NATS tracking Brexit’s likely impact on revenues

Continuing uncertainty over Britain’s decision to leave the European Union could hit the revenue NATS generates from managing traffic, the business has warned.

In its latest annual report, the UK air navigation service provider said that poor market and economic conditions could reduce revenues to levels below those assumed by the economic regulator in the next charge setting period which would impact shareholder returns.

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NATS said it was monitoring the key industry indicators on a monthly basis against its regulatory forecasts and noted that in the past it has taken action to realign its cost base with lower revenues and could also action traffic volume risk-sharing arrangements to offset a fall in income.

It said that over the longer term, the ultimate impact on air travel within its airspace would depend significantly on the type of relationship that is ultimately forged between the UK and the EU. Another important consideration for NATS would be the extent of its participation in the Single European Sky (SES) and the legislation governing the economic regulation of its en route business.

“Under the UK Transport Act 2000 the [UK] CAA has a duty to ensure that [its en route business] does not find it unduly difficult to finance its activities. Such a duty is not provided for in SES legislation.” it noted, adding, “after leaving the EU, we expect that the UK will no longer be able to participate, with a vote, in the process of drafting and approving SES legislation.

“This could mean NATS, uniquely in the UK, being economically regulated by a body in which the UK does not vote. We will therefore be keeping the implications of Brexit developments under review with the relevant government departments and the [UK] CAA.”

Asked in written questions in the UK parliament last week if the EU has blocked aviation regulators from having backstop talks with the UK to keep aircraft flying in the event of a no-deal Brexit, the parliamentary under secretary of state for transport Liz Sugg, admitted that although the UK was in discussions with Taskforce 50, the EU body charged with coordinating the European Commission’s work on all strategic, operational, legal and financial issues related to Brexit negotiations, the European Aviation Safety Agency had not been permitted to talk to the UK CAA regarding contingency planning.

“We have full confidence in the implementation period but we also have a duty to plan for the alternative,” said Sugg. Any implementation period agreed between UK and the EU would see the UK transition by 2020 and would be contingent on the UK and the EU agreeing a withdrawal treaty.

Tom Enders, the head of Airbus, also warned last week that in a worst-case scenario Brexit could result in production at its factories stopping and aircraft being grounded. “The certification for thousands of parts that are today part of the supply chain, part of our aircraft, would fall apart, and that could be a very troubling situation for us and could eventually lead to a standstill of production,” he said.

Read NATS urges reclaiming of economic control

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