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1 annual report 2017 annual report 2017

2 Highlights IFR flights IFR landings/departures % IFR transit flights Military flights % Traffic evolution IFR flights 97 % Flights without delay 10.1 Sec En-route ATFM delay per flight Personnel (in FTE) Contents 03 Editorial 05 Highlights Organisation 14 Performance 19 Customers 2

3 Editorial Skyguide is in the midst of cultural change Dear reader, 2017 was a year of change. Disruptive developments such as increasing automation, new airspace users and modified international norms all shape the parameters of our corporate strategy, at the core of which remains our new Virtual Centre. The realisation of this centrepiece of our innovation strategy continues to progress as planned. We expect the Virtual Centre to be a mould-breaking innovation in our activities that is of pioneering importance to the entire air navigation services industry. The newly-formed Skyguide Executive Board is unreservedly behind this strategy, and will consistently further refine the company s keen alignment to its customers and their needs. New to the Executive Board is Urs Lauener, to whom new CEO Alex Bristol has handed over his former Chief Operating Officer duties. Also newly appointed to the Executive Board are Klaus Affholderbach as Chief Safety Officer and Myriam Käser as Chief Communications Officer was another very satisfying year in terms of our operational performance. While air traffic volumes grew more strongly than had been projected, we met all the targets set under the European Performance Plan. This benefits all the users of upper airspace and of Switzerland s international airports. And it is of particular interest in financial terms for our commercial customers, to whom we will return two thirds of our additional income in the form of charge reductions. We also met once again all the terms of our services agreement with the Swiss Air Force. And in doing so we made a major contribution to maintaining the sovereignty of Switzerland s airspace. An audit conducted by the Swiss Federal Audit Office in the course of 2017 confirmed that the integration of civil and military air navigation services was not only a trailblazing step, but was also the right way to ensure the optimum management of Switzerland s limited airspace. For the users of Swiss regional airports, however, the costs of air navigation services are a major challenge. So working together with the airport operators and the Swiss Federal Office of Civil Aviation (FOCA), we have devised an action plan for reducing the associated costs. In this connection, we are also advancing the introduction of new services such as the Aerodrome Flight Information Service (AFIS), while continuing to ensure, of course, that safety remains our paramount priority. One of the most striking changes that we are currently seeing in Swiss airspace is the rapid increase in drone flying activity. The trend has prompted skyguide to work with industry and the authorities to develop an operating system that can safely integrate drone activity into overall airspace use. The U-Space concept was unveiled to the public in summer 2017, and earned particular praise from the European Commission. «The creation of the Virtual Centre, the centrepiece of our innovation strategy, continues to progress as planned. «3

4 Walter T. Vogel Alex Bristol «An audit by the Swiss Federal Audit Office in 2017 confirmed that the integration of civil and military air navigation services was a trailblazing step. «The complexity of Swiss airspace remains a major challenge for all its users. Because the shortest routings cannot currently be flown in Swiss upper airspace, Switzerland does not fare well in the international routing rankings. And in response to this, we are currently committed to a FOCA-led Project of the Century (to quote Swiss Federal Transport Minister Doris Leuthard) to enhance airspace structure. the more important to maintain a sound and trustworthy legal framework. Air traffic controllers, who ensure day in, day out that the passengers of the flights in their care remain safe, should not have to fear that any error they make may land them in criminal court. The present inconsistent legislation here is detrimental to enhancing safety. What we would like to see in particular are consistent standards when incidents are investigated with the involvement of the air navigation services provider. And here we advocate assigning the relevant competencies to the Swiss federal prosecutor, as is already the case for incidents in the air. The change processes outlined above will continue. And we plan to actively shape and drive them, to ensure that we continue to manage, safely and efficiently, the air traffic that is so vital to our country and its economy. We could not do so, however, without the highly professional work, service and commitment of all our employees. And for this we offer them our heartfelt thanks, on behalf of the Board of Directors and the Executive Board. We also remain committed to Functional Airspace Block Europe Central (FABEC) as part of the broader endeavour to establish a Single European Sky, even if only slow progress is being made towards the vision of an airspace managed free of nationalistic ambitions. Thanks to the adoption of 63 direct routes, flight plans can already be compiled much more flexibly in Switzerland. Cross-border airspace control, which greatly facilitates the operation of Switzerland s international airports, is also being regularly improved on the operating front, even if progress here is appreciably slower in institutional terms. The disruptive developments mentioned above demand great flexibility from our organisation and its personnel. Our company is in the midst of a cultural transformation. Radical changes cause inevitable uncertainties. And this makes it all Walter T. Vogel Chairman of the Board of Directors alex Bristol CEO 4

5 Highlights of 2017 JANUARy New services agreements with regional airports MARCh Skyguide earns Single European Sky Award April SFAO report confirms skyguide strategy JULy Alex Bristol takes over as CEO Enhanced coordination among the Reims, Munich, Frankfurt-Langen and Zurich control centres Skyguide earns Single European Sky Award 07 Alex Bristol takes over as CEO Skyguide is presented with a Single European Sky Award by the European Commission in Madrid for its serviceoriented architecture (SOA) concept. SOA helps reduce the number and the complexity of the air traffic management systems used at skyguide, which can both substantially cut costs and generate new business models. Alex Bristol becomes skyguide CEO, succeeding Daniel Weder upon his planned retirement. Bristol, who is 48 and a Swiss/British dual national, joined skyguide six year previously as its Chief Operating Officer (COO). Daniel Weder successfully led skyguide as its CEO for ten years. Alex Bristol is succeeded by Urs Lauener as Chief Operating Officer and a Member of the Executive Board. New services agreements with 01 regional airports Switzerland s regional airports conclude individual agreements with skyguide over the scope and the financing of the air navigation services they require. These accords lay the foundation for the reduction planned in the associated air navigation services costs. The existing high safety levels are still guaranteed. In the medium term, three such airports are considering switching from ATC (under skyguide s control) to AFIS (in which the provision of traffic information and approaches would be the pilot s responsibility). SFAO report confirms 04 skyguide strategy The Swiss Federal Audit Office (SFAO) publishes its audit report on the implementation of the integration of Swiss civil and military air navigation services since In terms of skyguide s air navigation services and its collaboration with the Swiss Air Force, the SFAO concludes that the combined civil/ military air navigation services which are unique in Europe have been steadily further enhanced and have proved their worth in day-to-day flight operations. Enhanced coordination among the Reims, Munich, Frankfurt-Langen and Zurich control centres Skyguide successfully concludes the first phase of Functional Airspace Block Europe Central Extended Arrival Management (FABEC XMAN) with its counterparts DFS of Germany and the DSNA of France, substantially improving coordination among the Reims, Munich, Frankfurt- Langen and Zurich control centres. XMAN absorbs delays earlier than the existing approach management system; and this can help reduce holding patterns and the resulting extra fuel consumption and carbon emissions.

6 Highlights of 2017 September Skyguide presents a drone integration strategy OCTOBER New additions to the Executive Board Skyguide marks its present at Lucerne s Swiss Museum of Transport November Additional direct routes in Swiss airspace Enhanced collaboration with France Skyguide presents a drone 09 integration strategy Skyguide demonstrates, together with its project partners, how drones can be safely and efficiently integrated into airspace and its other users. The so-called U-Space will provide the digital infrastructures, services and procedures required to give drones access to airspace while still ensuring the safety of other airspace users. The live demonstration in Geneva confirms that skyguide is ready for the next step in the effective integration of drone flying activities. New additions to the 10 Executive Board Klaus Affholderbach, who was only recently appointed Head of the Virtual Centre, is named Chief Safety Officer and a Member of the Executive Board effective 1 January 2018, succeeding Simon Maurer. Myriam Käser also joins the Executive Board on 1 January 2018 as skyguide s new Chief Communications Officer. Skyguide marks its present at Lucerne s Swiss Museum of Transport Skyguide opens a theme island in the Aviation Hall at the Swiss Museum of Transport in Lucerne. The exhibit enables visitors to experience the world of air navigation services in all its detail and variety. Not only does it offer extensive information on airports, airspace, airways and more: it also gives interested visitors a realistic impression of the work of an air traffic controller. Additional direct routes in 11 Swiss airspace Skyguide establishes 13 more direct routes (DCTs) under the FABEC Free Route Airspace programme. All night flights are handled on DCTs with immediate effect. This makes the FABEC network more attractive for airlines under Swiss responsibility, because it shortens flying times and thus helps save them fuel. In creating the new DCTs, skyguide also meets European requirements and helps enhance FABEC s broader environmental credentials. Some 50 DCTs were established back in March. Enhanced collaboration with France Skyguide teams up with its French counterpart, the Direction des Services de la Navigation Aérienne (DSNA), to establish a new interface between the Marseille and Geneva control centres. A new division of responsibilities and better coordination improve the management of aircraft flying from or to Geneva and Lyon airports and enhance traffic flows. The work also sees a modification of the borders between the Geneva terminal manoeuvring area and the adjacent area of French airspace under skyguide control, a reorganisation of the collaboration between the Marseille and Geneva control centres and the creation of an innovative dynamic responsibility zone. 6

7 Organisation Skyguide s public service mandate Skyguide manages and monitors the airspace above Switzerland on behalf of the Swiss Confederation. Skyguide is also responsible for adjacent airspace areas in France, Italy, Austria and Germany that have been delegated to its control. Skyguide performs the demanding task of both serving the interests of civil aviation and enabling the Swiss Air Force to fulfil its sovereign mandate. Swiss airspace is the most densely used in Europe. The various intercontinental airports in and around Switzerland all generate high air traffic volumes. And these, together with the traffic to and from Switzerland s own airports, ensure that some 70% of the traffic managed by skyguide consists of climbing or descending flights. On top of this, upper Swiss airspace is a meeting point of key north-south and east-west airways over Europe that create two of the continent s busiest air traffic crossroads. Extensive areas of skyguide s airspace are reserved for military use at certain times. To ensure that Swiss airspace is managed as safely and efficiently as possible, civil and military air traffic management have been integrated in Switzerland since So skyguide simultaneously serves the economic interests of civil aviation while ensuring that the Swiss Air Force can fully perform its sovereign air defence mandate a challenging high-workload undertaking. Skyguide s mission and mandate Skyguide provides its services under a public service mandate issued by the Swiss Confederation and the Federal Office of Civil Aviation (FOCA), Switzerland s national aviation authority. This mandate requires skyguide to ensure the daily safe, fluid and cost-effective management of air traffic in the airspace it controls. Skyguide is assigned a set of strategic objectives by the Swiss Federal Council every four years. The company then pursues these objectives, along with the further targets set by the European authorities under the European Performance Plan. Air navigation services are part of the aviation value chain, and must help benefit the customer. This means finding an optimum balance between safety, capacity, costs and sustainability. A high performance capability is a further key criterion, to ensure that the company retains its promising position within the European air navigation services market. Skyguide works closely with the international aviation community, to ensure that it plays an active role in the requisite renewal of Europe s air navigation services. Such renewal must be more internationally oriented, more closely interlinked, and based on an airspace area that is free of national borders. Skyguide is a joint-stock company under Swiss private law which has its head office in Geneva and maintains further operations in Alpnach, Bern Belp, Buochs, Dübendorf, Emmen, Grenchen, Locarno, Lugano Agno, Meiringen, Payerne, St. Gallen Altenrhein, Sion and Zurich. With this aim in mind, skyguide has embarked on a venture to virtually merge its Geneva and Zurich air navigation service centres. The resulting Virtual Centre Switzerland programme has become a central plank of its corporate strategy, and should be further developed through international partnerships. 7

8 Organisation Safety paramount Geneva Cointrin Payerne Bern Belp Zurich Kloten Grenchen Emmen Alpnach Sion Dübendorf Buochs Meiringen Locarno Lugano Agno St.Gallen Altenrhein The safety of skyguide s air navigation services was maintained in 2017 and is at a high level. These safety levels are measured by the numbers of violations of aircraft separation minima in skyguide-controlled airspace that are either reported or automatically recorded. This statistic was lower for 2017 than the average of the past five years. Safety enjoys priority in all of skyguide s decisions and activities. The company s employees are empowered to take appropriate decisions if required. And its safety culture, together with its certificated safety management system, form the foundation on which the company develops its services. The prime objectives of the Skyguide Safety Strategy are to permanently enhance the company s safety culture, to systematically record its safety performance and to develop a new risk management system. The maturity and effectiveness of skyguide s safety management are confirmed, and are annually assessed by Eurocontrol, the European Aviation Safety Agency (EASA) and the Federal Office of Civil Aviation (FOCA). Skyguide s safety policy lays down a series of basic principles: the priority of safety our employees awareness of their individual responsibilities a risk-based approach to mastering complexity transparent internal and external communications with maximum protection of the employee. Skyguide is subject to a series of European safety objectives. These must be achieved by 2019, but have already been fully met today. Having previously assessed its safety culture using analyses of its own devising, the company conducted its first such study in 2017 using a form developed by and with the support of Eurocontrol. Findings from this have already been acted upon in the areas of teamwork, culture and involving frontline staff. Skyguide has also created a new forum in which management, its unions and its staff associations can exchange offthe-record views. And the resulting reciprocal trust has led to a number of concrete improvements. Civil locations Military locations Airspace managed by skyguide Delegated airspace Flight Information Region (FIR) Switzerland Flight zones used primarily by civil traffic with main airways Flight zones available for military traffic according to the Air Force s needs and reservations Mixed flight zones used according to the priorities of civil or military traffic Skyguide also formulated a Just Culture policy in A just culture is a corporate culture which is based not on penalties but on constant systems improvement. And the new just culture policy ensures that, except in cases of gross negligence or wilful intent, anyone reporting an incident will be protected from disciplinary action. An agreement between skyguide s management and the relevant staff associations also anchors the principles of an open reporting culture. This has raised the numbers of reports of incidents to almost 100%. The reporting of technical malfunctions at skyguide still needs to be improved. To this end, the company introduced a new internal reporting system for all technical incidents in the course of Accidents and incidents Aircraft accidents and serious incidents are generally investigated by the Swiss Transportation Safety Investigation Board (STSB). In the case of the fatal accident involving a Swiss military aircraft in 2016, the investigation was initiated by the military justice authorities. Their final report had not yet been published by the time this Annual Report went to press. Every violation even the slightest of the minimum radar separations required between two aircraft is automatically recorded. Skyguide registered 173 such violations among the 1.2 million instrument flight rules flights it handled in The volume involved is too small to determine any trends. 8

9 Jean-Yves Bonvin The Board of Directors (since 2012) is an attorney who holds degrees in law (from the University of Geneva) and economics (from the University of St. Gallen). A partner in a law firm, he was elected to the Board of Directors in He chairs the Board s Finance & Audit Committee and is a member of its Safety Committee. Further mandates held: member of the Board of Directors of IRMC; President of the Valais Aero Club; President of the 2017 Sion Air Show; Deputy President of the Sion Airport Users Association; Treasurer of the Association Sion Airport Technology Center. Walter T. Vogel (since 2015) holds a degree in mechanical engineering from the ETH Zurich and business administration qualifications from the HSG and INSEAD. He served eight years as CEO and later as Chairman of the Board of the Aebi-Schmidt Group. He is Chairman of the Skyguide Board of Directors, chairs the Board s Compensation & Nominations Committee and is a member of its Finance & Audit Committee. He is also Chairman of the Board of St. Gallen-Appenzell Power Stations, a member of the boards of Kardex and FAI Air Sports Marketing & Events AG and a member of the Central Committee of the Aero Club of Switzerland. Dominik Hänggi (since 2015) joined skyguide in 1988, and currently serves as a Genevabased air traffic controller/watch supervisor. He was Deputy President of the Association du Personnel de la Tour de Contrôle (APTC) staff association, and was actively involved in several collective labour agreement negotiations in this capacity. He was elected to serve as the employees representative on the Board of Directors in He is also a member of the Board s Projects and Safety committees. Bernhard Müller (since 2009) Major General Bernhard Müller has been Commander of the Swiss Air Force since 1 January After completing teacher training and studying history and philosophy at Zurich University, he went on to hold various senior functions within the Swiss Air Force. He was elected to the Skyguide Board of Directors as its Deputy Chairman in He also chairs the Board s Safety Committee and is a member of its Projects Committee. Further mandates held: member of the Executive Committee of Aerosuisse (as the Swiss Air Force s representative). Cristina Feistmann (since 2015) is an attorney and the holder of an M.B.L. degree from the University of St. Gallen. After a number of years as an external lawyer and legal advisor, she entered the aviation sector in 1998 initially joining the Swissair Group, and later becoming General Counsel to Swissport. In 2007 she moved into the insurance sector, where she is currently Company Secretary to the Swiss Reinsurance Company Ltd. She was elected to the Skyguide Board of Directors in She is also a member of its Compensation & Nominations Committee. Further mandates held: member of the Board of Trustees of the Swissair Staff Foundation for Children in Need. Anne Bobillier (since 2014) holds a degree in information technology from the University of Geneva. She is the Managing Director of Bechtle Suisse Romande, and previously served in further executive functions with various well-known companies. She was elected to the Skyguide Board of Directors in She also chairs the Board s Projects Committee and is a member of its Safety Committee. Further mandates held: member of the boards of Romande Energie Holding, Romande Energie SA, SkySoft-ATM and the Franco-Swiss Chamber of Commerce & Industry. Res Schmid (since 2017) is a Government Councillor for Canton Nidwalden and a Swiss Air Force, aviation and safety policy expert under the Chief of Staff of the DDPS. He spent over 20 years as a military pilot with the Swiss Air Force and Armasuisse, rising to chief test pilot and project manager for the evaluation for the partial replacement of the F5-E Tiger. He is a member of the Board s Compensation & Nominations and Finance & Audit Committees. Further mandates held: chairman of the boards of Bergbahnen Beckenried-Emmetten and of INSILVA AG; president of the ch-x Swiss Federal Surveys of Adolescents Committee, the Schindler Arts Foundation and the Winkelried House Foundation; trustee of the Höfli Foundation in Stans and various further foundations.

10 The Executive Board Alex Bristol (CEO), who is a Swiss-British dual national, earned a bachelor s degree from the University of Exeter and completed the Advanced Management Programme of INSEAD Fontainebleau und Singapore. From 1992 onwards he held various functions with NATS (the UK s air navigation services provider) including air traffic controller, Head of Operations and ultimately Head of Development & Investment Strategy. He joined skyguide as Chief Operating Officer and a member of the Executive Board in September 2011, and took over as CEO in July Marc R. Bohren (Finance & Services) holds a master s degree from the CPCG together with various US commercial and stockexchange qualifications. After working in the banking sector in Switzerland and the USA for several years, he was appointed CFO of an international food corporation. He joined skyguide in 1999, and has been a member of the Executive Board since Francis Schubert (Corporate Development & Deputy CEO) is a qualified air traffic controller and holds a doctorate in law. He joined the company in 1982 and has been a member of the Executive Board since He also teaches aviation law at the Institute for Air & Space Law at McGill University in Montreal, Canada, and at the law faculty of Lausanne University. Hans Bracher (Human Resources), who is a qualified attorney, can draw on over 20 years of experience as an HR specialist. He assumed his duties as skyguide s Head of Human Resources in Prior to this, he had been Head of Corporate Human Resources and a member of the Executive Board of RUAG Holding AG. He also held various functions during many years with Ascom, ultimately serving as Head of Corporate Human Resources and a member of the Extended Executive Board. He joined the Skyguide Executive Board in January Simon Maurer (Safety, Security, Quality) holds a degree in physics from the University of Basel and a post-graduate diploma in business administration from the Swiss Federal Institute of Technology. After several years with Swissair and Swiss International Air Lines as a pilot and as a project leader within Flight Operations, he was appointed Deputy Aviation Safety Officer at the Swiss Federal Department of the Environment, Transport, Energy and Communications. He joined skyguide as Head of Safety, Security, Quality and a member of the Executive Board at the beginning of Urs Lauener (Operations) served as an air traffic controller and process expert at Switzerland s air navigation service provider before moving to the Swiss Federal Office of Civil Aviation (FOCA) as an air navigation services specialist. He returned to skyguide in 2003 and went on to hold a number of management roles in both military and civil air traffic management. He holds an Executive MBA from HEC Paris. He has been Chief Operating Officer and a member of the Executive Board since July 2017.

11 Klaus Meier (Engineering & Technical Services) has been skyguide s Chief Information Officer and Director of Engineering & Technology (CIO) since Prior to joining skyguide, he served as CIO Americas for the Schindler corporation, based in the USA. He is also well familiar with the aviation world through his years with Swissair, where he promoted process enhancements and technological innovation in various executive capacities. Klaus Meier is a qualified electrical engineer, and also holds a doctorate from Zurich s ETH. If an incident is classified as serious, because there was a risk of collision, the STSB will investigate it and compile a report (such reports can be viewed on Eight such incidents were investigated in No details are available of any involvement of air navigation services organisations in the incidents concerned. Skyguide Safety Management also investigates all accidents and incidents. Any air traffic controller involved in a serious incident is offered specialist assistance and support. Roger Gaberell (Communications) has a doctorate in linguistics and is a qualified mediator of the Swiss Mediation Federation. He taught and researched at Zurich and Geneva universities before joining skyguide in He served as Head of Internal Communications and Deputy Head of Communications until 2008, and as Head of Communications and a member of the Extended Executive Board until A Pilatus PC-7 of the Swiss Air Force crashed near the Schreckhorn in Canton Bern on 12 September The pilot, who was flying under visual flight rules and without radar assistance, was killed. The Swiss Air Force s pilots and skyguide s military air traffic controllers form close teams in the missions and exercises they perform. So with this tragedy, too, our sense of loss and grief was correspondingly strong. The military justice authorities are still to publish their investigation report. A high-reliability organisation Safety is skyguide s paramount objective and concern. And the company s safety culture, together with a safety management system (SMS) that is certified to comply with all European norms, are the foundations on which skyguide bases all the services it provides. Jeannette Haus (Chief of Staff) has served skyguide in various capacities (flight advisor, instructor, AIM officer, Head of Requirements Engineering) since she joined the company in In parallel with her work, she also studied business IT and earned an Executive MBA from the University of St. Gallen. She has been the CEO s Chief of Staff on the Enlarged Executive Board since 2009, and is also Secretary to the Board of Directors. For any high-reliability organisation (HRO), the constant improvement of its services is the focus of all its endeavours. An HRO will continuously improve the balance between safety requirements, capacity, cost-efficiency and sustainability in all the processes and structures throughout the institution. And the centralised maintenance of the organisation s values enjoys a high priority in all such activities. An HRO recognizes that problems and malfunctions can always arise in complex organisations. And an HRO will develop and maintain the skills and capabilities required to anticipate and respond to unexpected situations. 11

12 Organisation In the heart of Europe Some 40% of the airspace that skyguide manages and monitors is above neighbouring countries. And Switzerland has a clear interest in collaborating with its neighbours, since all its international airports are located close to its national borders. Delegating air navigation services beyond national borders was one of the objectives of the Single European Sky (SES) initiative that was launched in SES is intended to ensure that air traffic is handled according to operational and not national criteria. And the creation of functional airspace blocks or FABs was designed to support this objective. Sadly, however, Europewide harmonised airspace control is unlikely to be achieved in the foreseeable future. The European Performance Plan is a tool which sets binding targets for all air navigation services providers. The harmonisation of technical infrastructures, to provide a foundation for implementing operational, safety, environmental and efficiency measures, is being promoted via the Single European Sky ATM Research (SESAR) programme. And skyguide is fully committed to pursuing this European Performance Plan. One major obstacle to this pan-european harmonisation of air navigation services is each state s current demand to physically own (and even individually develop) its own system. Skyguide is convinced that it can procure some of its services from elsewhere in Europe, optimising both development and maintenance costs. The industry s flight data processing systems or FDPSs combine planning and real-time data from various sources and present summaries thereof on the controller s screen. The complexity of such systems is a major cost driver. Skyguide decided at the end of 2015 to suspend its existing collaboration on the Coflight FDPS, which is being jointly developed by air navigation services providers DSNA of France and ENAV of Italy together with industry partners, and to adopt a service relationship instead. In 2016 skyguide, the DSNA and ENAV teamed up with Malta s air navigation services provider to launch the Coflight Cloud Services programme, which aims to offer flight plan processing services, primarily to smaller and medium-sized air navigation services providers. Coflight Cloud Services should be up and running by The collaboration within Functional Airspace Block Europe Central (FABEC) is based on an international agreement concluded in 2010, and has been under way since December FABEC launched a strategic reorientation in Following a study of the success of the FAB approach to date, and in view of various breach-of-contract proceedings against FABEC members, FABEC s management bodies the states and air navigation services providers involved are reconsidering the alliance s future alignment and thrust, with a view to providing FABEC with realistic parameters and objectives. 12

13 full-time equivalents GVA ZRH Regio GVA ZRH Regio 1 GVA 59.3 ZRH 25.6 GVA 1.9 ZRH 26.8 GVA 19.4 ZRH 18 GVA 19.4 ZRH 5 GVA 12.3 ZRH Operations 328 Engineering & Technical Services 84.9 Finance & Services 44.7 Safety, Security, Quality 37.4 Directorate* 24.4 Corporate Development 19 Human Resources The people in air navigation services Skyguide offers specialist jobs in a technologically demanding field. In doing so, the company enables competencies to be developed within Switzerland that have sizeable future potential. And employer branding positioning the company attractively within the employment market is a major skyguide concern. Employee satisfaction has always enjoyed a high priority at skyguide. It s reaping its rewards: in the 2017 Universum market study of Switzerland s top 100 most attractive employers, the company improved its rankings in various categories. Skyguide s appeal here can be attributed to a number of factors, not least its active cultivation of its workforce diversity, its equal opportunities philosophy and its harmonious collaborations between different cultures. Some 34 nationalities are currently represented in the skyguide workforce. And the company offers employment opportunities to career beginners and older individuals alike. The diversity strategy includes actively supporting women. The company has a Skywomen Initiative in place to promote the development of female employees careers. Skyguide also help its employees better combine their work duties with their family role. Mothers-to-be can take pre-natal leave up to two months before birth with no reduction in their subsequent maternity leave. Every mother is also entitled to take up to one year of unpaid leave or to reduce their working hours after the birth of their child. Skyguide also grants paternity leave. And the company further strives to integrate persons with disabilities into its working world. Skyguide has five unions and professional associations as its social partners. The company s air traffic controllers are represented by the Aerocontrol, Skycontrol, Association du Personnel de la Tour de contrôle (APTC) and Personalverband des Bundes (PVB) associations, while its administrative, operational and technical (AOT) personnel are represented by the Syndicom union. Regular meetings are held to cultivate the social partnership. The company s AOT personnel are subject to a collective labour agreement (CLA) which was concluded by skyguide and Syndicom in 2016 and runs until For the company s air traffic controllers, by contrast, no such agreement could be reached in 2017, either, despite intensive negotiations. A works agreement was concluded with the PVB, however, which in particular covers the specific issues relating to military controllers and those assigned to regional airport duties. Skyguide makes regular efforts to further raise its already high levels of occupational safety and workplace health protection. The company bases all its activities here on the standards specified by the Swiss Federal Coordination Commission for Occupational Safety and by the SUVA Swiss federal industrial injury insurance scheme. Remuneration policy The remuneration of the CEO and the further members of the Executive Board is devised by the Compensation & Nominations Committee of the Board of Directors and resolved by the full Board. The remuneration of the Chairman and further members of the Board of Directors is determined by the company s owners (in accordance with a Swiss federal resolution of 2007). The CEO s remuneration is also approved by the owners. The remuneration for the Chairman of the Board amounted to CHF in 2017, while the remuneration for the further members of the Board of Directors averaged CHF per member. The remuneration for the Executive Board (including the CEO) for 2017 totalled CHF , plus short-term and long-term results-based compensation and further compensation amounts totalling CHF The highest fixed remuneration paid to a member of the Executive Board was CHF , plus results-based and further compensation totalling CHF Expenses were separately reimbursed. * Incl. Corporate Communication, Innovation & Change. 13

14 Performance Stronger-than-projected growth The volumes of traffic using the airspace above Switzerland and adjacent border areas which is managed and monitored by skyguide grew more strongly than Eurocontrol had predicted in Total flight numbers were a 3.2% increase on their 2016 level. Switzerland s airports saw almost exactly the same volumes of landings and takeoffs as they had the previous year. The volumes of air traffic control-related delays remained very low. Airlines in Europe reaped the benefits of a substantial economic recovery in The market has also consolidated, following the failure of several regional carriers. And the continent has recovered, too, from 2016 s terrorist attacks. All these trends are reflected in the region s seat load factors, which, at 84.3%, were the highest ever recorded. Business was further buoyed by strong transatlantic demand. The 3.2% traffic volume growth in the airspace which skyguide controls exceeded Eurocontrol s projections. The increase was particularly strong for en-route traffic (up 5%, and up more than 10% in the summer months). At Switzerland s airports, by contrast, the volumes of arrivals and departures were almost unchanged (i.e. down 0.01%) from The growth in Switzerland s air traffic volumes was broadly mirrored in neighbouring countries such as Italy (+ 2.8%), Germany (+ 3.5%) and France (+ 4%). Despite the greater traffic handled, skyguide s reliability slipped only slightly: 97% of flights departed free of delays, compared to 97.2% the previous year. En-route delays did increase, but are still below the levels prescribed in the European Performance Plan. Delays to traffic entering and leaving skyguide airspace were reduced by 22.1%. A steady increase The annual records of the instrument flight rules (IFR) flights handled by skyguide show a steady year-on-year increase of between 2.7% and 5.2% in monthly flight volumes between March and November. The 3.2% increase in IFR traffic for the year was 0.9 percentage points above the projections of Eurocontrol, which had forecast a 2.3% annual increase in February The overall growth showed sizeable variations among the different traffic segments. Traffic volumes in the air cargo sector grew by 7.7% (having declined 6.7% the previous year). The low-cost segment continued to expand, and registered further 7.9% growth (following 7.7% growth the previous year). The traditional airlines recorded slightly higher year-on-year growth: 0.9%, compared to the 0.4% of And business aviation volumes recovered substantially with an increase of 8.4% (compared to 0.2% the previous year) change Total IFR flights % of which transit % Seasonal variations The following chart illustrates the seasonal fluctuations in the daily volumes of IFR flights handled by skyguide between 1998 and Each dot represents the number of such flights handled on a particular day. The seasonal fluctuations in air traffic levels show a certain regular pattern. But traffic levels can also be influenced by factors such as the entry into service of new technical systems (with corresponding temporary capacity reductions), strike action in neighbouring countries or meteorological conditions. The volatility of traffic levels has increased in recent years, posing a growing challenge for skyguide s capacity planning. 14

15 97 % of flights on time 97.0% 2.5% 0.5% On time flights with less than 15 min. delay with more than 15 min. delay The chart shows the impact that political and economic developments can have on air traffic volumes, such as the decline following the attacks on the World Trade Center on 9 September 2001, the effects of the 2008 financial crisis or the impact of the volcanic eruption in Iceland in Contrary to all Eurocontrol projections, traffic volumes stagnated between 2008 and IFR flights all skyguide centers Source: CFMU IFR landings/takeoffs Change Bern Belp % Buochs % Donaueschingen % Friedrichshafen % Geneva % Grenchen % Les Eplatures % Lugano Agno % Sion % St. Gallen-Altenrhein % Zurich % Total % Skyguide handled an average of 3389 flights a day in 2017, exceeding the previous record traffic year of 2008, which had an average of 3387 flights a day. The peak traffic day in 2017 was 8 September, with 4253 flights a new daily record that surpassed the previous busiest traffic day in Flight movements handled Skyguide maintains a range of operating centres and locations. The table below shows the sizes of these operations and the corresponding development of their IFR traffic Change Geneva % Zurich % Total % The two area control centres, which largely manage and monitor en-route traffic, registered a 4.8% overall increase in their movement volumes. Total IFR landings and departures at the Swiss airports under skyguide s responsibility were virtually unchanged from their prior-year level (down 0.02%). IFR landings and departures in Geneva and Zurich were up 0.3% and 0.4% respectively, while Bern Belp, Grenchen and Lugano Agno saw volume declines. High punctuality On the punctuality front, skyguide has been given clear and ambitious targets by the European Commission for both its en-route and its airport traffic handling. The delay statistics presented here make no distinction as to the cause of the delay, but are only categorised by the place where the delay occurs. To gain a clear and accurate picture of an air navigation services provider s performance, however, the individual causes of the delays incurred must also be considered: ATFM departure delays can have any of a number of causes, some of them attributable to the air navigation services provider and others attributable to exogenous factors beyond its control. One flight will generate multiple flight movements, which are registered at the various control centres along its route. The list of possible causes of delays, which are all recorded, has been standardised throughout Europe and comprises: 15

16 Performance Causes influenceable by the air navigation services provider Military activities ATC capacity Exceptional events ATC routings ATC staffing ATC infrastructure Causes beyond the influence of the air navigation services provider Accident/incident Weather Non-ATC infrastructure Airport capacity Industrial action (ATC or non-atc) De-icing Environmental issues The air traffic flow management (ATFM) departure delays attributable to air traffic control are a key criterion for assessing the performance of any air navigation services provider. ATFM departure delays can occur whenever Eurocontrol s Network Management Operations Centre (NMOC) predicts that the number of flights scheduled to use a particular sector of airspace during a particular period according to the flight plans submitted will exceed the sector s capacity. In such an event, the NMOC will intervene to assign specific takeoff slots to the individual flights concerned. ATFM departure delays have a major economic impact for the air navigation services provider s customers. A flight is regarded as punctual when it suffers zero delay. Despite the high traffic volumes of 2017, skyguide saw only a slight decline in its punctuality performance. A full 97% of all flights were handled without any delay. Average ATC-related delays per flight for the year increased from the 4.2 seconds of 2016 to 10.1 seconds. These delays were attributable primarily to adverse weather conditions (31%) and short-term capacity shortages (also 31%). Employee sickness rates (22%) and system maintenance work (13%) also played a role. The majority of delays are outside air navigation services control. Delays at Geneva Airport declined by 21.2%. The main causes of the delays which were incurred were adverse weather (57%), insufficient runway capacity (19%), personnel illness-related absences (21%) and inadequate approach capacity (2%). Delays at Zurich were reduced by as much as 24.5%. As in Geneva, these were largely the result of adverse weather conditions (53%) and insufficient runway capacity (28%), along with environmental constraints (11%) and inadequate approach capacity (7%). Average ATFM delay per flight airport / en-route (skyguide airspace) Average ATFM delay per delayed flight (Europe and skyguide airspace) Delay (in minutes) Source: OPAL data warehouse - CFMU data Delay (in minutes) Source: OPAL data warehouse - CFMU data Total En-route Airport Change (in %) Europe skyguide

17 Dynamic capacity management En-route delays increased by 152%, after five years of steady declines. The reasons for this were: Adverse weather conditions, which began earlier (in May) than usual, caused more than three times the delays of The Dübendorf and Geneva area control centres accepted additional traffic to ease the workload of neighbouring control centres in Germany and France. This led to capacity shortages and congestion in various Swiss airspace areas employee absence rates through illness were double their prior-year levels. Area control centre capacities were reduced by 10% in May and June for Dübendorf and in June for Geneva owing to system malfunctions. Skyguide also took various actions to raise system capacity. These included: A new sectorisation for the Dübendorf ACC which horizontally aligns the control sectors above FL 315 with those of ACC Geneva. Sector and roster planning tools that process projections on an hourly basis. Continuous improvements to the systems that project traffic volumes, traffic flows and the complexity thereof. Enhanced flexibility in the rostering of controllers. New measures to enhance traffic management. Developing a new methodology for detecting flights not planned for specific sectors. Average delayed flights per day (skyguide airspace) Number of flights Source: OPAL data warehouse - CFMU data Change (in %) Average delayed flights per day (Europe) Number of flights Source: OPAL data warehouse - CFMU data Change (in %) Skyguide s goal is to further enhance its flight plan handling and make even more effective use of its available capacities. Skyguide doesn t only demonstrate its performance capabilities to its owners and customers in Switzerland. Since 2012, it has also been required to do to towards the European Commission. And at the end of 2014, the Commission set a series of performance criteria for the reference period, in consultation with skyguide and the Swiss Federal Office of Civil Aviation (FOCA). The criteria defined prompted controversy within Europe: a sector as regulated as air navigation services finds it difficult to reduce costs, simultaneously invest in new technologies and achieve the further performance targets of the European Performance Plan. 17

18 Performance More traffic and higher revenues With revenues of CHF million and operating expenses of CHF million, skyguide s financial results for 2017 were negative. Due to extraordinary provisions required mainly in connection with the financing of the company pension scheme, a negative net result was posted for the year. Once again in 2017, skyguide handled more air traffic than it had the year before. As a result, annual operating revenues were a CHF 15.3 million improvement on the prior-year period. Operating expenses (before the extraordinary provisions for the pension scheme) were up CHF 5.4 million, prompting (before the aforementioned provisions) a CHF 9.9 million improvement in the annual operating result. For regulatory reasons, however, extraordinary actions had to be taken in connection with the financing of the company s occupational pension provision: skyguide was compelled to conduct a restructuring of its skycare company pension scheme which resulted in a sizeable actuarial shortfall. To offset part of this underfunding, the company had to invest CHF 53 million in skycare. And, as a consequence thereof, the operating expenses increased and the company incurred a net loss for the year of CHF 35.6 million (which compares to a net profit of CHF 15.3 million for 2016). Once again, real traffic volumes were above the values projected in the European Performance Plan for Reference Period 2, which runs from 2015 to This applies to both en-route traffic and the traffic at Category I airports, i.e. Zurich and Geneva. Moderate growth expected Skyguide expects to see a moderate 1-2% further increase in its traffic volumes in This projection is in line with the assumptions of the European Performance Plan. The Swiss franc weakened slightly against the key foreign currencies in But the strength of the franc continues to disadvantage airspace users, as skyguide s charges are calculated in francs and then translated into euros. The continuing strength of the Swiss franc is adversely affecting skyguide s competitive credentials in the European air navigation services landscape. Regional airports now responsible for their own financing Financial responsibility for the air traffic services provided at Switzerland s Category II airports was transferred to the airport operators in Skyguide now invoices these operators for the services it provides. Each airport creates its own charge regime and sets its own charges for the air traffic management provided. 18

19 CUStomERS Enhanced customer relations Skyguide continues to develop and refine its customerfocused approach. With a view to understanding the needs of its customers even better and finding adequate responses to the same, the company conducted a detailed analysis of its profile partners and customers in the course of With its improved processes and procedures, the company s new Key Account Management should help further enhance its customer care. Centre-stage in all of skyguide s endeavours is the question of how to develop its relations with its customers and further partners in ways that are sustainably beneficial to both sides, and how to establish a shared development strategy. The company focuses on its four customer and partner segments here: commercial aviation, the Swiss Air Force, non-commercial aviation and third parties. And its Key Account Management looks after each of these customers and partners, offering them appropriate assistance and care. This helps enhance the relevant external and internal communications, and enables the company to maintain its customer and partner relations at the highest possible quality. in 2016 and extended for a further four years. The mission planning processes are also constantly further developed together with the Swiss Air Force. The detailed weekly planning introduced in 2015/2016 has proven its worth and is being further enhanced. Military air traffic management more and more important Military air traffic management is one of skyguide core tasks. The Swiss Air Force has been the company s most important partner for more than 15 years now. Thanks to the full integration of civil and military air navigation services which was effected in 2001, skyguide can meet the Swiss Air Force s need for unrestricted access to Swiss airspace and optimally coordinate this with civil aviation s operating requirements. In doing so, the company makes a vital contribution to maintaining the sovereignty of Switzerland s airspace. In amalgamating civil and military air traffic management back in 2001 the Swiss Federal Council laid the foundations for the best possible use and management of Switzerland s limited airspace. The action led to a reduction in ATC-related delays of over 80%. The services that skyguide provides for the Swiss Air Force are regulated in an agreement that was revised Skyguide fully achieved all the objectives specified under its services agreement with the Swiss Air Force in The air patrol and training activities and the associated skyguide assistance from the Air Defence and Direction Centre in Dübendorf are set to further increase: the Swiss Air Force intends to establish a permanent airspace surveillance capability by The Luftpolizeidienst 24 (LP24) project is based on a political initiative dating from The second phase in the project s implementation, to permit daily airspace surveillance from 08:00 to 18:00, was initiated in January This accounts for the increase in military aircraft movements (including drones) to 2017 to flights. A third project phase providing airspace surveillance between 06:00 and 22:00 will follow in Skyguide managed 328 live or hot missions and 2220 tactical missions for the Swss Air Force in 2017 (compared to 363 and 19

20 CUStomERS 2403 the previous year). The relatively high number of such missions is attributable to the fact that, on the Air Force s instructions, skyguide reports every single violation of Switzerland s airspace provisions. Providing adequate numbers of air traffic controllers is a constant challenge. Skyguide has been meeting it through targeted actions for some years now. But the longer operating hours demanded by Project LP24 will further raise such staffing demands. In view of this, skyguide is making great efforts to recruit and train the personnel required to serve at its Air Defence and Direction Centre and the country s air force bases. A technical partner, too Skyguide is also a key partner of the Swiss Air Force in technical terms. For the adoption of the MALS Plus programme to replace the ageing radar systems at Swiss airports and airfields with military or mixed civil-and-military traffic, skyguide is a partner of the Swiss Federal Office for Defence Procurement (armasuisse). Skyguide s mandate here it to technically validate the airfield surveillance radar and direction finders, conduct safety analyses and coordinate the associated legal and institutional requirements also saw approval issued for the operational use of precision approach radar (PAR) at Payerne and Emmen air force bases. Skyguide is supporting armasuisse in the adoption of further such systems at Meiringen, Locarno and Sion. A solution for regional airports The Swiss Parliament approved a new financing model for the provision of air traffic services at Switzerland s regional airports at the end of The new model transfers responsibility for financing such services to the relevant airport authority. Since, under the provisions of the Single European Sky, skyguide is no longer permitted to cross-subsidise its services for Category II airports, these airports face a financing problem. To make the transition to the new financing system as smooth as possible and ensure an appropriate assignment of the means required, skyguide has conducted talks with all the parties involved (the FOCA, the various airport authorities and the Swiss Aerodromes Association). These discussions have also included an analysis of the type of services that are currently provided. And this has led to the drawing up of a joint roadmap which also extends to the introduction of an Aerodrome Flight Information Service (AFIS) at three such regional airports. The corresponding subprojects are currently in the feasibility study phase. Under the new financing model, skyguide was compelled to temporarily reduce its services at Grenchen Airport in September 2017 owing to an understaffing situation. In view of this, work on an AFIS for Grenchen was a key project priority. The Skyguide Training Centre The Skyguide Training Centre (STC) trains the company s own air traffic controllers, air navigation services employees (ANSEs) and air traffic safety electronics personnel (ATSEPs) for their civil and military air traffic services. The STC also offers its services to external customers. The Centre provided training days in Fifteen (prior year: 14) air traffic controllers and two (prior year: three) air navigation services employees completed their training, were awarded their licences and assumed their new duties. Three classes totalling 29 (prior year: 23) students began their basic controller training. And 15 (prior year: 28) internal and 13 external students completed their basic ATSEP training or qualification courses. Sizeable investments were made in new simulators to replace the ageing simulator software and lower operating costs. Speech recognition technology is also being gradually introduced into the simulation environment. To comply with the European Union s Commission Regulation (EU) 2015/340, which was approved by the European Parliament and the European Council at the beginning of 2015, the STC is required to bring its training materials up to the latest standards. After earning the corresponding certification from the FOCA, the Centre is now formally approved to conduct its training activities under this new EU regulation. 20

21 Integrating drones into the airspace Aircraft are one of the safest means of transport. This should remain the case, even with the massive increase in the use of unmanned aerial vehicles or drones. Skyguide has begun work, together with a number of partners, on developing a system to integrate these drones safely and efficiently into the airspace they use. SESAR, Europe s air traffic management research programme, estimates that some seven million drones will be flying in the continent s airspace for leisure purposes by 2050, with a further in use for commercial or official purposes. The development of the drone industry depends on our ability to integrate these vehicles safely and efficiently into the airspace they use. And it was to this end that the non-profit Global Unmanned Aircraft Traffic Management Association (GUTMA) was founded back in July 2016 with skyguide participation. Commission, which are being devised by the European Aviation Safety Agency (EASA). A skyguide ILS checker Skyguide intends to use drones for its own purposes, too. Up until now, the checks and calibrations of the company s instrument landing systems (ILS) have had to be performed by an aircraft specially flown in from Germany. In future, drones will be able to perform some of this work. This will not only lower costs: it will also mean significant reductions in noise and carbon dioxide emissions. How this goal could be achieved was demonstrated by skyguide and its project partners in Geneva in September The U-Space concept will provide the digital infrastructure, services and procedures required to give drones access to airspace while still ensuring the safety of other airspace users. As the successful live demonstration in Geneva underlined, skyguide is at the forefront in the development of such systems, and is well ready for the next step in the drone integration process. Skyguide now plans to develop a fully automated and interlinked digital U-Space infrastructure between now and U-Space should not be limited to a single country. And this is why skyguide is ensuring that it is developed in due and full compliance with all the requirements of the European 21

22 CUStomERS Key customers Skyguide s most important airline customers are Swiss International Air Lines, Lufthansa, Ryanair and Easyjet, which jointly account for over 40% of its total flight volume. 18.5% Swiss International Air Lines Information management Skyguide s Aeronautical Information Management (AIM) unit is subdivided into AIM Operations and AIM Data Management. Skyguide AIM collaborates closely with other air navigation services providers and with further partners such as the Swiss Air Force and Eurocontrol. 8.4% Lufthansa AIM Operations is responsible for publishing aeronautical information bulletins for immediate countrywide or international distribution, which are known as NOTAMs. The unit maintains a 24/7 Expert Service Centre offering integrated flight advisory services to pilots, along with its platform. The data required for these are procured by AIM Operations from all over the world, evaluated and prepared for further distribution. 5.3% 4.9% Ryanair Easy Jet Switzerland AIM Operations also publishes the so-called KOSIF zones: airspace areas whose availability is temporarily limited or which are temporarily wholly unavailable. Details of these zones are published every day in the Daily Airspace Bulletin Switzerland. Skyguide has been working since 2017 with the supervisory authorities and its airspace user customers (especially from general aviation) to further develop this service, with a view to further enhancing flight safety. 4.5% 3.4% Easy Jet Airline Air France AIM Data Management publishes official aeronautical manuals (the AIP and the VFR Manual), charts and specific aeronautical information on behalf of the Swiss Confederation. It also provides twice-yearly military flight manuals in collaboration with the Swiss Air Force. 2.9% Eurowings GMBH The print edition of the AIP was discontinued in The publication is now only available in electronic form. The CD-ROM production of the VFR Manual has also been abolished. Since January 2017, the Swiss Air Force has obtained these manuals, too, solely electronically from the website. 2.7% 2.1% British Airways BA Niki Luftfahrt GmbH % Vueling Airlines

23 Glossary of abbreviations used ACC area control centre AFIS Aerodrome Flight Information Service AIM Aeronautical Information Management AIP Aeronautical Information Publication ANSE air navigation services employee AOT administrative, operational and technical personnel APTC the Geneva Tower air traffic controllers union ATC air traffic control ATFCM air traffic flow and capacity management ATFM air traffic flow management ATM air traffic management ATSEP air traffic safety electronics personnel CERN the European nuclear research organization CLA collective labour agreement CIO Chief Information Officer COO Chief Operating Officer CPCG Centre de Perfectionnement des Cadres à Genève DCT direct routing DDPS Swiss Federal Department of Defence, Civil Protection and Sport DFS Deutsche Flugsicherung (Germany s air navigation services provider) DSNA Direction des Services de la Navigation Aérienne (France s air navigation services provider) EASA European Aviation Safety Agency ENAV Italy s air navigation services provider ETH Swiss Federal Institute of Technology FABEC Functional Airspace Block Europe Central FDPS flight data processing system FOCA Federal Office of Civil Aviation HEC Haute Ecole Commerciale HRO high reliability organisation HSG University of St. Gallen IFR instrument flight rules IRMC Institut de Radiologie Monthey- Collombey KOSIF body for coordinating Swiss military firing exercises with ATC LP24 permanent aerial policing capability NATS the UK s air navigation services provider NMOC Network Management Operations Centre NOTAM notice to airmen PVB the union for personnel employed by the Swiss Confederation SES Single European Sky SESAR Single European Sky ATM Research SFAO Swiss Federal Audit Office SMS safety management system SOA service-oriented architecture STSB Swiss Transportation Safety Investigation Board TMA terminal manoeuvring area U-Space drone operating system XMAN Extended Arrival Management

24 Impressum Media Relations This report is also available in German and French. The original German version shall prevail Skyguide, swiss air navigation services ltd. Annual Report 2017/en/3.2018

25 FINANCIAL REPORT 2017 FINANCIAL REPORT 2017

26 2

27 Contents STATUTORY ACCOUNTS Income statement for the years ended 31 December 2017 and Balance sheet as at 31 December 2017 and Notes to the statutory accounts as at 31 December Proposal of the Board of Directors 9 Report of the statutory auditors 10 CONSOLIDATED FINANCIAL STATEMENTS Consolidated income statement for the years ended 31 December 2017 and Consolidated balance sheet as at 31 December 2017 and Consolidated cash flow statements for the years ended 31 December 2017 and Consolidated statement of changes in shareholders equity, for the years ended 31 December 2017 and Notes to the consolidated accounts as at 31 December Report of the group auditors 34 3

28 Statutory accounts Income statement for the years ended 31 December 2017 and 2016 in KCHF Air navigation services revenue Other operating revenue Net revenue from disposal of assets TOTAL OPERATING REVENUE TOTAL PERSONNEL EXPENSES Eurocontrol contribution Meteorological services contribution Other external air navigation services Leased communication lines Material and supplies, maintenance Property-related expenses Energy Administrative expenses Allowance for bad debt Unplanned depreciation Depreciation TOTAL OTHER OPERATING EXPENSES TOTAL OPERATING EXPENSES OPERATING RESULT Financial income Financial expenses FINANCIAL RESULT RESULT BEFORE TAX (Under) / over-recovery balance brought forward (Under) / over-recovery balance carried forward NET RESULT

29 Balance sheet as at 31 December 2017 and 2016 in KCHF ASSETS CURRENT ASSETS Cash and short-term cash deposit below 90 days Intercompany receivables 4 27 Receivables and advances Derivative assets Prepaid expenses TOTAL CURRENT ASSETS NON-CURRENT ASSETS Long-term advances and other long-term assets Property, plant and equipment Investments in affiliates Securities Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Derivative liabilities Intercompany payables Advances and other short-term liabilities Accrued liabilities Short-term provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term debt Other long-term liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES SHAREHOLDERS EQUITY Share capital Treasury shares General reserve Other reserves Retained earnings brought forward Result for the year TOTAL SHAREHOLDERS EQUITY TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

30 Statutory accounts Notes to the statutory accounts as at 31 December 2017 Skyguide, Swiss civil and military air navigation services ltd (hereinafter skyguide ), operates under a mandate given by the Swiss Confederation. This mandate is governed by the Federal Aviation Act and the associated ordinances. The company is domiciled at route de Pre-Bois, in Meyrin (Switzerland). Basis for the establishment of the accounts These financial statements have been prepared in accordance with the provisions of commercial accounting as set out in the Swiss Code of Obligations (art. 957 to 963b CO). The accounting principles applied are in line with those described in the consolidated financial statements for the year ended 31 December Receivables and advances in KCHF Receivables from the air navigation revenue Other receivable Personnel related receivable VAT receivable Allowance for bad debt TOTAL RECEIVABLE AND ADVANCES Contingent liabilities a) Guarantee deposits in KCHF Swiss customs and excise authority: provisional customs duties Zurich and Geneva Chamber of Commerce and Industry: ATA booklets Geneva cantonal employment office TOTAL The deposits have been made at the Cantonal Bank of Bern. Long-term loan Grant date 19 October 2011 Date of reimbursement 19 October 2021 Amount in CHF Interest rate 1.65 % Skyguide signed an acknowledgement of debt of CHF toward the issuer of the loan. An interest rate swap contract had been entered into before the conclusion of the long-term loan, to define a maximum interest rate on the loan. The instrument has not been exercised and the overall cost of KCHF is being amortised over the duration of the loan. Covenants linked to the long-term loan In case of the total loss of the mandate as defined in the Ordinance on the provision of air navigation services (OSNA) in article 2, paragraph 2, this could lead to an immediate cancelation of the ongoing loan. Covenants linked to specific credit lines Some credit lines obtained by the company are linked to covenants, which if not met, could lead to the cancelation of those credit lines, respectively to the cancelation of the open loan in relation with those credit lines. These covenants are: direct participation by the Confederation in the borrower s capital of a minimum of 51% and the preservation of the majority of the voting rights; minimum ratio of shareholders equity (share capital, reserves, retained earnings) representing 30% of the total skyguide statutory balance sheet. b) Other guarantee deposits in KCHF Rent guarantees in favour of employees Guarantees deposited on instalments received Pledged collateral TOTAL The deposits have been made at the Cantonal Banks of Bern and Geneva, at the Crédit Suisse in Geneva and the UBS in Geneva. 6

31 Other commitments not included in the balance sheet Leasing Maturity pattern of future lease payments are as follows: in KCHF Within one year In the second to the fifth year inclusive After the fifth year TOTAL The table on the left summarises the company s commitments concerning leases (leasing of premises), surface rights as well as operating leases (lease of copiers, servers and programs for management information system). Commitments are calculated based on current contracts, for the agreed contractual term if they cannot be cancelled within a year. Skyguide subsidiaries Paid Paid in nominal in nominal capital capital by by % % skyguide % % skyguide Name of subsidiary Activity Country held controlled (KCHF) held controlled (KCHF) SkySoft-ATM SA Software development Switzerland skynav SA Holding Belgium swisscontrol SA Dormant Switzerland The total of KCHF (2016: KCHF 2 119) in the balance sheet includes KCHF 50 of capital not paid up in favour of Swisscontrol SA. Share capital The Swiss Confederation holds 99.94% of the company. The share capital is CHF and is divided into registered fully paid-up shares, with a par value of CHF 10 each. The structure of the capital remained unchanged in 2017 and 2016 and no preferred share are issued. The Federal Aviation Act specifies that the majority of the capital belongs to the Swiss Confederation. The bylaws of the company stipulate that this holding is a minimum of 51%. No dividend was paid in 2017 and Business model The business model of skyguide comprises two main categories: regulated and non-regulated services. The regulated services are financed primarily by charges that are billed to the users (en-route, approach category I) or by contractually agreed charges (approach category II, military), while the non-regulated services are financed by winning tenders on the open market. Treasury shares On 8 July 2011, skyguide purchased treasury shares, sold by SAirGroup AG in debt restructuring liquidation and SAirLines AG in debt restructuring liquidation, for CHF 10 per share. There were no transactions in 2017 and Regulated services Nonregulated services En-route Approach category I Approach category II Military Commercial activity 7

32 Statutory accounts Route and approach category I General remarks Route and approach services in category I (Geneva Airport and Zurich Airport) are governed by Implementing Regulation (EU) No. 390/2013 and 391/2013 of the European Commission, the Principles for establishing the cost-base for en-route charges and the calculation of the unit rates of Eurocontrol and the Ordinance on Air Navigation Service. The terms of this economic regulation system are fixed over a so-called reference period (RP). For each reference period, route and approach services in category I are regulated by a performance plan agreed at the national and European levels. The current reference period covers the period 2015 to The key terms of this economic regulation system are as follows: an annual cost amount is forecast to finance the air navigation services; these are the so-called defined costs. Any deviation from this amount is recorded in the financial statements of the service provider in question (skyguide, MétéoSuisse, FOCA), thus generating a profit or a loss. A certain number of adjustments are allowed, however, to account for inflation and uncontrollable costs. Adjustments for inflation are carried over in the year n + 2, whereas the adjustments for uncontrollable costs are carried over for the subsequent reference period. These carry forwards are financed by the users by means of an increase or a decrease in the charges. A traffic forecast is made in the performance plan for each year covered by this plan. The forecast serves as the basis for the calculation of the unit rate invoiced to the users of air navigation services. The difference between the actual traffic and the forecast traffic generates a surplus or a shortfall in the revenues to cover the defined costs. For a certain number of elements in the defined costs (e.g. MétéoSuisse, FOCA, Eurocontrol, etc.), there is no risk of variations between the actual and the forecast traffic. This means that the over- or under-recovery generated on these elements of the defined costs is compensated by being passed on entirely to the users in year n + 2. The other elements making up the defined costs (e.g. skyguide s costs) are subject in part to the risk of variations between the actual and the forecast traffic. The first two percentage points of any variation are covered in full by skyguide as well as 30% of the variation in traffic between (+/ ) 2% and (+/ ) 10% compared with the forecast. The remaining 70% is passed on to the users in year n + 2. The portion of the variations beyond the (+/ ) 10% threshold are charged entirely to the users. Provisions for the carry forwards mentioned above relating to the costs or the variation in revenues are created in the year in which they occur (creating carry forwards). A positive carry forward represents an under-recovery of costs and results in an increase in the net result. The counterpart on the balance sheet is recognised in advances and other long-term assets. A negative carry forward represents an over-recovery of costs and results in a decrease in the net result. The counterpart on the balance sheet is recognised in other long-term liabilities. The carry forwards will be integrated in the calculation of the rates for the year to which they are carried forward. Thus, they increase or decrease the annual revenues concerned through an increase or decrease in the unit rate. As the change in revenues is recognised in the year in which it is generated, its impact on the net result of the year in question is neutralised through the carry forwards line item. Route charges For route services until the end of 2011, the full-cost recovery system was applied. As of 2012, the system of full cost coverage has been abolished and replaced by a new economic regulation system. The accumulated under-recoveries up to the end of 2011, when the system changed, will be transferred entirely to the users until the end of 2019 at the latest. Approach category I (National airports) Category I comprises the airports of Geneva and Zurich. Until the end of 2014, the full-cost recovery system was applied for these airports. Since 2015, the same economic regulation system and the same reference period as for the route have been in place. The accumulated over-recoveries up to the end of 2014, when the system changed, will be transferred entirely to the users until the end of 2019 at the latest. 8

33 Approach category II (Regional civil aerodromes) Category II comprises the aerodromes of Berne-Belp, Buochs, Grenchen, La Chaux-de-Fonds-Les Eplatures, Lugano-Agno, Sion and St Gall-Altenrhein. Since 2017, the responsibility for financing the air navigation services has been transferred to the regional civil airports. Each airport constitutes a specific tariff zone and sets the charges relating to air navigation. Skyguide invoices them for its services. In 2016, revenues from approach services in category II should cover the costs. The surplus of charges or income in a year was transferred to users by means of an increase or a decrease in the charges. This transfer was realised in the subsequent year. Military activities The services that skyguide provides to the Swiss Air Force are governed by the full-cost recovery principle. A quarterly lump sum compensation paid by the Swiss Air Force to skyguide is fixed by a service agreement. A financial statement is prepared at year-end with regard to the military activities. In principle, a provision is created for the balance between the income and the cost of the activity in the year ended and reversed the following year in favour of the Air Force or in favour of skyguide. Proposal of the Board of Directors Proposal of the Board of Directors for the appropriation of cumulated earnings Proposal Resolution of the Board of the annual of Directors general meeting in KCHF Retained earnings brought forward Result for the year RETAINED EARNINGS IN BALANCE SHEET in KCHF Appropriations to general legal reserve Appropriations to other reserves Transferred from other reserves Retained earnings to be carried forward RETAINED EARNINGS IN BALANCE SHEET

34 Report of the statutory auditors Report of the statutory auditor to the General Meeting of SKYGUIDE, Swiss civil and military Air Navigation Services Limited Meyrin Report of the statutory auditor on the financial statements As statutory auditor, we have audited the accompanying financial statements of SKYGUIDE, Swiss civil and military Air Navigation Services Limited, which comprise the balance sheet, income statement and notes (pages 4 to 9), for the year ended 31 December Board of Directors responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended 31 December 2017 comply with Swiss law and the company s articles of incorporation. 10

35 Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company s articles of incorporation. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers SA Marc Secretan Audit expert Auditor in charge Ludovic Derenne Audit expert Lausanne, 22. February

36 Consolidated financial statements Consolidated income statement for the years ended 31 December 2017 and 2016 in KCHF Note Air navigation services revenue Other operating revenue Net revenue from disposal of assets TOTAL OPERATING REVENUE TOTAL PERSONNEL EXPENSES Eurocontrol contribution Meteorological services contribution Other external air navigation services Leased communication lines Material and supplies, maintenance Property-related expenses Energy Administrative expenses Allowance for bad debt Unplanned depreciation Depreciation TOTAL OTHER OPERATING EXPENSES TOTAL OPERATING EXPENSES OPERATING RESULT Financial income Financial expenses FINANCIAL RESULT RESULT OF AN ASSOCIATED ORGANISATION RESULT BEFORE TAX Taxes RESULT AFTER TAX (Under-) / over-recovery balance brought forward (Under-) / over-recovery balance carried forward NET RESULT Attributable to minority interests ATTRIBUTABLE TO SKYGUIDE SHAREHOLDERS

37 Consolidated balance sheet as at 31 December 2017 and 2016 in KCHF Note ASSETS CURRENT ASSETS Cash and short-term cash deposit below 90 days Receivables and advances Derivative assets Prepaid expenses TOTAL CURRENT ASSETS NON-CURRENT ASSETS Long-term advances and other long-term assets Property, plant and equipment Securities and investment in associate Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Derivative liabilities Advances and other short-term liabilities Accrued liabilities Short-term provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term debt Other long-term liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES SHAREHOLDERS EQUITY Share capital Treasury shares General reserve Other reserves Translation reserve Retained earnings brought forward Result for the year TOTAL SHAREHOLDERS EQUITY EXCL. MINORITY INTEREST Minority interest TOTAL SHAREHOLDERS EQUITY TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

38 Consolidated financial statements Consolidated cash flow statements for the years ended 31 December 2017 and 2016 in KCHF OPERATING ACTIVITIES Net result Depreciation Financial income Financial expenses Dividends received Taxes Gains and other changes on property, plant and equipment and intangible assets Fair value change on available for sale securities and associated entity Change in long-term deferred revenues and advances received Change in long-term debt Change in advances and other short-term receivables Change in prepaid expenses, long-term advances and other long term assets Change in trade and other payables Change in advances and other short-term liabilities Change in accrued liabilities Change in provisions CASH FLOW FROM OPERATING ACTIVITIES Taxes paid Interest paid Interest received NET CASH FLOW FROM OPERATIONAL ACTIVITIES

39 ... in KCHF INVESTING ACTIVITIES Investment in property, plant and equipment Proceeds from sale of property, plant and equipment Investment in intangible assets Dividends received NET CASH FLOW FROM INVESTING ACTIVITIES FINANCING ACTIVITIES NET CASH USED IN FINANCING ACTIVITIES 0 0 Difference on foreign currency conversion CHANGE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at January Cash and cash equivalents at December CHANGE IN CASH AND CASH EQUIVALENTS

40 Consolidated financial statements Consolidated statement of changes in shareholders equity, for the years ended 31 December 2017 and 2016 Share Treasury General in KCHF capital shares reserve Shareholders equity at January 1, Currency translation difference Allocation to reserves Net result for the year SHAREHOLDERS EQUITY AT DECEMBER 31, Shareholders equity at January 1, Currency translation difference Allocation to reserves Net result for the year SHAREHOLDERS EQUITY AT DECEMBER 31, The General reserve represents the legal reserve as per Swiss Code of Obligations art

41 Retained TOTAL earnings EXCLUDING Other Translation brought Result for MINORITY Minority reserves reserve forward the year INTEREST interest TOTAL

42 Consolidated financial statements Notes to the consolidated accounts as at 31 December 2017 General information Skyguide, Swiss civil and military air navigation services ltd (hereafter skyguide ), operates under a mandate given by the Swiss Confederation. This mandate is governed by the Federal Aviation Act and the associated ordinances. The company is domiciled at route de Pre-Bois, in Meyrin (Switzerland). Relations with the Confederation The Swiss Confederation is the majority shareholder in skyguide. The Federal Aviation Act provides that the majority of the capital belongs to the Swiss Confederation. The bylaws of the company state that this holding must be at least 51%. A reduction in the holding of the Swiss Confederation would necessitate a modification of the law by the Federal Chambers, and such a decision, under certain circumstances, might be subject to a referendum. As the majority shareholder, the Swiss Confederation has the power to control all the decisions taken at the company s general meetings, including the election of the members of the Board of Directors. Transactions with the Confederation Skyguide maintains various business relationships with the Swiss Confederation or other companies in which it is the majority shareholder. These transactions include the payment by the Confederation of exempted flights. These transactions are conducted under the usual market conditions. Basis for the establishment of the consolidated accounts The consolidated financial statements for the years ended 31 December 2017 and 2016 are prepared in accordance with the whole Swiss Accounting and Reporting Recommendations (Swiss GAAP-ARR) relating to the presentation of accounts and in accordance with the specific rules in force in our industry. In accordance with the specific rules in force in this industry, skyguide applies the Principles for establishing the cost base for route facility charges and the calculation of the unit rates of Eurocontrol, as well as the Ordinance on the provision of air navigation services. These texts govern the handling of over- and under-recoveries. The consolidated financial statements have been prepared under the historical cost convention, with the exception of the items Derivative financial investments held at the fair value. The consolidated financial statements have been prepared on an accrual basis. All the companies included in the consolidation close their books at 31 December. Method of consolidation The consolidated annual accounts include the accounts of skyguide and of its subsidiaries listed in the scope of consolidation. Modification to the scope of consolidation During the 2017 financial period, there was no modification to the scope of consolidation. 18

43 Skyguide subsidiaries included in the scope of consolidation Paid Paid in nominal in nominal capital capital by by % % skyguide % % skyguide Name of subsidiary Activity Country held controlled (KCHF) held controlled (KCHF) SkySoft-ATM SA Software development Switzerland skynav SA Holding Belgium swisscontrol SA Dormant Switzerland Skyguide fully consolidates subsidiaries in which it has a holding of more than 50% or exercises exclusive control, either directly or indirectly. The assets and liabilities of its subsidiaries, together with the expenses and income, are included in full in the annual consolidated accounts. The book values of the affiliates investments, plus the shareholders equity, are eliminated. Any minority shareholdings in the net equity and the result appear separately in the balance sheet and the consolidated income statement. Under the unity principle, the minority interest is included in the shareholders equity. Intercompany balances, expenses, income and profits are eliminated upon consolidation. Conversion into Swiss francs The consolidated accounts are prepared in Swiss francs (CHF) and presented in thousands of Swiss francs (KCHF). The subsidiaries of the Group express their financial statements in local currency. The conversion of the income statement of the foreign subsidiary (skynav SA) is carried out at the average exchange rate for the year, while the balance sheet is converted at the year-end rate, at the rates published by the federal tax administration. The translation difference resulting from the conversion of the balance sheet items is allocated to the shareholders equity along with the translation differences on the income statement arising from the difference of the average and the year-end exchange rate. Authorisation of the annual accounts The annual accounts were authorised for publication by the Board of Directors in its meeting of 22 February 2018 and must still be approved by the general shareholders meeting of 2 May Accounting rules The accounting rules of SkySoft-ATM SA and swisscontrol SA follow the rules described for skyguide. Skynav SA follows the Belgian accounting rules. The accounts of skynav SA are adjusted to the skyguide accounting principles. The main accounting rules used in the preparation of skyguide s consolidated financial statements are described below. Consolidation of the capital The book value of the investments is eliminated with the share of the net assets at the time of the acquisition or foundation using the purchase method. 19

44 Consolidated financial statements Foreign currencies Functional currency The elements included in the financial statements of skyguide are measured in the currency that best reflects the economic reality of the transaction. The accounts are presented in Swiss francs (CHF), which is the functional currency of skyguide. Transactions in foreign currencies Transactions in foreign currencies are converted to the functional currency at the closing rate of the prior month. The exchange losses and gains arising from the settlement of these transactions and from the re-evaluation of the balance sheet items expressed in foreign currencies as at the balance sheet date are posted to the statement of income, unless the transactions qualify as cash flow hedge in which case the exchange difference is posted to shareholders equity. Cash and short-term cash deposit below 90 days This item represents assets in current accounts as well as short-term cash deposit below 90 days. These transactions are recorded at the exchange rate prevailing at the time of the transaction. These items are revalued at year-end at closing rate. Receivables Receivables are recorded at the amount originally billed. A provision for bad debts is established on the basis of a review of the open items at the end of the period, when there is high probability that the amounts will not be recovered by the company. Amounts which are definitely unrecoverable are written off. Prepaid expenses This caption includes the prepaid expenses relating to the following accounting period, as well as accrued income, including under-recoveries (see note 14). Securities and associate The securities are presented as non-current assets. They are valued at market rate at the closing date. Re-evaluations and losses and gains on the sales of such securities are accounted for under financial income or expense. An associated organisation is an investment in which a decisive influence can be realised. A significant influence can be assumed if the share of the voting rights is at least 20 percent but less than 50 percent and control cannot be exercised. An associated organisation is recognised using the equity method. The result of the associated organisation is disclosed separately in the consolidated income statement. Property, plant and equipment Property, plant and equipment are recorded at historical cost, less accumulated depreciation. Depreciation method is straight-line and based on the following useful lives, by category of assets: Depreciation term Nature of the assets (years) Buildings: shell 40 Buildings: internal and external layout 10 to 15 Land No depreciation Fixed assets under construction No depreciation Building infrastructure Based on the residual lifetime of the underlying equipment Vehicles 5 to 8 Air navigation facilities (ANF): buildings 40 Air navigation facilities (ANF): technical installations 15 to 20 Furniture and equipment 5 to 10 Computer equipment (without ANF) 3 to 8 Measuring devices 8 to 15 Instruction and simulation equipment: Software and hardware 4 to 8 Instruction and simulation equipment: Technical equipment for simulation 15 to 20 Instruction and simulation equipment: Simulation facilities 20 Write-offs of fixed assets are posted to the statement of income, under Unplanned depreciation. When applicable, the interest on loans used to finance the acquisition of tangible assets is posted to the statement of income under Financial expenses. Expenses for repairs and maintenance are posted to the statement of income under Material, repairs and maintenance. Expenses for major renovation are capitalised and amortised over the life of the element replaced, but never beyond the remaining useful life of the underlying asset. Exchange losses and gains on transactions specifically attributable to a tangible asset are added to the value of the respective asset. In accordance with the standard, any research costs (e.g. expenditure incurred in the pre-project phases or in connection with feasibility studies) are not capitalised but recognised as of the date that they are incurred. 20

45 Intangible assets Intangible assets are included at their historical value, reduced by depreciation. Depreciation method is straightline and based on a standard useful life of generally between 3 and 8 years. Intangible assets created by the company (mainly software linked to air navigation) are capitalised under Software, when launched into production. The intangible assets under construction are integrated in the column Fixed assets under construction of the property, plant and equipment table. Intangible assets acquired by the company are included under this heading at their historical value, reduced by depreciation. Business model The business model of skyguide comprises two main categories: regulated and non-regulated services. The regulated services are financed primarily by charges that are billed to the users (route, approach category I) or by contractually agreed charges (approach category II, military), while the non-regulated services are financed by surpluses from tenders placed on the open market. Regulated services Nonregulated services Impairment The company measures each asset as at year-end. An estimate of the net realisable value of the asset in question is made if the net realisable value corresponds to the value in use. If the net realisable value of an asset cannot be determined, skyguide makes an estimation at the level of the smallest cash-generating unit to which the asset in question is allocated. If the market value of an asset exceeds the value in use, a write-down is booked. En-route Approach category I Approach category II Route and approach category I Military Commercial activity Goodwill The goodwill depreciation period is established on acquisition. The current term is 5 years. Financial debts All debts are recorded at their net proceeds received, on the date the funds are received. The long-term debt is initially recorded at the net proceeds received and then recognised in accordance with the amortised cost method. Accrued liabilities This item includes expenses payable relating to the current period, which will only be paid in the following period, as well as short- and long-term deferred income. Provisions A provision is recorded when the company has a probable obligation that is based on a past event and its amount and / or its due date is uncertain but can be estimated. This obligation gives rise to a liability. Revenue Revenue is recognised when the service is delivered. The amounts are posted to the statement of income, net of taxes. General remarks Route and approach services in category I (Geneva Airport and Zurich Airport) are governed by Implementing Regulation (EU) No. 390/2013 and 391/2013 of the European Commission, the Principles for establishing the cost-base for en-route charges and the calculation of the unit rates of Eurocontrol and the Ordinance on Air Navigation Service. The terms of this economic regulation system are fixed over a so-called reference period (RP). For each reference period, route and approach services in category I are regulated by a performance plan agreed at the national and European levels. The current reference period covers the period 2015 to The key terms of this economic regulation system are as follows: an annual cost amount is forecast to finance the air navigation services; these are the so-called defined costs. Any deviation from this amount is recorded in the financial statements of the service provider in question (skyguide, MétéoSuisse, FOCA), thus generating a profit or a loss. A certain number of adjustments are allowed, however, to account for inflation and uncontrollable costs. Adjustments for inflation are carried over in the year n + 2, whereas the adjustments for uncontrollable costs are carried over for the subsequent reference period. These carry forwards are financed by the users by means of an increase or a decrease in the charges. 21

46 Consolidated financial statements A traffic forecast is made in the performance plan for each year covered by this plan. The forecast serves as the basis for the calculation of the unit rate invoiced to the users of air navigation services. The difference between the actual traffic and the forecast traffic generates a surplus or a shortfall in the revenues to cover the defined costs. For a certain number of elements in the defined costs (e.g. FOCA, MétéoSuisse, Eurocontrol, etc.), there is no risk of variations between the actual and the forecast traffic. This means that the over- or under-recovery generated on these elements of the defined costs is compensated by being passed on entirely to the users in year n + 2. The other elements making up the defined costs (e.g. skyguide s costs) are subject in part to the risk of variations between the actual and the forecast traffic. The first two percentage points of any variation are covered in full by skyguide as well as 30% of the variation in traffic between (+/ ) 2% and (+/ ) 10% compared with the forecast. The remaining 70% is passed on to the users in year n + 2. The portion of the variations beyond the (+/ ) 10% threshold are charged entirely to the users. Provisions for the carry forwards mentioned above relating to the costs or the variation in revenues are created in the year in which they occur (creating carry forwards). A positive carry forward represents an under-recovery of costs and results in an increase in the net result. The counterpart on the balance sheet is recognised in advances and other long-term assets. A negative carry forward represents an over-recovery of costs and results in a decrease in the net result. The counterpart on the balance sheet is recognised in other long-term liabilities. The carry forwards will be integrated in the calculation of the rates for the year to which they are carried forward. Thus, they increase or decrease the annual revenues concerned through an increase or decrease in the unit rate. As the change in revenues is recognised in the year in which it is generated, its impact on the net result of the year in question is neutralised through the carry forwards line item. Route charges For route services until the end of 2011, the full-cost recovery system was applied. As of 2012, the system of full cost coverage has been abolished and replaced by a new economic regulation system. The accumulated under-recoveries up to the end of 2011, when the system changed, will be transferred entirely to the users until the end of 2019 at the latest. Approach category I (National airports) Category I comprises the airports of Geneva and Zurich. Until the end of 2014, the full-cost recovery system was applied for these airports. Since 2015, the same economic regulation system and the same reference period as for the route have been in place. The accumulated over-recoveries up to the end of 2014, when the system changed, will be transferred entirely to the users until the end of 2019 at the latest. Approach category II (Regional civil aerodromes) Category II comprises the aerodromes of Berne-Belp, Buochs, Grenchen, La Chaux-de-Fonds-Les Eplatures, Lugano-Agno, Sion and St. Gall-Altenrhein. Since 2017, the responsibility for financing the air navigation services has been transferred to the regional civil airports. Each airport constitutes a specific tariff zone and sets the charges relating to air navigation. Skyguide invoices them for its services. In 2016, revenues from approach services in category II should cover the costs. The surplus of charges or income in a year was transferred to users by means of an increase or a decrease in the charges. This transfer was realised in the subsequent year. Military activities The services that skyguide provides to the Swiss Air Force are governed by the full-cost recovery principle. A quarterly lump sum compensation paid by the Swiss Air Force to skyguide is fixed by a service agreement. A financial statement is prepared at year-end with regard to the military activities. In principle, a provision is created for the balance between the income and the cost of the activity in the year ended and reversed the following year in favour of the Air Force or in favour of skyguide. Financial and derivative instruments Skyguide uses derivatives to hedge its exchange and interest rate risk, which are related to the normal course of its activities. These instruments are recorded on the basis of the trade date. Derivative financial instruments can consist of future exchange contracts, currency options, cross-monetary swaps, interest rates swaps and swaptions. Fair value hedging includes derivatives used to hedge the exchange risk and/or the interest rate risk. The profit or loss resulting from the re-evaluation of these fair-value hedging instruments is booked to either the income statement or the shareholders equity. 22

47 Cash flow hedging includes derivatives used to hedge the risk related to the cash flows resulting from future transactions (exchange and/or interest rate) and the risk related to the purchase of equipment in foreign currencies. The unrealised profit or loss arising from re-evaluation at the fair value of cash flow hedging instruments is posted to provisions, if the hedging of the risks is effective. This verification is performed regularly and at least quarterly. If the instrument is recognised as ineffective, the loss or gain arising from fair value re-evaluation is immediately posted to the statement of income. When the element covered by a hedging instrument is a fixed asset, the accrued gains and losses of such hedging instrument previously posted to provisions are charged to the cost of the fixed asset. When the element covered is a financing instrument, the accrued gains and losses of the hedging instrument relating to it are included in the amount of the loan. Pension plan The Group covers the costs relating to the professional pension of all its workers, as well as their assignees, under the legal prescriptions. All the pension plans are covered by Swiss law. The pension obligations and the plan assets are managed by a legally independent pension fund. The organisation, the management and the financing of the pension plans are governed by the law (LPP), together with the deed of foundation and the regulations applicable to pensions in force. Transactions with related parties According to Swiss GAAP-ARR 15, transactions with the Swiss Confederation, including the departments and other companies in which it is the majority shareholder, are not considered as related parties. Risk management policy Risk assessment To achieve the goals set up by the company, skyguide introduced a systematic and complete risk management framework. The enterprise risk management (ERM) that started as a corporate governance tool enhances the transparency and provides an adequate risk assessment when taking a decision. All the strategic, financial, operational and compliance risks are identified and quantified based on their probability of likelihood and impact. These risks are then categorised and classified in a risk matrix. The key risks are regularly reviewed and actions are taken if needed. The board of directors formally reviews the key risks twice a year. Management of exchange risk exposure The Swiss franc is the functional currency of the Group. Skyguide receives a significant part of its revenue in Euros. Most expenses are in Swiss francs and Euros. Exchange rate fluctuations versus the Swiss franc may have a significant impact on the company s result. To reduce this risk, the company enters into certain instruments (options, forward exchange, swaps, etc.) on the currency market, within the limits of the rules set out by the Board of Directors. The main objective of this risk management is: a) to avoid significant exchange losses on exposure to the functional currency; and b) to limit revenue volatility related to fluctuations in the exchange rate of foreign currencies. Management of interest rate risk exposure Skyguide mainly intends to protect itself against significant increases in net interest expenditure due to market fluctuations in interest rates. Given its position of net borrower, the interest rate risk is mainly addressed by managing the ratio of the fixed rate to the floating rate of the net debt. To limit the negative effects on the result of net interest expenditure linked to the potential rise in market interest rates, skyguide keeps at least 50% of the net debt at fixed interest rates. Management of liquidity risk Skyguide is exposed to this risk in the event of default of certain counterparts or a refinancing problem. The liquidity of the group is proactively supervised to ensure that the company can cover its obligations at all times. Market risk The company is exposed to market risk, primarily vis-à-vis the airlines, its major clients. This risk is mainly linked to the dependence toward the national carriers, Swiss and Lufthansa which represent almost 27% of the total revenue of skyguide (2016: almost 28%). The 15 largest customers represent almost 62% of the route facility income (2016: almost 64%). A decrease of the activity for these clients would have negative consequences on the company s revenue. 23

48 Consolidated financial statements Notes to the consolidated financial statements as at 31 December Operating revenue segment analysis in KCHF Route charges (RC) Approach charges (AC) Air Force compensation Contributions from the Confederation Other air navigation services revenue TOTAL AIR NAVIGATION SERVICES REVENUE Other operating revenue Net revenue from disposal of assets TOTAL OTH ER OPER ATI NG R EVEN U E TOTAL OPERATING REVENUE (Under-) / over-recovery balance brought forward (Under-) / over-recovery balance carried for ward TOTAL CAR R I ED FORWAR D TOTAL OPERATING REVENUE NET The segment analysis of the air traffic is composed as follow: overflight traffic (route charges, RC); traffic from and to Swiss airports (approach charges, AC); for the Swiss Air Force skyguide provides services that are essential to maintaining the sovereignty of Swiss airspace. The geographical airspace region managed by skyguide overlaps the national borders and extends to France, Italy, Austria and Germany. The item Other air navigation services revenue includes revenue from maintenance and repair contracts, instruction, training and technical consulting. 2. Personnel expenses in KCHF Salaries and social benefits Duty and shift allowances Social charges Other personnel expenses Internal hours capitalised TOTAL PERSONNEL EXPENSES The social charges include the employer s contributions in respect of pension benefits as indicated in the table below: **As at 1 January 2018, the technical interest rate of the pension fund was reduced from 3% to 2%. As a result, the obligations have increased. This amount includes a KCHF additional contribution to finance the majority of the increase in the pension fund obligations related to the retirees. The average number of personnel, including personnel under training, was in 2017, versus in Eurocontrol contribution As a state member of Eurocontrol, the Confederation was bearing this contribution until the end of Since then, skyguide bears these costs, considering the new contribution received from the Confederation (see note 1). 4. Administrative expenses The administrative expenses include subcontracting costs as well as purchase costs for material sold. The amount is KCHF (2016: KCHF 854). 5. Net allowance for bad debt in KCHF Allowance / (Reversal) for bad debt (RC) Allowance / (Reversal) for bad debt (AC) Allowance / (Reversal) for bad debt (other) TOTAL ALLOWANCE FOR BAD DEBT Unplanned depreciation Unplanned depreciation amounting to KCHF 282 were recorded in 2017 (2016: KCHF 7 303). In 2017 and 2016 unplanned depreciation result from assets under construction for which a revaluation of the situation indicate that these assets no longer meet the criteria for capitalisation under the Swiss GAAP-ARR standards and anticipated scrapping of material. 7. Financial income in KCHF Interest income Foreign exchange transaction gains/losses net gain Revenue on foreign exchange instruments Other financial revenue TOTAL FINANCIAL INCOME in KCHF Employer s contribution **

49 8. Financial expenses in KCHF Interest expenses Foreign exchange transaction gains/losses net loss 0 49 Loss on foreign exchange instruments Other financial expenses TOTAL FINANCIAL EXPENSES Taxes Skyguide is exempt from any federal, cantonal and municipal taxes according to Article 40, indent 3 of the Federal Aviation Act dated 21 December The other companies are subject to taxes in their respective countries. 10. (Under-) / over-recovery balance brought forward For route services, the amount brought forward is the under-recovery generated prior to 2012 and the underrecovery generated in year n 2. For approach services in category I, the amount brought forward is the over-recovery generated up to the end of 2014 and the under-recovery generated in year n (Under-) / over-recovery balance carried forward This item represents the carry forwards to subsequent years of any over- and/or under-recovery of charges for route services and approach services in category I recorded in year n. The over-/under-recoveries in connection with the traffic an inflation is transferred to users in the year n + 2. The over-/under-recoveries in connection with unavoidable costs will be carried forward to the subsequent reference period. 12. Cash and short-term cash deposit below 90 days in KCHF Cash and cash equivalents Short-term cash deposit below 90 days TOTAL CASH AND SHORT-TERM CASH DEPOSIT BELOW 90 DAYS Average interest rate on short-term deposits (%) Average duration of short-term deposits (days) Receivables and advances in KCHF Receivables from the air navigation service revenue Other receivable Personnel related receivable VAT receivable Allowance for bad debt TOTAL RECEIVABLE AND ADVANCES Prepaid expenses in KCHF Accrued income: under-recovery approach charges n Accrued income: under-recovery route charges n Accrued income: under-recovery route charges generated before Accrued income: other Prepaid expenses TOTAL PREPAID EXPENSES For the route activity, the cumulated under-recovery generated before 2012 amounted to CHF at the end of This amount was reduced at end 2017 to CHF On 31 December 2017, the amount of CHF is accounted for in the accrued income: other and the amount of CHF in the long-term advances and other long-term assets (see note 15). 15. Long-term advances and other long-term assets in KCHF Accrued income: under-recovery route charges generated before Accrued income: under-recovery route charges RP12-14 to RP Other OTHER LONG-TERM ADVANCES AND OTHER LONG-TERM ASSETS

50 Consolidated financial statements 16. Property, plant and equipment TOTAL Fixed assets LAND AND under Buildings in KCHF Buildings Land BUILDINGS construction Infrastructure ACQUISITION VALUE Status as at January 1, Additions Reclassifications Disposals STATUS AS AT DECEMBER 31, DEPRECIATION Accumulated depreciation as at January 1, Depreciation Unplanned depreciation Accumulated depreciation of reclassifications Accumulated depreciation of disposals ACCUMULATED DEPRECIATION AS AT DECEMBER 31, NET BOOK VALUE AS AT DECEMBER 31, ACQUISITION VALUE Status as at January 1, Additions Reclassifications Disposals STATUS AS AT DECEMBER 31, DEPRECIATION Accumulated depreciation as at January 1, Depreciation Unplanned depreciation Accumulated depreciation of reclassifications Accumulated depreciation of disposals ACCUMULATED DEPRECIATION AS AT DECEMBER 31, NET BOOK VALUE AS AT DECEMBER 31,

51 TOTAL PROPERTY, Air Instrument PLANT AND navigation Furniture and EQUIPMENT facilities and IT facilities Measuring simulation EXCL. LAND Vehicles (ANF) equipment (excl. ANF) devices facilities AND BUILDINGS TOTAL

52 Consolidated financial statements 17. Intangible assets in KCHF Software Goodwill Other TOTAL ACQUISITION VALUE Status as at January 1, Additions Reclassifications Disposals STATUS AS AT DECEMBER 31, DEPRECIATION Accumulated depreciation as at January 1, Depreciation Unplanned depreciation Accumulated depreciation of reclassifications Accumulated depreciation of disposals ACCUMULATED DEPRECIATION AS AT DECEMBER 31, NET BOOK VALUE AS AT DECEMBER 31, ACQUISITION VALUE Status as at January 1, Additions Reclassifications Disposals STATUS AS AT DECEMBER 31, DEPRECIATION Accumulated depreciation as at January 1, Depreciation Unplanned depreciation Accumulated depreciation of reclassifications Accumulated depreciation of disposals ACCUMULATED DEPRECIATION AS AT DECEMBER 31, NET BOOK VALUE AS AT DECEMBER 31, The amount of commitments as at 31 December 2017 with suppliers for the acquisition of tangible and intangible assets is KCHF (31 December 2016: KCHF ). 28

53 18. Derivative financial instruments Contractual values net Positive fair value Negative fair value in KCHF Exchange rate instruments Forward foreign exchange contracts Options Swaps TOTAL OF EXCHANGE RATE INSTRUMENTS TOTAL DERIVATIVE FINANCIAL INSTRUMENTS INCLUDED IN ASSETS AND LIABILITIES Derivative instruments have the following maturities: in KCHF Within one year Within the second year 0 0 Between the third to the fifth year inclusive 0 0 After the fifth year

54 Consolidated financial statements 19. Advances and other short-term liabilities in KCHF Other personnel related liabilities VAT payable Other liabilities TOTAL ADVANCES AND OTHER SHORT-TERM LIABILITIES Accrued liabilities in KCHF Deferred revenue: approach charges Deferred revenue: route charges Deferred revenue: other Charges to pay Financing commitment in favour of skycare** TOTAL ACCRUED LIABILITIES ** see note 2. Some deferred revenue is refundable in case skyguide would be unable to meet its contractual obligations. For the approach activity with Category I airports, the cumulated over-recovery generated before 2015 amounted to CHF at the end of This amount was reduced at end 2017 to CHF On 31 December 2017, the amount of CHF is accounted for in the accrued liabilities and the amount of CHF in the other long-term liabilities. 21. Short-term provisions Personnel TOTAL SHORT-TERM in KCHF Litigation related Restructuring Other PROVISIONS At January 1, Additional provisions Utilised during the year Unused provisions reversed AT DECEMBER 31, At January 1, Additional provisions Utilised during the year Unused provisions reversed AT DECEMBER 31,

55 22. Long-term debt in KCHF Long-term debt Borrowing from financial institutions Interest rate swap settlement TOTAL LONG-TERM DEBT Maturity of debt Within one year 0 0 In the second year 0 0 In the third to the fifth year inclusive After the fifth year 0 0 TOTAL in % Weighted average interest rate 2,2312 2,2312 in KCHF Interest rate structure of borrowings Fixed interest rate debt TOTAL The fair value of the financial debts is not significantly different from their book value. No guarantee or pledging of assets has been issued in relation to the financial debts. Long-term debt Grant date 19 October 2011 Date of reimbursement 19 October 2021 Amount in CHF Interest rate 1.65% Skyguide signed an acknowledgement of debt of CHF toward the issuer of the loan. Skyguide had entered into an interest rate swap contract before the conclusion of the long-term loan in order to define a maximum interest rate on the loan. The instrument has not been exercised and the overall cost of KCHF is being amortised over the duration of the loan. Covenants linked to the long-term loan In case of the total loss of the mandate as defined in the Ordinance on the provision of air navigation services (OSNA) on the article 2, paragraph 2, this could lead to an immediate cancelation of the ongoing loan. Covenants linked to specific credit lines Some credit lines obtained by the company are linked to covenants which, if not met, could lead to the cancelation of those credit lines, respectively to the cancelation of the open loan in relation with those credit lines. These covenants are: direct participation by the Confederation in the borrower s capital of a minimum of 51% and the preservation of the majority of the voting rights; minimum ratio of shareholders equity (share capital, reserves, retained earnings) representing 30% of the total skyguide statutory balance sheet. 31

56 Consolidated financial statements 23. Other long-term liabilities This amount includes over-recoveries that will be repaid in the long term totalling CHF KCHF (2016: KCHF). 24. Share capital The Swiss Confederation holds 99.94% of the company. The share capital is CHF and is divided into registered fully paid-up shares, with a par value of CHF 10 each. The structure of the capital remained unchanged in 2017 and 2016 and no preferred share are issued. No dividend was paid in 2017 and Treasury shares On 8 July 2011, skyguide purchased treasury shares, sold by SAirGroup AG in debt restructuring liquidation and SAirLines AG in debt restructuring liquidation for CHF 10 per share. There were no transactions in 2017 and Contingent liabilities a) Guarantee deposits in KCHF Swiss customs and excise authority: provisional customs duties Zurich and Geneva Chambers of Commerce and Industry: ATA booklets Geneva cantonal employment office TOTAL The deposits have been made at the Cantonal Bank of Bern. b) Other guarantee deposits in KCHF Rent guarantees in favour of employees Guarantees deposited on instalments received Pledged collateral TOTAL The deposits have been made at the Cantonal Banks of Bern and Geneva, at the Crédit Suisse in Geneva and the UBS in Geneva. 32

57 27. Other commitments not included in the balance sheet Leasing Maturity pattern of future lease payments are as follows: in KCHF Within one year In the second to the fifth year inclusive After the fifth year TOTAL This table summarises the company s commitments concerning leases (leasing of premises), surface rights as well as operating leasing (lease of copiers, servers and programs for management information system). Commitments are calculated based on current contracts, for the agreed contractual term if they cannot be cancelled within a year. 28. Pension fund The patrimonial and financial position of skycare, the skyguide pension fund is as follows according to its annual accounts (2017 estimates): in KCHF (estimates) Assets at market value ** Pension obligations (liabilities) Deficit Professional pension care applies in principle to all staff subject to compulsory insurance as per the LPP (Law on occupational pension scheme) benefiting from an unlimited-term employment contract or a contract of over 3 months or a training or apprenticeship contract. The aim of the Foundation is to provide professional pension care in the framework of the LPP and its implementing ordinances, and to protect the staff of skyguide and, as appropriate, the staff of the companies linked to it economically or financially, as well as in favour of their families and their survivors, against the economic consequences of ageing, decease, invalidity and an early retirement linked to the profession. The calculation of the pension obligations is made annually, based on the financial statements of skycare which are prepared in accordance with Swiss GAAP-ARR 26. There are no free reserves. No economic benefits or commitments exist at year-end. Contributions due to the pension plan There are no regulatory contributions due to the pension plan. 29. Audit and additional fees PricewaterhouseCoopers SA charged skyguide CHF (2016: CHF ) for the services associated with its statutory and group auditing mandate in 2017, and a total of CHF (2016: CHF ) for the year. % degree of cover 108,1 102,8 ** Includes employer contribution reserves (ECR) in the amount of CHF 53 million. By agreement, skyguide waives the use of the ECR if the degree of coverage is less than 100%. As at 31 December 2017, the legal coverage rate in accordance with article 44 OPO 2 is %. 33

58 Report of the group auditors Report of the statutory auditor to the General Meeting of SKYGUIDE, Swiss civil and military Air Navigation Services Limited Meyrin Report of the statutory auditor on the consolidated financial statements As statutory auditor, we have audited the accompanying consolidated financial statements of SKYGUIDE, Swiss civil and military Air Navigation Services Limited, which comprise the balance sheet, income statement, cash flow statement, statement of changes in equity and notes (pages 12 to 33), for the year ended 31 December Board of Directors responsibility The Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with Swiss GAAP FER and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2017 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with Swiss GAAP FER and comply with Swiss law. 34

59 Report on other legal requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers SA Marc Secretan Audit expert Auditor in charge Ludovic Derenne Audit expert Lausanne, 22. February