Examination of Witnesses (Questions 400-419)
MR DAVID JAMIESON, MR ROY GRIFFINS AND MR IAN MCBRAYNE
TUESDAY 11 JUNE 2002
Mr O'Brien
400. Are you anticipating that British Airports Authority will become a strategic investor in NATS? If so, by how much?
(Mr Jamieson) That would appear likely, yes.
401. If BAA do not invest, where will NATS make up the shortfall in the future?
(Mr Jamieson) If they do not, then they would have to seek another equity partner.
402. Will the Government be involved?
(Mr Jamieson) At the moment the commitment we have made is that we would match any funding that had been raised through the private sector. That is our assurance we have given at the moment.
403. In this discussion of BAA investing in NATS have they approached the Government for concessions in any way?
(Mr Jamieson) No.
404. Would it alter your policy on the airport capacity in the south east?
(Mr Jamieson) No.
405. Has that been raised?
(Mr Jamieson) No.
406. Are NATS or BAA suggesting that BAA's involvement is dependent on the stimulus of a financial contribution from the Government? Have they raised this at all?
(Mr Griffins) I have been slightly closer to these talks than the Minister. On that one, I cannot give a categorical no. I think there is an expectation. I think, indeed, there is an expectation on the part of all the parties involved in putting together this financial solution that each will play a part; that is to say, NATS, the existing shareholders, the new potential shareholders, the regulator (and I saw signs that the regulator recognises that) and the lending banks—the financiers, as he called them.
407. How firm is the consortium, the arrangements, that you refer to? How far advanced are they?
(Mr Griffins) The hope is that in order to meet the timetable set out in the CAA's process there will be a proposition which is on the way to being formed to be put to the CAA when NATS goes back to the CAA in order to meet the timetable on 21 June. The CAA has said that it hopes then to come to a decision by the end of July. I can envisage an iterative process carrying on during the period.
Chairman
408. There are a lot of nods and winks in that, Mr Griffins, are there not?
(Mr Griffins) Yes, but it does have a couple of firm dates in it.
409. It has a couple of firm dates if everybody does what they mildly understand to be the case. The CAA tells us "We have not been involved, we have not been asked for anything special, we do not expect to be reaching that conclusion"; you say to us "I am very clear, all the parties concerned must have a say"; we say to you "Have any concessions been asked for?"; you say "No". You then say "Nevertheless, of course, the package put together will have to be looked at with all of the parties contributing something". I may be naive but it seems to me there is a little tiny gap here and there opening up. Am I wrong, Mr Griffins? I can deal with Mr Jamieson later.
(Mr Griffins) I do not think there is a gap appearing, Madam Chairman.
Andrew Bennett
410. It is wide open!
(Mr Griffins) It was wide open and what we are trying to do is bridge the gap, and I think when the solution is reached—and I believe there will be a solution reached—the gap will have been closed.
Chairman
411. When a solution is reached, of course, but if there is not a solution reached then it will not be closed. The reality is, are you assuring the Committee that there is now a firm timetable, that everybody knows the part they have to play and they are already prepared to come up with something in order to make that formula work?
(Mr Griffins) I cannot give that assurance on the part of organisations for which I am not responsible. However, I am sitting here with my Minister and I know the Government is prepared to do that.
412. So the fact that some of those organisations do not seem to fully understand the situation is because nothing has been decided?
(Mr Griffins) I believe each of those organisations that I mentioned is fully aware of the part that it has to play and I think the ones you have heard, even so far today, have demonstrated that they understand it.
Mr O'Brien
413. I come back to the original question: in view of the situation as you outline—the doubt, the gaps and everything else—if BAA decides not to fund where will the shortfall be made up? Will it be the Government?
(Mr Jamieson) Perhaps I inadequately expressed my answer a moment ago. We would have to face that situation if it arose, but at the moment there are negotiations that are on-going and if those negotiations are successful then the Government will look to maintain its shareholding of 49 per cent, but that situation has not arisen yet. At the moment we do not anticipate the whole of that amount being provided by Government.
Mr Donohoe
414. When NATS was brought into being as its present form, we were told that part of the selling of it was that you would be able to sell this system abroad. How confident are you, as a Government, that that is likely?
(Mr Jamieson) I think what we have seen of the operation of NATS, both before it was in the PPP and after, is that it is highly successful at doing its job and—dare I say—I think it is, if not the best in the world, it reflects some of the best practice that there would be in the world.
415. As a fairly major shareholder, how much have you estimated to build into its future over the next ten years is going to be on the basis of investments going into foreign countries?
(Mr Jamieson) I do not think that has been part of our consideration.
416. Why is it that NATS is amongst the highest chargers in Europe?
(Mr Jamieson) That is a very good question. Previously it was in the state sector and it ran a high-quality service but some would argue that perhaps it was inefficient. What we have seen since the PPP was set up is that they have had to find cost-savings, there are greater efficiencies now with the systems and equipment they are using and we have moved from being the highest chargers in Europe now down to about the third-highest in Europe. That is partly because other European countries, since September 11, have had to put all the extra costs that they have incurred on to the users, whereas in real terms NATS charges are actually still falling. There are very few other European countries—and certainly not any major countries—where that is in fact the case.
417. What approaches, if any, have you had from SERCO?
(Mr Jamieson) You mean as a Government? I am not aware of any approaches.
418. Do you expect to have any approaches from SERCO, given the situation is now very much in the balance? I put this as a question earlier to NATS. When the original bid was made they were the second-highest bidder.
(Mr Jamieson) I could not anticipate whether or not SERCO would be making any approaches to us.
Chairman
419. I think we want to move on from that. However, I would just say that you do keep referring to 11 September as being the point that created so many of NATS' difficulties, but the evidence shows that they were in financial difficulties before that. As a matter of courtesy I should inform you that we were told that many of the sort of economies that you have just been lauding under the Public Private Partnership have not yet been put into operation. I hope I do not misinterpret what I was told. Therefore, it seems a little difficult to understand how the points that you have raised in relation to their finances actually operate.
(Mr Jamieson) What has happened, of course, since September 11 is the income that NATS gets, particularly from the over-flights, has dropped on average in the last eight to nine months in the region of about 9 per cent over the previous year.
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