In July 2001, an innovative Public Private Partnership (PPP) was signed for National Air Traffic Services Ltd (NATS), the monopoly provider of air traffic control for aircraft flying over the UK. The NATS PPP is interesting in policy terms as other national air traffic control organisations are part of government, except NavCan, a Canadian trust with the power to set its own prices, and Airways New Zealand, a state owned company that receives no government support. The UK Government wanted to reform NATS and ensure that it had access to sufficient funds for capital investment. Following the terrorist attacks of 11 September 2001, air traffic volume fell considerably, particularly across the North Atlantic, which reduced NATS' income and increased uncertainty regarding long-term growth in air traffic. It was difficult for NATS to respond quickly to revenue reductions as the bulk of its costs are fixed and its work force highly specialised. The banks providing NATS' acquisition facility were concerned that NATS would not be able to meet its debt service obligations in the period 2005-2010. Hence the banks stopped NATS from borrowing from a #630 million capital facility they also provided. In these circumstances, NATS had little alternative to applying to its regulator, the CAA, in February 2002 for a real price increase (9% over the period 2003-2005). In March 2003, the CAA determined that a 6% real price reduction over the period was most appropriate in the changed circumstances. Following detailed consideration of all options to strengthen NATS' financial position, a 'Composite Solution' was agreed in March 2003 including BAA and Government investment of #130 million, a 12% uplift in NATS' Regulatory Asset Base, a looser price cap, volume risk sharing with NATS and a regulatory policy statement. For the covering abstract see ITRD E126595.
Samenvatting