NATS faces profit drop from industry challenges

UK air traffic control business NATS will need to achieve a 21 per cent reduction in charges by 2019 under new price-cutting targets set by Brussels.

Recently published results for the year ended 31 March showed that more than 240 million passengers flew through the UK and North Atlantic airspace over the 12 month period.

The business will however soon face a number of challenges including meeting significant price reduction targets set by the European Commission as part of a second phase of Single European Sky price-cutting objectives.

That, combined with an increasingly competitive UK airport market and other cost pressures such as a higher pension accounting cost and depreciation charges, will mean NATS will generate a much lower group pre-tax profit in 2016.

Even so, Martin Rolfe, NATS chief executive, remains confident that the business can tackle future challenges effectively.

“We are pleased that the European Commission confirmed that our plan for the regulated business for the second reference period ( 2015-2019) met its targets. Over this period, when we expect traffic to continue to grow, our plan is to deliver a 21 per cent reduction in prices by 2019 while retaining the excellent safety and service standards that our customers rely on.

Throughout the twelve-month period, the air navigation service provider saw good growth within the UK aviation sector with air traffic volumes increasing compared with the previous year, reflecting improvements in the economy.

Rolfe said: “Our profit before tax was £200.3m, which was £42.8m higher than the previous year. Our underlying performance remained strong and our results reflected far lower exceptional charges for redundancy and goodwill impairment.”

The business pointed out that while the overwhelming majority of flights through UK airspace experienced no delay due to NATS, it had not ‘lost sight’ of the technical failure at Swanwick in December 2014.

“On behalf of NATS, I apologise again for the inconvenience caused to passengers and our customers. We are pleased that the independent inquiry report acknowledged that safety was not compromised at any time and it recognised the quality and timeliness of NATS’ response.  We will be implementing the majority of the enquiry’s recommendations.”

Rolfe also highlighted the winning of the contract through its Aquila joint venture, with partner Thales to deliver Project Marshall for the UK Ministry of Defence last year. “This contract will deliver a genuine transformation of the military’s air traffic management and will help its cost efficiency,” said Rolfe.

Financial year ended 31 March 2015 2014
Financial highlights:    
Revenue – £m

Operating profit before exceptional items1 – £m

Operating profit – £m

Profit before tax – £m

Capital expenditure – £m

Net debt2 – £m

Gearing3 (%)

Dividends4 – £m

922.4

252.8

226.6

200.3

153.5

378.7

53.4%

77.0

917.6

240.3

167.5

157.5

129.7

407.9

54.0%

62.0

Operational highlights:    
Flights handled 2,216,000 2,162,000
Safety: risk-bearing Airprox5 (attributable to NATS) 1 1
Delay seconds per flight (attributable to NATS) 2.4 5.5
Cumulative % reduction in enabled CO2 savings (average per flight against a 2006 baseline and at 31 December) 4.3% 2.2%

1 Operating profit before the cost of redundancy and goodwill impairment

2 Excludes derivative financial instruments

3 Ratio of the net debt to regulatory assets of the economically regulated business, NATS (En Route) plc

4 Paid in financial year.  In May 2015 the company declared an interim dividend for the year ending 31 March 2016 of £54.4m which was paid to shareholders in June 2015.

5 An Airprox is a situation in which, in the opinion of a pilot or a controller, the distance between aircraft as well as their relative positions and speed have been such that the safety of the aircraft involved was or may have been compromised.

 

Posted in CAAs/ANSPs, Corporate, Military ATC, News, Single European Sky

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