41. You said in answer to the Chairman, when he asked whether you tested for a downturn in the business, "There has never been a downturn on this scale" and that it was very extensively stress tested and that every scenario that people could think of was worked up. Could I ask you to look at page 38, figure 21, where you will see that, according to the NAO there was a number of scenarios tested by the Airline Group over and above those that had been requested, but a number of historic scenarios were not remodelled, including those three on the right there, the first oil shock, the second oil shock and the Gulf War. Presumably if those are historic scenarios, somebody could have thought of them and yet you said that every scenario that people could think of was worked up.
(Ms Lomax) The question that I think was asked, which is not exactly the same as testing these scenarios, was what sort of shock to airline traffic would cause this deal to fall apart. As I understand the advice given to me when I have asked this question, the answer was such a large shock that it was thought to be quite implausible.
42. I do not think that was the question. What the Chairman asked you was why did you not test for a downturn in business. You said that there had never been a downturn in business on this scale, which I understand, but there have been significant downturns in business, including the ones which showed that, for a few years at least, there was very little growth in air traffic as in the first oil shock and the second oil shock scenarios given here. Clearly, if those had been tested for, it would have given a very different picture of the ability of NATS to retain the chance to invest in the future and to take on more debt, which we now find it cannot take on.
(Ms Lomax) I do not think that is quite right. I think that downside scenarios were tested.
43. Not these.
(Ms Lomax) There was a prolonged period of low growth and individual shock in one year on the same scale as the Gulf War, which I am told we did test for.
44. If you look at the fifth column, "Lower Traffic in Year 6", I understand that it was insisted that they do a certain amount of testing of 3% growth as opposed to 6% growth, or 7% ; I forget. Anyway, it is still growth of a considerable amount, whereas if you look at the scenarios, first oil shock and second oil shock, you get effectively no growth for three or four years. In the first oil shock case, you actually get a downturn and a positive drop in air traffic for the first four years.
(Ms Lomax) These are flights as opposed to the chargeable service units. These are not comparable data for-
45. On the left hand side it says "chargeable service units".
(Ms Lomax) I do not think they can be for the first and second oil shocks because comparable data do not exist before 1983.
46. You appear to be saying that this report is wrong. If it is wrong, you should have said so at the time.
(Ms Lomax) I think it actually says-
47. Could I ask the NAO? (Mr Colman) I am as puzzled as you are. The chart is what it says, chargeable service units, and this report has been agreed in detail with the Department.
(Ms Lomax) I do not want to make a big thing about this because I think there are general points to be made. I am told you did not take account of all our comments.
48. Chairman, this seems to be quite serious. The witness is saying that she claimed that the report was wrong and that this has not been taken into account by the NAO. Therefore, there is still a conflict, apparently, between what the Department and the NAO are saying as to the truth of this Report.
(Ms Lomax) The important point to make is that very large numbers of scenarios were tested. They did include some downside scenarios. The ones that were tested-
49. Before we get back to that, there is a point which I want to investigate further as to what this means. The first thing we have to get at is whether this report is accurate or not. As far as I can understand the NAO, the NAO still thinks it is accurate. Are you saying that you hold that it is not accurate and that you told the NAO this and that, in your view, there is still a difference of opinion between yourselves and the NAO and yet this report has been allowed to go ahead?
(Ms Lomax) I do not want to pursue this.
50. I do want to. It is a very important point.
(Ms Lomax) It may be me who has got this wrong. I would much rather-