HC Deb 20 July 1964 vol 699 cc39-49
The Minister of Aviation (Mr. Julian Amery)

With permission, I will make a statement about the size and composition of the B.O.A.C. fleet of aircraft.

As the House knows, B.O.A.C. has ordered 30 Super VC10s. These aircraft with the 12 Standard VC10s now being delivered and the 20 Boeing 707s now in service would make a total fleet of 62.

When Sir Giles Guthrie assumed the chairmanship of B.O.A.C. on 1st January, this year, I sent him a directive which was published in HANSARD on 5th February. In this I asked Sir Giles to prepare a plan for putting the Corporation on its feet financially. This plan is intended to cover all aspects of B.O.A.C.'s operations, and Sir Giles has not yet completed his work on it. He has, however, already made a detailed study of the Corporation's route pattern. He does not propose to make many reductions in this and, indeed, has same plans for extension. He has, however, concluded that by higher utilisation of aircraft he can maintain B.O.A.C.'s services in 1967 with 23 less passenger aircraft than the Corporation had previously planned. In other words, he judges that he will need a fleet of about 39 passenger aircraft in 1967 instead of 62.

As the House knows, the issue which now has to be decided is to find the best solution to the problem which has arisen as a result of B.O.A.C. having ordered more aircraft than it now appears will be needed. Sir Giles and the other members of the Corporation have reached the conclusion that the right course for B.O.A.C. to follow would be to cancel the order for 30 Super VC10s. This would involve heavy cancellation charges. It would reduce the fleet to 32 aircraft. To meet the full requirements B.O.A.C. would then wish to buy six new Boeings. The fleet would then consist of 26 Boeing 707s and 12 Standard VC10s.

The main consideration that has led B.O.A.C. to this conclusion is the following. The 20 Boeing 707s now held by the Corporation have a number of years of life before them and have already been very largely amortised in the Corporation's accounts. The cost of amortising new Super VC10s would be much greater than the further depreciation of the Boeing 707s now in service. In the opinion of B.O.A.C., the continued use of the Boeing 707s would be more profitable than their replacement by Super VC10s, and it would be more economical, in their view, to buy new Boeing 707s rather than to take Super VC10s.

Sir Giles has also told us that B.O.A.C. will need about eight further aircraft after 1968. If B.O.A.C. were now to buy six new Boeing 707s, this further requirement would almost certainly have to be met by further purchases of Boeing 707s. Implementation of this proposal would thus mean the cancellation of 30 Super VC10s and the purchase of 14 new Boeing 707s. The fleet would then consist of 34 Boeing 707s and 12 Standard VC10s.

I wish to stress the point that the issue is not simply what aircraft B.O.A.C. should now order to meet its estimated requirements, but whether it should cancel the order already given and, at the same time, embark on a policy of replacing some of the cancelled Super VC10s with new Boeing 707s. While I appreciate the force of the considerations advanced by Sir Giles Guthrie, I do not think that it would be right to allow B.O.A.C. to cancel the order given by it for Super VC10s with a view to buying more Boeing 707s.

The trials of the Super VC10 show that this will be an aircraft of very high performance and quality. Its quietness, slower landing speed and relatively short take off and landing capacity should give it great appeal both to passengers and operators. The result of following B.O.A.C.'s commercial proposals would be to inflict extensive injury on the British aircraft industry and those who work in it. It would also do serious damage to the prospects of a fine and promising aircraft.

I have had several talks about this with Sir Giles Guthrie, and in view of all these considerations, including the existence of the contracts, he has agreed that B.O.A.C. will take 17 of the 30 Super VC10s. This means that he will take seven to meet his estimated requirements up to 1967 and subsequently a further 10. As the House will appreciate, this is two more than he now thinks will be required after 1968, and B.O.A.C., if its present forecast of future traffic requirements does not, in fact, prove to be an underestimate, may decide when it gets the additional two VC10s to dispose of two of the Boeing 707s.

Of the balance of 13 Super VC10s, the Royal Air Force will take three in addition to the 11 Standard VC10s now on order by the Air Force. These three aircraft will be needed to maintain our strategic airlift capacity as existing transport aircraft cease to be operational. Work will, therefore, continue as planned on 20 of the 30 Super VC10s ordered by B.O.A.C.

I come now to the balance of 10 aircraft on order by B.O.A.C. I have found this a very intractable problem. B.O.A.C. is, in my view, quite rightly not prepared at this time to say how many more or, indeed, what aircraft it may need at the end of the decade in addition to the 47 for which it now has a requirement.

In April, 1963, the then Chairman of B.O.A.C. asked the British Aircraft Corporation to suspend work on 10 of the Super VC10s ordered by B.O.A.C. This B.A.C. agreed to do. The work on these aircraft is not very far advanced, and a final decision with regard to them need not now be taken. Work on these aircraft will remain in suspense for the time being. This is, of course, without prejudice to the contractual position.

B.O.A.C.'s fleet as now planned will consist of 17 Super VC10s, 12 Standard VC10s—in all, 29 VC10s—and 18 to 20 Boeing 707s. It could well be that in the light of operating experience, B.O.A.C. may wish to replace the Boeing 707s as they age with Super VC10s. It may be that some new features can with advantage be incorporated in the Super VC10s, and it may be that B.O.A.C.'s requirements after 1968 will exceed present forecasts. It does not, therefore, appear to be sensible now to decide to cancel the order for these 10. As I have said, work on them will remain in suspense for the time being. [HON. MEMBERS: "Resign."]

I have assured Sir Giles Guthrie that it is the Government's intention to take whatever action may be necessary to reorganise the Corporation's capital and financial structure so as to enable it [HON. MEMBERS: "Resign."]

Mr. Speaker

Order. If hon. Members make so much noise they will prevent us making further progress.

Mr. Callaghan

On a point of order, Mr. Speaker. In view of the fact that this statement seems to comprise mostly argumentation, conjecture and postponement of decision, may I ask under what rule it is in order that the Minister is making it? Surely this is the very reverse of a statement. He is telling us what he is not going to do, not what he is going to do. Is this not an abuse of the procedure of this House? May I inquire whether you ask for these statements to be submitted to you in detail before they are made?

Mr. Speaker

This is covered by Rulings by my predecessors which I have had occasion to look up lately. There has been correspondence with a right hon. Gentleman. The Minister has a right to make a statement if he thinks fit, and I cannot stop him if I am given notice about it. How early I get notice of its terms is apparently a matter of hazard.

Mr. Amery

I think that what I am saying will be helpful to the House for the debate on Wednesday.

As I was saying, I have assured Sir Giles Guthrie that it is the Government's intention to take whatever action may be necessary to reorganise the Corporation's capital and financial structure so as to enable it to operate as a fully commercial undertaking with the fleet of aircraft now planned and with those which may be ultimately selected. The detailed implementation of this assurance will be worked out between my Department, the Treasury and the Corporation in the context of any other steps necessary to put B.O.A.C. on its feet financially.

Sir Giles Guthrie, on behalf of B.O.A.C., Sir Charles Dunphie, on behalf of Vickers, and Sir George Edwards, on behalf of the British Aircraft Corporation, have assured me of their full co-operation in the discussions which must necessarily take place in view of the decisions I have announced. I would like to express my thanks to them for their help in seeking to find the best solution of the difficulties which have arisen as a result of B.O.A.C.'s ordering more aircraft than are now required.

Mr. Lee

Is the right hon. Gentleman aware that the House will be very grateful to him for confirming all the Press statements which we have been reading during so many weeks? Indeed, at times it sounded almost like tedious repetition. Is he aware that despite what he said, we on this side of the House do not accept that B.O.A.C. freely ordered too many aircraft? It would have been as well if Viscount Watkinson's name had been mentioned in this statement instead of in the one which has just been made by the Secretary of State for Industry and Trade.

As the right hon. Gentleman has instructed B.O.A.C. to function as a commercial airline, may we ask who now pays for the VC10s which are surplus to the requirements as announced by Sir Giles Guthrie? Surely if we are to expand the fleet when the routes are contracting we shall be back where we were, regulating our routes to our aircraft.

In his statement the right hon. Gentleman said that he has assured Sir Giles that it is the Government's intention to take whatever action may be necessary to reorganise the Corporation's capital and financial structure and to help get it on its feet financially. Does this include the cancellation of the £80 million deficit on which B.O.A.C. is condemned to pay £4 million interest a year? Does it also include raising the ban on trooping contracts, which also is costing B.O.A.C. money?

Does the right hon. Gentleman not agree that instead of this extremely tortuous recommendation, it would have been far better had the Government agreed themselves to purchase the 30 planes and then to charter them out as needed until the routes structure expands, until the Boeings can be sold and until the R.A.F. is ready to take more VC10? We believe that the latter course would have been a far better way than merely deferring 10 planes for the consideration of the next Government and the House.

What the right hon. Gentleman has done is, we suggest, a rather cowardly way of getting rid of a very sticky political issue and palming it on to those who will come afterwards.

Mr. Amery

The question of the accumulated deficit will, of course, be dealt with when we make proposals to the House for the reorganisation of the capital structure.

Mr. Lee

When?

Mr. Amery

The hon. Member suggested that it was a cowardly thing to leave the decision until the next Parliament. I do not think that there is anything cowardly in that. We shall no doubt have to deal with the problem. I can imagine nothing which could have been more damaging to the prospects of the VC10 than if we had had to take it over on Government account and to charter it out here, there and everywhere.

Sir A. V. Harvey

In view of the almost irresponsible over-ordering of aircraft by B.O.A.C., will my right hon. Friend say whether his directive to the new Chairman on 1st January was intended to give him authority to turn down much valued capital equipment ordered by his predecessors? May we be told that? Will he tell the House what firm inquiries there are for the VC10 from overseas and for home orders? Will he bring B.O.A.C. and the new Chairman of Vickers together so that they may work out the basic economic costs, get on with this very fine aeroplane, and get it into operation?

Mr. Amery

In my directive to Sir Giles Guthrie I asked him to approach the problem from a purely commercial standpoint, and I make no complaint of the proposals which he has put forward. But the Government have to have regard to wider issues than purely commercial ones.

As to the interest shown in the VC10 by other airlines, there are a number of foreign inquiries at present, and I understand that British Eagle Airways has also been making inquiries, particularly with regard to the possibility of using the VC10 on the South American routes. These are still inquiries and I am not in a position to make any announcement about them. Last night, Sir Charles Dunphie, of Vickers, Sir George Edwards, of B.A.C., Sir Giles Guthrie and I all met, and there have been discussions between us as to the implementation of the decisions which I have announced.

Mr. Cronin

Is it not an extraordinary situation that the Chairman of B.O.A.C., only two days ago, issued a statement which is diametrically opposed to the Minister's decision this afternoon? Has this situation not done great harm to the British aircraft industry, and is it not the case that when he took office two years ago the Minister was fully aware that VC10s had been ordered in excess? Why did he not take action much earlier? Finally, is this not another example of vaccilating policy, procrastination and muddle on the part of the Government?

Mr. Amery

I make no complaints about the Chairman of B.O.A.C. making a statement and putting his position forward. He must be free to do this. It would be quite wrong to attempt to inhibit him from decisions of this kind.

I was asked what the situation was two years ago. It is true that at one time Sir Matthew Slattery proposed the cancellation of 13 aircraft, and it was partly the result of my intervention in this matter that no action was taken and that, instead, B.A.C. agreed to suspend work on these aircraft, but without any prejudice to the contractual position, so that the whole question might be studied at leisure. It is still being studied, and I think that it would have been quite premature to have made any cancellation two years ago. I am sure that hon. Members would not wish to suggest that I was wrong in halting action on that occasion.

Sir W. Robson Brown

Is my right hon. Friend aware that his statement will bring very limited relief to my constituents and all the workers in the Weybridge factory? Is he aware that informed public opinion in this country takes the attitude that we should not cancel VC10s, but rather the reverse—that we should sell the Boeings which are under the control of B.O.A.C? Would he, between now and the debate on Wednesday, make it clearer what has been the real outcome of an agreement between B.A.C, B.O.A.C. and himself, because this is the first time to my knowledge that there has been any confrontation of these parties in this most vital national matter?

Mr. Amery

As I said, no cancellation is proposed. But it seems to me that it would be wrong to ask B.O.A.C. to take aircraft surplus to its requirements or to sell off very profitable Boeings. It seems to me that the important thing, without interrupting the contract, is to give time for the Corporation to see what its longer-term requirements will be.

Mr. Lubbock

Will the right hon. Gentleman "come clean" and admit that the intractable problem of these 10 extra VC10s is one of the Government's own creation? Does he recognise that serious damage has already been done to a fine and promising airliner by the delay in making this statement? Will he answer these questions?

First, does the part of his statement which refers to B.O.A.C's estimated requirements after 1967 mean that the orders for this aircraft will be phased out and that the deliveries will not take place as previously scheduled?

Secondly, what exactly do these reductions in the route structure of B.O.A.C. consist of? What effect will they have on the Corporation's future fleet requirements?

Thirdly, on the high utilisation which Sir Giles Guthrie expects to get out of his fleet, will the right hon. Gentleman give the House the comparative figures of the present utilisation and that which Sir Giles expects?

Finally, in view of the great importance of these calculations to B.O.A.C. and to the aircraft industry, will the right hon. Gentleman publish a White Paper setting out all the calculations involved?

Mr. Amery

The phasing of the orders is a matter which B.O.A.C. and B.A.C. will be discussing together. I am not in a position at this point to say exactly how the phasing will take place. I will do my best to deal with the other points which the hon. Gentleman raised in Wednesday's debate. It may be that, after the hon. Gentleman has heard what I have to say on Wednesday, he will not any longer wish to press for a White Paper.

Sir J. Eden

Is my right hon. Friend aware that we welcome the statement that he has made, particularly as it appears from all reports that the VC10 is an extremely popular aircraft with passengers? Is my right hon. Friend aware that we welcome the fact that no cancellation has taken place, because there is apparently plenty of stretch in the aircraft and the prospect of a Mark II version coming along is very realistic indeed?

Further, is my right hon. Friend aware that we also welcome the commercial approach of the new Chairman of B.O.A.C., recognising that it has always been the case that the Minister can, should he wish to do so for reasons of greater national interest, make a directive or make some issue quite plain, as he is doing now?

Is it not quite clear from the ribaldry of the Labour Party that it is more concerned with the party politics to be gained from this than it is with the future of the British aircraft industry, for which the Labour Party has only one solution—

Mr. Speaker

That question does not arise out of this statement.

Sir J. Eden

Mr. Speaker, may I complete the sentence? The Labour Party has only one solution for the British aircraft industry, which is nationalisation, which is the basis of the present trouble.

Mr. Amery

I entirely agree with my hon. Friend in saying that we welcome the commercial approach of the new Chairman. What I have always sought is that the Chairman of B.O.A.C. should give us his judgment of what is the commercial solution and that he should not seek to determine what the national interest is.

It is important that the Corporation's management should proceed on commercial lines and that the Government should determine where the national interest lies. Many of the troubles with the Corporation have arisen from the fact that the Chairman sometimes thought that he was judging where the national interest lay.

I confirm that the VC10 is an extremely popular aeroplane with both passengers and pilots. I believe that it is capable of very substantial stretch both in passenger accommodation and in engine power.

I would also add, since I have been given the opportunity, that the utilisation rate of the Standard VC10 now in service with B.O.A.C. has been sensationally high, I believe something like eight out of 24 hours, which, in a new aeroplane, is very unusual.

Mr. G. Brown

Would the Minister or the Chancellor of the Exchequer tell us the cost in terms of public money of the decisions which the Minister has announced this afternoon?

Mr. Amery

The cost of the reorganisation of the capital structure of B.O.A.C., which will have to take account of the problem of the accumulated deficit, is something which I cannot define until we bring clear proposals before the House on this subject.

The decisions which I have announced this afternoon involve no increase in cost, in the sense that the money for the purchase of VC10s has already been approved by the House in the 1963 Act, making loan money available for the purchase of aircraft by B.O.A.C.

Mr. Brown

That is not expenditure.

Mr. Amery

There will be a provision with regard to the three aircraft for Strategic Command. There will be ultimately an element to be included in the capital reconstruction of B.O.A.C. [HON. MEMBERS: "When?"] We cannot define this until the whole proposal is brought forward.

Several Hon. Members

rose—

Mr. Speaker

We must choose some other time to revert to this subject.