NATS-Annual-Report-2015

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Annual Report and Accounts 2015 | NATS Holdings Limited Strategic Report 30 Safety, regulatory and economic environment (continued) Outlook for air traffic Chargeable Service Units 2015 2014 Year on year change (‘000s) (‘000s) % 9,815 9,747 0.7% Total UK traffic (flights): Domestic 375 377 (0.5%) North Atlantic 321 314 2.2% Other 1,520 1,471 3.3% Total 2,216 2,162 2.5% Oceanic traffic (flights): Chargeable flights 418 403 3.7% Overall, the volume of UK flights handled by NATS increased by 2.5%, reflecting a generally improving economic outlook. Domestic flights were broadly unchanged as Flybe reduced its schedules, particularly at Gatwick. Chargeable service units (the billing unit for UK en route services that is a function UK flights of in controlled aircraft airspace weight and distance flown) benefited less from improved transatlantic traffic as flights took more southerly routes due to weather, which led to shorter distances flown in UK airspace. UK Flights (Handled by NATS Centres) Historically, the growth in demand for air travel has been closely linked to the strength of the global economy, and for UK air traffic, to the economies of the UK, US and the Eurozone. The UK economy is now growing at its fastest rate since 2006 and is set for another year of solid growth in 2015 of 2.8% (source: Oxford Economics), supported by lower oil prices and low inflation. The US economy is forecast to accelerate in 2015 based on strong domestic economic fundamentals. Eurozone economies continue to build momentum with a weaker euro supporting stronger exports. However, there remain significant risks to this outlook. There are also risks to growth from a weaker outlook for emerging markets, with slowdowns in activity in China, Brazil and Russia likely to have an adverse impact on demand for air travel, and the potential escalation of conflicts in the Middle East and Ukraine. The STATFOR (February 2014) forecast assumes that flight volumes will grow by 1.9% per annum on average through RP2. Traffic levels are expected to return to the prefinancial crisis peak (2007) shortly after the end of RP2. Our own internal forecast, produced in December 2014, and the most recent STATFOR forecast produced in February 2015 are materially consistent with the forecasts on which the RP2 settlement is based. 2,600 UK Flights (000s) 2,500 2,400 2,300 2,200 Actual (2005-2014) CP3 Forecast (Sep 2010) RP2 Forecast (Feb 2014) 2,100 2,000 1,900 CP3 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 RP2 Strategic Report
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