3.34 NATS is a relatively capital intensive business, and most of its costs, for infrastructure and specialist staff like its 1400 en route controllers, are fixed in the short and medium term. It is not well placed to reduce its costs quickly when there is a reduction in the number of flights it handles. In their bid for the PPP, the Airline Group made a number of proposals for operating cost reductions, mainly by reducing the number of staff in support functions and by consolidating NATS' accommodation outside London. The Airline Group proposed the largest reduction in staff of any of the three short-listed bidders, partly offset by an increase in the number of controllers. The effect of September 11th has been to accelerate NATS' timetable for cost savings. But it is evident that the financial position of the company must be improved before the programme can be fully implemented. For example, some redundancies in non-operational posts have been delayed while the Company sought ways of affording the redundancy payments.
3.35 Some of NATS' proposals for staff cuts or efficiency improvements, such as changes in maintenance staffing, will need to obtain the approval of the Safety Regulation Group of the Civil Aviation Authority. Implementation of any substantial programme of staff reductions brings with it risks for industrial relations. NATS has sought to improve its management expertise in this area in order to achieve a constructive relationship with the principal Trade Union, Prospect. There is evidence of some improvements in relationships in that Prospect has agreed to a holiday in employer's contributions to the staff pension fund, on the understanding that the holiday is regularly monitored for its effect on the fund and its obligations.