Examination of Witnesses (Questions 180
- 199)
WEDNESDAY 8 DECEMBER 1999
SIR ROY
MCNULTY
AND MR
BILL SEMPLE
180. If you can make cost savings, why are you
not doing that now?
(Sir Roy McNulty) A lot has been done. NATS and Bill
Semple have done an excellent job, starting from where they were
four or five years ago, but it is quite clear—and we all
agree on this—that there are still further things that we
can do and will do over the next five years.
181. But if there is a debt, and you say £300
million is outstanding, why has not the efficiency, to which you
have referred, which can obviously be introduced on the PPP: why
cannot it be done under the present system with more vigour?
(Sir Roy McNulty) The cost saving opportunities that
I can see today would happen, at least to some extent, under public
sector ownership but some of them require significant investment
and I do not know whether we would get that investment.
Chairman
182. What are you talking about, Sir Roy? You
are not being very specific, are you? The obvious way—the
first thing British Airways did, for example—was to cut
back on large numbers of jobs.
(Sir Roy McNulty) I do not think this is what will
happen in NATS. What I see in NATS, for example, are opportunities
to rationalise the accommodation we have. If you look at the number
of sites that NATS has and the way in which I think that inhibits
the efficiency of the organisation, improvements can be made but
that means spending more money.
Mr O'Brien
183. Will that be at the expense of safety?
(Sir Roy McNulty) Certainly not. It is nothing to
do with safety. It is more in the back-up and administrative areas
where the company is spread over an awful lot of sites.
184. We were given information that because
of the increase in traffic, that the space between the planes
was narrower because the companies wanted to increase more traffic
in and out of our airports. There are so many hours in the day.
How would you see this improvement in the efficiencies if you
are going to close down units?
(Sir Roy McNulty) These are not operational units.
Dealing with the safety aspects and capacity aspects, I would
like Bill Semple to answer that, and I will come back to the accommodation
side in a moment.
(Mr Semple) In terms of safety and in terms of capacity,
I think the concern that we would start reducing jobs and all
the rest of it, does not stand scrutiny at the moment. The only
way we have, in the foreseeable future, of increasing capacity,
is to put more air traffic controllers into the system. There
is no other way to do it, at the moment, and that is the same
for every air traffic service provider across the world. What
is going to happen in the future is that technology is going to
come along, which will take on a lot of the tasks that air traffic
controllers currently do. That is going to happen. That will happen
whether we are in the public sector or in the private sector.
At that time the company will have then to consider the number
of people in it. That is one of the reasons why—
Chairman
185. I am sorry, Mr Semple, but I am not terribly
bright. Did you actually say take on more air traffic controllers?
(Mr Semple) Yes.
186. But at that point you would have to consider
the numbers of people in the company.
(Mr Semple) In ten years' time or so, or perhaps even
less time than that, we will probably have to start bringing on
the big computer systems that will help us to handle the traffic.
This is because there will be so much traffic around then, that
no matter how many air traffic controllers there are, they will
simply not be able to handle that volume of traffic. That is no
slight on the air traffic controllers. We know we have the best
air traffic controllers in the world, but human beings simply
cannot accommodate the amount of work required to deal with that
volume of traffic. We will have to bring in big computerised systems.
They are already available, although not fully tested. We will
have to bring them into operation. At that stage our requirement
for air traffic controllers will diminish. There is no doubt about
that—whether we are in the public sector or the private
sector.
Mr O'Brien
187. Is that part of the programme you are now
involved in, in improving systems?
(Mr Semple) Absolutely. We are involved in that programme
right now. That is what we think will happen. It is one of the
reasons why we are very keen to have PPP so that we can grow the
company. Then, when we are in the situation where technology comes
along, we have the option of doing other things with our staff.
I have been in the situation for the last few years that I have
been in a senior management position, of being in a total cost-cutting
efficiency operation. Where technology has come along, we have
nowhere else to deploy our staff and we have had to let a lot
of them go. That is not a pleasant place to be. I do not enjoy
doing that. I want to be in the position where I have a growing
company, redeploy the staff, and we get into the technology grid.
That is where we are going. It is inevitable we will go there.
We are on our way now. That is one of the reasons why we are very,
very keen to have public-private finance.
188. Are you saying that under the public sector
you are now being denied that kind of investment to improve and
progress the services and the safety of the service?
(Mr Semple) No, not yet, but we have not come for
the investment other than to do the research and development,
which is a reasonably low level of investment. We have been able
to get the funding to do the research and development. Now that
the systems are getting to the stage where they are almost ready
for deployment into the operational area, we will be coming to
Government for very substantial sums of money. Sir Roy has given
you some examples of the sort of money we are looking for. Hundreds
of millions of pounds for each piece of business.
189. When we asked him to break it down he could
not do it.
(Mr Semple) I think we were in the process of actually
doing that when we were diverted slightly. We can certainly break
that down for you.
Chairman
190. Please do not allow yourself to be diverted
by anything. If you have a exact break-down, give it to us now,
please.
(Mr Semple) We have a broad break-down.
191. A broad break-down.
(Mr Semple) Yes, because the individual items run
to a list of hundreds of items. Several hundreds of items. I can
tell you we will have to upgrade the Swanwick hardware and that
will likely cost us £40 million.
192. Swanwick. Well, we have done so well with
the technology at Swanwick I am not surprised you are going to
have to upgrade it.
(Mr Semple) Yes, it is a very good platform, Madam
Chairman, and we will really be able to build up a very good system
and develop a continuing improving system on that, which we cannot
do on the West Drayton platform. We have software developing these
productivity tools, which we are putting in, and it is estimated
at the moment that these will cost us somewhere in the region
of £130 million over the next few years. We have the New
Scottish Centre, which Sir Roy has referred to. We have to do
a whole upgrade of our radar systems and our infrastructure systems,
our communication systems. That will be around £160 million.
Mr Olner
193. Is this part of safety? Are you saying
that it would not be available under the public sector?
(Mr Semple) Yes, but it is not just safety. It is
a case of updating our systems. We are in the situation where
we think it will become more and more difficult in the public
sector for us to get access to that money.
Mr O'Brien
194. For safety purposes?
(Mr Semple) For capacity purposes primarily.
195. It was for safety, if you remember. Are
you saying that this is denied you under the public sector?
(Mr Semple) I am not trying to avoid the question.
I am trying to rationalise what the situation is. We would never
let the traffic situation become unsafe. But if we cannot meet
the capacity demands—and we are talking about traffic doubling
by 2010 or something like that—if we cannot meet the traffic
demands, then the outcome of that will simply be that delays will
escalate exponentially. Because we will not let the system become
unsafe, we will just control the number of aeroplanes in it and
the delays will go up very considerably.
Mr Donohoe
196. The Government is going to retain 49 per
cent. You have said that you are going to have foreign investment.
How long does this 49 per cent stay as the Government's own if
you can see that with foreign investment there is a potential
for conflict?
(Sir Roy McNulty) I do not think I used the words
"foreign investment". What I meant was investment in
business opportunities outside the United Kingdom.
197. So if you set up an air traffic control
in Africa, with 49 per cent of that investment being from this
Government—49 per cent of the company is owned by this Government
and there is some problem—do you think you are not going
to face a situation where there will be a diplomatic fall-out
between the two countries?
(Sir Roy McNulty) I would not expect so. Why should
there be?
198. If you have a major incident above your
air space, and there is a foreign country that part-owns the air
traffic control who is to blame, I think I would have something
to say to the Government who owns 49 per cent.
(Sir Roy McNulty) You are assuming that we would own
the air traffic operations in another country. It may not be ownership
at all. It may be providing systems, providing advice, whatever.
199. You could do that as it stands.
(Sir Roy McNulty) We cannot do that. We cannot invest.
NATS is not allowed to invest for purposes other than what we
are charged to do, which is to operate air traffic controls systems
in the United Kingdom.
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