Nats has been struggling financially since it was privatised

Transatlantic flights were down 1% on the previous year and down 11% on May 2001.

The fall is bad news for the beleaguered National Air Traffic Service (Nats), which relies heavily on the transatlantic market.

At the same time, British Airways has reported a huge dip in flights to the Far East, following the Sars outbreak.

BA's Asia Pacific traffic fell 33.1% in May compared to the same time last year.

Overall, the airline saw a small rise in passenger numbers, but it warned there was "considerable volatility in booking levels".

Nats is particularly hit by the reduction in long-haul traffic, from which it earns a big part of its income Nats chief executive Richard Everitt

On all routes, BA carried 3,155,000 passengers in May 2003 - a rise of 0.3% on the May 2002 total.

Its planes last month were 69.4% full compared with a figure of 66.9% in May 2002.

The fall in overall transatlantic traffic affected Nats total business, with an increase of just 2.6% on May last year.

Nats' chief executive Richard Everitt said: "The uncertainty we have experienced in recent months is continuing and there is no sign of traffic growth returning to the five per cent growth levels the industry has used for forecasting purposes for several years.

Financial crisis

"Nats is particularly hit by the reduction in long-haul traffic, from which it earns a big part of its income. But we anticipate that some of the services cut due to the Iraq war and other factors will soon be restored."

Nats was part-privatised two years ago, giving a controlling stake to a consortium of airlines led by Virgin and British Airways.

Nats makes nearly half of its money from transatlantic flights and was hit hard by the slump in air travel following the terror attacks on September 11.

The financial crisis at Nats had jeopardised plans to modernise the UK's air traffic control systems.

In March, the airports operator BAA announced it would invest �65m ($102m) to make sure the long-term future of Nats was safe.

Nats was also allowed to increase the fees it charges airlines over the next three years.