Memorandum by the International Air Transport
Association (IATA) (AT 13)
THE AIR TRANSPORT INDUSTRY POST 11 SEPTEMBER
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.
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.
1. THE ECONOMIC
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
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
The effects on the industry of the terrorist
attacks can be summarised as follows:
|Loss during groundings||Added security measures
|Loss of public confidence||Insurance premiums
|Sharp drop in passenger demand||Cost 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:
IATA MEMBERS' AVERAGE
|Passenger Traffic, % change over 2000|
|Passenger Seat Capacity, % change over 2000|
|Passenger Load Factor (% points)||69%
|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 providersshort
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.
2. WAR RISK
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
expensiveabout 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
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
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.
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 industryIATA,
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 meetand in some cases exceedthe
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.
In close collaboration with the industry, governments need
to explore and implement the latest technologies to enhance the
effectiveness ofand speed upthe 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.
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
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.
4. SLOT ALLOCATION
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)
The definition (and legal nature) of slots, and
limitations on exchanges;
Preferential treatment for intra-EU routes (and
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.
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 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
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)
THE AIR TRANSPORT INDUSTRY
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.
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
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
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
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.
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
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
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
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
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
33. Will all the equipment of the current Scottish Centre
be in condition to continue, (some of it will be 35 years old
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.
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
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.