Annual Report 2014

Annual Report 2014 MISSION • Ensuring of high level of flight safety and aviation security • Provision of high-quality air navigation services in conformity with the standards of the European Union and international civil aviation organizations

SCOPE OF • Provision of air navigation services ACTIVITIES • Maintenance of air navigation equipment • Preparation of air navigation documents • Aeronautical search and rescue coordination • Implementation of programmes of international civil aviation organizations

AIMS • Meeting international obligations of the Republic of Lithuania in the field of air navigation services • Continuous enhancement of quality of the air traffic services • Development of the airspace structure of the Lithuanian Republic • Immediate response to suggestions from the airspace users • Steady improvement of qualifications of specialists • Expansion of the market of air navigation services • Timely response to the market changes and ensuring of continuous modernization of systems of communication, surveillance, air traffic control and information exchange • Rational use of financial, economic and human resources of the enterprise

LITHUANIA’S • International Civil Aviation Organization, ICAO (from 1992-02-27) MEMBERSHIP IN • European Civil Aviation Conference, ECAC (from 1992-07-02) INTERNATIONAL • Joint Aviation Authorities, JAA (from 2004-03-16) AVIATION • European Aviation Safety Agency, EASA (from 2004-05-01) ORGANIZATIONS • European Organisation for the Safety of Air Navigation, EUROCONTROL (from 2006-09-01) The European Commission evaluated positively the projects on the Baltic FAB Programme implementation which would undoubtedly give considerable impetus towards development of the air transport system in the region.

YEAR OF INNOVATIONS

Thinking back to the last year, we recall signifi- Aiming at extending the range of the I am pleased to note that due the efforts cant events and highlights of activity. We may services provided, in 2014 the enterprise of the staff of the enterprise there were no say that, in comparison to the previous years, together with the Polish and Ukrainian ATM-related flight delays. Good indicators the 2014 was especially highlighted by inter- air traffic service providers as well as ATC were also reached in economic effectiveness. national projects. First of all it was SE Oro navi- equipment manufacturers established a Finance policy of SE Oro navigacija is usually gacija’s strategic decision to participate in the consortium, to participate in Eurocontrol’s agreed with the airspace users and the super- Single European Sky ATM Research (SESAR) call for tender relating to the Centralized visory authorities. Project to modernise the air traffic manage- Service CS4 AFUAS (Advanced Flexible Use On behalf of the Board I would like to express ment in Europe. The project is the Single of Airspace Support Service). my gratitude to all the staff of the enterprise European Sky’s technological pillar. The Board of the Enterprise paid a lot of at- and the partners. I hope that our joint efforts The enterprise’s participation in the SESAR tention to processes of the Baltic Functional will bring even better results in future. Programme will be based on the joint activity Airspace Block development. The European agreement with the Polish, Czech and Slovak Commission evaluated positively the projects air navigation service providers. International on the Baltic FAB Programme implementa- partnership will allow to take part and carry tion which would undoubtedly give consid- out scientific research, develop innovations erable impetus towards development of the Arijandas Šliupas and collaborate in joint projects in the sphere air transport system in the region. Chairman of the Board of SE Oro navigacija, of air traffic control. Vice-Minister of Transport and Communications

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 1 In the accounting year a lot of work was put into drafting the plan for 2015–2019. It should be noted that this period already covers the performance of the entire JOINT EFFORTS Baltic FAB, therefore, the foreseen performance indicators had to be agreed not only with the European Union institutions but also BEAR FRUIT with our Polish colleagues – functional airspace block partners. We hope that this work will contribute to successful performance Due to the fact that high level of flight safety of our enterprise and enable to create the was provided in 2014, we may state that this added value of the Baltic FAB. Even now posi- year will remain in our memory and SE Oro nav- tive moves are obvious and the implementa- igacija’s history as successful. It should be tion programme for the Baltic FAB is being also noted that without significant change in carried out successfully. human resources we provided good-quality air ALGIMANTAS RAŠČIUS Joint work with the Baltic FAB partners navigation services to a larger number of air- opened up opportunities to extend col- Born in 1954. Graduate engineer. Honorary craft flying the Lithuanian airspace, if compared laboration with other states in the sphere of member of Vilnius Gediminas Technical with the number planned in consideration with air navigation service provision. A strategic University (VGTU). In 1978 graduated from the prevailing trends in Europe. alliance GATE ONE covering the area of three Kirovograd Aviation School (Ukraine), in 1987 The 2014 ended a three-year period, which functional airspace blocks (Baltic FAB, FAB CE, from Leningrad Civil Aviation Academy was quite challenging to us as, in accordance and Danube FAB) was founded, its activity (St. Petersburg, Russia). Worked as an air with the European Union regulation, we had being oriented towards enhancement of traffic controller, a supervisor, head of to draw up precise budgets for this period. quality of air navigation service provision in Vilnius Area Control Centre, director deputy We analysed carefully the factors that could the airspace far outside the boundaries of of Antanas Gustaitis Institute at Vilnius have had impact on a three-year perspective. the Baltic FAB. Gediminas Technical University. Developed Now we are pleased to note that this task The year 2014 marks a new significant stage his professional competence in Great Britain, was successfully accomplished: the achieved for our enterprise – the beginning of imple- Sweden and Luxembourg. Head of SE Oro results are in conformity with the require- mentation of the project on construction of navigacija from 2001. ments laid down in the regulation. We have a new administrative and the area control fulfilled all the criteria set for our state.

Joint work with the Baltic FAB partners opened up opportunities to extend collaboration with other states in the sphere of air navigation service provision.

2 VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 centre building and acquisition of new air I would like to express my sincere gratitude traffic control equipment. The programme is to all the staff owing to whose efforts we being successfully implemented: technical re- achieved the set objectives. While expecting quirements, and project proposals have been our employees’ good performance indicators, drawn up. The project completion date – we keep in mind that showing appreciation the end of 2016. is a strong motive to seek for even better One of significant investment projects to be results. There are some spare-time clubs at mentioned is the implementation of Cat I the enterprise, and two strong trade-unions ILS/DME system by Thales Electronic Systems supported by the administration seeking to GmbH in Kaunas (Karmėlava) aerodrome satisfy the cultural needs of employees and RWY 08. As regards Šiauliai branch, it should to cover sanatorium treatment. be noted that in this air traffic control centre successful transition to radar air traffic control is taking place. As it is known, in this aerodrome our traffic controllers provide services to military aviation. In this context it should Algimantas Raščius be also emphasized that due to a change Director General in the international situation the number of flights serviced by Šiauliai branch increased by one third in 2014. In the accounting year our attention was also focused on matters concerning the possibilities to implement new air routes which were under consideration with specialists of the neighbouring countries. Representatives of the enterprise took part in different workgroups of the European Commission, Eurocontrol, and CANSO. I would like to emphasize that the lead- ership of the Ministry of Transport and Communications and the Board of the enterprise paid a lot of attention to activity of Oro navigacija. It is also worth mentioning that 2014 was the year of close cooperation with air companies. With the purpose of strength- ening these relations, as every year, we organized a meeting with representatives of the air companies and other aviation structures.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 In 2014 we started automation of processes of the airspace restriction planning, coordination and allocation to the users.

Like every year, in 2014 we modernized We carried out analysis of the conformity and developed the air traffic management of the harmonised Eurocontrol Rules for system with the purpose of increasing the Operational Air Traffic under Instrument quality of services. Apart from our usual tasks Flight Rules inside Controlled Airspace of the essential to successful performance of the European Region with the aviation legislation enterprise, life is continuously posing new of the Republic of Lithuania. challenges. A lot of efforts were devoted In 2014 we started automation of processes to implementation of the automated ATC of the airspace restriction planning, coor- system AirCon 2100 in Šiauliai ATC centre. dination and allocation to the users. Taking In June of 2014 the air traffic controllers of into consideration Eurocontrol’s plans for this centre started using radar ATC in Šiauliai the centralized service of advanced airspace terminal control area (at and over 4000 feet management, we performed feasibility study above MSL) alongside with the previously for implementation of automated tools and practiced procedural ATC. In the initial stage, systems for organisation and use of airspace in collaboration with the specialists of the at the enterprise. Lithuanian Air Force we drew up a detailed In August we signed an agreement with the plan for transition to radar ATC. Swedish air traffic service provider LFV- Air Integration processes aimed at implementa- Navigation Services on the airspace manage- tion of the Single European Sky concept ment procedures for establishment of special were also on the focus of our employees. activity area over the Baltic Sea. SEEKING TO ENHANCE AIR TRAFFIC MANAGEMENT

4 VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 In the accounting year the quality of the In the accounting year, together with the aeronautical information service provision Lithuanian Aero Club we organized a seminar was also increased. The first publication of VFR in which we discussed the new flight plan Aeronautical Chart – ICAO 1:500 000 Lithuania submitting procedure and the airspace was issued. At the end of the year the geo- management peculiarities. In cooperation magnetic field model data by the Geophysical with representatives of the Civil Aviation Data Center of the National Oceanic and Administration, general and sport aviation, Atmospheric Administration of the U.S. we took part in solving matters related with started to be used for ATS route calculation. activities of RC airplanes, provision of flight A new agreement with the Lithuanian Armed information services in the uncontrolled Forces was signed and coordination of the airspace, acrobatic flying and parachuting. draft of the procedure for reservation of temporary segregated areas and special gliding areas and for notification of the intended activity in danger areas and restricted areas was started. All the matters related with a consid- Sergej Smirnov SERGEJ SMIRNOV erable increase in flights of military aircraft Air Traffic Management Director Born in 1968. Graduate transport engineer. and the air traffic services provided thereto In 1989 graduated from Leningrad Civil were being solved in cooperation with the Aviation Academy (St. Petersburg, Russia) and NATO units, performing air policing mission, obtained an air traffic controller license. He located in Šiauliai aerodrome. In cooperation started his career as an air traffic controller with the NATO Allied Air Command a lot of 20000 40 % at Vilnius Area Control Centre, later worked work was put into organizing and conducting as an air traffic controller-instructor and the the exercises BRTE XVII and IRON SWORD. 17500 30 % chief of the Development Division. In 1995 he Certainly, considerable efforts were being 15000 20 % was appointed as chief of the European Air put into flexible coordination of the needs Traffic Control Harmonization and Integration of military aviation and those of other 12500 10 % Program (EATCHIP) Division. Later he was airspace users. We looked for solutions on 10000 0 % appointed as chief of the Vilnius Area Control further improvement of efficiency of the use Centre and director deputy of the Air Traffic of airspace in the Lithuanian, Latvian and 7500 -10 % Management. Air Traffic Management Estonian Civil Aviation Authorities’, Air Traffic Director from December of 2005. Developed Service Providers’, and the Air Force repre- 5000 -20 % his professional competence in Great Britain, sentatives’ meetings with the NATO officials. 2500 -30 % Luxembourg, Sweden, Iceland and Ukraine. At the meetings we also addressed possible amendment to the Letter of Agreement 0 -40 % between HQ AIRNORTH and Estonia, Latvia, 2010 2011 2012 2013 2014 and Lithuania as well as extension of the air policing mission in the airspace of the above- Flight Dynamics in 2010–2014 mentioned Baltic States. total flights transit flights arrivals/departures n/n-1, %

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 5 INNOVATIONS SERVING TO FLIGHT SAFETY

Continuous operation of the communica- We have to think about the future, therefore, tion, navigation and surveillance equipment in 2014 we implemented several future- is provided by our engineers and technicians oriented investment projects. We have due to whose, not only ATCOs’, working started a programme, which is very impor- skills and high-level proficiency SE Oro navi- tant for future performance of the enterprise gacija receives positive evaluations from the “Construction of a New Administrative GENADIJUS MATULAITIS airspace users. In 2014 the maintenance of and the Area Control Centre Building and Born in 1954. Graduate engineer. In 1975 all equipment was performed on time and Acquisition of Equipment for Provision of graduated from Riga Aviation School (Latvia), in conformity with regulations on operation Air Navigation Services”. In the account- in 1985 from Kiev Aviation Institute (Ukraine). and maintenance. Our specialists prepared ing year the technical conditions for the Worked as a technician, an engineer and professionally the equipment for spring– construction were being prepared and chief of ATC Technical Centre. Developed summer and autumn–winter operation. agreed with the Civil Aviation Administration, his professional competence in France, Results of ground tests and flight inspec- also the design proposals and the func- Luxembourg and Sweden. Technical Director tion have proved that the navigation and tional layout of premises were drawn up. of SE Oro navigacija from 2001. surveillance equipment is in compliance Meetings with specialists of the company with technical requirements and may be “Baltic Engineers”, implementing the project, operated without restrictions. were taking place every week and the routine matters were being resolved. We accomplished successfully the project on replacement of the Instrument Landing System (ILS) in Kaunas ATCC. After a com- Continuous operation of the communication, missioning flight inspection had been per- navigation and surveillance equipment is provided formed, the new equipment was launched into test-mode operation. After completion by our engineers and technicians. of this programme in December, the CAA issued a certificate of suitability for use of the equipment.

6 VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 We started modernising the air to ground According to the Interim Deployment radio communication: a contract on supply Programme’s Activity Area 2, the Free Route of new equipment was signed with the Airspace concept is under implementation Norwegian Jotron A.S. The first set of the air in the Lithuanian airspace. Also, the pro- to ground radio communication equipment cedures for using the Backup Area Control was acquired in 2000, so its service period is Centre to provide air traffic services were coming to an end. A new generation of the drawn up in 2014. radio communication with remote control and monitoring is based on the state-of-the- art communication standards. In 2014, to extend the functionalities of the approach and aerodrome ATC simulator, a Genadijus Matulaitis contract on its modification was signed with Technical Director the company NITA. The upgraded functionalities will comply with the new European air traffic management requirements. We also started implementation of the wide area multilateration surveillance system. On the basis of a joint research agreement, this project will be performed in cooperation with manufacturers, the Finnish company NRPL Aero OY. In the accounting year the project on Implementation of Contingency Measures in Aerodromes of Lithuania’s International Airports was completed. A mobile ATC Tower allows safe aerodrome and approach control. It may be used in case of contingencies when for some reasons the main ATC tower cannot function. The mobile ATC tower is easily transportable and may be deployed in a relatively short time (no more than 1 h). In 2014 we implemented several It is supplied with all necessary air traffic control equipment and may be used in vari- future‑oriented investment projects. ous aerodromes.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 7 IMPLEMENTING NEW IDEAS

In 2014, like in the previous years, we were For closer mutual relations and in order to en- very involved in activities of the organisation- hance collaboration relevant to the Baltic FAB, al structures of the Baltic FAB: the Council, meetings of leaderships of SE Oro navigacija the Board, the Committees, and the Project and PANSA are taking place. The enterprise Management Office. The organisational was visited by the European Commission coordination tasks have been performed, representative, supervising the matters of the detailed plans for projects envisaged by functional airspace blocks. At a meeting with the Baltic FAB Implementation Programme the guest, specialists from the Lithuanian and are being drawn up, and employees to be Polish Transport Ministries, Air Navigation responsible assigned. A joint meeting of Service Providers, and the Baltic FAB these employees and their Polish colleagues Programme Management Office discussed was arranged where the first steps towards the progress of implementation of the Baltic implementation were considered. The Baltic FAB programme and the Single European Sky FAB Council appointed certain employees to regulations. be responsible for implementation of specific Some of the projects included into the Baltic projects of the programme. FAB Implementation Programme are aimed at analysis of the enterprise’s infrastructure and impact of the Baltic FAB on the functions and competence of the staff. An agreement has been reached on the harmonized The Baltic FAB Implementation upgrade of the air traffic control equipment. Programme is being successfully In general we may say that the Baltic FAB Implementation Programme is being suc- conducted and positive moves in the cessfully conducted and positive moves in FAB-related activities are obvious. the FAB-related activities are obvious.

8 VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 When the initiative of GATE 1 was launched in 2014, Oro navigacija took up the opportunity to apply for the SESAR JU membership under the joint activity agreement with the Polish PANSA, the Czech ANS CZ, and the Slovak LPS. An agreement for participation When the initiative of GATE 1 was launched in the SESAR JU with these companies was in 2014, Oro navigacija took up the opportunity signed, projects in which the enterprise could be involved were identified, and the Letters to apply for the SESAR JU membership under of Intention with potential partners were the joint activity agreement. drawn up. Documents for accession to the SESAR JU were submitted and a preliminary approval of membership was received. Currently, the tasks envisaged by the project In the accounting year we also organised are being described. a meeting of the neighbouring countries’ Situation in the sphere of air navigation specialists of the information and commu- KAZIMIERAS JAKAS services was undergoing significant changes nication technologies on matters essential Born in 1954. In 1972 graduated from Kirovograd in recent years. As new ideas concerning pro- to our performance. Together with the Aviation School (Ukraine), in 1981 from Leningrad vision of the Centralized Services are brought responsible employees of the Civil Aviation Civil Aviation Academy (St. Petersburg, Russia). about by Eurocontrol, our enterprise together Administration, the National Defence He started his career as an air traffic controller, with the Polish and Ukrainian air traffic ser- Ministry, and the Lithuanian Airports we were later worked as a supervisor and chief of Vilnius vice providers as well as ATC equipment preparing a new Local SES Implementation Area Control Centre. Developed his professional manufacturers, INDRA and AVIATECH, have Plan (LSSIP). competence in Luxembourg, Sweden and established a consortium. We have received Great Britain. In 2001 he was appointed as Air an invitation to participate in Eurontrol’s call Traffic Management Director of SE Oro navigacija. for tender (Call for Interest No.14-110062-I) Strategic Development Director from 2006. relating to the Eurocontrol Centralized Service CS4 AFUAS (Advanced Flexible Use of Kazimieras Jakas Airspace Support Service). Strategic Development Director We keep on delegating our representatives to ICAO and Eurocontrol workgroups for the route network planning and development. In cooperation with specialists of the neighbouring countries – Poland, Belarus, Latvia, Russian Federation, and Ukraine – we constantly discuss the prospects for new route implementation. In 2014 a lot of attention was focused on free route development in Vilnius Flight Information Region.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 9 FINANCE: STABILITY GUARANTEE OF THE ENTERPRISE

Speaking of 2014, it should be noted that the We are also pleased to note that the number of flights to which SE Oro navigacija Performance Plan for the first reference rendered services was by 4 % larger than period 2012–2014 was successfully accom- the forecasted. Rational cost management plished: the enterprise, and thereby Lithuania, allowed us to ensure positive cash flow. Such achieved and even exceeded the economic financial condition is the enterprise’s stability efficiency target set up for the country. JOLANTA VERIKAITĖ and security guarantee and has positive Born in 1963. Graduate economist. In 1986 she impact on flight safety which is the most graduated from the Faculty of Economics at important mission of our enterprise, provider Jolanta Verikaitė Vilnius University. Worked as an economist at of the air navigation services. manufacturing companies. From 1997 in the In 2014 the enterprise tackled a new Director of Finance and Economics sphere of accounting and finance in the field of challenge: taking into consideration the services. In 2004 she started working as chief European-wide performance targets for the financier of SE Oro navigacija. Developed her second reference period 2015–2019, the professional competence in Great Britain. Director Performance Plan was approved after its first Rational cost management allowed of Finance and Economics from 1 January 2007. submission to the European Commission. us to ensure positive cash flow.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 11 In 2014 the enterprise rendered air navigation services to 227 034 aircraft crews, i.e. by 6.28 % more than in the previous year. Most of them flew over the territory of the Republic of Lithuania by transit (176 017). The rest landed on and took off from airports of the country.

In 2014 most flights in the airspace of the Republic of Lithuania were performed by these airlines:

Deutsche Lufthansa, AG, Koeln 21 784

Air Baltic Corporation JSC 18 515

Finnair OYJ 14 268

Aeroflot-Russian Airlines 13 776

Rossiya Airlines, Open JSC 9 622

Ryanair 9 507

Flybe Finland OY 7 250

Transaero Airlines 5 947

Scandinavian Airlines System 5 599

Turk Hava Yollari 4 973

Air Berlin PLC&CO 4 882

Wizz Air Hungary LTD 4 716

Air France 4 559

Lot-Polskie Linie Lotnicze 4 325

Air Lituanica 3 507

12 VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 STRUCTURE OF THE ENTERPRISE

DIRECTOR GENERAL Adviser to Director General Assistant to Director General Public Relations Officer

AIR TRAFFIC MANAGEMENT STRATEGIC DEVELOPMENT FINANCE AND ECONOMICS Chief of Infrastructure and TECHNICAL DIRECTOR DIRECTOR DIRECTOR DIRECTOR Resources Service

Deputy Director Deputy Directors Deputy Director Deputy Director Document Management Division

Area Control Centre Communications Division Strategic Development Division Financial Division Maintenance and Supply Group

Vilnius Aerodrome Navigation Division Training Centre Economic Division Control Centre Radar Division ATM Safety and Quality Aeronautical Rescue Management Division Division of Information Coordination Division Communication Technologies Šiauliai ATCC Division of Air Traffic Control Air Traffic Management Division Technological Systems

Aeronautical Information Service Division

Air Traffic Flow Planning and Data Processing Division

Personnel Safety and Legal and Personnel Internal Auditing Service Security Division Health Service Division

Kaunas ATCC Palanga ATCC

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 13 Kęstutis JURKĖNAS Albinas BALČIŪNAS Edmundas ADOMYNAS Director of Kaunas Air Traffic Control Centre Director of Palanga Air Traffic Control Centre Chief of Šiauliai Air Traffic Control Centre BRANCH In 2014 Kaunas ATCC employed 32 special- In the accounting year Palanga ATCC em- In 2014 Šiauliai ATCC employed 13 specialists, including 10 ATCOs, 5 AIS instructors, ployed 25 specialists, including 11 ATCOs, ists, including 9 ATCOs and 3 AIS instructors. and 14 engineers and technicians. To ensure 12 engineers, and 2 AIS instructors. To keep A major change in activities of the centre flight safety and adequate quality of services pace with the world practice, we further was considerable increase in the number of OFFICES rendered by us, we further developed ATC enhanced the air traffic control procedures. flights of aircraft performing the NATO air procedures following the best international Specialists of the centre improved their policing mission. Transition from procedural practice and know-how. Most specialists im- knowledge in different courses abroad and to radar air traffic control related with improved their qualifications in different courses in the Training Centre of the enterprise. plementation of the automated ATC system in foreign training institutions and the Training The modern ATC equipment Air Con 2100, AirCon 2100 was fairly complex but the air Centre of the enterprise. In 2014 we imple- implemented a year ago, has been operating traffic controllers of our centre succeeded in The total area of the mented new CAT I ILS/DME system by Thales smoothly and the air traffic controllers and overcoming the hurdle. Šiauliai aerodrome Electronic Systems GmbH on course 08. engineers of the centre have already become is the only one, where SE Oro navigacija’s Lithuanian airspace In the accounting year we also put consid- accustomed to working with it. ATCOs not only provide air traffic services to extending over its territory erable efforts into creating cosy working civil aircraft but also render control services to environment for ATCOs and other specialists. military operations. and part of the Baltic Sea makes up 76,126 sq km. A network of 47 transit routes crossed the Lithuanian airspace in 2014. The total length of airways was 9,820 km.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 FLIGHT SAFETY AND QUALITY MANAGEMENT

Having summed up the results of 2012–2014, Like every year, in 2014 we developed safety we are pleased to note that the services pro- management documents in conformity vided by SE Oro navigacija are in conformity with the ICAO, European Commission and with the acceptable levels of safety in ATM Eurocontrol requirements, adopted an approved by CAA. No incidents related to integrated safety and quality policy, prepared the work of units providing air traffic services and established an internal procedure for occurred in 2014. safety SP601 to ensure that the requirements An integral and essential element of the laid down in the Commission Regulation (EC) AVIATION SECURITY safety management system is recording No 482/2008 are implemented. and investigation of air traffic management Multiple certification audit on the qual- In conformity with the international practice In the accounting year an internal audit on (ATM) and specific ATM safety occurrences ity management system according to ISO and the instructions of the Ministry of physical security was performed, training ses- which had impact on the performance of the 9001:2008 standard requirements was taking Transport and Communications of the sions in aviation security, civil protection and enterprise. The aim of safety inspections is to place at the enterprise in December of 2014. Republic of Lithuania, and keeping consist- information protection were conducted. investigate if the air traffic management sys- The audit was carried out by representatives ently to the information system protection Testing, programming and adjustment of tem components managed by the enterprise of the international certifying authority TÜV standards ISO/IEC 27001 and ISO/IEC 17799, protection equipment were systematically could prevent such occurrences. In 2014 we SÜD Management Service GmbH – Technical and also to the terms of reference of the being performed in protected objects of the conducted 24 safety occurrence inspections and management services LLC auditors. The Safety Oversight Committee, in 2014 we en- enterprise. In the accounting year, no cases and investigations to determine the reasons group of auditors have confirmed that the sured adequate protection of the enterprise’s of unlawful interference, threat, navigation for these occurrences and drew up recom- processes conducted by the enterprise are property and information resources as well as equipment damage or despoilment were mendations on how to avoid their recurrence. in conformity with the above-mentioned prevention of information security incidents. recorded. In the enterprise protection of state In the accounting year four internal audits standard requirements. Some of the process With the purpose of implementation of the secrets has been ensured. management features applied by the enter- requirements for the physical security of the on safety and quality were performed. We The enterprise possesses considerable poten- prise were even noticed as examples of best air traffic control equipment at the enterprise, arranged a meeting on safety management tials of specialists and technical measures for practice. Taking into consideration positive re- we installed and modernized the access for heads of units, and two meetings of the ensuring aviation security. Safety Oversight Committee. At the meetings sults of the audit, the certifying authority TÜV control, video surveillance and security alarm we discussed means of practical implemen- SÜD Management Service GmbH granted systems as well as the air traffic control- tation of safety requirements, considered the to the enterprise the quality management lers’ work-time recording system in Vilnius, results of safety performance target monitor- standard ISO 9001:2008 certificate valid until Kaunas, Palanga and Šiauliai. ing, and assurance of safety and quality 15 January 2018. management system efficiency. VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 15 WORK, In 2014, the enterprise employed 304 persons, In conformity with provisions of ICAO and the including 89 air traffic controllers. Due to the European Union documents, the enterprise joint efforts of all the staff SE Oro navigacija pays a lot of attention to training specialists reached good performance results. One of the who operate modern air traffic control and TRAINING enterprise’s keys to success is the relationship – radio navigation equipment, thus, the process based on mutual understanding and respect – of training and skills development is insepa- between the administration and the staff in rable part of the activity of the enterprise. performing the mission of providing good- The Training Centre of the enterprise meets our AND REST quality air navigation services. Positive influence expectations in competence development. of the trade union on successful performance In 2014, the total number of employees of the enterprise should be also mentioned. trained in different qualification improve-

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 ment courses and workshops was 301. St Giles International, Great Britain (31 partici- The total number of participants was 1,105. pants). In 2014 the funds used for personnel Distribution of staff by services In Lithuanian training institutions 1,037 par- training made up 768 thousand Lt. 135 44 % Air Traffic Management (ATM) ticipants were being trained, 930 out of In 2014, a constructive dialogue between the 63 21 % Communications, Navigation and Surveillance (CNS) them – in the Training Centre of the enter- administration and trade-unions continued. 23 8 % Aeronautical Information Service (AIS) prise. In six foreign institutions 55 employ- The Association of Air Traffic Controllers was 6 2 % Search and Rescue (SAR) ees were being trained (68 participants). active as usual. A collective bargaining agree- Among the foreign training institutions were ment granted the staff different social privi- 77 25 % Other staff the Eurocontrol’s Institute of Air Navigation leges and possibilities to satisfy their cultural Services (IANS) in Luxembourg (29 partici- needs. Atmosphere of cosiness at the enter- pants) and the English language school of prise was being created by collective tours,

In 2014, the enterprise employed 304 persons; among 89 air traffic controllers (ATCOs) 18 women.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 17 the traditional midsummer and the New Year festivities. In different sporting contests the enterprise was represented by the ama- 301 300 292 289 1200 teur football club and the basketball team

229 238 “Oro navigacija” which took second place 797 768 200 800 740 717 713 in the Capital City Basketball League 2014. Also active was the fishing club “Vokė”.

100 400 In the accounting year the enterprise was staffed by 90 women, including 18 air traffic controllers.

0 0 The Women’s Club “Suoma”, which marked its 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 10th anniversary last year, earns respect at the enterprise. Women promote a healthy lifestyle, Number of Staff that Improved Their Qualifications Total Expenses for Personnel Development (LTL thous.) organize spare-time, and go to the theatre. The Women’s Club arranged a non‑commercial picture exhibition, organized a lecture on “How to Outwit Stress?”, and hold a pre‑Christ- mas party dedicated to mark the 250th birth anniversary of the father of Lithuanian litera- ture Kristijonas Donelaitis. Women were also travelling a lot – to Italy, Latvia, and Poland. Already for several years women have been organizing donation actions to children suf- fering from oncologic diseases. Also, at the request of Caritas of Kaunas Archbishopric they organized a charity action to support a family that had fallen into very difficult situation. For many years “Suoma” has been supporting children from a non-state kinder- garten as well as their mothers.

In 2014 the funds used for personnel training made up 768 thousand Lt.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 AERONAUTICAL RESCUE COORDINATION

CENTRE Special attention was focused

Like in the previous years, in 2014, the Aero Employees of ARCC were purposefully extend- on the NATO air policing mission nautical Rescue Coordination Centre (ARCC) ing their international relations and participat- seminars, which had been was performing its mission successfully. ing in meetings with specialists of coordina- ARCC specialists were taking part in the confer- tion centres of other European states. conditioned by considerable ence “Search and Rescue Europe” in Denmark, increase in the number of also in the search and rescue exercises “Griausmas”. Special attention was focused military flights. on the NATO air policing mission seminars, which had been conditioned by considerable increase in the number of military flights.

VĮ „ORO NAVIGACIJA“ METINĖ ATASKAITA 2014 19 FINANCE REPORT ON ACTIVITY FOR 2014

Major financial resources of the enterprise are revenues from air navigation services. The rev- In 2014 other operating revenue received by the Company made up 1 473 thousand Lt, that is enues are comprised of en-route and terminal charges for air navigation services. The charges 1.5% of the total amount of the revenue received. Other operating revenue basically comprises cover the costs incurred by the state in the provision of air navigation services. According to income received for: the Multilateral Agreement Lithuania has delegated to EUROCONTROL billing and collecting • navigation information; of charges on its behalf. Costs of billing and collection of charges are covered by airspace users. • radar information; In 2014 revenues for air navigation services made up 98.2% of the total revenue of the Company. • rent. In 2014 the major part of income from financial activities (227 thousand Lt) was received from (000’Litas) 2012 2013 2014 interest on fixed deposit (105 thousand Lt) and fines and penalties calculated for late payment Revenue from en-route services1 70 410 72 002 76 976 for the services rendered. In 2014 income from financial activities made up 0.3% of the total Change, % -2,1 % 2,3 % 6,9 % amount of revenue received by the Company. Revenue from terminal services1 14 404 15 454 17 928 In conformity with Article 11 of the Commission Regulation (EC) No 1794/2006 of 6 December Change, % 24,1 % 7,3 % 16,0 % 2006 laying down a common charging scheme for air navigation services, the unit rate in the ter- Total operating revenue: 84 814 87 456 94 904 minal charging zone shall be calculated by dividing the forecast number of chargeable service

1 Without adjustment of over- or under-recovery of revenues units for the relevant year into the forecast cost-base of air navigation services. The costs incurred directly or indirectly in the provision of air navigation services are included into the cost-base. The balance resulting from over- or under-recovery in the previous years is also included into the In 2014 growth of operating revenues was determined by increase in demand for air navigation forecast cost-base. This ensures the mechanism for recovery of costs related with air navigation services. In 2014 the total number of flights to which air navigation services were rendered in the service provision and allows carrying out investment projects, which help maintain high level of Lithuanian airspace was 227,0 thousand and, if compared to 2013, increased by 6.3%. In 2014, safety and quality of services. a reduced unit rate of en-route charges and an increased unit rate of terminal charges for air The unit rate of en-route charge shall be calculated in accordance with the provisions of Article navigation services were applied. 10 of the Commission Regulation (EC) No 1794/2006 of 6 December 2006 laying down a common charging scheme for air navigation services. According to the provisions, the unit rate of the (Litas) 2012 2013 2014 en-route charge for the relevant year shall be calculated by dividing the forecast total number Unit rate of en-route charges 164,39 160,35 158,48 of en-route service units into the forecast cost-base for air navigation services (the costs shall Change, % -4,2 % -2,5 % -1,2 % be established in the performance plan of the Lithuanian air navigation service provision for a Unit rate of terminal charges 739,69 726,36 745,20 relevant period). The costs incurred directly or indirectly in the provision of air navigation services Change, % 17,0 % -1,8 % 2,6 % are included into the established cost-base for the en-route services. The balance resulted from over- or under-recovery before 2012 is also included into the forecast cost-base. Oro navigacija’s unit rates of air navigation service charges are determined in conformity with From 1 January 2015 the Commission Regulation (EC) No 1794/2006 of 6 December 2006 is re- ICAO, EU and EUROCONTROL documents which form an integral part of the Company’s legal pealed; the Commission Implementing Regulation (EU) No 391/2013 of 3 May 2013 laying down basis. Unit rates of air navigation service charges are calculated and approved every year. a common charging scheme for air navigation services will be applied for calculation of charges.

20 (000’Litas) 2012 2013 2014 In conformity with Article 11 of the Commission Regulation (EC) No 1794/2006 of 6 December En-route costs1 63 435 67 736 66 865 2006, the over- or under- recoveries of revenue for terminal services received in the accounting Change, % 3.4 % 6.8 % -1.3 % year will be reimbursed to/from users of services in the coming years. In 2014 the balance of ter- Terminal costs1 12 576 14 378 15 562 minal services revenue resulted in over-recovery of 1.5 million Litas which would be reimbursed Change, % 15.1 % 14.3 % 8.2 % to the users in 2016 by reducing the unit rate for terminal services. Other costs 1 077 1 077 15 160 From 2012 the traffic risk sharing mechanism has been applied to the en-route services. Where, Change, % 0.0 % 0.0 % 1 307.6 % over a given year, the actual number of en-route service units does not exceed or fall below the SE Oro navigacija’s total costs: 77 088 83 191 97 587 forecast established at the beginning of the reference period by more than 2%, the additional or lost revenue of the air navigation service provider in respect of determined costs shall not be CAA costs2 1 388 1 281 1 577 carried over. Result of 2014: the number of en-route services rendered was by 4.3% above the LHMT costs2 2 312 1 747 2 067 forecast established before start of the reference period for 2012–2014. By applying the traffic EUROCONTROL membership costs3 3 720 3 974 3 938 risk sharing mechanism, 1.2 million Litas of over-recovery (the share of SE Oro navigacija) will be Total costs: 84 508 90 193 105 169 reimbursed to the users in 2016 by reducing the unit rate of en-route services. 1 The cost of capital excluded 2 SE Oro navigacija’s costs allocated to CAA and LHMT in 2014. However, these are not the actual costs related to In 2014 the actual en-route service indicator – the determined en-route service unit rate – was lower provision and oversight of air navigation services incurred by CAA and LHMT. The cost-recovery mechanism will be by 6.2%, compared to the target set in the performance plan of Lithuanian air navigation service applied to the difference between the revenue received from SE Oro navigacija and the actual terminal costs incurred provider for 2012–2014. The major reason was decrease of the en-route costs by 2.9%, compared to 3 EUROCONTROL membership fee paid by SE Oro navigacija in 2014 the target set in the performance plan of Lithuanian air navigation service provider for 2012–2014, and the fact that by 4.3% more than planned en-route services were provided. The target set in the In Lithuania these costs are comprised of costs of SE Oro navigacija, the Civil Aviation performance plan for 2012–2014 – annual reduction by 3.5% of the established en-route service Administration (hereinafter – CAA) as the national supervisory authority, and the Lithuanian unit rate (expressed in Litas in 2009 prices) in 2012–2014 – was achieved. The annual reduction of Hydrometeorological Service (hereinafter – LHMT) related to provision of air navigation services, the established en-route service unit rate (expressed in Litas in 2009 prices) in 2012–2014 was 3.76%. and the EUROCONTROL costs (the membership fee per state paid by SE Oro navigacija) related to billing and collection of charges. In 2014 the growth of total costs was determined by bad debt (due to bankruptcy of AB Ūkio bankas)

expenses (14,1 million Lt of accounts receivable estimated as irrecoverable were written off). The rest 60 58.43 costs grew only by 0.9%. The costs of terminal services grew more than those of en-route services be- 56.85 cause a considerable part of investment projects for aerodrome control centres were implemented 57.88 55 in 2012–2014. Increase in terminal costs was also largely due to writing off the accounts receivable 55.87 (0.9 million Litas) from the bankrupt FlyLAL air company for the terminal services rendered. 53.92 50 EU: 47.00 In 2014 SE Oro navigacija’s percentage of costs in the en-route cost-base made up 90.3%, target 45.59 EUROCONTROL’s – 5.9%, LHMT’s – 2.3% and CAA’s – 1.5%. 44.23 45 actual In 2014 SE Oro navigacija’s percentage of costs in the terminal cost-base made up 96.8%, 45.84 45.37 LHMT’s – 1.6% and CAA’s – 1.6%. Lithuanian: 40 41.49 SE Oro navigacija’s percentage of costs is essential to both, en-route and terminal cost-base. Taking target this into consideration, in 2014, like every year, costs were reviewed thoroughly in order to increase 35 actual cost-effectiveness and at the same time to maintain high level of safety and quality of services. Also it 2012 2013 2014 should be taken into consideration that in calculating the unit rates, the costs of air navigation services are reduced by amount of revenue received from other activities. In Lithuania these revenues are En-route unit costs, EUR (2009 prices) only from SE Oro navigacija and make up 1.5% and 1.7 % of en-route and terminal costs, respectively. Source (for actual values of EU en-route unit costs): PRB Annual Monitoring Report 2013 21 BALANCE INCOME STATEMENT

(000’Litas) Note 2014-12-31 2013-12-31 Year ended Year ended (000’Litas) Note 31 Dec 2014 31 Dec 2013 Assets Sales 17 96 860 89 225 Non-current assets Cost of sales 18 65 894 68 370 Property, plant and equipment, net 4 89 322 94 259 Gross profit (loss) 30 966 20 855 Intangible assets 5 2 106 4 140 Financial assets 6 19 358 5 000 General and administrative expenses 19 20 535 18 563 Total non-current assets: 110 786 103 399 Other operating revenue 20 1 473 1 385 Other operating costs 20 1 473 1 385 Assets held for sale Operating profit 10 431 2 292 Current assets 0 0 Financial income 21 277 400 Inventories 7 25 30 Financial expenses 21 17 267 1 875 Prepayments 8 1 634 1 836 Trade debtors and other receivables 9 18 341 31 763 Net profit (loss) -6 559 817 Fixed deposits 10 13 466 17 000

Cash and cash equivalents 11 14 465 12 740 Current assets in total: 47 931 63 369

Total assets: 158 717 166 768

Capital and reserves attributable to owners of the company Share capital 12 132 025 132 032 Legal reserves 13 14 000 14 000 Other reserves 14 8 373 7 556 Profit -6 559 817 Total owners’ equity: 147 839 154 405

Non-current liabilities Grants 15 566 935 Provisions 2 867 Total non-current liabilities: 3 433 935

Current liabilities Debts to suppliers and other payables 16 7 445 11 428 Total current liabilities: 7 445 11 428

Total owners’ equity and liabilities 158 717 166 768

22 CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY

Year ended Year ended Statutory Legal Other (000’Litas) 31 Dec 2014 31 Dec 2013 (000’Litas) Capital Reserve Reserves Profit Total

Cash flows from operating activities 2013-01-01 133 984 9 064 10 697 1 795 155 540 Net profit (loss) -6 559 817 Net profit (loss) 817 817 Adjustments to Increase in statutory capital -1 952 - 1 952 Depreciation and amortization 12 901 17 831 Changes in reserves 4 936 -3 141 -1 795 0 Unrealized exchange (income)/loss Impairment of inventory Closing balance as at 2013-12-31 132 032 14 000 7 556 817 154 405 Doubtful debt expenses Recalculated as at 2013-12-31 132 032 14 000 7 556 817 154 405 Other Net profit (loss) -6 559 -6 559 Operating cash flows before working capital changes 6 342 18 648 Increase in statutory capital -7 - 7 Changes in working capital Changes in reserves 817 -817 0 Trade and other accounts receivable 13 422 -14 757 Closing balance as at 2014-12-31 132 025 14 000 8 373 -6 559 147 839 Inventories 207 718 Trade and other accounts payable -1 116 -2 026 Taxes paid Cash generated from operations 12 513 -16 065

Cash flow from investing activities Purchases of property, plant and equipment -6 328 -2 838 Proceeds from sale of property, plant and equipment 398 2 801 Interest received Net cash in investing activities -5 930 -37

Cash flows from financing activities Change in capital -7 -1 952 Change in reserves Change in cash and cash equivalents (change in fixed deposit) 3 534 -11 000 Change in financial debts -14 358 2 000 Change in government grants received -369 -369 Net cash used in financing activities -11 200 -11 321 Financial statements approved by management on 5 March 2015 and signed Exchange gain (loss) on cash and cash equivalents by Director General Algimantas Raščius. Net increase in cash and cash equivalents 1 725 -8 775 The notes on pages 24–32 form an integral part of these financial statements. Cash and cash equivalents at the beginning of the year 12 740 21 515

Cash and cash equivalents at the end of the year 14 465 12 740 23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES EXPLANATORY NOTES The principal accounting policies applied in preparation of these financial statements are set out TO FINANCIAL STATEMENTS below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1. Basis of accounting 1. GENERAL INFORMATION The financial statements have been prepared in accordance with the Law on Financial SE Oro navigacija (hereinafter – “the Company”) is a limited liability company founded by the Statements, the Law on Accounting and the International Accounting Standards (IAS). Republic of Lithuania providing air traffic control and navigation services within the airspace of the Republic of Lithuania, as well as air traffic control for landing and take-offs and related aero- To present accurately the Company’s assets, liabilities and financial effect, i.e. profit (loss), in the drome services at Vilnius, Kaunas, Šiauliai and Palanga airports. On 1 July 1994 the Civil Aviation financial statements, we have deviated from Part 10 of IAS 37 (Provisions, Contingent Liabilities Directorate of the Republic of Lithuania was established, which after reorganization of activities and Contingent Assets), which treats liability as the Company’s obligation arising from past on 1 July 2001 was re-registered as a limited liability company SE Oro navigacija. events, the settlement of which will require the outflow of the Company’s resources embodying economic benefit. The Company’s operations are governed by the International Standards for Air Transport (ISAT), legal acts of the International Civil Aviation Organization (ICAO) and the European Union, docu- Also in preparing the Company’s financial statements, we have deviated from the Financial ments of the European Organisation for the Safety of Air Navigation (EUROCONTROL), and the Statement Concepts according to which, in order for an asset to be recognized, a respective title Law on Civil Aviation and other legislation of the Republic of Lithuania. to it shall exist already on the day of recognition. As at 31 December 2014 the Company had 304 employees (31 December 2013: 306). The reg- Pursuant to the provisions laid down, a liability arising from implementation of Article 11a of istered office of the Company is located at Rodūnios kelias 2, Vilnius, the Republic of Lithuania. the Commission Regulation (EC) No 1794/2006 of 6 December 2006, according to which the charges for air navigation services should be established so that the received revenues cover the Relations with the State costs in those cases, when the Company earns income in excess of actual costs to the income earning, should not be recorded, according to IAS. The Company’s owner is the Ministry of Transport and Communications. According to IAS, assets should not be recorded, when in implementing provisions of the above- The Company’s major customers are foreign airlines. mentioned regulation, the Company’s revenues do not cover the costs incurred. To ensure that tariffs comply with the general pricing arrangements for air navigation services Taking into consideration the practice in this branch of economy, in order to present in the finan- worldwide, all information is submitted to the Ministry of Transport and Communications of the cial statements information on transaction results, other events or the Company’s financial sta- Republic of Lithuania, EUROCONTROL, and the European Commission, and tariffs are agreed tus, financial results or cash flows, the Company in its records shows both, assests and liabilities, with representatives of the airspace users: the International Air Transport Association (IATA), the arising from the difference between the Company’s revenue from air navigation services and the International Air Carrier Association (IACA), representatives of different organizations of general actual costs to the income earning. aviation and others. Otherwise, in its records the Company should show the earned profit (loss), regardless of the fact In conformity with the Law on Corporate Income Tax, the Company’s income is not subject to that such profit from air navigation services will be used to reduce charges in future periods and corporate tax. the loss will be covered by increasing the charges. Preparation of financial statements in conformity with the International Financial Reporting Standards (IFRS) requires the use of certain critical accounting estimates. Also, the management is required to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in notes.

24 2.2. Foreign currency translation Construction in progress is stated at historical cost. It comprises the cost of value of construction, building and equipment and other direct costs. Depreciation of construction in progress is a) Functional and presentation currency not calculated until the construction is not completed and assets are not brought into working Items included in the financial statements of the Company are measured using the currency of condition. the primary economic environment in which the entity operates (“the functional currency”). The The Company revaluates the reconstructive value of non-current assets whenever there are any financial statements are presented in “Lithuanian Litas” (“Litas”), which is the Company’s func- indications of impairment of value of the said assets. Impairment loss is charged to the income tional and presentation currency. From 1 January 2015 the Company’s functional and presenta- (loss/profit) statement only after revaluation. tion currency is the Euro. 2.4. Intangible assets b) Transactions and balances The Company’s intangible assets are initially recognized at historical cost. Intangible assets are Foreign currency transactions are translated into the functional currency using the exchange recognized when it is probable that the company will receive economic benefit from these as- rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting sets in the future, and if the asset value can be estimated reliably. from the settlement of such transactions and from the translation at year-end exchange rates of The useful lives of intangible assets may be limited or unlimited. monetary assets and liabilities denominated in foreign currencies are recognised in the income After initial recognition intangible asset, for which limited useful life has been estimated, is re- statement. ported at historical cost less accumulated amortization and accumulated impairment loss, if any. From 2 February 2002 to 31 December 2014 the Litas was pegged to the Euro at the rate of Intangible assets are amortized using straight-line method over their estimated period of useful 3,4528 to 1, and the exchange rate of the Litas to other currencies was determined daily by the lives. The useful lives, the residual values and the method of amortization are reviewed every Bank of Lithuania. year to ensure that they comply with the intended use of non-current intangible asset. Translation differences on non-monetary financial assets and liabilities are reported as part of The Company does not possess intangible assets with unlimited useful lives. the fair value gain or loss. Amortization is calculated using the straight-line method over the following periods of useful 2.3. Property, plant and equipment lives: • Licences 1–5 years; Property, plant and equipment are stated at historical cost less accumulated depreciation and • Computer software 7 years. accumulated impairment loss. The historical cost comprises the cost of replacement of part of non-current assets when such costs are incurred and the recognition condition is satisfied. When Costs that are directly associated with the development of identifiable and unique software major maintenance/repair is performed, expenses are charged into the balance sheet as replace- products controlled by the Company, and that will probably generate economic benefits ex- ment of non-current asset. Other costs of repairs and maintenance are reported as gains or losses. ceeding costs beyond one year, are recognised as intangible assets. Costs include the software development employee costs and an appropriate portion of relevant overheads. When assets are sold or written off, the historical cost, the accumulated depreciation, increase in/ decrease of value are written off, all income from/expenses of disposal are recorded and Computer software development costs recognised as assets are amortised over their estimated write-offs are charged into account. useful lives (not exceeding 5 years).

Depreciation is calculated using the straight-line method over the following estimated useful lives: 2.5. Impairment of non-financial assets • Buildings 25–50 years; Assets that are subject to amortisation are reviewed for impairment whenever events or • Navigation equipment and facilities 7–15 years; changes in circumstances indicate that the carrying amount may not be recoverable. • Vehicles 6–10 years; • Furniture, fittings, equipment, and computer hardware 4–10 years. An impairment loss is recognised for the amount by which the asset’s carrying amount ex- ceeds its recoverable amount. The useful lives, the residual values and the method of depreciation are reviewed every year to ensure that they comply with the intended use of non-current assets.

25 2.6. Financial assets • The book value of short-term trade and other receivables, short-term trade loans and short-term The Company classifies its financial assets into the following categories: receivables and other loans is equal to their fair value. financial assets (held-to-maturity investments). Classification depends on the purpose for which • The fair value of long-term loans is determined on the basis of the market price or the interest the financial assets were acquired. The management determines the classification of its financial rate applied to the same or a similar loan at that time. The book value of long-term loans, bearing assets at initial recognition. variable or fixed interest, approximates to their fair value.

a) Receivables 2.9. Cash and cash equivalents Receivables are non-derivative financial assets with fixed or determinable payments that are not Cash include cash in hand, deposits held at call with banks, and cash in transit. Cash equivalents quoted in an active market. Receivables are initially stated at fair value. Short-term receivables are short-term highly liquid investments with original maturities of three months or less. after initial recognition are reported at amortized value, by using the effective interest method, less any impairment loss. Profit (loss) is recognized in income statement when such asset is writ- 2.10. Grants related to purchase of property, plant and equipment ten down, when its value reduces or it is amortised. Grants received as non-current assets or grants relating to purchase of property, plant and equipment, construction or other acquisition, are considered to be asset-related. Assets received Impairment of value of receivables is charged into account whenever there are any indications free of charge are attributable to this category of grants. An asset-related grant is credited to that value of receivables is impaired; then the book value of receivables is reduced using account the income statement over the period of its expected life and is included into the item of other of impairment of values. Depreciated loan receivables are written off when they are estimated operating income, net. as irrecoverable. Grants received to compensate for the accounting or past period’s expenses or income due, as b) Held-to-maturity investments well as all other grants, not attributable to asset-related grants, are grants related to income. Use Held-to-maturity investments are non-derivative financial assets with fixed or determinable of an income-related grant is recognized in proportion to the costs incurred in the accounting payments and fixed maturity that the Company has the positive intention and ability to hold period or the amount of income due calculated for the accounting period, for compensation of to maturity. Held-to-maturity investments are measured at amortised cost using the effective which the grant is given. interest method. The unused amount of grant is shown in item “Grants” of the balance sheet.

2.7. Inventories 2.11. Trade payables Inventories are shown at the lower of cost. The cost is determined using the first-in, first-out Trade payables are recognized at their fair value. (FIFO) method. Net realizable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses. 2.12. Employee benefits

2.8. Fair value of financial assets and liabilities a) Social security contributions The Company’s major financial assets and liabilities not reflected at fair value are trade and other The Company pays social security contributions to the state Social Security Fund (hereinafter – receivables, trade and other loans, long-term and short-term loans. the Fund) on behalf of its employees according to the contribution plan defined in conformity with the state’s legislation. A defined contribution plan is a plan under which the Company pays The fair value is defined as an amount for which an asset or a service could be exchanged for or fixed contributions into the Fund and will have no legal or constructive obligations to pay further an amount for inclusion of a liability between unrelated parties intending to purchase (sell) an contributions if the Fund does not hold sufficient assets to pay all employees benefits relating asset or to include a liability into account. The fair value of financial assets and liabilities is based to employee service in the current and prior period. The social security contributions are recog- on quoted market prices, discounting cash flow models or option pricing models, depending nized as an expense on an accrual basis and are included within employee-related expenses. on circumstances. To estimate each category of financial assets and liabilities, the Company uses the following methods and assumptions: 26 b) Termination benefits a) Revenue from air navigation services Termination benefits are payable whenever an employee’s employment is terminated before the Revenues are determined on the basis of tariffs applicable to en-route and terminal air naviga- normal retirement date or whenever an employee accepts voluntary redundancy in exchange tion services. for these benefits. The Company recognises termination benefits when it is demonstrably com- Revenues from en-route air navigation services are calculated on the basis of tariffs determined mitted to either terminate the employment of current employees according to a detailed formal in conformity with the Commission Regulation (EC) No 1794/2006 laying down a common plan without possibility of withdrawal or to provide termination benefits as a result of an offer charging scheme for air navigation services and the Multilateral Agreement Relating to Route made to encourage voluntary redundancy. Benefits falling due more than 12 months after bal- Charges. Route charge is collected for air traffic services provided to an aircraft flying over the ance sheet date are discounted to present value. Lithuanian controlled airspace. The rate of route charge is calculated according to the following formula: R = W x P x D, where: c) Insurance benefits • R – the rate of route charge; The Company pays contributions to publicly or privately administered pension insurance plans • W – the mass factor (W = √(MTOM/50), MTOM – the maximum take-off mass rounded after the on a mandatory, contractual or voluntary basis. The Company has no further payment obliga- decimal point in the usual manner; tions once the contributions have been paid. The contributions are recognised as employee • P – the unit rate of route charge; benefit expense when they are due. Prepaid contributions are recognised as an asset to the • D – the great circle distance divided by 100. extent that a cash refund or a reduction in the future payments is available. Revenues from terminal air navigation services are calculated on the basis of tariffs determined in conformity with the Commission Regulation (EC) No 1794/2006 laying down a common 2.13. Provisions charging scheme for air navigation services. Terminal charge is collected for air navigation ser- A provision is accounted for only when the Company, with regard to a past event, has a legal vices provided to landings at airports. The rate of terminal charge is calculated according to the liability or an irrevocable commitment, and it is likely that cost-effective resources will be needed following formula T = I x W, where: to meet it, and the amount of liability may be credibly estimated. Provisions are reviewed at each • T – the rate of terminal charge; balance sheet date and adjusted to reflect the most accurate present estimation. In cases when • I – the terminal service unit rate; the effect of time value of money is significant, the amount of provision is the present value of • W – the mass factor ((W = (MTOM/50)0,7, MTOM – the maximum take-off mass rounded after the cost which probably will be needed to cover the liability. When discounting is applied, increase decimal point in the usual manner). in provision, reflecting the past period, is accounted for as interest cost. The Company also provides ancillary services, i.e. pre-flight aeronautical information services (briefing) to cabin crews, radar information to the Lithuanian Air Force and other different ser- 2.14. Revenue recognition vices at Vilnius, Kaunas, Šiauliai and Palanga airports. Revenue comprises the fair value of the consideration received or receivable for the services provided in the ordinary course of the Company’s activities. Revenue is shown in net value, ex- b) Interest income cluding value-added tax. Interest income is recognized on a time-proportion basis using effective interest method. The Company recognizes the revenue when the amount of revenue can be reliably measured, when it is probable that it will receive economic benefits and when specific criteria have been met for each of the Company’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases its estimates on historical results, taking into consideration the type of cus- tomer, the type of transaction and the specifics of each arrangement.

27 3. FINANCIAL RISK MANAGEMENT 4. PROPERTY, PLANT AND EQUIPMENT

3.1. Credit risk Machinery Construc- As the Company works with many customers it has no significant concentration of credit risk. Land and and tion in (000’Litas) buildings equipment Other progress Total The Company does not provide guarantees for other parties’ liabilities. For the purpose of appropriate management of credit risk of keeping the Company’s funds in 2012-12-31 current accounts of commercial banks and investing temporarily free money resources into oth- Cost or valuation 47 642 128 575 5 479 10 592 192 288 er financial instruments, the Procedure for the Financial Risk Management Policy of SE Oro navi- Cost written-off -343 -3 223 -595 -4 161 gacija was adopted. The procedure has established the policy for financial risk management Accumulated depreciation -14 568 -62 743 - 3 094 -80 405 Accumulated depreciation written-off 325 3 195 573 4 093 of the Company with reference to managing funds in current accounts of commercial banks, investing temporarily free money resources, and also making transactions on derivative finan- Net book amount 33 056 65 805 2 362 10 592 111 815 cial instruments. Year ended 31 Dec 2013 Opening net book amount 33 056 65 805 2 362 10 592 111 815 3.2. Foreign exchange risk Additions 324 67 2 422 2 813 The Company serves predominantly foreign airlines operating transit flights through the air- Internal transfers 4 913 -10 179 -5 266 space of the Republic of Lithuania. Settlement for the services provided is performed in euros. Sales, disposals, write-offs -1 244 -1 097 -460 -2 801 All Company’s purchases, sales and financial debts are denominated in litas and euros (till 31 Depreciation charge (Notes 18 to 19) -1 501 -9 486 -1 315 -12 302 December 2014). From 2 February 2002 to 31 December 2014, in conformity with the Law on Closing net book amount 30 311 60 459 654 2 835 94 259 Litas Reliability and resolution of the Bank of Lithuania, the Litas was pegged to the Euro at the 2013-12-31 rate of 3,4528 to 1, therefore, the Company was not exposed to foreign exchange risk. Cost or valuation 47 299 130 589 4 951 2 835 185 674 Cost written-off -1 584 -3 542 -563 -5 689 3.3. Liquidity risk Accumulated depreciation -15 744 -69 403 - 3 836 -88 983 In order to meet its liabilities, the company keeps to the policy of maintaining sufficient amount Accumulated depreciation written-off 340 2 815 102 3 257 of cash and cash equivalents or ensuring financing through credit lines or loans. At the end of Net book amount 30 311 60 459 654 2 835 94 259 2014 the current assets exceeded the current liabilities by more than 6 times (in 2013 this indicator was over 5), therefore, the Company does not consider that liquidity risk may significantly Year ended 31 Dec 2014 influence its activity. Opening net book amount 30 311 60 459 654 2 835 111 815 Additions 20 480 37 5 742 6 279 For the purpose of controlling the liquidity risk with reference to managing the Company’s funds Internal transfers 364 6 399 -5 763 0 in current accounts of commercial banks, investing temporarily free money resources, and also Sales, disposals, write-offs -3 -394 -1 -398 making transactions on derivative financial instruments, the Company keeps to the adopted Depreciation charge (Notes 18 to 19) -1 523 -9 145 -150 -10 818 Procedure for the Financial Risk Management Policy. Closing net book amount 29 169 56 799 540 2 814 89 322

3.4. Capital risk management 2014-12-31 In recent years, except for grants received for the instrument landing system, the Company did Cost or valuation 46 099 132 926 4 425 2 814 186 264 not use external financing for its operating activities. For all investments the Company’s funds Cost written-off -9 -1 240 -25 -1 274 are used. Accumulated depreciation -16 927 -76 102 - 3 884 -96 913 Accumulated depreciation written-off 6 1 215 24 1 245 Net book amount 29 169 56 799 540 2 814 89 322

28 5. INTANGIBLE ASSETS 6. FINANCIAL ASSETS

(000’Litas) Licences Software Other Total (000’Litas) 2014-12-31 2013-12-31 Financial assets 19 358 5 000 2012-12-31 Cost or valuation 750 22 842 149 23 741 Total financial assets: 19 358 5 000 Cost written-off -60 -48 -108 Accumulated depreciation -686 -18 530 -147 -19 363 At the end of 2014 financial assets were comprised of held-to-maturity investment – a long- Accumulated depreciation written-off 60 48 108 term fixed deposit which certainly is intended to and may be held to maturity by the Company. Net book amount 64 4 312 2 4 378

Year ended 31 Dec 2013 7. INVENTORIES Opening net book amount 64 4 312 2 4 378 Additions 6 19 25 (000’Litas) 2014-12-31 2013-12-31 Internal transfers 5 266 5 266 Inventories 25 30 Sales Impairment provision Depreciation charge (Notes 18 to 19) -42 -5 485 -2 -5 529 Total inventory: 25 30 Closing net book amount 28 4 112 0 4 140

2013-12-31 Cost or valuation 696 28 079 149 28 924 8. PREPAYMENTS Cost written-off -38 -9 -47 Accumulated depreciation -668 -23 967 -149 -24 784 (000’Litas) 2014-12-31 2013-12-31 Accumulated depreciation written-off 38 9 47 Prepayments 1 634 1 836 Net book amount 28 4 112 0 4 140 Total financial assets: 1 634 1 836

Year ended 31 Dec 2014 Opening net book amount 28 4 112 0 4 140 9. TRADE AND OTHER RECEIVABLES Additions 29 20 49 Internal transfers (000’Litas) 2014-12-31 2013-12-31 Sales Trade receivables 17 749 17 044 Depreciation charge (Notes 18 to 19) -18 -2 065 -2 083 Less: provision for impairment of trade receivables Closing net book amount 39 2 067 0 2 106 Trade receivables, net 17 749 17 044 2014-12-31 Prepaid insurance Cost or valuation 687 28 090 149 28 926 Receivables from related parties 88 48 Cost written-off -22 -22 Other receivables 504 14 671 Accumulated depreciation -648 -26 023 -149 -26 820 Trade and other receivables, net: 18 341 31 763 Accumulated depreciation written-off 22 22

Net book amount 39 2 067 0 2 106 29 In accordance with agreements signed with EUROCONTROL the state has delegated the opera- 12. SHARE CAPITAL tion of route and terminal facility charge billing and collection system to this organization. The SE Oro navigacija is a state-owned company. At 31 December 2014 the subscribed capital of the amounts collected by EUROCONTROL are accumulated in an interest-bearing current account enterprise made up 51 859 thous. Lt. The capital corresponding to assets which under laws can with the EUROCONTROL clearing house. As of 31 December 2014 the balance on this account be owned only by the State is equal to 80 166 thous. Lt. made up 164 thous. Lt (47 thous. euros) (31 December 2013: 74 thous. Lt (21 thous. euros). After having assessed the auditing report and other bank supervision data, and in the interest of the public, depositors and other customers, the Board of the Bank of Lithuania restricted activi- 13. LEGAL RESERVE ties of the joint-stock company Ūkio bankas on 12 February 2013. By decision of the Board, a A legal reserve is a compulsory reserve under Lithuanian legislation. A legal reserve is formed temporary administrator of the bank was appointed and charged with putting forward solutions from the Company’s distributable profit by making annual deductions into the legal reserve, for ensuring performance of the bank’s liabilities to the customers of the bank. amounts of which are determined by the authority exercising the rights and responsibilities of In conformity with the Law on Banks of the Republic of Lithuania, on 2 May 2013 Kaunas the Company’s owner. Deductions to the legal reserve cannot be less than 1/20 of the distribut- Regional Court opened bankruptcy proceedings against JSC Ūkio bankas and appointed the able profit and shall be made until the reserve reaches the amount equal to 1/10 of the value of CJSC Valnetas as bankruptcy administrator for the bank. Bank bankruptcy procedures are regu- the owner’s capital. The legal reserve can be used to cover the accumulated losses. lated by the Law on the Enterprise Bankruptcy Procedure, the Law on Financial Institutions, and the Law on Banks. As at 12 February 2013 SE Oro navigacija held 14.2 million Lt in Ūkio bankas. In conformity with 14. OTHER RESERVES the laws of the Republic of Lithuania, the amount of a deposit insured is equal to the deposi- In accordance with its statutes the company may form the following reserves: tor’s deposit held with a bank, branch of bank or a credit union at the date of the event insured, • Revaluation reserve; however, it may not exceed an amount in litas which is equivalent to 100,000 EUR. In 2013, • Investment reserve; the amount in excess of the insurance coverage was carried forward to accounts receivable. • Reserve for liabilities, bad debts and losses, which cannot be attributed to allowable deductions; On 31 December 2014 the accounts receivable, recognized as bad debts, were written off. • Profit (loss).

10. FIXED-TERM DEPOSITS 15. GRANTS The fixed-term deposit balances comprise mainly from the 3 to 6 month deposits at bank. The Movement of the grants relating to the purchase of property, plant and equipment and intangi- carrying amounts of the Company’s fixed-term deposits are as follows: ble assets may be summarised as follows:

(000’Litas) 2014-12-31 2013-12-31 (000’Litas) 2014 2013 Fixed-term deposits 13 466 17 000 Balance at 1 January 935 1 304 13 466 17 000 New grants received Amortization of deferred income to match related depreciation 369 369 11. CASH AND CASH EQUIVALENTS Amortization of deferred income to match related expenses (000’Litas) 2014-12-31 2013-12-31 Balance at 31 December 566 935 Cash at bank and on hand 14 465 12 740 14 465 12 740

30 In 2007 the enterprise received a grant of 4 119 thous. Lt for acquisition of non-current asset, 19. GENERAL AND ADMINISTRATIVE EXPENSES the instrument landing system (ILS), the depreciation charge of which in the accounting period made up 369 thous. Lt. (000’Litas) 2014 2013 Remuneration expenses 11 205 10 436 Depreciation and amortization 845 1 081 16. TRADE AND OTHER PAYABLES Personnel training 43 72 Business trips 524 489 (000’Litas) 2014-12-31 2013-12-31 Utilities 517 562 Debts to suppliers 2 654 2 874 Tax expenses 205 149 Communication expenses 147 194 Provisions 4 823 Insurance 531 488 Taxes, remuneration and social security payable 4 781 3 651 Advertisement 122 181 Other payables 10 80 Regulator’s expenses 1 577 1 281 Total trade and other payables: 7 445 11 428 LHMT expenses 2 067 1 747 Other operating expenses, net 2 752 1 883 Total general and administrative expenses: 20 535 18 563 17. REVENUES

(000’Litas) 2014 2013 20. OTHER OPERATING INCOME (EXPENSES), NET Revenues from en-route services 76 976 72 002 Adjustment of over- or under-recovery (000’Litas) 2014 2013 of revenues from en-route services 3 114 1 769 Rental income 35 35 Revenues from terminal services 17 928 15 454 Other income (expenses) 1 438 1 350 Adjustment of over- or under-recovery EU grants administrative expenses of revenues from terminal services -1 158 Other expenses, net 1 473 1 385 Total revenues: 96 860 89 225 Total other operating income (expenses), net: 0 0

18. COST OF SALES 21. FINANCIAL INCOME (EXPENSES)

(000’Litas) 2014 2013 (000’Litas) 2014 2013 Remuneration expenses 39 976 36 684 Currency translation income (expenses), net 28 33 Depreciation and amortization 12 056 16 749 Grants received EUROCONTROL expenses (membership fee) 3 938 3 974 Interest on held-to-maturity investments and Other cost of sale expenses 9 924 10 963 fixed-term deposits 105 286 Total cost of sales: 65 894 68 370 Income from fines and penalties 142 79 Other financial income 2 2 Financial costs 17 267 1 875 Total financial income (expenses), net: -16 990 -1 475 31 22. RELATED PARTY TRANSACTIONS AIR NAVIGATION SERVICES IN 2014 All entities under state control are considered related parties. En-route Terminal In the normal course of business the Company enters into transactions with related parties. The (000’Litas) services services Company provides air navigation services to governmental institutions such as the Ministry of National Defence or the Border Control Department. The details of the related party transactions Revenue from total en-route flights 80 090 for the financial periods reported are provided below: Revenue from total terminal flights 16 770 Operating revenue from total flights 80 159 16 778 Loan and Accounts interest Accounts Staff costs 42 832 8 348 payable payable receivable Purchases Sales Other operating expenses 14 466 3 879 as at as at as at during during Depreciation 9 567 3 334 (000’Litas) 31-Dec-14 31-Dec-14 31-Dec-14 2014 from 2014 to Cost of capital 2 551 889 Ministry of National Defence 84 2 357 Exceptional items Border Control Department 3 SE Oro navigacija’s costs of air navigation service provision 69 416 16 451 Other state institutions 209 4 3 729 240 CAA costs 1 125 262 Total: 209 88 3 729 2 600 LHMT costs 1 798 279 Loan and EUROCONTROL membership costs 4 551 Accounts interest Accounts Lithuanian cost-base 76 890 16 992 payable payable receivable Purchases Sales as at as at as at during during Terminal (000’Litas) 31-Dec-13 31-Dec-13 31-Dec-13 2013 from 2013 to (000’Litas) services Ministry of National Defence 42 1 566 Revenue from chargeable flights 16 876 Border Control Department 2 Other operating revenue 282 Other state institutions 178 6 3 044 273 Lithuanian cost-base 16 992 Total: 178 48 3 044 1 841 Costs of flights exempted from charges 997 Over-recovery of previous years 335 Under-recovery of previous years 23. POST-BALANCE-SHEET EVENTS Over- or under-recovery in 2013 from terminal services In conformity with the Council Decision (EU) of 23 July 2014 on the adoption by Lithuania of the by applying the principle of full cost recovery 1 498 euro on 1 January 2015, the euro as the official currency has been introduced in the Republic of Lithuania from 1 January 2015. One euro comprises 100 cents. From 1 January 2015 the Commission Regulation (EC) No 1794/2006 of 6 December 2006 laying down a common charging scheme is repealed. Beginning with 1 January 2015 the Commission Implementing Regulation (EU) No 391/2013 of 3 May 2013 laying down a common charging scheme is applied.

32 CONTACTS

Director General Algimantas Raščius +370 706 94 501 [email protected] Air Traffic Management Director Sergej Smirnov +370 706 94 503 [email protected] Technical Director Genadijus Matulaitis +370 706 94 504 [email protected] Strategic Development Director Kazimieras Jakas +370 706 94 505 [email protected] Director of Finance and Economics Jolanta Verikaitė +370 706 94 506 [email protected] Director of Kaunas Air Traffic Control Centre Kęstutis Jurkėnas +370 706 94 320 [email protected] Director of Palanga Air Traffic Control Centre Albinas Balčiūnas +370 706 94 112 [email protected] Chief of Šiauliai Air Traffic Control Centre Edmundas Adomynas +370 706 94 712 [email protected]

SE ORO NAVIGACIJA Rodūnios kelias 2, LT-02188 Vilnius Tel. +370 706 94 502, fax. +370 706 94 522 E-mail: [email protected] www.ans.lt www.ans.lt