This five-year financial plan supports our strategy, delivers price reductions to our customers, and funds key investment and services improvement programs to enhance safety and deliver value to industry.
The financial plan continues to deliver value to industry to support the long term growth of aviation across Australia.
This plan passes on savings that Airservices has achieved through a customer price reduction of 2 per cent. It also returns $200 million in capital to the Government while continuing to fund $1.1 billion in capital investment and new and enhanced services.
The investment program remains focused on customer service improvements through programs such as OneSKY, supporting airport infrastructure projects while continuing to enhance safety and business resilience. The five-year operating projections and performance measures are shown in the Operating Projections and Performance Measures table below. The plan reflects the latest economic outlook and airways traffic projections.
Pricing
We set our prices in consultation with our customers for core airways services under Long Term Pricing Agreements. Under the provisions of the Competition and Consumer Act 2010 (Cth) any increase in prices must be notified to the Australian Competition and Consumer Commission for its review.
The current prices were established in October 2011 allowing us to recover all reasonably incurred costs (including a return on capital employed) relating to the delivery of our services. Under this agreement the last Airservices pricing change occurred on 1 July 2015.
Following successive years of zero price growth, from 1 July 2019 Airservices delivered a price reduction of 2 per cent.
This delivers price certainty to our customers through to 2023-24 and a real price decrease of 20 per cent since 2015.
Operating Performance
Financially, we have sustained our new operating model and continue to build on our financial strength. This ensures the capacity for reinvestment in key programs and services to support industry growth into the future.
We anticipate that our returns will come under pressure in the latter years of the plan due to increased investment and costs associated with delivery of our strategy.
Over the planning horizon, Return on Assets and Net Profit After Tax are forecast at an average of 5 per cent and $53 million a year respectively.
These returns are marginally below regulatory benchmark rates acknowledging the peak in investments associated with implementing the future air traffic management services through OneSKY.
Revenues over the period reflect the planned price reduction and grow in line with projected traffic growth.
Signs of slowing traffic across the international aviation sector are starting to emerge following successive years of strong growth across Asian and Middle Eastern services. The outlook for domestic market growth still remains soft as major domestics continue to manage capacity and improve yields through increased load factors.
On balance traffic is expected to grow at average of 3 per cent a year.
Expenses are forecast to grow in line with inflation and then lift. This uplift will support the expansion of our core services to new regional locations and parallel runway operations at major airport locations. It will also support required transition and capability readiness activities, and provide overlapping support for old and new systems as part of OneSKY’s implementation.
To deliver information services for the future, the financial plan funds costs associated with developing these services, as well as modernisation of our networks and information platforms to ensure timely and secure delivery information and data services in an ever challenging cyber environment.
Allowances have also been made for per- and poly-fluoroalkyl substances (PFAS) site testing, containment and monitoring work.
Operating Projections and Performance Measures
| Description | 2018-19 Forecast ($million) | 2019-20 Plan ($million) | 2020-21 Plan ($million) | 2021-22 Plan ($million) | 2022-23 Plan ($million) | 2023-24 Plan ($million) |
|---|---|---|---|---|---|---|
| Airway Revenue | 1,103.0 | 1,108.9 | 1,141.8 | 1,179.1 | 1,218.7 | 1,259.0 |
| Other Revenue | 30.6 | 30.8 | 30.9 | 31.0 | 31.2 | 31.3 |
| Total Revenue | 1,133.6 | 1,139.7 | 1,172.7 | 1,210.1 | 1,249.9 | 1,290.3 |
| Staff Costs | 639.2 | 658.9 | 682.1 | 700.5 | 724.3 | 750.0 |
| Supplier Costs | 228.3 | 225.1 | 239.4 | 256.2 | 277.2 | 283.2 |
| Depreciation | 146.7 | 154.4 | 155.0 | 155.0 | 155.0 | 169.6 |
| Total Expenses before interest and Tax | 1,014.1 | 1,038.4 | 1,076.5 | 1,111.7 | 1,156.6 | 1,202.8 |
| Earnings Before Interest & Tax (EBIT) | 117.0 | 92.4 | 90.3 | 92.6 | 87.4 | 81.7 |
| Performance Description | 2018-19 Forecast ($million) | 2019-20 Plan ($million) | 2020-21 Plan ($million) | 2021-22 Plan ($million) | 2022-23 Plan ($million) | 2023-24 Plan ($million) |
|---|---|---|---|---|---|---|
| EBIT/Revenue | 10.4% | 8.2% | 7.7% | 7.7% | 7.0% | 6.4% |
| Return on Assets | 7.6% | 5.9% | 5.2% | 5.0% | 4.3% | 3.7% |
| Net profit after tax | 72.3 | 55.7 | 53.5 | 54.9 | 51.3 | 51.4 |
| Return on Equity after tax | 9.7% | 8.1% | 8.7% | 8.6% | 7.8% | 7.6% |
| Gearing | 25.2% | 44.5% | 44.9% | 44.8% | 46.1% | 45.2% |
| Returns | ||||||
| Dividends | 9.8 | 22.1 | 32.7 | 32.5 | 31.9 | 30.8 |
Capital Expenditure
The five-year capital investment projections are provided in the Capital Investment Projections table below. This investment profile incorporates the funding required to deliver on our strategy across the planning years with total investment levels estimated at $1.2 billion over five years.
The OneSKY program accounts for approximately 60 per cent of the total expenditure. The program also supports the delivery of runway developments, establishes two new regional services and continues the expansion of surveillance services to improve safety and support industry growth.
Capital Investment Projections
| Description | 2019-20 Plan ($million) | 2020-21 Plan ($million) | 2021-22 Plan ($million) | 2022-23 Plan ($million) | 2023-24 Plan ($million) | TOTAL 5 years ($million) |
|---|---|---|---|---|---|---|
| Air Traffic Management Services | 15.4 | 34.8 | 35.7 | 42.1 | 33.7 | 161.6 |
| Aviation Rescue Fire Fighting Services | 21.6 | 16.5 | 27.1 | 43.9 | 48.4 | 157.5 |
| Future Services | 167.6 | 146.5 | 137.7 | 141.0 | 151.9 | 744.6 |
| Enabling Services | 15.3 | 33.8 | 39.5 | 35.6 | 15.4 | 139.6 |
| Total Program | 219.9 | 231.6 | 239.9 | 262.5 | 249.4 | 1203.3 |
Returns, Dividends and Gearing
Through sustained levels of profitability, dividend planning and management of capital expenditure funding, Airservices is in a position to make a $200 million capital repayment to the government. The five-year returns, dividends and gearing projections are provided in the Operating Projections and Performance Measures table above.
Over the term of the plan:
- earnings before interest and tax (EBIT) will average $89 million a year
- EBIT returns over revenue are forecast at an average annual rate of 7 per cent.
Dividends are forecast to be paid out at a rate of 60 per cent of after tax profits returning an average of $30 million in dividends each year. Gearing is projected to remain within target levels and average 45 per cent over the term of the plan.