1. The Department rejected the option of a not for profit corporation on the grounds that such a body would be less efficient and its expenditure would be classified to the public sector. Its reasons look even weaker now than they did then. There is growing evidence of the successful use of a not for profit model for Canada's air traffic control system. And in 2002 the Office of National Statistics classified the not for profit Network Rail to the private sector. Departments should evaluate all options thoroughly, and base their conclusions on objective evidence.
2. NATS' prices are capped through the RPI-X model developed for relatively predictable domestic utilities like gas and water supply. Only belatedly are NATS' price controls being modified to reflect the greater risks from exposure to volatility in international air traffic. PPPs and privatisations should not just be based on standard approaches, but should be tailored to reflect the particular characteristics of the business.
3. The Department accepted that NATS looked inherently riskier than a utility like water, but how risky depended on the Regulator, and was difficult to determine in the absence of clearly stated regulatory policy which was only now being agreed. We agree with this view from the Department, which is however hard to reconcile with its assumption, when testing NATS' financial robustness, that no financial risk for NATS would arise from the behaviour of the Regulator.