Examination of witnesses (Questions 260-279)
MR RICHARD EVERITT AND MR COLIN CHISHOLM
TUESDAY 11 JUNE 2002
260. Do you need the CAA to agree to your increased charges to secure BAA involvement?
(Mr Everitt) We need a modification to our charging formula in order to get the investment from BAA, yes.
261. What do you mean by "modification"?
(Mr Everitt) At the moment for the last three years of our formula if nothing changes we will be on RPI minus four, RPI minus five, RPI minus five. We sought RPI plus four, plus three, plus two. We made no assumptions in doing that that we would be able to secure an investment. By securing or taking account of the potential investment of BAA matched by the Government we will be able to moderate, we believe, the change that we were asking for. We hope to go somewhere between the two and persuade the CAA that there is a good case around that.
262. There are three parties here, are there not, there is BAA, the CAA and the Government?
(Mr Everitt) Indeed.
263. Is there any kind of negotiation going on involving those three parties?
(Mr Everitt) The CAA strictly stand as an independent regulator and we interface with the CAA as the applicant, as it were.
264. But you have just told us that they turned down your application but they have suggested you could put together another.
(Mr Everitt) Yes.
265. Then is Mrs Ellman not right to ask you is there negotiation of some sort?
(Mr Everitt) There is not a negotiation. We will put a proposition to the CAA, as they have invited us to do.
266. They are not negotiating, they are just asking you to do it again.
(Mr Everitt) Yes. They have said there could be a proposition which they would be prepared to consider in the context of the application we have made and that is what we are working on with our shareholders, the bankers and, indeed, our customers because our customers will have a strong bearing on the view that the CAA takes.
267. So is the CAA really standing aside from this?
(Mr Everitt) I think it would be right to say that it stands independently and aside from this they have invited us to make a proposition and that is what we will do. They have invited that proposition by 21 June and that is the date that we are working to.
268. If BAA do not invest will NATS make up the shortfall and how will that be done?
(Mr Everitt) I do not think NATS can make up the shortfall. We have identified this very considerable cost saving and that has obviously been put into the equation, if I can put it that way. That, I think, consistent with our safety responsibilities
269. You are talking about sacking the assistants?
(Mr Everitt) No, no, I am not talking about sacking the assistants. I am not talking about sacking anybody. We have a voluntary redundancy scheme and we have asked people in certain parts of the business whether they would be prepared to leave.
270. That is what we are talking about. We are talking about downsizing.
(Mr Everitt) That is one element of the cost saving package that we are talking about. We are talking about bringing more work in-house and having less contracted work, using our workforce more effectively. That saves us quite a considerable sum of money. We are talking about procurement efficiencies. We are talking about rationalisation in terms of getting four sites into one by having a technical centre near Southampton. There are a host of issues that we have worked through very carefully against the criteria of safety as our absolute priority, the integrity of the system and our ability to invest in the future development of the system. So we have put our piece in and what we are looking to is the investor obviously who will look for a return and also an adjustment in prices, possibly looking at an eight year period rather than a three year period, or in addition to the three year period.
271. Do the non-Airline Group support your application for an increase in charges?
(Mr Everitt) We have had discussions with IATA who I think are probably the best representative group of the non-Airline Group airlines. They have asked us for further discussions and we will be seeing them in the course of next week. I do think, and I have quite a high degree of confidence that they see investment in our system, and after all our investment plan of over a billion is to totally modernise the system over an eight year period
Chairman: I am sorry, I am afraid we must stand adjourned.
The Committee suspended from 4.15 pm to 4.23 pm for a division in the House.
272. Had you finished, Mr Everitt, on that particular point?
(Mr Everitt) I think I had, if Mrs Ellman is happy with my answer.
273. Whether she is happy or not is not the question.
(Mr Everitt) I think I had finished my response.
274. Have NATS or BAA suggested that BAA's involvement is dependent on the Government making this contribution?
(Mr Everitt) I think BAA have said that it is, yes, that it is expecting a contribution from HMG and I think HMG have also indicated that they would expect to maintain their 49 per cent shareholding.
275. That is all agreed, is it?
(Mr Everitt) Not in the legal sense but I think that is what has been stated by BAA as the basis for their investment and I think HMG indicated before the last Committee that they were expecting to
276. They indicated it to us but what we are trying to get our heads around is you told us that you have got a series of heads of agreement but that is not signed.
(Mr Everitt) We have not got a formal heads of agreement with the Government, no. With BAA, yes, and that does contemplate that the Government would maintain its 49 per cent.
277. Has BAA asked the Government or yourselves for any concessions in return for investment in NATS?
(Mr Everitt) No, I do not think so. I cannot think that they have sought any concessions from us certainly, no.
278. Have they raised any policy issues with you such as airport capacity in the South East?
(Mr Everitt) They have said that their concern is a financially stable NATS because we are obviously an integral part of the air traffic flow into and out of their airports and they have obviously also said that they share everybody's priority around safety but not in any sense concessions, no. The rationale for the investment is to ensure that we are able to maintain a high quality service to their airports.
279. Have they raised any issues about capacity in their airports?
(Mr Everitt) Not in the context of this investment, no. We have regular biannual discussions with them about the declared runway capacities at each of their capacity constrained airports but that is part of the normal course of events which has gone on now since probably the last seven or eight years. No, they have not raised any additional issues with us.