§ The following Question stood upon the Order Paper:
54. Mr. LEE
To ask the Minister of Aviation whether he will make a statement giving details of the financial arrangements under which British Overseas Airways Corporation-Cunard Ltd. will function; and what provision has been made in the agreement regarding the effects upon this company of a change of ownership of the Cunard Steam-ship Co. Ltd.
The Minister of Aviation (Mr. Peter Thorneyeroft)
With permission, I will now answer Question No. 54. Yes, Sir. The decision of British Overseas Airways Corporation and Cunard to join forces has my full support.
Airlines on the Atlantic have suffered severe losses because of the setback in the growth of traffic and excess of capacity. The United Kingdom is facing fierce competition on these routes and by concentrating their capacity, maintenance facilities, sales effort and managerial experience, B.O.A.C. and Cunard should strengthen the British civil aviation effort in this vital area.
B.O.A.C.-Cunard Ltd. will have a capital of £30 million, of which B.O.A.C. will contribute 70 per cent. and the Cunard Company 30 per cent. Profits and losses will be shared in proportion to the holdings of capital. B.O.A.C.'s contribution to the capital of the company will not involve it in any additional borrowing from the Exchequer.
961 B.O.A.C. will operate the new company's aircraft on its behalf and charge the company a price to cover full costs. The financial results, so far as they affect the Corporation, will be presented to Parliament in the customary detail.
As regards any possible change in the ownership of the Cunard Steam-ship Company, Ltd., B.O.A.C. retain the right to call for the transfer to itself of the 30 per cent. Cunard holding.
I am obliged to the right hon. Gentleman for making that statement, but is he aware that we on this side of the House are very dissatisfied with the way in which the announcement of the formation of this company was made? We are now discussing the matter after the company has begun to fly the route.
The right hon. Gentleman has just spoken about excess capacity. Will he explain what B.O.A.C. has to gain from capacity additional to the surplus capacity it already has, represented by two Boeings, from which, apparently, Cunard may get 30 per cent. of the takings?
From the point of view of the House, will the Minister say what Ministerial responsibility to the House he now has for this new company? In other words, do we treat it as a nationalised concern? Can we put down Questions or debate its affairs as we should those of B.O.A.C. as a nationalised concern? Further, since there have been losses by both these companies during the past year, and the North Atlantic routes are still showing losses, will the Minister bear the losses on Cunard, if this situation unfortunately continues?
Is it not obvious that the only reason why B.O.A.C. has done this is that it is afraid of the Air Transport Licensing Board and the licences which might be given? Will the right hon. Gentleman now tell us what Government policy is? We had, first, a public monopoly broken on the Atlantic by the Civil Aviation (Licensing) Act, 1960, in the interests of free competition. Now we have the Minister conniving at the creation of a monopoly, with the independents inside it, to ensure that we do not suffer the disadvantages of wasteful competition. What is now to happen to the Act of 1960?
§ Mr. Thorneycroft
Whatever else can be said about this arrangement, it is certainly not a monopoly. This company will be faced with fierce competition on the North Atlantic and my belief is—and this belief is shared by the Chairman of B.O.A.C.—that it will advantage B.O.A.C., which is a great public corporation, to share and pool its capacity, its managerial experience, its sales offices and the like in this sphere of operations.
The losses will be borne in proportion to the way in which the capital is being put up. Cunard, in this respect, will, of course, bear its own losses.
§ Mr. P. Williams
is my right hon. Friend aware that there are some hon. Members on this side of the House who still believe in a greater degree of competition? Although international airlines are going through what we hope are temporary difficulties, we should be able to take a long-term view and hope that these two concerns will, in future, be able to compete. If this was the object of the Civil Aviation (Licensing) Act of two years ago, why did we waste our time passing it if we now set about amalgamating these two concerns?
§ Mr. Thorneycroft
If my hon. Friend will study the Act and the debate on the Bill which took place at that time, he will see that my predecessor in no way said that every airline had to compete with every other airline. My predecessor said then that there were many instances in which co-operation was the better answer.
§ Mr. Rankin
Has the Minister forgotten that the competition to which he just referred was in existence before the Bill became an Act and that his predecessor was constantly reminded of that during the passage of the Bill? If B.E.A. now decides to take over incompetent private airlines, will the right hon. Gentleman give the same welcome to it as he has given to B.O.A.C. when it shows that public enterprise is a better form of organisation in the air than private enterprise?
Finally, can he assure the House that the wages and conditions of employees of Cunard who are being taken over will be raised to the same level as those operating in B.O.A.C.?
§ Mr. Thorneycroft
I will, naturally, judge any case on its merits as it comes forward. In my personal belief, a merger of public and private enterprise to anyone who is not completely doctrinaire in these matters may well serve a very useful purpose.