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| Characteristics of Structure | PPP
| IPOC | NavCanada
| Airways Corp of NZ |
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| Under UK rules, would the entity have access to private capital free from PSBR constraints?
| Yes, because the Government rules would classify the PPP company to the private sector.
| Unlikely, because the shares would be 100 per cent government owned and, in the UK, such a company would normally be classified to the public sector.
| Unlikely. There is no UK equivalent to the Nav Canada legal structure—the nearest equivalent would be a company operating under Royal Charter. In that form it would not meet the requirements for classification to the private sector.
| Unlikely, because the shares are100 per cent government owned and under UK rules such a company would normally be classified to the public sector.
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| Under UK rules, would investment decisions be free from HM Treasury constraints?
| Yes, but with the safeguard that Government directors would participate in the decision making process.
| Not if the IPOC was classified to the public sector. An analogy would be the Post Office model, where all borrowings above a fixed level continue to require Government approval.
| Not if the company was classified to the public sector.
| Not in the UK. The NZ government is prevented by law from guaranteeing or underwriting Airway's obligations in any form. It can therefore raise funds in the commercial market.
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| Does this structure affect safety? | PPP won't change the safety regime, and safety is enhanced by separating service provision from safety regulation.
| Safety would be enhanced by separating service provision from safety regulation. Investment in safety would depend on Government making funds available.
| This structure maintains safety. | This structure maintains safety.
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| Is safety regulation separate from ATC operation?
| Yes. The Government's objective is to ensure that stringent standards of safety regulation are maintained. A government director may have specific responsibility for safety at Board level.
| Yes. | To some extent. Nav Canada is responsible for establishing and regulating its own safety practices. However, Transport Canada establishes and monitors general safety regulations and standards.
| Yes. Safety regulation is the responsibility of the NZ Civil Aviation Authority.
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| Are all the principal stakeholders actively involved?
| Yes. Primarily through the Stakeholders Council, which may be chaired by a Government Director. There is also active involvement through the rights of Government and staff as shareholders, the Government's right to appoint Board members, and the rights of customers in the regulatory consultation process.
| Not directly. There woulde regular discussions on NATS' plans with Government and customers as now. In addition there would
be periodic consultation (every five or ten years) to review and agree the terms of the IPOC's Charter. Negotation of the Charter would be the mechanism for defining the relationship with stakeholders, performance targets and long term plans.
| Yes. However the mechanism for involving stakeholders is indirect and complex, involving a number of layers of control. The organisation is governed by a
15 member Board of Directors, 10 of whom are nominated by stakeholders. In addition there is an advisory Committee elected by "associate members".
| To some extent. Airways Corp are required to consult their airline customers on their plans. The underpinning philosophy is that the organisation will only provide the level of service that customers require, at a price they are prepared to pay.
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| Does Government have "partnership directors" or equivalent?
| Yes. | Not clear.The purpose of establishing the IPOC mechanism is to separate operational control from long term control, thus limiting the Government role to that of a "shareholder". The appointment of Government directors could compromise this objective.
| Yes. | No. While all the shares are held by two Government departments, the organisation is managed by an independent, commercial Board of Directors.
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| Can Government receive a dividend? | Yes, from its 9 per cent holding.
| Yes, depending on whether the IPOC was allowed to make a profit.
| No. The Canadian Government has no financial interest in the company.
| Yes, and it does so annually. |
| Are national and security interests protected?
| Yes, through the Golden share, the Shareholders Agreement, the continued commitment to joint and integrated operations with the MOD, and powers in the Bill to issue directions to the company.
| Yes, as now. | Yes, through continued close liaison between Nav Can and the Canadian Department of National Defence.
| Yes, as a holly owned Government company. |
| Does the entity have freedom to do business overseas?
| Yes, with the incentive to profit from unregulated activities.
| Yes, on a restricted basis and with no profit incentive.
| To a limited extent. With no profit incentive, and no funding raised for this purpose, business activities have been restricted to the provision of training and some flight inspection work.
| Yes, mainly consultancy activities. |
| Does the entity have freedom to invest in projects overseas?
| Yes. | No, because it would be inappropriate to invest public funds in overseas ventures.
| Not unless funding could be raised. | Yes, though it has not done so except on a limited scale.
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| Does the structure provide rapid access to private sector management skills?
| Yes. | No. | No.
| No. |
| Are there strong drivers for efficiency? |
Yes, through economic regulation and the opportunity to improve profits by reducing costs in the regulated business, and through competition in the unregulated areas of the business.
| No, except to the extent that effective performance targets can be established through the process of negotiating the Charter.
| Not strong.
The legislation governing Nav Canada stipulates that the organisation is only permitted to collect revenues to cover its costs, plus prudent reserves. Any surplus is returned to users.
| Not strong. NZ State Owned Enterprises (SOEs) were established as a means of introducing commercial disciplines into state owned organisations.
A number of these SOEs are now being privatised. A decision has yet to be taken on whether to privatise Airways Corp.
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| Is there effective economic regulation? |
Yes, by adopting the standard RPI-X model as applied to the regulated utilities.
| No. Nor is there any precedent for economic regulation of one Government owned body by another Government body.
| No. Nav Canada is self regulating. However, proposals for increases in charges can be appealed to the Canadian Transportation Agency.
| No. While there is no economic regulation, the company is legally bound to operate to private sector standards, including the requirement to achieve a profit target and deliver a dividend stream which delivers shareholder value.
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| Can proceeds be used by Government for other transport purposes?
| Yes. | No. There are no proceeds, though some debt repayment may be possible.
| Yes. The Canadian Government was able to realise a substantial value (C$1.5bn) from the sale of the business to NavCanada.
The purchase was financed by debt, syndicated by a number of banks and by issuing revenue bonds in the Canadian public debt market.
| Annual dividends are paid to the NZ Government. These can be used for any Government purposes. Proceeds will be available if the NZ government decides to privatise.
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| Is this model suitable for other alliances?
| Yes. | No, without a profit incentive.
| No. With the legal bar on profit making there is no incentive to enter into alliances.
| Yes, on a small scale. |
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