The Irish Aviation Authority (IAA) has said it must cut costs by 8.5 per cent in order to offset revenue loss caused by downturns in North Atlantic air traffic. The cuts, which translate into a reduction of €7 million (£5.51 million) in the authority's cost base, will be achieved through measures such as job sharing and accelerated voluntary redundancies - but will not go so far as job losses among the controller's 700 employees, according to an IAA statement.

The authority will also pursue outsourcing contracts abroad, whereby IAA staff would be seconded to other European air traffic control bodies. Such a relationship is already in place with German authority, Deutsche Flugsicherung.

Management at the IAA informed staff yesterday that the measures were required in order to ensure that the authority's cost base did not grow in 2002 while air traffic volumes continued to decline, as foreseen. Staff were told that, if traffic falls by as much as 20 per cent in 2002, additional measures such as wage reductions may be considered.

The authority, which gains 80 per cent of its revenue from fees charged to airlines flying between the US and Europe, has seen traffic on these routes fall by more than 10 per cent in recent weeks and is expecting traffic in 2002 to be 15 per cent lighter than that of 2000.

IAA director of commercial and training, Mr Philip Hughes, said yesterday the authority was suffering as a result of the now ubiquitous trading difficulties in the airline industry. "Like anyone else involved in the aviation industry, we've has long discussions with our customers," he said. "They're all hurting very badly from the present downturn and it's beholden on us to make sure that we're doing everything in our power to reduce costs as much as possible."

Also on the IAA's agenda yesterday were the troubles of National Air Traffic Services, the UK air traffic controller in which the IAA has an advisory interest. Reports indicate that the British operation is coming under pressure from its bankers to request emergency financial aid from the UK government, just months after the body was partly privatised amid much political opposition.

The IAA is in partnership with the Airline Group, the body that was chosen by the UK government to control 46 per cent of National Air Traffic Services in March. There was speculation at that time that the IAA might take an equity stake in the Airline Group, which is made up of a consortium of seven British airlines, but Mr Hughes confirmed yesterday that this had not occurred.

"We looked at the issue but we didn't really think that it was appropriate at the time," he said. "From that point of view, we have been fortuitous."

Mr Hughes described NATS as being in "very bad shape" and said his personal view was that a government injection of funds was probably the only solution available to the controller, despite the political embarrassment that might ensue.