UK risks becoming EC ‘whipping boy’

UK air traffic agency NATS and its national regulator reacted swiftly to reports that Brussels has rounded on the business for charging the EU’s highest fees and posting excessive profits.

Under regulations set by the UK’s Civil Aviation Authority, NATS recently posted an 18 per cent net profit margin, while its customers – airlines – say they earned a fraction of that, claiming NATS charges the EU’s highest rates for overflight.

Britain ‘could and should have contributed more’ to cost-cutting, the European Commission said in letter sent last month to the UK Civil Aviation Authority. The letter comes at a time when Brussels has already signalled it plans to crack down on those air traffic control agencies that are not working hard enough to radically improve the efficiency of the region’s airspace.

A NATS spokeswoman said regulated profits are calculated differently from those at ordinary companies and NATS’s fees are increased by pension obligations that many other countries’ agencies don’t bear.

“While price is important, it is equally important to relate it to the service and value that we provide to airlines, passengers, business, the environment and the wider economy,” she said.

Read NATS statement in full here.

A CAA spokesman said the agency balances operational efficiency and NATS’s financing needs, and that NATS’s charges are set to fall. “The CAA, in both its European and UK statutory roles, will continue to monitor NATS’ performance to ensure best value is provided and consumers benefit from the delivery of effective and efficient air navigation services,” it said.

Read the UK CAA statement in full here.

NATS’ revenue for the year to 31 March increased by £88 million to £865 million, while pre-tax profits rose by £89 million to £195 million.

At the time NATS posted the figures, Richard Deakin, chief executive, said: “We are acutely aware of the high cost to our airline customers of delay and flight inefficiency. This explains our focus on continuing to provide the highest standards of safety, environmental and service performance, cost-effectively. We believe this delivers the greatest economic value.

“We are looking to find innovative solutions that add even more value in the future. For example, if we deliver on flight efficiency targets, enabling our customers to save 600,000 tonnes of CO2, we will reduce their fuel bill by some £120 million at today’s prices.

“And increasingly we are seeking to enhance these outcomes by working collaboratively with other air navigation service providers under the European Commission’s Single European Sky programme.”

An interesting aspect of the positive business performance was that it seemed to have persuaded the UK Government to pull the sale of its significant, controlling stake in its national air traffic agency.

Transport Minister Justine Greening persuaded her colleagues to reject any sale of the government’s 49 per cent ownershipstake in NATS.

Some media reports suggested that this was motivated by the ‘risk of the political and financial consequences of handing control of Britain’s skies to Berlin’ in reference to the widely known interest expressed by DFS, Germany’s ANSP, in buying at least some of those shares.

In fact, Greening admitted she was also focused on short-term government revenue considerations, noting that the government currently receives hefty dividends on its NATS shares, as opposed to only a one-time gain from selling them.

The news of the ditched sale disappointed industry observers who believe that consolidation of Europe’s fragmented airspace – which would produce huge efficiency gains – will require not merely the creation of cross-border FABs but the actual merger of ANSPs as the precondition for serious consolidation of en-route centres from the current 63 to a much smaller number.

“A partial merger of two of the biggest ANSPs, DFS and NATS, would be a giant step in that direction,” said Bob Poole of the Reason Foundation. “Instead of just complaining about the high cost of Europe’s fragmented air traffic control, they should take a positive step towards solving the problem.”

Posted in CAAs/ANSPs, News, Single European Sky

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