NATS-Annual-Report-2015

Annual Report and Accounts 2015 | NATS Holdings Limited
Strategic Report 27
Safety, regulatory and
economic environment
(continued)
Single European Sky (SES)
SES is a European Commission (EC) initiative to reform air
traffic services to provide a safer, more environmentally
sound and cost effective service. Performance schemes
have been established under the SES legislative framework
which regulates air traffic service provision. This also
requires airspace management within Functional Airspace
Blocks 9 (FABs) to improve operational efficiencies and for
technology to be modernised and interoperable.
Economic regulation
The economic regulatory framework for NATS’ UK en route
and Terminal Air Navigation Services (TANS) at large UK
airports (more than 70,000 movements per annum) is
governed by the SES performance scheme.
For en route services, European performance targets are
set for safety, capacity, environment and cost efficiency and
Member States are required to develop Performance Plans
for FABs consistent with those targets. The UK and Ireland
form a FAB and NERL’s en route service forms a major part.
After consulting with customers in 2014, NERL submitted to
the CAA a plan for RP2 which met each of the performance
targets, including real price reductions of 18%.
After review, the CAA set even more challenging cost
efficiency targets, requiring real price reductions of 21%.
The revised plan, submitted as part of the joint UK/
Ireland FAB plan, was assessed in March 2015 by the
EC as consistent with European targets.
The main features (see table below) of NERL’s plan are:
> maintaining safety and service quality while handling a
projected 13% increase in traffic volumes;
> reducing prices in real terms by about 21%; and
> enabling reductions in fuel and CO 2
emissions, delivering
savings of up to £180m p.a. to airlines by 2019.
This is a challenging regulatory settlement which will
reduce our revenue and margins. However, we will work
hard to deliver the customer benefits associated with
this plan by implementing our safety strategy, deploying
new technology and supporting the UK’s Future Airspace
Strategy (see below).
Under the SES regulations, if market conditions do not exist
for TANS, air traffic service providers may be subject to
European cost efficiency targets and required to disclose
their costs by airport.
9 A FAB is an airspace block
based on operational
requirements and
established regardless
of State boundaries,
where the provision of
air navigation services
is enhanced through
cooperation between
air navigation service
providers.
Summary of the main features of NERL’s plan for RP2
Dimension Performance measure RP2 plan
Safety % lower safety risk per flight 13%
Capacity
En route average delay per flight (all causes)
En route average delay per flight (NERL attributable)
6-12 seconds
c. 6 seconds
Environment Enabled fuel savings per annum by 2019 £180m
Return Real return on regulatory assets 5.9%
Cost efficiency Real price reduction through RP2 (c. £480m) 21%
Long term investment plan Capital investment £575m
Strategic Report