Byers in new row over £50m more for air traffic

Stephen Byers landed in a new row yesterday when the Government indicated it was prepared to hand over a further £50m of taxpayers' money to the partly privatised air traffic control system. A £30m emergency loan had been agreed in February.

Yesterday ministers were forced to admit that the Secretary of State for Transport was given official warnings about the financial viability of the beleaguered National Air Traffic Services (Nats).

Mr Byers has told The Independent that neither he nor his officials could find any documents in which the Civil Aviation Authority (CAA) registered "grave concern" about the organisation's ability to withstand a "major shock". But yesterday David Jamieson, Aviation minister, and a senior civil servant confirmed their existence.

The Transport Secretary has always refused to be drawn on the issue, simply saying the authority did not argue against the sale of Nats shares. The sell-off of air traffic control equity came just weeks ahead of 11 September, which led to a massive slump in air travel.

The part-privatised company told the Commons Transport Committee yesterday there was a strong possibility the Government would match the £50m Nats was hoping to raise in new equity in the summer.

Roy McNulty, chairman of the CAA, told MPs he had warned the Government about the potential financial fragility of Nats and said he still harboured concerns about its ability to withstand an event similar to 11 September.

Ministers were warned in two letters on 11 and 15 June last year that the ratio of debt to equity in the proposed company was unacceptably high and that its capital expenditure plans were over-ambitious. Mr McNulty registered his opinion that Nats would be "quite exposed to adverse shocks".

Roy Griffins, director general of civil aviation at the Department of Transport, said the debt level was reduced by £100m as a consequence of the fears and separate concerns raised by the seven British airlines that bought 46 per cent of the company. But the debt-equity ratio, at 100 per cent, remained high "by any standards", Mr McNulty told MPs.

Pressed by Chris Grayling, Tory MP, the CAA chairman said they still needed to develop "a much more sustainable" financial structure. But he added that the financial structure had survived the "ultimate test" and was still working.

Representatives of Nats told the committee the number of flights was down 5 per cent on last year, but income had declined by 10 per cent. The company earns more than 44 per cent of its income from North Atlantic flights, which had suffered the worst effects.