Nats has £140m 'black hole' in business plan

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Britain's part-privatised air traffic control service revealed a £140m "black hole" in its business plan yesterday. The massive turnaround in the fortunes of National Air Traffic Services (Nats) was disclosed to employees as ministers were trying to finalise details of a £30m emergency government loan to the organisation.

Last March, when the Government agreed to sell 46 per cent of the shares in Nats to the country's biggest airlines, the new company claimed it would make a £60m surplus. But after the atrocities on 11 September, that projected profit was revised to a predicted £50m loss. Yesterday Nats employees were told the deficit would reach £80m.

Although the company had budgeted for a 5 to 6 per cent growth in traffic in January, revenue-earning flights in fact slumped by 9.6 per cent. The management confirmed that a £30m loan was being negotiated with the Government, a figure the banks backing Nats have pledged to match. But Nats sources claimed the Exchequer would earn a "commercial return" on the debt.

The deep financial problems experienced by the company began with the global downturn early last year, continued with the foot-and-mouth epidemic that caused a tourism drop, and became much worse when air travel slumped in the wake of 11 September.

Iain Findlay, a national official with the air traffic controllers' union Prospect, said the company was not yet "out of the woods". He said that while the organisation was meeting its revised targets, there was a great deal more to be done to ensure Nats remained profitable and was able to sustain investment on a long-term basis.

He said there was still considerable concern over whether the Civil Aviation Authority, the industry's regulator, would agree to an increase in the fees paid by airlines to Nats. Originally, Nats said it would reduce such charges in real terms by 4 per cent in 2003 and 5 per cent in both 2004 and 2005. Sources at Nats said it would make a "small trading profit" this year and the overall £80m loss would contain one-off costs such as the air traffic control centre at Prestwick in Scotland, where construction has been suspended.

Don Foster, the Liberal Democrats' transport spokesman, said the "huge turnaround" in the fortunes of Nats showed part-privatisation was a "fundamentally flawed idea" because the Government would continue to have a huge responsibility for such a vital service. The state has kept a 49 per cent stake in the company with employees taking 5 per cent.

Mr Foster said it was important to ensure now that the organisation maintained its strategy of establishing two air traffic control centres: the £625m complex at Swanwick, Hampshire, which is already operational, and the new centre at Prestwick.