It’s time for the ownership structure to change

Prospect has written to Kelly Tollhurst, Parliamentary Under Secretary of State responsible for aviation calling for NATS to be taken back into public ownership.

NERL has now faced the impact of 9/11, the financial crisis, the challenges of volcanic ash and now Covid 19. Each time its finances have been severely disrupted resulting in a bail out, a contraction of staff, rapid re-planning, and now unprecedented uncertainty about its cash flow position.

It is clear that the experiment of private ownership of NATS, as part of the critical national infrastructure has failed. The recent announcement on NATS having to defer pension contributions as an emergency cash flow measure (which should be an option of absolute last resort) is a clear leading indicator that the current structural setup is not fit for purpose. It should also be remembered that following 9/11 the company was forced to take a pension holiday, leading to a funding crisis and the current pension arrangements we now have in place.

It is time for a better way forward.

The call on the UK Government now is to take back the Airline Group and Heathrow Airport’s shareholding and run NATS as a government owned corporation, much along the lines of Network Rail – a publicly owned critical infrastructure company. Indeed, Network Rail was born out of the failed privatised Railtrack – and we should learn from that experience.

Such ownership would allow a source of last resort funding, which would allow NATS to be much more financially stable, and less vulnerable to world events.

DfT letter for view or download

8 thoughts on “It’s time for the ownership structure to change

  • Claire Harrison
    May 9, 2020 at 4:48 pm

    Having come from a civil service role before joining NATS I do wonder if this action has been taken prematurely.
    I agree that it should be considered as one of a possible number of options to support the business if the recovery is slower than hoped.
    But I am also under no allusions that staff pay, terms and conditions and pensions would not be where they are today if we’d been a government owned business during the previous recession.

    • Aaron Curtis
      May 10, 2020 at 12:55 pm

      Thanks Claire. That of course may have been the case, but our proposal is for a corporation with the vast majority of shares held by the UK Government, not a direct civil service department. Therefore it would not directly be impacted by civil service policy. This structure could be similar to that of Network Rail, or indeed a train operating company that has been taken back in to Government control, such as LNER. This would allow NATS to still be run at arms length as a corporation, but with easier access to guaranteed funding of last resort.

  • ed platt
    May 7, 2020 at 7:11 pm

    Having just read two preceding posts that exorted me not to listen to rumours and to approach my branch rep (who is excellent by the way) when I had questions or concerns. Followed by a piece expressing disappointment with NATS that they did not discuss the pension deferral with the TU before approaching the trustees.
    I find it somewhat incongruous that my TU have called for the renationalisation of Air Traffic without any consideration of whether the members may desire this, and as far as I can tell without the consent of my local branch.
    Perhaps you could have a conversation about such a monumentous move with those you represent before you write to the Minister?

    • Eamonn Wylie
      May 8, 2020 at 3:00 pm

      Hello Ed,

      Firstly thank you for taking the time to respond to what we understand is a significant announcement from the Branch during the Covid-19 pandemic. Secondly, we hope that some background detail on the work that’s been done so far might help shed light on why we have come to this decision.

      For several weeks now, the Prospect Aviation Group has been meeting the Department for Transport to engage on the issues that are acutely affecting our industry. Prospect has been lobbying for an aviation package – something that will take the unique issues that the industry is currently facing into account, and ensure the continued running of everything from airports across the country to ground handling services to air traffic control. In addition, we have campaigned the DfT and the government to view air traffic services as critical national infrastructure – this theme is evident in our recent articles online.

      Currently, both the revenue issues and cash flow problems that many companies are facing within aviation are bringing businesses closer to collapse. In the absence of any aviation-specific package that will tackle the industry’s unique circumstances, it is our strong concern that the NATS model will simply not have the funds to continue to operate in the coming months or years ahead. The very fact that NATS have sought to defer pension contributions is evidence of this.

      Notwithstanding the various measures that have been taken in the two major parts of the NATS business (NERL and NSL) to help ease the cash flow issues, problems still remain. For example, in NERL, the recently announced ‘support package’ from EUROCONTROL to help its income shortfall due to lack of aircraft flying will, we believe, fall far short of the mark to provide sufficient revenue:

      ‘It’s important to note that the second package is not a bailout – it is the payment of part of the expected revenue from airlines to ANSPs had they not been deferred by the first package. It still represents a significant financial strain on NERL’s cash flow – merely a sticking plaster […]’

      This, and other so-called income protections such as the traffic risk sharing mechanism (in which we have little confidence will operate as intended), that we refer to in the attached letter do not on their own solve NATS’ cash flow issues which could result in a deeply precarious position in the months and years ahead. NATS on behalf of the UK State must continue to provide air traffic services, whilst dealing with a severe and continued revenue shortfall given all traffic predictions from various sources including EUROCONTROL.

      Within NSL, the drop in traffic is just as acute and in some airports, e.g. London City, the traffic has dropped by 100% with a full closure of the airport. Others have seen a huge reduction in opening hours and closures of positions.

      Without repeating the content of the letter, it is important to note again that almost 100% of other European ANSPs who receive revenue via EUROCONTROL are in some way part of, or closely aligned to their member states’ governments, and thus have the support of the government to run a deficit during times of funding crisis. This is not the situation in the UK.

      And so, on the matter of an aviation package or a change of tack that would demonstrate that the DfT and the government now view air traffic services as critical national infrastructure, Prospect has not received the assurances it has sought on this. Unfortunately as time goes on, the funding situation is only getting worse and could, conceivably, lead to the collapse of the company in the future if nothing were to change in the funding model. For this reason, the Branch as a matter of urgency has decided to make a plea to the government to ensure the continued running of air traffic services, and that the ability to retain full capacity that will be required whenever traffic returns to ‘normal’ levels, are guaranteed.

      We understand that this is a significant announcement. The Branch Executive of Prospect ATCOs’ Branch works as a committee and a unanimous decision was taken by elected members of that committee to pursue this line of action during this unprecedented crisis and with the knowledge that each passing day exacerbates the financial issues. This action is supported by Branch policy A.5.14 (2014):

      The BEC shall lobby the DfT, and other organisations as appropriate, to inform them of:
      • the operational benefits of having a unified ANSP.
      • the operational and financial benefits to the UK of the organisation being state owned.
      • the financial benefits to customers of the economy of scale, and operational savings through integrated procedures.

      To answer all the points you raised in your message, NATS were informed of our announcement before publication on 7/5/20.

      The Branch truly hopes that this reply has given you and others more clarity over the background to our position. We strongly encourage you to engage with your (‘excellent’) rep and with the Branch Executive as we work to protect our membership and the profession during these difficult times.

      Branch Executive Committee
      8th May 2020

  • James Jeavons
    May 7, 2020 at 6:14 pm

    Has this letter been sent to other political parties and politicians too? It’s easier for such a letter to be deflected if it’s addressed only to one of them. A letter addressed to multiple recipients, some of whom could actually be won over, could build a consensus and put some real pressure on them to act on this.

    • Aaron Curtis
      May 8, 2020 at 12:44 pm

      Hi James

      Yes, we have had very constructive conversations with the Shadow Secretary of State for Transport and the Shadow Minister for Aviation, and will continue to do so.

  • Mark Kennerley
    May 7, 2020 at 12:26 pm

    Is there any incentive for the government to take any action!? If NATS folds then surely the stock would plummet and the government would have to step in but at massively reduce cost to the national purse and new punitive contracts for the employees?

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