International Civil Aviation Organization

Financial Support from the World Bank

Dr. Charles E. SchlumbergerLead Air Transport Specialist

The World Bank

26. October 2011

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Outline

The World Bank Air Transport Portfolio

The Pacific Aviation Investment Program

Support for the Pacific Aviation Safety Office

Financial Support from the World Bank

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The World Bank Air Transport Portfolio

30 major projects in all regions of IBRD and IDA

28 active IFC investments and several advisory mandates

total active portfolio financed by loans or grants of IBRD and IDA is at US$569 million

IFC air transport investment portfolio is at US$ 679 million

Overall, the WBG air transport portfolio volume is at US$ 1.247 billion

Financial Support from the World Bank

4Project title (Insert, Header & Footer)

The Pacific Aviation Investment Program

• The Pacific Aviation Investment Program is a grant of US$ 147.47 million (US$ 73.66 million Phase 1; US$ 73.81 million Phase 2)

• It will focus on three main areas: (i) infrastructure investments; (ii) aviation sector reform; (iii) strengthening the operations and

management of regional airports.

5Project title (Insert, Header & Footer)

The Pacific Aviation Investment Program

Component A: Aviation Infrastructure Investments (US$ 118.42 million) – Airports, ATC to meet ICAO SARP

Component B: Aviation Sector Reform (US$ 12.10 million) – CAA, PASO (US$ 2.4 million)

Component C: Strengthening Airport Operations and Management Capacity (US$ 7.86 million)

Component D: Project Support (US$ 9.09 million)

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Support for the Pacific Aviation Safety Office – Regional Context

• the Pacific Island Countries are characterized by: small populations scattered over many islands in one of the most remote and geographically dispersed

countries in the world• Aviation plays a vital role in providing national, regional,

and international connectivity tourism is a high contributor to the national GDPs air transportation allows export of high-value, time-sensitive

products such as fresh fish, flowers, marine plants, etc. sea transportation is often not a viable alternative for

passenger transport

Financial Support from the World Bank

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Support for the Pacific Aviation Safety Office – Institutional Context

Financial Support from the World Bank

• PASO was established in 2004 to provide safety and security oversight in the aviation sector for all PIC countries, as individual states have limited resources PASO provides services in 5 areas: airworthiness, flight operations,

aerodromes, aviation security, and personnel licensing• For many states PASO is the link with ICAO and acts as the

only technical advisory body• Non-profit organization, services provided on a cost-recovery

basis Subscription fees cover fixed costs Variable fees cover costs associated with inspections and other

activities

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Support for the Pacific Aviation Safety Office - Options for PASO’s Scope

Financial Support from the World Bank

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Support for the Pacific Aviation Safety Office – Funding of the Organization

• Model 1 (current situation): membership fees + service fees paid by member countries Places a financial burden on the countries budgets, and hence

creates a disincentive to use PASO’s services For different reasons countries may fail to secure funding

• Model 2: safety levy paid by passengers PASO’s costs would be funded through implementation of a fee

per passenger, or safety levy Eliminates financial burden on member countries Creates incentive to engage PASO, as countries would not have

to make any payments Different implementation options

Financial Support from the World Bank

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Support for the Pacific Aviation Safety Office – Options for Restructuring

• Option 1: Front-office funded with membership fees• Option 2: Current situation• Option 3: Programmed oversight funded with safety

levyOption 3A: HQ in Port Vila, VanuatuOption 3B: HQ in Wellington, New ZealandOption 3C: HQ in Nuku’alofa, TongaOption 3D: HQ in Apia, Samoa

• Option 4: Full Technical Regulator funded with safety levy

Financial Support from the World Bank

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Support for the Pacific Aviation Safety Office – Assessing the Safety Levy

• Financial analysis carried out to determine alternative ways to implement a safety levy

• Projection of PASO’s full cost structure Direct operating expenses: technical team salaries, travel expenses Overhead: administrative team salaries, office expenses

• Current traffic volumes for first year, conservative projection of future traffic

• Resulting safety levy requirements per departing international passenger

• Safety levy requirements cover first year operating expenses, generates surplus to capitalize PASO in following years

Financial Support from the World Bank

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Support for the Pacific Aviation Safety Office – PASO Members’ Traffic Levels

Financial Support from the World Bank

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Support for the Pacific Aviation Safety Office – Safety Levy 1st Year (AUD)

Option 1: Only international passengers pay the safety levy

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Support for the Pacific Aviation Safety Office – Safety Levy 1st Year (AUD)

Option 2: International and domestic passengers pay the same

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Support for the Pacific Aviation Safety Office – Safety Levy 1st Year (AUD)

Option 3: International passengers pay 2x than domestic passengers

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Support for the Pacific Aviation Safety Office – Safety Levy vs. Airport Charges