Air traffic firm denies cash crisis

Nats suffered in the air travel slump after 11 September

The board of Britain's recently part-privatised air traffic control service is meeting to discuss its financial problems.

The session comes amid reports that the banks which underwrote the privatisation are threatening to foreclose on their loans.

National Air Traffic Services (Nats) has denied that it is edging into bankruptcy after losing the support of financial backers.

Four banks - Abbey National, Barclays Capital, Halifax and Bank of America - will threaten to force the service into administration at the meeting, newspaper reports have suggested.

A spokeswoman for Nats admitted that the service had suffered losses in the slump in transatlantic air travel after the 11 September attacks.

Nats makes its money by charging aeroplanes to use British airspace and to land in the UK.

'Supportive'

But the company spokeswoman said that the banks backed the company's efforts to cut costs and there was "no question of administration".

Stephen Byers oversaw the part sell-off of Nats

"Since 11 September we have been working with the banks to keep them fully appraised and they are fully supportive of the steps we are taking," she said.

However, the BBC's Tom Symonds pointed out that the board is usually the last to know about any moves against them.

According to The Independent newspaper, the banks will warn officials in the Department for Transport, Local Government and the Regions (DTLR) that the government must inject cash to save the system.

Mr Symonds added that the government will be under pressure to invest tens of millions of pounds into the company.

But a DTLR spokesman confirmed that the banks had not demanded compensation from Mr Byers.

Shadow transport secretary Theresa May described the situation as "another blunder" on Mr Byers' part.

"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."

Warning

A group of seven airlines - including British Airways, Virgin Atlantic and Easyjet - has owned 46% of the company since July 2001.

The government holds 49%, and employees own the remaining 5%.

But the Civil Aviation Authority (CAA) warned at the time that the part-privatised service may not be able to weather poor economic conditions or an air disaster and advised against the privatisation.

Since 11 September, Nats has cut £200m from its costs and has asked the CAA to review its pricing formula in an effort to raise extra cash.