Financial Performance

Performance

Reform our revenue and cost model and financing structure to be more efficient, flexible and sustainable.

KPI Results

	2018-19 Result	2019-20 Result	2020-21 Target	2020-21 Result
Cost per Instrument Flight Rules Flight Hour Our cost per instrument flight rules (IFR) flight hour ($/hour)	$332	$367	$890	$578
Return on assets (RoA) Airservices annual earnings as a percentage of assets	8.2%	-1.3%	-12.3%	-2.1%*

* Excludes $550M Government Grant Tranche 3 for future funding
Source: Airservices 2020-21 Corporate Plan, page 19.

Analysis

Our cost per instrument flight rules (IFR) flight hour is favourable to target mainly driven as a result of cost reductions of $100m during 2020-21.

The Australian Government provided relief to the Australian aviation industry through this time. Airservices received $1.1b in 2020-21 to help fund the provision of critical air traffic and aviation rescue fire fighting services, while airways revenue dropped by 50.4 per cent. It also helped fund fee waivers provided to domestic aircraft operations worth $159.2m. The expected negative return on assets of -12.3% was reduced as a result of saving in operating costs, to -2.1%.

Initiatives

FINANCIAL INITIATIVES	FINANCIAL INITIATIVES ACHIEVEMENTS
SHORT-TERM COST-SAVING MEASURES Obtain $85m of savings in 2020-21 by reducing demand-driven expenditure and identifying process changes to ensure that expenditure is minimised as air traffic returns.	Implemented a program of rigorous cost savings in response to the financial impacts of the COVID-19 pandemic on the industry. The various initiatives saved us $100m throughout the year and will remain in place for the foreseeable future. We have finalised the voluntary redundancy program for management and corporate agreement staff enabling $28.1m in annualised savings.
SUPPLIER ENGAGEMENT Work with suppliers to find appropriate solutions to harvest incremental and sustainable savings. Establish scalable and flexible cost structures to move away from static, fixed cost structures.	Opportunities to realise near and longer-term savings of approximately $13m have been identified. $7.2m worth of savings negotiated in 2020-21.
LIQUIDITY MANAGEMENT / GEARING STRATEGY Agree acceptable financial KPIs/ratios centred around sustainable debt and liquidity during the pandemic and through the recovery phase to ensure ongoing financial sustainability.	Capital Structure review undertaken to understand our funding structure. The Australian Government provided financial assistance to Airservices. This assistance, along with our cost savings, enabled us to continue to deliver our services while maintaining our charges. We continued to administer the Australian Airline Financial Relief Package (AAFRP), which has provided $159.2m in financial relief through fee waivers to the domestic airlines and operators for 2020-21.

Case Study

One Airservices Plan

The COVID-19 pandemic has severely impacted the aviation industry. Border closures and movement restrictions meant a drastic drop in air traffic operations. As a result, the way we think about travel and connect with people has changed. Disruptive trends that were already impacting the industry have accelerated.

To support the aviation industry and safe access to our skies in these turbulent times, our strategic One Airservices Plan was introduced in 2020-21. The Plan’s focus was threefold: address the immediate challenges presented by COVID-19; reposition the organisation to react and respond quickly in a volatile environment; and continue our journey to reimagine how we work and transform, to meet the evolving needs of our customers into the future.

In response to dramatically declining revenues as the pandemic took hold, we moved swiftly to drive efficiency and enhance service resilience, reduce costs, pause discretionary spending and adjust our investment program.

Together these measures have delivered $100m in savings in 2020-21.

As we repositioned to meet the ‘new normal’ operating environment affected by border closures and restrictions, we introduced a new operating model to support us to be more flexible, scalable and efficient.

We also identified some unexpected opportunities to prepare for the future while our skies are quieter.

This includes accelerating important projects such as the enabling projects for OneSKY, investing in digitalisation, automation and infrastructure, that will deliver value to our customers in the future and ensure we are better placed to support them as they recover from the pandemic.