£60m rescue for air traffic control

A £60m rescue deal has been pieced together to save the recently part-privatised National Air Traffic Services. The Government is to put in £30m and four leading banks are to contribute the rest.

The funding comes after suggestions that Nats was on the brink of being plunged into administration, prompting a fresh crisis for Transport Secretary Stephen Byers.

Today bankers said that they have agreed to lend the company the extra money which should tide it over until the end of the year. The Government has also been forced to put up taxpayers' money for the cash-strapped company. In return Nats is applying to the Civil Aviation Authority for permission to charge airlines more for using British air space.

Nats' crisis was prompted by the 11 September terrorist attacks in America. Air travel plummeted and the company, which is funded by airlines flying over Britain, found itself desperately short of money. The group was privatised last year despite a barrage of criticism from aviation experts.

The £623m new national air traffic centre opened last month at Swanwick, near Southampton. It was six years behind schedule and will take two years before there is any significant increase in the capacity of flights handled. The Government now owns 49% of it and the rest is owned by a group of airlines and Nats staff.

As part of the privatisation deal, Nats was lent £1.4bn by four banks - Barclays, Abbey National, Halifax and Bank of America. Half of that money was used to pay for the privatisation and the rest, which was intended for capital expenditure, has not been touched.

At a board meeting today, Nats finance director was expected to tell directors that he has secured the £60m emergency money. The hope is that the CAA will now agree to let Nats charge more. If the CAA refuses to play ball, however, Nats will be forced into a massive debt restructuring.

The switch to a privatised system last summer has been severely undermined by the slump in air travel since 11 September. Nats relies on payments from the airlines and the new structure was based on forecasts of continuing traffic growth of 6% a year.

The company relies disproportionately on the transatlantic routes worst hit by the terrorist hijackings, with 44% of its income from flights to and from North America. Union leaders who fiercely opposed the privatisation along with a number of Labour MPs today said the Government appeared to have little option but to take back control of air traffic services.

Iain Findlay, national officer of the air traffic controllers' union Prospect, said: 'These latest developments underline that it should never have been privatised. The banks are only interested in short-term profit and as soon the going gets tough they are demanding their money back. The Government has to seriously look at taking Nats back into public control. Within a year we have gone from having the best air traffic control system in the world to one that is facing bankruptcy.'

According to the CAA, the new body was not strong enough to survive an economic downturn or a major aviation disaster. Within weeks of the sell-off, the 11 September terrorist attacks led to a huge drop in passenger numbers.

Shadow transport secretary Theresa May described the situation as 'another blunder' on Byers' part. She said: 'Following on from problems on the railways, it now appears he is facing severe problems in aviation. He has to find a plan to ensure Nats stays afloat and he has to find it fast.'