ANA Traffic Growth Incentives Program Terms and Conditions
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1 ANA Traffic Growth s Program Terms and Conditions 1. Introduction ANA Traffic Growth s Program (hereinafter referred to as the Program) is aimed at the growth of commercial air traffic at ANA airports by encouraging the passenger traffic growth on existing operations and the opening of new frequencies and new airport routes. This Program was designed to encourage airlines to develop their services at ANA airports network, to promote traffic growth as well as to make more efficient use of each airport s capacity. 2. Definitions 2.1. Airline: Any airline company with a valid air transport operator license issued by a civil aviation authority Airport: The airports of Porto (OPO), Faro (FAO), Beja (BYJ), Ponta Delgada (PDL), Horta (HOR), Santa Maria (SMA), Flores (FLW), Madeira (FNC) and Porto Santo (PXO) : Airport or number of airports that to a large extent have the same city or regional market and are subject to consolidation for the purposes of market growth analysis and the evaluation of incentives requirements Eligible Passengers: Passengers departing on a commercial flight and subject to the payment of the passenger service charge ATM / Frequency: Air traffic movement corresponding to one landing plus one takeoff Aircraft Capacity: Number of seats available on the aircraft used in an operation Load Factor: Ratio between the number of Eligible Passengers and the Aircraft Capacity on a given flight; 2.8. Incremental Departing Passengers: Increase of Eligible Passengers in relation to the previous corresponding period on eligible flights for the purposes of this Program adjusted according to the mechanisms set out in IATA Season: Periods of the year set by the International Air Transport Association (IATA), designated as IATA summer (from April to October) and IATA winter (from November to March) : Financial support following the principle of private investment, awarded by ANA to an Airline generating developing passenger traffic at an airport according to the terms and condition of this Program Existing Frequency: Number of scheduled flights (ATMs) operated in the previous homologous IATA season (excluding ATMs under New Route s) set by ANA New Frequency: Number of additional scheduled frequencies compared to the existing frequencies in the previous homologous IATA season. 1
2 2.13. New Operational Base: Initial start-up of an Airline operational base with all its associated facilities and services, comprising the overnight parking of a number of aircrafts at the airport, on a daily basis, so that its first movements the following day are performed by the aircrafts based there New Route: Route that is not an existing airport route or has not been previously announced by any Airline and that directly serves a new city or market destination that will increase the connectivity and the overall passenger traffic to ANA airport and that has not been served in the previous equivalent IATA season with the minimum frequencies defined in the terms of this Program. Airports shall not be considered as new destinations if they serve a city market already served by another airport. Considering that markets served from an airport may be different according to the characteristics of each particular origin/destination city, ANA will base its final decision about potential new routes serving existing city markets on a detailed market assessment taking into consideration the following criteria: ANA Airports marketing strategy and business model; market volume; destination airport location; airline market segments served at the time and the route s expected contribution to increase ANA Airports passengers traffic. If, following this assessment, the route is considered as new, ANA will monitor the destination market performance and will apply to the incentive the market growth mechanism Off-peak: Period of the day during which the declared capacity of the airport presents no limitations to the growth in passenger traffic Peak: Period of the day during which the installed capacity of the airport presents some limitations to the growth in passenger traffic Route Level 1 and 2: An Existing or a New Route to a destination airport within a distance range set by the Airport as set out in Annex Program scope 3.1. The Program is opened to all Airlines that wish to develop their operation in the Airports and that comply with the terms and conditions of this Program The Program is applicable in the Airports as defined in The Program is not applicable to PSO routes There is no consolidation of ANA s network Airports in the calculation of the incentives. However, ANA reserves the right to consolidate its network airports if there is substantial evidence of significant substitution of airline operations between ANA airports Ad hoc scheduled flights and non-scheduled charter flights are not subject to incentives pursuant to the Program Notwithstanding paragraph 3.5. Supra, charter operations may be eligible for the in the categories of New Frequency and New Route if they have a published schedule and if, after a market assessment, the economic benefits and the growth in passengers to the airports, driven by those operations, are demonstrated. The market assessment will be based on the following criteria: Tour Operator / Airline business case; Identification of Tour Operators promoting the route; proportion of seat only that will be directly sold via distribution channels; route s expected contribution to increasing the number of Eligible Passengers. ANA reserves the right 2
3 to modulate the according to the results of its assessment in terms of its expected commercial benefit. 4. Program outline 4.1. The incentive structure and its terms and conditions are applicable in the Airports. However, due to specific market characteristics and business goals the s values and its criteria may differ between Airports in accordance with that shown in Annex The Program defines three categories of s: a) for Operational Efficiency; b) for Opening a New Frequency; c) for a New Route; 4.3. The program defines additional support to an Airline Base Start-up. 5. for Operational Efficiency 5.1. Specific conditions The for operational efficiency aims to reward the year-on-year Incremental Departing Passengers on the airline s existing frequencies, defined as all the frequencies operated in the previous homologous period, excluding New Routes under this Program. The consists on: a) A base incentive for Incremental Departing Passengers; and b) A set of mark-ups (to the base incentive) depending on the profile of the passenger growth The number of Incremental Departing Passengers in the analysed period is calculated using the market growth adjustment mechanism described in Base For Incremental Departing Passenger carried by the Airline a base incentive will be awarded according to the amounts set out in Annex This incentive is applicable to Airlines with an annual positive variation of Incremental Departing Passengers valid for this category of incentive Aircraft capacity mark-up For Incremental Departing Passengers as a result of an increase in aircraft capacity a mark-up to the Base will be added according to the amounts set out in Annex This situation occurs when the number of seats offered in the current period is higher than the number of seats offered in the previous homologous period (as a result of an aircraft capacity increase), when analysing the total airline operations, applying the mark-up to all the Incremental Departing Passengers This incentive is applicable to Airlines with an annual positive variation of Incremental Departing Passengers valid for this category of incentive Annual Seasonality mark-up 3
4 For Incremental Departing Passengers in a specific period of the year, a markup to the Base will be added according to the amounts set out in Annex to airlines with a positive variation in Incremental Departing Passengers valid for this category of incentive during the respective mark-up period. More than one annual seasonality mark-up per airport may exist. 6. for opening a New Frequency 6.1. Specific conditions The for opening a new frequency aims to reward the Incremental Departing Passengers traffic growth by the airline opening new scheduled frequencies on the Airport s existing routes To be eligible for the New Frequency, the Airlines need to increase the flight frequency (compared to the previous homologous IATA season) during a minimum number of weeks, in accordance with the conditions set out in Annex This incentive is for a period of one year, beginning on the date of commencement of the new frequency The consists of: a) A base incentive for New Frequencies for Eligible Passengers; and b) A set of mark-ups (to the base incentive) depending on the profile of the New Frequencies operated The may differ based on the flight schedule of the New Frequency (Peak/Off-Peak) Requirements and incentives are evaluated by and by IATA season The number of Incremental Departing Passengers of the New Frequency in the analysed period is calculated using the incentive adjustment mechanisms described in Ad-hoc New Frequencies are not considered for any category of incentives Base For every Incremental Departing Passenger carried in the New Frequency, the Airline will be awarded a base incentive according to the amounts set out in Annex Annual Seasonality mark-up For Incremental Departing Passengers in a specific period of the year, a markup to the Base will be added according to the amounts set out in Annex to airlines with a positive variation of Incremental Departing Passengers valid for this category of incentive for the respective mark-up period. More than one annual seasonality mark-up per airport may exist mark-up 4
5 For Incremental Departing Passenger in designated markets, a mark-up to the Base will be added in accordance to the amounts set out in Annex Two levels of route mark-ups may apply: a) Level 1 b) Level 2 7. for opening a New Route 7.1. Specific conditions The incentive for opening a New Route aims to reward the growth in passenger traffic in the Airport by opening scheduled New Routes To be eligible for the New Routes, Airlines need to operate a minimum flight frequency during a minimum number of weeks, according to the conditions set out in Annex This incentive is awarded over a number of years, beginning on the commencement date of the new route, in accordance to the conditions set out in Annex This consists of: a) A base incentive for New Route departing passengers; and b) A set of mark-ups (to the base incentive) depending on the profile of the New Route operation The may differ based on the flight schedule of the New Route (Peak/Off-Peak) Requirements and incentives are evaluated by and by IATA season Ad-hoc New Routes are not considered for any category of incentives Base For every departing passenger carried on the New Route, the Airline will be awarded a base incentive according to the amounts set out in Annex Annual Seasonality mark-up For passengers departing in during a specific period of the year, a mark-up to the Base will be added in accordance with the amounts set out in Annex More than one annual seasonality mark-up per airport may exist mark-up For passengers departing in designated markets, a mark-up to the Base will be added according to the amounts set out in Annex Two levels of route mark-ups may apply: a) Level 1 b) Level 2 8. adjustment mechanisms 8.1. A growth adjustment will apply to the as follows: 5
6 An Airline Incremental Departing Passengers adjustment, according to performance, is applicable to the Operational Efficiency and the New Frequency for the Incremental Departing Passengers calculation. For purposes, this result is referred to as Adjusted Incremental Passengers This mechanism is applied by and by IATA season If all the airlines operating in the grow, all Incremental Departing Passengers will be considered If the passenger decreases, for growing airlines, the Incremental Departing Passengers will not be considered If the grows but not all the airlines in that grow (some airlines grow, some decrease), ANA will apply a proportional reduction on the Incremental Departing Passengers for the growing airlines, by applying a ratio to these growing airlines, that is referred to as the Growth Adjustment factor, in order to calculate the Adjusted Incremental Departing Passengers, according to the following formulas: Growth Adjustment factor = Total incremental passengers on the Sum of incremental passengers of growing airlines on the market Adjusted Incremental Departing Passengers = Airline Actual Incremental Departing Passengers in the x Growth Adjustment factor Airline growth adjustment will apply to the as follows: This mechanism adjusts the New Frequency if the Airline decreases passengers on Existing frequencies The total New Frequency is adjusted according to the following formula: Adjusted New Frequencies s = New Frequencies s + (Actual Total Passengers reduction on Existing Frequencies New Frequencies Base ). 9. for Airlines to open New Operational Base 9.1. The for a New Operational Base aims to reward the initial start-up of an Airline operational base with all its associated facilities and services The transfer of operational bases between airports of the ANA network is not considered under the New Operational Base incentive For an Airline aiming to start a New Operational Base at Porto (OPO), Faro (FAO), Ponta Delgada (PDL) or Madeira (FNC) airports the base incentive for Eligible Passengers on New Frequencies and on a New Route will be increased according to the amounts set out in Annex 1. 6
7 9.4. The for a New Operational Base is subject to a specific operational agreement. 10. Application procedure The application must be submitted at least two weeks in advance of the start of the corresponding IATA season The application process shall be suitably organised by the Airline, which must submit the specific Application Form for this purpose to ANA ANA will analyse the application submitted and will notify the Airline The Airline must ensure that flight operations will be conducted under the terms and conditions set forth in the application process and shall immediately report to ANA any change or event undermining the assumptions relating to the application The to be paid under this Program is limited to the available Airport yearly budget All decisions made by ANA are final. 11. Financial conditions The to be granted to the Airline under this Program takes the form of a nonreimbursable financial contribution The minimum amount of the is ANA is responsible for the calculation of the to be awarded to the Airline using its traffic statistic data sources. ANA must notify the airline of the amount to be paid no later than 45 days after the end of the corresponding IATA season Payment of the will be made no later than 60 days after the end of the corresponding IATA season, under the following conditions: IATA : 100% of the amount due regarding the New Route summer ; 80% of the amount due from the sum of the Operational Efficiency and New Frequency ; IATA : 100% of the amount due regarding the New Route winter ; the remaining balance of the sum of the Operational Efficiency and New Frequency ; If the final amount due to the Airline is less than the amount already paid to the Airlines in the IATA summer, the remaining balance will be carried to the following year Under no circumstances will the paid under this Program correspond to a discount or credit applicable to or deductible from the amount of ANA airport charges Flights cancelled whatever reason do not qualify for the award of. 7
8 12. Term and termination The Program is effective from the date of its announcement for application purposes The incentives to be paid under the present Program shall only enter into force at the beginning of the IATA 2015 according to the conditions set out in Annex The Program is valid for a three years period from its entry into force. However, each year, ANA may amend the following points: the Airports covered by the Program and the value of any, mark-ups and mechanisms of adjustment. These changes should be announced annually in February The Program amendments do not terminate multiannual commitments assumed by ANA under the present Program Applications to this Program will cancel any and all previous incentive agreements between ANA and any Airline at specific Airports Excluding eventual promotional marketing support the under the present Program is not cumulative with any other type of support being offered, at the origin or at the destination airport, by ANA or under joint ANA/Tourism promotion programs ANA may at any time revoke this Program ANA expressly declines any liability, contractual or other, resulting from any modification or suspension of the Program. 13. General conditions The Airline is responsible for obtaining the necessary airport slots with the Slot Coordination Route changes between alliance and joint ventured airlines or routes that have been operated by an airline acquired, under a merger or take-over, will not be considered under this reward system For the purposes of this reward system, the following operations and airlines are excluded: Operations by aircraft non-compliant with Annex 16, Chapter 3 of the Chicago Convention and Regulation (EC) nº. 216/2008 of the European Parliament and the Council of 20 February 2008, as well as all black-listed airlines pursuant to Regulation (EC) nº. 2111/2005 of the European Parliament and the Council of 14 December 2005 on the establishment of a Community list of air carriers subject to an operating ban within the Community and to regular updates as published by the European Commission; Any Airline that is in debt or default regarding payment of any invoices issued by any Airport under the management of ANA ANA reserves the right to refuse any award to any Airline not complying with the terms and conditions set forth herein. 8
9 Annex 1 Specific airport rules and incentives 9
10 Specific airport rules and incentives Porto Airport (OPO) Date published September 2014 Application start date September 2014 Payable IATA Seasons x 15 x 15/16 x 16 Eligibility conditions Capacity Minimum /week Minimum weeks New frequencies New routes Max. number of scheduled freq. in the previous season to be considered a new route: 10 in and 5 in. Off-Peak periods (local time) Shoulder Low Not Base incentive mark-ups Mark-up criteria Seasonal Level 1 Level 2 Shoulder x IATA Low Route sector distance between 950 nm and nm Route sector distance higher than nm s amount s duration Op. Efficiency New New Routes Peak Off Peak Peak Off Peak Peak Off Peak Base incentive 1,0 2,0 4,5 Base inc. based start-up ops. 1,0 2,5 5,0 Seasonal Markup Mark-up Level type Shoulder ,0 2,0 Low Level 1-1,0 3,0 Level 2-3,0 4,0 amount proportion Year 1 Year 2 Year 3 Year 4 Op. Efficiency n.a. 100% Route L0 100% New frequencies New routes Route L1 100% Route L2 100% Route L0 100% 80% 60% 20%* Route L1 100% 80% 60% 20%* Route L2 100% 80% 60% 20%* (*) Only for routes operated by based aircrafts on operation base start-up conditions. 10
11 Specific airport rules and incentives Faro Airport (FAO) Date published September 2014 Application start date September 2014 Payable IATA Seasons x 15 x 15/16 x 16 Eligibility conditions Capacity Minimum /week Minimum weeks New frequencies New routes Max. number of scheduled freq. in the previous season to be considered a new route: 10 in and 5 in. Off-Peak periods (local time) 06:00 to 07:59 x 12:00 to 15:59 x 20:00 to 23:59 x Shoulder Low Base incentive mark-up Mark-up criteria Seasonal Level 1 Level 2 Shoulder x March; April; May; October; November Low x December; January; February Route sector distance between nm and nm Route sector distance higher than nm s amount s duration Op. Efficiency New New Routes Peak Off Peak Peak Off Peak Peak Off Peak Base incentive 1,0-2,5 1,5 3,5 Base inc. based start-up ops. 1,0-3,0 2,0 4,0 Seasonal Markup Mark-up Level type Shoulder 1,0-1,0 1,5 1,5 Low 2,0-3,5 4,5 4,5 Level ,0 1,0 2,0 Level ,0 2,0 3,0 amount proportion Year 1 Year 2 Year 3 Year 4 Op. Efficiency na 100% Route L0 100% New frequencies New routes Route L1 100% Route L2 100% Route L0 100% 50% 25%* Route L1 100% 60% 30% 15%* Route L2 100% 60% 40% 20%* (*) Only for routes operated by based aircrafts on operation base start-up conditions. 11
12 Specific airport rules and incentives Azores Airports (PDL, HOR, SMA, FLW) Date published September 2014 Application start date September 2014 Payable IATA Seasons x 15 x 15/16 x 16 Eligibility conditions Capacity Minimum /week Minimum weeks New frequencies New routes Max. number of scheduled freq. in the previous season to be considered a new route: 10 in and 5 in. Off-Peak periods (local time) Shoulder Low Not Base incentive mark-ups Mark-up criteria Seasonal Level 1 Level 2 Shoulder x IATA Low Route sector distance between nm and nm Route sector distance higher than nm s amount s duration Op. Efficiency New New Routes Peak Off Peak Peak Off Peak Peak Off Peak Base incentive 1,0 2,0 4,0 Base inc. based start-up ops. 1,0 2,5 4,5 Seasonal Markup Mark-up Level type Shoulder ,0 2,0 2,0 Low Level 1-1,0 2,0 Level 2-3,0 4,0 amount proportion Year 1 Year 2 Year 3 Year 4 Op. Efficiency na 100% Route L0 100% New frequencies New routes Route L1 100% Route L2 100% Route L0 100% 80% 65% 25%* Route L1 100% 80% 65% 25%* Route L2 100% 80% 65% 25%* (*) Only for routes operated by based aircrafts on operation base start-up conditions. Only valid at PDL. 12
13 Specific airport rules and incentives Madeira Airport (FNC) Date published September 2014 Application start date September 2014 Payable IATA Seasons x 15 x 15/16 x 16 Eligibility conditions Capacity Minimum /week Minimum weeks New frequencies New routes Max. number of scheduled freq. in the previous season to be considered a new route: 10 in and 5 in. Off-Peak periods (local time) Shoulder Low Not Base incentive mark-ups Mark-up criteria Seasonal Level 1 Level 2 Shoulder x February; March; November Low x December; January Route sector distance between nm and nm Route sector distance higher than nm s amount s duration Op. Efficiency New New Routes Peak Off Peak Peak Off Peak Peak Off Peak Base incentive 1,0 3,5 6,5 Base inc. based start-up ops. 1,0 4,0 7,0 Seasonal Markup Mark-up Level type Shoulder ,5 2,0 2,5 Low 2,0 3,0 3,0 Level 1-2,0 4,0 Level 2-3,5 5,5 amount proportion Year 1 Year 2 Year 3 Year 4 Op. Efficiency na 100% Route L0 100% New frequencies New routes Route L1 100% Route L2 100% Route L0 100% 80% 65% 25%* Route L1 100% 80% 65% 25%* Route L2 100% 80% 65% 25%* (*) Only for routes operated by based aircrafts on operation base start-up conditions. 13
14 Specific airport rules and incentives Porto Santo Airport (PXO) Date published September 2014 Application start date September 2014 Payable IATA Seasons x 15 x 15/16 x 16 Eligibility conditions Capacity Minimum /week Minimum weeks New frequencies New routes Max. number of scheduled freq. in the previous season to be considered a new route: 10 in and 5 in. Off-Peak periods (local time) Shoulder Low Not Base incentive mark-ups Mark-up criteria Seasonal Level 1 Level 2 Shoulder x January to June; October to December Low Route sector distance between nm and nm Route sector distance higher than nm s amount Op. Efficiency New New Routes Peak Off Peak Peak Off Peak Peak Off Peak Base incentive 1,0 4,5 7,5 Base inc. based start-up ops Seasonal Markup Mark-up Level Shoulder ,0 3,0 3,0 Low Level 1-2,5 4,5 Level 2-3,5 5,5 s duration type amount proportion Year 1 Year 2 Year 3 Year 4 Op. Efficiency na 100% Route L0 100% New frequencies Route L1 100% Route L2 100% Route L0 100% 80% 65% - New routes Route L1 100% 80% 65% - Route L2 100% 80% 65% - 14
15 Specific airport rules and incentives Beja Airport (BYJ) Date published September 2014 Application start date September 2014 Payable IATA Seasons x 15 x 15/16 x 16 Eligibility conditions Minimum /week Minimum weeks New frequencies New routes Capacity Off-Peak periods (local time) Shoulder Low Not Base incentive mark-ups Mark-up criteria Seasonal Level 1 Level 2 Shoulder x March; April; May; October; November Low x December; January; February Route sector distance between nm and nm Route sector distance higher than nm s amount s duration Op. Efficiency New New Routes Peak Off Peak Peak Off Peak Peak Off Peak Base incentive 1,0 2,5 3,5 Base inc. based start-up ops Seasonal Markup Mark-up Level type Shoulder 1,0 1,0 1, Low 2,0 3,5 4,5 Level 1-1,0 2,0 Level 2-3,0 3,0 amount proportion Year 1 Year 2 Year 3 Year 4 Op. Efficiency na 100% Route L0 100% New frequencies New routes Route L1 100% Route L2 100% Route L0 100% 50% 25%* Route L1 100% 60% 30% 15%* Route L2 100% 60% 40% 20%* (*) Only for routes operated by based aircrafts on operation base start-up conditions. 15
16 Annex 2 Resume of incentive values per airport and type of passengers Category Route Period Daily time OPO FAO FNC PXO Azores Operational Efficiency Operational Efficiency with Capacity - 1,00 1,00 1,00 1,00 1,00-1,00 2,25 2,65 3,00 3,00-1,00 1,00 1,00 1,00 1,00-1,00 2,25 2,65 3,00 3,00 Level 0 Peak 2,00-3,50 4,50 2,00 Off-Peak 2,00 2,50 3,50 4,50 2,00 Peak 3,00-5,80 7,50 4,00 Off-Peak 3,00 4,13 5,80 7,50 4,00 New Frequency Level 1 Peak 3,00-5,50 7,00 3,00 Off-Peak 3,00 3,50 5,50 7,00 3,00 Peak 4,00-7,80 10,00 5,00 Off-Peak 4,00 5,13 7,80 10,00 5,00 Level 2 Peak 5,00-7,00 8,00 5,00 Off-Peak 5,00 5,50 7,00 8,00 5,00 Peak 6,00-9,30 11,00 7,00 Off-Peak 6,00 7,13 9,30 11,00 7,00 Level 0 Peak 4,50 1,50 6,50 7,50 4,00 Off-Peak 4,50 3,50 6,50 7,50 4,00 Peak 6,50 3,75 9,15 10,50 6,00 Off-Peak 6,50 5,75 9,15 10,50 6,00 New Route Level 1 Peak 7,50 2,50 10,50 12,00 6,00 Off-Peak 7,50 5,50 10,50 12,00 6,00 Peak 9,50 4,75 13,15 15,00 8,00 Off-Peak 9,50 7,75 13,15 15,00 8,00 Level 2 Peak 8,50 3,50 12,00 13,00 8,00 Off-Peak 8,50 6,50 12,00 13,00 8,00 Peak 10,50 5,75 14,65 16,00 10,00 Off-Peak 10,50 8,75 14,65 16,00 10,00 Note: Faro : assuming 75% for Shoulder and 25% de Low Funchal : assuming 70% for and 30% de Low 16
17 Annex 3 Regulation application example Route performance growth XPTO airline performance Real Pax variation adjustment factor Real Pax Variation Adjusted Pax Variation Total Route A Route of growing airlines Route of growing airlines Existing New A na na na na na na na na A na na na na na na na na Total % 100% B % 86% Total Existing New Existing New Existing New Existing New Operational Efficiency = (seasonality add-on) New Frequencies = ( ) (800 2 ) Example based on Ponta Delgada incentives and assuming Level 0 markets. 17
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