Air traffic could double by 2010

Mr Prescott said the group had satisfied the government that it would maintain the high safety standards achieved by the existing National Air Traffic Services (Nats).

The choice of bidder has lifted a threat of a strike by air traffic control unions, which had raised concerns over safety and job security if Serco, the other bidder, had won.

If the Airline Group finally wins the contract, it will own 46% of Nats, with the employees taking 5% and the government retaining a 49% stake.

Lord Marshall, chairman of British Airways, said on behalf of the seven-strong Airline Group: "The government has acknowledged that our bid addresses all its objectives, has wide endorsement from industry, the public and employees, and offers the best and safest future for Nats."

Mr Prescott said the group's investment would ensure "that Nats continues to operate safely, while reducing costs to users".

He added: "This will be the first true public-private partnership (PPP), helping to ensure the safe and efficient provision of air traffic services and providing the opportunity for Nats to emerge as a major worldwide player in its field."

We do not welcome the PPP. It is a major distraction at a time of momentous change for air traffic control

Union leader Paul Noon

The Institution of Professionals, Managers and Specialists, the union representing 3,000 Nats' workers, welcomed the choice of the not-for-profit partner.

"But we do not welcome the PPP," said IPMS general secretary Paul Noon.

"It is a major distraction at a time of momentous change for air traffic control."

National emergency

Air traffic could double by 2010, according to some estimates.

Under part-privatisation, the government will retain the power to control aircraft movements at times of war or national emergency.

Safety regulation will be split from Nats and remain in the hands of the Civil Aviation Authority (CAA).

John Prescott welcomed new investment

Nats will control aircraft movements, subject to the safety rules set down by the CAA, and will charge airlines for the service.

The part-privatisation has led to bitter divisions in the Labour party, with 47 rebel MPs voting against the government in a Commons vote on Nats last year.

Lord Marshall, chairman of British Airways, said on behalf of the seven-strong Airline Group: "The government has acknowledged that our bid addresses all its objectives, has wide endorsement from industry, the public and employees, and offers the best and safest future for NATS."