Memorandum by Ryanair (NAT 9)
NATS REVIEW
I understand the Committee is currently undertaking
a review of NATS. As a major user of UK airspace (Ryanair is the
second largest carrier to and from the UK, behind only BA) and
a non-member of the group of airlines with an interest in NATS,
we would like to take this opportunity to express our concerns
regarding the serious decline in the service levels of NATS and
its impact on our customers. In addition, we are opposed to any
increase in NATS's already high charges.
So far this year, there have been three collapses
of the NATS system in as many months, the latest occurring on
Friday, 17 May 2002. These disruptions of service have led to
tens of thousands of passengers having their flights cancelled
or severely delayed. As a direct result of the NATS failure on
17 May last, more than 7,500 of our passengers had their flights
cancelled and approximately 25,000 passengers had their flights
delayed between one and four hours. All airlines were forced to
refund passengers for cancelled flights due to the sheer incompetence
of NATS. Ryanair has had to refund over £250,000 to its passengers
to date.
Despite these unacceptable levels of service,
NATS has requested the CAA to allow them to increase their
charges, which are already among the highest in Europe. NATS (and
its airline shareholders) is using the fall off in traffic due
to 11 September last as a justification for increasing their en
route charges by 25 per cent. The CAA has indicated in its recent
consultation paper that it is opposed to any increase in the en
route charges, stating that this fall off in demand is not a justification
for re-opening the cap as volume sensitivities were taken into
account when arriving at the cap. The CAA also pointed out that
the Government had allowed additional "headroom" of
£79 million over and above what the CAA recommended as the
cap on en route charges. The CAA recognises that NATS is a "high
charge and high cost provider by European standards" and
that accepting NATS' application would "dilute the incentive
properties of the price cap framework".
Ryanair agrees with the CAA's findings in this
respect. However, the incentive properties of the cap have already
been diluted by the UK Government's granting of an additional
£79 million under the allowable cap and this has resulted
in the current abysmal level of services and even higher charges
proposed by NATS. In addition, Ryanair is concerned that the CAA
is pointing out that NATS has scope to increase its non-regulated
terminal navigation charges by reallocating costs from overflying
to terminal air traffic control. This would effectively move costs
away from the regulated cost base but leave charges at the current
levels thereby allowing NATS even greater "headroom".
This situation is unacceptable and will lead to higher charges,
and therefore higher airfares to consumers, despite the abject
service levels being provided by NATS to its users.
Ryanair therefore urges the Committee to deny
any price increase to NATS, either on regulated or non-regulated
charges, and to support a compensation mechanism that would make
NATS accountable directly to passengers for long delays and cancellations
caused by their continuing inefficiency.
Ryanair would be available to meet with the
Committee at your convenience to answer any questions you may
have.
Jim Callaghan
Head of Regulatory Affairs
30 May 2002
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