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Wednesday, 5 December, 2001, 15:30 GMT
Nats privatisation 'financially flawed'
Air traffic control tower
Revenues to the UK's air traffic control service were hit by the 11 September attacks
The 750m privatisation of Britain's air traffic control system, Nats, was never going to be financially viable, an official from aerospace giant BAE Systems has said.

Nats has been in financial difficulties since the 11 September attacks on the US, which caused a slump in trans-Atlantic traffic from which it makes about 44% of its income.

BAE Systems, which withdrew from the bidding race for Nats in October last year, would not have taken over the service even if offered it for free, BBC News Online has learned.

"We withdrew because the business case just didn't add up," John Brownbill, a bid leader at BAE, said.

BAE withdrew after financial director George Rose and chief executive John Weston rejected the bid at a full board meeting, said Mr Brownbill.

The Airline Group, a consortium of seven carriers led by British Airways and Virgin Atlantic, took over Nats in July after beating a rival group led by services group Serco.

Foregone conclusion

"The government was very disappointed because we would have had the capability and been an acceptable owner to the users as well as the employees," said Mr Brownbill.

"But it wasn't going to be a money generating operation, unless there was a benefit somewhere else in the business," said Mr Brownbill referring to the charges the airlines pay to the Nats.

"After we withdrew, the Airline Group's win was a foregone conclusion", he added.

A senior member of the Serco-led bid team told BBC News Online that his financial backers had expressed their "satisfaction" when the consortium failed to win the deal.

Serco spent more than 10m in trying to secure the deal.

Traffic chaos

Just four months after buying a 46% stake in Nats, the Airline Group has reportedly asked the government to void an agreement to cut charges paid by airlines.

Under the privatisation deal, the Airline Group agreed to cut charges to British and international carriers by 17.5% over five years.

But Nats has since said its income, which was 600m last year from the 2 million flights through the UK, is expected to fall dramatically.

Now the Airline Group, which was originally given until 26 November to present the government with at 10-year business plan, is expected to be given an extension until March by the Civil Aviation Authority.

The group is also reportedly considering asking the government for more cash.

And unions representing the 5,500 strong workforce have said the consortium is considering further job cuts, which could affect engineering staff, who maintain the radars and computers, which may compromise safety.

The government retains a 49% stake in Nats, with staff holding 5%.

See also:

14 May 01 | Business
EU clears UK air traffic takeover
31 Jan 01 | UK Politics
Bids in for air traffic control plans
29 Nov 00 | UK Politics
Peers capitulate on air sell-off
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