Germans Close To Landing Air Traffic Deal
Germany's state-owned airspace controller has edged ahead in the race to buy a large stake in its British counterpart amid mounting concerns about the implications for the company's future.
Sky News understands that Deutsche Flugsicherung (DFS) has tabled the highest bid for a major shareholding in the Airline Group, a consortium which owns 42% of National Air Traffic Services (NATS).
A deal has yet to be finalised between the German group and the quartet of airlines which want to sell down their interest in NATS but sources close to the situation said on Wednesday that DFS's offer was, in financial terms, significantly ahead of a rival bid tabled by a big UK pension fund.
"It's likely to get done in the next ten days," said a person involved in the sale process.
A sale of the stake in the Airline Group would not hand the German government control of UK airspace but it would position it strongly to exploit any future decision by the British government to reduce its 49% shareholding, which also includes a 'golden share' giving it special rights.
After the 2010 general election, the Coalition spent many months contemplating the sale of about half of its stake, with the aim of raising roughly £250m.
Those plans we quietly shelved amid concerns of an outcry about the sale of such a sensitive asset, and ministers are considered to be unlikely to sanction the sale of any of the state's shareholding in the near future.
NATS handles roughly 5,300 flight movements in the UK every day and employs 5,000 people, who collectively own about 5% of the company.
The Airline Group consists of seven carriers, four of which - Lufthansa, Thomas Cook, Tui, Virgin Atlantic - have decided to reduce their interests to close to zero. Three other airlines - British Airways, easyJet and Monarch - intend to hold on to their shares, which are each worth in the region of £50m.
The selling carriers plan to offload their stakes in the Airline Group plc, meaning that as an entity it will have different shareholders but continue to hold 42% of NATS. A new shareholder in the Airline Group would therefore hold a roughly 21% stake in NATS.
The existing consortium has decided against selling more than 49.9% of the Airline Group to external investors, and it is expected to retain operational control at NATS.
If DFS does win the auction, it would nevertheless make the German state the de facto largest shareholder in NATS behind the British government, a prospect which has left some members of the Airline Group expressing discomfort.
The carriers which are holding onto their stakes are understood to have some rights to veto a deal, with at least one expressing dissatisfaction about the level of consultation about a prospective deal.
The German offer is understood to contain a number of demands about future control rits and opportunities to increase its stake, although it is unclear whether the Government would consent to these.
"The remaining shareholders may struggle to see the benefit to them or to NATS of a closer operational alliance with DFS," said one insider.
Klaus-Dieter Scheurle, DFS's chief executive, said in June that combining its operations with NATS would enable more efficient control of in excess of 80% of transAtlantic routes serving Europe.
DFS is thought to be planning to approach Heathrow Airport Holdings about acquiring its 4% stake in NATS if its bid for the Airline Group shareholding is successful.
The Universities Superannuation Scheme, which manages the retirement funds of thousands of UK lecturers, also made an offer for the Airline Group stake, as did the Irish aviation authority.
The Department for Transport, NATS and Rothschild, which is advising on the airlines' sale, all declined to comment.