Memorandum by British Airways (NATS 05)
NATIONAL AIR TRAFFIC SERVICES (NATS)
1. The Transport Sub-committee of the Environment,
Transport and Regional Affairs Committee is undertaking an inquiry
into National Air Traffic Services, including developments at
both Swanwick and at Prestwick and the failure of systems at West
Drayton on 17 June. BA is pleased to be given an opportunity to
provide evidence on these matters. We begin with a discussion
of the nature of the ATC business and its impact on BA and then
address the three areas identified by the Committee for its inquiry.
NATS AS A
2. NATS is a sizeable business, with annual
revenues of £568 million, a return on capital of 8.4 per
cent and 5,500 staff. Although NATS is still in public ownership,
it has been operating as a commercial undertaking at least since
1996, when it was made a limited company and run as an autonomous
subsidiary of the CAA. The CAA's involvement in NATS is primarily
that of safety regulator. NATS also works within formal CAA Directions
and an operating agreement with the SoS for Defence, both dating
from 1996. NATS presents itself as a business, with its own independently
audited annual report and Board of Directors.
3. BA is NATS' largest customer, contributing
£102 million in revenues in the last financial year. So far
as BA is concerned, NATS is a major supplier of a vital service.
We pay a full commercial rate for the service and we expect to
receive a safe and efficient service in return. Currently, however,
there is no contract between NATS and the airlines and no system
of economic regulation.
4. NATS' service is of a high quality in
two areas: their commitment to safety and their ability to manage
the complex and densely used airspace over the UK, especially
the London terminal area. We have a very high regard for the professionalism
of their staff, who we consider to be amongst the best in the
5. In the Eurocontrol Performance Review
Commission's annual report on the performance of European ATC,
NATS emerged as having the highest unit charges
of the 26 countries analysed, with rates 65 per cent above the
European average. Some of this premium is accounted for by five
variables identified as the prime cost drivers. When allowances
have been made for the effects of these variables, NATS' charges
are still 16 per cent above the European average.
6. Delays remain a serious concern because
of the costs and inefficiency they impose on airlines and passengers
alike. According to NATS' figures, the percentage of flights delayed
by NATS in the year 1999-2000 was 6.9 per cent and the average
delay per delayed flight was 17.1 minutes, a significant improvement
over the previous year. Applying this to the 1,943,000 flights
in UK airspace, this equates to a total delay of 38,209 aircraft
hours over the year, and, assuming a rough average of 100 passengers/flight,
a delay of 436 passenger delay years.
7. It is essential that last year's improvement
in delays is sustained and improved. BA is concerned that NATS
is prepared to allow delays to worsen over the next four years.
They have planned for 4 per cent capacity growth each year until
2002, but movements are currently increasing at a faster rate.
Last year, movements increased by 6 per cent and the figure for
January-July 2000 is 5.4 per cent. NATS' own high level forecasts
show movements growth of 5.5 per cent a year up to 2010. It is
clear to us that faster capacity growth is needed.
8. It is also important that NATS comes
up with a robust plan for dealing with expected and unexpected
manpower shortages as soon as possible. Over the past few months,
staff shortages have caused several significant episodes of delay
and this problem appears to be increasing. Contingency arrangements
are also needed to address potential staff shortages especially
over the period of NERC training and handover.
9. In their proposed "Service and Investment
Plan" (published in April 2000), NATS have proposed targets
for flight delays attributable to NATS in UK airspace. These are
10 per cent for the percentage of flights delayed and an average
of 15 minutes per delayed flight, or an average of 1.5 minutes
for every flight operated. The figure of 1.5 minutes represents
a substantial deterioration over current performance, where the
delays average 1.19 minutes for all flights. Eurocontrol recommend
that the average flight delay should not exceed 1.1 minute per
flight centre in order to respect the current 3.5 minute/flight
target across the Eurocontrol area (each aircraft flies over an
average of 3.1 centres per trip). We do not wish to see a deterioration
over current delay performance and we expect to see a significant
improvement once NERC is implemented.
10. BA supports the Government's proposals
for a public private partnership of NATS with an accompanying
system of independent economic and safety regulation. We have
responded to the initiative by joining with seven other UK airlines
to form the Airline Group to bid to run NATS. The Airline Group
is one of four consortia who have submitted formal bids. We are
not at liberty to provide further details of our bid at present.
17 JUNE: SYSTEMS FAILURE AT WEST DRAYTON
11. The systems failure on 17 June caused
unprecedented disruption of services which was very damaging to
British Airways and its passengers. We have been told by NATS
that the cause of the problem was the failure of the FDPS flight
data processing system, caused by routine software revisions made
on 15 June. It appears that there were warnings of problems the
day before. We do not understand why it took NATS as long as it
did on 17 June to recover their software to the previous version.
12. NATS have acknowledged that the failure
"should not have happened" and that: "It is no
excuse that this has never happened before." An independent
review of the events leading to the failure has been commissioned,
but we have not yet seen the results.
13. NATS appears to have a rudimentary approach
to business continuity, relying only on hardware redundancy and
fall back to manual systems with dramatically reduced capacity.
They accept that there were communication difficulties and this
made it more difficult to respond effectively to the crisis and
to contain its effect on airspace users. NATS are now taking part
in a working group with British Airways, Heathrow Airport Ltd
and others to review NATS' ability to respond in a crisis and
to identify how some of the difficulties could be overcome through
better understanding and coordination.
14. The main lesson to be learned from the
crisis is that NATS' procedures for business continuity are inadequate
and need urgent and extensive improvement. Falling back on manual
systems is no longer an adequate response. NATS' reliance on computer
systems is increasing and the risk of failure needs to be positively
managed along with other business risks. It is not clear how NATS'
plans for a two centre strategy will provide future contingency
for business recovery in the event of hardware or software failure,
or loss of a building.
15. All companies listed on the London Stock
Exchange are required to comply with the Combined Code of the
Committee on Corporate Governance. This includes a report on internal
control referred to as the Turnbull Report, published in September
This guidance is provided as good governance practice in the area
of managing business risk. Among the risks listed in the report,
failure of a major change initiative, skills shortage and business
continuity are all included as areas to be considered.
16. NATS is not obliged to comply with the
Turnbull Report because the Government has decided against selling
NATS through a Stock Exchange floatation. Nonetheless, we believe
that Turnbull provides a good framework for NATS, whether or not
it is obliged to implement it. It would be illogical if NATS did
not comply simply because of the mechanics of the sale process.
17. British Airways has experience of business
continuity, which we manage as part of our emergency planning
function. We have offered to assist NATS wherever we can. The
main elements of BA's programme are set out in the Annex.
18. We think NATS should address the following
Manual fall-back is no longer sufficient
because the capacity available is insufficient to continue the
operation at acceptable levels;
The scope for creating additional
capacity by making arrangements with the Military and/or neighbouring
airspace providers could be examined;
Processes for quality control of
software upgrades is needed and very fast recovery procedures
for software and data in the event of a failure;
Clearly defined procedures need to
be drawn up within NATS for decision making in the event of a
crisis, separate from the normal operational business processes,
so that exceptional matters can be addressed with minimum disruption
to operational staff;
Decision making in a crisis needs
to be fully coordinated with NATS' close business partnersincluding
NATS' own airport control towers as well as airports, major airlines
Procedures should be agreed both
for prioritising flights in the event of a severe constraint and
methods of returning operations to normal once capacity of the
system is restored;
External bodies need to be able to
communicate freely with NATS and to be given accurate information
about the state of the crisis, decisions taken by NATS and the
likely prognosis, without compromising NATS' ability to respond
to the crisisthis is likely to require a dedicated information
centre, closely coordinated with the decision making team;
NATS needs to agree with its customers
the cost of setting up these systems against the benefits of reduced
risk and ability to operate in a crisis; and
Robust and well rehearsed procedures
for business continuity need to be introduced as soon as possible
and to be established and tested well before the implementation
of the New En-Route Centre (NERC) in January 2002.
19. In concluding our comments on this issue,
we believe that if NATS had had better management processes for
system upgrades and business continuity, the effect of the failure
on 17 June would have been much less severe and might even have
been avoided altogether. We have no complaint with the operational
staff who responded as well as they could in difficult circumstances.
NATS have declined to compensate our losses but they have agreed
to address the subject of business continuity. In particular,
they have recently agreed that a national approach is needed and
they have agreed to work with BATA to achieve this. British Airways
endorses the need for an effective national business continuity
programme and we would like to see this treated as a very high
20. British Airways has supported a two
centre strategy provided that any particular proposal can be justified
on the basis of a cost/benefit analysis. We are disappointed that
a contract has been signed without users being given the opportunity
to review the business case.
21. The costs of the proposed NSC are extremely
high and we have seen no evidence that these are justified by
benefits of increased capacity or reduced delays. We have not
seen an analysis which demonstrates the timescales over which
increased capacity is needed in Scotland, nor do we know the extent
to which the NSC will provide business continuity for the NERC
centre. We think that the consultative mechanisms employed by
NATS are inadequate for addressing these issues and we are in
discussion with them to find practical ways of improving this.
22. NATS' proposed investment plan, with
the NSC as a major element, is described by NATS as "high
risk" (Table 1.1 of the Service & Investment Plan.) It
is difficult for users to have confidence in this approach, especially
before NERC has been implemented successfully.
23. We supported the CAA's recommendation
that assets in the course of construction are not remunerated,
since this weakens the incentives to implement major projects
24. We do not know what plans NATS have
to address the gap left by the failure of the FDPS2 project earlier
NERC THE NEW
25. We cannot comment on the state of the
project. As users, we are concerned that the implementation date
of January 2002 should be met. As customers, we have been paying
the depreciation costs for some time and would view with deep
concern any further delay or increase in costs.
26. the Service and Investment Plan states
in 1.5. 9-10 that the NERC system already needs to be upgraded,
since parts of the system are effectively obsolete.
27. We have asked the CAA to incorporate
service quality in its system of economic regulation. This is
necessary in the period before and after NERC becomes operational.
28. NATS have told us they will have difficulty
in staffing their operation at the current centre because of NERC
training requirements coinciding with expected manpower shortages.
There is little that airlines can do if capacity of UK airspace
is reduced, even if warning is given. It is essential that NATS
makes alternative contingency arrangements to cope with operational
demand without compromising safety or increasing delays.
1 PRR3 published in May 2000 and available from the
internet at www.eurocontrol.be/dgs/prc Back
This relates to the en-route charges, expressed as cost per kilometre. Back
A "Boardroom briefing" on implementing Turnbull is
available on the Institute of Chartered Accountants internet site: