Nats warns that PPP could unravel

By Clayton Hirst

Richard Everitt, chief executive of National Air Traffic Services, has warned that there is a "very strong prospect" of the part-privatisation unravelling and the company returning to the public sector.

The comments represent the strongest indication yet of Nats' dire financial position, triggered by last year's 11 September terrorist attacks on America, which threatens to turn Nats into a fresh Railtrack or British Energy.

According to Mr Everitt, the fate of the £765m public private partnership – under which BA, Virgin, easyJet and BMI took a 46 per cent stake in Nats – rests with the Civil Aviation Authority. Industry sources said that the regulator will publish its long-awaited ruling on Nats' application to increase its charges this week.

If the CAA says yes, it will trigger up to £65m of new investment in Nats by airports operator BAA, to be matched pound-for-pound by the Government.

However, in a report to the CAA, Nats says that if the application is rejected then "there is a very strong prospect of Nats' return to the public sector".

The report adds that the rejection of the application would mean that the "remaining choices [are] to revert to Nats' original, more significant, charge adjustment, or to face serious damage to users' interests resulting from severe impairment of expected air traffic services provision".

Speaking to The Independent on Sunday, Mr Everitt sought to play down the possibility of the part-privatisation being abandoned. "If CAA said 'no', we would have to go back to discussions with the banks and shareholders. We would also have to slow our £1bn investment programme. Going back to public ownership is at the bottom of the risk profile, but it is within the range."

In February, the Government was forced to bail out Nats with a £60m emergency loan. Mr Everitt said that Nats had not drawn on the facility, which expires at the end of the month. He added that as long as the CAA approves the application, Nats will not need another government handout, despite suffering a 16 per cent fall in revenues over the year.

Coming just a week before the start of the Labour Party Conference, and with the prospect of a government bail-out of British Energy, ministers will hope that the uncertainty surrounding Nats is resolved swiftly.

While in opposition, Labour insisted that "our skies are not for sale". But in power Nats became the party's first major privatisation.

Prospect, the union representing 3,500 Nats employees, has warned the Secretary of State for Transport, Alistair Darling, that there is a "very real risk" to safety as a result of Nats' cash crisis.

There have been reports that ministers have attempted to exert influence on the CAA to approve Nats' application. To the frustration of the Government, however, the CAA has remained fiercely independent.

Whitehall sources said that Mr Everitt had discussed a contingency plan with the Government should the CAA reject the application.