Allocation of costs within NATS

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Client Civil Aviation Authority (CAA)
Dates 2014
Service(s)Policy & Economics, Regulation & Competition, Review & Evaluation
CEPA, in association with BDO, provided advice to the CAA on whether it can rely on NATS’ cost allocations and apportionments. The aim is to assist CAA in regulating charges and setting cost effectiveness targets for the NATS business overall.

The consortium’s main objective was to establish whether the allocations, attributions and cross charges (including between operating cost and capital expenditure) are fit for the purpose of regulation by CAA. The key areas of NATS’ allocations are between:
  • its licensed business and unlicensed business;
  • the different segments of the licensed business; and
  • the allocations that NERL makes to operating and capital costs.
The specific issues which the consortium investigated are:
  • the suitability of cost allocation methods;
  • the adequacy of updates to cost allocation since the previous review (in 2009);
  • the transparency of the update process, including the process for sign-off procedure for accepting costs from affiliates; and
  • consistency of application of allocations and cross-charges.