The UK Civil Aviation Authority today published for consultation its initial proposals to establish new price controls for NATS En-Route PLC ("NERL"), a subsidiary of NATS Holdings. The controls regulate the prices NERL can charge airlines for the services it provides in UK airspace.
The UK Civil Aviation Authority has proposed that NERL can increase the unit rate for its regulated activities over the period 2023 to 2027 inclusive by approximately 27 per cent from £43 to £54 in 2020 prices, or £47 to £65 in nominal terms.
Despite these increases, NERL's charges will be below the average level experienced in Reference Period 2, referring to 2015 to 2019, (RP2) price control period from 2015 to 2019 and should remain broadly in line with NERL's European comparators.
In addition to providing for efficient operating costs, capital investment and regulated returns for the next five years, the regulator's proposals would allow NERL to begin to recover its costs from the period affected by the covid-19 pandemic, consistent with the traffic risk sharing arrangements in NERL's licence at the time.
This represents around £6 per service unit. The other factors that contribute to the increase in unit costs include lower forecast numbers of flights at the start of the NR23 period (the price controls for 2023 to 2027 calendar years).
It is estimated the cost of these proposals would increase the average cost of UK en route air traffic services by around £0.43 on average, to around £2.03 per passenger per flight.
Paul Smith, Director of Consumer and Markets at the UK Civil Aviation Authority, said:
"Today's announcement will incentivise NERL to continue to put in place resources and investment required to deliver a resilient service while air travel numbers continue to recover following the impact of the covid-19 pandemic.
"In addition to managing price increases, these proposals include challenging service quality targets for delay and flight efficiency, designed to deliver positive outcomes for consumers."
Notes to Editors:
- Full consultation can be found at NATS En Route plc NERL Licence | Civil Aviation Authority (caa.co.uk)
- Under the Transport Act 2000 the Government issued a licence to NATS (En Route) plc (NERL) to provide en route air traffic services in the UK.
- The Act gives the Civil Aviation Authority the role of economic regulator of NERL. The Civil Aviation Authority exercises this role mainly through monitoring and enforcing the conditions in the Licence and through modifications to the Licence.
- Nominal prices are forecasts based on the OBR March 2022 inflation forecast.