§ 10.11 p.m.
§ The Minister of State, Board of Trade (Mr. Goronwy Roberts)
I beg to move,That the British Overseas Airways Corporation (Borrowing Powers) Order 1969, a draft of which was laid before this House on 17th November, be approved.I hope it will be helpful to the House if I address myself now to the terms and purposes of the Order, and, at the end of the debate, to seek the permission of the House and of yourself, Mr. Speaker, to speak again briefly, when I will endeavour to clarify any points that may have arisen during the debate.
Hon. Members will see from the Explanatory Note on the draft Order that the aggregate amount outstanding in respect of the principal of any moneys borrowed or deemed to have been borrowed by B.O.A.C. (except moneys borrowed to redeem stock or pay off loans) and of sums paid to the Corporation by way of public dividend capital, is limited by Section 16(1) of the Air Corporations Act 1967 to £90 million or such greater sum not exceeding £120 million as the Board of Trade may by Order specify. This Order specifies the sum of £120 million.
Hon. Members will naturally wish me to explain how B.O.A.C. has spent the money it has raised so far, and why an extension of the limit by £30 million is now sought. The limits of £90 million and £120 million were settled during the passage of the Air Corporations Act 1966, which provided for B.O.A.C.'s capital reconstruction. The reconstruction took the form of reducing the Corporation's capital liabilities from £176 million to £66 million, which was divided into £31 million of loan capital and £35 million of public dividend capital, all deemed to have been taken up on 1st April 1965. So on that date, the sum of £66 million reckoned against the limit of £90 million in the Act.
Since then, hon. Members will be aware that B.O.A.C. has achieved great success in an intensely competitive international environment. Between April, 1965, and March, 1969, total traffic carried by B.O.A.C. on scheduled services increased by 31 per cent. Profits after payment of interest over the period 374 amounted in total to some £76 million, from which dividends totalling just over £31 million have been paid to the Exchequer, and £45 million has been put to reserves. This is a splendid achievement by any standard and I am sure the House will wish me to congratulate all in B.O.A.C. who have contributed to this signal success.
One consequence of this fine performance is that B.O.A.C. has had no need to draw on Government funds, by way either of loans or of public dividend capital, since early in 1965. All B.O.A.C.'s capital expenditure in sterling since then has been financed from its own resources; including progress and delivery payments amounting to £30 million on Super VC.10 aircraft and spares, investment of about £17 million in buildings and £14 million on engineering plant and commercial equipment, including £8 million on the Boadicea Computer complex. Furthermore, B.O.A.C. has repaid £12.7 million off the £31 million loan capital deemed to have been borrowed from the Government under the 1966 Act.
In accordance with the Government's policy of conserving official dollars, all B.O.A.C.'s borrowings since 1965 have been in the form of foreign currency loans—in dollars or Swiss francs—negotiated with banks and other agencies in the United States, with Swiss banks, and with a Canadian bank. The money has been used to finance aircraft purchases in the United States, mainly progress and delivery payments on Boeing 747 and 707/336C aircraft, and to meet expenditure on capital projects overseas, such as airport buildings, ground handling equipment and sales shops.
§ Mr. Eric Lubbock (Orpington)
While on the subject of aircraft purchases that have been made during this period, can the Minister tell the House how many Boeing 336C aircraft the Corporation has purchased and how this compares with the estimated capacity required in 1964 by the Corporation?
§ Mr. Roberts
I shall be glad to take note of that point later in the debate. It requires a little handling, as the hon. Gentleman will no doubt agree.
To continue the analysis of the expenditure engaged in by B.O.A.C., contracts for B.O.A.C.'s twelve Boeing 747 375 aircraft were placed between September, 1966, and December, 1968. Deliveries are due to begin next April.
The House was told of the Government's approval in August, 1966, to the purchase of six of these aircraft, in November, 1967, to the purchase of a further five and a year later to the purchase of a twelfth. B.O.A.C. was asked to finance all but 20 per cent. of the cost of the first six aircraft by foreign currency loans in order to avoid drawing on official dollars. When my right hon. Friend, then the President of the Board of Trade, announced approval to the second batch in November, 1967, he said that the whole of the dollar expenditure involved was to be financed by B.O.A.C. through overseas borrowings, and went on to say thatthese borrowings may eventually necessitate an increase in the present statutory limits applicable to B.O.A.C. under Section 16 of the Air Corporations Act 1967. At the appropriate time the House will be asked to approve the increase."—[OFFICIAL REPORT, 16th November, 1967; Vol. 754, c. 182.]The four Boeing 707/336C aircraft, the purchase of which was announced to this House in August, 1966, May, 1967, and May of this year, are likewise to be financed by overseas borrowings.
B.O.A.C. has so far negotiated terms for foreign currency loans amounting to £89.7 million. A further £50.9 million will need to be raised to meet payments due between October, 1970, and October, 1972, on aircraft already ordered. So far B.O.A.C. has taken up only a part of the loans negotiated; and for some it is required to keep on deposit with the lenders a certain proportion of each loan in sterling.
After setting these compensating deposits against loans taken up, the balance currently outstanding amounts to £30.8 million. This sum, together with the £35 million public dividend capital provided for under the Air Corporations Act 1966, and the balance of £18.3 million outstanding from the Government loan deemed to have been made on 1st April, 1965—that was the loan for £31 million which I mentioned previously—brings the total amount counting against the statutory limit to roughly £84 million.
The existing limit of £90 million will allow B.O.A.C. to take up a further £6 376 million of foreign currency loans, plus a further £1½ million when B.O.A.C. repay an instalment of roughly this amount at the end of this month off its loan from the Government. A sum of about £7½ million is due to be paid in the next two months in further progress payments on Boeing 747s and on associated spares, so the limit is likely to be reached early in the New Year, about mid-February I should expect. Thereafter, borrowings of £15 million will be required to finance delivery payments on the first three of these aircraft during April and May together with £4.4 million on delivery of two Boeing 707/336C aircraft. By the summer of 1970 there will also be requirements for further aircraft progress payments and payments for spares amounting to a further £10 million. These three items make a total of £29½ million so that the additional £30 million allowed by the Order is all expected to be taken up by that time.
It will be necessary to introduce a Bill for enactment by next summer to increase borrowing powers beyond the £120 million limit so that dollar expenditure on the purchase of aircraft can continue to be financed from foreign currency loans.
§ 10.22 p.m.
§ Mr. Cranley Onslow (Woking)
I have no wish to detain the House for long at this time of night, although it is rather a shame that this occasion, at this relatively late hour, is the first opportunity that we have had for a long time to debate the affairs of B.O.A.C. Our time tonight is limited. We are in a transitional situation because we know that legislation is impending which will have a radical bearing on the whole situation of the Corporations and of the aviation industry. Although there are many points which might, with your indulgence, Mr. Speaker, be brought within the compass of order, I think that it would be a mistake to attempt to anticipate matters on which we can expand at greater length when we debate the White Paper. I intend, therefore, to be original and to stick to the Order, and to be dull by talking mainly about money. This is not something which comes naturally to me, but I hope to make a fist of it.
377 I understand the Minister to have reminded us that under the 1966 Act B.O.A C. was set up with liabilities in the shape of £31 million deemed to have been loaned to it by the Board of Trade at the useful rate of interest of 4 per cent.—those were the days!—and £35 million: of what is called occasionally public dividend, or Treasury equity capital, but which ought really in the interests of accuracy to be known as variable interest Government loan. Now its liabilities are composed of about £18 million of Board of Trade 4 per cent. Loan—12.7 per cent. of the loan having been extinguished in the interval—a variable interest Government loan amounting to a total of £50 million—the accretion over the original £35 million having come from the capitalisation of £15 million from reserves—and about £30 million in foreign currency loans at rates of interest of which I do not believe we have ever been informed. This gives a total liability of £98 million, of which £15 million does not count against the borrowing powers limit because it represents capitalization for reserve under Section 14(3)(b) of the Act.
I have three questions to put to the Minister arising from that. The House might like to know what policy has been and is being adopted regarding the replacement of the remainder of the £31 million notional Board of Trade loan. Are there any rules governing this? Is repayment being accelerated or deferred and what in general is the anticipated date by which the whole of that will have been paid off?
What is the policy with regard to the variable interest Government loan? Is it the intention that the total of this should be increased? I imagine that this is not the case, because as far as I can tee the foreign currency borrowing commitments now in prospect will consume the whole of the limit of £120 million. It is perfectly clear from the most recent report of B.O.A.C. that it will go beyond it, if realised to the full. On page 6 of the report the Corporation is shown to have arranged loans of 200 million dollars already.
We can see from the accounts on page 67 that it had, when the accounts were prepared, taken up 42 million dollars of that provision and this total 378 must now have risen. If we take that figure it leaves 65 million dollars which it clearly needed. That, taken with the £75 million borrowing shown in the accounts, goes well over the top of the limit. I understood the Minister to say that this means that the powers which we are giving the Government tonight will be adequate for another six months. That is not particularly surprising—that we may have been overtaken by events—when we consider that the original figure was plucked out of the air in 1964–65, when it was probably rather difficult for anyone to foresee precisely how the borrowing pattern should go.
Of the money which B.O.A.C. will thus be empowered to borrow, most I gather will go on delivery payments of 747s. I imagine that an element must go on payments for the 707/336s. It was not clear whether there were to be more than the four which the House has been told have been ordered. Above and beyond that, I suppose that some must go on hatel buildings overseas, although I believe that the new terminal at Kennedy Airport, New York, has been financed on a different basis and does not count against these loans.
Not surprisingly, there is no provision in the borrowing powers which would take account of Concorde purchases. That is something we must come to later. Clearly the needs of B.O.A.C. for capital will be considerable. The White Paper on public expenditure makes this clear. We can see there that the forecast is that it will have capital expenditure in 1969–70 of £51 million, in 1970–71 of £84.5 million and in 1971–72 £70.7 million. Paragraph 7 at page 60 makes it clear that 1973–74 will see its expenditure peaking again. It is as well we should remind ourselves of the dimension of financing which a modern aviation industry involves.
I do not find the Explanatory Note to this Order particularly explanatory. It tells me nothing I have not already gathered from reading the Order. I would like to make the suggestion that by way of innovation it would be helpful on future occasions if the Minister's speech could be published in advance, in the form of an Explanatory Memorandum. It would save a great deal of Parliamentary time, and I am perfectly 379 serious about it. The background to the Order would be before us in black and white and the debate could take place with all the information available. I make this suggestion with no discourtesy to the Minister, for it would improve the quality of debate and provide a little more time for speeches.
We are bound to legislate on this subject again. The Minister might, therefore, consider the desirability of not placing a ceiling in legislation of this kind. Instead, a clause could empower increases to be voted on a proportionate basis. In other words, an increase in the borrowing powers of, say, 10 per cent. on each occasion might be obtainable by Order and there would not necessarily be a ceiling. Further borrowing is likely to occur and there seems no need for new legislation every year, a pattern which has prevailed since I had the privilege of first coming to this place. If a system which allowed a request to be made for an increase of, say, 10 per cent. on—
§ Mr. Speaker
Order. I appreciate that the hon. Gentleman is striving to keep in order, but I remind him that we cannot amend the Order.
§ Mr. Onslow
I am seeking to improve future Orders. I have said enough to show that we could obtain closer supervision, and I hope that the Minister will consider my suggestion.
Given the importance, which we recognise, of maintaining healthy finances in this sector of endeavour in which B.O.A.C. has done so well, and appreciating the vast sums involved, do we really need the approval of the House for additional borrowing on each occasion? Should not B.O.A.C. go to the money market like any other business? As I would be out of order in developing this theme, I will leave it at that, in the hope that we may return to this suggestion on another occasion.
I echo what the Minister said about B.O.A.C. and I look forward to a longer and more detailed debate of these matters on another occasion at an earlier hour. In the meantime, I am happy to inform the hon. Gentleman that he and I will not fall out tonight.
§ 10.30 p.m.
§ Mr. Leslie Huckfield (Nuneaton)
Like the hon. Member for Woking (Mr. Onslow), I will have to restrain myself to keep within the bounds of order imposed by this Instrument.
§ Mr. Huckfield
Studying the profit figures which the Minister gave, I, too, agree that since 1964 a substantial improvement has been made in B.O.A.C.'s overall financial position. It was in 1964 that B.O.A.C. recorded a deficit of £80 million. Turning a deficit of that magnitude into a profit of £21 million in the last recorded financial year has been no mean achievement.
Like the hon. Gentleman, I have been trying to fit into the context of the Order borrowing powers of a much vaster magnitude that I know the Corporation will require in future. It has been estimated that between now and 1978 B.O.A.C. will have a total capital requirement of about £680 million. I therefore agree that a change in the present procedure—of regularly coming to the House for increases—is needed.
We are, after all, in an age when to equip B.O.A.C. with just a fleet of Jumbos, 747s, will cost possibly £159 million. Of the £680 million to which I referred, it is estimated that at least £545 million will be required for aircraft, including the £386 million until 1978 for the Concorde.
When one re-examines the previous purchasing policies of the corporation, one is led to conclude more and more that with each generation of jet aircraft one is not replacing like with like. It is a policy of replacing one generation with a rather different generation. This is why I think this Order is so germane, although only for such a short period of time.
When B.O.A.C. equipped itself with a fleet of DC7s, the total purchase price was £30 million, and 32 Britannias cost £42 million. The 18 Comet IVs cost—
§ Mr. Speaker
Order. With respect, they cannot all be provided out of the £30 million in this Order. The hon. Gentleman must keep to the Order.
§ Mr. Huckfield
With respect, Mr. Speaker, I was trying to say that the magnitude of the finance which had been predetermined in the Order was a great deal larger than the amount of finance we had envisaged before. The point I was about to make was that it is therefore very vital that B.O.A.C. should be much more accurate in some of its depreciation forecasts and writing-down provisions and some of its market and revenue forecasts than in the past.
Some of the money made available under the Order is to go to assist B.O.A.C. by the purchase of Boeing 747s. When we talk of equipping the corporation with such aircraft, we are at the same time talking of every other major world airline making the same kind of calculation. I therefore hope that my right hon. Friend can tell us something of the detailed market analysis that B.O.A.C. has made in respect of the requirements for these aircraft. That information is very relevant to the Order.
What is also very relevant is the Government's policy towards some of the corporation's recent applications for routes on some services. We are told of the number of Jumbo 747s which will be purchased with the money made available by the Order, and we are told that they will fly on the North Atlantic route, over which we have already had some controversy and dispute recently engendered by the managing director of B.O.A.C. with regard to the Bermuda Agreement. One then wonders whether the Government ought not to be a great deal clearer about their policy for the corporation in respect of that agreement.
It seems to me now that the House ought to have, and the corporation certainly ought to have, at the same time as this Order a very much more definite statement of my right hon. Friend's Department's intentions with regard to the Bermuda Agreement, and the recent violations of it.
§ Mr. Huckfield
Again, Mr. Speaker, the point I was trying to make was that the viability of the corporation and the marketing potential of these aircraft will be very much affected by Government 382 policy with regard to transatlantic flights.
The type of policy which will be pursued by B.O.A.C. and B.E.A. and their capital requirements are also very relevant at this point. When one considers that we are now approaching the stage where the capital requirements of the two corporations are beginning to fit more and more into the pattern where each will have to receive a certain amount of Government assistance or a large amount of foreign borrowing, one wonders whether this kind of Order ought not to be made to bring the two corporations much more closely together.
It is proved that with the load factor which B.O.A.C. has achieved, the kind of aircraft purchasing it has followed since 1964 can be justified up to the present, but we are now getting to the stage of a brand new generation of aircraft purchasing policies. Since 1961 we have been living in an era when B.O.A.C. could count on replacing the Boeing 707 and the D.C.B. The kind of purchasing policy it will have to pursue starting with this Order will be one where its basic aircraft requirements will be a split demand, one part being fulfilled by the Boeing 747 and the other fulfilled supersonically, we hope by Concorde.
Bearing in mind this split demand, although I heartily support this Order I hope that we shall have much more accuracy in market forecasting and more adaptability to see that load factors are maintained and that there is a much more viable B.O.A.C.
§ 10.40 p.m.
§ Mr. Eric Lubbock (Orpington)
I join with the hon. Members who have spoken in congratulating B.O.A.C. on its very much better profit performance in the last five years than prior to 1964, albeit that that is partly due to the capital reorganisation effected under the 1966 Act by which £110 million was written off so that the corporation will not have to bear interest charges on that money in future.
Looking back over those five years, we would be too optimistic in thinking that it can be maintained over the period covered by this Order and into the seventies. As the chairman said in his 383 newsletter, although B.O.A.C. made a profit of £12½ million in the first half of this year, this does not indicate that the level of over £20 million achieved in the last financial year as a whole can be maintained in 1969–70. Perhaps when he replies to the debate, the Parliamentary Secretary will say a little about this because it is relevant in the sense that the higher the profits in 1969–70, the later is the point when these borrowing powers will be exhausted. I could not reconcile the £84 million which he said was the total amount outstanding against the statutory limit at the moment with the commitments which he mentioned up to the middle of next year and on the other side of the equation the profits plus depreciation which the corporation could expect in that period.
I rather agree with the hon. Member for Woking (Mr. Onslow), who said that on occasions such as this when we are debating rather complicated financial aspects of the corporation's management, it would he extremely useful if the House had the figures which the Minister was to use in his speech set out in the Explanatory Memorandum beforehand. Then he could deal with the policy issues and we could have the figures before us and see whether we accepted the views of the Government. Perhaps the hon. Gentleman will bear that in mind. In default of having such a paper before us, I hope that he can say how he expects the corporation's profit plus depreciation to move during the 12 months up to the exhaustion of these borrowing powers.
I was rather alarmed at the rapidity with which this extra £30 million is to disappear. I understood that we still have £6 million left against the old limit of £90 million and the Parliamentary Secretary said that at the beginning of next year the additional £30 million will have been swallowed up by these payments, the £15 million required for the 747, £4.4 million for the 336 and £10 million for spares. In its annual report the corporation boasted about its forecast in 1964 of the needs of its fleet to meet its operational requirements. It pointed out that with the three V.C.10s which remained to be delivered at that time it would have exactly the fleet foreshadowed 384 in 1964, in spite of the extra forecast traffic and expansion of route traffic dealt with elsewhere in the report. The corporation does not repeat this statement in 1969, because it has already had two Boeing 336s, and I think that the right hon. Gentleman said that there were another two still on order, making four, which are additional to the corporation's forecasts in 1964.
In that debate I predicted that the corporation would become short of capacity and would need to invest more money than it had planned before the 1970 date to which those figures referred. It is easy to be wise after the event, but I can at least say to the right hon. Gentleman that if Sir Giles Guthrie had listened to the warning that I then gave him, he would not have cancelled all the VC10s and he would not have been so short of capacity as he is now.
It is not an adequate defence for the corporation to say, as it does, that it is something of a triumph to have achieved an expansion of its turnover with the same fleet by having very high aircraft utilisation. This is not always the answer. It might have been better to have additional aircraft in the fleet to ensure a greater degree of reliability, something which all airlines find is a very valuable selling point if they can maintain it. I am not sure that the corporation has followed the right policy by pushing up its utilisation to over 10 hours a day in the case of the Boeing 707s.
§ Mr. Peter Bessell (Bodmin)
Has my hon. Friend taken account of the fact that during the period in question from 1964 B.O.A.C. has had the misfortune to lose two 707s?
§ Mr. Lubbock
Yes, this is taken into account. Flight for 16th October, 1969, shows that B.O.A.C.'s present fleet consists of 12 VC10s, 17 Super VC10s, and 24 Boeing 707s of one kind or another—two more, in spite of the losses my hon. Friend mentions, than were predicted as being necessary by the end of 1969 in the corporation's forecasts of 1964. Perhaps the Minister of State will kindly verify the figures I have given and say how many of the 336s he mentioned additional to that forecast B.O.A.C. has in its fleet today.
The right hon. Gentleman said that £15 million is earmarked for payment on 385 delivery of the 747s, which he said was scheduled for early next year. Originally B.O.A.C. was supposed to be getting these aircraft in February, 1970, but deliveries to all airlines have had to be put back as a result of defects in the engine, about which we are all very sorry to learn. Perhaps it hurts B.O.A.C. less than it hurts some other airlines, particularly Pan American, which will not have the advantage of being first in the field by as many months as it had hoped. From B.O.A.C.'s point of view it may not be a bad thing, because the aircraft will, I hope, come into operation in time for the beginning of its summer season.
Can the Minister of State assure me that the difficulties Pratt and Whitney have had with the engines will not result in any deterioration in the aircraft's performance compared with the brochure? Some anixety has been expressed about this in the American journals, that perhaps the engine would be down on specific fuel consumption and that the payload range characteristics of the aircraft would be adversely affected as a result of the modifications which Pratt and Whitney have had to make.
Again, this may not be so relevant to B.O.A.C. as to some of the other customers, but there has been discussion in the United States whether there would be grounds for making claims against Boeing, although the fault was not Boeing's, for late delivery of the aircraft. I should be very grateful if the right hon. Gentleman would deal with these two points.
In conclusion, I am sure that we all wish B.O.A.C. well. The corporation is coming into an era which, as the hon. Member for Nuneaton (Mr. Leslie Huckfield) said, involves the most enormous, almost astronomical, capital expenditure programme but one which is designed to secure for Britain an increasing share in world air traffic and a very substantial income in the form of foreign exchange, particularly dollar exchange, which will be of great value to us.
§ 10.50 p.m.
§ Mr. Goronwy Roberts
If I may have the leave of the House to intervene once more, I wish to answer some of the points which have been raised during this useful debate.
386 I much appreciated and enjoyed the speech of the hon. Member for Woking (Mr. Onslow). The hon. Gentleman made several attractive suggestions about the form in which the Order should appear, including the suggestion that the Explanatory Note should be made somewhat more explanatory. I join with him in that criticism, and, though I may not be able to join with him immediately on the way to meet it, I recognise that it is a matter which all hon. Members with experience of Orders and how they are discussed would wish to consider.
The hon. Gentleman and the hon. Member for Orpington (Mr. Lubbock) suggested that where there is a statement to be made in explanation of an Order which contains a good deal of statistical matter which cannot be extensively explained without, perhaps, encroaching on the time of other hon. Members, there might be some way by which such material could be made available to the House in conjunction with the Order. I do not know whether this can be done, but certainly that, too, is a substantial point which those concerned with the organisation of business may well take up.
The hon. Member for Woking spoke of the coming legislation and the possibility of a debate on the White Paper. It is not for me to give guarantees about it, but I am sure that it is the desire of the House that there should, if at all possible, be a proper debate on the White Paper, so perhaps I may be forgiven if I do not comment now on what one might call the White Paper points which have been raised tonight.
The honourable Gentleman suggested that the constant increases in statutory provision for borrowing—not confined to civil aviation—might well be looked at in the context of what kind of statutory provision we need and how to define it. He threw out the suggestion that it could be done in a proportionate way. I do not know how one could relate that to the needs of public corporations. I imagine that it could be done, and I should be interested to discuss it further.
I make no comment about the argument that B.O.A.C. should go to the market. There are two strong views about that—indeed, more than two views 387 —and it would take too long to discuss them tonight.
Next, the hon. Member for Woking raised the question of public dividend capital, which he tended to describe as a loan. It is not a loan. It is not redeemable.
§ Mr. Roberts
It is a matter for decision whether it is carried on or not, but per se it is not a loan.
I was asked when the £31 million loan was repayable. It is repayable over 11 years from 1965, and will notionally be extinguished by 1976. Consideration has been given to accelerating that rate of redemption, but we have thought it advisable to defer decision till plans for the new airways board under the White Paper have been further advanced. This will form part of the decisions reached under the White Paper, and embodied in the new legislation which we hope to present to the House, as my right hon. Friend said when he introduced the White Paper, perhaps in April.
B.O.A.C.'s passenger terminal at Kennedy Airport has been acquired under a leasing arrangement, and no capital expenditure is involved.
It is right, as several hon. Members said, that we should remind ourselves on these occasions of the immensity of the capital needs of this major industry. My hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield) gave figures about the need in a certain time scale which do not accord with other figures in other time scales. Substantial sums will be needed by the public corporations and even more in the industry itself between now and 1980 to carry forward this industry in the way that it should be carried forward.
My hon. Friend also mentioned detailed market analysis. I can reassure him here. B.O.A.C. makes a thorough analysis of what is a changing situation in regard not only to markets but to variables like load factors, seasonal and otherwise, and different routes. B.O.A.C., like other airlines, is properly alive to the need for proper minute analysis so as to be that much more able to frame future policy.
388 I cannot give the hon. Member for Orpington complete clarification about the sums with which I have been struggling over the last few hours. No doubt reading the OFFICIAL REPORT will make this much clearer. Without going through this rather complicated calculation, which gives me the figure £84.1 million—although the hon. Gentleman did not think that the steps which I described should lead to that figure—I can assure him that when we have counted the various compensations and provisions and set them in this rather complicated way one against another, we do reach the figure I gave.
The hon. Member also mentioned the Boeing 707/336Cs. B.O.A.C. has ordered eight. These orders have been approved. It also wishes to order two 707/336Bs. The point of the hon. Member for Bodmin (Mr. Bessell) is relevant—that it was unlucky in regard to two. Its desire to order the further two is being considered urgently.
B.O.A.C. has regard to the possibility of the trans-Siberian routes. These discussions are proceeding in Moscow. I say this not without a certain measure of hope that some success may attend them. It is never wise to prognosticate too hopefully in such an area, but I think that we may allow ourselves just a little confidence on this point.
The hon. Member for Orpington also went pretty deep into the process of borrowing in order to engage in dollar expenditure without drawing on official resources. B.O.A.C. could use internal resources of profits and depreciation to meet dollar expenditure on aircraft, but Government policy is to dissuade too much drawing on official dollars and convertible currency and, therefore, to encourage the method of foreign loans. I do not think we should be too critical of this process. There are views about it. This has served the industry and the country well so far, and I personally would not favour a departure from this policy at present.
There are a number of other financial points—
§ Mr. Lubbock
I did not want to imply that B.O.A.C. would use profits and depreciation to buy dollars and thereby finance the 707, but what could happen is that profits and depreciation could be 389 used to accelerate repayment of the £30.8 million owed to the Board of Trade and for it still to borrow dollars and be able to remain within its limits.
§ Mr. Roberts
It could happen that way. This is not our policy as of now but that process could happen and there would be nothing wrong with it.
It so happens that the preferable process is as I have described it, but I would not quarrel with the hon. Gentleman about the feasibility of the process he has described.
On the question of anticipating the movement of profits and what net depreciation and net assets will be next year, I cannot tell the hon. Member much more than this: he is right in expecting that over the next few years there may be a diminution in the net profitability for a number of reasons, some of which he gave. However, for the next year the success which has attended B.O.A.C.'s efforts in the first six months of this year—and a copy of a statement of what happened has been placed in the Library—should carry B.O.A.C. to a year comparably successful with 1968. How far it will improve on that I could not say, but at least I think it will come up to the standard of performance of 1968.
As everybody has said in this debate, B.O.A..C. is certainly to be congratulated. This is a highly competitive business in which it is engaged. There are complex questions of airline fares, and all this will bear hardly on its performance. So far, on the performance of the last four to five years, the House may be proud of what B.O.A.C. has done to serve the nation, and I feel a certain confidence of what it will do in future.
§ Question put and agreed to.
That the British Overseas Airways Corporation (Borowing Powers) Order 1969, a draft of which was laid before this House on 17th November, be approved.