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


Supplementary memorandum by National Air Traffic Services (NAT 6B)

THE FINANCIAL SITUATION OF NATS

1.  INTRODUCTION

  1.1  The Committee has announced its intention to hold a further hearing on 11 June. This supplementary memorandum provides an update on the three issues which are to be the subject of this hearing namely:

    —  the Civil Aviation Authority's (CAA) consultation document setting out its preliminary conclusions on NATS' application to re-open the Eurocontrol charge control;

    —  the legibility of text on screens at the Swanwick centre; and

    —  the service delivery failure experienced on 17 May.

2.  CAA CONSULTATION DOCUMENT

  2.1  The Committee will recall that NATS assessed the revenue loss from the reduction in traffic following the tragic and unprecedented events of 11 September at £230 million. We therefore applied to the CAA to increase prices by RPI + 4 per cent, +3 per cent and +2 per cent in the remaining years of the current Control Period to repair this shortfall in NATS' income. The Transport Act 2000 provides for a reopening of the price cap in exceptional circumstances and, in NATS' view, the events of 11 September constitute such an exceptional event.

  2.2  The CAA issued a Consultation Document on 21 May setting out its preliminary conclusions on the application. The document notes that NATS is a fundamentally sound business operating within a unique PPP environment, which has performed well in delivering a business plan that aims to close the gap between demand and capacity, while improving NATS' cost-effectiveness. The CAA accepts that NATS faces significantly lower projected demand over 2001-2005 than was projected at the time of the PPP but is "not convinced" that this amounts to a case for re-opening the cap.

  2.3  The CAA document recognises the importance of establishing a sustainable financial structure for NATS at an early date to give NATS a firm platform for expanding capacity, but does not consider it justified that NATS' users should face an increase in charges to secure this objective. Nevertheless, the CAA accepts that if user airlines are sufficiently concerned about the risk of adverse effects on NATS' performance and, consequently, are prepared to pay somewhat higher charges to assist a financial strengthening, the CAA will consider these views. Whilst the CAA's preliminary conclusions are a disappointment to NATS, we see in the consultation document a constructive basis for a solution to NATS' financial difficulties. We are continuing to work closely with the Airline Group and Government shareholders, the banks, the CAA and our customers to resolve the issues.

  2.4  We are developing a composite solution that would involve all parties. For its part, NATS has committed to delivering cost savings in excess of £200 million over the remainder of the first Control Period to 2005. The Committee will be aware from recent press reports that good progress has also been made on the process of attracting new capital into the business, and the Government has indicated that it will be prepared to match an appropriate level of private sector investment. We expect our lenders to make a number of concessions, including some reduction in debt availability fees. A limited price rise is part of this solution.

  2.5.  The consultation process on the CAA document is now in progress and we are urging our customers to support the PPP. Our customers and shareholders see NATS as the pathfinder to the commercialisation of air traffic services throughout Europe. The business is fundamentally sound, and PPP is already achieving the goal of making NATS more business driven, commercially aware and customer focused. Failure to resolve the current difficulties would most likely lead to a change in the current framework, compromising the investment programme and resulting in a return to the former cost-plus financial regime and investment uncertainty. This would not be in the interests of the industry or of the travelling public.

  2.6  In summary, all of NATS' stakeholders are working towards a composite solution to ensure that the company is able to implement its Business Plan, invest in new systems, and continue on its current path towards a more efficient and more commercial service. We remain confident that the steps NATS is taking in conjunction with its stakeholders, including the CAA, will result in a successful outcome.

3.  SCREENS AT SWANWICK

  3.1  As the Committee will be aware, there has been continuing interest in the media about the legibility of the display screens at the Swanwick centre. In recent articles it has been claimed that aircraft have been directed to the wrong airport or wrong height level because of confusion due to the size of the text employed on the displays.

  3.2  These articles are inaccurate and at no time have aircraft been sent to the wrong destination or to the incorrect flight level. They are based on a misrepresentation of reports made locally by NATS staff, as part of the overall programme to encourage open reporting within the company. The fact that these reports have been leaked and then misrepresented in the media is a matter for concern, because the objective of open reporting is to avoid blame and encourage learning and improvement.

  3.3  The method of operation at Swanwick is based on a team of three people to plan and control the movement of aircraft in a sector of airspace—two controllers known as the tactical controller and the planner, plus an assistant. Aircraft are controlled by the tactical controller. The articles were based on reports made either by assistants or planners recording observations on information that was, as part of standard operating procedures, checked and corrected before the aircraft came under the supervision of the tactical controllers.

  3.4  A small number of controllers have reported that the legibility of certain data text sets on the screens of the control displays used by the planners is unclear. This issue does not affect the displays used by the tactical controllers. The Committee will recall that a joint working group, comprising operational controllers, human factor experts, systems experts, health and safety experts and NATS Chief Medical Officer, together with representatives from management, the trade unions and the CAA's Safety Representation Group, was established several months ago to review the need for improvements to the displays in question. Changes to the screen fonts have now been prototyped and the results of initial consultations with staff, including some of those who had expressed concerns, have been most encouraging. A general consensus now needs to be established amongst operational staff that these changes will meet earlier concerns. Subject to that being achieved, the changes would be incorporated in the next main software build scheduled for November or before if possible.

  3.5  NATS has co-operated fully with the Health and Safety Executive throughout this process, and on other recommendations made by the HSE regarding the ergonomics of the workstations. The CAA's Safety Regulation Group has been very clear that safety neither is, nor has been, compromised by this issue.

4.  DELAYS ON 17 MAY

  4.1  The Swanwick Centre suffered a major reduction in capacity on Friday 17 May, the first technical problem to result in significant delays attributable to the new system since it went into operation in January. When we began to open additional airspace sectors for the morning traffic at 6.30 am, controllers found that they were unable to activate the workstations required for these additional sectors. The Centre was thus left in its overnight configuration of only 8 sectors as opposed to 22. To ensure that the limited sector configuration could safely handle traffic we immediately imposed restrictions on traffic flow of 50 per cent and, in some cases, departures were stopped.

  4.2  Following extensive assessments of potential causes, the problem was located to a faulty workstation. This workstation had developed a fault in communicating with adjacent workstations and became overloaded to the point where it could not manage the data associated with opening additional ATC sectors. The other workstations were brought on line successively from 9.00 am and full capacity was restored at 11.30 am. Procedures have now been enhanced to deal with this issue, allowing a workstation to be re-set without impacting on operations.

  4.3  Subsequently, the Central Flow Management Unit (CFMU) computer in Brussels failed at 12.15 pm. This is the system that issues slots and manages updates to flow rates and departure times across much of European airspace. The CFMU system was not restored until 6.00 pm. During this period, under European contingency procedures, flights departed from major airports across Europe at pre-defined intervals (MDIs) but minor airports had no restrictions.

  4.4  This was a disappointing episode for NATS, for its customers and the travelling public and one for which we offer our apologies. Whilst safety was not compromised, and the technical issues were identified, isolated and resolved, the episode has reinforced the urgent need to keep the risk of further disruption to an absolute minimum. In order to achieve this objective we have established a new task force aimed at implementing improved risk and change management processes to mitigate the risk of further disruption. Measures include the tightening of rules on discretionary change, a review of all outstanding problem reports, the introduction of even more rigorous risk analysis procedures and a review of system architecture dependencies.

National Air Traffic Services Ltd

7 June 2002



 
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