the use of flight schedules
instead of actual flight records, missing information on
aircraft configuration and ownership, and application of
nominal routes instead of actual routes flown, result in
charges being missed or being incorrectly processed.
3. Data entry errors are introduced when large amounts
of data are being processed manually, especially where
data is being transcribed from hand-written records such
tower flight strips. It often seems that air traffic controllers
are second only to doctors in their ability to produce
indecipherable hand-writing
4. Invoice delays such as introduced by manual processing
and chasing missing data, result in invoices being
produced days, weeks, or even months after the flight
even though the flight charges are usually payable shortly
after the operation. The resulting impact on cash flows,
especially for increasingly commercialised ANSPs who are
expected to produce a fair return on capital employed, is a
significant and real cost.

flightyield.aero

5. Invoice disputes are inevitable when processing millions

of charge record items for dozens, hundreds or thousands
of airspace users. Changes to establish user pays and
granular charging, while supportive of yield management
objectives, are likely to increase the time and resource
invested in processing these disputes unless this is
addressed with improved information flow.
6. Payment delays result not only from the time taken by
airspace users to process invoices and raise disputes and
enquiries, but from the fact that many systems are based
on paper invoices and statements, sent through the post
and subject to monthly cheque runs.

How significant are these

hidden costs?
In working with ANSPs to optimise revenue management
processes, FlightYield has experienced examples of the six
hidden costs:
An ANSP reduced working capital costs by about 1%
(US$1m) of total turnover by moving from traditional
processing to an integrated, electronic processing system
with its major customers.
During audit and parallel processing of sample data, ANSPs
often discover that revenue was missed or overlooked as
a result of missing data and processing errors. In most
cases this amounts to at least 6% of total revenue and, in
some cases, significantly more.
Significant resources are deployed in processing charges,
both in the ANSP and in the airspace users. The cost of
staff involved can be up to 2% of the total revenue of the
ANSP and the processing costs borne by the airlines may
be similar.

flightyield.aero

In response, some ANSPs have undertaken major systems

development projects to create new systems to automate the
process, eliminate errors, and reduce the impact of the Six
Hidden Costs.
Some of these projects have been successful, however
the time, costs and risks associated with such system
development projects are significant and may be beyond
the capacity of some ANSPs. Others choose not to apply
specialised resources to this task.
While a proliferation of point solutions may improve the
outcome for individual ANSPs, it will not be optimal for the
industry as a whole and especially for major airlines, who have
to interface and interact with many new ANSP-developed
solutions.
Some independent services have emerged to address the
inefficiencies, and have achieved some success, however
these generation one services tend to be limited in scope,
use subsets of available data and technologies, and operate
under ownership and governance models which dont provide
the best long term outcome for ANSPs.

A new approach to
revenue management
Putting in place an effective revenue management system
enables ANSPs to address the Six Hidden Costs, and prepare
for a future where more sophisticated and sustainable pricing
approaches are possible.
Most ANSPs operate, at least for the en-route element of
their service provision, in a natural monopoly, and charges are
usually set on a regular (three-to-five year) cycle. This follows
a dialogue and negotiation between the ANSP and airspace
users, often overseen by the regulator or other Government
body. The language is usually directed to recovering ANSP
costs on an equitable basis and according to the general
policies and principles outlined in ICAO Document 9082 (ICAOs
Policies on Charges for Airports and Air Navigation Services).
The ICAO policies (ICAO Document 9082 -ICAOs Policies on
Charges for Airports and Air Navigation Services) encourage a
charging regime based on user-pays and specifically provide
for charges based on distance flown, aircraft weight, and on
the different elements of a flight. The reality is that a simple
construct is usually agreed because most ANSPs do not
have the systems to differentially charge millions of aircraft
movements based on individual flight profiles. Detailed
user-pays principles are often absorbed into a simple
cost-allocation model and any variations are absorbed by
the ANSP. This leads to under investment, as there are few
financial incentives for increased investment or performance.
For example, two of the significant new technologies
available to ANSPs are PBN and Air Traffic Flow Management
(ATFM). Both of these, especially ATFM, require considerable
investment from the ANSP. However the majority of the
economic benefits of the investment, in terms of reduced
flight time and fuel usage, will accrue to the airline and not to
the ANSP. This approach will not be financially sustainable for
ANSPs unless a user-pays or pay-for-performance element
is introduced.

flightyield.aero

Likewise, if traffic volumes demand alternate or parallel

routes between destinations, such as across the Atlantic, is
the central/optimal route of more value to an airline than the
alternates and, if so, will some airlines be willing to pay more
to use the premium lane.
Operating within the framework of ICAO policies, ANSPs can
move away from a gross cost allocation framework and more
towards a new pricing approach, which incorporates:
Increased granularity of charging so that individual flights
and phases of each flight can be accurately priced in terms
not the services and assets actually utilised.
Introduction of performance elements which reward
the ANSP for improved service delivery especially where
it results in direct and measurable cost savings for
airspace users.
Enhanced transparency of charging so that airspace users
can understand and navigate the resulting charges and
be satisfied that services are being delivered and charged
accordingly.
Improved efficiency of charging systems and processes
so that the new principles do not result in additional costs
for both ANSP and airspace users in processing the more
complex charging regime.
The transformation of ANSPs from government department
to service provider, separate from regulator and airport
operator, is well advanced in much of the world. Furthermore,
many of the newly focussed ANSPs are undergoing a
commercialisation process to develop as an independent
player in the aviation community.

SAFETY

Capacity
LOWER
Flexibility
Efficiency
COSTS
Next generation approaches
to charging and revenue
Environment
management, such as
described above, are an important
Regulation

requirement for both transitions and allow the ANSP

maximum capability and flexibility in managing the yield from
the assets under its control.
The above diagram highlights the three key pillars required
for a next generation revenue management system.
This approach delivers fully integrated, end-to-end systems
and processes that provide ANSPs with greater financial
sustainability and deliver full transparency during
pricing reviews.

Revenue collection &

debt management

Fully integrated
& transparent
end to end process

Configurable &
efficient processing

flightyield.aero

Automated data
collection & processing

Making efficient revenue management

a reality
As previously noted a number of the larger ANSPs have
undertaken major systems development projects to create
new systems to automate processes, eliminate errors, and
reduce the impact of the Six Hidden Costs.
Some of these projects have been successful, however
the time, costs and risks associated with such system
development projects are significant and generally beyond
the capacity of some ANSPs. Others choose not to apply
specialised resources to this task, focussing on technology,
systems and processes associated with being an ANSP.

While a proliferation of point solutions may improve the

outcome for individual ANSPs, it will not be optimal for the
industry as a whole and especially for major airlines, who have
to interface and interact with many new ANSP-developed
solutions.
Some independent services have emerged to address the
inefficiencies, and have achieved some success, however
these generation one services tend to be limited in scope,
use subsets of available data and technologies, and operate
under ownership and governance models which dont provide
the best long term outcome for ANSPs.

Fresh thinking on next generation systems

FlightYield is a fully-outsourced modern revenue management
service purpose built for ANSPs and operated in partnership
by CANSO, the Global Voice of ATM, SITA, the worlds leading
specialist in air transport communications and information
technology, and Airways, New Zealands ANSP with 10 years
experience in developing next generation billing solutions.
Based on patented systems technology developed by Airways,
FlightYield is proven in current operation in both complex
airspace such as China and Saudi Arabia, and less complex

airspace such as Fiji and Papua New Guinea.

FlightYield provides technology in a cloud-based model,
supported by a dedicated invoice processing team and
financial services resources provided by SITA. FlightYield
will not only provide the systems to support next generation
airspace yield management, but will process invoices, manage
enquiries, accept payments and remit cleared and validated
funds to the ANSP.

FlightYield Architecture
FlightYield is a fully managed, cloud-based service, designed
for ANSPs in partnership with CANSO, using technology
developed and managed by Airways, which is hosted on
SITAs secure cloud network, and operated by SITAs revenue
management team based in Europe.

flightyield.aero

 FlightYield installs a Secure FlightYield Gateway (SFG)

within each customer network to collect, filter, and buffer
source data from the surveillance, airport and flight
planning systems. It processes financial transactions
into the customer financial systems. Each SFG is
configured with drivers from existing radar and other
standard interfaces, or a custom driver will be developed
for each new system. The SFG is provided with a range of
monitoring, filtering and buffering options to enable the
ultimate control of data to remain with the customer ANSP.
Data is securely transmitted to the FlightYield servers
located in secure and redundant SITA data processing
centres. Servers are configured for the charging rule
sets by FlightYield technical operations personnel in
collaboration with the ANSP.
Charges are processed on an agreed schedule and
reviewed and approved by FlightYield Revenue Operations
staff, prior to sending the transactions electronically (and/
or using other means) to airspace users.

ANSP staff have real-time access to the system to view

status and to drill-down into invoices, transaction and
charge elements. They can review and edit charging rules,
or can use the services of the FlightYield operations teams
to assist with those processes.
ANSPs can provide secure access to the system to
airspace users so that airlines, airports and others can
receive detailed and real-time access to the details
underneath invoices and statements.
Benefits of the FlightYield service
FlightYield uses modern systems technology, is fully
integrated with data sources and with financial systems,
incorporates a sophisticated and granular charging rule
engine, includes comprehensive reporting and drill-down
facilities for airspace users, and uses real-time electronic
processing to significantly reduce the six hidden costs.
FlightYield is delivered on a pre-agreed fee basis, with cost
savings and increased revenue flowing directly to the ANSP.

FlightYield Operations staff manage enquiries from

airspace users and pursue outstanding payments. Funds
are remitted to the customer ANSP as they are received
and validated.

flightyield.aero

10

 As a service available to all ANSPs, FlightYield offers a

common system and interface for ANSPs and their airline
customers, with the potential to massively reduce the
number of point-to-point connections between them. For
example, if there are 200 ANSPs and 400 airlines and each
ANSP engages with 100 airlines, there will be 20,000
point-to-point connections. If all connections were
through the FlightYield service, only 600 connections
would be required.
FlightYields ability to create charge records from
operational data and provide supporting information for
each invoice line item allows ANSP customers to drill right
down to the individual elements of each operation which
makes up the amount invoiced. This reduces the time
taken to process invoices, establishes an environment of
collaboration and transparency, and improves customer
satisfaction with the process.

flightyield.aero

FlightYields comprehensive, proven rules engine

allows and supports the introduction of sophisticated
charging regimes, without a resulting increase in
cost and complexity. ANSPs can offer premium and
performance based services and increasingly granular
user-pays pricing.

FlightYield allows multiple rule scenarios to be established
to allow source data to be recalculated under a new/planned
set of charging rules. This allows new charging propositions
to be modelled and the results analysed and discussed with
stakeholders well in advance of introduction.
FlightYield core business is the end-to-end process
of revenue management that leverages the relative
strengths of the parties to provide an industry
standard service.
FlightYield improves the confidence of the stakeholders
including Boards, Ministers and Shareholders.

11

About the Flightyield Partners

Flightyield is a collaboration between three leading players in the aviation industry, each bringing core skills and experience to
the Flightyield revenue management service.
In association with

civil air navigation services organisation

The Global Voice of

Air Traffic Management

The worlds leading specialist in air

transport communications and IT

Making Your World Possible

CANSO is the global voice of ANSPs

worldwide. Its members support over
85% of world air traffic, and share
information and develop new policies,
with the ultimate aim of improving
air navigation services on the ground
and in the air. CANSO represents its
members views in major regulatory
and industry forums, including at ICAO,
where it has official Observer status.

SITA is the worlds leading specialist

in air transport communications and
information technology. SITA works
closely with every sector of the air
transport community, innovating,
developing and managing business
solutions over the worlds most
extensive network one that forms
the communication backbone of
the global air transport industry.

Airways is New Zealands ANSP,

managing around 30 million km2 of
controlled airspace and over 1 million
movements per year. For more than
20 years, Airways has also provided
a range of products, services and
training to ANSPs around the world.

CANSO represents the needs and

strategies of the global ANSP
community in the overall design
and architecture of Flightyield and
provides the contractual framework
for Flightyield services.

SITAs secure network and cloud

infrastructure hosts the Flightyield
technology. SITA Bureau Services,
which is owned by SITA, integrates
IT and financial services to provide
business processing and management.
It manages the business processing for
Flightyield including billing, collection
and revenue management.

Contact Flightyield
Contact us to explore how Flightyield can help you improve
your revenue management and improve your cash flow.

Further details can be found at flightyield.aero

Sales@flightyield.com

Airways has extensive experience

in developing and deploying the
technology behind Flightyield both
in New Zealand and internationally
and is responsible for deploying and
operating the technology for the
Flightyield service.