Memorandum by BAAplc (PPP 04)
THE PROPOSED PUBLIC PRIVATE PARTNERSHIP FOR
NATIONAL AIR TRAFFIC SERVICES (NATS)
INTRODUCTION
1. As owner of a large proportion of the
nation's airport infrastructure, BAA welcomes another opportunity
to stress to the committee the importance of NATS being able to
access the private funds necessary for its capital investment
programme to meet the growing demand for air travel with the highest
standards of safety and having the commercial freedom to develop
its business.
2. In BAA's view, the proposals brought
forward by the DETR in July, following the consultation with the
industry, for a strategic partner for NATS will fulfil these objectives
and enhance the ability of NATS to deliver a world leading air
traffic management (ATM) service safely and in line with the national
interest.
3. The committee has identified several
key aspects of the PPP for consideration. In addition to comments
on these, BAA believes that there are several additional issues
relating to environment and the wider ATC issues which the committee
should note.
MANAGEMENT
4. NATS already has an experienced management
team which has already shown its capability to manage a high degree
of change in a high technology industry and create a safe, customer
service business culture. The incorporation of a strategic partner
will bring further private sector management skills to allow the
business to grow and develop free from the present constraints.
FINANCE
5. BAA believes that the proposals for the
PPP are the most appropriate for NATS to free itself from the
financing restraints of the public sector and to allow it properly
to finance its investment programme. Whilst corporatisation and
the "trust" concept have been adopted in other countries,
the advantages of bringing a private partner, in terms of flexibility
and financial capability to assist in the development of a high
technology and fast moving business to meet the needs of demanding
customers, far outweigh the disadvantages that detractors of the
proposals claim. The committee should note that the International
Air Transport Association, as part of its new strategy relating
to European ATC, is now calling for the commercialisation or privatisation
of all European airspace ATC providers. The industry needs a much
more flexible and robust approach to investment that can only
be provided from the private sector.
ACCOUNTABILITY
6. The proposals for partnership directors
and a stakeholder council, which, when compared with the arrangements
made in the airline and airport sector, appear cumbersome, will
ensure that NATS will be accountable to the needs of its customers
and ultimately to Government. Whilst these arrangements are necessary
given the monopoly en route part of the business, they should
not fetter the management of NATS to develop its business in new
markets or the freedom to develop new products and services. NATS
must have the freedom to manage its business and provide the service
its customers require. In particular, the PPP will give NATS the
opportunity to apply its world leading ATM expertise to ATC centres
and airports beyond the UK, enhancing safety and providing further
opportunities for UK businesses.
SAFETY STANDARDS
7. As with airports and airlines, safety
of operation is the paramount goal for NATS. It has been defined
as their "ultimate" product. The proposals, following
the overwhelming consensus of the industry, enhance the role of
the CAA Safety Regulation Group (SRG) as the safety regulator
for NATS. The PPP will reinforce the division between the service
provider and the safety regulator and make the same arrangements
as exist for airline and airports. Throughout the air transport
industry, there is a clear definition of responsibility between
infrastructure providers and operators. The proposals for the
NATS PPP emphasise this and the committee should note the excellent
safety record of those airports and airlines which are in the
private sector. As we have stated before, private ownership has
the potential to place more onerous safety responsibilities on
the directors of private companies. This, together with the re-affirmed
role of SRG as the aviation safety regulator, should reassure
the committee that the proposed arrangements should enhance rather
than detract from the safe provision of ATC services.
INVESTMENT
8. The very nature of NATS investment, the
infrastructure and software to complete Swanwick and the new Scottish
centre, requires flexibility and innovation for efficient application
of new technology in the ATM business. The committee will be aware
of the harsh criticism now being directed at the US FAA by leading
US airlines regarding the delays in implementing new systems at
both en route and airport ATC facilities. As the new communication
and surveillance technology is rolled out, it will be imperative
that the ATM providers have the financial capability to deploy
it and other technologies to safely improve airspace capacity.
STAFF
9. Whilst it is understandable that the
staff of NATS are concerned at the PPP proposals, given the protracted
period of uncertainty, they should relish the opportunities that
a private partner will bring. The opportunities for a company
operating in the private sector to grow and develop its business
will be greater. Again, the examples of the airports and airlines
operating in such an environment should be noted. The proposal
for the PPP make clear statements relating to pensions and share
ownership.
ALTERNATIVES
10. From our position in the private sector
and as a key provider of air transport infrastructure, BAA would
urge the committee to view the PPP proposals positively. The corporatisation
and trust options would simply not give NATS the business freedom
required for it to meet the needs of the industry. The nation
needs investment in transport infrastructure and there is a real
danger that UK business and prosperity will be affected if air
travel becomes constrained by infrastructure limitations. The
safe provision of ATC capacity is central to this and can only
be provided by a strategic partner for NATS.
ENVIRONMENT
11. Although environmental concerns were
largely absent from the consultation on the PPP, the proposals
do make general reference to environmental concerns. Again citing
experience with airports and airlines, the general public expects
companies operating in the private sector to offer effective protection
of the environment and this is reflected in emerging government
policy. It is therefore important that the regulation of NATS
takes full recognition of these aspects and that both NATS and
SRG develop effective audit of en-route and airport ATC procedures
against key environmental goals.
EUROPE
12. The committee will be aware through
recent airline user comments of the degradation of operational
ATC performance across Europe this summer and the effects this
has had on the airline product and customer confidence. The committee
will note the excellent performance of NATS with regard to delays
in its complex and densely used airspace over the London airports
compared with that achieved across other areas of western Europe.
These delays impact upon the airports business as well but it
should be emphasised that ATM issues cannot be solved by looking
at each nation state individually. By definition, ATM is an inter-connected
global network and UK and North Atlantic Oceanic airspace are
mere chips of a global system.
13. As identified above, airline users are
calling for more investment and better performance from national
ATM providers and this will increasingly focus on issues of ownership
and investment. The PPP proposals point the way for the UK to
couple what will be a world leading ATM facility at Swanwick with
an innovative approach to ownership of the ATM provider for the
benefit of UK airports and all airlines and users. The committee,
whilst rightly concerned with issues of safety, should now support
the PPP ownership proposals in the context of the emerging strategies
that Eurocontrol, other state providers and ICAO are developing
to provide effective ATM capacity within Europe and globally into
the next century.
October 1999
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