Supplementary memorandum by National Air
Traffic Services (NAT 6B)
THE FINANCIAL SITUATION OF NATS
1.1 The Committee has announced its intention
to hold a further hearing on 11 June. This supplementary memorandum
provides an update on the three issues which are to be the subject
of this hearing namely:
the Civil Aviation Authority's (CAA)
consultation document setting out its preliminary conclusions
on NATS' application to re-open the Eurocontrol charge control;
the legibility of text on screens
at the Swanwick centre; and
the service delivery failure experienced
on 17 May.
2. CAA CONSULTATION
2.1 The Committee will recall that NATS
assessed the revenue loss from the reduction in traffic following
the tragic and unprecedented events of 11 September at £230
million. We therefore applied to the CAA to increase prices by
RPI + 4 per cent, +3 per cent and +2 per cent in the remaining
years of the current Control Period to repair this shortfall in
NATS' income. The Transport Act 2000 provides for a reopening
of the price cap in exceptional circumstances and, in NATS' view,
the events of 11 September constitute such an exceptional event.
2.2 The CAA issued a Consultation Document
on 21 May setting out its preliminary conclusions on the application.
The document notes that NATS is a fundamentally sound business
operating within a unique PPP environment, which has performed
well in delivering a business plan that aims to close the gap
between demand and capacity, while improving NATS' cost-effectiveness.
The CAA accepts that NATS faces significantly lower projected
demand over 2001-2005 than was projected at the time of the PPP
but is "not convinced" that this amounts to a case for
re-opening the cap.
2.3 The CAA document recognises the importance
of establishing a sustainable financial structure for NATS at
an early date to give NATS a firm platform for expanding capacity,
but does not consider it justified that NATS' users should face
an increase in charges to secure this objective. Nevertheless,
the CAA accepts that if user airlines are sufficiently concerned
about the risk of adverse effects on NATS' performance and, consequently,
are prepared to pay somewhat higher charges to assist a financial
strengthening, the CAA will consider these views. Whilst the CAA's
preliminary conclusions are a disappointment to NATS, we see in
the consultation document a constructive basis for a solution
to NATS' financial difficulties. We are continuing to work closely
with the Airline Group and Government shareholders, the banks,
the CAA and our customers to resolve the issues.
2.4 We are developing a composite solution
that would involve all parties. For its part, NATS has committed
to delivering cost savings in excess of £200 million over
the remainder of the first Control Period to 2005. The Committee
will be aware from recent press reports that good progress has
also been made on the process of attracting new capital into the
business, and the Government has indicated that it will be prepared
to match an appropriate level of private sector investment. We
expect our lenders to make a number of concessions, including
some reduction in debt availability fees. A limited price rise
is part of this solution.
2.5. The consultation process on the CAA
document is now in progress and we are urging our customers to
support the PPP. Our customers and shareholders see NATS as the
pathfinder to the commercialisation of air traffic services throughout
Europe. The business is fundamentally sound, and PPP is already
achieving the goal of making NATS more business driven, commercially
aware and customer focused. Failure to resolve the current difficulties
would most likely lead to a change in the current framework, compromising
the investment programme and resulting in a return to the former
cost-plus financial regime and investment uncertainty. This would
not be in the interests of the industry or of the travelling public.
2.6 In summary, all of NATS' stakeholders
are working towards a composite solution to ensure that the company
is able to implement its Business Plan, invest in new systems,
and continue on its current path towards a more efficient and
more commercial service. We remain confident that the steps NATS
is taking in conjunction with its stakeholders, including the
CAA, will result in a successful outcome.
3. SCREENS AT
3.1 As the Committee will be aware, there
has been continuing interest in the media about the legibility
of the display screens at the Swanwick centre. In recent articles
it has been claimed that aircraft have been directed to the wrong
airport or wrong height level because of confusion due to the
size of the text employed on the displays.
3.2 These articles are inaccurate and at
no time have aircraft been sent to the wrong destination or to
the incorrect flight level. They are based on a misrepresentation
of reports made locally by NATS staff, as part of the overall
programme to encourage open reporting within the company. The
fact that these reports have been leaked and then misrepresented
in the media is a matter for concern, because the objective of
open reporting is to avoid blame and encourage learning and improvement.
3.3 The method of operation at Swanwick
is based on a team of three people to plan and control the movement
of aircraft in a sector of airspacetwo controllers known
as the tactical controller and the planner, plus an assistant.
Aircraft are controlled by the tactical controller. The articles
were based on reports made either by assistants or planners recording
observations on information that was, as part of standard operating
procedures, checked and corrected before the aircraft came under
the supervision of the tactical controllers.
3.4 A small number of controllers have reported
that the legibility of certain data text sets on the screens of
the control displays used by the planners is unclear. This issue
does not affect the displays used by the tactical controllers.
The Committee will recall that a joint working group, comprising
operational controllers, human factor experts, systems experts,
health and safety experts and NATS Chief Medical Officer, together
with representatives from management, the trade unions and the
CAA's Safety Representation Group, was established several months
ago to review the need for improvements to the displays in question.
Changes to the screen fonts have now been prototyped and the results
of initial consultations with staff, including some of those who
had expressed concerns, have been most encouraging. A general
consensus now needs to be established amongst operational staff
that these changes will meet earlier concerns. Subject to that
being achieved, the changes would be incorporated in the next
main software build scheduled for November or before if possible.
3.5 NATS has co-operated fully with the
Health and Safety Executive throughout this process, and on other
recommendations made by the HSE regarding the ergonomics of the
workstations. The CAA's Safety Regulation Group has been very
clear that safety neither is, nor has been, compromised by this
4. DELAYS ON
4.1 The Swanwick Centre suffered a major
reduction in capacity on Friday 17 May, the first technical problem
to result in significant delays attributable to the new system
since it went into operation in January. When we began to open
additional airspace sectors for the morning traffic at 6.30 am,
controllers found that they were unable to activate the workstations
required for these additional sectors. The Centre was thus left
in its overnight configuration of only 8 sectors as opposed to
22. To ensure that the limited sector configuration could safely
handle traffic we immediately imposed restrictions on traffic
flow of 50 per cent and, in some cases, departures were stopped.
4.2 Following extensive assessments of potential
causes, the problem was located to a faulty workstation. This
workstation had developed a fault in communicating with adjacent
workstations and became overloaded to the point where it could
not manage the data associated with opening additional ATC sectors.
The other workstations were brought on line successively from
9.00 am and full capacity was restored at 11.30 am. Procedures
have now been enhanced to deal with this issue, allowing a workstation
to be re-set without impacting on operations.
4.3 Subsequently, the Central Flow Management
Unit (CFMU) computer in Brussels failed at 12.15 pm. This is the
system that issues slots and manages updates to flow rates and
departure times across much of European airspace. The CFMU system
was not restored until 6.00 pm. During this period, under European
contingency procedures, flights departed from major airports across
Europe at pre-defined intervals (MDIs) but minor airports had
4.4 This was a disappointing episode for
NATS, for its customers and the travelling public and one for
which we offer our apologies. Whilst safety was not compromised,
and the technical issues were identified, isolated and resolved,
the episode has reinforced the urgent need to keep the risk of
further disruption to an absolute minimum. In order to achieve
this objective we have established a new task force aimed at implementing
improved risk and change management processes to mitigate the
risk of further disruption. Measures include the tightening of
rules on discretionary change, a review of all outstanding problem
reports, the introduction of even more rigorous risk analysis
procedures and a review of system architecture dependencies.
National Air Traffic Services Ltd
7 June 2002