2.5 Since the 1960s, NATS and the Ministry of Defence (the Ministry) have provided what is known as a "joint and integrated service". NATS is actually responsible for the control of civilian aircraft throughout UK airspace, but in practice some of its responsibilities are carried out by military controllers. NATS provides services within the main airways along which the vast majority of commercial traffic flies, and also the areas around major civilian airports where aircraft will be climbing, descending or holding in "stacks" waiting to land. The Ministry offers a service to both military and civil air traffic in the airspace outside these areas, and at military airfields and air weapon ranges. NATS provides the Ministry with the infrastructure it needs, such as radar information on aircraft entering or flying in UK airspace. This also assists the air defence organisation in spotting unauthorised or unidentified incursions. The Government considered that the joint and integrated approach had worked well and set the Department the objective of retaining it in the PPP It benefits both NATS and the Ministry. Military controllers are trained to control in the different environment outside the main flight-paths. Where military and civil movements cross each others' flight-paths, having military and civil controllers collocated is helpful to both parties.
2.6 As before the PPP, decisions as to how finite UK airspace is allocated for different purposes are made by the Directorate of Airspace Policy. For example, the Directorate might be called on to decide whether the Royal Air Force could have a fighter training area over the North Sea, how big this might be, and how often it could be activated. The Directorate was formerly a joint Civil Aviation Authority / Ministry body, but was brought wholly within the Authority by the Transport Act 2000. The CAA is now independent of both NATS and the Ministry, and with the powers conferred by the Act is now in a stronger position to judge impartially the often-competing demands of civil and military aviation. The Act requires the Authority to ensure the efficient use of airspace, to meet the needs of all users, and to facilitate civil and military co-operation. Other protections for military / civil co-operation are provided by directions that can be issued to the Authority by Defence and Transport Ministers under the Transport Act and by the conditions of the company's licence.
2.7 The Ministry of Defence is, after British Airways, NATS' second largest customer, paying the company some £43 million each year for equipment and services such as the provision of radars and flight information. One of the key risks facing the PPP was that the Ministry of Defence might decide to procure these services through alternative arrangements. Until the run up to the PPP the organisations had had no formal contract. In August 2000, in preparation for the PPP, NATS and the Ministry signed a five-year contract to put their relationship on a firm commercial footing. NATS and the Ministry have yet to reach agreement within this contract on the performance regime with financial consequences for the Company if its level of performance drops below agreed standards. However the contract between the two parties is capable of operating without this regime.
2.8 Since the signature of the PPP, NATS has been in discussions with the Ministry with a view to securing a follow-on contract. Indications are that costs could be reduced in return for a longer-term 15 to 25 year contract term. Some issues, besides the performance regime, remain. For example NATS is required by its licence to continue to provide existing primary radar, i.e. longdistance radar which is not required for either civil or military air traffic control, but is used for air defence or other purposes. NATS considers that the funding arrangements for these radars should be revisited.
2.9 During the PPP selection process, the Ministry were consulted on bidders' proposals on how NATS would work with the Ministry. The Ministry expressed reservations about elements of the Airline Group's proposals which assumed making greater use of military controllers for civilian traffic. In the event since the PPP there has been little change to joint operations and NATS and the Ministry both told us that they continued to work well together.