Memorandum submitted by National Air Traffic
1.1 National Air Traffic Services Ltd (NATS)
welcomes this inquiry by the Transport Committee into the remit
and work of the Civil Aviation Authority (CAA).
1.2 As the UK's leading provider of air
traffic management services NATS, in common with the rest of the
aviation industry, works on a daily basis with the Safety Regulation
Group (SRG) and the Directorate of Airspace Policy (DAP) on matters
pertaining to policy and procedures for air traffic control and
airspace management in UK airspace.
1.3 As the monopoly provider of en-route
air traffic services under licence established by the Secretary
of State, and regulated by the CAA, NATS also maintains a constructive
working relationship with the Economic Regulation Group (ERG)
which sets the charging framework within which NATS operates.
1.4 From the early 1970s to 1996 NATS was
managed as a joint CAA/MoD activity. The civil side of NATS was
established as a Companies Act company in 1996, following which
it was set up as a Public Private Partnership in 2001, thereby
creating a logical separation of provider from regulator to foster
a more transparent and customer-focused organisation.
1.5 Today NATS is owned 49% by the Government,
42% by The Airline Group (a consortium of UK airlines including
British Airways, bmi British Midland, Virgin, My Travel, Monarch,
Britannia and easyjet), 4% by BAA and 5% by its staff. The company
continues to provide its services on a joint and integrated basis
with the MoD, through a contract mechanism.
1.6 NATS has a productive relationship with
the CAA in terms of the day-to-day conduct of business. It provides
effective challenge on safety performance and safety management,
and on other regulatory matters. NATS sees the CAA's major challenge,
moving forward, as being to ensure it has a clear and strong strategic
direction to help guide the development of future regulation under
the emerging Single European Sky (SES) initiative, and to ensure
it plays a leading role in promoting the interests of UK plc.
1.7 In answer to the Committee's specific
questions we offer the following observations, noting that we
do not offer comment on all aspects of the CAA in respect of all
2. REMIT, STRUCTURE,
2.1 REMIT: The CAA's current remit from
the Government places upon it and in particular upon the DAP,
a difficult balancing act in representing the interests of a wide
range of general and commercial aviation bodies and the Ministry
of Defence (MoD). In NATS' view the CAA achieves fair balance;
the DAP has been particularly successful in supporting the joint
and integrated relationship between NATS and the MoD by maintaining
equitable arrangements for the allocation of airspace in the UK.
Overall, the result is a UK air traffic control service which
safely accommodates greater volumes of traffic, with higher levels
of efficiency, than anywhere else in Europe.
2.2 STRUCTURE: In NATS' view, the CAA's
high level structure is effective. In governance terms, NATS believes
there is considerable benefit in a unitary regulator able to weigh
and balance the competing considerations of safety, economic and
airspace regulation under a unitary Board.
2.3 Within the DAP we believe the balance
between MoD representation and civil representation requires critical
appraisal. Whilst NATS appreciates the difficulty of balancing
all issues it has on certain occasions felt the MoD perspective
has been emphasised a little too strongly.
2.4 POWERS: NATS believes the CAA's powers,
as expressed through the Civil Aviation Act, Transport Act and
the Air Navigation Order are sufficient and fit for purpose.
2.5 The CAA's powers are generally well
applied, especially in respect of urgent situations. NATS would
encourage an increasingly proactive approach to setting policy
objectives and providing early advice on emerging issues. For
instance, the industry is still awaiting guidelines expected in
early 2005 on windfarms and their effect on aviation.
CAA IN RELATION
3.1 Notwithstanding our comments above,
NATS believes the CAA performs well.
3.2 SAFETY REGULATION: SRG provides thorough
oversight of NATS' safety performance and safety management processes,
although this can be resource-intensive for both organisations.
As NATS continues to improve its safety management processes,
we expect that there will be opportunities to reduce the regulatory
process to mutual advantage (for instance, it may be possible
to reduce SRG's involvement in controller training and validation).
We would encourage SRG to continue to develop a regulatory regime
proportionate to risk, so that their resources can be applied
most effectively. Overall, however, NATS believes that SRG continues
to be the most effective safety regulator in Europe and applies
standards which are generally accepted as being the highest in
3.3 ECONOMIC REGULATION: The CAA monitors
NATS' compliance with its licence conditions and reviews the charge
control for the next control period with a view to resetting the
price-caps for the NERL en-route and oceanic services. A review
has just been completed and it is expected that new price-caps
will be in place for the start of the new control period on 1
January 2006. NATS' view is that the CAA has carried out its review
in a professional manner with full cognisance of all stakeholders.
NATS believes, however, that the proposed price caps are tough
and reflect the wider industry's disproportionate attention to
transparency on details of NATS' cost and efficiency which are
not available readily from other European ANSPs.
3.4 NATS also works with the ERG on economic
policy and in particular the advice it gives on charging for air
navigation services. The CAA acts as the principal adviser to
the DFT, playing a key role:
UK Panel Member on the ICAO Air Navigation
Services Economics Panel (ANSEP).
Key adviser to the DFT on SES issues.
Adviser to the EAPC and the SES Stakeholder
Forum on economic and charging issues.
3.5 NATS has worked closely with the CAA
in these areas and appreciates not only the high standard of technical
ability of the CAA staff involved but also their willingness to
listen to and, where appropriate, take into account NATS' views.
We believe this has helped produce a strong UK position in both
ICAO and in Europe.
4.1 NATS believes the CAA could be more
proactive if the regulatory framework was reviewed to provide
more flexibility. This applies to each area of the regulation
by the CAA and although not comprehensive some supporting detail
is included below.
4.2 AIRSPACE POLICY: DAP owns the processes
used by the sponsors (such as NATS) of changes to controlled airspace
dimensions or air routes. It also determines policy on issues
such as the design and application of future RNav (area navigation)
applications and approval of RNav Initial Approach Procedures.
Progress on these, and determination on new developments, such
as enhanced RNav, can at times lag behind the operational need
to implement them. There must be scope to improve these processes
to deliver enhanced safety, support specific environmental objectives,
increase the efficiency of UK airspace and reduce delays which
result from demand pressures on the current airspace and ATC infrastructure.
For instance, NATS has been alerted to intended changes in the
process for Airspace Change Proposals (ACPs), but has not yet
been consulted in shaping these changes despite being the main
sponsor bringing forward such requests.
4.3 SAFETY REGULATION: NATS supports SRG's
intention to move away from prescriptive regulation towards more
objective based regulation (ie stating what needs to be achieved,
rather than prescribing a solution, as in the case of ACPs). This
is essential as air traffic service providers are better placed
to decide on practicable solutions. This also avoids the problem
of blurring the ownership of operational accountability, which
properly lies with the service provider.
4.4 ECONOMIC REGULATON: NATS believes that
the CAA's regulatory consultation in general, and the NATS price
review specifically, is transparent and accountable. However,
it is a long, complex, time-consuming and costly process. Most
customers do not have the time or resource to engage in such protracted
consultation and NATS would therefore like to see a shorter, simpler
CAA IN THE
5.1 NATS believes the CAA is a professional
organisation with capable people in key positions who work extremely
hard to accommodate many different customers with widely differing
5.2 The CAA's expert teams have great respect
for their colleagues across the industry and we appreciate their
consultative methods of working. For instance, NATS' recently
proposed structure for enhanced environmental assessment and consultation
in respect of airspace development has been well supported and
developed into a joint approach, though it is true to say that
on some occasions NATS had hoped for more precise guidance on
5.3 The CAA could improve co-ordination
on sensitive policy issues. For instance, the DFT will on occasions
provide apparently conflicting policy guidance (eg environmental
and capacity advice on airspace configuration) which means the
CAA is then required to interpret Government intentions into a
policy framework. The subtleties of this can be challenging to
respond to, and interact with.
5.4 However, NATS also believes the CAA
needs to continue to review its own charging regime, and its ability
to put the right resources in place to discharge its duties.
5.5 NATS currently pays a single charge
for safety regulation of en-route air traffic services. Without
any breakdown of the CAA's costs it is difficult for NATS to assess
whether it is receiving value for money or whether resource is
being focused effectively.
5.6 Notwithstanding the fact that consultation
on the appropriateness of NERL's licence will be taking place
next year, NATS believes the licence as it stands to be onerous
and costly to administer. For a number of licence conditions,
we believe the cost of compliance more than outweighs the benefits.
5.7 Appropriate cost/efficiency benchmarks
are not readily available, but the regulatory charges reported
for other European states appear to be lower than in the UK. We
note that the Government sets the CAA a target rate of return
of 6% on capital employed. This implies a risk premium of 3.5%,
which is very high for an organisation that bears little or no
5.8 NATS believes there must be scope to
reduce costs (in the same way as NATS is required to cut costs
under the terms of the regulatory framework), and increase transparency.
Given that there is no regulation for the CAA, NATS would support
a regular independent review of its charges to provide a check
on efficiency and effectiveness.
5.9 The extension of the CAA's regulatory
role as required by SES legislation has the potential to stretch
the resources of the organisation. It is therefore important that
the CAA continuously reviews allocation of resources to ensure
that they are deployed efficiently and effectively.
5.10 One of the keys to effective regulation
is consistency of message from within the CAA. NATS understands
the spectrum of priorities across ERG, SRG and DAP and would support
even greater cross-checking and alignment, through the unitary
Board mechanism. This is especially important in areas relevant
to safety and our ability to deliver an effective service.
6. EFFECT OF
OF THE CAA
6.1 The CAA has recently taken on the role
of National Supervisory Authority for the UK; under the SES Regulations
each EU member state is establishing a NSA to assess and approve
all ANSP proposals for SES work. Although the CAA is still in
the early stages of discharging this function there is a lack
of clarity on how it will work in practice. NATS is deeply involved
in SES work under the SESAME initiative and requires a structure
which clearly identifies NSA responsibilities and their relation
to safety regulation and other CAA functions.
6.2 Above all, the role of NSA gives the
CAA an opportunity to shape the direction of European policy to
UK standards. This will require focus, leadership, resource and
commitment to drive through, and NATS encourages the DFT to continue
to support the CAA's ability to maximise this opportunity.
6.3 SAFETY REGULATION: The Single European
Sky is currently transforming the ANSP industry, particularly
with the increasing influence of the European Air Safety Agency
(EASA); this is a significant challenge for the CAA to ensure
it remains at the forefront of EASA's development to help develop
a framework for safety regulation across Europe to ensure the
highest standards whilst avoiding duplication and over-regulation.
NATS will continue to offer the CAA its full support in moving
6.4 Whilst NATS believes the SRG is the
most rigorous and effective safety regulator in Europe, it would
like the CAA to lobby for other European states develop a similarly
rigorous regulatory framework to ensure that there is a level
playing field across Europe and, even more importantly, that standards
are levelled up rather than down. Until there is consistency of
standards across Europe, NATS will continue to bear a higher cost
of compliance than other European ANSPs.
6.5 ECONOMIC REGULATION: The regulatory
regime in the UK is not entirely consistent with emerging SES
regulations, which could risk putting the UK and NATS at a disadvantage.
The current debate on airports charging is an important example
of the DFT, CAA and NATS working together to ensure a combined
UK voice is presented to the EC.
7.1 The CAA demonstrates a high level of
competence in working with NATS and the DFT to further the interests
of UK aviation. NATS welcomes the CAA's inclusion of expertise
from elsewhere in the industry.
7.2 The ERG has been fair in monitoring
compliance with the NERL Licence and has taken a tough line in
setting NERL's price-caps. The ERG demonstrates awareness of the
principles of good regulation, as defined by the Better Regulation
Task Force (transparent, accountable, proportionate, consistent
and targeted). The CAA's charging mechanisms need to be more transparent
and subject to independent, periodic review to ensure that customers
including NATS can be sure they are receiving value for money.
7.3 The overriding priority for the CAA
going forward must be its role in the development of the Single
European Sky and ensuring it has sufficient influence to ensure
that UK standards, both for safety and for the cost of regulation,
are those which set the benchmark for the Single European Sky.
17 November 2005