Supplementary memorandum by National Air
Traffic Services Ltd (PPP05A)
NATS PRIVATE PUBLIC PARTNERSHIP
At the hearing on 8 December, Sir Roy McNulty
undertook to provide some additional information to the Sub-Committee.
1. NATS FINANCIAL
RESULTS
Figures since 1996 are as follows:
|
| Year to 31 March | Profit £M
| Capital Expenditure £M
| Net Repayment of Loans
|
|
| 1996 | 20.4
| 65.7 | n/a
|
| 1997 | 13.7
| 56.5 | 31.3
|
| 1998 | 14.7
| 42.7 | 26.2
|
| 1999 | 30.9
| 35.7 | 54.2
|
| Total | 79.7
| 200.6 | 111.7
|
|
Notes:
(1) No figures are available for Loan movements in the
year ending 31 March 1996, as NATS was not a separate company
at that stage. However, during that year the CAA had net borrowings
of £19.1 million, almost all of which would have been on
behalf of NATS.
(2) The net repayment of loans totalling £111.7
million in the three years to 31 March 1999 should be seen in
the context of net borrowings by the CAA totalling £240.6
million, almost all on behalf of NATS, in the six years to 31
March 1996.
2. LONG TERM
INVESTMENT PROGRAMME
2.1 A breakdown of the NATS investment programme was
requested at the hearing, including the costs of the moves of
Terminal Control and military operations from West Drayton to
Swanwick.
2.2 NATS memorandum to the Sub-Committee explained that
the business needs about £1 billion over the next 10 years
in a steady and sustained way. This investment is required to
maintain and enhance NATS' safety systems, to provide sufficient
capacity to meet growing traffic demand, and to improve the productivity
and cost effectiveness of the organisation. The core of the programme
is the Two Centre Strategy. The new centres at Swanwick and Prestwick
provide the necessary expansion capability and the technology
platform for future development.
2.3 In the current planning cycle, and as part of the
preparations for PPP, the Long Term Investment Plan is being reviewed
in detail. The latest figures (not finalised) indicate 10 year
total capital costs of some £1.3 billion, including capitalised
manpower costs. The total includes the cost of the New Scottish
Centre, which was formerly a PFI project. The plan also reflects
the fact that traffic forecasts have been revised upwards, and
hence a need for increased air traffic capacity. Major components
of the programme include:
|
| | £m
|
|
| New Scottish Centre | 350
|
| Transfer of Terminal Control operations to Swanwick
| 150 |
| Transfer of military operations to Swanwick
| 40 |
| Hardware upgrade at Swanwick | 40
|
| Development of new computer tools | 140
|
| Radar Upgrade programme | 50
|
| Other infrastructure upgrades | 145
|
| Replacement of the Flight Data processing system
| 150 |
| Non operational IT | 80
|
|
2.4 The balance of the investment programme includes
the cost of completing the Swanwick programme, ongoing programmes
to maintain operations at West Drayton and Prestwick prior to
their closure as operational centres, the research and development
programme, developments in satellite technology and investment
at airports.
3. COMPARISON OF
THE PPP MODEL
WITH OTHER
OPTIONS
Sir Roy undertook to provide a paper for the Sub-Committee
summarising our analysis of PPP in comparison with other options
which have been dismissed—the IPOC model, Nav Canada and
Airways Corporation of New Zealand. This paper is attached as
Appendix A.
Sir Roy thought it would be useful also to let you have some
more detailed information on the moves towards privatisation/corporatisation
being made in various countries. This is attached as Appendix
B.
4. GOLDEN SHARE
Similarly, Sir Roy thought it would be useful to let you
have a summary of the advice we have recently received concerning
a possible golden share in NATS. This is attached as Appendix
C.
5. EUROPEAN COMMISSION/EUROCONTROL
The Sub-Committee should also be aware of the recent European
Commission proposals for "the creation of the single European
sky" and, in case you have not seen it, I enclose a copy
of the communication from the Commission on this topic.
This puts forward some important guidelines which, if adopted,
will create a radically new framework for air traffic management
in Europe:
— making the reform of air traffic management in
Europe an urgent priority;
— establishing collective management of European
airspace in the interests of all its users;
— more effective planning of European airspace capacity;
— development of new air traffic control tools and
procedures;
— separation of regulation from provision of air
traffic services;
— liberalisation of air traffic services, ensuring
that Treaty provisions on competition and the freedom to provide
services are properly applied.
We believe that these initiatives, particularly the last
item, will create an environment in which NATS, in a Public Private
Partnership, can make a major contribution to improving safety
and capacity in European air traffic control.
Andrew Picton
Company Secretary
December 1999
| 
