NATS first had to identify the contribution it could make

3.10 In October 2001 NATS was the first of the participants to define its contribution to the Composite Solution, through a programme of spending cuts and deferrals, much of which represented an acceleration of measures already identified in the Airline Group's first Business Plan for NATS. Government's Partnership Directors provided the Department and Treasury with assurance that the savings were a reasonable sum at reasonable risk, and that more stringent cuts would raise industrial relations issues. Indeed by late 2002, NATS' savings had reduced from £200 million to some £170 million, due in part to a less tight wage settlement for staff than previously expected.

3.11 One of the main elements in NATS' cost savings programme is attributable to its plans for fewer air traffic controllers compared to the major increase proposed in the Airline Group's original proposals for the PPP. The Airline Group had intended to raise the total number of Controllers from 1939 in 2001 to 2400 by 2010, to raise the capacity of the system. The new Business Plan provides for an increase to only 2079 controllers by 2010. NATS does not consider that this will prejudice its plans to enhance the capacity of the system. Following a review, it decided that 2400 controllers would be unnecessary given the current business plan and reduced traffic levels since September 11th. NATS intends to reduce the number of traffic control centres from four to two, and to automate some functions of controllers in the period 2006-2010. Changes in working practices, including earlier starts to morning shifts, will also help. The revised figure of 2,079 still represents an increase and is also more realistic in the light of the Company's finite training capacity.4

3.12 NATS and its shareholders also considered whether the Group should raise funds by selling off its unregulated business, NATS (Services) Ltd. But they concluded that this would not have been a sufficient answer in itself. NATS (Services) is not a big business and would not have raised sufficient funds to address the funding deficit.

Key Players in the refinancing of NATS

Many parties had to play their part, which took time and money. The stance of each of the main parties is explained in more depth at Appendix 4.

NOTE

1 Moving forward following the refinancing, the banks will be replaced as the principle creditor to the company by MBIA, an insurer which provided a guarantee for the bonds issued.

Source: NAO

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4 HC 1096 2001-02 The PPP for National Air Traffic Services Ltd, Paragraph 3.12.