HL Deb 21 July 1977 vol 386 cc571-606

8.45 p.m.

Lord BOYD-CARPENTER rose to ask Her Majesty's Government, in view of the fact that the Agreement which they have concluded with the United States of America for a new Air Service Agreement prevents them from honouring in full either the letter or the spirit of the undertakings given to British Caledonian Airways in paragraph 9 of Cmnd. 6400, what provision they intend to make to compensate that airline. The noble Lord said: My Lords, in rising to seek leave to ask the Unstarred Question standing in my name I should like to make it clear that I do not propose to raise the whole complex question of the Bermuda Agreement. First, it is too large and important a matter to be dealt with adequately by an Unstarred Question at this hour of the day. Secondly, we have not yet—officially at any rate—seen the full text of the Agreement which I understand is to be signed in Bermuda on Saturday.

Apart from two general comments which I shall make quickly, I want to confine myself to the specific Question of which I gave notice—that is, the treatment under this Agreement of British Caledonian Airways, and of its consequential position. The two general questions on the Agreement, which I foreshadowed, are as follows. I believe it is now self-evident that the decision last summer to give notice to denounce the old Bermuda Agreement was singularly inept in timing, given that it was made last summer at the height of the American Bicentennial celebrations and with an American Election pending. Under the American system, where there is a change of Government following an Election, there is a period of three months of lame-duck government in which no serious negotiation can be carried out. I can only put down our Government's lapse in this respect to the fact that they felt that the possibility that a Government facing an Election might be defeated was too horrible for them to contemplate.

Secondly, it is clear that the original negotiating position, with its apparent insistence on single designation only on routes between London and New York, was on a wholly unrealistic basis. Having said that, I must—as I have already done once in this House—pay tribute to the skill and devotion to duty of our negotiators who, placed in a very difficult position as the result of the Government's two initial mistakes, did their level best to redeem it, and after the Department of Trade element in the team had been strengthened, did a very fine job of work indeed. It would be ungenerous and ungrateful not to accept that. However, the outcome for British Caledonian Airways, in my judgment, and, judging from its published statements, in its judgment, has not been at all satisfactory or, indeed, what it might have expected. If one is to understand the situation it is necessary to sketch in the background, although in view of the hour I shall do so as briefly as possible.

Under the original Civil Aviation Guidance of 1972, which was produced by the then Conservative Government, British Caledonian was placed in a strong position. It was to be given a measure of preference over all the other independent airlines and an opportunity to compete with British Airways. It was specified as the major independent British airline. In accordance with that Guidance, in 1973 the Civil Aviation Authority granted to it, on its application, licences to operate inter alia to Singapore, Toronto, Atlanta and Houston. Appeals were submitted against some of those licences, but those appeals were dismissed by the then Secretary of State.

By the end of 1973 British Caledonian Airways was in possession of licences, to Singapore, Toronto, Atlanta and Houston, among other points. It was then the duty of the Department of Trade in the case of Singapore and Toronto, where we already had rights, to designate them, and, in the case of Atlanta and Houston, where we did not at that stage have rights, to seek to negotiate that these additional gateways should be opened under the previous Bermuda Agreement. I am sorry to have to tell the House that they did nothing at all.

I do not want to comment further on that because on a certain reading of the judgment of the Court of Appeal last year, in the decision in Laker v Secretary of State for Trade, it is at least arguable that the Department of Trade were under a legal duty, licences having been granted and having come into effect, to take steps to designate; and it may be, though it is not for me to comment on it, that on a study of that judgment British Caledonian Airways may feel disposed to take such steps as they may be advised. The House will understand, therefore, that I do not wish to state more than the bare facts.

The next stage in the procedure came when, in 1976, the present Government—Mr. Peter Shore then being the Secretary of State—issued a new Guidance. That Guidance, as the House knows, suffered something of a battering from the Court of Appeal, which decided that the Secretary of State had exceeded his powers, acted ultra vires, and that some part of it was invalid. It was accompanied by a White Paper which is still, so far as I know, as valid as any White Paper is. It contained in paragraph 9, which I refer to in my Question, some clear indication of what the Secretary of State was trying to do to British Caledonian. He was proposing under his policy review to see that steps could be taken for the licences on certain of their routes to be taken away, but gave clear assurance that when Atlanta and Houston were opened up they would be able to operate there.

We now come to the Agreement itself as to which British Caledonian have expressed their disappointment. By one of those happy coincidences which adorn our public life, it so happened that a Member of another place, who is the chairman of the Labour Party Civil Aviation Committee in that House, asked a Question for Written Answer of the right honourable gentleman the Secretary of State for Trade. Again by happy coincidence, this was answered on the 19th of this month.

The Question, as it bears exactly on the issue I am raising, is one I should like to read to the House with as much of the Answer as seems to be relevant. For those who want to study the full Answer at length it is in the Official Report of the House of Commons of 19th July, Written Answers Columns 470 and 471: Mr. Kerr asked the Secretary of State for Trade whether he is satisfied that British Caledonian Airways will obtain a fairer opportunity to establish viable services to Houston and Atlanta under the new Air Services Agreement with the United States of America than could have been obtained under the 1946 Bermuda Agreement". It will not surprise the House that Mr. Dell began his Answer: Yes. We have won a better deal for British Caledonian Airways than would have been possible under the 1946 Agreement". He then goes on to refer particularly to the position on Houston, Atlanta and Dallas, and there are one or two aspects of it which are relevant to the matter I am raising tonight and on which I should like to comment.

It is true that, as he says, under the Agreement with the United States, British Caledonian are to have rights to operate services to Atlanta starting three years from now, whereas the United States' carrier on that route will be able to operate as soon as it is ready to do so. By way of balance, or purported balance, to that British Caledonian are given rights on Houston immediately with the comparable American carrier coming on in three years' time. But although Mr. Dell, in the Answer to which I have referred the House, seeks to brush it off as a minor matter, the right to operate out of Houston is greatly diminished in value by the fact that under the same Agreement a United States' carrier is authorised to operate out of Dallas/Fort Worth into London.

Noble Lords who are not familiar with the entertaining intricacies of the geography of Texas may not fully appreciate that Dallas/Forth Worth, is, first of all, a magnificent airport. I have visited it. It is immensely impressive. More important, it is a centre of inter-lining for United States traffic, and its area is larger than the whole of Manhattan Island which, when you visit the Americas, they tell you every five minutes; but it happens to be true. More important again, it serves the same area of industrial central and southern Texas as does Houston. It is a matter of some 200 miles away, which in terms of American distances, American roads, and American automobiles is not what that would seem in this country, and in fact it serves the same area as Houston.

Consequently, the position so far as British Caledonian is concerned is that they have to wait three years on Atlanta, for which they already have a licence, while an American airline, which I understand will be Delta—a highly efficient airline—gets well dug in. They themselves are free to start on Houston, and I understand intend to do so in a matter of a few weeks, but will face almost from the beginning a tapping of that market by an American airline through Dallas/Fort Worth. Mr. Dell refers to this as having a quite modest effect. There will be some indirect competition for BCAL's Houston service from the United States service to Dallas; … But of course it doe's alter the picture.

There was also a matter which, until this morning, was something of a mystery. It is my understanding that the Agreement as initialled during the famous all-night meeting last month provided also for a United States cargo carrier to operate immediately from Houston in competition with British Caledonian. Mr. Dell does not refer to that in his Parliamentary Answer. I was puzzled when I saw that, particularly because I know Mr. Dell—with whom I had the privilege of working when I was at the Civil Aviation Authority—as a man of the highest and most scrupulous integrity, who would never run the slightest risk of giving a fallacious or deceptive answer. With his habitual courtesy he wrote to me this morning and told me that in subsequent discussion the Americans had agreed to defer the operation of this cargo service out of Houston for three years, but apparently it will operate at that stage.

We have the position that British Caledonian who, for years have held licences on both of these points, who have the assurances given in paragraph 9 of last year's White Paper, will have to wait three years to go on to Atlanta, where the Americans will establish themselves without any British competition at all, and themselves will operate immediately out of Houston but faced with the immediate competition of American passenger and freight carriers from Dallas/Fort Worth tapping the same area, as well as the fact that at the end of three years they will have to face a cargo and no doubt American passenger carrier out of Houston. They seem, therefore, to have got considerably the worst of the deal.

Finally, I want to ask the noble Lord what the Government propose to do to help British Caledonian and compensate them in respect of this decision.

I have two suggestions to make, but the Government, with all their resources, may have better ones. One suggestion is that they should themselves be allowed to operate on Dallas/Fort Worth. I appreciate that in the first place they do not have a licence for that and that they would have to apply to the Civil Aviation Authority. I can, however, tell the House that when, in 1973, they applied to the Civil Aviation Authority, also for a licence on Dallas/Fort Worth, that application was rejected solely on the basis, as the published statement by the Authority indicated, that it was premature, and secondly because they had themselves indicated that they would not want to operate it for some years. If they were to be allowed now to operate on Dallas/ Fort Worth, that would enable them to meet the sucking off of traffic to the Americans which otherwise will occur in respect of their Houston service and would give them a nice compact area to serve.

The other way in which they could be helped is this: there are no licence complications for them so far as Los Angeles is concerned: they hold a licence for Los Angeles. The Agreement provides that there is one further point to the United States, other than New York but an unspecified one, and I understand at the choice of the British Government, between London and Los Angeles. The Americans are doubly designating on Los Angeles; on Traffic figures it is the natural route for double designation and one understands why they are doing it. British Caledonian already have rights in the sense of a licence on Los Angeles and it would seem that one of the ways of compensating them for the somewhat raw deal they are getting in respect of the Southern States would be for them to be designated, holding a licence as they already do, on Los Angeles, and those are the suggestions I would leave with the noble Lord.

I know that the noble Lord will not contradict me when I say that British Caledonian are a very fine airline. They look after their passengers extremely well and although there is nothing more dangerous in the world of aviation than ever referring to safety considerations, they have a very fine safety record. Moreover, they have been in the past acknowledged to be the principal British independent operator, and here I would leave a quite serious point with the noble Lord.

It was the purpose of the Edwards Committee and their recommendation to set up a Civil Aviation Authority to try to take the guidance and control of civil aviation out of Party politics. It will be the greatest pity if we got into a situation in which British Caledonian, as the biggest independent operator, were forced to look to Conservative Governments for more help and expect to be rather badly treated by Labour Governments for doctrinal reasons because they are a private enterprise airline. If that were to develop it would be extremely bad for civil aviation and would help to defeat some of the purposes of setting up a Civil Aviation Authority which was, as I have indicated, designed to seek to insulate this industry from the changes that could follow, for political reasons, from changes of Government.

Having briefly, for this is a big subject, even confined to British Caledonian, sought to raise this matter, I beg the Government—the Agreement is no doubt now finalised; it is to be signed on Saturday and nothing can be done about it—to accept that it lies in their hands to help to make up to British Caldeonian in other ways for the setback which they have received from this Agreement. I suggest that it would be in the interests of long-term stability of British Civil Aviation and of the non-political, non-partisan approach which we all want to see towards it if the Government were really to make some efforts, either in the way I have indicated or otherwise, to give them a little further help.

9.5 p.m.

Earl AMHERST

My Lords, I wish at the outset to echo what the noble Lord, Lord Boyd-Carpenter, said in appreciation of the efforts of our negotiators on their extremely difficult negotiation of a new Bermuda Agreement. I do not propose to follow him into the question whether the Government chose the right time to renegotiate it. This is a new Agreement, which I believe is now called Bermuda II, which we have not yet seen, but in the meantime there are a great many questions to which I wish to draw attention and I have given prior notice to the Minister of those questions.

How much overall have the British gained or lost by this new Agreement? How many new routes through the United States of America have the British gained in addition to the old Bermuda Agreement? Our previous policy of single designation seems to have been modified by double designation to New York and to an unspecified point yet to be announced. British Caledonian, I think I am right in saying, have had their licence from Los Angeles taken away. Would it not be in all fairness and logical to appoint this company to be the second British designated operator to this new point, where-ever it is, whether it is Los Angeles or somewhere else?

Are the Government now still determined on a policy of single designation outside of New York and outside of this unspecified point for all routes across the Atlantic? What is the detail of the cutback in the United States Fifth Freedom through the United Kingdom? What freedom rights through the United States have the British had cut back as a quid pro quo? I have been told that the United States have been given unlimited Fifth Freedom rights through London to Frankfurt and that these rights have been given in perpetuity. Can such rights be given in perpetuity to anybody and, if so, what rights have been given to the British in return? I have also been told that the United States have been given unrestricted rights in London to pick up all and any United States originating traffic. Does this mean genuine stopover traffic only or is it totally unrestricted, including change of gauge? If so, what have the British got in return? What is the detail of the British Fifth Freedom rights through the USA?

I believe Laker Airways is to be the second British designated operator on the London-New York route. If the Skytrain service is to be so operated, will it be subject to the limitations of the licence for Skytrain? Because, if so, will not Laker Airways be heavily handicapped in competing with the reciprocal American service if that American service is not similarly restricted? In fact, will not Mr. Laker be called upon to compete with the American reciprocator with his hands virtually tied behind his back? I am informed that the US carriers have already filed their winter schedules with the British Government. Bearing in mind what happened last winter, when so many US lines indiscriminately dumped surplus capacity on London, are the Government now satisfied that the new regulations for capacity in the new Bermuda Agreement will totally protect the British operators?

The Earl of KINNOULL

My Lords, may I interrupt my noble friend? I am not sure whether he has read the Question on the Order Paper, but none of these points comes within the scope of my noble friend's Question. I do not know whether that is a fair point to make.

Earl AMHERST

My Lords, I have already said that I was not going to follow the noble Lord, but I am going to say that questions on the Bermuda Agreement are raised; and I was going on to say, if the noble Earl would let me finish my speech, that I know we have not seen the agreement yet, and it may well be that we shall have to wait and see, but, in the meantime I think it is very useful to get these questions out into the open.

Can the Minister now give an assurance that these regulations for the scheduled operators will also fully cover operating across the Atlantic by the charter and the non-scheduled operators? I understand that the Concorde service to Washington is excluded from the control clauses of this new Bermuda Agreement, and that in exchange Pan American have been given the rights to operate a round-the-world service from Washington to London with 747 aircraft. Can the Minister say what will be the position when the Concorde is allowed into New York, as we all hope it will be; and can he give us any more information as to how this is going on?

I am sure there are a great many other questions relating to the whole of this Bermuda Agreement, and I understand that the agreement is still in the form of its final legal drafting. It should be operative on 23rd July—as the noble Lord, Lord Boyd-Carpenter, has already said, two days from now—but it will be published only some time in August. Therefore, in discussing it tonight, we may be (at least, I am, or I may be) talking in the dark. If so, I should not be surprised, or take it amiss, if the Minister, in his reply, tells me to wait and see.

To go back to the terms of the Unstarred Question, my Lords, it makes definite reference to Command Paper 6400, The Future of Civil Aviation Policy, about which I would ask for some clarification in view of what seems to have happened since it was published in February last. Paragraph 8 of this document stated that double designation for long haul routes across the Atlantic was to be ruled out. As a result, British Caledonian was to lose its licences for New York, Los Angeles via Chicago and Houston and Atlanta via Boston. But paragraph 9 stated that British Caledonian was to retain its licence for Houston/Atlanta, and there was no mention of Boston. In a recent Press release British Caledonian announced the early inauguration of its non-stop service from London to Houston, and at the same time drew attention to an apparently last-minute United States decision to operate an American non-stop service from Fort Worth to London. British Caledonian state that this American service from Fort Worth/Dallas to London will very seriously deflect traffic from its Atlanta/Houston service.

Consequently, in an effort to offset some of these losses, British Caledonian are now asking that Fort Worth/Dallas be added to its licence for Houston, on the argument that Forth Worth, Dallas and Houston all lie in the same traffic catchment area. Can the Minister tell us whether the British Government or the US Government, either or both, consider this argument a valid one? I am sure that the answers to most of these questions lie in what we shall find out about the Bermuda Agreement when we see it, and, consequently, as regards the questions I have asked about British Caledonian, I shall not be surprised if the Minister still says, "Wait and see".

9.14 p.m.

The Earl of KINNOULL

My Lords, I do not intend to follow precisely what the noble Earl, Lord Amherst, has said on the wider scope of this question, because I think that my noble friend's Unstarred Question is fairly narrow, and rightly so, and specifically to do with British Caledonian vis-à-vis the Bermuda Agreement. I am sure that the whole House is indebted to my noble friend for the skilful manner in which he raised this matter. My only quarrel with him is that there are two paragraphs numbered 9 in Command 6400. There is a Part I and a Part II to the document. He did not say to which Part he was referring. I think your Lordships will agree that no Member of this House can come near to equalling my noble friend's experience in the political part of British aviation or in facing the practical problems following his five years' distinguished chairmanship of the Civil Aviation Authority. That period of office temporarily silenced my noble friend. I well remember seeing him last year sitting silently on the Cross-Benches, no doubt longing to get up and interrupt some points which had been wrongly expressed; but I am sure that the House is now grateful that he is silent no longer and is able to express his views. My noble friend's Question is phrased in typically pungent terms and, indeed, his speech was typically pungent. I apologise for having missed the first few minutes of it.

If asked to give a view on the general points of the Bermuda Agreement, I think that many people would be as bemused as I am to understand the wisdom of the Government in their timing in terminating the old Agreement last year. It came in a Presidential year; it came mixed up with the IMF Conferences and with the Concorde problems. I do not think that one could have chosen a more sensitive occasion. The brinkmanship that followed may or may not have worried the Government, but it was extemely unattractive to the rest of us. For the thousands of Atlantic travellers who rely on British and American airlines not to know up to within five hours of the deadline whether all the services would be suspended was not exactly appealing. For the two countries, who pride themselves in a very special relationship and who pride themselves in leading the world in patient diplomacy, to be locked in this form of brinkmanship must have seemed strange to the rest of the world and not a shining example of the art of diplomacy.

My noble friend's Unstarred Question raises a number of very serious issues but the primary one, with which he dealt very well, is the future welfare of British Caledonian. Only a year ago, the Government were making some very graceful remarks about the major independent carrier: its value to the users, its undoubted appeal with its Scottish flavour, its impact on the international services, its value to British aviation and what it earns for the country. One must recall that two years prior to the announcement of the new guidelines, British Caledonian were locked in long and exhaustive discussions to reshuffle the international routes. The whole basis of the reshuffle was to find, within the Government's policy of single designation, a viable network with which they could foresee a good future.

I do not think the guidelines were over generous to British Caledonian; but I find it disturbing that a year later, when all the uncertainties should have been dispersed by the guidelines, and when British Caledonian, I believe, placed orders for certain VC10s on the strength of the routes they had been given, we find that the Government have apparently—I say "apparently" because we know little about the Bermuda Agreement—done a deal with America which interferes with last year's Agreement.

As the noble Earl, Lord Amherst, said, not a great deal of information has yet come out on the Bermuda Agreement and it is still to be ratified; but there seem to be three points of note. The first is, as my noble friend said, that British Caledonian have lost for three years the use or the service from Atlanta; so that has been delayed for three years. Secondly their Houston service, which is of immense importance to them, has been weakeened materially by the use or service now going into operation of the American carriers. Thirdly, I think that the surprising thing—and I hope the noble Lord will deal with this—is that the Government have not yet nominated the second point qualifying for double designation. The Americans have done so; we have not. As my noble friend said, I hope that the Government will nominate this quickly and that it will be Los Angeles. I hope that the Government and the noble Lord will examine urgently this matter of how they can right some of the effects of the Bermuda Agreement on British Caledonian and that they will be able to say something quickly about the second point of double designation.

Another point of which I have not warned the noble Lord—for which I apologise—is this. The noble Lord, Lord Merrivale, is not taking part in the debate, but I suspect he would have raised the question about Zaire as he raised it the other day with the noble Lord. I understand that British Caledonian have decided to withdraw these services simply because they are not getting the funds out of Zaire. They have not had them for three years. In America, if this should happen I understand that the American Government can implement some fairly tough anti-trade laws against the offending Government if one of their companies is genuinely being dealt with harshly, unfairly and to the detriment of that company. This applies so long as it can be proved that it is a clear case of the foreign country acting unfairly. I understand that the British Government do not have these laws. I should like to ask the noble Lord whether he will look into this matter. It is obviously important particularly for independent airlines. I do not know whether British Airways have had similar experience.

The last point that I should like to raise is regarding the whole relationship and stability of licences, and the freedom that the Civil Aviation Authority was given by Parliament from Government; the freedom of issuing licences without interference unless it was a guidelines policy. If one is correct in saying that the Bermuda Agreement interferes with licences already granted by the Civil Aviation Authority and agreed by the Government, it brings a serious aspect into the whole question of licences and particularly in the independent sector when bankers and supporters, and all those producing enormous capital sums for independent carriers, rely on the licences. The licences should be sacrosanct for a period of time and there should be no interference. I hope that the noble Lord will be able to give some assurance tonight to that effect.

9.24 p.m.

Earl ALEXANDER of TUNIS

My Lords, I, too, am grateful to the noble Lord, Lord Boyd-Carpenter, for raising this matter. His experience as one-time chairman of the Civil Aviation Authority will add weight to his words which I hope will be followed closely by Her Majesty's Government. From the information available to us at the present time, we have come away from the negotiations with the short end of the stick. The key objectives of the negotiations of the new Bermuda Agreement, as they affect British Caledonian, have, in my opinion, fallen rather short of expectations. We have been reminded that the original agreement was signed in 1946 and substantially revised in 1966, which I believe was to the benefit of all parties.

Whether it was wise for the British Government to precipitate a wholly new agreement in those circumstances, must be open to question. Of course it is easy for me to say this with the benefit of hindsight, of which I can boast twenty-twenty. However, with the signing of the new agreement in less than three days' time I cannot but feel that we have been "gazumped". I should like to explore the matter of the Dallas/Fort Worth clause and add a few points to those already expressed by previous speakers. I apologise if some of my comments seem to overlap those of earlier speeches.

The geographical triangle of the cities of Dallas, Fort Worth and Houston represent a heavy concentration of potential customers. Dallas and its neighbour, Fort Worth, share an airport which, as the noble Lord, Lord Boyd-Carpenter, said, even by Texan standards is enormous. Some years ago, at the beginning of the 1970s, this potential market caught the eye of British Caledonian during its search for business in the States. The early talks which took place found the Houstonians receptive to the idea and keen to encourage overseas airlines. In fact, they were keen to the point that the Chamber of Commerce of Houston, which represents powerful commercial interests in that area, came to London to beg for the inclusion of British Caledonian in the apportioning of the air carrier routes.

That appeal was not without influence. The airline, British Caledonian, estimated its passenger services as carrying 69,000 persons in one year's operation, and it was originally planned to start in the spring of 1978. They would be using the 707 and the newer, wide-bodied DC.30. Servicing a new route, my Lords, involves no small investment on the part of an airline. Engineering and aircraft maintenance cannot be done on the cheap and, of course, neither can the marketing and sales. It need hardly be added, perhaps, that to compete with foreign carriers in a home market is both a demanding and difficult task, whatever so-called "sphere of interest" is allocated to that airline.

This new agreement, I understand, allows an American carrier to operate an all-cargo service between London and Houston. British Caledonian estimates that this concession alone will cost the airline £750,000 in lost revenue. Furthermore, the effect of Dallas/Fort Worth being part of the new Agreement will—and here I quote from what the airline say: Lead to a 34 per cent. diversion of legitimate British Caledonian traffic from Houston and a loss of revenue in the first year of £5 million for passengers and one third of a million pounds for cargo". Those figures have been accepted as realistic by the United Kingdom authorities. To put it another way, the revised estimate they have to work on shows that the passengers who are expected to fly by British Caledonian now number only 47,000.

To aggravate matters, Pan American have applied for a licence to operate from Houston via Dallas/Fort Worth to London. I understand there is no reason why that licence should not be granted as it is within a domestic area and outside the terms of the Burmuda II Agreement—a fact which, if correct, somewhat surprises me. I was assured of this application by a director of British Caledonian. Therefore, to counter that threat, British Caledonian has had to advance the starting date of its London to Houston service to 23rd October this year, in order to build up a market as quickly as possible.

It has been generally assumed—and certainly it was the impression given by the news media—that the Bermuda II Agreement represented a triumph for this country and that British airlines would be getting a greater share of the profitable long-haul routes. However, as we have heard from the noble Lord, Lord Boyd-Carpenter, and others, this hardly seem to be the case.

I will refrain from taking up more of your Lordships' time, since the other arguments I was going to put forward have already been better expressed, and with greater force. However, I should like to conclude by asking the Minister, when he comes to reply, whether he believes there was adequate consultation with. British Caledonian, whether the Bermuda II Agreement really reflects the needs of this airline, and, finally, whether in future negotiations the airline's representatives should not be able to participate, rather than merely observing the proceedings.

9.30 p.m.

Lord TREFGARNE

My Lords, we are indeed grateful to my noble friend Lord Boyd-Carpenter for raising this matter tonight. As my noble friend Lord Kinnoull has said, his knowledge and authority on this subject are second to none. At the risk of upsetting my noble friend, I am going to depart a little from the Question on the Order Paper, and, relating to the Bermuda Agreement, put some general points to the Minister which I do not believe have been adequately ventilated thus far, and to which I hope the noble Lord will be able to reply. Not all of the matters I raise will be specific questions aimed at the noble Lord; some of them will be my own views on the subject. But the bulk of what I have to say will be in the form of the interrogative, aimed at the Government.

I wholly support the view advanced by my noble friend Lord Boyd-Carpenter that the deal which has been done on behalf of British Caledonian is depressing and unsatisfactory. I suppose that it all stems from the point which I think has been raised by every noble Lord who has spoken so far; namely, the timing of the denunciation of the first Bermuda Agreement, originally signed in 1946. That Agreement having served for 30 years, no less, suddenly fell into disfavour with the Government and, apparently without any detailed consultation with anyone, it was denounced. As all noble Lords have said, it was presidential election year in the United States, so the period of negotiation could only be short; it was the bicentennial year in the United States, which must have distracted them; the Laker Airways issue was unresolved and, above all, the position of Concorde was far from clear.

Who was consulted before this denunciation took place? Were the Civil Aviation Authority consulted? Surely they had a right to be consulted. Surely they should have been consulted. If they were, did they specifically agree not only to the fact of denunciation, but to the timing of the denunciation? Some of us might be persuaded, if the noble Lord went on long enough, that the fact of denunciation was in the long run justified. But I doubt whether any Member of your Lordships' House would be able to agree that the timing was right, and as the timing was so crucial I want to know specifically whether the Civil Aviation Authority were consulted, and whether they agreed to the timing of the denunciation.

In addition to the Civil Aviation Authority, who else was consulted? After all, there were many people who had a vital interest in the matter. What about British Airways? We have hardly heard mention of them so far. But, of course, a great percentage of their business, including the operation of Concorde, falls within the ambit of both Bermuda I and, indeed, Bermuda II. And what about British Caledonian and Laker Airways? Did the Government ask them, or even consult with them, or even advise them that this denunciation was under consideration?

Regarding Laker Airways, my noble friend Lord Gisborough asked the noble Lord, Lord Oram, a Starred Question this very afternoon, and the noble Lord, Lord Oram, answered in clear and unequivocal terms, which I greatly admired, what he thought of the deal that Laker had got from his permit recently granted by the Americans. But I suggest that some of the problems, at least, which have so recently beset Laker have arisen from the fact that the Government threw the whole matter into uncertainty by denouncing the Agreement in the spring of last year. However, denounce it they did, and we are now entitled to consider and ask what success the Government and their negotiators have achieved in arriving at the new Agreement. I do not wish to detract from the words of congratulation which my noble friend Lord Boyd-Carpenter addressed to the negotiators, but, as Laker himself has complained, they were fighting with one hand tied behind their backs.

There are a few specific points that I should like to put to the noble Lord about the provisions of the new Agreement. As noble Lords have said, the final document is to be signed in Bermuda this weekend, although so far its text has not been published. Nevertheless, the comments in the American Press on the matter are infinitely more complete and detailed—I cannot say accurate because I do not know—than those which we have had on this side of the Atlantic. The American Press has posed the question as to why it was that they, the Americans, were willing to publish in such detail the provisions that had been agreed at the all-night sitting while we were so diffident. I do not believe that we need to look very far for the answer to that question, because some of us were not too proud of what we had achieved.

Turning to what, if anything, has been achieved, can the noble Lord say, first, whether the provision in Bermuda I which allowed for all aircraft duly certificated by the signing authority, or holding certificates of airworthiness issued by what is called an ICAO country, is to be found in the new Bermuda II Agreement? This is particularly important because it may be said—and I say it—that Concorde is a duly certificated aircraft and, as such, ought to be allowed to land in New York or anywhere else. I shall revert to that point in a moment.

Secondly, may I look at the point which was considered and touched upon by the noble Earl, Lord Amherst; that is, the question of Fifth Freedom rights. The Government have said that certain restrictions are to be imposed upon Fifth Freedom carriers—that is, American carriers—operating from London to points in Europe, but the major point to which Fifth Freedom flights out of London to Europe are operated is to Frankfurt. Far from being decreased, the rights to Frankfurt have been increased. I believe this to be a highly damaging provision which the Government were wrong to concede, especially because, in addition to granting unrestricted rights through London to Frankfurt, apparently they have also now approved what is called a change of gauge provision. This means that American carriers can base a smaller aircraft in London, change passengers from larger to smaller aircraft and thus operate at a high frequency, which is still more damaging to British and other European carriers.

There is nothing—or very little, at least—that is available as a quid pro quo to United Kingdom airlines operating out of the United States, because there are far fewer Fifth Freedom points beyond the United States to which we can operate. It is true that there are some to New Zealand and Australia. Indeed, British Airways have a joint arrangement with Air New Zealand for the operation of just such a service from Los Angeles onwards. However, the great catchment area of South America, which might be regarded as a legitimate Fifth Freedom destination for United Kingdom carriers, is not readily available, for two reasons: first, the strength of the regional carriers in that area who object very strongly to the provision of Fifth Freedom rights to Transatlantic carriers—namely, American regional carriers—and, secondly, the very real and perhaps unduly minimised difficulties of obtaining Fifth Freedom landing rights in South American countries from those South American countries themselves, which have to agree to these operations, as well as from the American Government.

One of the key features of this new Bermuda Agreement is said to be the capacity controls. Again the British Government have seen fit to keep quiet as to how these will work. There have been a number of unofficial reports in the American Press, some of which I have seen, but I should be obliged if the noble Lord could spell out in fairly clear terms how he believes that these capacity controls will work and, in the end, to whose advantage they will work.

Another point that I hope the noble Lord will be able to touch upon is the question of charter regulation. Before this Agreement comes into force charter flights are covered not by Bermuda I Agreement, as one might imagine, but by a separate document called a Memorandum of Understanding which has been used for this purpose for a number of years. But now we are told—and I welcome this—that charter flights are to be included in the provisions of the new Bermuda Agreement. But as to how they are to be included we are thus far not told. It is true that there has been some vague reference to multilateral arrangements. I am not exactly certain what that means, but I suppose it means that the charter flights across the Atlantic will be shared out between all the major European carriers; for example, the Germans, the Scandinavians, the Dutch and the French. I hope the noble Lord will be able to give me some more information on that, and in particular I hope he will tell me whether our European colleagues have been consulted and what view they take of having to share their flights with us, if that is what is intended.

I want now to return to Concorde. As your Lordships will know, the Port of New York Authority until now has consistently refused to grant landing rights to Concorde on the grounds principally that the aeroplane is too noisy. In my view—and I believe in the view of many responsible people in this field—the Port of New York Authority has no right to impose this ban because the American Government—namely, the sovereign Government of the United States of America—have entered into the Bermuda I Agreement, authorising the use of any aircraft holding the appropriate certificate of airworthiness, and the Concorde most certainly holds such a certificate. I believe that the action of the Port of New York Authority is ultra vires; in other words, they are acting outside the scope of the law as it applies to them, in preventing Concorde from landing in New York, and I believe the Government should have been more forthright thus far than they have been in making this point.

I recognise, of course, that in this matter we have to take our French colleagues with us, but the delays in bringing it to court in New York were, in my view, regrettable. The answer may not have been only in bringing the matter to court. I suspect that we have not been sufficiently vigorous on the diplomatic front because, although the American Federal Government may have only limited sway over the New York State Government, or the Port of New York Authority, I do not believe they have used all the sway, however limited, they do have.

It is interesting to remember that in the late 1950s, when the first Boeing 707 aircraft came into service on the North Atlantic route, we were then operating very quiet Britannia aircraft, although, of course, we had some Comets as well. However, the bulk of our operations were with comparatively quiet aeroplanes, and when those new, early and horrifyingly noisy Boeing 707s came into operation we could then have taken a strong line with the Americans and said: "We are not going to allow landing rights to your noisy 707s". But of course we did not because we were bound by the terms of the Bermuda Agreement.

The American Government, or at least one part of it, namely the PNYA, have chosen to disregard the Agreement which was so willingly entered into by both parties all those years ago. I think this means that when we were negotiating the new Agreement, Bermuda II, we should have said quite clearly that there was really not much point in entering into a new agreement if the Americans were not able to honour the old one. It is a matter of great regret that the Port of New York Authority continues to refuse Concorde landing rights and it is a matter on which the Government should continue to exercise themselves on the diplomatic front. Finally, my Lords, I want to end with a general observation on the provisions of the Bermuda Agreement. My noble friend Lord Alexander suggested that we have been "gazumped". I think we have been "taken to the cleaners".

9.45 p.m.

Lord ORAM

My Lords, I am faced straight away with something of a dilemma, and I am quite sure the noble Lord, Lord Boyd-Carpenter, will sympathise with me. He and I spent many years together in another place, and it was our habit there to look at the Question on the Order Paper and to confine ourselves to it. Indeed, if we did not, we were quickly rebuked. The noble Lord, in introducing this subject in his characteristically able way, did say that, with two minor exceptions, he would confine his remarks, as indeed he did, to the issue as tabled on the Order Paper. Because of his record in this field, particularly in recent years as chairman of the Civil Aviation Authority, of course the case that he deployed merits the most careful reply, and I shall do my best to give it that. Then, on the other hand, we have had a series of speeches, as the noble Earl, Lord Kinnoull, pointed out at one stage, which were very much wider in their scope than the particular situation of British Caledonian Airlines under the Bermuda Agreement. This is my dilemma, therefore.

I acknowledge that the noble Earl, Lord Amherst, and the noble Lord, Lord Trefgarne, did me the courtesy, which I greatly appreciated, of giving me advance notice of the much more wide-ranging points that they have now raised. I do not in any way wish to hide behind, as I might be able to do, the actual words of the Question: I want to respond to the wider questions that have been raised. But I hope your Lordships will recognise that I must perhaps truncate my answers to the other noble Lords in order to give a fuller answer to the noble Lord, Lord Boyd-Carpenter.

I hope we shall have in mind, as has been mentioned by one or two noble Lords, that the Bermuda II Agreement is to be signed on Saturday. It will be published; it will be placed in the Library; there will be a Command Paper, and I have little doubt—though this is not for me to settle—that there will be an opportunity of discussing that. That, I suggest, will be the appropriate opportunity to take up many of the points that have been raised here this evening, although I will, for the reasons I have mentioned, reply briefly to a number of them.

Perhaps I may take the noble Lord, Lord Trefgarne, first. He raised a question, which I recall was raised, possibly at a Question Time or possibly when I repeated the Statement on the Agreement, about the timing of the notice to terminate the old Agreement. This point has been repeated by the noble Earl, Lord Kinnoull; it was made by the noble Lord, Lord Boyd-Carpenter, and subsequently by the noble Earl, Lord Alexander of Tunis. I have been asked: Was the CAA consulted in the decision to terminate the 1946 Agreement? Yes, the CAA was consulted, but this question of the timing, as I have made clear in your Lordships' House before, was a matter for decision by the Secretary of State for Trade alone.

Lord TREFGARNE

My Lords, I am obliged to the noble Lord, Lord Oram, for giving way. Of course, it is a matter for the Secretary of State alone because he is the representative of the Government. The CAA is not the Government, but I asked the noble Lord whether it agreed to the timing.

Lord ORAM

My Lords, that I do not know; but it was consulted. I accept that no time is ideal for reaching such an important decision. It was a difficult decision, and whatever time had been chosen, I am sure would have come under criticism.

The noble Lord, Lord Trefgarne, asked about British Airways and British Caledonian. They, too, were consulted about the decision to terminate. Indeed, British Airways, to which the noble Lord made special reference, had for a long time made it clear that they were dissatisfied with the 1946 Agreement, and they were fully consulted throughout.

I turn to the question of certificated aircraft. The airworthiness provisions of the 1946 Agreement are maintained in the new Agreement with some minor textual changes. Duly certificated aircraft of either country will be granted landing rights provided that they, and the airlines operating them, comply with the laws and regulations of the other country. Our treaty rights for Concorde are maintained in the new Agreement.

Next, the noble Lord, Lord Trefgarne, asked about Fifth Freedom rights. I think that the noble Earl, Lord Amherst, was also interested in this problem. The new Agreement provides for a considerable reduction in the United States Fifth Freedom rights over London. On the other hand, United Kingdom airlines obtain some useful Fifth Freedom rights beyond the United States to points in Canada, South America and Mexico, and these will be of value to both British Caledonian and British Airways. Under the old Agreement there were no limits to United States rights over London to Frankfurt, but under the new Agreement only two United States airlines will be allowed on this route, one of which must be the airline operating the round the world service, the frequency of which will be limited to seven flights a week in each direction.

The noble Lord, Lord Trefgarne, then asked me about the capacity control and whether I would spell that out. He will understand that it will be spelt out in the document to which we look forward, and we shall then be able to go into the matter in more detail. However, I shall merely repeat what I said on an earlier occasion. On North Atlantic routes airlines have to file their plans for each season with both Governments, which can then express dissatisfaction with them. In that event, there is provision for consultations between the Governments. In case of disagreements, the airlines will be entitled to operate fallback levels of frequencies based on not less than the previous equivalent season, plus a growth element. There are a number of detailed provisions which will be published in the Annex to the Agreement.

The noble Lord then went on to ask about charter flights. As I understood it, he stated the general position quite accurately; namely, that for the time being charter air services will continue to be governed by the existing Memorandum of Understanding with the United States on charters, under which it lifted its earlier severe restrictions on the access of our charter airlines to the United States market. It was agreed that this might be developed into a bilateral agreement. However, both sides agreed to work towards a multilateral agreement for all charter services between, on the one side, Europe and, on the other side, the United States and Canada. That is in accordance with recommendations adopted by European Governments in the European Civil Aviation Conference.

In answering the noble Lord, Lord Trefgarne, I have already dealt with some of the points notified to me by the noble Earl, Lord Amherst, but, together with other noble Lords, the noble Earl specifically raised one or two further matters. The noble Earl asked about gains and new routes for the United Kingdom. Without going into details, I would indicate that in the negotiations the United Kingdom gained 14 gateways into the United States, which compares with the nine previously held. So that is an indication of the gain there.

As the noble Earl, Lord Amherst, asked about Los Angeles in relation to single designation, and as a number of other noble Lords have raised this point, perhaps I might explain the position regarding Los Angeles. The Statement of 23rd June, which I repeated in your Lordships' House, explains that, like the Americans, we would have the right to designate two of our carriers on two routes. The Americans have already made it clear that their two routes would be New York and Los Angeles. We have announced that Laker will be designated as our second carrier on the New York route so that Mr. Laker can operate his Skytrain service. But the Government's intention—and this particularly relates to one of the concluding recommendations from the noble Lord, Lord BoydCarpenter—is to retain the option to designate a second carrier on some other route, and the Secretary of State for Trade intends to keep that option open.

Although the Americans have decided to keep two of their carriers on Los Angeles, it does not follow that Her Majesty's Government are bound to match them. In fact, we believe that traffic at Los Angeles will be insufficient to justify more than two carriers for some time to come. As a result of the bargaining process which I have described, we have had to accept that there will be two United States carriers against our one. We see no justification for putting a second British carrier on that route and adding to the over-capacity that is likely to result from the existing three airlines.

To some extent this problem will be kept under control by the new capacity mechanism, but I suggest that it would not profit British Caledonian and it would certainly not be in the overall national interest to designate British Caledonian to operate again to Los Angeles. I hope that that deals with points made by a number of those noble Lords who have contributed to the discussion.

The Earl of KINNOULL

My Lords, as this is an important point, I should like to ask the noble Lord a question. I am sure he will agree that the Government have kept open a valuable option on this second designation route. If a British carrier comes to the Government and says, "We believe that we can make good use of this", does the Minister feel that the Government should take note of what that British carrier says, and, if so, has British Caledonian intimated to that effect to the Government?

Lord ORAM

My Lords, clearly at all times the British Government are in close contact both with British Caledonian and with British Airways. We take seriously the representations that they make to us, which would include any representations in respect of Los Angeles. I was answering the points of the noble Earl, Lord Amherst. I think he will agree that I have now answered them; or that I answered them in relation to the noble Lord, Lord Trefgarne—or I can hide behind his kind absolution to me that I need not answer all his points.

Perhaps I may answer just two points made by other noble Lords before I turn specifically to the speech and the argument of the noble Lord, Lord Boyd-Carpenter. The noble Earl, Lord Kinnoull, asked whether I would undertake to look into the different legal powers which the United States has by contrast with ours. Of course, there are these differences. I am not in a position to pontificate upon those differences here this evening, but I give him the undertaking which he sought.

There is one much more general point to the noble Earl, Lord Alexander of Tunis, who said that when the Agreement was announced through the media it was presented as something of a triumph for Britain. If he recalls the Statement that was made by my right honourable friend in another place and which I repeated here, and if he recalls the statements made to Press conferences at that time, he will know that there was no attempt on the part of Her Majesty's Government to present it in that light, as a triumph. Indeed, I would rather quote from Ambassador Boyd—and I am quoting here from a letter in The Times of 15th July 1977, from Sir James Dunnett. He recalled that Ambassador Boyd, in summing up the negotiations, had said: This is not a win or lose proposition. I think we both won and the public has won, and that is the way agreements between sovereign nations should work out". Sir James Dunnett then goes on to say: These are remarks that I, for one, would fully endorse". And I, for two, would fully endorse.

Now may I turn to the specific Question and the specific points made by the noble Lord, Lord Boyd-Carpenter. He calls attention in his Question to paragraph 9 of Command Paper No. 6400. That paragraph describes the exchange of routes to be carried out between British Airways and British Caledonian they both agreed as part of the policy review. The paragraph, which I need not read in full, explains that British Caledonian's sphere of interest would include both Central and West Africa and virtually the whole of South America. The relevant part concerning British Caledonian's services to the United States reads as follows: It"— that is, British Caledonian— will however retain its licence to serve Atlanta and Houston and it will be the sole British airline designated to operate this route when it becomes available for international services". Paragraph 2 of the White Paper had noted that British Caledonian had begun services on routes to New York and Los Angeles in April 1973 but discontinued them in November 1974. The difficulties that British Caledonian had faced in establishing itself in the North Atlantic scheduled market in those years were one of the reasons why my right honourable friend Mr. Peter Shore reached the conclusion that a policy of double designation would not be in the best interests of British airlines. Paragraph 8 of the White Paper pointed out that the decision to rule out double designation on long-haul routes would involve the loss to British Caledonian of their existing licences to serve New York, Los Angeles, and Boston. The main features of the new Air Services Agreement with the United States concerning services to Atlanta and Houston will already be known to your Lordships as a result of the Statement to which I have referred several times and which I repeated in the House on 23rd June and the answers which I subsequently gave.

That Agreement provides sole rights for a British carrier to operate a non-stop passenger and cargo service to Houston for three years following signature of the Agreement. A United States carrier will have corresponding sole rights to operate a non-stop service from Atlanta. These were the facts which the noble Lord, Lord Boyd-Carpenter, rehearsed. At the end of the three years' period, both routes will be open to both sides. In the meantime, either side can start an indirect service; that is, one making an intermediate stop at another point. This would of course not be very competitive with the direct service, but the opportunity is there; and possibly this has relevance to a point which the noble Earl, Lord Alexander of Tunis, was making in the reverse direction, that is from America.

The paragraph of the White Paper to which Lord Boyd-Carpenter referred contains a statement that British Caledonian will retain its licence to serve Atlanta and Houston and that it will be the sole British airline designated to operate to these points when they become available for international services. British Caledonian does retain its licence to serve Atlanta and Houston. It will be so designated by Her Majesty's Government at the appropriate time following signature of the new Agreement, and in good time before it wishes to start its services. As I said, Houston will be available to it for a non-stop service immediately. Atlanta will become available in three years' time, and I understand that this arrangement accords with British Caledonian's own wishes. I therefore fail to understand why the noble Lord should suggest that we have failed to honour in full either the letter or the spirit of the undertakings given to British Caledonian under the Civil Aviation Policy Review.

Lord BOYD-CARPENTER

My Lords, would the Minister not agree on reflection that it must be wholly contrary to the spirit, and I suggest the letter, of the paragraph, having, as he said, allowed British Caledonian to operate out of Houston, to have signed an Agreement which enables an American carrier to tap a large part of the Houston market by operating out of Dallas/Fort Worth and, at the same time, giving British Caledonian no assurance that it will be free to operate out of Dallas/Fort Worth? It really is no good to say, "I have given you a point A" if, at the same time, somebody else has been given point B which destroys a great deal of the value of point A because it taps that market.

Lord ORAM

I noted those points in the noble Lord's opening speech, my Lords, and I shall come to them in the course of my further remarks.

Lord BOYD-CARPENTER

My Lords, I await those further remarks with eagerness and interest. As the Minister was putting the general point of my question, I think it fair to point to the problem that paragraph 9 says that it may operate on Atlanta as soon as it is open for international service. It will be open for international services this autumn but it will not be allowed to operate on it for three years.

Lord ORAM

My Lords, I hope to pick up those points—perhaps not wholly to the noble Lord's satisfaction, but shall be dealing with them in my own way. I was about to say on this point that there can be no question of compensation for the airline, even if it were accepted that loss of a licence were grounds for compensation.

The main questions that have been raised in the debate are whether British Caledonian will be able to operate to the Southern United States on a viable basis, and whether we have obtained a better deal for them under the new Air Services Agreement than we could under the old Agreement. It has also been argued that we should have obtained more for British Caledonian by preventing competition from a United States carrier on the Dallas/Fort Worth route—the point to which the noble Lord has now returned. The Government believe that, far from complaining about the results, British Caledonian have every reason to be pleased with the outcome of these negotiations. It is relevant, I suggest, to compare the conditions under which they will now operate with what we would have expected under the old Agreement.

Under the first Bermuda, the best we could have hoped to negotiate was new routes to Atlanta and Houston, and possibly to other points, including Dallas, but these would have been available to both sides simultaneously. The United States authorities would have been entitled to designate several of their carriers to operate in competition with British Caledonian, and there would have been no satisfactory provision to enable us to restrain the amount of capacity these carriers could have put on to the routes; and if the American carriers had decided to push British Caledonian off the market by putting on more and bigger aircraft in order to capture the traffic, there is little, under Bermuda I, that we could have done to prevent them.

Lord BOYD-CARPENTER

My Lords, I am sorry to continue interrupting the noble Lord, but is he really being realistic? Is he not aware that, in fact, for years past on the North Atlantic the carriers on both sides have arranged voluntary capacity controls? It would have been so obviously in the interests of neither of them to ruin both of them.

Lord ORAM

My Lords, it is very much a question of judgment, but I think that the danger would have been there. Under the greater freedoms to the Americans under Bermuda I, they might well have adopted the policy that I have indicated. Under the new Agreement, not only have we succeeded in obtaining the three years' sole rights that British Caledonian wanted to establish their service to Houston, but we have ensured that not more than one United States airline can be designated on each of these routes; and, further, that when British Caledonian come on to the Atlanta route, their United States competitor will be obliged to restrain its capacity in order to give them a fair chance to become established. This will help British Caledonian to establish themselves on the Atlanta route without fear of swamping of capacity by their competitor. The capacity-regulating mechanism, which is the main novel feature of the new Agreement, will also provide a continuing means of preventing the swamping which occurred under the old Agreement. These provisions on capacity are of considerable value to British Caledonian, and could not possibly have been negotiated under the old Agreement.

The counter argument, to which noble Lords have referred, is that from the start British Caledonian may have to face indirect competition from United States airlines operating to London from Dallas/Fort Worth. This airport, as has been said, is only some 200 miles from Houston, and clearly, I agree, to a considerable extent they are serving the same market. Naturally, British Caledonian would have preferred not to have had to face competition from an American carrier at Dallas—that is perfectly understandable —but, unfortunately, it was just not negotiable that British Caledonian should be the only airline on either side able to operate a non-stop service between Texas and London for a three years' period. It was just not "on".

The Americans insisted that the Dallas service could also start once the Agreement was signed and that this would be available to one of their own airlines on a solo basis for three years. However, it should be remembered that British Caledonian can start their Houston service immediately. I am glad to see that they have announced 23rd October as their starting date. But a US airline to start from Dallas has still to be selected by the US authorities. There is a lengthy procedure under US law and possibly it will be accelerated in this case. However, I would suggest to noble Lords that British Caledonian are very likely to have a good head start. It could take several months after British Caledonian's starting date of 23rd October before a US airline can start the Dallas service, but I do not wish to suggest to the House that there can be any guarantee of this. It should be remembered also that estimates by the Civil Aviation Authority show that traffic at Houston should be half as big again as the traffic at Dallas. On this count also British Caledonian appear to have a good bargain.

Both British Caledonian and British Airways have now applied to the Civil Aviation Authority for a licence to serve Dallas/Fort Worth. This relates to the second of the suggestions that the noble Lord, Lord Boyd-Carpenter, has made. The Civil Aviation Authority will be carrying out its statutory duty in deciding whether to issue a licence for this route, and to which of the applicants it should be issued. In the first instance, this is a matter exclusively for the Authority to deal with. My right honourable friend the Secretary of State for Trade has the duty to consider appeals from the decisions of the Civil Aviation Authority, and, since this is a matter which may come to him on appeal, the House will understand that I certainly should not comment further on these applications. However, the Command Paper of February 1976 which was approved by both Houses of Parliament put Dallas/Fort Worth into British Airways' sphere of interest.

Lord BOYD-CARPENTER

My Lords, this is vitally important. Is the noble Lord indicating that the Civil Aviation Authority—although, as he said, it is for them to consider quasi-judicially the two applications—will be bound by his suggestion that the guidance given in 1976 compels them to choose one rather than the other?

Lord ORAM

My Lords, I was merely indicating what is in the Command Paper. It will be for them to make up their minds and it will be for the applicants to appeal if they wish. That is my understanding of the procedure which lies before the applicants.

Lord TREFGARNE

My Lords, as my noble friend has said, this is a vital point. Is the noble Lord aware—and perhaps he will correct me if I am wrong—that the Secretary of State has powers to direct the CAA in cases where the international implications appear to him to be paramount? Has he considered making such a direction in the case of these two applications?

Lord ORAM

My Lords, I am not personally in a position to know whether my right honourable friend has taken up that matter, but I will inquire and let the noble Lord know.

I do not accept that the sole rights that the Americans will have on Dallas for three years unbalances the Agreement as a whole. That has been the implication of much that has been said this evening. The US advantage on this route is upset by the fact that, while Manchester is available to us immediately, the Americans cannot start operations on their 15th gateway for three years. British Caledonian have expressed concern that the Americans will select a southern city as their 15th gateway, and that their services to Houston and Atlanta will suffer as a result. I do not think that the noble Lord made this point but it is a point which has been made. But the 15th United States gateway will have to be agreed with Her Majesty's Government and cannot be imposed upon us by the Americans.

We have also succeeded in obtaining for British Caledonian some Fifth Freedom rights to enable them to carry traffic from Atlanta or Houston to points in South America in their sphere of interest. We could not have secured these rights under the old Agreement. I understand that British Caledonian themselves said during the negotiations that these rights would be of considerable potential benefit, and I have no doubt that this may be so, since I believe that no airlines are currently operating direct services between the cities concerned. If British Caledonian wish, the Department of Trade are ready to open negotiations for corresponding rights from the other countries concerned. The ability to combine services to South America with the new services to Houston and Atlanta will give British Caledonian new commercial opportunities and greater flexibilities.

I must explain the position regarding all-cargo services. The noble Lord, Lord Boyd-Carpenter, was rather more up to date in this matter than his noble friend Lord Alexander. I confirm what the noble Lord, Lord Boyd-Carpenter, says: that British Caledonian are entitled to operate an all-cargo service to Houston immediately, and I understand that they intend to start this October; but a United States carrier will not be entitled to operate a similar service for three years. I think that is what the noble Lord said.

Lord BOYD-CARPENTER

My Lords, I was informed, with his habitual courtesy, by the Secretary of State that the position was now as the noble Lord has indicated. I understand that when the Agreement was initialled the United States could have put their cargo service on at once but there has been some subsequent negotiation. Is that a fact?

Lord ORAM

My Lords, I believe that to be the position, yes. At Atlanta the Americans will have no right to operate a direct all-cargo service, whereas in three years British Caledonian will be able to operate both passenger and all-cargo services there direct.

The Americans' agreement that their carriers on these routes should go into Gatwick and not to Heathrow is another achievement of the new Agreement and perhaps one of the most important to British Caledonian. Under the old Agreement, we could not have prevented the United States carriers from operating to Heathrow, and this would have put British Caledonian at a considerable disadvantage. The fact that all the carriers of both sides will have to operate to Gatwick will put matters on an equal basis and British Caledonian should be very satisfied that this will be so. They must also be glad at the great stimulus this will give to the build-up of Gatwick as a major scheduled service airport serving London. I hope that it will encourage other scheduled service airlines to move from Heathrow to Gatwick, both for long haul services like those to Atlanta and Houston and for the vital connecting services to Europe and other easterly points.

I suggest that all these gains for British Caledonian that we have secured under the new Agreement amount to far more than either we or they could reasonably have expected when we opened negotiations or, indeed, when the Civil Aviation Policy Review was completed last year. I accept that the Government did not secure all their objectives in these negotiations, and that British Caledonian have not secured 100 per cent. of their objectives. But we have not at any time claimed that we have obtained all our objectives. The Secretary of State was careful, in the Statement which I read to this House on 23rd June, to claim only that the new Agreement will give British airlines a fairer opportunity to fight for a bigger share of a growing market". It is not to be expected in any negotiations that one will achieve all the targets with which one goes into the negotiations. We have had to give way on a number of points and to make a number of concessions to the Americans. In return, the United States have moved a long way towards us. It is the Government's strong belief, from the point of view both of our civil aviation interests in general and of British Caledonian in particular, that we have secured the best we could from these negotiations. Certainly we could have achieved nothing like these results unless we had served notice of termination of the old Agreement. The deal, in so far as it affects British Caledonian, will give them improved new opportunities and several vital safeguards. They will be starting their Houston service in October. The Government hope that British Caledonian will in this way begin to maximise the opportunities for growth that have been created for them.

In conclusion, my Lords, I apologise for great length of my statement, but that is a reflection of the great importance of the subject that has been raised, and of the fact that noble Lords spread it out well beyond the strict limitation of the Question. If there is a fault, it is not mine but the fault of your Lordships' House.