Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by Ryanair (NAT 9)


  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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