§ Order for Second Reading read.
§ 4.23 p.m.
§ The President of the Board of Trade (Mr. Anthony Crosland)
I beg to move, That the Bill be now read a Second time.
The object of this Bill is to raise the limit on B.E.A.'s borrowing powers, which now relate mainly to borrowing on capital account, and also to confer a new, but limited, power to borrow to finance a deficit on revenue account.
In the debate last November on the draft British European Airways Corporation (Borrowing Powers) Order 1967, my hon. Friend the Minister of State explained that the Air Corporations Act, 1962, had set a limit of £110 million on B.E.A.'s borrowings, which could be increased to £125 million by an affirmative Resolution Order. In asking the House to approve that Order, my hon. Friend forecast that B.E.A.'s borrowings would approach the £125 million limit soon after the close of the last financial year. I now estimate that they will reach this limit by about the end of May, and we must, therefore, make additional provision if B.E.A. is to continue to invest in its expanding business.
The House has debated B.E.A.'s affairs on many occasions and is, therefore, well aware of how this money has been invested over the years. B.E.A.'s operations extend from Norway to the Middle East, from Casablanca to Moscow. They account for two-thirds of the traffic carried on scheduled air services in the United Kingdom; for over 22 per cent. of all passengers carried by air within Europe, making B.E.A. the largest carrier of intra-European traffic; and for a total of nearly 7½ million passengers carried per year, making B.E.A. the sixth largest carrier of air passengers in the world. B.E.A. now has a fleet of about 100 aircraft, including the fleet of 23 Trident I aircraft which has come into operation as the major capacity provider.
Aircraft constitute about 80 per cent. of any airline's capital investment, but one should not forget the varied and often costly facilities needed on the 633 ground—terminals, ground equipment, workshops and widespread sales organisation. It is for these purposes that B.E.A. has spent the capital which it has borrowed under past statutes. But its future borrowing needs will be considerably higher, for replacing older aircraft and providing for further expansion of traffic. Deliveries have just started of the 15 Trident 2s which will cater for its longer-haul services, and B.E.A. now has about £20 million of payments still to be made on these. Deliveries will start this summer of the 18 BAC 1–11s, which will replace Vanguards with jets, notably on the highly competitive German and Irish services; and about £24 million of payments are still to be made for these.
As the House knows, B.E.A. has now asked to buy 26 Trident 3Bs at a cost of about £80 million. I have given my approval in principle, but detailed negotiations are not yet complete. The Trident 3B will be a most useful addition to B.E.A.'s fleet, as the longest jet aircraft in its fleet and one with an economic short-range performance. I know that B.E.A. was disappointed when I announced last December that the Government could not support the BAC 2–11 project. But, at a time when we are being urged to restrain the growth of public expenditure, the total cost of this project to the Exchequer would be far more than we could contemplate. True, the success of the RB.2–11 engine in the United States means that we could now deduct the launching costs of the engine from the total cost; but, even so, the BAC 2–11 would still be about four times more costly to launch than the Trident 3B. I note that last October's Report on B.E.A. by the Select Committee said that,the Government has no obligation to B.E.A. to cause the aircraft of B.E.A.'s choice to be developed, if it can be shown that the development of another type will be cheaper, taking into account all the expenses involved".Finally, B.E.A. must have in mind the progress payments it will need to make on the airbus, which should come into service in the mid-1970s. We all hope that the European airbus will prove, on performance and cost, a successful contender for orders from B.E.A. and many other airlines.
In short, civil aviation has been, and will continue to be, a rapidly expanding 634 business, and the capital cost of its main asset, aircraft, continues to rise year by year as technology develops. To keep in the running, B.E.A. must have the additional capital it needs.
There has been some argument in the past, and some confusion, about the respective rôles of the Corporation and the Government in determining B.E.A.'s capital investment. The Select Committee, in its Report last year, discussed this at some length and greatly helped to clarify the matter. First, it noted that the borrowing limit, which is the subject of this Bill, is a limitation on the Minister's power to lend, not an authorisation to B.E.A. to spend. But since common sense dictates that I should look some five years ahead, I must, naturally, be guided by the forward plans of B.E.A. At this stage, detailed purchasing programmes may or may not exist; but by consultation with B.E.A. I can make a broad assessment of what funds will be required.
Secondly, within these borrowing limits, the Corporation's major investment proposals require specific Government approval. It is sometimes said that government is slow in authorising the purchase of aircraft and pedantic in insisting on full information and justification. I think the Select Committee disposed of this general criticism. We are dealing with very large sums of public money which can involve the Government in an additional commitment to participate in launching costs. The House would not be satisfied with anything short of a most rigorous examination of the need for the investment and the likely return on it.
We have now codified for B.E.A. and B.O.A.C. the kind of information that will be required both for the annual investment forecasts and for particular investment proposals. This will enable the two Corporations to follow the same pattern in their internal discussions of projects, and so save time and effort.
The House will recall that, in August, 1966, the then Minister of Aviation, when he announced that B.E.A. would buy British aircraft for its re-equipment programme, said that the Government… will take steps to ensure that B.E.A. is able to operate as a fully commercial undertaking with the fleet it acquires."—[OFFICIAL REPORT, 2nd August, 1966; Vol. 733, c. 261.]We are nearing the end of negotiations on how that pledge will be implemented; 635 and, if I can, I will tell the House the outcome during the passage of the present Bill. I should have preferred it if the present Bill could have dealt with those arrangements also; but B.E.A.'s borrowing powers were running out, and so we found it unavoidable to proceed in two stages.
I turn now to the Bill itself. Its first object is to increase the limit for borrowings on capital account for five years ahead. To arrive at the right figure for the new limit, we have first to estimate what B.E.A. is likely to spend on capital account over this period, the extent to which this can reasonably be financed from internal resources and so the amount which falls to be met by borrowing.
The best estimate that I can make is that B.E.A.'s capital spending will amount to some £199 million over the next five years. I have already mentioned most of the items which make up this amount. On one major assumption, which I will explain in a moment, B.E.A. expects to be able to provide £86 million of this from its own resources—from depreciation, sales of aircraft, and so on. Given that its revenue is almost wholly determined by regulated prices, this seems to me a not unreasonable proportion of its capital needs to be met from internal sources. So, we are left with a borrowing requirement of £113 million. Adding this to the £117 million which B.E.A. has borrowed up to the end of March this year, we have a total of £230 million towards the overall limit of £240 million specified in Clause 1(1) of this Bill.
It is also the practice to set an intermediate borrowing limit, for a date about half-way through these five year periods, which can be exceeded only after a draft Order has been approved by this House. By about the end of 1970, B.E.A. is likely to incur capital outlays of about £126 million: and of this, it is likely to need to borrow £83 million. Again adding this £83 million to the £117 million it has already borrowed, we arrive at £200 million as against the £210 million intermediate limit which is specified in Clause 1(1). I will explain the remaining £10 million in a moment.
But, first, I refer to the major assumption which I mentioned as underlying the estimate of how much 636 B.E.A. can provide from its own resources. This is that B.E.A. will, on its revenue account, break even when interest has been charged on all loans made to it. I stress that this is only a working assumption. It is entirely without prejudice—in either direction—to what the Government may eventually propose in order to fulfil the pledge of 1966 that B.E.A. should be able to operate "… as a fully commercial undertaking."
What we do eventually propose may affect some of the calculations which underlie the figures in this Bill. But in practice this would only mean that the period of time which the new borrowing limits would cover would be somewhat different from what we are now envisaging. Given all the other uncertainties of forecasting five years ahead, this is not a matter of great importance. We could, of course, have introduced a Bill which would merely hold the situation for a year or two ahead until further legislation could be introduced; this is in effect what we are doing in regard to the deficit financing provision to which I shall come in a moment. But when we are discussing capital spending, it is the picture over a period of years which is really relevant. So I thought it was right, and of more help to the House, to try in this Bill to explain and to provide for as best we can, B.E.A.'s capital expenditures over the next five years.
I now turn to Clause 1(2) of the Bill, which gives B.E.A. a new power to borrow to finance deficit on revenue account. Since it became fully independent financially in 1955–56, B.E.A. has achieved an overall net profit in nine out of the eleven years up to 1966–67. We do not yet know its detailed results for 1967–68; but it has already made it clear in public that it expects to show a loss of about £3 million. It will be able to meet this loss out of reserves.
It attributes this to a falling-off in traffic growth due to the economic climate throughout Europe generally and the restriction in travel allowance. The growth of intra-European traffic as a whole has fallen seriously below expectations in this past year; for example, traffic in the summer of 1967 increased by only about 4 per cent. over the previous year compared with an average annual growth of 12 per cent. in the five preceding years.
637 I should say a word here about the effects of devaluation on B.E.A. Inward tourism should increase; and B.E.A. is making a strong promotional effort to obtain a growing share of the air traffic that this increase will generate. Outward business traffic will also expand as new export opportunities open up. More directly, devaluation resulted in a rise of 16⅔ per cent. in most of B.E.A.'s international fares, and this will greatly benefit its revenues. As against this, there will be higher operating costs overseas, and a possible reduction in the number of Britons taking holidays a broad.
On balance, it seems clear that devaluation will benefit both B.E.A.'s total earnings and its foreign currency receipts. But it will take some time for the full benefit to show. In any case, it will rot have much direct impact on its capital expenditure, since it is buying British aircraft; and so the main figures in the Bill are largely unaffected. Its impact will be on its revenue account; but even here the beneficial effect will be outweighed by the continuance of the difficulties which it encountered last year, and to which I have just referred.
§ Mr. Robert Howarth (Bolton, East)
While my right hon. Friend is talking about the effects of devaluation, would he care to comment on the effect of increased airport landing charges on B.E.A.?
§ Mr. Crosland
I certainly do propose to comment on that in the course of my speech. I will come to it later.
There is another factor, discussing the revenue account. In the initial period before B.E.A.'s new aircraft are fully worked in, some net losses may be inevitable, and we are pledged to make financial arrangements to deal with this. I must emphasise that we are not talking about a subsidy to cover the use of inferior aircraft: the BAC1–11 and the Trident 3B should prove excellent aircraft for B.E.A.'s operations. But we need to tide B.E.A. over a period of difficulty, until aircraft and traffic can again match well enough to produce a profitable operation overall. In the longer term we shall do this by implementing the pledge of 1966. Meanwhile, we propose to do it by the holding operation of Clause 1(2) of this 638 Bill. This enables B.E.A. to borrow in order to finance such deficits on revenue account as may accrue up to the end of its 1969–70 financial year, provided that they do not in total exceed £10 million. I estimate that this sum, plus the use of its accumulated reserves, will be fully adequate to hold the position until March, 1970. By then, of course, we shall have introduced the further and more comprehensive legislation to fulfil the pledge of 1966.
I may add that as part of our negotiations on that pledge we shall consider setting B.E.A. an appropriate new financial target in accordance with last November's White Paper to replace the 6 per cent. target which it has had for the past five years.
§ Mr. F. V. Corfield (Gloucestershire, South)
Returning to Clause 1(2), as I read it it looks as if at any time before 1970, when the accumulated deficit reaches £10 million, it can be borrowed against, and another £10 million accumulated and then the same process gone through again. I cannot believe that is the intention of it, but it certainly reads that way.
§ Mr. Crosland
The hon. Gentleman is right in saying it is not the intention. I would ask my hon. Friend who is to wind up to read the Clause even more carefully than I have done, and to give a reply when that point is reached in debate.
Summarising the present Bill, then, it provides for B.E.A.'s borrowing needs on capital account up to March, 1973, by sanctioning a further £113 million over and above their existing borrowings of £117 million; and it sanctions £10 million in respect of deficits on revenue account up to March, 1970. Adding these together, we get the maximum limit of £240 million specified in Clause 1(1). The intermediate limit of £210 million also includes the £10 million deficit financing provision and is estimated to meet B.E.A.'s capital needs up to about the end of 1970.
§ Mr. Tim Fortescue (Liverpool, Garston)
Could the right hon. Gentle-say what the fleet would be at the end of the ten years when all this borrowed 639 money has been taken up? The fleet will obviously consist of Trident 3Bs and Trident 2s. Will there be any airbuses? How many aeroplanes and of what kind will be flying with that money?
§ Mr. Crosland
The fleet, as the hon. Gentleman the Member for Liverpool, Garston has said, will consist mainly of Trident 3Bs and a considerable number of BAC1–11s. The airbus will not be running at the end of the period we are considering, but some progress payments may have been made on it.
If the hon. Gentleman would like the exact figures of the prospective fleet, I will ask my hon. Friend to give them when he comes to reply.
I now turn to one or two more general topics, all affecting B.E.A. First, I refer to the decision of the B.A.A. to increase landing charges at Heathrow as from 1st April by 16⅔ per cent. for inter-continental services and 12½ per cent. for other international services. Domestic services, including those to the Isle of Man and the Channel Islands are not affected. No increase in charges is proposed at the other three Authority airports, because with the increasing saturation of Heathrow the Authority wish to induce traffic to move away, and this differential increase represents a modest step to this end.
The reason for the increases is very simple. Without it, devaluation would have meant a fall in the Authority's direct earnings of foreign exchange of approaching £1 million a year; this increase will largely restore the position. I do not expect it to lead to any fall in demand. It represents no more than 0.25 per cent. on average of British airlines' total operating costs; while most foreign airlines will pay approximately what they paid before devaluation, paying in foreign currency, and so can scarcely complain that they have been hurt. In our present balance of payments situation it makes no sense to sell this important invisible export too cheaply. The Authority is in the same position as an exporter to the United States, for example, who was already selling all he could supply at the pre-devaluation dollar price and so he reacts to devaluation, rightly, by maintaining his dollar price and raising his sterling price by the full amount. 640 This is good business for him and good business for the nation.
§ Mr. Cranley Onslow (Woking)
Could the right hon. Gentleman explain in this analysis which he has given whether the initiative and decisions to rectify the deficiency in foreign exchange earnings was one which came from the Authority or from his Ministry?
§ Mr. Anthony Royle (Richmond, Surrey)
Would it not be possible to exclude British airlines from paying this, in particular airlines such as British Eagle—although I realise they do not come under this Bill? Surely this could have been done by an application to I.A.T.A. and agreement made. It would have been very beneficial to the British airlines.
§ Mr. Crosland
As is often the case with interruptions, I was about to come to exactly that point in my next remarks.
It is, of course, true that the increase falls equally on British operators of international services at Heathrow. This is unavoidable if we are to honour our international obligation not to discriminate in favour of national carriers. But as air travellers know, devaluation has already brought a rise in international scheduled air fares expressed in sterling terms—a rise on average of 15 per cent. in respect of long haul services and of 12½ per cent. in respect of medium and short haul services. Although I recognise that this very substantial increase in revenue will be partly offset by the higher sterling cost of overseas supplies and services, it still is a very large increase compared with the trifling increase in total operating costs which I have just mentioned.
I am, therefore fully satisfied that the increased charges are justified in the interests both of the Authority and of the country. And as we are dealing here with export prices, I do not propose to refer the increases to the Prices and Incomes Board.
§ Mr. Stanley R. McMaster (Belfast, East)
Has not the right hon. Gentleman considered the loss of good will by raising prices? Admittedly, the foreign operator would have to pay them, but does this not mean he may cut out Great Britain 641 and we may suffer very considerably by this?
§ Mr. Crosland
I recognise foreign operators, many of whom will lose, are not pleased with the increase, and many of them are making indignant statements. When we come to an actual loss of possible traffic if the hon. Member for Balfast. East looks at the figures, however, it is very unlikely indeed this increase will lead to any fall in demand. If one uses the jargon which is used so often in these matters, demand is extremely inelastic to price in this case.
Next I turn to the very complex question of the minimum prices of inclusive tour holidays by air. The House will recall from my statements in December that, when international air fares were increased following devaluation, I decided that the minimum control prices for charter inclusive tours should remain zit their pre-devaluation levels until the end of the coming summer season which is 31st October. I also undertook to make a thorough review of the whole question of the regulation of minimum inclusive tour prices after that date. I have consulted the air operators and representatives of the travel trade, and the review is now complete.
For a long time past, the minimum prices of inclusive tour holidays by air have been controlled in order to avoid undermining scheduled services, which have to be operated all the year round. Otherwise the revenues of scheduled service airlines could be seriously affected, and their peak season traffic diverted to charter services.
These controls are imposed by I.A.T.A. on its members and extended by Provision I of their air service licences to other United Kingdom operators. The minimum prices have also to be acceptable to the other countries concerned.
For these reasons, I have come to the conclusion that the special arrangements which we made for charter inclusive tour prices this summer should not continue after 31st October, but that we should then revert to the previous basis for controlling these prices.
But at the same time, the review we have undertaken has shown that we need to make substantial modifications to the minimum price structure for inclusive 642 tours, both on charter and scheduled services, so as to achieve a more even distribution of traffic throughout the year, and also in order to encourage inward tourist traffic. The present price structure on most European routes results in lower minimum prices during the summer peaks than in winter; this makes no economic sense.
Accordingly, I have approved a tariff under the terms of Provision I for the period from 16th October, 1968, to 30th April, 1969, under which the minimum price for a holiday of eight days will be 50 per cent. of the normal tourist class round trip fare available on the route in question, and 60 per cent. in the case of longer holidays. This tariff will apply to journeys in either direction between the United Kingdom and the member countries of E.F.T.A. and the E.E.C., the Irish Republic, Spain, Morocco, Algeria, Tunisia and Malta. The control prices applicable to Gibraltar, which are governed by the cabotage tariff and to other destinations in Europe are not affected by this decision. Operators are, of course, free to apply for other tariffs to the Air Transport Licensing Board. I have arranged for copies of the new tariff to be laid in the Library.
Only a very small proportion of inclusive tour holidays are taken in countries outside Europe. But I am anxious that the growth of this market, especially in Commonwealth countries, should not be inhibited by the structure of public fares. Accordingly, I have also approved and alternative tariff which will permit certain reductions in the control prices for tours outside Europe.
The effect of these measures will be to increase the minimum tour prices on both scheduled and charter services by an average of about 12½ per cent. in the summer of 1969 compared with an expected average increase in costs of at least 7½ per cent. But the control prices next winter will be substantially reduced to levels about 10 per cent. below those applicable in the summer. The longer-term future of these tariffs will, of course, depend on the outcome of the I.A.T.A. tariff Conference in Cannes this autumn.
I want to say something about air safety. I have now received the report of the special review of this subject which my predecessor announced last June after the accidents to two British aircraft at 643 Perpignan and Stockport. The review was undertaken by the Director of Aviation Safety and the Air Registration Board, with the help of two independent advisers, Sir Frederick Brundett and Captain F. A. Taylor. I would like to express my warm thanks to all those who took part in it.
The main purpose of the review was to make a rigorous examination of the way in which British operators in practice meet safety requirements. But with the help and encouragement of the independent advisers the review was extended to include an analysis of accidents over the past 10 years, an examination of the effects on safety of the age of aircraft, and a study of the regulatory machinery itself. The independent advisers have added substantial comments of their own.
My predecessor promised that he would make the conclusions of the review available to the House. But the report is of such general interest and importance that I propose to go further and to publish it in full as soon as it can be reproduced. I hope this will be early next month. It will then be on sale through the Stationery Office, and I shall, of course, place copies in the Library.
Meanwhile, the House will wish to know that among the conclusions of the review are: first, that there is no evidence that any aircraft operator, currently in possession of an Air Operator's Certificate, is not competent to secure the safe operation of aircraft within the terms of the Certificate; secondly, that there is no evidence that any type of aircraft currently in use is below an acceptable level of airworthiness; thirdly, that as regards older aircraft a policy of retirement at an arbitrarily defined age would not necessarily lead to improved airworthiness overall; fourthly, that the general safety level has improved over the past 10 years, but that there is still room for further improvement which must be sought both from within the industry and by improvement in the regulatory machinery.
These are, as far as they go, reassuring conclusions, which are fully shared by the independent advisers. But the report emphasises that safety is closely linked with the operational environment and the economic situation of the indus 644 try. I have, therefore, referred the Report to the Edwards Committee, which is studying the industry in all its aspects.
Meanwhile, I am studying the more detailed recommendations about the regulatory machinery in the context of changes which I am already in process of making. I had already decided to appoint a Director-General to supervise the safety work and certain other professional Directorates. I shall appoint him to exercise the statutory function of Director of Aviation Safety when the present Director retires on 17th April. It will be his task to reorganise the work so as to provide simplified lines of command and greater concentration on training, licensing and the inspection of operations. We shall, of course, be able to discuss air safety in more detail when hon. Members have had a chance of reading the report.
Finally, I want to say a brief word about the prospects of Britain's aerospace industry, with particular reference to exports, in which, of course, I have a special Departmental interest.
§ Mr. R. Gresham Cooke (Twickenham)
In all the discussions with the Air Corporations, has the right hon. Gentleman given thought to his duty to those on the ground to ensure that the engines put in the forthcoming Tridents will be as quiet as possible, or quieter than the present generation of engines?
§ Mr. Crosland
Like other hon. Members, I have a very strong personal interest in aircraft noise due to where I live in London. Therefore, my instincts are strongly on the side of diminishing noise wherever possible. This is one of the factors we take into account. It cannot outweigh all the other factors, but it is certainly a relevant factor.
It is disappointing that the Trident 3B is not quieter than it is. The BAC211 would have been quieter, but it is only fair to point out that the Trident 3B will be no more noisy than the Boeing 727, which was the Corporation's original choice. One of the most encouraing things about the sale of the RB211 engines to American airlines is that they belong to the new generation of engines, which will be significantly quieter than the present generation.
645 In 1967, export deliveries by Britain's aerospace industry amounted to just over 0200 million. In the first month of 1968, deliveries amounted to £30 million—an all-time record.
The civil side of the industry has already taken advantage of the benefits of devaluation. The British Aircraft Corporation's order book for the BAC111 now stands at 151. Orders for 20 of these aircraft, worth £30 million with spares have been won in the last three months; and there is no doubt that devaluation has increased the attractiveness of the aircraft to both home and overseas customers. Hawker Siddeley's orders for the HS125 now total 145, of which 19, worth about £8 million with spares, have been gained since devaluation. Orders for its HS748 now stand at 182, including 129 for export. The Britten Norman Aircraft Company has orders for 116 of its Islander aircraft, of which all but 10 are for export and which include 58 ordered in the United States. And all this is in addition to the splendid news, which the House has already noted and welcomed, of the American order for the RB211 engine.
On this encouraging though not strictly relevant note, I commend the Second Reading of this Bill.
§ Mr. Onslow
I am sure that the right hon. Gentleman would not wish to omit from his list of orders the Handley Page Jetstream. Could he say how that matter stands, because this is another project which we believe has great export potential?
§ Mr. Crosland
It was not an intentional omission. I was giving examples rather than an entire list. I will check what that company's order book is at the moment and my hon. Friend will give the position later.
§ 4.59 p.m.
§ Mr. F. V. Corfield (Gloucestershire, South)
Without disrespect to the Chair. I should like to congratulate the President of the Board of Trade on the amount of material he got within the rules of order under the Title of the Bill. It never occurred to me that we could discuss the wide-ranging matters on which he finished his speech, encouraging as they were. I should like particularly to thank him for his promise that the 646 whole of the Report on safety will be available to the House. This clearly is a matter of vital interest, not merely to hon. Members, but to the public. If I may say so, it emphasises the confidence of the right hon. Gentleman in the system that this should be made available, and this is all to the good from the point of view of public relations.
On the subject of inclusive tour fares, as I understand it, at the moment, the minimum fare as laid down can be avoided. In other words, it is possible to go a little lower than the minimum fare by flying at night. This is the one thing we ought not to encourage. In many of these structures there is a definite advantage to the operator, if he wishes to offer particularly attractive fares, in taking off during certain hours of darkness, the time of day when it would be better to discourage too much noise interference by air movement. I hope the hon. Gentleman who will reply will be able to assure us that the new structure, which is a little difficult to absorb without seeing the entire schedules, will remove that particular incentive to fly at night.
§ Mr. Rankin (Glasgow, Govan)
Will the right hon. Gentleman in making that statement also keep in mind the large section of the community who cannot easily afford the more expensive fares for day travel and who find the cheapness of night travel a great asset?
§ Mr. Corfield
The hon. Gentleman, with due respect, has missed the whole point. Where the right hon. Gentleman the President of the Board of Trade has a certain amount of flexibility in inclusive tours without being rigidly controlled by I.A.T.A., there is not much sense in having a structure of this sort. There is no reason why cheap fares, particularly applying to the smaller airports which are not overcrowded, such as Southend, should not be available at a time when it is more covenient to the surrounding neighbourhood that the airport should be busy. I am not for one moment encouraging anyone to put the prices up and I am sure the right hon. Gentleman did not take it in that way.
As the right hon. Gentleman reminded us when he opened his speech, only a short time ago, in November, we were 647 discussing similar matters on the B.E.A. Borrowing Powers Order. Our debate on that occasion was a good deal narrower, in that we confined ourselves to projects, payment for which, either in whole or in part, fell to be covered by the relatively modest increase of £15 million which we were then discussing. There is inevitably bound to be a good deal of overlap between the two debates, if only for the reason that some of those payments were progress payments on projects on which there still is money either due or about to become due. I hope therefore, that I need not apologise for reverting to some of the matters which were then considered.
I would remind the House, as the right hon. Gentleman has already reminded us, that one of the principal matters which concerned hon. Members during that debate, was the then pending decision on the BAC211 and the Hawker Siddeley Trident 3B. The right hon. Gentleman is in a difficult position but it is fairly well known that the contest was between B.E.A. and the President of the Board of Trade on the one hand and the Ministry of Technology on the other. However that may be, I am bound to say he did not entirely convince me that the time was completely passed and that there was no case for looking again at the possibility of reviving the BAC211.
The winning of the order for the RB211 by Rolls Royce, on which we all constantly congratulate Rolls Royce, must make a substantial difference in that as far as the BAC211 is concerned we are no longer concerned with engine launching costs. The right hon. Gentleman put them at about £50 million, which is approximately 50 per cent., perhaps a little less, of the total launching costs. In addition to that, there was an allowance of £15 million for launching costs for the Trident 3B, and there is a still unknown figure which the Government have promised in principle to B.E.A. as compensation for the increased cost of operating the Trident 3B as compared with their original choice of the Boeing 727.
I do not imagine that some of the more extravagant figures which have appeared in the Press are accurate, but 648 I hope the hon. Gentleman or right hon. Gentleman who is going to wind up will give us some idea of the magnitude of the figures which the Government think are reasonable. My own feeling is that this must depend to some extent on the attractiveness of the aircraft to the passengers. If it has a particular passenger appeal—and the Trident family have been very popular—then a high load factor is achieved and therefore the difference in the direct operating costs of a less attractive aircraft which may be cheaper per mile may well be very marginal indeed.
The management of B.E.A. is, however, presumably anxious to have a fairly definite figure in mind so that they know what they are going to get. But it is a very vital figure. If it is at all substantial, and even if it is only half the figure recently published in one of the newspapers, it would appear that the difference in capital cost between the BAC211 and the Trident 3B is very marginal indeed.
The last thing I wish to do is to denigrate the Tridents or the Trident family. They are fine aircraft and I have no doubt the 3B will be no exception. However, I think we all agree in our heart of hearts that the export potential of an aircraft built round an advanced technology engine such as the RB211 is bound to be much greater than that of the last stretch of a type of aircraft which started its life under unfortunate circumstances, having at the request of B.E.A. been reduced in size in a way which made its export appeal very much less than, with the advantages of hindsight, it need have been.
On the other side of the account it is fair to say that, because of the difficulties facing the B.E.A. Board in making a firm decision on how many aircraft they want in the next generation there has been a very sharp drop in the curve of the increase in air transport. Devaluation has made it difficult to forecast their requirements, but nevertheless that delay has put Hawker Siddeley in a difficult position. They have had a difficult problem in ensuring that their design and production teams are kept available without uneconomic working for an immediate start on this project when the order comes. In order to retain an immediate capacity to carry on the work, they already have had to put up quite a lot of their own 649 money in materials and arranging for sub-contracts.
In making this balance sheet some allowance must be made for reasonable compensation to Hawker Siddeley should the decision go the other way. I fully appreciate there is no object in talking about this now unless a decision can be made very quickly. I can see no good reason why a decision should not be made quickly. The basic figures on which one can assess quickly the true difference in capital cost of these two aircraft ought to be available immediately or within a matter of days. We ought to consider this is view of the fact that the adoption of the RB211 by Lockheeds has not only relieved us of the launching costs of that engine but it has enormously boosted the export potential of any British aircraft powered with the same engine.
I beg the right hon. Gentleman to reconsider this. I know that there are some people who say, "Order; counter-order; disorder". But the situation has changed. I believe that the concept of an aircraft built round the 211 has a tremendous potential and, even at this late stage, it is right that we should look at it again and try and make sure that we have made the proper decision.
It is also relevant to remember that, when the Hawker Siddeley Trident was in the design stages, it was cut back in size and performance very largely because there happened at that time to be a dip at the curve showing the annual increase in air transport. We have a similar if rather more pronounced dip today. I rust that we have learned the lesson and that B.E.A. and the Ministry will bear in mind that the only sensible way of planning ahead is to do so on the assumption that there will be a resumption of the fairly steady growth which we have known since the war. All the lessons are that we have tended, on the whole, to build too small in terms of both aircraft and engines. It has become increasingly obvious that there are great economies in a large engine rather than a multiplicity of smaller ones in terms of cost and, with modern techniques, in terms of noise, so that all the indications are that we should go for reasonable size.
That leads one on to a further consideration of the A300 airbus. I do not share the pessimistic view of some hon. 650 Members and some commentators outside the House about the project. I believe that it has a considerable potential. It is almost certainly right that it should be powered by two engines instead of three in the circumstances and in view of the ranges for which it is designed, bearing in mind that there are these economies in large engines and bearing in mind, too, the enormous increase in the reliability of the engines of today as compared with those of even a relatively short time ago.
I do not accept that the aircraft is in direct competition with the airbus or buses which have been built or conceived in America. By the very nature of things, having three engines, they will be designed for longer routes and are bound to be less economical on the routes for which the A300 is designed.
There are still a number of question marks over the project. The first problem is the agreement of a specification between the three airlines concerned. I have had the privilege of visiting Hawker Siddeley recently and of talking to the Chairman of B.E.A. As I understand it, Hawker Siddeley and Sud-Aviation have endeavoured to collaborate fairly closely with the three national airlines, Air France, B.E.A., and Lufthansa, and it appears that the airlines are a long way from agreeing a common specification. To some extent the position is complicated by B.E.A.'s different approach towards flight crew from that of the other two airlines. B.E.A. insists on three pilots as opposed to two and a flight engineer, and that makes quite a substantial difference in the specification of the cockpit layout and so on.
However, if it is true that we are some way off an agreed specification and the chances of getting firm orders for at least 75 aircraft from the three airlines which the Ministry of Technology has made a prerequisite for continuing with the project are diminished, I hope that the right hon. Gentleman will use his influence to persuade his right hon. Friend that we should not stick too rigidly to the demand for firm orders for 75 aircraft, particularly if they are to come from the three airlines to which I have referred. My information leads me to believe that the orders will not be forthcoming by July, and to some extent that takes us back again to the 211, because 651 there is no doubt that B.E.A. would regard a delay with the A300 as the result of a failure to agree a specification with a great deal more equanimity if it had the 211 than it would be able to do otherwise.
I suppose that it might be argued that, if we resurrected the 211, that the French would retaliate by vetoing the co-operation with the airbus. It is doubtful if that would be so, because it seems that Air France is the keennest of the three airlines. But if that was the case, it is time that we asked ourselves whether a cooperative effort based on the threat of a veto of that sort is the type of co-operation which offers us the advantages which we have always claimed for European cooperation.
There is a disturbing report in the Financial Times today which, since it refers to military aircraft, takes me even further away from B.E.A. than some of the right hon. Gentleman's remarks. It makes the point that the Germans and the Dutch are anxious to carry on without us with the present project plans in relation to the advanced combat aircraft. That is disturbing because, having done a good deal of work on it, we have considerably more expertise. As I understand it, both in this and the V.T.O.L. concept, we have endeavoured to co-operate with the Germans to our utmost, and the news must put a question mark over the long-term success of some of these co-operative ventures, sad as it may be.
In this rapidly changing world of the airlines, I have always doubted the wisdom of insisting on the 75 order as a prerequisite. I say that basically because airline managements do not operate in this way in present conditions. I have referred already to the falling off in the growth of traffic. There is a tremendous temptation for the airlines to wait as long as they can to see what is on the market nearer the time when they have a need for this type and size of aircraft.
I do not suggest for a moment that the British aircraft industry has been a failure in the past, but, if we are to make a real success of it in the sense of fully exploiting the considerable potential market in the next ten years, both Government and industry have to be much more sophisticated in studying the market making assessments and backing their 652 commercial judgment. The game will not be won by playing safe. There is grave danger of our being beaten by a concept which is no better but which has simply got off the mark quicker. That applies particularly at the present time when there is not only a fall in passenger transport but when cargoes are dipping, as they have been in recent months.
In this context, I add my congratulations to those of the President of the Board of Trade to B.E.A. for its efforts to build up a greater volume of tourist traffic to Britain from Europe. I hope that it will be remembered that the independents also have a substantial potential in these operations, and that we shall be assured that the Government will do everything to assist them as well in their licensing and other policies. In the past, the independents have afforded a substantial stimulus to the Corporation in the realm of inclusive tours. It is in everyone's interests that they should be enabled to continue.
I turn briefly to the point which I regard as the most controversial of the matters on which the right hon. Gentleman has touched, namely, the increased landing fees at Heathrow. It seems to me that they are largely contrary to the Government's exhortations about devaluation.
We hear a great deal about the advantages of devaluation. In my view we hear too little about the corresponding disadvantages, and the problems that flow from it. Basically, the only real advantage of devaluation is that one's prices become more competitive abroad in terms of foreign exchange. But they do that—and this applies to both visible and invisible exports—only if they remain the same in terms of sterling. If the sterling price is increased to match devaluation, there is no increased competitiveness.
What I do not understand about this is that the Government have been urging the British Motor Corporation and other great exporters to cash in by holding their prices at the original sterling rates, or only marginally above them, to take advantage of the lower prices which they now command in terms of the foreign currencies in which they are exporting, while here the B.A.A. is doing the opposite.
§ Mr. Eric Lubbock (Orpington)
There is this difference. The B.M.C. can vastly increase its output, and thereby take advantage of the reduced costs in the United States, but the British Airports Authority has only a fixed quantity of output, which it cannot vary.
§ Mr. Corfield
The hon. Gentleman is wrong. It has a fixed quantity of output which could decrease if it played its hand badly. I find it difficult to follow the logic of this. My hon. Friend has kindly collected a copy of the Act from the Library. Section 2 sets out the functions of the B.A.A. Its basic function is to manage certain domestic airports. Its expenditure in doing so is domestic, and is payable in sterling, and its costs do not include anything that has increased as a result of devaluation, other than such imported items as have affected us all. I cannot see that, purely as a result of devaluation, the B.A.A. requires any additional income.
In short, the B.A.A. has cashed in—and the right hon. Gentleman was frank about this—on its monopoly position. I did not know that it was an accepted theory teat monopolists were entitled to exploit a monopoly so long as some of their customers were foreigners, but, even if this is so, we have a right to consider the views of, and the effect on, our British airlines who, when all is said and done, are bigger potential foreign exchange earners than the B.A.A. is ever likely to be.
It is true that because of the I.A.T.A. agreements the airlines have been forced to put up their fares, and B.E.A. amongst them. They have had no option but to do that. They maintain substantial overseas operations of one sort or another, the costs of which have gone up in terms of sterling because of devaluation. They, at least, have a sound excuse. In fact, they have no option, but none of this applies to the B.A.A., and I think that it makes a great mistake if the B.A.A. regards itself as being in a monopoly position.
Heathrow has not some divine law which gives it a pre-eminent position in North Europe as the principal port of call for inter-Continental foreign services. For many reasons it has become less attractive. There is considerable congestion, there are more restrictions on 654 night flying, because of the noise nuisance, than there are at many other airports, and there are a number of possible switching operations to other North European airports which will be open to quite a number of foreign airlines on a number of routes. If this happens, it will be damaging to our foreign exchange position. What is curious is that this is one of the principal arguments which is pressed over and over again by those who say how urgent the third London airport is, and the leading exponent of this is the B.A.A. Yet here we have action which seems likely to have precisely the same effect.
There are two deplorable aspects to this. One is the apparent complete lack of consultation with B.E.A. and other British airlines, and the other is the position of the right hon. Gentleman himself. I am sorry to introduce this controversial note, because the right hon. Gentleman introduced the Bill with particular charm and clarity, but this seems to me to be an important point. The Board of Trade remains the sponsoring Department both of B.A.A. and of the two airline corporations. In matters affecting either Government policy, or the policy of one of these authorities which affects one of the others, representations to the President of the Board of Trade are the sole means of appeal, whichever of the three is involved.
His responsibility for the Air Corporations is no whit less than his responsibility to the B.A.A., and if the right hon. Gentleman is to fulfil his duties, which have been imposed on him by Parliament in the national interest, he must be in a position to look at any dispute between these corporations in a quasi-judicial capacity. He must not only do that, but he must be seen to exercise a quasi-judicial function when doing so. In my view, in this matter, he has wholly failed to give that appearance. Indeed, all the appearances are that he was either persuaded, or he readily approved—and we know that the Chairman of the B.E.A. has a persuasive personality. Nevertheless, it does not appear that there was any consultation with the airlines, and it does not appear that the decision was postponed for long enough for the corporations to make representations which could be considered in a quasi-judicial way, even if the right hon. Gentleman was then in a position to do that.
§ Mr. Crosland
On the question of consultation, perhaps I might tell the House that before I approved the B.A.A. proposal I was aware of the objections being made to it. With respect, the hon. Gentleman has not answered the main difficulty which was raised by the hon. Member for Orpington (Mr. Lubbock), which is that if I had not approved this increase, there would have been a significant loss to the British balance of payments. I must repeat my analogy, and ask the hon. Gentleman to comment on it. This is like a manufacturer who is exporting at a pre-devaluation price in dollars at which he could sell almost all that he could supply. If he lowers his price he loses us foreign exchange pointlessly. If he increases his selling price, he is at least maintaining his foreign exchange earnings.
The hon. Gentleman mentioned the question of consistency. I must say that whenever we have given advice to exporters on price policy following devaluation, we have said that under these circumstances the case is strong for their raising their selling prices, and keeping their prices constant in foreign exchange.
§ Mr. Corfield
I appreciate the difficulty. If someone has a commodity in respect of which he has an immense hold in a foreign market, it is far to ask what the market will pay, so long as he does not thereby induce domestic competition in the long term. But this is a more difficult problem, because the actual assessment of whether one loses foreign exchange is much more difficult for the President of the Board of Trade to do until at least a year has passed. I say that because this issue is affected by increased fares, and, therefore, increased foreign exchange earnings, for the same service, which the airlines are obliged to charge under the I.A.T.A. agreement. I doubt whether, if we total the whole of the devaluation increase in the air transport industry, even leaving aside the B.A.A. increases in landing fees, there will be this real overall loss resulting from devaluation.
There might be a loss resulting from other things, notably the falling-off of American tourists coming to this country, and the traffic they bring. The right hon. Gentleman has many more facilities for making this calculation than I have, but I shall be glad to see the breakdown 656 which assures him that he is facing a loss in foreign exchange overall. I would have thought this a very difficult thing to assess even with all the resources available.
I am glad that I gave the President of the Board of Trade the opportunity to intervene—and perhaps he will say more when he winds up—in order to deny the charge that there were no consultations and to say that he was aware, as I think he said, of the Opposition, because it is certainly felt among the airlines, both nationalised and non-nationalised, that they were presented with a fait accompli at the time when they could make representations to the President—and he was the only person to whom they could make representations—because the decision had already been made and there was therefore no opportunity to make effective representations. The right hon. Gentleman will probably agree with me that appearances could have been better, what ever his motives. This is important because we constantly argue the merits of leaving these nationalised corporations, particularly the airlines, to make their own commercial judgments. Nevertheless, they are in a perculiar relationship with their sponsoring departments and it is of the utmost importance that that relationship should be one of mutual confidence and respect.
Finally, I go back to what I said by way of conclusion at the beginning of our debate in November, and say once again that the Opposition attach as great importance to the contribution that has been made and is being made to our economy by our airlines, whether they be nationalised or independent, as does anybody else, and of course we recognise, in the context of this debate, that it requires money as far as B.E.A. are concerned to keep pace with their equipment programme as regards both long-term traffic needs and the developments which are constantly being offered to them by the ingenuity of the air-frame, air-engine and systems engineers of this country and others.
Of course they need the money, and it would be quite wrong for us to quibble unduly at a Bill of this sort, but there are matters on which we should have better answers than we have had. In particular, I hope that the right hon. Gentleman who winds up will not dismiss out of hand the prospect of looking again 657 at the 211 in the light of what has happened in the past week, and also at the procedure by which the matter of landing charges was dealt with, and consider again whether there is not more merit in what I have said, that there is some danger of driving foreign airlines to other airports in other parts of Northern Europe. There is no doubt, reading the papers this morning and seeing that some 50 airlines are refusing to pay, that we have not made ourselves popular. I have never thought that popularity was the most important thing, but I am not sure that at the moment a few friends across the water would not be rather valuable.
§ 5.34 p.m.
§ Mr. Robert Howarth (Bolton East)
I welcome the Bill, because I believe it indicates the continuing growth of B.E.A., Europe's foremost airline, as they rightly claim in their advertising. Obviously it is not controversial, and, despite the fact that large numbers of hon. Members are not clamouring to enter the debate, I will speak very briefly and confine my remarks to the problems of re-equipment for B.E.A.
I start with the order for Rolls Royce engines for the Lockheed 1011. It is relevant to contributions that have already been made by my right hon. Friend and by the Opposition spokesman. It is particularly relevant because the Opposition spokesman made a very mistaken plea to the President of the Board of Trade to reconsider whether the Government should support the development of the BAC211 with the Rolls Royce RB211 engines. I would put the contrary point of view very strongly, which I have held for a long time, and would link it with the decision by certain American airlines to order the Lockheed 1011 with the Rolls Royce engines by pointing out to the Opposition spokesman that what I think he has not appreciated is that the Boeing 747 and the Lockheed 1011 and, starting from this summer, the European airbus, are the first of the family of large-fuselaged aeroplanes—the at least 10-abreast and possibly 12-abreast seating aircraft.
We are beginning to move away, and it is a definite step in the progress towards very large aircraft, from the six-abreast fuselage. That was the fatal flaw in the BAC211. This was an aircraft which, if 658 it had been started four years ago, would have made commercial sense and might have had the sort of sales which are now being taken up by the Boeing 727 200. But this is not the case, and to suggest that a British manufacturer should be commencing at this point in time the construction of an aircraft with a six-abreast fuselage only is to misunderstand where we are in the growth of traffic and the size of aircraft.
§ Mr. Corfield
I would not dissent from much that the hon. Gentleman has said, but I would remind him that there is always an intermediate stage and there are always other routes. As the intermediate stage on the busiest routes is surpassed, there are other routes for which these aircraft are suitable. I am sure he would not advocate using the largest aircraft on the Birmingham to Manchester route, for instance.
§ Mr. Howarth
That is precisely the dilemma that faced the Government, and they made the choice on the difference in cost between the Trident 3B and a completely new aircraft with a time-scale longer than the Trident 3B, as represented by the 211. I think the decision was right and, contrary to what the right hon. Gentleman was saying, I think that the order for the Lockheed 1011 with the Rolls Royce engines makes the case in support of the Government decision stronger. I believe it indicates that American airlines from the early '70s and undoubtedy European airlines from the mid-'70s will be operating these large aircraft, and the sort of aircraft of which we have been speaking will have a very limited life indeed.
I want to make a number of brief comments about the decisions that have been taken by B.E.A., first of all to order the BAC111 500 and then, albeit after a great deal of time and trouble for everyone, to order the Trident 3B. I join the hon. Gentleman in saying that I hope that the decision will soon be taken. Indeed, every week that passes presents problems both to B.E.A. and to Hawker Siddeley themselves and possibly delays the introduction of the 3B. I know the view taken by B.E.A., that until they clear up the discussions they are having with the Board of Trade they are loathe to place the firm order for the Trident 3B, but I hope the decisions will be taken very quickly.
659 This brings me to a point I have looked forward to making. As has been said by the Opposition spokesman, I think it is most unfortunate to see Press reports giving quite fantastic figures of sums of money which it is said B.E.A. are claiming for the operation of the BAC111 500 and the Trident 3B. I was horrified a couple of weks ago to see a front page story in The Times headed, "Bill £75 million for flying British". This story alleged that this was the sum of money that was being claimed by B.E.A. It must be a ridiculous figure. Considering that the BAC111 500 is now picking up orders from independent commercial airlines, this aircraft must obviously have good economics and must offer, particularly since devaluation, a very attractive alternative to the Boeing 737. The Trident 3B has also been assisted by devaluation, because the American alternatives have increased in price. The economics offered by both these aircraft are now very attractive.
Although I appreciate that this might not be B.E.A.'s first choice, I greatly regret the sort of scare headlines which have appeared, such as those which I quoted. It is most unfortunate that a newspaper with the national and international reputation of The Times should peddle this sort of nonsense. I wrote to the editor of The Times; what I thought was a reasoned letter, challenging this figure and pointing out the damage which this sort of story could do to the prospects for British export of aircraft, not only the two aircraft concerned, but all British aircraft.
I said that I thought that the following day every Boeing and McDonnell Douglas salesman would have had a copy of that article on the desk of every aviation operator throughout the world and that one could imagine the effect which this would have. Unfortunately, The Times did not see fit to publish my letter. They choose some amazing subjects on which to publish letters, but when they receive one—they may have received others, for all I know—which, I hope, presented a reasonable viewpoint and tried to defend the British aviation industry against nonsensical articles such as this one, they choose not to publish it. This is most unfortunate—
§ Mr. Corfield
The hon. Gentleman may be assured that, through what he said, his speech will be fully reported in tomorrow's The Times, to judge from my past experience in these matters.
§ Mr. Howarth
I hope so, anyway.
It would be possible to go on to a number of items arising from the fact that the debate is going rather wide and that we seem to have all day in which to hold it, the few of us who are here. I look forward to the time when we shall be debating the Edwards Committee's Report and its effect on B.E.A.—and, of course, on B.O.A.C.—but that is something for the future.
I would appeal to B.E.A. to consider its all-important decision to announce in advance when it is to have an all-jet fleet. On a recent visit to the United States, I was greatly impressed by the constant advertising by all the major airlines, I think without exception, that they had all-jet fleets. There was no doubt that very few of the average American air travellers would consider travelling by propellor-driven aircraft any more. They are used as "back-up" aircraft, perhaps in the mountains, but no one thinks of operating anything but jets on the normal trunk and important routes between cities.
The sooner that B.E.A. justifies its claim to be Europe's foremost airline and begins to offset the advertising of a number of European airlines, which are now beginning to introduce the theme that they are all-jet airlines, the better it will be and the more easily it will win and possibly increase its share of European traffic. This is important. B.E.A. is operating a number of fleets of older aircraft, and the sooner it plans for replacements the better. I know that it is doing this, but it is a very slow process.
I would like to raise the question of an associated or subsidiary company, British Air Services, through which B.E.A. has interests in a number of semi-independent operators. I am referring particularly to B.K.S., which, it is reported, it contemplating ordering American aircraft. I hope that this will be viewed very closely by the Board of Trade, as it will presumably have to go through the Board of Trade if B.E.A. has a controlling interest in this company.
661 I hope that the Department will be as firm on this as it has been with B.E.A. itself, and will decide that, if almost every British independent operator can find the right aircraft from British manufacturers, a subsidiary of B.E.A. should not he allowed to break this principle by ordering American Boeing 737s. One would have hoped that the pattern of the company's traffic could have been met by one of the variants of the BAC111. It is interesting that certain independents are ordering the 500. The Rumanian airline is ordering the 1–11 400 series and I cannot understand why it is thought necessary that B.K.S. should order an American aircraft.
I hope that what the hon. Member for Gloucestershire, South (Mr. Corfield) said is correct and that my strictures on The Times will appear in one form or mother. I hope also that B.E.A. will continue with the good work which it has been doing. I appreciate its difficulties and I welcome the Bill because it shows the progress which the Corporation is making.
§ 5.47 p.m.
§ Mr. Eric Lubbock (Orpington)
The hon. Member for Bolton, East (Mr. Robert Howarth) commented on the thin attendance of this debate. That may be because some of us who are interested in aviation were up rather late yesterday discussing Concorde, rather than because of any lack of interest in the affairs of B.E.A. At any rate, I hope so, because other debates in which I have taken part on the affairs of the Corporation have always been reasonably well attended.
As for his remarks about The Times, this is a disappointment which we all suffer occasionally and I am certain that his speech this afternoon will be given its proper attention and the importance that it deserves. I thought that he had much to say of sound common sense, particularly on the re-equipment of B.E.A.
The hon. Member for Gloucestershire, South (Mr. Corfield) made his principal criticisms of the Bill from the point of view of the increased charges being imposed by the British Airports Authority. It is clear that the hon. Gentleman has been talking to the Chairman of British European Airways, because much of 662 what he said was quotations from the Chairman's page in the B.E.A. magazine, which I have studied since it came through my letter box this morning.
Of course I have given the remarks of Sir Anthony Milward the attention which they deserve and I have studied his case carefully. What he said—I tried to intervene to point this out to the hon. Member, but he did not give way then—was that his complaint was that there was not proper consultation. He did not complain that there was not any consultation, and his criticism was not directed against the President of the Board of Trade but against the Airports Authority.
If one expects the nationalised industries to behave as commercial organisations, as the hon. Gentleman said he would like them to, it would be better for the consultations to be directly between the Airports Authority and the airlines which are using its services rather than through the intermediary services of the President of the Board of Trade. Surely that would be more convenient.
I would have said that it was impossible for the Airports Authority to consult all the hundreds of airlines which use Heathrow and that it would probably have needed several months to collect all the views, if that was the policy. I have no doubt that Sir Anthony Milward was properly informed of the intentions of the Airports Authority before the final decision. He devoted a great deal of space to this in the magazine, but the amount concerned is not all that great. It is only £200,000 in the coming year on his international routes, which is not a very high percentage of his total expenditure during the course of the year.
He says that he would not mind paying such an increase if he were to receive immediate benefit in the shape of improved airport services, but the British Airports Authority has a substantial capital expenditure programme of its own, and this will be increasingly important as the amount of traffic coming through Heathrow increases and as the number of passengers per aircraft increases.
When one sees the bedlam and chaos in the concourse of London Airport after 663 one of the present generations of subsonic jets arrives, one dreads to think what it will be like when several 747s arrive in the course of the same hour. It is for this reason that the Authority is to spend a considerable sum over the next few years on the provision of facilities for processing passengers' luggage and getting passengers quickly from the aircraft into the Customs Hall and then on their way by various means of transport to central London or other destinations.
§ Mr. Onslow
I do not dispute what the hon. Gentleman is saying, but this need is not advanced by the Airports Authority as a reason for taking this action.
§ Mr. Lubbock
No, it is not. I am not saying that it is. I am merely pointing out that the Chairman of B.E.A. says that he would not mind paying an increase of £200,000 in the coming year if he were to see something for his money. I am saying that he will see something for his money, perhaps not in the coming year, but between now and the 1970s when the much larger aircraft are introduced.
It is fair to expect him to pay something in advance, just as he does for new equipment. He does not complain because he has to make a down payment for the Trident 3B or the BAC111 500 series which he is shortly to introduce into service, and he has no grumble about helping a little to meet the capital charges of the Authority which are being incurred in the course of the construction of these enormous capital facilities.
The arguments for increasing the landing charges stand out by themselves, even without the expenditure which the B.A.A. is incurring. I agree with the President of the Board of Trade about this. It would be commercial madness not to charge the going rate. If the foreign air lines operating into Heathrow are not to pay any more in terms of their own currencies, they have no right to complain. Nor do I agree with the hon. Member for Gloucestershire, South that the increase is likely to drive foreign air lines away from Heathrow. Our experience over the last few years is that traffic has grown at a substantial rate. If one extrapolates that rate, it is frightening to see what number of aircraft will be coming into the airports around 664 Greater London by the early 1970s, and that, of course, is the justification for the third London airport. All Peter Masefield may have done by imposing these increases is to moderate the rate of increase in the amount of traffic coming into Heathrow, and that would not be a bad thing if it were so.
As for the diversion of these foreign air lines to other destinations in Northern Europe, to the extent that those other destinations were elsewhere in the United Kingdom, this would be a very good thing. The hon. Member for Glasgow, Govan (Mr. Rankin) will agree with me that there are not nearly enough direct services from Scotland to the Continent. Not long ago the A.T.L.B. refused Caledonian Airlines permission to fly a direct inclusive tour service from Glasgow to Majorca—I cannot think why—but the ostensible reason was that there was a perfectly good inter-change service available at Heathrow and Gatwick.
I should welcome the initiative of any air line which offered to fly passengers direct from Glasgow to the holiday destinations of Europe—or from Manchester, Birmingham and so on. To the extent that the 16⅔ per cent. increase in the charges for Heathrow will divert airlines to other places in the United Kingdom, it will have the beneficial effect of evening out traffic over the United Kingdom as a whole.
I tend to agree with what the hon. Member for Bolton, East said about the re-equipment programme of B.E.A. The Trident 3B will be an extremely good aircraft and it is more sensible to go for it than to spend a great deal of money, and it would be very substantial, on developing the BAC211. It would be interesting to know how much of the £120 million which the BAC211 would have cost to develop would have been attributable to the airframe and how much to the engines.
§ Mr. Crosland
It might save time if I gave the answer now, because the hon. Member for Gloucestershire, South (Mr. Corfield) gave the wrong figure. £30 million would have been attributable to the engines.
§ Mr. Lubbock
That is interesting and I am grateful to the right hon. Gentleman, because it enables us to compare 665 the figure of £90 million which would remain for the airframe with only £15 million which it will cost to develop the Trident 3B.
It has to be remembered that only limited resources are available in this country and if we were to spend this colossal sum on developing the BAC211, the effect on other aircraft programmes would be serious. I have always been inclined to favour the Trident 3B against the BAC211, because we will have our work cut out for years to come with our share of the European airbus. I hope that we shall and that the work will be running out of our ears in the early 1970s as we struggle to build up the programme of a large rate of output of the European airbus. If we had taken on the burden of the BAC211, it would have tied up the resources of the aircraft industry.
I think that the hon. Member for Gloucestershire, South will agree that it would also have been a psychological mistake to go for that aircraft, because it would have been an indication to our European friends, the French and the Germans, that we were not interested in co-operating with them in the development of the A300. They might envisage a situation in which we decided to drop the whole thing and go straight from the BAC211 to the Lockheed 1011, particularly as it now has British engines. That might have been a strong temptation to some future President of the Board of Trade or Chairman of British European Airways.
We have been perfectly right to develop the Trident 3B and it will not be nearly as expensive to operate as some of the irresponsible commentators have suggested. We have it on record from the President of the Board of Trade himself in his statement on B.E.A. aircraft re-equipment that:… after devaluation the Trident 3B is as attractive in terms of running costs as the Boeing 727, for which the Corporation originally asked in July, 1966."—[OFFICIAL REPORT, 15th December, 1967; Vol. 756, c. 780.]I do not see that there is any question of a vast subsidy being given to the Corporation for operating this aircraft in reference to the Boeing 727 and I hope that there will be an early decision to place a firm order.
I have one or two questions about the figures which the right hon. Gentleman 666 gave. He said that capital expenditure over the next five years would amount to £199 million, of which £86 million would be met by depreciation, sales of aircraft and so on. It would be convenient to have a breakdown of those figures, particularly as B.E.A. has a substantial fleet of older aircraft which, presumably, it will be getting rid of over this period. There are the Vanguards, Viscounts and perhaps some of the Comet IVBs. I would be interested to know if it is the intention of B.E.A. to continue operating its Argosy fleet during this five-year period.
The growth of B.E.A's freight traffic has been substantial, even in the last year when passenger traffic has stagnated. Will B.E.A. be asking the President of the Board of Trade during this period to discuss the re-equipment of its freight-only fleet with a much larger type of aircraft than it now possesses? If so, that will mean an additional sum on both sides of the equasion; substantial additional capital expenditure, but also the proceeds from the sale of the Argosys, which will have a second-hand value.
§ Mr. Onslow
Does the hon. Gentleman envisage that that would require the development of a new or variant of an existing major jet type or does he think that B.E.A's freight requirement might be met by, for example, converting the Britannias?
§ Mr. Lubbock
I understand that it is possible to convert the Vanguard but that it has the disadvantage of not being able to accommodate the pallet sizes to meet the new international standard which is being agreed. Perhaps B.E.A. will wish to have an aircraft with a larger cross-section than the Vanguard.
It would also be interesting to know whether, in the discussions with the French and Germans, there has been any mention of a freighter conversion of the A300. If freight is growing at a substantial rate—as it has been in the last few years; faster than the passenger growth—we should be thinking of a pure freighter for European routes so that we are not obliged to buy this type of aircraft from the United States. I suggest that there would be a considerable market for a pure freighter conversion of the A300. This is something that should be borne in mind when considering B.E.A's 667 capital expenditure programme, although I accept that this may not have to be done in the next five years.
§ Mr. Robert Howarth
Is the hon. Gentleman aware that from the start Boeing has been developing a freighter version of the 747 which, I assume, will have good sales?
§ Mr. Lubbock
The hon. Gentleman reinforces my argument. If we could develop a pure freight conversion of the A300 there would obviously be a market for it, and the research and development, tooling costs and so on could be amortised over a longer production run, resulting in the price of each aircraft being reduced.
Is there any thought of extending B.E.A's helicopter operations? I cannot remember how long ago B.E.A. bought the S61 s for an experimental service to the Scilly Isles. I understand that this service is still running at a substantial loss, while B.E.A's helicopter operations for North Sea gas rigs have become extremely profitable in the last year or two. Will B.E.A. extend its scheduled helicopter operations and, in any event, will it make every effort to cater for the increased business which is bound to be available from the operations of oil companies in the North Sea?
The Minister said that the 1967–68 loss of B.E.A. was about £3 million. I am disappointed in this, but I understand it because of the stagnation of traffic in the last year, for the reasons given by the President of the Board of Trade. The restrictions on overseas spending, with probably fewer Americans coming to Europe, and the general economic situation has prevented B.E.A. from attaining the rate of traffic growth which we would have expected from the experience of the last few years. What is the outlook for 1968–69? Is it too early to give an estimate of the rate of passenger and freight growth respectively? Presumably by now B.E.A. is about to do its annual budgeting. A rough idea of these figures must be known and I hope that they will be given to hon. Members.
It is sad for the Corporation to run through a period of losses, but I believe that the new fleet which it is acquiring will enable it to be in good shape to 668 compete with any European airline at the beginning of the '70s. I wish B.E.A. well. The Bill is valuable and the increased borrowing powers are justifiable on the basis that B.E.A. will be doing a really excellent job for Britain at the beginning of the '70s.
§ 6.5 p.m.
§ Mr. John Rankin (Glasgow, Govan)
I agreed with a good deal of what the hon. Member for Orpington (Mr. Lubbock) said towards the end of his speech. I regret that I was not able to be in my place during the earlier part of his remarks.
Yesterday evening, on a visit to Southend Airport, we were told about the bus-stop services which fly between Southend and Aberdeen, stopping at Edinburgh and various other places en route. The airport manager assured us that these services were well patronised and extremely successful. Projects like this should be explored, not merely between Britain and the Continent—although we must always bear that type of market in mind—but also from the point of view of Scotland. There is now a great travelling market for the intermediate type of service; that is, a flight which takes a passenger to stops between Glasgow and London, and for this reason we should not all the time think in terms of the Glasgow-London demand. The same can be said of freight services.
My hon. Friend the Member for Bolton, East (Mr. Robert Howarth) will agree—because he was one of the hon. Members on that visit to Southend Airport—that every half hour an aeroplane arrived at Southend Airport and that, at a similar interval, one took off. I was assured that these services were profitable. There is, therefore, still a wonderful avenue for aircraft operators to explore in the United Kingdom—always bearing in mind the larger avenue of the Continent and the world in general.
It is important for us to begin to think about the future of London Airport. I use this airport twice a week. Already the number of passengers being handled there is presenting a problem. When one thinks of the situation that will arise when the new 400-seater turbo-jets come into service, the problem will be even worse. The airport is in a state of perpetual change, with work going on in 669 almost every part of it. If, in addition, we have supersonic aircraft landings there, the problem will be virtually insuperable. Not only is there a lack of manoeuvring space but an insufficiency of runways. If that is the case now, what will it be like in the future? Last Monday the aircraft in which I was travelling was held up and had to circle for half an hour before being able to land.
I agree with the hon. Member about increasing flights to and from Scotland. That has been a long felt want and the demand has been made for a long time, but nothing much has been done to meet it. It was a pity that the request, made over so many years, for a service embracing Dundee was regularly refused by B.E.A. Now, when a private operator has decided to come in, the venture merits success. I could never see any reason for refusing this type of service to meet the intermediate demands of London, Edinburgh, Dundee, Aberdeen and so on.
That should be met particularly when we see that on the western side of Scotland Prestwick is getting nervous about its future. It is feared that Abbotsinch is attracting too much traffic and therefore Prestwick is suffering. It is a pity tat that feeling should be created at a time when there is a clamour for more services in Scotland. Prestwick on the western side could be used in a similar sort of bus-stop plan as exists in the east.
I hope that my hon. Friend will note that the numbers and problems at London Airport are increasing. Traffic is increasing. That will make the need for the third London Airport even more urgent. I hope that there will be no undue delay in getting ahead with the inquiry into the Stansted question because time is no longer on our side. In the interests of the expansion of aviation and of the aircraft industry in Britain, the third airport is a pressing necessity. I hope d ere will be no unnecessary delay in coming to a conclusion on this matter at the earliest possible date.
The aim of this Bill is to provide British European Airways with finance to buy the new equipment which it must have. That, of course, includes aircraft, but it does not appear to comprehend engines. The Minister put it very euphemistically when he said that B.E.A. 670 has asked to buy the Trident 3B. That is where Ministerial imagination enters the field. All of us know, although one does not actually say so, that B.E.A. was told what it had to buy. It was not the Corporation's preference. The engine it wanted was not the 3B but the Rolls Royce 211.
§ Mr. Robert Howarth
My hon. Friend is not going back far enough. Originally B.E.A. wanted an American aircraft. It started by wanting an American aircraft with American engines.
§ Mr. Rankin
I am fully aware of that. My only reason for not going back to that was because I want to deal with the problem as it faced us here in Britain. I am well aware of the merit and truth of my hon. Friend's interruption. B.E.A. was told that it could not have that aircraft and no reason was given for the refusal. Many believed that it had something to do with the engine. Now we hear the praises of the 211 sung across the Atlantic. It is still the same engine. In view of the fact that the qualities which it carries are witnessed by this £100 million sale, surely, as time is still on our side, we might think again about the Trident's power unit.
We are proposing to provide B.E.A. with £115 million, or rather with the right to draw on that sum of money. The question of profitability is one of the items always raised when the aircraft operator asks for aid, particularly when the request comes from B.E.A. or B.O.A.C., with whom we have come now to a sort of final composition. I wonder if the Government have given any thought to striking a similar composition with B.E.A. and, instead of going on with this financial business, thinking of giving a loan at a fixed interest rate, or following the pattern of creating an Exchequer dividend capital account. I do not see why they should continue on the existing basis which is not always satisfactory; which becomes recurrent, instead of trying to reach a new pattern of investment which seems very practical and to be operating quite successfully with B.O.A.C. I fail to see why it could not operate equally well with B.E.A.
When we talk about profitability in this industry, in fairness to the operators we should realise that it is a very variable type of business. The competition is 671 intense. I ask my hon. Friend to think again about the present set-up in awarding routes.
The Air Transport Licensing Board has been functioning for quite a time and in my view not always effectively. For example, it decided that competition on the London-Glasgow route would be a good thing. B.E.A. was doing well on the route so the Board said that there would be room for a competitor. No one—and I was a user myself—could make any legitimate complaint about the efficiency of B.E.A. in serving the route. Nevertheless, a competitor was introduced.
The assumption was that, automatically, the number of passengers would increase because another airline was serving the route and, therefore, no penalty would be involved for B.E.A. But the Board was not satisfied with that. It introduced a third airline on the route—B.U.A. Whether it was partially because of that or not, B.U.A. I believe has now gone more or less bankrupt. Whether its competition was effective or not, I am not sure.
However, despite all this competition on the route, the number of passengers has not increased sufficiently to give an operating profit both to B.E.A. and British Eagle. The consequence is that there is a tendency for B.E.A. passengers to be reduced in number. The same thing is happening to British Eagle, although in its case the reduction might not be so evident because it is running more modern aircraft.
As the hon. Member for Orpington said last night when we were discussing the Concorde, putting a new aircraft on a route means that, because of its newness, people will be attracted to it away from the older aircraft. But this was an unfair position to create on the London-Glasgow route. The Minister of State should have another look at the functioning of the Board and consider whether or not he should keep it in existence. As I see it, the Minister himself is quite competent to deal with the problem. He knows it in a way the Board cannot. He is more informed about the factors surrounding the operation of aircraft than the Board. So he is fitter to deal with the problem of licensing. We must recognise the increased 672 competition, not just what we ourselves have created for our major operator on domestic routes but what it has to face outside the United Kingdom.
The other problem airline an operator must face is that, although he may plan for a certain rate of growth, as he must, saying, "We want X more passengers next year and will do this and that to get them" as there may be internal changes—for example, the Budget—which affect his profitability and upset his plans. Government intervention in the national interest can impose severe handicaps on the operator.
Another factor over which the operator has little control is the premature obsolescence of an aircraft. We have seen this happen in our own services. It has happened with the Vanguard, which has been made obsolescent because of the speed of development of new aircraft. It is a turbo-prop in a jet age. This is a very big change and can severely affect the operations of an airline.
§ Mr. Robert Howarth
I apologise for interrupting my hon. Friend twice. Referring to the competition on the London-Glasgow route, he made a remark about B.U.A. which, on reflection, he might wish to reconsider. While it is true that the company had some difficulties, it is now beginning to pull out of them and this has been exemplified by the fact that it has just ordered five new BAC111s. As far as one can see, the airline is quite viable and, indeed, is increasing its fleet.
§ Mr. Rankin
I thank my hon. Friend warmly for that intervention. Perhaps at the time I was thinking of events of a few weeks ago, when in the aviation group we were very much concerned, for it seemed that B.U.A. was about to face financial difficulties. I am sorry to have created a wrong impression and I accept fully what my hon. Friend has said.
I have here the economic review presented to us by B.E.A. for the year ended 31st March last year. We should consider what it says because it is very important. We are investing money in B.E.A. and should look at what is happening, because this reinforces what I have been saying about its difficulties. There was a profit of £5,095,027 before payment of interest on total capital borrowings and excluding the loss on the 673 Scottish Highlands and Islands services. They give certain comparisons as to the revenue yield per L.T.M. cost per C.T.M. and overall load factor. I mention that merely to go on to say that the significant change between last year and this year was a fall in load factor despite the fact that this change also happened to be quite small. It was this small drop in load factor from 60.2 per cent. to 59.3 per cent. which caused B.E.A.'s net profit to fall by £575,429. That is only a fractional fall in load, and yet it represented a fall in actual money profit of over half a million pounds; and therefore it emphasises the importance of the load aspect and what can derive from competition which in my view is unnecessarily prejudicing the Corporation that carries the flag. I do hope, therefore, that my hon. Friend will think very seriously about this problem and also about the other problem which B.E.A. carries.
Part of B.E.A.'s contribution to community services is represented by what it does on the Western Isles. For that it has already incurred this year a loss of over a quarter of a million pounds. This is a service to the community and I feel that the Government must in one way or another face up to this fact. Are they prepared to give some consideration to British European Airways which have been responsible for this social service for so many years? It has performed it well and has borne without complaint the loss on financial outturn which it causes to B.E.A., standing always as it does with the accusation before it that it is not making as big a profit as it might wall do.
I know that my hon. Friend has often had this issue presented to him, and that hi; Department has lived with it for a long while; but I want merely to remind him that it is still there and in my view there is no reason why the community should shelve on to B.E.A. a burden which is a community burden. I therefore see, no reason why the Government should not give special consideration to this problem, in financial terms, in order to assist British European Airways in bearing that burden.
§ 6.35 p.m.
§ Mr. Stanley R. McMaster (Belfast, East)
It gives me particular pleasure tonight to follow the hon. Member for Glasgow, Govan (Mr. Rankin) who 674 speaks so well for Glasgow and Scotland, as I speak for Belfast and Northern Ireland.
I believe it was the hon. Member for Bolton, East (Mr. Robert Howarth) who remarked that this debate was sparsely attended, probably because many of us were still debating at 2 o'clock this morning another aspect of the aircraft industry. It seems to me, looking round, that we still have in the House today very much the same team as were in the House at that time.
The hon. Member for Govan will perhaps remember that in Standing Committee C in 1960 we debated the Air Transport Licencing Board. I am not surprised to hear him take the attitude he does and almost to regret the fact that B.E.A. has introduced jet aircraft in one of its services. I can see him perhaps suggesting that it would be better to have no competition at all so that B.E.A. could go on operating turbo-prop aircraft services until the year dot. But I take a very different view from the hon. Gentleman's.
§ Mr. Rankin
I must correct the hon. Gentleman. I did not intend to give the impression that I regretted advance in any quarter. I want to see advance, but I want to see it all round, and I do not want to see the national airline handicapped in any way whatsoever in its advance.
§ Mr. McMaster
I do not wish to spend too much time on this point. The hon. Gentlemen spent some time on it, and what he said is on record. He concluded his speech on that point, and I take a very different view from him about the operation of the Air Transport Licensing Board.
I travel almost weekly by B.E.A. through London Airport to Northern Ireland, and I find the efficiency of B.E.A. not quite as good as it has been in the past. I am sure the hon. Gentleman must have noticed it. I have noticed it myself and it has been commented upon to me by many passengers. Only a week ago, while travelling home on an urgent call to my constituency, I wished to change to an earlier flight and I met with considerable opposition in trying to get on an earlier flight. In the end, I was reluctantly put on one, and then found to my surprise that there were several empty seats. This means that the staff 675 at London Airport, operating as they do under difficulties, of course, are not as much on their toes as staff in some of the independent companies who have been given a licence to operate a very limited service in competition with B.E.A. As I see it, B.E.A. has virtually a monopoly position. On many of the routes within the United Kingdom, the Air Transport Licensing Board seems to have been motivated by excessive conservatism.
In the case of the Air Transport Licensing Board granting a frequency to an independent line, there is a right of appeal and the final appeal goes to the Minister, which, perhaps, is unfortunate because the Minister is the protector of the public purse and is responsible for the expenditure by B.E.A. of the money we are debating tonight and, therefore, must protect the investment. The operation of the Air Corporations Act over the past eight years has had the effect of limiting very strictly the competition which British United Airways and British Eagle have been able to offer, so that their services have been hardly viable; and the hon. Gentleman is right in commenting on the financial difficulties into which British Eagle and British United have passed.
I have seen British European Airways failing to operate a frequency at a time that many of the travelling public would have liked and B.U.A., on being granted a frequency, immediately duplicating it with faster aircraft. This is competition of the very finest type. But I feel that the hon. Gentleman went too far in suggesting that B.E.A. suffers from this competition. It has the giant slice of the cake. The dice are very much loaded against the independents.
§ Mr. Russell Kerr (Feltham)
Perhaps the hon. Gentleman will go on to tell us that the main objection of B.E.A. is about independents being allowed to come in and cream off the main trunk routes—those which are the most profitable. The position is not as he suggests.
§ Mr. McMaster
I am going on to deal with this point. The service within the United Kingdom, particularly to Northern Ireland, offered by B.E.A. is gradually falling behind that of similar services 676 offered in other countries. The hon. Member for Govan, referring to the ordering of aircraft, said that he would not venture to America. If he did he would see the type of services offered by airlines there and, when he compared them with those offered by B.E.A., which has a virtual monopoly in Britain, he would have some surprises.
The hon. Member for Orpington (Mr. Lubbock) said that in many airlines in the United States only jet services were offered. They no longer operate turboprops. In many of its continental services, where it faces much stronger competition, B.E.A. operates almost exclusively with jets. Only we in Britain are left with slow, less efficient, turboprops. There is considerable room for improvement, and more competition would cause B.E.A. to improve its service.
Loading and unloading of planes and the "bus-stop" service were referred to. There is a "bus-stop" service, which has been operating for a long time, in the United States. Passengers can walk straight on to the aircraft. I have not seen the statistics but I suggest that B.E.A. might carry out a survey. It might be found that 70 per cent. to 80 per cent. of the travelling public has travelled before. The ticket is pre-booked. I do not see why a passenger who knows the ropes should not walk straight through the building at London Airport and reduce congestion by going straight out on to his aircraft instead of changing his ticket at the desk and having another voucher issued, which is again changed as he gets into the bus. One operation would save time.
Only one or two girls would be necessary, instead of the 12 who take the luggage or advise those who have never travelled before. We do not need a whole row of them at London Airport. I remember that a few years ago I made a suggestion to the right hon. Gentleman, the present Chancellor of the Exchequer, about running buses direct from the side of the aircraft to London. I also passed this on to Mr. Milward as he then was, the Chairman of B.E.A., and was delighted when he accepted the idea. This is not a new idea, but it might well be used to the advantage of the British travelling public. We spend vast sums of money—and an example is to be found in this 677 Bill—in increasing the efficiency of the service by introducing jet aircraft which cut perhaps 10 minutes off the flight to Belfast. This is at great cost to the airlines. We then waste the same amount a time, or perhaps double or treble, hanging about London Airport.
It is a little pointless buying faster aircraft at higher prices and then not paying the same attention to the loading and unloading of passengers and luggage. I would also encourage more passengers to carry their own luggage on to the aircraft. This would reduce costs.
§ Sir Knox Cunningham (Antrim, South)
Would my hon. Friend agree, speaking of the method of conveying passengers to planes at London Airport, that what used to be an easy operation for elderly persons is now highly dangerous? One is put into one of these buses and taken at high speed, standing up. One has a considerable amount of difficulty in keeping one's feet. Is this not something which could be improved?
§ Mr. McMaster
Yes. I would like to see much more progress being made with the direct loading at one level into the aircraft, of passengers and luggage. One could go out alongside one of the jets and, instead of going right down, like the Duke of York, marching his men up to the top of the hill and down again, one could walk straight on at the same level. This method is adopted in the United S sates and progress is being made in this direction at London Airport, but it is painfully slow. I agree that those buses running out without any seats are a real hazard for elderly people, or people with children, or any other infirmity. [Interruption.] I will not rephrase that sentence; I think the House takes the point.
The Government have lost an important opportunity in the ordering of the now aircraft to re-equip B.E.A. We have been delighted to see that Rolls-Royce has sold its 211 engine to Lockheed. I very much regret that the Government did not see fit to go ahead with the B4C211. This aircraft would be ideally suited for the route to Belfast. We do not want the airbus to Belfast, it is too big, we would only have one or two services in a day. We do not want the small Trident 3B because this service referred to in the Bill is a busy one, increasing between 12 per cent. per annum and 14 per cent. 678 per annum. It is a wonderful service, making a profit when others were making a loss. An aircraft that would fit into the slot, as the manufacturers say, such as the BAC211, seems ideal.
The Minister should look at this again. We are manufacturing this RB211 engine for Lockheed and we hope to manufacture a down-graded version of it for the airbus, the A300, when that comes along. We are not sure that it will come along, and even if it does, there seems to be a gap between the Trident 3B, which has a very small export potential, and the airbus. Britain should be manufacturing an aircraft between the BAC111, which is a very fine aircraft, and the airbus. We should be designing something. Perhaps by now the BAC211 is out of date, but we could use this advanced-technology engine in a newly-designed aircraft, even better than the BAC211, but along those lines, to fill this slot. The Minister would do well to follow the suggestion of my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) and reopen this whole question.
There has been a very sharp rise in the fares on the services within the United Kingdom, particularly to Northern Ireland. It seems only four or five years ago that B.A.C. received great support in Northern Ireland following an advertisement for peak fares to London in winter of £3. If one was lucky enough to get on to the flight standby and save the fare, one could fly from Belfast to London for £2—a remarkably low fare for that distance, but not out of line with some of the fares charged in America and other parts of the world for similar distances. Now the standard fare has been raised by 10 per cent. If one includes the bus fare, it costs almost £20 to fly return in winter on an ordinary flight from London to Belfast. This very sharp rise has caused a great deal of discontent among passengers.
It might be said that I am taking extreme cases, and not comparing like with like, but off-peak flights with the standard flights. As to the standard flights I have received many complaints, as a Member for Belfast, on the sharp increase in fares to Northern Ireland. I say this with some strength, because one notices in paragraph 27 of the decision of the Air Transport Licensing Board in 679 July last year the remark that "B.E.A. are making a profit on the Belfast flight". If they are making a profit and have made a continuous profit on this flight, why is it they need to put up the price? Are B.E.A. doing what the Minister suggested in opening this debate—maximising their profit? Are they milking the profitable routes in order to pay for the less profitable ones or the ones that are making a loss, for instance, the Highlands and Islands? How does this fit in with the Government's regional plan?
I suggest that this service to Northern Ireland is a vital lifeline. We are in a peculiar position in Northern Ireland, in that we have a sea barrier. This has an effect on our efforts to develop and encourage new industry to come to Ulster. As a result of this, our industrial development has lagged behind the rest of that of the United Kingdom. Our unemployment rate, even with the recent decrease, is still over 7 per cent., which is almost three times the national average.
One of the ways in which we can improve our industrial development in Northern Ireland is by improving our transport links. This is where an air service is the ideal type of service for business men travelling between the South of England and Northern Ireland. They do not have to trouble with trains and boats. It is therefore essential, if this industrial development in Northern Ireland is to go ahead quickly, that we should have a good, economic, cheap air service between Belfast and London and other cities in the British Isles.
I feel very strongly that the Minister should re-examine the fare structure between Belfast and London and consider whether the fare has not been raised too much, to see what effect this will have in building up traffic, remembering what I said a few moments ago about the monopolistic position of B.E.A. on the route.
If there are services such as the Highlands and Islands services which are making a loss and the Government feel that it is socially desirable that B.E.A. should continue to operate the services, the Government should be prepared to subsidise them out of public funds in the same way that certain railways are 680 now subsidised. It is not fair to the travelling public to Northern Ireland to expect them to pay more on a service which is making a profit in order to subsidise other services in the rest of Britain. It also seems to be directly contrary to the Government's economic policy and industrial development policy which should, if anything, encourage the State air corporation to reduce its fares in order to encourage industrial development in Northern Ireland.
I should like to mention the aircraft which have been referred to already. The Minister, in opening the debate, referred to orders for British aircraft which had been placed: the Trident 3B, BAC111, series 500, and the airbus. The hon. Member for Orpington mentioned the need for a freighter aircraft to be operated by the air corporations. The air corporations should look particularly at the type of aircraft which are being produced in Northern Ireland. It was suggested that they could look to America because of the system of palletising loads, but we have a small freighter produced in Northern Ireland—the Short Sky-van—which seems ideal for the uses of B.E.A. This aircraft is now being sold to the United States, and it will be somewhat contradictory for B.E.A. to look to the United States for a freighter or develop the Vanguard, which will not take a pallet, when it could order such aircraft as the Short Sky-van to serve this function.
These planes can take a pallet, could fly directly to London or to other towns in the United Kingdom, and would also be of great use in furthering the industrial development of Northern Ireland. They could offer a first-class service to manufacturers setting up new industries in Northern Ireland—a quick, inexpensive service to the main industrial centres of the United Kingdom. This alone, with a policy of cheaper air fares, would do a great deal to improve the industrial development and build up the air traffic between Belfast and the rest of the United Kingdom and, indeed, the rest of Europe, particularly if we entered the Common Market.
The subject of airports has also been mentioned today. I feel very strongly that the British Airports Authority was ill-advised to increase the landing fees at British airports following devaluation. I 681 would refer the Minister in this context to a recent article in a South African magazine called Prospect. The Minister spoke of an analogy when referring to the British Airports Authority increase in tariffs. This magazine pointed out how a manufacturer of machine tools had sent a short note, following devaluation, to a purchaser in South Africa advising him that as a result of devaluation, the manufacturer could charge 16 per cent. more for the machine tools but that he was only going to charge 14 per cent. to the South African purchaser. The South African purchaser was understandably irate about this. He immediately sent a letter to the manufacturer in Britain saying "Thank you for nothing" and got in touch with the Japanese to see what their rates were for machine tools. I suggest it is very bad business to raise tariffs just because we are in a position to charge more, and this applies equally to our airports. It is important for the industrial development of this country—and I should like to put this Bill into the background of our general economy policy—to encourage trade and commerce.
We will soon have a third airport for London, and when we do we will want to encourage more traffic to the United Kingdom from the Continent and from America. This policy of the Government—without any consultation, without warning and apparently without economic justification—in raising the landing fees by an arbitrary amount to get the maximum from the operators can do nothing but create much These operators will frequently have a choice, particularly on inter-continental flights, in whether they wish to use the airports in this country or not.
We want to build up airports. At the moment Heathrow is overloaded, but once we have another airport—whether it is Stansted or elsewhere—we will want to increase the traffic and, with better methods of air traffic control, we will be able to build up the frequency.
The aim of the Government in this Bill and in its airport policy should be to reduce tariffs as far as possible in order to build up greater trade and commerce and encourage more airlines to fly to London and, through London, to the United Slates and elsewhere.
§ 6.59 p.m.
§ Mr. Cranley Onslow (Woking)
I susspect that more hon. Members might have sought to catch your eye, Mr. Speaker, if we had been aware in advance how far we might range in this debate and still remain within the rules of order. But, perhaps it is just as well that advertisements to this effect are not circulated to hon. Members. You have heard a good deal about aircraft within the last week, Mr. Speaker, and you may share my wish that we could achieve the status of a specialist committee on aviation matters, so that we might discuss these things more fully in our expertise and perhaps disagree more deeply within the somewhat restricted membership of those closely concerned with aviation affairs.
It is not my intention on this occasion to try to prove what I might call "Bence's law", that "speeches expand to fill the time available for their completion", so I will touch only briefly on one or two points made by speakers in the debate.
The hon. Member for Bolton, East (Mr. Robert Howarth) is not with us at the moment, and perhaps I may leave him to read in HANSARD my advice to him on the trouble he has had with The Times, which is to cancel his subscription and to take the Daily Telegraph instead. That should ensure my being reported in both newspapers.
I should like to return later to the points which the hon. Member for Orpington (Mr. Lubbock) made about the landing charges at Heathrow. I find it very hard to accept his argument that it was impossible for there to be consultation with the airline operators before these charges were brought into operation. Today's newspapers carry a report of a meeting of the Heathrow Airport Airline Operators' Committee at which 40, I believe, of the 43 airlines represented, including those from Eastern Europe as well as North America, united in their opposition to the charges. If there could indeed not be proper consultation, it is very important that some means should be found to enable proper consultation to take place in future.
The hon. Member for Glasgow, Govan (Mr. Rankin), who is not at present in the Chamber, made some valid points about crowding at Heathrow, although there are those who believe that air traffic control procedures could be developed 683 to a higher pitch which would enable more landings and take-offs to take place there. However, I should like to take this opportunity of putting to the Minister a point concerning general aviation flights at Heathrow. Small, taxi executive aircraft are, I am glad to say, becoming increasingly popular. But we must recognise that when they make use of a major international airport they take up slots in the landing or take-off pattern which might be put to much greater passenger benefit if instead of a 10-seater aircraft using them a 100-seater aircraft were allowed to come into the traffic stream.
There is also a good deal of evidence of the risk entailed by allowing general aviation flights in the area of a major international airport. The Minister will probably have seen some figures on this subject in this week's edition of Flight. If he has time to touch on this point, I should be glad to know whether he is in agreement with the Chairman of the British Airports Authority, or whether he sees any prospect of developing for general aviation purposes the airport at Northolt, of which the R.A.F. can hardly be making saturation use.
The hon. Member for Govan also referred to the pressing need for the mounting of the inquiry into the third London Airport. He might not have listened to speeches made on this subject from this side of the House some months ago in which we stressed the urgency of this need. The whole House is glad that the Government have at last accepted it. It would be of general interest if the Minister could tell us tonight what progress is being made on setting up the inquiry.
The hon. Member for Govan suffered the unusual experience of being accused by his hon. Friend the Member for Bolton, East of not going back far enough in time, which he must have found a somewhat new charge. I was also a little sceptical about his proposal to instal the RB211 engine in the Trident, which I should have thought would create a surplus of power. Perhaps the hon. Gentleman was not at his most serious when he made that point.
It was very mischievous of the hon. Gentleman to suggest that B.U.A. was on the verge of bankruptcy. If he were present, I should ask him to withdraw that 684 statement. Independent airlines, indeed all airlines, have faced a difficult period, but the evidence which we have had recently, with the considerable orders placed by B.U.A. for new British aircraft and the major part which the Air Holdings Group played in securing the RB211 order by putting down a bid of their own for 50 airbuses, should indicate that this is by no means a bankrupt concern. It is very much a go-ahead, determined and enterprising concern. To throw allegations of that kind around the Chamber is the height of irresponsibility.
My hon. Friend the Member for Belfast, East (Mr. McMaster) made a useful contribution, as he always does, particularly by virtue of his being a regular airline traveller. It is worth remembering that travelling experience by air is not confined to those fortunate enough to be able to take frequent trips abroad. The communications by air which exist between the various parts of the United Kingdom are an integral part of our society. They provide a service which might well be developed and expanded in certain other areas of Britain, notably the South-West. We are often insufficiently air-minded as a nation, and when we consider transport and communication problems we are very slow in appreciating the part which aviation can and should play in bringing the various parts of this quite small island closer together.
Another absentee whom I must mention is the hon. Member for Feltham (Mr. Russell Kerr), who made an intervention concerning competition. He seemed to cast scorn on the idea that the introduction of independent operators to some of the domestic scheduled flights had been to the public disadvantage. He spoke of "creaming off" the most profitable sectors. This is a very narrow attitude. The right way in which to gauge these matters is in terms of providing more cream for the customer. If we want more choice, better flights and more modern aircraft, competition is the way to introduce them and the customer is the person who will benefit, I have no sympathy for narrow points of view of that kind.
My hon. Friend the Member for Belfast, East reiterated the plea of my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) about reconsideration of the BAC211. I should like 685 to clarify one point with the Minister. My hon. Friend quoted £50 million as being the figure which had been estimated for the engine element in the development of the BAC211. The Minister intervened to say that the correct figure was £30 million. I am puzzled about this, because it is at variance with the evidence given to the Select Committee xi Nationalised Industries reported in paragraph II 36 on page xxiv of its second Report, in which it says:… the Ministry of Technology put the launching costs at £60 million or more for the aircraft itself and £50 million or more for the engine".Perhaps this is all water under the bridge, but some of us in the past have felt inclined to accuse the Government of using an elastic slide-rule in doing their calculations on projects which they do not want to support. I should not necessarily condemn the Minister for that, but if we are to be able to reassess past decisions with a view to getting similar decisions right next time, it is important that there should not be an element of doubt about £20 million left in the history of the venture.
The Minister said that he was sorry that the Bill had to be brought forward in this form. The House shares his regret, because we had looked forward to getting the financial structure of B.E.A. resolved for the next 10 to 15 years. We know how hard it is to find places in the legislative queue for Bills of this kind. We should have welcomed an opportunity to get the matter right and to be fairly certain that for 10 or 15 years we should not need another Air Corporations Bill.
I was not clear from what the Minister said about precisely why the timing had gone against him. I understood him to say that discussions were far advanced and that he could not reveal the nature of the financial arrangements he was contemplating, but that he believed that the discussions were nearing their end and that he hoped to be able to tell hon. Members during the further stages of the Bill what the proposals were.
If the arrangements can be finalised in time for the Bill to be amended, is it the Government's intention so to amend it? It seems to me unlikely that we shall get into Committee before Easter, and therefore we have a certain amount of time to play with. We have a month before we can expect to reach the Com 686 mittee stage. Is there no possibility of getting the discussions cleared up in that time? Sir Anthony Milward, Chairman of B.E.A., writes in the current issue of BEA Magazine:I know from my discussions with the President and his staff that they are as anxious as we are to get this cleared up quickly and honourably.I know that there is not an easy process to be gone through, but there is good evidence of good will on both sides and I very much hope that it will be possible, with co-operation between the Board of Trade, B.E.A. and the manufacturers, to get this settled and enable the House to clear up the whole thing.
I make this point with slightly more emphasis because I am not certain that Clause 1(2), which authorises the Board to borrow £10 million against the revenue deficit, has very much to do with the purchase of the Trident 3B. It seems to me to be designed, sensibly perhaps, to deal with the short-term financial difficulties which B.E.A. may face if—as is possible, although we hope that this may not happen—it finds itself running into fairly substantial annual losses, not just this year but next year as well. It is conceivable that B.E.A. could lose about £10 million if air operations become an uneconomic sector in a relatively short period. This contingency fund will guard it against the consequences of that, but I do not see how it will help it to finance the costs of introduction of the Trident 3 and provide it with any element by way of compensation for such financial penalties as it may incur on its operation.
There are one or two other items on which B.E.A. may have to spend money and which the Minister did not mention. One is hotels. The right hon. Gentleman knows how important it is that when people have been flown into this country they should have somewhere to stay. There are those who believe that the shortage of hotel beds is one of the main limiting factors in international air travel, and there is certainly evidence of a need to provide more hotel facilities. I do not know whether there is any intention that B.E.A. should be responsible for their provision, and I am not sure that I am wholly in favour of B.E.A.'s doing so. So long as there are other people who can do this, I do not see that it is a necessary adjunct of air line operation.
687 The other and very important project on which money must be spent is the electronic data processing of air freight and the development of the new cargo terminal at Heathrow, which should have considerable effects in saving costs of both exports and imports. That is not to be despised.
I return to the question of landing charges. I share the unease of my hon. Friend on this subject. One thing which came out in the exchanges during the Minister's opening speech which does not make it any easier for me to understand the situation, is why the initiative in the question should have come from Mr. Peter Masefield. I cannot see anything in the Airports Authority Act, 1965 which obliges the Chairman of the British Airports Authority to take into account considerations of foreign exchange. I am not wholly in favour of chairmen of nationalised authorities exceeding their briefs. It is particularly undesirable that they should do so unless the Minister responsible takes the initiative in suggesting that they should do it.
If the Minister had told us that he proposed to the chairman of the Airports Authority that he should consider this matter and submit recommendations to him, I should have found it easier to understand the way in which the matter has come about. But we have been told that the Authority took the initiative in this and I am puzzled to see how what has happened wholly squares with the evidence which Mr. Masefield gave to the Select Committee on Nationalised Industries. I quote from page 98 two exchanges, in the first of which Mr. Masefield says, speaking of landing fees.If we wanted to alter them, we would have to go to the Board of Trade; I think we would have to go to the Prices and Incomes Board.The President of the Board of Trade told us that for some reason which is not wholly clear, this did not have to go to the Prices and Incomes Board. I am not sure that he has explained why.
The second answer Mr. Masefield gave is even more interesting in a way. Asked about the basis on which the fees are fixed, he replied:As I understand it, there were three basic factors taken into consideration. Number one, 688 and I think the primary one, was charging what the traffic would bear. Number two was achieving an adequate return on capital. Number three was to have one simple single fee which would embrace everything instead of these rather complex charges of all sorts of things which happens in some other places.The third of those criteria has gone to some extent, because we now have what we did not have before, a differentiation between the domestic and international landing fee. If I am correct in my understanding, these were previously the same and the inter-continental fee was more heavily weighted. There are now three instead of two, so there is more complexity.
I suppose that it could be said that we are now receiving a greater return on capital, but there is no evidence that fees previously represented an inadequate return. So I come back to the question of what the traffic can bear. The President of the Board of Trade should have taken greater pains to see that there was full consultation on this, and he should have heard evidence from both sides. Sir Anthony Milward is very critical of the increase, and the foreign operators have been very critical. I see nothing in their reaction which leads one to suppose that they are likely to try to divert traffic in the direction of this country. I know that the foreign operators will not be paying any more than they were before, but although they have been denied an uncovenanted bonus as a result of devaluation, B.E.A. will certainly pay £200,000 a year more on their international routes, on top of the extra £100,000 which will be the cost to it, direct or indirect, of the latest Budget.
Here we have another £300,000 a year being put on B.E.A.'s shoulders at a time when we are already aware that it stands in danger of making a loss of £3 million. This is not likely to make its task of providing air services any easier, and I do not believe that it is likely to make its staff morale any better. It is a fairly reasonable proposition that people who work for a firm that is not making money have a lower morale than those who are working for a firm that is making a profit. It is important that the morale of a Corporation like B.E.A. should remain high, because so much depends on all members of the staff doing their tasks with great diligence and responsibility.
689 I turn to the question of aircraft noise. I think that there is an obvious connection here. We are being asked to vote large sums of money for the purchase of aeroplanes for expanding air operations, and to a great many members of the public that will simply turn itself into a proposition that we shall buy them more noise in the sky. I do not regard these matters in that way, but the Minister knows that there are many people who feel as the hon. Member for Putney (Mr. Hugh Jenkins) feels, that noise is an abomination, and there are some who would go as far as the hon. Gentleman sought to do last Friday, which is to ground every jet aircraft in current airline service at the end of five years, and, incidentally, throw many people out of work and lose a lot of money.
§ Mr. Hugh Jenkins (Putney)
I sought to do no such thing. In any event, I was prevented from doing anything at all half way through the proceedings by the Chief Whip.
§ Mr. Speaker
Order. The hon. Gentleman is prevented tonight from debating the ending of Friday's debate.
§ Mr. Onslow
Were I in order, I should most emphatically dispute the hon. Gentleman's first assertion but unquestioningly accept his second. The serious feature of what happened was not that I was prevented from making one of the best speeches I have never delivered but that the Minister was denied the opportunity of giving certain information to the House which I believe that he was ready to give and which I think the House would have been glad to hear.
§ Mr. Speaker
Order. The hon. Gentleman complimented the Chair on being so generous tonight. He must not abuse its generosity.
§ Mr. Onslow
I would never seek, Mr. Speaker, to abuse your generosity. The Minister may be equally anxious this evening to give us certain information. May I leave the thought in the mind of the Chair that when we talk about spending large sums of money on buying aeroplanes, the people who live underneath them would be glad to hear a statement from the Minister on certain proposals he may have in mind.
690 We know there is an intention in the Board of Trade to introduce noise certification. We have waited some time to hear precisely what these proposals might be. They were first outlined to the House very roughly almost exactly a year ago, on 17th April, 1967, by the then President of the Board of Trade. We understand and appreciate the complexity caused by the need to obtain international agreement. Nevertheless, if we can be told anything about proposals for introducing noise certification, the public will most heartily welcome greater information being provided to them, as they should always welcome information which helps them to understand the peculiar problems of aviation and air operation.
Incidentally, it is time that a more up-to-date copy of the Ministry's pamphlet on aircraft noise was produced. It was printed in May, 1965, and it is still in current circulation. Much has happened since. This whole subject is one on which there ought to be a White Paper, and indeed there ought one day to be a proper debate. I am grateful to you, Mr. Speaker, for your generosity.
§ Mr. Speaker
The hon. Member has misunderstood. Noise is in order but the circumstances of the ending of Friday's debate are not in order.
§ Mr. Onslow
I am afraid that I did misunderstand you, Mr. Speaker, but that paragraph will join my collection of speeches never delivered.
I turn now to labour relations, a matter which was not mentioned by the Minister but which is relevant in the immediate context of the operation of B.E.A. and, slightly more obviously, of B.O.A.C. We have an unpleasant threat of another Easter strike. I very much hope it will not happen. The travelling public resents being held to ransom in this way. Any trade unionist misguided enough to take it out of the travelling public on bank holiday cannot expect to receive much sympathy or support.
On a more general matter, I ask the Minister to give us a short comment on the Pearson Report of the Court of Inquiry into the dispute between B.O.A.C. and the British Air Line Pilots Association, which deals tangentially with B.E.A. particularly in the third of the conclusions 691 of the inquiry, on page 36 of the Report, which reads as follows:There is strong dissatisfaction among the pilots about access to the level of decision, about status and about consultation at the appropriate management level, and in our view there is some foundation for this dissatisfaction.That is founded on the full Report, paragraph 79 of which states:Something has gone wrong with the relations between the pilots and the management in the two corporations.We know and welcome the fact that B.A.L.P.A. have returned to the N.J.C. I hope the Minister can tell us that something has been done to restore the unfortunate breach in labour relations between pilots and employers. This is a matter of great importance to the travelling public, the pilots and the corporations. We have not had a reaction on this from the Government side, although I realise this is directly the responsibility of the Ministry of Labour and not that of the Minister himself.
May I comment briefly on two points made by the Minister? The House will be delighted to know that he has decided to publish the Air Safety Review. He has for some time been pressed to say how far it had gone, and we shall certainly want to debate it. Meanwhile considerable reassurance is to be derived from the conclusions he has outlined to us. There should be no further cause for the kind of alarmist comment which was set off by the unfortunately coincident crashes which took place last year.
When the Minister comes to consider the changes in the regulatory procedure, I would ask whether an increase in staff will be required. I assure him that, if it does, I shall not object. I had a Question down to him some time ago which showed that there had been an increase of 19 per cent. in passenger miles flown and an increase of three in the staff of the Air Safety Department. This suggests an imbalance which I hope can be rectified. I have also had correspondence with the Minister of State on the subject of type certification of pilots and I hope this matter can be tidied up when the regulatory procedure is being revised.
The Minister did not touch on accident inquiry procedure. I do not know if this was covered by the inquiry. The Minister of State will remember that we 692 had an adjournment debate about it, and he expressed certain uneasiness, which echoed my expressed uneasiness, about the procedures we have at the moment. He told us then that he did not have a ready answer. I am not pressing him to produce an answer out of his hat, but, the progress of the Stockport inquiry has to some extent underlined the uneasiness I expressed. Since this is still sub judice, I will say no more now than that the inquiry has taken a somewhat erratic course, and it is possible to conceive that it might have been conducted with greater expedition and at less expense if it had taken a somewhat different course at the outset.
The Minister ended his speech by giving a review of the export prospects of the industry, and these, as I am sure the House will agree, were highly creditable and most encouraging. They are a vindication to any Member of the House who is prepared to say, as I am, that our aircraft industry is one of our most important export industries, and that it has an enormous potential. The Government can help. The Government have helped and nobody is denying that the Government are helping now. Perhaps the Government will be expected to help more in the future.
The main credit still goes to the industry; so much for Plowden. The events of the past few years and the successes achieved by the British aircraft industry make the Plowden Report look even less convincing in retrospect than some of us felt it looked at the time it was produced. Anyone who believed there would be a major redeployment out of this industry into other sections of the British economy will be very surprised when the effects of these latest orders and the implementation of the Concorde project come to be felt. Perhaps the Ministry of Technology could be persuaded to drop their inquiry into redeployment from the aircraft industry and mount an inquiry about redeployment into the aircraft industry.
The only anxiety we can have is whether there will be adequate capacity for all the work now coming in, whether there will be adequate capacity at Rolls Royce to develop the RB207 engine for the airbus. One of the secrets of maintaining initiative in this field is to reinforce success. With the RB211 we have 693 had enormous success, which must be reinforced. Efforts must be concentrated on it. I have the uneasy suspicion that in the process, inevitably, Rolls Royce will not be able to devote the attention to the RB207 which might be needed for it to be ready in time to fulfil the airbus requirement which has been set upon it.
I end by re-emphasising what my hon. Friend said. Aviation is an expanding industry, in aircraft manufacture and in aircraft operation, and we on this side of the House believe it is one in which Britain has in the past held a leading rôle and must at all costs now retain it.
§ 7.29 p.m.
§ The Minister of State, Board of Trade (Mr. J. P. W. Mallalieu)
Several hon. Members have remarked that, for various reasons, the debate has been thinly attended. Certainly it has not been thin in content or in quality. If you will allow me to say so, Mr. Speaker, at least part of the credit for that lies in your own lap, because you have allowed us considerable freedom to discuss a wide variety of topics which are related to the Bill without being integral to it.
In those parts of the speeches which have been directed to the Bill, there has been general approval of its provisions. Speaking for myself, I found it extremely helpful to hear the wider aspects of aviation debated, and I shall make sure that the Edwards Committee is well seized of the points which have been raised today.
One or two of them were very much matters for that Committee. My hon. Friend the Member for Glasgow, Govan (Mr. Rankin) and the hon. Member for Belfast, East (Mr. McMaster) made some criticisms of the licensing system. That is very much in the sphere of the Edwards Committee and will be considered by it.
My hon. Friend also brought up what is an old subject in this House when he referred to the Highlands and Islands and the "losses" that B.E.A. suffers there. He asked about the prospects of a subsidy to cover the losses. It is extremely difficult, however, to say that these social service activities result in a loss. One sees a loss in the accounts, but what one does not see is the profits from inter-lining which may result from those activities. This, too, is a subject 694 which the Edwards Committee is considering at present.
Not for the first time, the hon. Member for Belfast, East complained a good deal, and again he referred to the A.T.L.B. and services to Belfast. B.E.A.'s licence contains no restriction on the number of flights which it can run between London and Belfast, and it is up to its commercial judgment to decide how many it shall run. However, it has not a monopoly on the route. B.U.A. runs services to Belfast from Gatwick. Its licence is a restrictive one, but it has an application in to the A.T.L.B. to have its frequencies increased. Of course, I cannot comment on the prospects of that application.
In what was a particularly helpful speech, the hon. Member for Woking (Mr. Onslow) mentioned the subject of noise. Although we have responsibility in the Board of Trade for helping to see that the airlines prosper, independents and public corporations alike, we have a direct obligation to the people underneath the glide paths and elsewhere who suffer from noise. In the course of years, we have taken a great many steps to mitigate what undoubtedly is a nuisance. Some of them, about a limitation on night flights, and so on, are just in mitigation.
The real means of combating noise clearly lies in engine design. A tremendous amount of research has been done already, with very fruitful results, into ways and means of getting quieter engines with silencers, suppressors, and so forth. The latest results have reduced what is known as jet roar so far that we are beginning to be annoyed by the compressor noise which was hidden by it. It is the ghastly whistle which jet engines have as aircraft come in to land. Research is going on into it both in private industry and in Government establishments.
Ever since the meeting of the International Noise Conference and the Wilson Committee, we have been in close discussion and negotiation with the United States and France about the possibility of bringing in some form of noise certification. With your permission, Mr. Speaker, I can tell hon. Members that the discussions have gone forward so fast and so successfully that we are now in a position to introduce legislation in 695 the House, subject to the one qualification that there is a slight difficulty about the propriety of adding a new Clause to a Bill which is going through its Second Reading. However, that is probably a matter which can be discussed fruitfully with the Opposition. So far as we are concerned, we hope to proceed with the legislation.
§ Mr. Onslow
If the hon. Gentleman is referring to the Civil Aviation Bill, that has gone through its Second Reading and now awaits Committal to a Standing Committee. I should be extremely interested to have discussions with him, however, to see how any obstacles might be ironed out.
§ Mr. Lubbock
Surely the suggestion is one for the House as a whole to consider and should not be left to the usual channels.
§ Mr. Mallalieu
That is a procedural point. Whether we should have a whole day's full-scale debate and whether or not it is proper, I would not know, but—
§ Mr. Mallalieu
In whatever form it comes, the legislation will initially and primarily be to do with the new generation of engines. We hope that it will be possible to reduce the noise in new engines by anything up to half that of existing ones. In addition, we have to consider engines which are now flying or in the pipeline. Obviously there are immense difficulties. If planes which still have plenty of service in them are grounded, questions of compensation may arise. But there may be other ways of doing it by still better silencers on existing engines or even by re-engineing in some way. Therefore, in the legislation that we propose to introduce by one means or another, we shall have power to deal with engines which already exist, though we may not necessarily be able to use them.
A good many hon. Members have referred to the increased landing charges. I was a little disturbed by the point put 696 by the hon. Member for Gloucestershire, South (Mr. Corfield) about consultation. The procedure is that the British Airports Authority normally would give six months' notice of any increase. That would permit time for consultations with and protest by all the airlines. It was not done in this case, but my right hon. Friend made sure that the proposed increase which the Authority wanted to make immediately was delayed for about two months.
There comes a point in my right hon. Friend's position as arbiter when he has to watch the interests of the airport authorities as well as those of the airlines, just as he has a mixed duty when it comes to aircraft noise. Though the Authority put forward its proposal for an increase mainly on the basis of its own finances, when my right hon. Friend was considering the proposal he had to consider also the national interest, and of course the national interest was very much concerned with the balance of payments side of the issue, and with getting foreign exchange.
The Authority's point of view is that although, on the face of it, its figures look pretty good, they are not nearly as good as they seem because of the work that the Authority is having to do. The last published figures represented a return on assets of about 12½ per cent. About 5 points of that 12½ per cent. come back to the Exchequer in terms of interest, and still more goes off in Corporation Tax. What is left is not a great deal with which to finance the developments which the Authority now faces. In the Board of Trade we are under constant pressure from Scottish Members, or at least from some of them, to do something about Turnhouse, to improve the facilities there, and to put in a new runway. This is only one of the many projects to which the Authority will have to contribute substantially in terms of finance.
The hon. Member for Gloucestershire, South quoted from the Bill and said that one part of it meant giving continuous subsidies within this figure of £10 million. My right hon. Friend explained that that was not the intention, and nor is it. There is no question of the deficit being written off. It will remain on the accounts, and can be extinguished only by later profits.
697 The hon. Member for Orpington (Mr. Lubbock) raised the question of the profits of the B.E.A. beyond this year and next. My right hon. Friend said that it looked as though the current loss would be about £3 million, and he was asked how much it would be in the following year. According to the present estimates, it will not be less than it will be in the current year. Beyond that I am not prepared to forecast.
My hon. Friend the Member for Bolton, East (Mr. Robert Howarth) raised a point about the possible purchase of foreign planes by a subsidiary of B.E.A., by B.K.S. We are aware of various proposals, and we are watching them with even more than our customary care.
I propose, now, to say a few words about the constitution of the B.E.A. fleet at the end of the period about which we are talking. It is virtually certain that the air bus will not be flying in the B.E.A. fleet at the end of 1973. Assuming that orders are placed for it—and I have every reason to assume that they will be—the air bus should come in shortly after then. In 1973 there will not be any air buses. but there will be 23 Trident 1s, 15 Trident 2;, on present estimates, 26 Trident 3s, or perhaps a few more, and 19 BAC111s. Those planes will mainly constitute the fleet. There may be older planes still in service, but I do not want to go into detail about that, first, because I do not know, and, secondly, because it might tend to prejudice the position of the B E.A. if by any chance the Corporation proposes to put them up for sale.
§ Mr. Lubbock
Will the hon. Gentleman deal with the B.E.A.'s plans for freight operations over this period?
§ Mr. Mallalieu
The proposal mentioned across the Floor of the House was to convert its Vanguards. So far five have been converted to freighters. When they are converted, they can take a pallet. According to the advice which we have received, these converted Vanguards do a freighter's job extremely effectively.
§ Mr. McMaster
What is the seating capacity of this Trident? Is it not small compared with existing Vanguards, and does not this mean that for the next four or five years the number of seats in the Trident 3B will be insufficient to meet the needs on domestic flights?
§ Mr. Mallalieu
I do not carry these figures in my head, though perhaps I should. They are about the same as the Vanguard, and there ought to be an increase with the stretched version. The hon. Gentleman is justified in saying that there is a gap between the size of these aircraft and the airbus.
Incidentally, I ought to thank the hon. Gentleman for his suggestion about land buses which he made to the Corporation. His idea was adopted, and has proved to be a good one.
Hon. Members have suggested that we should look again at the question of the BAC211. I shall not go into the old history about who was in favour of this plane and who was not. I think that the time has come to make a decision, and I believe that this is very much the view of the B.E.A. The Corporation is worried, not about the quality of either the Trident or the BAC211 compared with American planes, but about the delay in approval for it to go ahead and re-equip its fleet. It is this delay which, to a substantial extent, is likely to cause losses in coming years when the Corporation is in competition with other lines which have not been subjected to the same kind of delay.
The BAC211 is not the responsibility of the Board of Trade. It is much more the responsibility of the Ministry of Technology, but we should not hesitate to go back to that Ministry, and indeed to the Treasury, if we felt that after such a long delay it was in the best interests of the airline and of the country that we should go ahead with it, but I cannot at the moment hold out any hope about that.
§ Mr. Corfield
I see the difficulty. We do not want to make confusion worse confounded, but I think that it would be useful to have the true difference in the capital costs as it now exists, bearing in mind the effect of the Rolls Royce order on the launching costs of the engine.
§ Mr. Mallalieu
It would be difficult to give an exact estimate of what the cost of further delay would be—which would be an element in it—but I shall consider the point made by the hon. Gentleman.
My hon. Friend the Member for Glasgow, Govan mentioned the difficulties about Abbotsinch and Prestwick and was suggesting that the latter might 699 possibly be used as part of a bus service. The Airports Authority and Glasgow Corporation have come to a reasonable and firm understanding about the relationship of these two airports—that they are both going to be necessary and are complementary; that Prestwick is for long-haul traffic, primarily North Atlantic, and Abbotsinch is for medium and short-haul traffic. We hope that agreement will be maintained.
The hon. Gentleman the Member for Gloucestershire, South raised a question about inclusive tours and the cheaper fares for night flights. I think this is a good point. I do not know whether we can do something about it, but I will ask the Authority and my right hon. Friend to have a look at that and see if we can make some suggestions.
The hon. Gentleman the Member for Orpington also raised the question of B.E.A. and helicopters. The position is that B.E.A. are awaiting delivery of a fifth S.61 and this will join two of the other S.61s which are at present operating between Beccles and the North Sea drilling rigs. The Scilly Islands service, which lost money for several years, has broken even during the past year and will, of course, continue. B.E.A. had the idea of running a helicopter service between the three airports and this was dependent on their having a heliport somewhere around this part of London. I think that the whole House of Commons, and certainly the Board of Trade, looked on this prospect with a good deal of alarm, as did the G.L.C. also, and so far nothing more has been heard of that proposal.
On general aviation, there was a question as to whether it would be possible to take the light aircraft away from Heathrow and put them into Northolt. I should have thought that was a question of air traffic control. There might be difficulties, but I see the point and will look at it.
I think it is clearly the opinion of the House that this present Bill is one that we should pass, but of course it does not presume to deal with the whole position of B.E.A., still less with the position of civil aviation as a whole. In the course of the next 18 months, the Government will have to take some very 700 important decisions about the future course of civil aviation as a whole, and indeed of B.E.A., B.O.A.C. and the independents, and this we shall do in the light of the Edwards Report. One thing remains certain: that the network of air services built up and sustained by our main flag-carriers—B.O.A.C. and B.E.A.—will remain, and for that they are going to need the best aircraft, and preferably the best British aircraft, they can get. B.O.A.C. were looked after in the Air Corporations Act of 1966 and were set on a new and, I hope, a sure course. I am glad to say that under the chairmanship of Sir Giles Guthrie they have overcome their troubles. They are now making handsome profits and are paying worthwhile dividends, and I hope they will go on doing so. Now it is B.E.A.'s turn and the present Bill is just the start. It will enable the position to be held until we again come to Parliament with a fully considered and, I hope, agreed measure to put B.E.A. on the right track.
§ Mr. Rankin
My hon. Friend said that this was to hold the position until the time came "to put B.E.A. on the right track". What right track—financially or operationally?
§ Mr. Mallalieu
I mean mainly financially. The Air Corporations Act of 1966 dealt with B.O.A.C. finances and we must now proceed to deal with B.E.A. finances, probably on the same or similar lines.
Obviously Parliament will not wish to have presented to it a series of civil aviation Measures, each modifying the previous one. At the same time, I am sure we want to see implemented as early as possible the eventual financial agreement with B.E.A. I cannot forecast the course of events precisely, but I want to assure the House that it is not our intention to allow B.E.A. to run into a decline while waiting for Edwards. B.E.A. are themselves very much alive to the problems ahead and we shall expect them to put their own house in order and to earn the aid they receive.
In this connection, I was delighted to hear a tribute paid by an hon. Member to the way that B.E.A. are now turning to the idea of I.T. tours, and so on, and the drive they are putting into getting tourists from abroad to come to this country.
701 With the assurance that B.E.A.'s situation is not viewed with any complacency, either in B.E.A. or in the Board of Trade, and that we shall come back to Parliament with a considered measure of aid to B.E.A. as soon as that is practicable, I invite the House to give a Second Reading to this Bill. What is in the Bill has not proved particularly controversial. It is more what is not in the Bill that is the subject of controversy. However, I hope what I have said tonight and what my right hon. Friend said in opening will persuade everybody that this Bill is the right measure for us to adopt now as the first step towards setting B.E.A. on a sound course for the future.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Grey.]
§ Committee Tomorrow.