Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by the International Air Transport Association (IATA) (AT 13)



  The Transport Sub-Committee of the UK Transport, Local Government and the Regions Committee announced on 18 October its intention to undertake an inquiry into the immediate implications of the current situation of the air transport industry in the light of the tragic events in the USA on 11 September.

  IATA welcomes the opportunity to present comments on four issues:

    —  The Economic State of the Industry.

    —  War Risk Insurance.

    —  Security.

    —  Slot Allocation.

  With the exception of the first item, which is an attempt at interpreting the incomplete economic data available, these comments are based on industry policy.

  Other issues raised by the Sub-Committee, such as subsidy or assistance to ensure the economic survival of individual airlines and the rules of ownership, fall under governmental purview. It is not, therefore, our intention to address them in detail, although a few general comments are made in the Appendix.


  Air transport is a vital global service industry that has traditionally only achieved marginal profitability in very good years, and even where the industry has achieved considerable economies of scale (eg, in the USA). It is subject to extensive regulation and is vulnerable to external economic and political shocks.

  The economic slowdown in the USA and several other key industrialised nations had impacted traffic well before 11 September. Year-on-year passenger traffic growth (in revenue-passenger-kilometres) had dropped from around 5 per cent in January 2000 to almost zero in August 2001. Freight traffic growth had plunged from well over 10 per cent at the beginning of 2000 to ¸8 per cent in August 2001.

  The effects on the industry of the terrorist attacks can be summarised as follows:
Loss during groundingsAdded security measures
Loss of public confidenceInsurance premiums
Sharp drop in passenger demandCost of financing
Corporate travel policies ("no travel") edicts Exchange rate volatility
Macro-economic (GDP growth impacts)Unpredictability
Reduced capacity/"Parked" aircraft "Cost of contraction"

  The carriers most severely affected were those registered in North America; their passenger and freight traffic fell more than 30 per cent in September. European and Far Eastern carriers experienced a 12 per cent fall in passenger traffic overall, but carriers with a high US component in their services fared worse. In numerical terms, this has translated as follows for IATA Members international scheduled services:

September 2001 January-
September 2001
Passenger Traffic, % change over 2000
¸17no change
Passenger Seat Capacity, % change over 2000
Passenger Load Factor (% points)69% 73%
Freight Traffic, % change over 2000

  The Association of European Airlines recently reported that for the first two weeks in October its members' traffic within Europe was down 10 per cent, transatlantic traffic was off 33 per cent and traffic to Asia-Pacific destinations had declined by 20 per cent. In the final days of September US airline traffic was down by about 25 per cent on domestic routes and 40 per cent on international routes.

And the recovery?

  Past experience is expected, once again, to provide little guidance. The Gulf War was short and sharp, as was the slump in traffic. The signs are that the current campaign against suspected sources of terrorism will be prolonged.

  Some observers see traffic returning to the levels of the same period in the previous year within six months, others predict 12 months or even longer. As regards financial performance recovering to acceptable levels, the only constant is that forecasters are talking in terms of years.

  The underlying issue is public confidence. The unsettled international environment is causing a significant number of travellers to postpone or cancel their travel. Renewed confidence is essential to the recovery of the air transport and tourism industries.

  IATA is currently projecting that its Member airlines will lose USD 7 to 11 billion on their international scheduled services during 2001, compared with a net profit of USD 2.8 billion in 2000. The Association was expecting that its Members would not make an aggregate net profit even before 11 September but we know now that the shortfall will be very, very significant. The US carriers will lose several billion dollars on their domestic services.

  The airline community has already cut staff levels by 120,000 worldwide and the final figure is expected to be up to 200,000. In addition, the travel and tourism industry has lost 1.3 million jobs and many more are expected. Some of these staffing reductions were likely before the events of 11 September but the terrorist attacks have made a bad situation much worse.

  In the short term, airlines are going to need all the help and understanding they can get from governments and service providers—short of state aid.

  As regards the longer-term effects, it is evident that the demand for air travel will grow as economic growth recovers but it is not yet clear when this will happen. The "rebound" that would be associated with a return of confidence among the travelling public will probably be dampened by the economic slowdown.


  All international airlines require insurance, including third party war and allied perils cover, in order to operate. Prior to the terrorist attacks, airlines' war risk and allied peril cover was provided as part of their total insurance package at no additional cost, while hull war risk premiums were nominal.

  The terrorist attacks of 11 September 2001 resulted in the short-term cancellation of this cover. While third party war risk insurance is commercially available again, the premiums are extremely expensive—about USD 7 billion worldwide for the air transport industry. Furthermore, IATA has been informed by the insurance market that the next war risk loss will trigger another cancellation of this cover.

  Some 60 States are providing limited indemnification for their respective airlines for third party war risks, however these plans are due to expire soon. (A number of them are also charging premiums for this indemnification.)

The Need for a Solution

  IATA understands that some groups of airlines are starting to work toward permanent solutions to the war risk coverage problem on a regional basis. However, each of these proposals is somewhat different and will only offer protection to airlines within the regional group. Airlines in other parts of the world cannot obtain support from their governments and are forced to purchase the expensive, commercially available insurance or operate without it.

  IATA believes that a programme for war risk and allied perils insurance for all airlines could include the use of pan-national organisations like the World Bank or IMF. Indeed, IATA believes that any long-term solutions outside the regular insurance markets should:

    —  be available to all international airlines no matter where they are located;

    —  be reasonably affordable;

    —  provide long-term stability, even in the event of a war risk claim;

    —  recognise the inherent role of governments in assisting in the provision of adequate levels of war risk insurance since acts of war and terrorism are directed towards States, not the air transport industry.

Future Developments

  IATA is working on a global solution that provides a stable war risk and allied perils insurance programme for all airlines. Such a solution would be developed in conjunction with programmes that may be developed by regional associations. In this regard, IATA will participate in the ICAO Special Working Group meetings of 6-7 December 2001 at which the problems of third party war risk insurance for the air transport industry will be considered.


  The Global Aviation Security Action Group (GASAG) has been established to coordinate industry efforts worldwide to improve aviation security and restore public confidence. GASAG brings together experts from throughout the aviation industry—IATA, the Airline Regional Associations, Airports Council International (ACI), the International Federation of Airline Pilots Associations (IFALPA) and Airbus. Boeing, ICAO and INTERPOL are observers.

  GASAG believes that governments have direct responsibility for aviation security and its funding. This responsibility includes the protection of its citizens and, since the security threat against airlines is a manifestation of a threat against the State, the provision and the cost of aviation security should be borne by the State.

  The prevention of unlawful interference requires harmonised security measures that are effective, efficient and operationally manageable and that meet—and in some cases exceed—the provisions of ICAO Annex 17 and ECAC Document 30. The following "industry positions" have been developed by GASAG to provide a basis for the harmonisation of worldwide efforts to tighten aviation security.

Airport Security

  In close collaboration with the industry, governments need to explore and implement the latest technologies to enhance the effectiveness of—and speed up—the screening of passengers, baggage and cargo world-wide.

  Access control systems that combine identification media with personal information are essential in order to improve perimeter security and tighten access to restricted zones.

  Employees and other people requiring unescorted access to restricted areas must be subjected to stringent and recurring background checks, both by service companies and government authorities.

In-Flight Security

  Cockpit doors need to be strengthened and should be locked as far as this is practicable; adequate communications procedures need to be established between the cockpit and cabin. Further consideration should be given to the need for cameras that would enable passengers to be monitored from the flight deck.

  The use of non-lethal protective devices by flight crews in case of emergency needs to be assessed. Our industry does not support the arming of flight crews with lethal weapons, combat training for flight crews, nor the carriage of ammunition, firearms and other weapons in aircraft, except where specifically required by States.

  However, where a State mandates the use of armed in-flight security personnel, such personnel must be provided, funded, selected and trained to the highest standards by the State.

  An urgent review should be carried out of on-board safety equipment and items carried in the cabin to determine whether they may pose a potential security risk.

  Pursuant to recent recommendations by IATA and ICAO, legislation facilitating the arrest and prosecution of unruly passengers needs to be internationally coordinated by governments.

  Improved air/ground communications systems and procedures for use during hijackings and other emergency situations should be studied. Radar coverage for tracking aircraft is adequate in Europe but inadequate in some other parts of the world.


  In the aftermath of the events of 11 September, many airlines have been obliged to reduce frequencies and have chosen to stop serving certain routes on a temporary basis in the light of reduced passenger and cargo traffic.

  Certain rules for the application of slots at busy and congested airports, notably the European Council Regulation 95/93, regarding the so-called "use it or lose it" provision, have caused particular concern at this time. Over the long term, the risk of losing "grandfather rights" because of not meeting the 80 per cent utilisation rule poses a serious threat to airlines and could jeopardise a return to the previous full service schedules when this becomes viable.

  The IATA Director General wrote to Vice President Palacio, the Commissioner responsible for transport and energy, at the end of September, asking for a moratorium on the 80 per cent rule during the 2001-02 winter season.

  The Commission subsequently wrote to the European Union Airport Coordinators Association (EU ACA) saying that "it would appear reasonable for coordinators to consider accepting" carriers' justification of the current and emerging circumstances for non-utilisation of slots during the present winter season and maintaining the related grandfather status.


  IATA and its Members appreciate the Commission's efforts to clarify the situation and interpret the letter to EU ACA to mean that they should, be able to give up slots this winter season without losing their historic rights for the winter season of 2002-03. However, this interpretation should be further clarified to guarantee legal certainty.

  This is clearly a more efficient approach to the situation than seeing airlines effectively forced to operate uneconomic flights solely to protect grandfather rights, which would be contrary to the spirit of the European Commission's overall response to 11 September and subsequent events.

Revisions to EC Slot Regulation 95/93

  Proposals from DG Comp to revise the current rules under which slots are allocated at congested EU airports are now under consideration by both the Council and the European Parliament. Most of these changes concern technical improvements that IATA supports. However, a number deal with basic policy issues and, we believe, should be considered only in a second, later phase that has already been announced by the Commission to address the whole question of slot allocation in the longer term. Specifically, the issues that should be considered only in context of a major revision to existing rules (particularly at this juncture, with so much uncertainty about the future shape of the airline industry) concern:

    —  The definition (and legal nature) of slots, and limitations on exchanges;

    —  Preferential treatment for intra-EU routes (and EU carriers);

    —  Prohibiting the re-timing of currently held slots except in limited circumstances;

    —  Introduction of new co-ordination criteria which are unrelated to technical or practical constraints;

    —  Introduction of sanctions against airlines, the practicality of which is questionable.

November 2001

Appendix—Additional Comments


  The air transport industry is both labour-intensive and cashflow-dependent and is thus very exposed to sharp economic changes or sudden political influences. Evidence of this in the past includes the impact of "fuel shocks" in the 1970s and '80s and of the Gulf War in 1991, as well as economic slowdowns and recessions over the years.

  The industry was already encountering a slowdown in traffic, especially in freight and business travel, prior to 11 September as a result of a decline in Gross Domestic Product (GDP) growth that had started in the USA. This was beginning to impact on airlines' financial health, most markedly in the USA but also, because of the global nature of the business, in other regions of the world.

  The events of 11 September triggered such a sharp decline in confidence in air travel that their impact was very serious indeed. Thus, to compensate for lost business in the early weeks after these events and the sharp rise in certain costs, notably insurance and security, some emergency government support or assistance could be justified.

  The risk is that uncoordinated application of this support by different governments could deliberately, or unwittingly, distort the competitive environment. The most obvious example, but not the only one, is the disparity between the assistance package provided by the US government to its national airline industry and the limited measures authorised by the European Commission. We do not have any specific suggestions on how to right this disparity but it should not be ignored.


  There is a school of thought that believes that the economically efficient development of the air transport industry is hindered by long-established ownership and control provisions that figure in almost all bilateral air service agreements. For this efficiency to be achieved a degree of consolidation needs to take place.

  One conceivable approach could be along the lines of a UK paper submitted to the recent Triennial Assembly of the International Civil Aviation Organization. This stated that ownership rules could be relaxed to allow increased foreign participation in an airline's share capital including majority ownership, provided that the principal "place of business" was in the country of registration of the carrier. Another yardstick could be the notion of "effective control" by nationals of the country of registration.

  Wholesale scrapping of the bilateral system, which currently comprises an estimated 4,000 agreements, is probably impossible in practice and, therefore, a measured approach, focussing on removing ownership restrictions is the most feasible in the short to medium term. This will permit cross-border ownership and mergers while still maintaining the "national" identity required in most bilateral agreements.

Memorandum by Transport 2000 (AT 14)


  We have a number of points to make:

  1.  The events have merely accelerated the restructuring of the airline industry, and its causes, that was developing for a long time before September 2001. Many airlines were already running on borrowed time.

  2.  There is no case for long or medium-term financial assistance to an industry that is already one of the most subsidised in the world. There is no tax on aviation fuel; no VAT on the purchase of new planes or airline tickets; the industry does not meet the costs of the noise and pollution it imposes on society (thus violating one of the Government's key policies, namely, the polluter pays principle). These subsidies distort the market: there is no level playing field with air or road transport; jobs in the aviation industry are subsidised to an extent that is rare in other industries in the UK.

  3.  Any short-term aid that is considered should be contingent on the aviation industry agreeing to tough targets on reducing noise and emissions levels and to target dates for the phasing out of the subsidies it currently receives.

  4.  The "downturn" in the UK might be short-term as BA may successfully merge with or acquire other airlines and two of the top low-cost carriers are based in the UK. This suggests that even short-term aid may not be required.

  5.  The bigger challenge remains: how, in the medium and longer term, the aviation industry becomes a cleaner, quieter and less heavily subsidised contributor to the UK economy. Transport 2000 would welcome a full-scale Inquiry by the Select Committee into that issue.

John Stewart

Chair Transport 2000

Memorandum by Prospect (AT 15)

  1.  This submission is made on behalf of Prospect, the trade union representing over 5,000 specialists directly employed in the aviation industry. The submission concentrates on National Air Traffic Services (NATS), where Prospect represents 3,500 air traffic controllers and engineers.


  The fall in transatlantic traffic means a disproportionate fall in NATS revenue. 44 per cent of NATS income comes from transatlantic traffic, but this is only 16 per cent of NATS total traffic;

  Need to examine how air traffic is charged;

  Delays in investment mean that there will be capacity constraints in the long term;

  The need for a New Scottish Centre is urgent. Ageing equipment needs replacement both at Manchester and Scottish Area Centres;

  Two-centre strategy is very important for contingency reasons not least terrorist attacks;

  NATS short-term financing problems must not get in the way of long-term infrastructure projects;

  Call on Government and NATS to open a New Scottish Centre, (NSC), in 2007-08.

  3.  As the Committee is well aware, NATS was privatised at the end of July 2001. The projections of future traffic used by the successful bidders, the Airline Group (TAG), were proving optimistic even at this stage. There had been traffic growth, but at a slower rate than predicted. This obviously had an effect on NATS financing before 11 September.

  4.  The reasoning given by Government for privatisation was to give NATS access to secure funding for the long-term development of the ATC infrastructure. The practical result has been a short-term view, narrowly focused on the finance of NATS and not the needs of the airspace users it serves.

  5.  The Airline Group plan was accepted by the Government as the best package to improve safety, provide a sound financial structure and innovative solutions to airspace capacity problems. The new NATS business plan achieves few of these and actually endangers some objectives.

  6.  Within the context of National Air Traffic Services the UK Government promoted the sale as a "Public/Private Partnership". In truth, it would appear to be less of a "partnership", and more of a straight sale or privatisation by the UK definition. The Government maximised the price paid for NATS by TAG, who had to borrow heavily to finance the deal. This heavy debt has exacerbated the financial difficulties caused by a sudden and unexpected fall in the income stream.

  7.  Prior to privatisation, NATS had outstanding loans of approximately £330m from the National Loans Fund (NLF). The international charging structure in place previously allowed NATS to recover enough from users to finance costs and pay down the outstanding debt. This provided considerable fiscal stability during times of economic and income down-turn. In the run-up to privatisation, a train of events was put in motion by the Government, creating the basis for NATS financial structure.

  8.  First, the Government put financial pressure on NATS by requiring it to repay a large part of its outstanding loans to the NLF. Second, it changed the charging convention from the method prevalent in other European countries (known as cost pass through) to an RPI-x formula in an attempt to reduce NATS costs by forcing it to make efficiencies.

  9.  Third, the Government sought to maximise its return from the sale of 46 per cent of NATS. This has saddled the privatised NATS with a debt in excess of £700m, more than double the level at the time of privatisation.

  10.  In order to obtain and service this debt, and obtain further investment for essential infrastructure modernisation, growth and therefore projected income, figures were used that were already in decline prior to 11 September. That is, NATS was facing some difficulty with investors prior to 11 September, but those difficulties have now been seriously exacerbated. Projected income and cash flow have been reduced.

  11.  The consequence for NATS, the UK's air traffic infrastructure, and therefore the impact on UK aviation may be serious and profound.

  12.  Projected job reductions of 20 per cent of support and engineering staff planned to take place over three years have now been accelerated to 12 months.

  13.  Capital investment in vital infrastructure projects such as the New Scottish Centre (NSC) and the Radar Replacement Programme have been postponed. The New Business Development Unit, established to obtain new business outside of NATS, has been reduced in size by over half. In part, this is a recognition of the lack of availability of any significant business outside NATS. Obtaining such business was a major plank of the Government's reasoning for privatisation.

Passenger Figures

  14.  Although the initial headline falls in passengers carried by airlines following 11 September has been large, (BAA figures indicated a 12 per cent drop), the detailed breakdown indicates considerable variation depending upon long haul/short haul, domestic/international, and transatlantic/European. 11 September clearly accelerated a process of re-structuring within a number of airlines.

  15.  One consequence has been a move to the use of smaller aircraft, higher frequencies and point to point services between regional airports, as main hubs (such as Heathrow), meet and often exceed declared capacity.

  16.  Budget airlines (eg Buzz, Easyjet and Go) are growing at a fast rate, and taking slots previously allocated to large airlines.

  17.  Airline restructuring, in the context of the size of aircraft being used and the short-term down-turn particularly of transatlantic traffic, is having a marked impact on NATS revenues. At present, the charging mechanism depends on the size of aircraft, eg a 747 pays considerably more than a 737. Prospect believes it is the time to review that mechanism for instance by simply charging per movement and the time spent under NATS control.

Engineering cutbacks:

  18.  There are proposals for significant cutbacks well in excess of previous NATS proposals, not only in personnel but also in "Service Level Agreements". These dictate the restoration times in the event of equipment failure, and there is often a direct correlation to the number of engineering staff required. There must also be direct safety concerns as engineering cover is reduced and restoration times lengthened.

  19.  The planned reduction of engineering and other support staff was to be based upon the purchase of modern equipment, which would be more reliable and require less maintenance. Few capital expenditure plans are now in place for that equipment but the staff reductions are going ahead. The planned radar replacement programme has now been put on hold, and this will mean that there is a need for engineering staff to maintain and service the ageing equipment. There is no question that more modern equipment has fewer failures and requires less maintenance, but engineering numbers should not be cut until that new, more reliable equipment is put in place.

Scottish Centre Refurbishment

  20.  Though there has been some refurbishment and replacement of equipment at the Scottish Centre, this is only a short-term stop gap measure. Indeed, the air traffic controllers feel the interim equipment fit as inferior to that used previously, and not sufficient to adequately and safely provide air control services for much longer into the future. Growth in air movements, particularly in the Scottish central belt, continues unabated. Though there is a clear fall in transatlantic traffic, few doubt that growth will return as the international situation stabilises, the US economy and NAFTA countries begin to recover and as the EU enlarges to the east.


  21.  By delaying the operation of NSC by at least two years the airspace expansion planned will not be achieved. Capacity will be restricted with airlines and other airspace users being delayed. NSC was due to go live in 2007 and add another sector to Scottish and probably also Manchester airspace every two years. Because the Scottish and Manchester operations will be delayed and physically constrained in their old buildings there will either be a delay to the new sectors being introduced or expensive modifications done to existing buildings with a short life expectancy. What will be the cost in delay to airspace users or unplanned capital expenditure?

  22.  The loss of traffic is almost exclusively on transatlantic services. The explosive growth of low cost airlines continues apace. Areas of the country with growth such as Bristol and Scottish lowland airports will mean that additional airspace capacity is likely to be needed in the next five years. This is relatively low income traffic for NATS. Does NATS plan to restrict the airspace users' access to airspace just because they do not generate a large income for NATS? Current plans for the existing Prestwick facility does not allow this growth to be handled before the completion of NSC.

Investment and New Scottish Centre

  23.  In the run up to privatisation, all parties recognised the need for long term continuous and sustainable investment. Figures quoted by NATS and Government indicated an investment requirement of £1.2 billion over 10 years. Following the sale to the Airline Group that dropped quickly to less than £700 million. Even that figure now looks under threat.

  24.  No matter what short-term down-turn takes place, the same infrastructure investment and modernisation is required.

New Scottish Centre

  25.  The actions of NATS following 11 September in relation to NSC development, give us cause for concern. The decision to seek a delay to the NSC building and operational date were made with undue haste, and without any consultation with some of the most important stakeholders, such as the air traffic controllers and engineers.

  26.  This has had a major impact on trust between management and the trade unions and the development of successful industrial relations within NATS.

  27.  We also have to question the position of the Government in allowing a delay when the impact of any long-term effect on aviation growth was impossible to determine.

  28.  If there have been overriding financial imperatives, then we call on the Government as a major shareholder, stakeholder and partner to provide assistance to continue NSC to an early timetable.

  29.  If there is one lesson that the tragic events of 11 September have highlighted, it is the need for vital services to be ready for contingencies. The UK region and its air traffic services are an essential linchpin connecting Europe with North America. System and Centre contingency within the UK is essential for the foreseeable future because serious damage to a UK Centre would have, amongst other consequences, potential serious transport, economic and social effects.

  30.  One of the main thrusts of the Government's two-centre strategy is to provide contingency for the UK ATC operation in the event of a catastrophic failure of either centre. During the debate on the policy which established the two-centre strategy the term catastrophic failure was considered to be most likely a major building, hardware or software event which would disable the centre's operations for a lengthy period. Very seldom was the matter of terrorist action openly discussed but that was understood to be a likely cause of such a failure. 11 September has added a new dimension to that risk. It is now conceivable that NATS buildings could be seriously damaged (or the operating systems attacked) by deliberate acts, which would have little or no chance of being prevented. All four NATS major sites (Swanwick, London ATC Centre, Manchester Area Centre and Scottish Area Centre) are within three miles of major airports. NATS has delayed the building of the new ATC centre in Scotland and with that move, reduced the element of contingency which might be available if either Swanwick or Prestwick were to be attacked for at least the next decade. If either centre was disabled there would be no ability for the ATC service to allow safe flights over many thousands of square miles of airspace. This could effectively stop all flights into and out of all airports south of Birmingham or seriously disrupt all transatlantic flights.

  31.  By delaying the decommissioning and move of the Manchester operation to Prestwick, NATS will have to sustain equipment at Manchester beyond its present life. A sustainment programme for vital radar and radio equipment for at least another two years will have to be devised, costing millions of pounds.

  32.  There are a number of other objections to any delay to NSC:—

  33.  Will all the equipment of the current Scottish Centre be in condition to continue, (some of it will be 35 years old by 2009-10)?

  34.  Will engineering/technical expertise that was due to transfer from the NERC project to NSC development be lost?

  35.  Many of the costs and problems associated with deferring NSC development have not been quantified. We do not believe NATS or the Government have taken a structured approach, and that the decision to delay has been a knee-jerk reaction.

  36.  The delay to the building of the New Scottish Centre has been focused on the need to reduce immediate cash spending and not the overall cost of the project or the costs to the airspace users. The rundown, and restart costs for the companies involved have not been clarified. How is the contract to be restarted? Each of the companies involved will have moved on their key personnel by the end of 2001. Years of experience with the Bechtel project management company will be lost. When the project is acquired and restarted there will be no in house company expertise. NATS has no building staff and a project management company has no experience. The prospect is that to secure an 18-month delay in building the centre NATS would have to start planning and hiring staff after one year. Only by doing this would it be sure of having a reasonable chance of completing the building on time.

  37.  For our part, the NATS trade unions believe any delay to an operational date of 2007-08 to be a grave mistake, and a breach of the Government assurances to stakeholders, MPs and the electorate during the PPP process.

  38.  We call on the Government and NATS to work towards an `O' date of 2007-08 for NSC.

Other ATS Providers

  39.  Other European ATS providers have also been affected by the down-turn in traffic growth and the switch to smaller aircraft. However, they continue in the public sector and have access to a number of other alternatives to provide some financial stability and supplement income. Charges by other European ATS providers are rising at between 10-20 per cent.


  40.  The Airline Group promised to increase spending on safety by a significant percentage. The new Long Term Investment Plan (LTIP) does not show this increase.

  41.  The planned safety improvements in NSC, such as multi-radar tracking, will be delayed for at least another two years. Even the recently installed equipment at Prestwick is modelled on the operation of the old Locus system designed in the 1960s and 70s. Neither will the Manchester operation be enhanced for at least an extra two years.

Other Effects

  42.  There is evidence that 11 September precipitated an acceleration of changes that were pending for many airlines. Over-capacity and poor shareholder return were apparently common. The concern of NATS trade unions is that there is an acceleration of financial considerations over the investment and safety needed within air traffic control. This would, of course, be completely contrary to Government reasoning and assurances prior to privatisation.

  43.  Long-term delay to NSC could mean the export of high quality jobs out of Scotland as European harmonisation and rationalisation seeks to replace UK under-investment.

  44.  With planned European moves towards reducing the number of ATC centres, there is a risk that NSC will not be built in its planned form. Purchase of compatible equipment by other countries eg the Republic of Ireland would allow such countries to propose controlling parts of the UK sky from ATC centres outside the UK. This would export high quality jobs out of Scotland.

  45.  Are other ATC service providers shelving capacity expansion plans?

  46.  The current airline view is that the down-turn caused by 11 September is temporary. Future growth is merely delayed a period of months and will then resume. NATS income is disproportionately hit. Because a high percentage (44 per cent) of NATS income depends upon transatlantic traffic it is being forced by its owners to reduce the planned increased capacity to other airspace users.

November 2001

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