Passengers will foot the bill for a questionable deal

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The Independent Online

Why sell off shares in air traffic control?

Stephen Byers, the Transport Secretary, argued that the sale of shares in National Air Traffic Services (Nats) was necessary to secure £10bn of investment for the system. But the move's many critics said it was a piece of political machismo to show the fundamental difference between Old and New Labour.

Who owns what?

The Government has 49 per cent of shares, the staff have 5 per cent and eight of Britain's airlines (the Airline Group) bought 46 per cent for £750m. A main criticism of privatisation was that a profit motive might be inimical to safety. The Airline Group made its bid on the basis that Nats would be run on a "not-for-profit" basis.

Has any other country sold off any significant part of its air traffic control service?

Fiji has sold the whole system.

Are there any other solutions to the need for investment?

One alternative would have been for the Treasury to drop its opposition to keeping Nats in full public ownership or to follow Canada, which has set up a public trust that raises its investment funds from landing fees and the sale of bonds guaranteed by the state.

What went wrong at Nats?

The downturn in the economy and fears over foot-and-mouth resulted in a five per cent decline in traffic last year, with eight per cent fewer visitors coming from the US. The attacks on 11 September led to a worse slump. Nats warned it was heading for a £50m loss.

What can be done?

The Government could have bought back the Nats shares. Instead it has chosen to provide £30m of taxpayers' money. Nats's management has embarked on a 20 per cent reduction in support staff and called for a five per cent real increase in fees instead of the decrease envisaged when it was sold off.Air travellers are likely to have to foot much of the bill.