U.K. air-traffic controller NATS Holdings Ltd. could be floated
as its shareholders look to reduce their holdings, but its chief
executive remains focused on growing the business with a push
deeper into international markets.
In the wake of its high-profile handling of the closure of
airspace after the eruption of a volcano in Iceland spewed ash over
much of Europe earlier this year, a sale would allow shareholders
to realize at least part of the value of their holdings at a time
when public and private sector budgets are under pressure.
A variety of options were under consideration, including
"whether it will be sold through an (initial public offering) or a
trade sale" or even both, NATS Chief Executive Richard Deakin said
in a recent interview.
Deakin expects to learn over the next few months the extent and
form of a sale. "I think it's likely there will be a fair chunk of
shares" would be sold, he said.
Its two key shareholders are the British government, with a 49%
interest, and the Airline Group, a consortium of seven airlines,
with 42%. Each is looking at what percentage of its stake to sell,
Deakin said. Another 5% stake is owned by employees and U.K.
airports operator BAA Ltd. holds 4%.
The U.K. Treasury didn't return calls and the Airline Group
couldn't be reached for comment. The Airline Group comprises
British Airways PLC (BAY.LN), Deutsche Lufthansa AG (LHA.XE) unit
bmi British Midland, Virgin Atlantic, TUI Travel PLC's (TT.LN)
Thomson Airways, Monarch Airlines, easyJet PLC (EZJ.LN) and Thomas
Cook Group PLC (TCG.LN).
At the same time, Deakin hopes to take the opportunity to double
the work force's shareholding to 10% to better engage the 5,000
workers and ensure their interests are more closely aligned with
the company's goals. Even though 80% to 90% of its employees are
unionized, NATS hasn't suffered industrial action since 1981.
National Air Traffic Services was established in 1962 but
rebranded as NATS in 2006. In July 2001 it became a public private
partnership, which led to the division into the regulatory part,
NATS (En Route) PLC, which is responsible for U.K. commercial
airspace, and NATS Services Ltd., which provides takeoff and
landing services at airports.
Following the terrorist attacks of 9/11 in the U.S., NATS was
forced to restructure after declines in traffic volumes, which led
to the government and BAA, a unit of Spain's Ferrovial SA (FER.MC),
each investing GBP65 million in NATS and BAA receiving its
shareholding.
NATS last year was responsible for guiding 2.2 million flights
through U.K. airspace and the eastern part of the North Atlantic.
It generated revenue of GBP767.3 million in fiscal 2009.
About GBP175 million of that revenue comes from NATS Services,
which Deakin aims to grow, particularly in the Middle East and
Asia-Pacific regions, where demand has bucked global trends over
the past couple of years and the rates of growth provide attractive
expansion opportunities.
NATS in July signed a deal with Oman's Ministry of Transport to
redesign its airspace, or the routes that aircraft travel, in order
to increase capacity, efficiency and safety. Deals like that were
becoming increasingly important given the political fragility of
the region and the proximity of Iran, Deakin said.
"There are also a lot opportunities for consultancy, designing
airspace so that it's efficiently handled," Deakin said, adding
NATS can also design airports to maximize efficiency.
Winning further business will be easier now that it has a more
prominent profile following volcanic eruptions that grabbed the
world's attention. Air-traffic controllers were in the spotlight in
April when they closed airspace over much of Europe for all
commercial flights on safety grounds after Iceland's
Eyjafjallajokull volcano erupted, and ash that billowed into the
sky was blown across the continent.
Deakin, 46 years old, had been in his job at NATS only two weeks
when the crisis hit. Sitting in a room equipped for coordinating
emergencies, the former Senior Vice President for Air Systems
Division at Thales S.A. (HO.FR) recounts how he watched images of
the volcanic eruption on a bank of televisions covering one wall
and relayed the order to close airspace to air-traffic controllers
in the 2,000-square-meter operations room below.
"It wasn't an easy decision," Deakin said, adding, "It hurt us
commercially as well."
Deakin is confident the decision was the correct one. Even then
Prime Minister Gordon Brown called to voice his support, Deakin
said.
A spokesman for the Labour Party declined to comment.
"I'm absolutely convinced the decisions that we took were timely
and proportionate and kept safety at the forefront," Deakin
said.
He said the existence of ash "wasn't a figment of anyone's
imagination" with the pilots of the first three Boeing Co. (BA) 747
aircraft--commercial flights flown by British Airways PLC
(BAY.LN)--that landed at Heathrow after airspace was reopened all
complaining of a sulphur smell as they descended from 6,000
feet.
BA declined to comment.
Still, Deakin said there would be significant differences if the
volcano erupts again, namely that Europe would have a more
consistent approach and that new rules would provide operators with
more flexibility to allow aircraft to fly through volcanic ash
provided operators, airlines and regulators were satisfied that a
safe case had been demonstrated.
- By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842
9299; kaveri.niththyananthan@dowjones.com
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