Serco, the facilities management company, has pulled out of talks that could have underpinned the finances of the UK's struggling air traffic control services.

The company was reported over the weekend to have given up on the prospect of investing in National Air Traffic Services (Nats).

Serco confirmed the reports on Monday.

"It is true that we are not in negotiations with Nats at this point in time," a spokesman told AFX News.

It is likely that BAA, which runs the UK's largest airports, will step in instead.

Unions have been lobbying against Serco's involvement, warning of reduced pay and worse conditions for employees.

Up for grabs

The UK government, still a 49% shareholder in Nats, is desperate to find a private sector investor to help prop up the air traffic control group, hit by a slump in transatlantic air travel.

A 10% slide in traffic following 11 September made a huge hole in Nats' revenues, 44% of which stem from the worst-affected Europe-North America route.

The slowdown dented a business plan under which a 46% stake in Nats was sold off for �750m to the Airline Group, a consortium of seven carriers including British Airways, British Midland, Easyjet and Virgin Atlantic.

The decision to go with the Airline Group over Serco - the other main bidder - has led to a conflict of interest between Nats and its owners.

While Nats is urgently lobbying for a rise in fees, its owners are less than keen on a move which would push up their own costs.