Update December 20th, 2004

 

Well Congress is grooving into the Christmas power down after their early shove was nixed by the goofiness within the Appropriations Omnibus Bill and the feet dragging on the 911 intelligence reforms.  So as they complete their forced overtime shifts and start to spool for the season I will too as will the FAA and to some extent NATCA. 

All I have for you this week are some lovely tidbits in a couple of articles on the privatization front.  It seems that Germany will be the next national operation to succumb to the intoxicating lure of privatization.  The advertised benefits of less cost, supposedly the same quality and safety, less personnel expenses and hey good news... some fat cats get to make a buck.  The European systems are quite different from ours but that doesn’t seem to influence those who blindly proclaim grandiose benefits if we would just privatize the US ATC system.

And some of those hoping to benefit, SERCO, are mentioned in the next article.  Aside from their European operations, their quest to outdo NAVCANADA in picking off ATC systems, the new towers in Hawaii and Guam that they’ve added to their extensive list of US towers and the sweetheart cash-laden deal they got for developing the ATC system in Iraq it seems they are shoring things up with a few more stateside acquisitions to feather the nest.  Does anybody remember the Beatrice commercials of a few years back? (We’re Beatrice!)  It seemed that consortium was intent on taking over the world too.

My apologies for the Xmas coal folks.  I won’t be putting out an update next week as I will be doing what hopefully many of you who were lucky enough to get leave will be doing, traveling to spend time with family during the holidays.  And to those left behind to staff the scopes, LC and GC and all the various needs within the NAS you have my thanks for keeping the skies safe.  Here’s wishing you all a merry Christmas and a prosperous New Year.

Grant Anderson

ganderson@natca.org

Reuters (12/16/04): Germany sets plans to privatise air traffic control.

BERLIN, Dec 15 (Reuters) - The German cabinet has drawn up plans for the privatisation of almost three quarters of the country's air traffic control company Deutsche Flugsicherung DFS, a spokesman for the Transport Ministry said on Wednesday.

The cabinet had decided to open 74.9 percent of the business to private investors but would retain the remaining share, the spokesman said.

"It is important for us that the privatisation improves DFS's flexibility and market orientation," he added.

Separately, Frankfurt airport operator Fraport (FRAG.DE) said on Wednesday it wanted to set up a joint venture with DFS once it was privatised.

The venture would offer control-tower services at airports in Germany and later abroad, Fraport chief Wilhelm Bender told Reuters at the fringes of an event at Frankfurt airport.

He ruled out a direct capital investment in DFS.

The ministry spokesman said it was too early to comment on any possible buyers for DFS. Aviation experts estimate Germany could gain a sum of at least 100 million euros from the sale.

Lufthansa (LHAG.DE) chief Wolfgang Mayrhuber said the airline "wouldn't be averse" to acquiring part of DFS.

German air traffic controllers supervise more than 2.5 million flights a year which land at or depart from German airports or fly through German airspace.

Serco

Business Wire: Serco to Significantly Enhance US Market Position Through Acquisition of RCI, a Leading US Federal Government Service Provider

DATELINE: HERNDON, Va. Dec. 16, 2004

Serco Group plc ("Serco"), one of the world's leading service companies, today announces that it has agreed to purchase RCI Holding Corporation ("RCI"), parent company of Resource Consultants, Inc. (RCI) of Vienna, Virginia. RCI is an important provider of systems engineering, IT services, supply chain management and business process management services to the US Department of Defense and other federal agencies.

This acquisition of RCI from CM Equity Partners, the majority owner, together with other shareholders, will materially increase Serco's competitive position in the world's largest service contracting market, through RCI's enhanced technology capabilities and its strong customer relationships with the US Federal Government.

Serco will integrate RCI with its existing North America business and the enlarged business will be led by Steve Cuthill, Serco's current group chief operating officer.

RCI was founded in 1979. Key services include HR focused business process management, IT services, systems engineering, supply chain management and strategic consulting. RCI's primary market - the Department of Defense - represents the largest portion of federal spending, accounting for more than 75% of total contract amounts.

The acquisition supports Serco's North American strategy in that it will:

-- Expand its position in the World's largest service contracting market: the US Federal Government represents the largest global market for managed services. It is expanding rapidly as the US government seeks to improve services and gain better value for money in the face of an ageing Federal government workforce and increasing costs

-- Broaden the customer base: RCI's Federal defense customer base complements Serco's largely civil agency and State customer base. Both have a strong record of contract renewal and delivering growth achieved through long term customer relationships

-- Enhance capabilities: RCI's significant technological and IT services capabilities complement Serco's North American change management and service delivery skills

RCI has a strong record of growth. In 2003 RCI's revenue was $270m and for 2004 RCI's revenue is projected to increase at a double digit rate. The Boards of both RCI and Serco believe that there are good prospects for continued growth given the US government's intentions to further increase the purchase of contracted services.

The majority of RCI contracts are of a lower risk 'cost plus' or 'time and materials' nature.

As usual for an acquisition of a business undertaking US government contracts, clearances are required under the US Department of Treasury Committee of Foreign Investment in US (CFIUS) regulations and under Hart-Scott-Rodino. Serco is confident of being granted approval, which is anticipated within 90 days.

Christopher Hyman, Serco's Chief Executive, said: "North America is one of our chosen markets. Opportunities in the Federal market are substantial for companies with proven capabilities and qualifications. This acquisition will give us deeper and broader access and will enable faster and more profitable growth.

"Critically, the two organizations share similar cultures based on principles of excellent customer service, long term relationships and employee development and we believe that this is the right platform from which to build."

RCI president George Troendle said: "This transaction positions RCI to continue our record of growth and will give us the resources and capabilities to achieve our broader strategic vision - to expand our US business and enter the global services market."

Notes to editors

Serco is one of the world's leading service companies. By successfully managing organizational design and change, it helps national and local governments and commercial clients around the world improve their services.

Serco's North American business employs 2000 people and operates at the Federal, State and local level. Serco North America had 2003 revenues of $127m and key activities include air traffic control for the Federal Aviation Administration, fleet management and local government services.

RCI, founded in 1979, is a leading professional services firm supporting the Department of Defense, the US Military, the US Postal Service, federal civilian agencies, state and local governments, and commercial customers. RCI is an ISO 9001:2000 and 14000:1996 registered and is SEI CMM Level 2 certified. The Company has been recognized by Washington Technology magazine as one of the Nation's Top 100 Federal Prime Contractors, and was recently selected as one of five Finalists for the "Federal Prime Contractor of the Year Award". RCI provides a wide range of service offerings, including strategic consulting, systems engineering, information technology, human strategies, enterprise outsourcing, and supply chain management. RCI's primary market - the Department of Defense - represents the largest portion of federal spending, accounting for more than 75% of its contracts.

CM Equity Partners is a private equity investment firm focused on middle market companies operating primarily in North America. CM Equity Partners has extensive experience in the federal and business services sectors. Since 1994, CM Equity Partners has acquired 29 companies, approximately half of which primarily serve the U.S. federal government. CM Equity Partners is affiliated with Carl Marks & Co, Inc., one of the oldest merchant banking firms in the United States.

Legg Mason Wood Walker, Inc. initiated this transaction and served as a financial advisor to RCI and CM Equity Partners.