THE PROPOSED PUBLIC-PRIVATE PARTNERSHIP
FOR
NATIONAL AIR TRAFFIC SERVICES LIMITED
Summary of Conclusions and Recommendations
83. Our principal conclusions and recommendations
are:
| (a) | Whatever else is decided about the future status of NATS, to effect proper safety regulation of the company the status quo cannot continue (paragraph 5).
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| (b) | The Government has failed, in its evidence to us, and more generally, to make a positive case for the public-private partnership for NATS. It has also failed to give adequate reasons for rejecting the options of establishing the company as an independent publicly-owned corporation, or as a trust or non-share-capital corporation, similar to NavCanada (paragraph 75).
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| (c) | We do not believe that it is appropriate for the CAA, as an economic and safety regulator, to give the impression that it is an advocate of the public-private partnership. It would be more sensible for it to take a disinterested view (paragraph 78).
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| (d) | The current proposal for a public-private partnership for NATS is, in our view, the worst of all the possible options for the future structure of the company. It would lead to operational control of NATS, other than in extreme situations, being ceded to a private investor which is very likely to seek either to cut costs, jeopardising safety, or to increase revenues, by raising charges to its customers, putting airlines and airports in the United Kingdom at a competitive disadvantage. It would also give rise to other concerns about NATS continued commitment to Eurocontrol, about matters of national security, and about the future provision of non-commercial services which are vital to safety. There are questions about the validity of the special share the Government intends to hold in the company. Moreover, the Government's revenue from the sale of control of NATS would be extremely small. Even a full privatisation would at least generate a reasonable revenue for the sale of the company (paragraph 79).
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| (e) | Although we do not support the public-private partnership, we recommend that, if it is to be established, the Government should only sell the remaining stake to a bidder committed to making no commercial return on NATS operations (paragraph 80).
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| (f) | If the Airline Group or a management team, or even another bidder, were to succeed in acquiring the 46 per cent stake in NATS, and to operate the company on a not-for-profit basis, it would be possible, subject to a number of conditions, to structure the company in a way similar to a trust model such as NavCanada. The conditions would include guaranteeing the staff, as owners of 5 per cent of the company, at least one place on its board. Another condition would be that the 'stakeholder' council would require greater power to put forward its advice. Conditions would have to be placed on the company, to ensure that it did not unduly favour members of the Airline Group: similar conditions already bind NavCanada. If these conditions were met, the proposed public-private partnership might be at least partially redeemed. Nevertheless, the Government would not have maximised the revenue it might be able to generate in exchange for ceding operational control of the company (paragraph 81).
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| (g) | The trust model, as adopted by NavCanada, would meet the main objectives of the public-private partnership, freeing NATS to borrow on the private market, and separating the company more clearly from its regulator, the CAA. Despite the Government's contrary view, we believe that NATS would face strong demands to become more efficient, because its customers, the airlines, would be involved in its management. However, there would be no over-riding commercial pressure to maximise profits, thus jeopardising safety standards. Moreover the Government would receive significant revenue from the sale of the whole of the company. In short, since customers, staff, and the Government would all be involved in the provision of air traffic services, the trust model answers concerns about rising charges, lower safety standards, national security considerations, and the future international development of air navigation services. We therefore strongly recommend that the Government should establish a trust, or non-share-capital corporation, as the owner of National Air Traffic Services Limited (paragraph 82).
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