HC Deb 03 June 1964 vol 695 cc1078-80
17. Mr. Lee

asked the Minister of Aviation what profits have accrued to British Overseas Airways Corporation as a result of their agreement with the Cunard Company.

Mr. J. Amery

B.O.A.C.'s accounts for 1962ߝ63 show that from the inception of the company in June, 1962 to March, 1963, B.O.A.C.-Cunard Ltd. lost just over £1 million, of which B.O.A.C.'s share was £744,000. Although the accounts for 1963ߝ4 are not yet available, B.O.A.C. tells me that the results will show a marked improvement.

Mr. Lee

The information we now have is that there will be a considerable profit during the current year. If that is so, can the right hon. Gentleman say how it will be divided? Is it within the agreement that shareholders of Cunard will receive dividends from the profits made by B.O.A.C.-Cunard, despite the fact that B.O.A.C., as such, is still many millions of £s in the red; in other words, that the nationalised sector will carry very heavy capital debts while shareholders from Cunard are bound to be given dividends as a result of the agreement?

Mr. Amery

Losses or profits are shared between B.O.A.C. and Cunard in proportion to the capital invested by each in the company. Cunard has shared in the losses with B.O.A.C. over the last year; if there are profits, it will share the profits.

Mr. Lee

I do not think the Minister understands the point. B.O.A.C. still carries a very heavy debt—the right hon. Gentleman has refused to write off £80 million. Within this, we have a small segment of B.O.A.C. that will be profitable. Do I take it that while B.O.A.C. still has to write off deficits B.O.A.C.-Cunard can pay dividends, or has to pay dividends, if there is a profit shown on the B.O.A.C.-Cunard side of the arrangement?

Mr. Amery

That will be so, of course, but I am sure that the hon. Member would not want to question that. For example, B.O.A.C. has a number of other associated agreements with Cathay Pacific and others. If those were to be individually profitable, the hon. Gentleman would not wish those companies not to be paid a dividend because B.O.A.C. was not making a profit.

Sir A. V. Harvey

Should not one take a broad view of these matters? The fact that this joint enterprise is now showing a profit may to some extent be due to the organisation of Cunard in North America, which is throwing its weight into the sales organisation.

Mr. Amery

I have no doubt that Cunard has helped considerably on the sales side and, by rationalising the competition previously existing, both associates have been made conjointly more successful than they would be in rivalry. Some of the associated companies have not been so successful, as I had to explain in the debate last autumn, but when we have a successful association, I should have thought that that the House would have been pleased about it.

Mr. Paget

Can the right hon. Gentleman tell the House what is the difference between rationalising competition and eliminating it?

Hon. Members

Answer.

Mr. Amery

Of course I shall answer. It is a perfectly understood principle of economic operation that very often economic forces join together for the development of a particular market against intensive foreign competition.