'Railtrack' alarm over air debacle

British Airways and Virgin Atlantic have warned the Government that there is a "significant risk" of the part-privatised national air traffic control system being forced into a Railtrack-style collapse.

Coming from two shareholders in Nats, the stark warning will be a huge embarrassment to Transport Secretary Alistair Darling, who has attempted to maintain the Government's line that the system is secure.

However in separate letters to the Civil Aviation Authority (CAA), obtained by The Independent on Sunday, the airlines argue that unless Nats is allowed to increase its charges, the business could be forced into administration.

In a three-page letter, Virgin says: "It is in no one's interest that we have a repeat of the Railtrack collapse. Yet that is precisely what will happen unless the CAA joins with the Government, Nats, The Airline Group and the banks to work together to find a way out of the current impasse."

BA's six-page submission to the CAA warns: "Without a modification to the price cap, there is a significant risk of Air Traffic Administration with the subsequent discontinuation of the [public-private partnership] model."

Under the 2000 Transport Act, if Nats goes into administration the Transport Secretary has the power to provide new grants and loans to the system and guarantee interest payments to creditors. This would effectively mean the re-nationalisation of Nats.

Air traffic control was plunged into crisis after the terrorist attacks of 11 September, which led to a sudden reduction in flights. Nats has calculated that, as a result, it will lose £230m in revenues.

The CAA is considering Nats' application to increase the amount of money it charges airlines for its services. The regulator is due to make a ruling before the end of the month. If the regulator says "yes", this will trigger up to £65m of new investment into Nats from airports operator BAA, to be matched pound-for-pound by the Government. This will allow Nats to reduce its £780m debts and trigger a £1bn modernisation programme.

If the application is rejected then Nats admits that it doesn't have a Plan B. A spokesman for The Airline Group, which owns 46 per cent of Nats and whose members include BA, Virgin, easyJet and BMI British Midland, said: "No one is contemplating that happening."

While in opposition, the Labour Party famously declared that "our skies are not for sale". But as soon as it got into power, Labour dusted down the Conservative's plans to sell off the service.

From the start the CAA objected to the plans and there is now a suspicion among The Airline Group members that the decision on charges could be motivated by its opposition to the sell off.

In its letter, Virgin says: "No doubt [the regulator] is tempted to say, 'I told you so'. That would be an unfair reaction."

Prospect, the union representing the air traffic controllers, has warned the Government that the financial crisis surrounding Nats now poses a "very real risk to safety".

Earlier this month, Prospect's national secretary David Luxton urged Mr Darling to cut short his summer parliamentary break to hold urgent talks on Nats. But Mr Darling has told the union that he won't discuss the matter until he's back in Westminster.