Is the UK market for Terminal ANS competitive?

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The 14-month transition of tower services from NATS to Air Navigation Solutions Ltd. (ANS Ltd) at London Gatwick airport was completed successfully on 1st March 2016. ANS Ltd, a wholly-owned subsidiary of Germany's DFS group, is expected to provide air traffic control and air traffic engineering services over a 10-year period at the world's busiest single runway airport.

Although the market for terminal air navigation services (TANS) in the UK has been liberalised since 1985, changes of service providers at major airports such as Gatwick (to ANS Ltd) or Birmingham (to self-supply) have only been seen in more recent years. As a result of these changes, NATS Services Ltd's share of the aerodrome ATC market based on aircraft movements in the UK is expected to fall to approximately 40% (2017) from 60% (2013).

Nevertheless, it was as recently as 3 years ago that the UK CAA concluded, in its assessment of the UK ATC market, that there was no contestability in the market for ANS at UK airports. This was primarily due to a much lower level of competitive activity in the provision of approach services – indeed approach services were also excluded from the Gatwick contract (handover from ANS Ltd to NATS takes place at 4000ft). One of the barriers considered by ANS Ltd will have been the high transition and set up costs required. Another will have been the Trust of a Promise (ToaP) which gave some NATS staff the right to choose not to transfer to the new operator. The enforcement of ToaP means that the new entrants would have to price in additional costs to train and replace staff who do not transfer and, in the case of Gatwick, the costs of seconding 24 employees from NATS to ANS Ltd for the next two years to support operations.

A recent update performed by the UK CAA on SES (Single European Sky) market conditions for Terminal ANS concluded that market conditions exist but the CAA did not assess whether the market is effectively competitive. For the CAA to consider that a competitive market exists, it is likely that several more airports will need to award tenders as a result of competitive processes – step forward Luton, London City, Edinburgh and Glasgow who are all approaching their contract expiry dates.

NATS might feel aggrieved by a situation in which their market is completely open to competition whilst many other European aerodrome ATC markets are not. Only a few countries (such as Sweden, Germany and Spain) have any competition at all and the UK is the most competitive environment in Europe by a considerable margin. For a true contestable market to exist, all European States need to open their ATC markets to competition.

For more on this topic, read our recent newsletter article: How will competition improve Air Navigation Services?

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Irisa Chiu
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