Press Release - Refinancing the Public Private Partnership for
National Air Traffic Services
7 January 2004
Sir John Bourn, head of the National Audit Office, reported
today that the refinancing of the public private partnership for
NATS, completed late last year, has put the Company on a much more
robust financial footing, enabling it to make further vital
investment to expand the capacity of Air Traffic Control to meet
future growth and limit delays to flights.
An NAO report in July 2002 concluded that the PPP contained many
positive elements, but that the financial position of the Company
needed strengthening to enable it to make further investment. Since
then there has been a major refinancing exercise involving NATS,
its banks, the Department for Transport, The Airline Group (which
remains the Government's Strategic Partner in NATS), a new investor
(BAA plc), and the Civil Aviation Authority.
Following the refinancing, NATS’ indebtedness to banks has been
reduced, replaced in part by a £130 million injection of funds,
half from the Government and half from BAA plc, and in part by the
proceeds of a bond issue. The bond and restructured bank loans and
facilities come with fewer 'strings' attached than the financing
arrangements put in place at the time of the PPP. NATS now has a
much stronger buffer of cash reserves to cope with possible future
traffic shocks. The robustness of the new financial structure has
been tested by modelling a wider range of scenarios than those that
were used when setting up the PPP, particularly for severe
downturns in traffic. More parties participated in the testing than
was the case for the initial PPP, notably NATS itself and the Civil
Aviation Authority.
This was a major and complex programme that took almost two
years to complete. It involved a £170 million cost reduction
programme within NATS, a £60 million temporary working capital
facility, finding a new shareholder, extensive revisions to NATS’
major bank facilities and the Civil Aviation Authority’s relaxation
of the limits on NATS’ charges to airlines. For much of this time
NATS was exposed to disruptive uncertainty and its investment
programme was delayed. During this period, NATS maintained its
strong safety record.
Sir John said,
"In 2002 we expressed reservations about the original
financial structure of the PPP. But other Departments can learn
useful lessons from the way the Department for Transport has played
its proper part in the reconstruction, acting as a responsible
shareholder, strengthening the company but ensuring that any
additional public funds were matched by a new private
investor."
Notes for Editors
National Air Traffic Services Ltd (NATS) is the company which
holds a monopoly over the management of controlled airspace over
the United Kingdom and, with its Irish counterpart, the North East
Atlantic. It also provides air traffic control at most of the large
airports around the country. The costs of its services are met by
charges to users, mainly airlines. Until the Public Private
Partnership (PPP) it was owned by the Civil Aviation Authority,
which remains its regulator. Civil Aviation policy is the
responsibility of the Department for Transport.
The Public Private Partnership for NATS was signed in July 2001
between the Secretary of State for Transport, and The Airline
Group. The Airline Group comprises: British Airways, Virgin
Atlantic, British Midland, MyTravel, Monarch, Britannia and
Easyjet.
In the refinancing The Airline Group did not inject new equity
into the business to match Government’s, but remains the
Government's strategic partner in NATS.
Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
The Comptroller and Auditor General, Sir John Bourn, is the head
of the National Audit Office which employs some 800 staff. He and
the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 01/04
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