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Annual Report 2012

The public enterprise LFV is responsible for air navigation services in Sweden. LFV is active in 32 locations all over the country. LFV had sales of SEK 3 billion during 2012 and reports results after financial entries of SEK 9 million. At year-end the number of full-time employees was 1,188.

Our mission is to provide safe, efficient and environmentally-sound air navigation services for civil and military aviation. LFV also works to ac-hieve transportation policy goals.

TABLE OF CONTENTS PAGEImportant Events 1The Director General on Aviation, LFV and the Future 2LFV’s Operations 4European Harmonisation of Air Navigation Services 8Fewer Flights 10Organisation and Employees 12Expanding International Operations 14Income Statements with Comments 15Balance Sheets and Financial Analyses with Comments 18Notes 22Reporting According to the Appropriations Directive for LFV 27Financial Statements 28Risks 30Proposal for Dividends 32Auditor’s Report 33Board of Directors 34Group Management 35Three Years at a Glance 36LFV in Sweden 37

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Important eventsAir Traffic During the year, the number of aircraft movements in Swedish airspace declined by almost 3% compared to 2011. This decline means that the number of overflight movements fell by 17,000 to 689, 000. During the first two months of 2012 the traffic growth which was experienced throughout 2011 contin-ued. Thereafter, 10 months of negative growth followed. For 2013, LFV expects zero growth.

Roadmap for the future In April 2012, Roadmap for the Future– a developed air navigation service (SOU 2012: 27) was launched. The appointed investigator stated that air navigation overflights is a public commitment that the Swedish state should ensure. The same is true for air traffic control in connection with significant airports managing commercial, international and domestic, regular flight services. Air traffic control is a society-critical op-eration and part of the national public sector commitment which military de-fence represents. The inquiry was sent for referral and preparation of responses is presently being performed by the government cabinet offices. A decision is expected during 2013.

Positive result The result for 2012 amounts to SEK 9 million. The result was adversely affected by reduced air traffic and increased re-tirement costs. Operating expenses were in general, lower than expected, partly thanks to the success of the effectivisa-tion programme. Since the split in April 2010, LFV has reduced the number of employees by over 100 people. A weak economy, tougher competition on the competitive markets as well as the EU’s and the airlines’ demands for reduced costs and fees mean that further cost efficiencies in the next few years will be needed.

NUAC fully operational On 1 July 2012, NUAC took over the operational running of overflight opera-tions in Danish-Swedish airspace. NUAC HB is jointly owned by Naviair and LFV. It is a pioneering project, which the EU sees as an important step in the process of harmonising air navigation and air-space in Europe. LFV’s employees at control centres in Malmö and Stockholm are outsourced to NUAC whilst maintaining employ-ment conditions. The management team is employed by NUAC. Overall, the operations include about 750 employ-ees and the turnover, on a full-year basis, will be in excess of SEK 1 billion.

Coopans The joint air traffic control system Coo-pans has been successfully deployed. In southern Sweden, it was introduced at the beginning of 2012 and for Stockholm and northern Sweden it was implemented during the night of 4-5 January 2013. Delays in air traffic have been nominal, since the timing for deployment was carefully chosen and scheduled to off-peak periods. Now, the same system is functional at three NUAC-operated control centres. It is a good starting point for the effec-tivisation programme which is NUAC’s primary role. Ireland, Austria and Croatia also participate in Coopans and the har-monisation of the system provides both financial and operational benefits.

Flight safety and punctuality According to global statistics, 23 air fatalities and a total of 475 fatalities on scheduled air services in 2012 were reported. This is the lowest figure in modern times. In Swedish airspace, there have been no accidents involving fatalities on regular air services since the Oskarshamn incident in 1989. LFV can report a high proportion of punctuality for the full year with flights

without restrictions in Swedish airspace amounting to 99.8%.

Environment During 2012, LFV has continued work to reduce aviation’s impact on the envi-ronment. Direct flight paths have been introduced in both Swedish and Danish airspace, saving fuel and thereby also re-ducing carbon dioxide emissions. Green Connection, a project which ended in May 2012 at Arlanda, contributed to the reduction of greenhouse gas emissions in all stages of a flight, from gate to gate. The reduction of CO2 emissions was as large as 150 kilograms for a single flight between Gothenburg and Stockholm. In December, a project at Göteborg Landvetter was started with the aim of reducing approach speeds to the airport. A common maximum speed means reduced emissions and a better flow of arrivals at the airport. An approach with reduced speed takes, on average, only 22 seconds more than a normal approach. In Indonesia, LFV Aviation Consulting continues work on energy efficiency at airports and green flights.

Local air traffic controlDuring 2012, five airports in Sweden extended their contracts with LFV. In addition, LFV won a procurement which however, was later contested. LFV will continue air navigation services for Swe-davia throughout 2013.

LFV Aviation Consulting Already in 1982, initial export operations within LFV in privatised form began. LFV Aviation Consulting focuses on the export of civil aviation services. The company has implemented projects in approximately 75 countries in the field of airport operations and air navigation services, but also in the construction of regulatory functions. The government has decided that LFV Aviation Consulting will continue to be a subsidiary of LFV.

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It is not often that flight traffic decreases, but that proved to be a fact in Sweden in 2012. The number of flight move-ments decreased by just under 3% to 689, 000.

After the financial crisis, air travel increased during 2010 and 2011, but since March 2012, traffic has declined each month. Domestic traffic exhib-its the worst growth, partly due to some airline bankruptcies during spring 2012. We fore-cast zero growth for 2013, however uncertainty prevails.

Despite these figures, the number of passengers has increased during the year. At Swedavia’s airports, the number of travellers rose by 3%. The difference between the figures for flights and passengers is because the airlines utilise larger aircraft and increase cabin factors. A positive effect of this is that the emission of greenhouse gases has reduced.

Positive result The result for 2012 amounts to SEK 9 million. The result was adversely affected by reduced air traffic and increased re-tirement costs. Operating expenses were overall lower than expected, partly thanks to the success of our efficiency meas-ures. Since the separation from Swedavia in April 2010, LFV has reduced the num-ber of employees by over 100 people. A weak economy, tougher competition on the competitive market as well as the EU’s and the airlines’ demands for re-duced costs and fees means that further ,major efficiency enhancements will be needed in the coming years.

Flight safetyFlight safety is paramount in aviation. According to global statistics, 23 air fatalities and a total of 475 fatalities on scheduled air services in 2012 were reported. This is the lowest figure in modern times. In Swedish airspace, there have been no accidents involving fatalities on regular air services since the Oskarshamn incident in 1989. In order to maintain a high level of safety, we are constantly developing our safety culture

where a high reporting level is key. It has provided good results, giving ourselves and others, such as airports and airlines, the ability to take swift, corrective meas-ures before accidents happen. A Nor-wegian military aircraft crashed into the Kebnekaise Massif in March 2012. The Swedish Accident Investigation Authority is currently investigating the event and a report is expected in May.

Punctuality and the environmentThe other pillars of aviation are punc-tuality and the environment. For the full year, flights without restrictions in Swedish airspace amounted to 99.8%. The goal of the Swedish-Danish airspace is a maximum of 0.2 minutes’ delay per flight. LFV contributes to the outcome with 0.06 minutes, which is well below the target. During 2012, LFV continued work to reduce aviation’s impact on the envi-ronment. Direct flight routes in Swedish and Danish airspace are standard. In the project Green Connection, we showed that it is possible to reduce the emission of greenhouse gases in all stages of a flight, from gate to gate. The reduction

The Director General on Aviation, LFV and the Future

Infrastructure Minister Catharina Elmsäter-Svärd, LFV’s Director General Thomas Allard, Swedavia’s CEO Torborg Chetkovich and Kjell-Åke Westin, Airport Director took part in the demonstration of the environmental project Green Connection at Arlanda Airport. The project’s ob-jective was to minimize the environmental impact of aviation on the route from Gothenburg to Stockholm.

of CO2 emissions was 150 kilograms for a single flight between Stockholm and Gothenburg.

In Indonesia, LFV Aviation Consulting continues work with energy efficiency at airports and green flights.

Aviation is internationalAviation is international in its essence and contributes to globalisation. The EU’s Single European Sky requirements affect us more and more and Swedish air navigation services are on the cutting edge when it comes to collaborations across borders.Since 2005, LFV operates a common air traffic control school at Malmö Airport with Norway and Denmark. The school has since its inception in 1974 trained air traffic controllers from many countries. The school meets the conditions of li-censing for which authorities in our coun-tries and the European Union require. In September 2011 a new coopera-tion for Entry Point North, EPN started through a new academy founded to-gether with Hungarian HungaroControl. The school is located in Budapest and named Entry Point Central, EPC. Further collaboration is being discussed.

Export is a necessityAlready in 1982, initial export operations within LFV in privatised form began. Our subsidiary LFV Aviation Consulting has since then implemented projects in approximately 75 countries. The Swedish parliament and government decided that LFV Aviation Consulting will contin-ue its operations.The company’s largest contract to date was recently signed and means that LFV together with a local partner will be responsible for air traffic control at five airports in Abu Dhabi for a period of five years. It is a welcome sign that Swedish air traffic control is competitive on global markets. For LFV, it is crucial to access other markets since the privatisation of local air navigation services means that our market share in Sweden is likely to shrink.

Local air navigation servicesIn 2012, five airports in Sweden extend-ed their contracts with LFV. In addition, we won a procurement, which has how-ever, been contested. LFV will continue to provide air navigation services for Swedavia throughout 2013.

NUAC 1 JulyEurope’s first, common, functional air-space block was created by Sweden and Denmark. From 1 July 2012 operations are being conducted at the three control centres by the jointly-owned company, NUAC. The business encompasses about 750 employees and the yearly turnover is expected to be in excess of SEK 1 billion. I am hopeful that NUAC’s intense work to reduce their costs will achieve the objectives.The takeover has been completed as planned and has gone extraordinarily well. The EU has praised us for this initiative. Direct flight routes have been introduced in both Swedish and Danish airspaces, an initiative which saves fuel and reduces CO2 emissions.

Common systemThe deployment of the joint air traffic control system, Coopans has been successfully implemented. In southern Sweden, this occurred in January 2012 and for Stockholm and northern Sweden it was activated on the night of 4-5 Janu-ary 2013. It was introduced in Denmark in March and was upgraded in Novem-ber. Comparable upgrades were carried out at control centres in Malmö and Stockholm at the end of January. Delays in air traffic have been nominal, since the timing for deployment was carefully cho-sen and scheduled to off-peak periods. Now, the same system is in operation at all three NUAC-operated control centres. It is a good starting point for the effec-tivisation programme which is NUAC’s primary role. Ireland, Austria and Croatia also participate in Coopans and the har-monisation of the system provides both financial and operational benefits.

A turbulent yearMuch has changed during 2012. Air traf-fic continued to grow at the start of the year, but then demand swiftly declined. At Swedavia’s airports, the number of travellers in December decreased by 5%. In the spring, two airlines went bankrupt. For a brief period SAS’s future also ap-peared uncertain. An airline bankruptcy severely affected access to flights to and from Sweden. Not least, the expanding tourism industry is extremely depend-ent on the proper functioning of flight services.For LFV, the proposals contained in Bjelfvenstam’s investigation were very interesting. He stresses, amongst oth-er things, the importance of having a strong national aviation actor so that Sweden can play a role in strengthening the effectiveness of European airspace. Some of his proposals have already been decided but a government bill is expect-ed in 2013. We look forward to it with confidence.In conclusion, I would like to extend a warm thank you to our employees who, during periods of difficulty made it pos-sible for aviation in Sweden to maintain a high level of safety and punctuality. I would also like to thank our Danish colleagues whose participation has been instrumental in our success.

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LFV is a public business with 1,300 employees, providing air navigation services for civil and military customers at 32 locations from Malmö in the south to Kiruna in the north. Sales are approximately SEK 2.5 billion and the main office is located in Norrköping.

LFV is one of Europe’s leading players in the field of air navigation services and works with solutions for even safer and more cost-effective air traffic. LFV is at the forefront in finding new, sound ways to reduce aviation’s impact on the envi-ronment. Together with airlines and airports, LFV is working to continue aviation’s contribu-tion to Sweden’s development by offer-ing fast and secure air transport.

High punctuality Every year, about 700,000 flights occur in Swedish airspace. In 2012, the total percentage of flights without restrictions in Swedish airspace was 99.8%. Authori-ties in Sweden and Denmark have a goal of a maximum of 0.2 minutes’ delay per flight in the Danish-Swedish airspace block. LFV contributes to the outcome with 0.06 minutes, which is well below the target. The delays in traffic which occurred in 2012 were a result of the deployment of Coopans, the air traffic control system, in Malmö at the beginning of the year as well as disruptions due to weather.

Flight safety The aviation industry’s high safety awareness and the systematic work that is constantly being done to rule out all conceivable risks, has created a safety culture that is reflected in our day-to-day work. This safety culture, in combination with a strict international regulatory framework, has made flying the safest of all means of transportation. The effort to ensure and improve aviation safety is a cornerstone of everything we do. During the year, much work has gone into giving the Danish-Swedish functional

airspace block (DK-SE FAB) the right pre-requisites in the form of a safety management system (SMS), which has been harmonised with Danish Naviair and our joint subsidiary NUAC. During 2013, work continues to further adjust processes and, procedures and to a greater extent, harmonise regulations and working practices between the partners.

Incident reporting LFV considers the effective reporting of incidents as a cornerstone in all aviation safety work. Deficiencies which escape detection cannot be assessed and im-proved. For many years, considerable en-ergy has been invested into the develop-ment of our safety culture with respect to encouraging each employee to report incidents and weaknesses, but also to make proposals for improvements. During the year, more than 4,000 de-ficiency reports have been compiled, which is a good result. LFV’s reporting comprises both events in which we were instrumental in the outcome and events where the causes were outside our remit. In this way, LFV contributes to

providing the Swedish Transport Agency with a sound picture of the level of safety in the aviation industry. Serious events in which LFV has been a contributory participant, always result in an internal, comprehensive investi-gation where focus is given to our role in the sequence of events. In addition to these, further investigations of other incidents are also conducted which are considered to provide an opportunity to gain knowledge and experience. During 2012, 20 investigations were carried out compared with 18 in 2011.

LFV’s flight safety goals The objectives regarding the area of aviation safety consist of those set by the Swedish Transport Agency in the perfor-mance plan for the Danish-Swedish func-tional air space block. This stipulates that a maximum of 1.49 separation violations can occur at classification level A or B in ”overflight air” per 100,000 flight hours. During 2012, only one event occurred which was counted into the goal, which means that this objective was achieved by a good margin.

LFV’s Operations

Number of Reported Separation Violations 2008-2012

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ATM Contributions

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LFV’s business plan includes a goal of a maximum of eight incidents classified by severity A and/or B, of which a maximum of two may be A incidents. During the year a total of four incidents occurred (3 B incidents and 1 A incident), which means that even this goal was achieved. On 15 March 2012, an incident oc-curred involving an aircraft belonging to the Norwegian Ministry of Defence in the Kebnekaise massif. The accident killed five people. The accident is being investigated by the Swedish Accident Investigation Authority and a report is expected to be completed in the first quarter of 2013.

Separation violations and runway incursionsThe number of separation violations increased to 33 reported cases in 2012. This is an increase of more than 10 in-cidents whereas incidents in which LFV contributed amounted to 23 which is the same level as 2011 results. See dia-gram on previous page. On a positive note, the downward trend regarding runway incursions continued. During the year, 89 events were report-ed, of which LFV had a contributory role in 11; a decrease from the previous year. LFV’s strategic plan for aviation safety will be developed further in 2013. Co-operation with the Ministry of Defence has been expanded as well as new col-laborations with the Swedish Air Traffic

Controller Association and Aviation Capacity Resources AB. LFV’s strategic flight safety plan is an important tool to control our systematic flight safety work. The willingness to report remains high, which is a prerequisite for proactive flight safety work. Our technical systems have worked well during the year and have not caused any incidents.

Air traffic securityLFV fulfils the requirements in laws and ordinances, the purpose of which is to protect civil air traffic against criminal actions, including terrorism. During the year, LFV has not endured any serious criminality. The threat prognosis against air navigation services is still low. Civil air traffic, on the other hand, where LFV plays a part, is experiencing a contin-ued increase in laser pointers aimed at aircraft and their crews. Use of laser pointers is already a social problem especially regarding public transport. The incidents which occurred in 2012 however, were not deemed to affect air safety. In the networks in which LFV ac-tively contributes, partly domestically to distribute information about the risks to civil air traffic and partly to have current information about this development, all social functions that have been affected agree on the need for changed, stricter legislation.

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Number of Reported Runway Incursions 2008-2012

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Kristina Lundgren, CO ATS Vidsel

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Civil-military integration Since 1 January 2008, LFV has the entire responsibility for air navigation services during all stages of readiness for both civil and military aviation. Since the 1970s, LFV has run an integrated civil-military air navigation service and LFV provides air navigation services for both civil and military aviation. Air navigation services are performed for military aviation at military airports, at certain civilian airports as well as in the airspace because the Armed Forces do not have their own air navigation services in Sweden. As of 2012, LFV is an authority with spe-cific responsibility for crisis readiness and with particular responsibility prior to and during alerts. LFV also engaged a Duty Officer (TiB) according to a government decision and has started up an advanced, developed collaboration with the Swed-ish Civil Contingencies Agency (MSB). This is to handle the civilian dimension of air traffic control during all stages of readiness. LFV has a well-developed cooperation with the Armed Forces at both a stra-tegic and tactical level as well as in the

operational production of air navigation services. Cooperation also takes place through strategic and tactical liaison meetings held several times per year. In the operational production of air naviga-tion, the Armed Forces and pilots have contact with LFV’s Air Traffic Controllers. Collaboration with the Ministry of De-fence includes total defence cooperation in order to plan and carry out prepara-tions to handle situations during peace time and exercises, as well as on high alert and at war. Defence planning is car-ried out in close cooperation with LFV.

In all stages of alertCooperation covers almost all parts of air traffic control and aims to create a ro-bust air navigation service in all phases of an emergency. During national exercises involving reserve officers the service is exercised under LFV’s jurisdiction, whilst at operations abroad the responsibility is entirely that of the Ministry of Defence. Cooperation also includes the training of LFV’s Air Traffic Controllers to ensure the necessary competence to handle upcoming military traffic and the train-

ing of reserve officers in air navigation services. Cooperation on technology and systems are far-reaching and complex because the common system and technology are one of the cornerstones of civil-military integrated air navigation services. In large part, the systems and technology are shared and we also have systems placed in each other’s facilities.

Reducing aviation’s environmental impact LFV has worked for many years to achieve a more efficient airspace implementing, initiatives from more direct flight paths to better timing of flights. For LFV. it is important to con-tribute to effective aviation with as little environmental impact as possible. LFV offers airlines the possibility of flying the shortest route through Swedish airspace. The shorter flight routes are made pos-sible by modern air traffic management systems on the ground and advanced route planning tools at the airlines. Eurocontrol, the body which coordinates air traffic in Europe, has estimated that direct flight paths in the Danish-Swedish

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airspace block shorten flight routes by 6,500 miles, lowering fuel consumption by 20 tonnes and reducing CO2 emis-sions by 70 tonnes every day.

Green flights LFV is working to provide so-called Green approaches to the airports where LFV conducts air traffic control. In a nutshell, a green approach involves the aircraft gliding in a steady descent from high altitude down to the airport with minimum thrust. This is usually termed CDA (Continuous Descent Approach). In May 2012, the environmental project Green Connection ended at Arlanda Airport with a demonstration of the tech-nology for, amongst others, the Minister for Infrastructure, Catharina Elmsäter Svärd. The project’s goal was to fly from the gate at Göteborg Landvetter Airport to the gate at Stockholm Arlanda Air-port with as little environmental impact as possible. With Green Connection the flight industry took the plunge and achieved resource-efficient flights. After starting at Göteborg Landvetter Airport, the aircraft ascended as fast as specifications allowed, up to cruising

altitude. Once up at cruising altitude the aircraft followed the shortest possible flight path, at the optimum speed to Stockholm Arlanda. The project showed that it was possible to, with the help of modern GPS-based technology, shorten the approach to one of Arlanda’s three runways, which led to reduced emissions of carbon dioxide of between 100 and 165 kilos per flight.

Remote-controlled towers The work to complete our first RTC (Re-mote Tower Centre) continued during 2012. All equipment has been delivered to the facility in Sundsvall and the valida-tion of the concept and methods will be made during the first half of the year, to be approved by the Swedish Transport Agency. The operational launch of the first airport is possible in the fourth quar-ter of 2013 and in 2014 it is estimated that additional airports will be connected. By means of remote-controlled tow-ers, air traffic can be controlled from a distance, without having air traffic controllers placed in the airport’s tow-er buildings. Air traffic controllers are brought together in one centre and by

using cameras, sensors and displays they can then guide air traffic at several air-ports. With modern technology, aviation safety can be increased even as costs for air navigation services are reduced. Remote-controlled towers are in line with the government’s aims for LFV to pro-mote research, development and the in-troduction of new technology significant to air navigation services.

Competitive market During 2012, five airports renewed their contracts with LFV. Halmstad Airport had a call for tenders. The contract was won by LFV but the procurement was contested by another supplier and the process will be restarted. The other 26 contracts LFV has are also valid for the duration of 2013 (including seven air-ports belonging to the Armed Forces).

At the Remote Tower Center in Sundsvall the concept of remote air traffic control is being developed. From one work station, the air traffic controller can remotely direct air traffic at numerous airports. On the screen in front of the air traffic controller, a 360 degree image of the chosen airport is shown.

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European Harmonisation

The EU Commission is pushing the development of a joint Eu-ropean airspace, Single Euro-pean Sky (SES). The intention is to create a ”borderless”, fully harmonised airspace for avia-tion in Europe.

In the late 1990s, it was estimated that SES could contribute to air navigation services, ANS in Europe, being able to:

• Triple the capacity

• Improve safety tenfold, to cope with the increase in capacity without in-creasing the number of air traffic con-trol-related incidents

• Reduce the costs of air navigation ser-vices by 50%

• While reducing the environmental im-pact by 10%

Separate aviation authoritiesTo achieve these improvements, the EU has legislated in two steps. In the first step, requirements were introduced to separate aviation authorities and ANS providers and to impose requirements for certification and designation of the latter. In the second step, European States were requested to get together and form functional airspace blocks, FAB. A Network Management function, with the responsibility for improving conditions for the planning and execution of an efficient air traffic flow, was established. The European Aviation Safety Agency, EASA was given an expanded mandate which also included the ANS providers. Furthermore, the Single European Sky SES Research Programme, SESAR was tasked to develop technologies and methods for achieving the SES goals. From 2012, performance management of ANS providers was also introduced.

Functional airspace block It is intended that the creation of FABs shall harmonise airspace and streamline air navigation services to facilitate a more direct flight, at a lower cost. In December

2009, Sweden and Denmark formed a FAB. At the same time, LFV and Danish Naviair agreed to a joint venture, NUAC, to operate air traffic overflights within DK/SE FAB.From 1 July 2012, NUAC is responsible for the operation of the control centres in Stockholm, Malmö and Copenhagen and the Swedish Flight Planning Centre, FPC. The intention is to integrate Swed-ish and Danish businesses to streamline operations and cut costs. The basis for the formation of NUAC and DK/SE FAB are estimates regarding a savings potential of € 13 million per year, as well as environmental benefits estimated at 52,000 tonnes of CO2 per year. Some efficiency improvements have already been realised. Amongst other things, Sweden and Denmark Free Route Air-space, FRA, where all flights over 28,500 feet can fly the shortest path regardless of flight routes and national boundaries. NUAC is a Swedish trading company which is owned equally by LFV and Naviair. Apart from the management who are employed in NUAC, all person-nel are on loan from the parent compa-nies. These organisations also account for the premises and technical systems utilised by NUAC. NUAC has a Swedish

ATS certification but it is the parent companies which are designated as ser-vice providers by each country’s aviation authority. This construction means that NUAC works on behalf of LFV and Navi-air, also bringing in revenues and having a responsibility for the services NUAC delivers.

Harmonisation of technical systems Traditionally, the technical systems used by national air navigation services have been relatively different. The develop-ment has largely been based on national requirements. In recent years, the EU has legislated demands on technical systems to drive harmonisation forward. The decision to introduce and change various standards has meant that na-tional air navigation services have been forced to implement similar functionality into their systems. The requirements needed for harmonisation implies that the costs to develop and adapt the tech-nical systems have increased.In order to effectively deal with these changes and share development costs LFV, Naviair and Irish IAA began coop-eration with the system supplier Thales to develop a unified Air Traffic Manage-

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ment system. The cooperation is known as Coopans and has since been expand-ed with Austria and Croatia. The system is deployed in Malmö, Copenhagen and Stockholm. When the default system has been deployed by all parties, coopera-tion with a view to coordinating opera-tional working methods and introducing new features adopted by EUROPEAN and ICAO will continue. The cooperation is expected to lower the cost of develop-ing the air traffic control system by about 40%. In order to develop technologies and methods for air navigation services of the future, SESAR Joint Undertaking was formed. This is a programme in which the EU, Eurocontrol and the aviation industry jointly finance and manage the development of methodologies and technical systems to streamline Europe-an aviation. LFV participates via NORA-CON, which is a collaboration between eight Swedish air navigation services and the airport company Swedavia, in a number of subprojects in SESAR. LFV is involved to influence development with Swedish interests at the fore. It is intend-ed that Coopans will be a platform for the changes introduced by SESAR.

Performance Management For the period 2012-2014, the national aviation authorities of all EU Member States produced a performance plan with targets for cost development, flight safety, punctuality and environment which is to be ratified by the EU. The performance plan includes annual gov-erning goals for air traffic control over-flights. For Sweden, the objectives for flight safety and punctuality have been set for DK/SE FAB. The economic ob-jective is however national. For LFV, this means that the real unit cost will be re-duced by 3.5% per year over the period.Performance management of cost de-velopment involves a major change in the economic conditions for overflights. For the period up to and including 2011, LFV estimated the costs for the next year, compiled a traffic forecast and then calculated the price per service unit for

the coming years. If the cost or traffic after the end of the year turned out to differ from the estimate, this was com-pensated in the price two years later, i.e. the airlines took the risk. Through the introduction of perfor-mance management, it is the national authority in Sweden, the Swedish Trans-port Agency which, in consultation with LFV and the airlines decides on both costs and traffic forecast and thus the price per service unit. Starting this year therefore, LFV takes the consequences if the cost differs from that of the es-tablished cost target set by the Swedish Transport Agency. In terms of deviations from the traffic forecast, legislation is such that LFV will take all the conse-quences of changes of up to 2% while LFV and the airlines share responsibility for larger deviations.

Comparisons of En Route chargesIn Europe, a high correlation exists between the En Route charges in the central block of countries. Great Britain, France, Germany, Spain and, the three Scandinavian countries are now all at a charge between €64.26 (Norway) and €79.68 (Great Britain). The average charge among these is €71.27.Sweden is at €72.48, somewhat above the average for these countries, and above the neighbouring countries of Norway and Denmark. One of our neighbouring countries, Poland, has a charge of €36.00. The charges are not completely comparable, because amongst other things, there are differ-ences in the demarcation between over-flight and local air navigation services in various countries.

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En route per service unit in some European countries in 2012. The Swedish charge was €72.48, of which €60.53 concerns LFV. The average charge in the Eurocontrol countries was €57.80. The cost for a flight is based on the charge, flown stretch in the country’s airspace and the weight of the aircraft.

En Route charges 2012 in Europe (euro/service unit)

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Fewer Flights

During the year, the number of aircraft movements in Swed-ish airspace decreased by 3% compared to 2011. This down-turn means that the number of overflight movements fell by 17,000 to 689,000. During the first two months of the year, the traffic growth which lasted throughout 2011, con-tinued. This was followed by 10 months of negative develop-ment.

Weak market 2012 was marked by a very restrained market. This has meant reduced traffic volumes in Swedish airspace as a result of the European and global economic downturn. Economic business trends weakened gradually during the year with a wave of redundancies in Sweden as a result. The year was marked by financial turbulence and the high price of aviation fuel. In addition, a number of airlines which had flight routes in Sweden went bankrupt. On a positive note, passenger volumes increased.

Domestic traffic was marked by the aforementioned bankruptcies and a de-gree of consolidation and better utiliza-tion of aircraft capacity which led to a fall of just over 4% to 148,000 movements. Higher cabin factors and slightly larger aircraft explain the differing developments of airspace movements and passenger numbers.

Decrease in international traffic International traffic also dropped by al-most 3% fewer movements to 250,000. The comparison however is done with reference to 2011, which was a very suc-cessful year with an increase of just over 9%. The major impact caused by eco-nomic developments occurring mainly in southern Europe, hampered air traffic during the year. The decline of overflights (aircraft that neither start nor land in Sweden), was just over 1% amounting to 291,000 movements. The weak economic en-vironment in Europe combined with emerging economies at the other end of the spectrum, means that overflights declined, thus having a negative impact on the volume of movements in Swedish airspace overflights traffic accounted for

42% of the total of air traffic volume in Swedish airspace. Its share of the LFV’s revenue was more than 60%.

European Outlook From an international and European perspective development was relatively good in Sweden during 2012. In Eu-rope development was very mixed. The aggregate for the whole of Europe is a decline of 2-3% between the years 2011 and 2012. Some countries, such as Tur-key, have also seen growth in air traffic during 2012. Other countries with high traffic volumes show zero growth. Many countries in southern Europe, on the other hand have, as a result of financial and political unrest and mass unemploy-ment with falling consumer demand, seen much less favourable growth, with significant air traffic cuts as a result. In addition, this part of Europe has been hit hard by several airline bankruptcies. The traffic trend remained favourable in Asia, South America and the Middle East. However, these regions are also experiencing a lower growth rate than previously. Countries that stand out showing continued strong traffic growth are China, India and Brazil.

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A geographical shift of the leading po-sition which Europe has had in the field of aviation can be seen to have moved towards the Middle East.

Continued concernAs a result of the continued decline in conditions of aviation traffic, LFV has amended the traffic forecast accordingly. It is probable that traffic growth in the short-term will be weak and domestic traffic in particular is expected to reflect sluggish growth. Tradition dictates that the business community reduces do-mestic travel during difficult economic times. International and overflights traffic however have a better prognosis because they are also affected by other regions economic growth. This provides a level of economical respite for LFV when air traffic in Swedish airspace is ex-periencing such a decline. For 2013, LFV is forecasting zero growth.

0

100000

200000

300000

400000

500000

600000

700000

800000

20122011201020092008

Overflights International Domestic

Movements in Swedish airspace 2008–2012

12

Organisation and EmployeesIn November 2011, the Swed-ish Government instigated an investigation to assess the business structure and the pre-requisites for air navigation services at LFV. According to the directive and in the light of the privatisation of the Europe-an market, the EU regulations governing air navigation ser-vices, as well as the civil-mili-tary integrated air navigation service, the investigation would analyse LFV’s business structure, its organisation and competencies and, where nec-essary, propose changes.

Roadmap for the futureIn April 2012, Roadmap for the Future– a developed air navigation service (SOU 2012: 27) was launched. The investiga-tor stated that air navigation concerning overflights is a public commitment that the Swedish state should ensure. The same is true for air traffic control

in connection with significant airports managing commercial, international and domestic, regular flight services. Air traffic control is a society-critical oper-ation and part of the national public sec-tor commitment which military defence represents. The investigator proposed a first step in which LFV’s competitive activities should be reported separately and a second step in which the business be incorporated under the administra-tion’s own management. LFV should further have the opportunity to form companies abroad.

LFV’s responsibility to provide air naviga-tion services during all stages of readi-ness should be clarified and the respon-sibility for contingency planning should be expanded. The investigator also suggested that LFV should be bound to a business contingency agreement to ensure continuity in air navigation services should a supplier lose the op-erational mandate. Further, LFV should be appointed as a service provider for air traffic control at military airports. The

investigation also suggests proposals with regard to the scope of competitive airspace, the assessment of the needs of air traffic controller training being done at national level and that access to the infrastructure needs monitoring. The referral time expired in June 2012 and preparation of responses is presently being performed by the government cabinet offices. A decision is expected during 2013.

New organisationThe EU’s performance plan makes great demands on rationalisation and thereby an altered structure of LFV. In addition, changing military requirements, compe-tition within local air traffic control and the appointment of NUAC as a provider of overflight services have changed the conditions for LFV dramatically. Prepa-ration of the ”Roadmap for the Future – a developed air navigation service ” is speeding up the need to streamline and clarify LFV’s organisation. The focus is to replace today’s independent business areas by a more centralized organisation.

13

The change is being made to facilitate a more effective form of production management as well as highlight crucial business and marketing issues which have been at the forefront since the pri-vatisation. The new organization should be clear in terms of responsibility. The proposed organization comprises a centralising of activities, divided into the four departments of production, systems and development, marketing and ad-ministration. The new organisation takes effect on 1 May 2013 meaning that the business areas and group functions of business development and strategy, as well as civil/military production and tech-nology will be terminated.

NUAC fully operational On 1 July NUAC took over the opera-tional management of Danish-Swedish airspace. LFV’s employees at the con-trol centres in Malmö and Stockholm are being outsourced to NUAC whilst maintaining employment conditions. On the other hand, the operational man-agement team, responsible for those 500 employees, is being transferred

to NUAC. LFV, Naviair and NUAC are working to harmonise processes and find synergies to achieve the streamlining goals which were set out. The Flight Planning Centre, FPC works with flight briefing and is included in NUAC’s organisation since 1 July. When the business area ceased activities it em-ployed 430 employees.

Organisation Business Area Terminal provides local air navigation services at 32 sites around the country, including two civil and three military sites. LFV’s customers are mu-nicipal, military, private and state airports, which own their respective tower build-ings. The business area had more than 400 employees and during Q4 of 2012, 344 employees. The business area Products & Services has about 220 employees with a wide range of tasks within technical and op-erational support functions. Employees can be found at several locations and are engaged in, amongst other things, LFV’s operative and technical development

work within the framework of the Euro-pean project SESAR. GSF, the common service function for the Swedish Maritime Administration and LFV, employs just over 100 employees. The joint unit will reduce administrative costs and increase resource sharing with other public enterprises and authorities in the region.

Reduced staff volume During Q4, LFV had 1 114 full-time em-ployees which is a decrease of 27 since the previous year. This is despite the fact that about 30 employees from the Swedish Maritime Administration were integrated on 1 January 2012. LFV has a collaboration with Linköping University’s programme Air Traffic and Logistics, in which air traffic control train-ing forms a part. The first students with a focus on air traffic control, started their basic air traffic control training in January 2012 at Entry Point North, and will be given the opportunity to carry out their final dissertation in the autumn of 2013. After an approved Bachelor’s degree in Air Traffic and Logistics, focussing on air traffic control, the training as an Air Traf-fic Controller is completed. LFV strives for a good working environ-ment. A proactive approach and early measures result in low absence due to illness and few rehabilitation cases. During 2012, absence due to illness was 2.16%, the same figure as in 2011.

New salary agreements A central salary agreement for the peri-od from 1 October 2012 to 30 Septem-ber 2013 has been reached. Local salary negotiations are on-going. In 2012, LFV performed a variety of programmes to strengthen and develop a more effective and committed lead-ership. For newly recruited managers a basic management programme is conducted. LFV implements a High Potential programme, the purpose of which is to develop future leaders inter-nally. To strengthen existing managers in their leadership roles a mentorship programme is implemented.

LFV’s directive is to operate both in Sweden and interna-tionally. The international work includes collaborations and alliances with other countries, but also commercial business. LFV’s economically crucial col-laborations include Coopans. Through more countries shar-ing development cost, a lot of money is saved.

LFV’s corporate activitiesThe LFV group consists of the public en-terprise and its wholly-owned subsidiary LFV Holding AB which operates through wholly and partly owned subsidiaries and stakeholder companies. Entry Point North, EPN trains air traffic control staff and is located at Malmö Airport. The academy was established in 1974, but since 2006 activities are conducted by EPN. The company is owned equally by LFV, Danish Naviair and Norwegian Avinor.The academy conducts the national air traffic controller basic training for Swe-den, Denmark and Norway. But there are also many programmes for other countries both in terms of basic traning and development training. Since the au-tumn of 2011. EPN owns and operates Entry Point Central together with the Hungarian air navigation services. More international collaborations are being discussed.

Export BusinessLFV’s wholly-owned subsidiary LFV Avia-tion Consulting AB has been operating since 1982. It is focused on service export in civil aviation. The company has broad experience of projects in the fields of airport operations and air navigation services, but also in the construction of administrative functions.Some current projects include the setup of aviation authorities and regulatory bodies in Yemen and Ukraine, as well as flight calibration assignments in the Baltic States, Denmark and Jordan. In Indone-sia, the work continues on airport energy

efficiency and green flights. Norwegian Avinor has expressed an interest in hir-ing air traffic controllers and the United Kingdom wants to streamline military air traffic management with our experience of integrated civil and military air traffic control so that the airspace can be uti-lized more effectively.In 2012, the company successfully nego-tiated, in cooperation with a local partner, the responsibility of air traffic control at five airports in Abu Dhabi. A contract worth SEK 1 billion was signed in Janu-ary 2013 and is valid for five years. The largest airport, which is midway between Landvetter and Arlanda in size, has about 120,000 movements and 12 million passengers per year.

Air traffic control overflightsLFV has a national monopoly for over-flight operations. In the EU, there is

significant pressure to increase efficiency and reduce the costs of European air navigation services. Sweden and Den-mark have thus created a joint functional airspace block.LFV and Naviair have also started a joint organisation, NUAC to run overflight activities in the joint airspace block. It is a pioneering project, which the EU sees as an important step in efforts to harmo-nise air navigation services and airspace in Europe.NUAC HB is jointly owned by Naviair and LFV. Operations include air navigation services overflights which are conducted by the three control centres in Copen-hagen, Malmö and Stockholm. Since 1 July 2012, NUAC employs about 750 people and will turnover in excess of SEK 1 billion on a full-year basis.

14

Expanding International Operations

LFV’s profit after financial items amounted to SEK 9 mil-lion which is a sharp decline in earnings compared to 2011 when the profit was SEK 85 million. Reduced traffic vol-umes and increased pension costs are the main causes of this result; an effect which could have been amplified if the cost constraints and other efficiency measures did not mitigate the deteriorating prof-itability.

As of 2012, the EU’s, fixed, perfor-mance-based pricing of air navigation service en route began. This involves a shift from a purely cost-based pricing system to payment in advance for the entire reference period (2012-2014 at the moment). Compensation is no longer payable for increased costs or lower revenue volumes. It is only the so-called uncontrollable costs and traffic vol-ume changes greater than ±2% which, in whole or in part, can still be regulated via the charging system. Consequently, this year’s increase in pen-sion costs can largely funded by en route and terminal fees but the part which falls outside the scope of these activities has, however, as a one-off effect, negatively impacted LFV’s profit by about SEK 70 million. This year’s air traffic decrease of almost 3% means that together with the lower index enumeration, LFV lost SEK 45-50 million in revenue.

Operating revenueOperating revenue amounts to MSEK 3,076 (2,489). The sharp revenue increase has been achieved by compen-sating this year’s considerable increase in pension costs largely via revenue from the en route and terminal fee systems. The last recession and traffic decline from the autumn of 2008 to spring 2010, in combination with the large salary increases and pension provisions, resulted in a large deficit in en route operations. The hope was that the deficit

could be reduced as of 2012. This year’s sharp pension costs increase means that on the contrary, a further deficit of SEK 200 million, amounted to SEK 673 mil-lion at year-end.Another reason for the large increase in revenue is that from mid-2012, NUAC took over all operational activities for air navigation services en route. This means that LFV receives compensation for the staff and the other services which NUAC purchases from LFV, whilst LFV pays compensation to NUAC for services ren-dered. This means an increase in reve-nue for LFV of SEK 323 million between 2011 and 2012.Revenue from air navigation services overflights, is the dominant revenue item in LFV, accounting for 63% of the total turnover. In addition, 14% corre-sponds to compensation from NUAC. Compensation for local civil and military air navigation services, in the form of terminal fees at Stockholm Arlanda and Göteborg Landvetter airports as well as agreements with airports and the armed forces, accounted for 16% of turnover. The remaining 9% refers to commercial and other income in the form of the sales of consulting services and hiring of staff, revenues for air measurement and other technical commissions, rental income and contributions for LFV’s par-

ticipation in international development and collaborative projects.

Operating expensesOperating expenses amount to MSEK 2,720 (2,258). In tandem with revenue increases, dealings with NUAC account for much of the cost changes between 2011 and 2012. Services purchased from NUAC have accounted for MSEK 322 higher expenses in 2012.Salaries, social security contributions and pension costs dominate LFV’s operating expenses and correspond (including the interest in pension costs) to about two-thirds of the total costs. Changes in salary levels and, not least, pension costs significantly affect LFV’s economy. Low interest rates have affected LFV’s pension liabilities so that increasingly larger amounts must be set aside in order to secure future pension obliga-tions. In 2012 the interest rate affecting pension-debt was lowered from 1.1% to 0.4%. This affected LFV’s total costs for 2012 with MSEK 391 allocated to inter-est (MSEK 315) and personnel costs in the form of payroll tax (MSEK 76). Another factor which affects cost in-creases between 2011 and 2012 corre-sponds to the accounting-related gain/cost reduction of MSEK 100 when part of LFV’s pension debt was transferred

Income Statements with Comments

15

16

to the National Government Employee Pensions Board (SPV). In addition to direct employee costs, operating expenses comprise mainly of costs to secure the operation of techni-cal systems and other infrastructure to maintain quality and flight safety. LFV is also involved in development activities and European cooperation which will contribute to permanent cost savings. Depreciation on capital assets decreased during the year to MSEK 188 (210). This amount includes MSEK 18 in write-down of assets that LFV has sold to the Swed-ish Fortifications Agency, a ”residual item” from the division of LFV in 2010. For the past few years, LFV has been conducting an effectivisation plan whose purpose is to permanently adapt the cost picture to the conditions under which the performance-based fee sys-tem applies, and to be competitive in the market for local air navigation services. Measures continued to be effective during the year and LFV has been able to limit expenses. Excluding the increase of purchased services from NUAC and one-off effects regarding pension liability, this year’s operating expenses (including price and salary increases) were lower than 2011.

Financial items The sum of financial items and costs amounted to MSEK -348 (-145) and is influenced to a large extent by increased allocations to the pension costs. The net financials include interest in-come of MSEK 51 (47) and interest costs of MSEK 399 (193). Financial

income refers primarily to interest on LFV’s liquid assets. The costs consist almost exclusively of the financial portion of the pension costs of which MSEK 315 was a one-time payment due to the re-duced interest rate. Some minor entries consist of interest costs for leased assets, interest on over-due payments and changes in currency exchange and the like. LFV Holding AB Included in LFV Group’s results are the results from subsidiary and partnership

companies combined in the holding company LFV Holding AB. LFV Holding was established in 1995 to coordinate and manage LFV’s corporate operation. LFV Holding consists of the parent company, the wholly owned sub-sidiary LFV Aviation Consulting AB, as well as the associated companies Entry Point North AB and NUAC HB. The business had a turnover of MSEK 20 (24) in 2012 and the profit after finan-cial items was MSEK -5 (3).

17

Statement of Income (MSEK) Note Group Public Enterprise2012 2011 2012 2011

Operating revenue

Aviation revenue 1 2 432 2 200 2 432 2 200

Other operating revenue 2 644 289 640 277

Total operating revenue 3 076 2 489 3 072 2 477

Operating expenses

Staff expenses 3 –1 553 –1 421 –1 543 –1 415

Various external expenses 4 –979 –626 –975 –620

Depreciation/amortisation and write-downs of tangible and intangible fixed assets 5 –188 –210 –188 –210

Total operating expenses –2 720 –2 258 –2 706 –2 245

Profit on holdings in associated companies 6 2 –2 – –

Operation profit 357 230 366 232

Profit from financial investments

Dividends from subsidiaries – – – 201

Interest income 7 51 47 48 42

Interest expenses and similar items 8 –399 –193 –399 –192

–348 –145 –351 50

Profit after financial items 9 85 15 282

Income tax and tax equivalent 9 –5 0 – –

Minority share of after-tax profit – – – –

Profit for the year 5 85 15 282

18

Balance Sheets and Financial Analyses with CommentsLiquidity in the LFV group is good and amounts to MSEK 2,592 (1,912) including short-term investments correspond-ing to an increase of MSEK 680.

InvestmentsDuring the year, LFV’s investments amounted to MSEK 100 (84).The largest investment concerns con-tinued development of the Coopans air navigation system, MSEK 28. The purpose is, together with other suppliers of air navigation services, which have the same type of equipment or system suppliers, to develop the next generation of air navigation systems and a common technical platform for the possibility of sharing future costs for maintenance, development, training and competen-cies. LFV (Sweden), Naviair (Denmark), IAA (Ireland), Austrocontrol (Austria) and Croatia Control Ltd. (Croatia) are members.Other major investments include the development of remotely controlled tow-ers, RTC (Remote Tower Centre), MSEK 24, minor reconstruction of the control centre in Malmö, MSEK 12; and the exchange and upgrade of radio stations, MSEK 17.

Other long-term receivablesFrom 2012, LFV’s revenues deriving from the en route operation follows a new tariff model within the European Union, which means that the principle of full cost recovery has been replaced by a model of risk-sharing between the provider of air traffic services and the airlines. The conditions are set out in a national performance plan. Risk-sharing applies to variances in traffic forecasts, where the supplier is responsible for the entire risk up to 2% of deviations from the forecast in the performance plan, and for between 2-10% the supplier bears 30% of the risk. Further, an ex-ception is made for uncontrollable cost

increases. In Sweden changes in pension costs belong to this category.LFV has chosen to periodise previous years’ and this year’s deficits over a five-year period which are reported under “Other long-term receivables”. This year these have increased by MSEK 210 from MSEK 464 to MSEK 673. The increase relates to MSEK 279 risk-sharing be-tween suppliers and airlines according to the national performance plan and MSEK 69 pertains to a decline in the previous years’ receivables.

Allocations to pensionsThe National Government Employees Pensions Board (SPV) decided in Oc-tober 2012 to change the calculation basis for the calculation of obligations of the public enterprise’s commitments concerning pension allocations. The new calculation basis has a lower, real gross interest 0.4% (previous year 1.1%) and a lower real net interest -0.1% (0.4%). The net interest rate is the interest rate that affects the size of the calculated obliga-tion. The new calculation basis applies as of 1 January 2012 but may be applied earlier. LFV has applied the new bases in the final accounts for 2012, which resulted in an increase in pension liability by MSEK 391.

The year’s pension obligation including payroll tax concerning the pension debt amounted to MSEK 4,027 (MSEK 3,205), an increase of MSEK 822. The increase corresponds to, besides chang-es in calculation bases, MSEK 391; index-ation and interest, MSEK 102; this year’s accrued pension benefits, MSEK 401; disbursed pensions, MSEK -32; and other changes MSEK -41.

Distribution and taxThe tax equivalent for the year amounts to MSEK 5 (0). The tax equivalent is calculated according to government guidelines. During the year, subsidiaries have paid MSEK 0 (0) in income tax. LFV will pay dividends for the fiscal year 2012 equal to 15% of the results after tax equivalence.

Return on equity and equity ratioThe government’s financial goals for LFV after division of the operation are that return on equity shall amount to 4% and long-term equity ratio shall correspond to 15%. The return on equity after tax equivalence amounts to 1% (14%). Equity ratio as of 31 December 2012 amounts to 13% (15%).

Balance Sheet (MSEK) Note Group Public Enterprise2012 2011 2012 2011

ASSETS 31 Dec 31 Dec 31 Dec 31 Dec

Fixed assetsIntangible assets

Licenses 10 1 1 1 1Total intangible assets 1 1 1 1

Tangible fixed assetsBuildings 11 208 220 208 220Land 11 – – – –Field structures 11 – 10 – 10Electrical installations 11 27 27 27 27Telecom equipment 11 742 632 742 632Vehicles 11 29 27 29 27Leased fixed assets 11 4 6 4 6Constructions in progress 11 374 550 374 550

Total tangible fixed assets 1 384 1 472 1 384 1 472

Long-term financial assetsShares in subsidiaries 12 – – 75 75Shares in associate companies 13 10 8 – –Latent tax receivables 9 14 – – –Other long-term receivables 14 648 464 648 464

Total long-term financial assets 673 473 723 539

Total fixed assets 2 058 1 946 2 108 2 013

Current assetsInventories, etc. 1 1 1 1

– Stocks

Current receivablesTrade receivables 91 57 89 55Receivables with subsidiaries – – 4 3Receivables with associate companies 153 31 153 31Tax receivables 0 2 – –Other receivables 191 173 190 169Pre-paid expenses and accrued income 15 249 277 247 275

Total current receivables 683 539 683 532

Short-term investments 16 49 99 49 99Cash and bank deposits 2542 1813 2384 1650

Total current assets 3276 2451 3117 2282

TOTAL ASSETS 5 334 4 397 5 226 4 294

19

20

Balance Sheet (MSEK) Note Group Public Enterprise2012 2011 2012 2011

EQUITY CAPITAL AND LIABILITIES 31 Dec 31 Dec 31 Dec 31 Dec

Equity capitalRestricted equity 17

State funds 202 202 202 202Restricted reserves 270 269 252 252

Total restricted capital 471 471 453 453

Unrestricted capital 17Balanced profit/loss 213 110 117 –166Profit for the year 5 85 15 282

Total unrestricted capital 218 194 131 117Total equity capital 688 665 585 570

AllocationsInterest-bearing allocations

Allocations for pensions 18 4 027 3 205 4 027 3 205

Non-interest-bearing liabilitiesOther non-interest-bearing liabilities 19 125 133 125 133

Total 4152 3338 4152 3338

Long-term liabilitiesInterest-bearing liabilities

Liabilities to leasing companies 20 4 6 4 6

Non-interest-bearing liabilitiesOther non-interest-bearing liabilities 21 21 19 21 19

Total long-term liabilities 25 25 25 24

Current liabilitiesNon-interest-bearing liabilities

Trade creditors 87 132 83 126Debt to subsidiaries – – 2 0Liabilities to associate companies 138 28 138 28Tax liabilities – – – –Other non-interest-bearing liabilities 74 68 74 68Accrued expenses and pre-paid income 22 168 141 166 140

Total current liabilities 468 370 464 362

TOTAL EQUITY CAPITAL AND LIABILITIES 5 334 4 397 5 226 4 294Items within the line

Contingent liabilities 23 2 2 25 25Pledged assets None None None None

21

Financial Analyses (MSEK) Group Public Enterprise2012 2011 2012 2011

Operations

Profit after financial items 9 85 15 282

Adjustments for items not included in cash flow 188 208 188 210

197 293 203 492

Tax paid –5 – – –

Cash flow from operating activities before changes in the working capital

192 293 203 492

Cash flow from changes in working capital

Change in operating receivables –144 –33 –151 –34

Change in operating liabilities 912 –1 349 916 –1 351

Cash flow from operating activities 768 –1 382 765 –1 385

Investment activities

Change in fixed capital assets –100 –84 –100 –84

Change in group and associate companies –2 2 0 0

Cash flow from investment activities –102 –82 –100 –84

Financing activities

Change of long-term receivables –198 4 –184 4

Change of long-term debt 0 2 0 1

Adjustment of free reserves and tax receivables 19 – – –

Cash flow from financial activities –179 6 –184 5

CASH FLOW FOR THE YEAR 679 –1 165 684 –972

Liquid assets at start of year 1 912 3 077 1 749 2 721

Liquid assets at end of period 2 592 1 912 2 433 1 749

22

Note 4Various external expenses

Group Public Enterprise

2012 2011 2012 2011

Costs for resale 35 36 21 21

Property and rental costs 74 73 74 73

Material, maintenance, transports 154 156 154 156

Travel expenses 21 21 20 20

Outside services 635 281 649 292

Administrative expenses 59 58 56 57

979 626 975 620Group companies’ share of the public enterprise’s diverse external costs, 0.3% (0.4)

NotesNote 1

Aviation revenueGroup Public Enterprise

2012 2011 2012 2011

En route charges 1 941 1 734 1 941 1 734

Terminal charges 155 135 155 135

Compensation for airnavigation services 336 331 336 331

2 432 2 200 2 432 2 200

Salaries and compensation, MSEKBoard of

Directors,Director General & CEO Other employees

2012 2011 2012 2011

Public enterprise 2 2 768 768

Subsidiaries 1 1 5 3

Total LFV Group 3 3 773 771

Note 3Staff expenses and disclosures about staff, Director General, Board of Directors and Auditors


2012 2011 2012 2011

Salaries 776 774 770 771

Employer social welfare fees 760 550 757 548

Other staff expenses 17 97 17 97

1 553 1 421 1 543 1 415

Included in social security Contributions are pension expenses Including payroll tax 512 299 511 296

Absence due to illnessGroup

2012 2011

Total sick leave as a share of ordinary work time:: 2,16% 2,16%

Share of total sick leave that concerns conse-cutive sick leave of 60 days or more 47,39% 48,59%

Sick leave divided by gender:

Men 1,20% 1,16%

Women 3,43% 3,49%

Sick leave divided by age category:

29 or younger 1,24% 1,87%

30-49 2,02% 2,00%

50 or older 2,65% 2,53%

Fees to auditorsGroup Public Enterprise

2012 2011 2012 2011

Swedish National Audit Office

– Auditing 1 1 1 1

KPMG

– Auditing 0 1 – 0

– Other work 0 0 0 0

PWC 0 0 – 0

Transcendent Group 1 1 1 1

2 2 2 2

Note 2Other operating revenue


2012 2011 2012 2011

Rents and leases 12 13 12 13

Commercial service 584 241 581 230

Contributions received 25 31 25 31

Miscellaneous 22 4 22 3

643 289 640 277

Group companies’ share of the public enterprise’s miscellaneous business income, 2.2% (3.5)

Salaries/fees to the Board and Director General

Salary/fee

DG Thomas Allard 120101 – 121231 1 494 674

Billinger, Nils Gunnar. Chairperson 120101 – 121231 105 000

Bredberg Pettersson, Maria. Director 120101 – 121231 30 218

Zetterdahl, Ann-Catrine. Director 120101 – 121231 30 000

Fredriksson, Ingemar. Director 120101 – 121231 30 000

Hafström, Marie. Director 120101 – 121231 30 000

Lennartsson, Peter. Employee Rep 120101 – 121231 30 139

Bredberg Anne-Marie. Employee Rep. 120101 – 121231 30 000

23

Note 6Profits from shares in associate companies


2012 2011 2012 2011

Associate companies:

Entry Point North AB

Share in associate company’s earnings 2 –2 – –

NUAC HB

Share in associate company’s earnings 0 0 – –

2 –2 – –

Note 7Interest income

Group Affärsverket

2012 2011 2012 2011

Interest income from bank 17 43 14 37

Interest income from short-term placements 29 4 29 4

Interest income from short-term receivables 1 1 1 1

Other 4 0 4 0

51 47 48 42

Note 8Interest expenses and similar items


2012 2011 2012 2011

Bank 0 – – –

Interest portion of pension expense 397 188 397 188

Financial leasing 0 0 0 0

Miscellaneous 1 4 1 4

399 193 399 192

Note 9Income tax and tax equivalent on reported profit

Group

2012 2011

Year-end tax equivalence

Group’s earnings pre-tax 9 85

Deduct associate companies’ share –2 2

Profit after associate companies’ share 7 86

Calculated tax 26.3% –2 –

Recalculation of latent tax receivables –3 –

Year-end reported tax –5 –

Deduct:

– deficit from previous years – –159

Profit after tax 5 85

Remaining deficit –65 –73

Latent tax receivables (Previous year’s remaining deficit 26.3%) 19 0

Yearly tax equivalence 26.3% –2 –

Recalculation to new tax 22% –3 –

Deduct: paid tax by subsidiaries – –

Latent tax receivables (22% of remaining deficit) 14 –

Income tax to pay for the year 0 0

Note 10Intangible fixed assets


2012 2011 2012 2011

Opening acquisition value 17 17 17 17

Acquisitions for the year – – – –

Ending acquisition value 17 17 17 17

Opening depreciation and write-downs –15 –15 –15 –15

Write-downs for the year –1 –1 –1 –1

Ending accumulated write-offs and depreciation –16 –15 –16 –15

Ending planned residual value 1 1 1 1

Note 5Depreciation/amortisation and write-downs


2012 2011 2012 2011

Depreciation/ amortisation:

Intangible assets 1 1 1 1

Buildings 22 13 22 13

Field installations 10 1 10 1

Electrical installations 5 5 5 5

Telecom equipment 132 153 132 153

Vehicles, machinery, etc. 8 7 8 7

Leased installations 2 2 2 2

Write-downs:

Buildings 0 – 0 –

Telecom equipment 7 27 7 27

Vehicles, machinery, etc. 1 – 1 –

188 210 188 210

24

Telecom equipment (Note 11)


2012 2011 2012 2011

Opening acquisition value 1 877 1 860 1 877 1 860

Acquisitions for the year 249 35 249 35

Sales/discards/transfer –14 –19 –14 –19

Other adjustments – 0 – 0

Ending acquisition value 2 112 1 877 2 112 1 877

Opening depreciation and write-downs –1 245 –1 083 –1 245 –1 083


Depreciation for the year –7 –27 –7 –27

Sales/discards/transfer 13 19 13 19

Other adjustments 0 0 0 0

Ending accumulated depreciation and write-downs –1 370 –1 245 –1 370 –1 245


Electrical installations (Note 11)


2012 2011 2012 2011


Acquisitions for the year 4 – 4 –

Sales/discards/transfer –7 – –7 –




Sales/discards/transfer 7 – 7 –

Ending accumulated depreciation and write-downs –43 –45 –43 –45


Leased residual values (Note 11)


2012 2011 2012 2011

Vehicles, machinery, etc. 4 6 4 6

Note 11Tangible fixed assets

BuildingsGroup Public Enterprise

2012 2011 2012 2011




Other adjustments 0 – 0 –




Depreciation for the year 0 – 0 –

Sales/discards/transfer 23 – 23 –


Ending depreciation and write-downs –226 –227 –226 –227


Field installations (Note 11)


2012 2011 2012 2011



Other adjustments – – – –

Ending acquisition value – 25 – 25

Opening depreciation and write-downs –15 – –15 –


Depreciation for the year – –1 – –1

Sales/discards/transfer 25 25


Ending accumulated depreciation and write-downs – –15 – –15

Ending planned residual value – 10 – 10

Constructions in progress (Not 11)


2012 2011 2012 2011



Completed new installations –275 –38 –275 –38

Depreciation –1 – –1 –


25

Vehicles, machinery, etc. (Note 11)


2012 2011 2012 2011



Sales/discards/transfer 0 –12 0 –12





Depreciation for the year –1 – –1 –





Leased fixed assets (Note 11)


2012 2011 2012 2011



Sales/discards/transfer –4 –4 –4 –4

Other adjustments – – – –




Depreciation for the year 0 – 0 –


Other adjustments 0 – 0 –



Shares in associate companiesGroup Public Enterprise

2012 2011 2012 2011

Accumulated earnings

shares, etc. at start of year 8 10 – –

Year’s share in associate companies’ net result 2 –2 – –

Change in associate companies’ own capital, etc. 0 0 – –

Sale – –

10 8 – –

Entered value 10 8 – –

Note 12Shares in subsidiaries

Corporate ID-number

Number of shares

Percentage of share capital

Nominal value

Book value

Direct holdings

Shares in group Companies, public Enterprise, LFV Holding AB 556374-8432 75 000 100 75 75

Indirect holdings (via LFV Holding AB) Shares in group Companies LFV Aviation Consulting AB 556193-1469 3 000 100 3 –

Note 13Shares in associate companies Itemisation of public enterprise’s and group’s shares in associate companies

Corporate ID-number

Number of shares

Percentage of share capital

Nominal value

Share of adjust equity capital

Book value


Indirect holdings (via LFV Holding AB)

- NUAC HB 969745–6433 – 50 0 0 0 –

- Entry Point North AB 556682–8272 100000 33 33 0 10

Indirect holdings(via EPN AB)

- Entry Point Central Kft 23399583 51 118 0 0 –

151 10 –

In the group statement of income ear-nings, shares from associate companies are accounted for in two items: pre-tax earnings and share in associate com-panies’ paid tax, which is accounted for together with the group’s taxes (see Note 9).

26

Note 17Restricted and unrestricted capital


Restricted reserves

Un-restricted reserves

Restricted reserves

Un-restricted reserves

Amount at start of year 269 194 252 116

Conversion of latent tax 19

Profit for the year 5 15

Amount at end of the year 269 218 252 131

Not 19Other allocations


2012 2011 2012 2011

Reorganisation expenses 92 99 92 99

Other allocations 34 34 34 34

125 133 125 133

Note 21Other non-interest-bearing liabilities


2012 2011 2012 2011

Contingency funds for personnel 21 19 21 19

21 19 21 19

Note 23Contingent liabilities


2 012 2 011 2012 2011

Pension obligations to other subsidiaries and associate companies 2 2 2 2

Surety for subsidiaries 0 0 23 23

2 2 25 25

Note 20Liabilities to leasing companies


2012 2011 2012 2011

Leasing companies 4 6 4 6

4 6 4 6

Note 22Accrued expenses and prepaid revenue


2012 2011 2012 2011

Salaries and compensation 7 4 7 4

Holiday pay obligations 72 72 72 71

Social insurance fees 52 49 51 48

Other accrued expenses 34 13 33 12

Pre-paid revenue 4 4 4 4

168 141 166 140

Note 18Pension provisions


2012 2011 2012 2011

At start of year 3 205 4 670 3 205 4 670

Pension provisions for the year 462 338 462 338

Pension disburse-ments for the year –31 –25 –31 –25

Changed calculation principles 391 188 391 188

Redemption of pen-sion obligations – –1 966 – –1 966

4 027 3 205 4 027 3 205

Note 16Short-term investments


2012 2011 2012 2011

Corporate certificates 49 99 49 99

At end of year 49 99 49 99

Note 14Other long-term receivables


2012 2011 2012 2011

At start of year 464 468 464 468

Settlement of terminal fees –26 –21 –26 –21

Settlement Eurocontrol 210 18 210 18

648 464 648 464

Entered value 648 464 648 464

Note 15Pre-paid expenses and accrued income


2012 2011 2012 2011

Pre-paid expenses 35 66 34 66

Accrued income 214 211 213 209

249 277 247 275

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Reporting According to the Appropriations Directive for LFVThe following is a summarised response to LFV’s performance in achieving the transport poli-cy goals as well as missions and targets in accordance with the Appropriations Directive. Parts of this response are also found in other parts of the annual report.

Transport policy goalsAccording to the Act (2010:184) with instruction, LFV shall proceed so that the transport policy goals will be achieved. Aviation plays an important role in enabling the business community and citizens all over the country to transport passengers and goods, both within Swe-den and globally. Especially for many smaller communities, there is no realistic alternative to aviation to ensure rapid, ef-ficient communications. LFV has an im-portant role in the aviation sector. Safe, efficient and environmentally sound air navigation services are a pre-requisite for well-functioning air transports. LFV con-tributes to the goal of function — which concerns creating accessibility for travel and transports —by supplying safe, effi-cient and environmentally sound air nav-igation services all over Sweden, which is a prerequisite for the accessibility, provid-ed by aviation. LFV plays an active role in developing the European air navigation system so that growing air traffic can be handled while the goals for increased aviation safety, reduced costs and re-duced environmental impact can also be achieved. LFV contributes to the goal of consideration — which concerns safety, environment and health — by offering secure air navigation services in which the greatest possible environmental con-sideration has been taken. The system is constructed so that LFV will prevent being involved in any fatality or serious injury. By optimising flight paths and traf-

fic flow, LFV contributes to reducing the environmental impact of aviation.

Mission according to the Appro-priations Directive LFV has information responsibilities for geographic environmental information according to regulation (2010: 17770) and has received funding for this pur-pose. According to the Appropriations Directive LFV would, no later than 1 October, account for the allocated funds up to August and provide a forecast for 2012 to the Government Offices (Minis-try for the Environment). In September, LFV reported the activities which had been undertaken to the Min-istry for the Environment, comprising of: the update of metadata; implementation of the download service; implementation of the conversion service; as well as the initial phase of work with implementation of a redundant operating environment. Furthermore, planned activities were reported in the INSPIRE project, and a statement of the cost of both imple-mented activities and a forecast for 2012 were delivered. LFV collects information about the air transport net and airports which provide the basis for the publication of informa-tion to airspace users. The publication is called AIP (Aeronautical Information Publication), and the information that forms the basis of the publication, such as airspace coordinates, flight routes and airport maps, is according to the regu-lation to be made available digitally. LFV has created a demonstration service with the associated metadata for the informa-tion that we are responsible for.

LFV’s work on infrastructure for access and exchange of geographic environ-mental information has achieved results

during the year in accordance with the applicable rules.

LFV’s work with Inspire progresses in tandem with its work on compliance with EU regulation 73/2010 (ADQ), which governs the quality requirements for flight data and production of aeronauti-cal information.

Roadmap for the future In November, the government decided to set up an inquiry into LFV’s opportuni-ties within the framework of the present business structure and instruction, to operate in a competitive market. The inquiry ”Roadmap for the future – a developed air navigation service” (SOU 2012: 27) was presented in April 2012. LFV has assisted the investigation with the provision of the necessary docu-mentation to support Investigator, Jonas Bjelfvenstam in carrying out the assign-ment. Goals according to the Appropri-ations DirectiveLFV’s long-term financial goals regard-ing profitability are that earnings after tax equivalence shall amount to 4% of equity capital. Return on equity capital was 1% in 2012. This result was a con-sequence of the recession and falling traffic volumes, combined with increased pension costs. LFV’s long-term financial goals regarding solidity are that this shall amount to at least 15%. On 31 December 2012, so-lidity amounted to 13%. The reason that the goal has not been achieved is due to the large and growing pension debt. SPV has been commis-sioned by the Government to make the necessary preparations so that LFV can have the opportunity to redeem the pension debt, in whole or in part, and instead pay the premiums.

28

Financial Statements

The group consists of the public enter-prise, the wholly-owned holding compa-ny, LFV Holding AB, LFV Holding AB’s wholly-owned corporation, LFV Aviation AB and the associate companies Entry Point North AB and NUAC HB, with 33% and 50% share ownership respectively. During the year, the associate company, Entry Point North AB started a subsidiary, Entry Point Central Kft in Budapest, Hun-gary, with a 51% share ownership while Hungaro Control Plc, which is owned by the Hungarian government, owns the re-maining 49%. The instruction states that LFV’s primary mission is to supply safe, effective and environmentally sound air navigation services for civil and military air traffic. During 2012, local air naviga-tion was run at 32 airports. Two control centres in Malmö and Stockholm were responsible for air traffic control in the airspace outside the airport areas.

Accounting principlesLFV’s accounts for the public enterprise and the group followed the Ordinance(SFS 2000:605) on Annual Reports and Budget Material (FÅB) and the Swedish National Financial Management Author-ity’s regulations and general advice, plus the requirements for good accounting practice in accordance with the Ordi-nance (2000:606) on the Accounts by Public Authorities. To the extent norms are lacking that directly relate to public authorities and state agencies, LFV will apply, as accounted for in the respective sections below, the valuation rules in the Swedish Financial Accounting Board’s recommendations. LFV’s subsidiaries prepare annual accounts with application of the Annual Accounts Act and good accounting practice for corporations.

Arrangement and supplementa-ry informationThe income statements, balance sheets and financial analyses have been ar-ranged in accordance with the applicable rules for public enterprises and public enterprise groups.

The Swedish Financial Accounting Board’s recommendation RR 4, Ac-counting of extraordinary income and expenses plus disclosure for comparison purposes, is applied.

Changes to accounting principles, etc.In the income statement and balance sheets, financial analyses and associated notes, certain marginal corrections and transfers have been made.

Group accountingThe group accounting includes the pub-lic enterprise and the group companies where the public enterprise directly or in-directly holds more than half of the votes for all shares or otherwise exercises a controlling interest, and the other com-panies (associate companies) in which the public enterprise has a controlling interest as a result of share ownership.

SubsidiariesThe group accounting is arranged ac-cording to the acquisition method. Prin-ciples for the group’s accounting of de-ferred (latent) tax effects are described below under the heading Taxes and tax equivalence.

Associate companiesCompanies are accounted as associate companies where the public enterprise, on the basis of ownership of more than 20% and at most 50% of the votes, can exercise a controlling interest. The asso-ciate companies are accounted accord-ing to the equity method in the group accounts.

General balance sheet valuation principleUnless otherwise stated below, assets, obligations and allocations are valued at acquisition value.

Fixed assetsTangible fixed assetsTangible assets are valued at acquisition value with deduction for depreciation according to plan. In applicable cases,

depreciation is made as shown below. Depreciation according to plan is calcu-lated by periodising the acquisition value linearly over the projected period of use. Depreciation begins when an asset is ready to be put into use for its purpose. When an asset includes components with different periods of use, the rules in RR 12 concerning so-called component depreciation are applied. The deprecia-tion times are revised continually.On-going investment projects are ac-counted under the heading On-going new installations. Any need for deprecia-tion is tested through application of the Swedish Financial Accounting Board’s recommendation RR 17. Depreciation.

Intangible assetsLFV applies the Swedish National Finan-cial Management Authority’s directives and general advice concerning ac-counting of expenses for development. According to the directives, the kind of expenses for development that fulfil specified requirements are submitted as intangible assets. Expenses for research may not be capitalised. This is because the National Financial Management Authority’s rules are based on the same principles as the Swedish Financial Ac-counting Board’s recommendation RR 15. Intangible assets and guidance in various application questions have been taken from the Board’s recommenda-tion. Purchased software with a financial lifetime deemed to exceed three years is entered as an asset.

Depreciation according to planField installations 15-30 yearsBuildings 15-30 yearsElectrical installations 5-20 yearsTelecom installations 5-15 yearsFMU 3-15 yearsIntangible assets 3-7 yearsLeased assets 3-5 years

LeasingLeasing is classified either as financial or as operational leasing. The classification is made by applying the Swedish Finan-cial Accounting Board’s recommendation RR 6:99. Leases.Agreements that are classified as finan-cial leasing are accounted as asset and

It is stated in the government’s instruction for LFV (SFS 2010:184) that LFV and those companies, where the govern-ment, through the public enterprise, directly or indirectly has a controlling interest, together will form a public enterprise group.

29

debt in the group balance sheet and in applicable cases in the public enterprise’s balance sheet. Accounted amounts are handled in ways indicated by the Board’s recommendation.

Warehouse stockWarehouse stock is valued according to the lowest value principle.

Revenue recognitionThe public enterprise applies general principles for periodised accounting. Applied principles are in accordance with the Swedish Financial Accounting Board’s recommendation RR 11. Revenue. The subsidiaries apply RR 11 in their revenue recognition. The subsidiary, LFV Aviation Consulting AB, therefore, accounts reve-nues as a result of on-going consultation projects with application of the recom-mendation’s rules on official business.

Customer receivablesAllocation of feared risk of loss concern-ing outstanding customer receivables have been made after individual review.

Receivables and debtsReceivables and debts in foreign cur-rencies have been converted at the exchange rate on the accounting date in accordance with the Swedish Financial Accounting Board’s recommendation RR 8. Accounting of effects of changed ex-change rates. To the extent receivables and debts have been secured under a forward rate, they are converted at the future rate.

Allocations and guaranteesThe Swedish Financial Accounting Board’s recommendation RR 16. Allocations, guarantees and potential assets, are applied in accounting of allocations and guarantees. Under allocations, any future obligations are accounted concerning such employees as are terminated on the basis of lack of work and are 55 or older. Such individuals may be granted retirement pension within a six-year peri-od according to agreement with the Job Security Foundation, assuming they have not found new permanent employment. Evaluation of the size of the allocation has been made at an average amount corresponding to 48 months’ salary in-cluding particular payroll tax.

PensionsAs of 2003, the pension agreement (PA03) applies to government employ-ees born in 1943 or later. PA03 includes old-age pension, survivor pension and disability pension, as well as temporary old-age pension for air traffic controllers. Pension obligations are calculated by the National Government Employees Pensions Board (SPV). SPV’s Board has decided on a new underwriting basis for calculation of pension obligation, which means that the current value of the pen-sion debt has been calculated according to an interest rate of 0.4% for 2013 (2012 1.10%). The interest is calculated as an average of the interest for long real obligation for the period September to September the year before. LFV has chosen to apply the new calculation basis in the final accounts for 2011.

These obligations are accounted for un-der provisions.

The year’s allocation to pension obliga-tions has been expensed together with paid premiums. The interest portion in the year’s pension expense has been entered as financial expense. The inter-est portion includes price-indexing of certain benefits. Less than 1% of the employees were not updated as of 31 December 2012 which means that a standard calculation has been made for these pension obligations. The pension debt includes commitments concern-ing both active personnel and retirees. Non-protected pension commitments concerning personnel who have a retire-ment age earlier than 65 are included in the debt, as these pensions are deemed to be earned. The public enterprise pays special payroll tax on disbursed pensions. Allocation is, therefore, made for special payroll tax based on the size of the pen-sion obligation at the end of the fiscal year.

Taxes and tax equivalenceLFV’s subsidiaries pay corporate tax. LFV is not liable for income tax but shall, in addition to distribution, deliver an amount to the government, known as tax equivalence, corresponding to the income tax that would have been paid

if the operation was run in the form of a corporation. The year’s actual tax equivalence is calculated on the basis of the results in the group accounting with deduction for tax-related dispositions corresponding to the balance-sheet allo-cations that corporations can exploit. De-ductions are also made for the corporate tax that the subsidiaries pay. The public enterprise accounts for debt regarding the calculated tax equivalence for the fis-cal year. The final amount for distribution and the year’s tax equivalence to pay will be established by the government in connection with the establishment of the enterprise’s annual report for 2012.

In the group, deferred (latent) tax is entered on all differences between accounted and tax-related values, in ac-cordance with the Swedish Financial Ac-counting Board’s recommendation RR 9.

The equity capital portion of the subsidi-aries’ untaxed reserves and unused por-tion of the public enterprise’s possibility for accelerated depreciation on assets is included in the restricted reserves that are accounted partly in the public enter-prise’s financial statement and, partly in the group’s financial statement.

LFV pays special payroll tax on pension expenses and is liable for tax according to the Value Added Tax Act. LFV will sub-mit a dividend of 15% of profit after tax to the government for 2012. The final amount shall be fixed by the govern-ment in tandem with the approval of the annual report for 2012.

MiscellaneousThe figures as accounted have, in certain cases, been rounded, which means that tables, graphs and calculations do not always add up. In texts and tables, figures between 0 and 0.5 are entered as 0. If a value is lacking, a dash is indicated.

Profit for the yearThe profit for the year after financial items amount to MSEK 9 (MSEK 85), a decline of just MSEK 74 compared with the previous year.

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RisksFinancial risksLFV’s financial operation and financial risks are handled by LFV Group Finance and are based on a finance policy estab-lished by LFV’s board which dictates the framework governing exposure to finan-cial risks within the areas of financing, financial and operational leasing, invest-ments and currency exchanges.

Interest rate risk is defined as the risk that changes in the general interest rate situ-ation entailing a negative effect on LFV’s earnings. Currency risk is defined as the effect on earnings a change in exchange rate will have on LFV’s earnings. Credit risk is defined as the risk where the oppo-site party in a transaction cannot fulfil his commitment. The risk value for interest rate increases and exchange rate losses plus the risk of significant credit losses are low with respect to the operation that LFV runs.

Pension liabilityLFV’s operation is financed exclusively by the pension obligation that concerns LFV’s pension commitment with respect to the personnel. The personnel in LFV are employed by the government and the government pension rules according to PA91 and PA03 thereby apply. The present value of the pension obligation is calculated by the National GovernmentEmployees Pensions Board (SPV) and the liability, including payroll tax (24.26%) is entered as allocation in LFV’s balance sheet. The guidelines that are used for valuation of the pension commitments for 2013 include a net interest assump-tion of 0.4% and a parameter for reve-nue tax of 0.5%. Due to the financial un-certainty within European countries, the interest rate on Swedish bonds declined to an extremely low level historically dur-ing 2012 swinging mostly between 0.1% and 0.2%. Already at the beginning of 2013, the interest rate began to show an increase to 0.4%.LFV assesses that there is risk of the real interest rate going down or continuing at a relatively low level 0.4%-0.5% in the immediate future. This may entail an in-crease of pension liability in future years.

For each 0.1 percentage point of change, LFV’s costs are affected by an estimated MSEK 60.

MeasuresLFV is in dialogue with the government and SPV on redeeming additional por-tions of the pension liability and transi-tioning to a premium solution. SPV has been commissioned by the government to investigate possibilities and conse-quences of a transition to premium solu-tions for all public enterprises.

Development of the aviation marketLFV’s finances are strongly dependent on the development of the aviation market. During 2012, there was a strong down-turn measured in the number of airspace movements in Europe. In Sweden the positive growth in air traffic in the first two months of the year was subsequently followed by a slump in traffic affected by the negative trend in Europe and its im-pact on the Swedish economy.

In total, traffic volume in Swedish airspace declined by almost 3% during 2012 when compared to 2011. Currently there are few signs that a recovery is im-minent, thus the conditions for growth in air traffic are minimal. For 2013, LFV is counting on traffic growth of 1%, but current conditions dic-tate zero growth.

MeasuresLFV will follow the traffic development of the aviation market and be prepared to take measures in the event of any nega-tive changes.

En route deficitOn 1 January 2012, the accumulated deficit and receivables amounted to MSK 464. The considerably increased pension debt during 2012 has meant that the deficit increased by a further MSEK 673 at the end of the year. This deficit is com-pensated by higher revenue from the en route fees for the period of 5 years. The Swedish Transport Agency reduced compensation for en route services in 2009 by MSEK 100. LFV has contested this decision.

The regulation (EU) no. 1794/2006 concerning the common fee system for air navigation services that governs fees concerning air navigation services in the EU has been reworked giving rise to a revised regulation applied as of 2012. The new regulation means that the principle of full cost coverage has been replaced with a model with risk distribu-tion among suppliers of air navigation services and the airlines. The conditions are to be stipulated in a so-called national performance plan. For Sweden and LFV, this involves decreasing the costs by over 10% during the period 2012-2014. A consequence of this is the reduction to the same extent of the en route charge.

Surplus or deficit as a result of deviations from the traffic prognosis shall be distrib-uted among suppliers and operators as follows: Revenue deviations as a result of traffic variations of +/- 2% stay with LFV. Revenue deviations as a result of traffic variations within the level +/- 2-10% will be divided between LFV bearing 30% of the risk while the rest is taken by the operator through adjustments in the fees. Traffic variations of over 10% will be borne entirely by the airlines. Since the plan was introduced social economic conditions have weakened and the traffic prognosis has been revised downwards. Since the fees are indexed, lower inflation can affect revenues negatively. Excep-tions are made for cost increases which are outside the remit of the providers. For Sweden this includes changes in pen-sion costs.

The new fee system does not limit the possibilities of financing the deficit from previous years. During 2009, LFV started an effectivisation programme, which through the end of 2011 has entailed cost efficiencies of about MSEK 200. To meet the new performance require-ments of the en route operation and competition on the tower market, the ef-ficiency requirements have been raised. Additional efficiencies of a total of about MSEK 200 must be implemented during 2012-2014. If LFV cannot deliver cost-ef-fective services, there is a risk that other

31

operators will take over the operation. In the short term, it is primarily our local air navigation services and various consulting and service offerings that are subject to competitive bidding.

MeasuresGood planning and efficient control in order to ensure cost and result de-velopment. LFV is strongly focused on ensuring the implementation of efficien-cies. Budget and activity responsibility is delegated and the results will be followed carefully. If the current effectivisation programme is not deemed to produce the intended effect, corrective actions must be taken. Even if the effectivisation programme is implemented, significant fee increases will be required to balance the economy.

Competitive bidding of local air navigation servicesLFV conducts local air navigation services at 32 airports. The operations were pri-vatised on 1 September 2009. As far as competitive ATS services for towers and terminals are concerned, LFV currently has almost 90% market share, having lost 4 procurements at smaller airports dur-ing 2010-2012. Swedavia started a process to procure air navigation services and possibly asso-ciated services for all of its airports apart from Ronneby and Luleå. The procure-ment process has been suspended and postponed indefinitely.

If LFV is not successful in streamlining the effectivisation measures in tandem with the management of the pension debt and the unsolved air traffic control train-ing responsibility, LFV would most prob-ably lose significant portions of the tower operation contracts. If the implementa-tion of Remote Tower Services is carried out the risk is significantly reduced. The Swedish Transport Agency has pro-posed a decision that approach control services in so-called “collective terminal areas” will be open to collective bidding. If the collective terminal areas are open to competitive bidding it would have major negative consequences on operations and finances. In the air navigation control

enquiry, collective terminal areas shall be exempted from competitive bidding.

MeasuresThrough the on-going effectivisation process, conditions will be created for increased competitiveness.

Division of LFVOn 1 April 2010, LFV was divided and the airport operation was transferred to Swedavia AB. Within the IT area, the work of division still continues. The logical division has occurred according to plan and at a lower cost than expected. The physical division which is currently being carried out remains complex; it is a pro-cess in which different procurements and projects are interdependent, increasing the risk of delays and cost increases. The interim agreement with Swedavia has been prolonged and the follow-through of the division will require more time re-sulting in subsequent cost increases.

Concerning the conveyance of prop-erties, all parts of the conveyance are still not completed, as certain property measures are time-consuming. If a prop-erty conveyance cannot be fulfilled for some reason in the intended manner, alternative solutions will be allowed, which as far as possible produce corresponding consequences for the parties. Currently, there is no reason to assume that there would be any obstacles to fulfilling the conveyance in essence according to plan. LFV is still a party in disputes that concern Swedavia’s operation where exchange of party could not be done. In the conveyance agreement, Swedavia’s financial liability, etc. in these disputes is regulated.

The transfer of responsibility for the “historical environmental debt”, i.e. such damages that were caused before the conveyance, from LFV to the Swedish Transport Administration, including, amongst others, the representative action concerning noise pollution at Stockholm Arlanda presented at Nacka District Court, Environmental Tribunal, has taken time. This wait in the transfer of responsibility is unfortunate especially

regarding representative action where delays in the reconciliation negotiations can result in large costs for both the state and Swedavia.

LFV’s protection against fraud, etc.LFV’s main operations are regulated and monitored by the Swedish Transport Agency. LFV’s organisation, working procedures and delegations, legal frame-work, instructions, processes, etc., are clearly defined and documented. In ad-dition, there are a number of documents and a digital personnel handbook which helps to clarify LFV’s regulatory frame-work and perspective in these matters. All directives and documents are published on LFV’s intranet which each employee has access to. Overall, LFV’s protection against fraud, corruption, bribery and oth-er irregularities is judged as satisfactory. A specific risk analysis has been established in this area.

MeasuresThe internal ”code of conduct” publica-tion will be updated. Running information regarding corruption, fraud, bribery and other irregularities are published partly via the intranet, partly in connection with new recruitment and manager training. We will also be introducing a ”whis-tle-blower system”.

Business Continuity RisksDuring 2008 and 2009, LFV conducted an in-depth analysis for the purpose of charting the capacity to maintain opera-tional capacity in the event of exceptional events and various possible types of in-terruption of operations due to everyday events.

MeasuresThe continuity analysis that shows the continuity capacity of the units shall be updated continuously and kept current. All product disturbances and deviations will be analysed and measures that may reduce risk identified and assessed. Activities are on-going to create redun-dancy for singular critical systems, both in cooperation with colleagues who use the same equipment and with the aviation industry.

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Proposal for dividends

From 2012, LFV will make a dividend of 15% of the year’s profits. For the fiscal year 2012, a profit of MSEK 5 is accounted for. The proposal for dividends results in MSEK 0.6. The year’s tax equivalence amounts to MSEK 5 and is deducted from the tax receivables. The tax to be paid amounts to MSEK 0.

We attest that the annual report provides a correct picture of the operation’s results as well as of costs, revenues and LFV’s economic position.

We are of the further opinion that the internal governance and control at LFV is satisfactory.

Norrköping 15 February 2013

Nils Gunnar Billinger, Chairperson of the Board Thomas Allard, Director General

Ann-Marie Bredberg Maria Bredberg Pettersson

Ingemar Fredriksson Marie Hafström

Peter Lennartsson Ann-Catrine Zetterdahl

The Swedish National Audit Office auditor’s report concerning this annual report was presented in February 2013

Leif Lundin Anders Lexner

33

Auditor’s Report21 February 2013The Government103 33 Stockholm

Auditor’s report for LFV Group

Report on the annual report with group reportThe Swedish National Audit Office has revised the annual report with group audit for the LFV for 2011, dated 16/2/2012

Agency management’s responsibility for the annual report with group reportIt is the agency management that has responsibility for preparing an annual report, which gives a true and fair view in accordance with the Annual Accounts and Budget Documentation Ordinance (2000:605) as well as in accordance with instructions for LFV, the government Directive and other decisions for the agency. The management is also responsible for the appropriate arrangement of internal control necessary for the preparation of an annual report free from material inaccuracies, whether due to fraud or error.

Auditor’s responsibilityThe Swedish National Audit Office is responsible for expressing an opinion on the annual report on the basis of its audit. The Swe-dish National Audit Office has conducted the audit in accordance with International Standards of Supreme Audit Institutions for financial audits. This standard requires that the Swedish National Audit Office follows professional ethics and plans and performs the audit in order to obtain reasonable assurance about whether the annual report is free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual report as well as whether management follows appropriate regulations and particular decisions in its administration. The auditor selects procedures to be performed, including the assessment of the risks of material misstatement in the annual report, whether due to fraud or er-ror. In making those risk assessments, the auditor considers those aspects of internal control relevant to the agency’s preparation of the annual report in order to give a true and fair view. The objective is to design audit procedures that are appropriate with respect to the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the agency’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the fairness of accounting estimates made by management, as well as evaluating the overall presentation in the annual report.

The Swedish National Audit Office considers that the auditing evidence that has been acquired is sufficient and appropriate as a basis for the opinion.

OpinionIn the opinion of the Swedish National Audit Office, the annual report gives in all material respects a true and fair view of the finan-cial position of LFV as of 31 December 2012 and of the performance and funding for the year in accordance with the Annual Ac-counts and Budget Documentation Ordinance (2000:605), the ordinance with instructions for LFV, the government Directive and other decisions for the agency.

Auditor in charge, Leif Lundin has made the decision in this case. Project manager, Anders Lexner has been reporting.

Leif Lundin Anders Lexner

34

StyrelseNils Gunnar Billinger,Chair of the Board of LFV 2010-Chair of the steering committeefor public agency governance in the Government Offices, Board Di-rector for Övre Hagen AB. Former-ly Undersecretary in the Ministry of Defence and Prime Minister’s office, General Director of Swedish Post and Telecom Agency (PTS), Swedish Aviation Agency and Pre-sident of Eurocontrol Provisional Council.

Thomas Allard,Director General and LFV Board Director 2010–. Director General and LFV Board Director 2010– Member of Public Control Board for SMHI 2008–. Member Ecumenical Congrega-tion at LiU Norrköping, Entry Point North AB, LFV Aviation Consulting AB, LFV Holding AB, NUAC HB.

Ann-Marie BredbergLFV Board Director 2010–.Employee representative

Ingemar FredrikssonLFV Board Director 2010–. Runs the company Mercari AB and works as a consultant in business development and marketing. Se-cond vice-chair in Företagarna

Marie HafströmLFV Board Director 2010–. Board Director at the Institute for Research in the History of Law. General Director of Swedish Coast Guard 1996–2005. Director Gene-ral of Swedish Armed Forces 2005–2008. Has also served on a number of boards and commissions.

Peter LennartssonLFV Board Director 2010–.Employee representative. Director on ST Federation Board..

Ann-Catrine ZetterdahlLFV Board Director 2010–. Director General of Swedish Maritime Administration 2010–. Board member for Svevia AB and Lighthouse. Has been CEO for Telia Installation AB and had board as-signments in Telaris.

Maria Bredberg PetterssonLFV Board Director 2010–.Board Director for National Govern-ment Employees Pensions Board (SPV), 2010–. Deputy National Police Commissioner for National Police Board (RPS), 2009–

35

Group Management

Direct reporting managers

Thomas AllardDirector General

Lena ByströmDeputy Director General

Kimmy Bech Head of Civil-Military Pro-duction & Technologyk

Carl SellingDirector, Group Communications

Rolf NormanTechnical Director

Cecilia BorinHead of GSF

Per HögbergHead of Production Terminal

Mikael LarssonFinance Director

Maths GöranssonDirector, Group Legal Affairs

Dan Lundvall Deputy Manager for Business Development

Anna FalckDirector, Human Resources

Marianne Sahlin-KarlssonHead of Products & Services

36

Three years at a glance

1) Details for economy and staff have in some cases been adjusted ‘pro forma’ in accordance with LFV’s division on 1 April 2010.

2012 2011 20101

Air traffic (in thousands)

Number of movements in Swedish airspace:

Domestic 148 155 145

International 250 256 235

Overflights 291 295 276

Total 689 706 655

Number of service units (in thousands) 3 113 3 175 2 939

Economy (MSEK unless stated otherwise)

Operational revenue 3 076 2 489 2 295

Profit after financial items 9 85 –96

Investments 100 84 143

Interest on own equity (%) 1 14 Neg.

Solidity (%) 13 15 10

Cash equivalents 2 592 1 912 3 077

Shareholders’ equity 688 665 580

Pension debt 4 027 3 205 4 670

Staff

Number of full-time employees 1 118 1 138 1 197

Of which air traffic controllers 611 624 630

Of which other staff 507 514 567

Number of employees 1 314 1 320 1 357

Of which women 578 568 570

Of which men 736 752 787

Absence due to sickness (%) 2,16 2,16 1,96

1) LFV provides local air navigation services at 32 locations.

2) Control centres are responsible for air navigation service in the airspace outside the airport area.

• ATS Units

• Control Centres

• Head Office, Norrköping

AIR NAVIGATION SERVICES 1)

BorlängeGällivareGöteborg CityGöteborg LandvetterHalmstadJönköpingKalmarKarlsborgKarlstadKirunaKristianstadLinköping-Malmen Linköping-SaabLjungbyhedLuleåMalmöNorrköping PajalaRonneby SkellefteåStockholm-Arlanda Stockholm-BrommaStockholm-SkavstaSundsvall HärnösandSåtenäsUmeåUppsalaVidselVisbyÅre ÖstersundÄngelholm HelsingborgÖrnsköldsvik

CONTROL CENTRES 2) MalmöStockholm-Arlanda

Editing: Group Finance, Group CommunicationTranslation: Projectique SwedenPhotos: Kenneth Hellman and LFVGraphic design and printing: LFV Printing, Norrköping 2013

This Annual Report is a translation of the Swedish original. In the event of any inconsistency between the English and Swedish versions, the Swedish version shall take precedence.

LFV in Sweden

601 79 NorrköpingSweden

Telephone: +46 (0)11-19 20 00 Fax: +46 (0)11-19 25 75 Email: [email protected] identity number: 202100-0795

www.lfv.se

LFV Tryck Norrköping T13-178

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