HC Deb 13 October 1975 vol 897 cc1096-106

2.41 a.m.

Mr. Les Huckfield (Nuneaton)

I am grateful for the opportunity even at this hour to raise what I and many of my hon. Friends consider to be a very important matter which ought to have the consideration of the House, namely, the direction which the Government's policy on civil aviation appears to be taking.

I believe that those of us who witnessed that veritable welter of ministerial statements that descended upon the House just before the Summer Recess might almost be forgiven if we almost missed the one that was made by my right hon. Friend the Secretary of State for Trade when he said that he was well on the way to a final decision, or at least to a fairly firm decision, as to the future of the two most important airlines serving this country, namely, British Airways and British Caledonian.

My right hon. Friend said in that statement that he was not in favour of the policy of dual designation—that is, having British Airways and British Caledonian both flying on the same routes—and I applaud him for saying that. However, he also said that British Caledonian, as a private enterprise carrier, has made a useful contribution. I and some of my hon. Friends have doubts about that.

Perhaps the most far reaching and significant thing that my right hon. Friend said was that he felt that there was scope for a sensible and fair exchange of routes between the two airlines. I have always been an opponent of the so-called second force airline. I have never been a proponent of the mixed economy in civil aviation. I opposed the formation of British Caledonian although its way was paved by a Labour Government. I still believe that we should have only one airline, namely, British Airways.

If we go back to the beginning of British Caledonian we are forced to remember that it was a Conservative Government who finally gave their blessing to the actual birth of this new airline in a rather dramatic way, whereby British Caledonian was given a send off of some £6 million-worth of British Airways routes.

Many hon. Members opposed at that time the transfer of these routes from British Airways to British Caledonian, and in fact, if my memory serves me aright, it was the policy of the Labour Party at that time to oppose that transfer of routes. Perhaps the most significant utterance of the then Conservative Minister responsible for aviation policy was that this transfer of routes from the public to the private sector was a once-for-all transfer. It was made fairly clear at that juncture that if British Caledonian could not manage on that transfer of routes, it would have to make up its own mind what to do about its future.

I remind my hon. Friend the Minister that the Labour Party at that time, and on several occasions since that time, made it clear to the House and the country that its policy was the transfer of those routes back to British Airways. In fact, we said that clearly and unequivocally both inside and outside this House.

My hon. Friend the Under-Secretary of State is a man whose integrity I respect, and I must tell him that I appear tonight in a spirit not of condemnation, but of deep concern. I recognise that he cannot give the House the final and ultimate judgment and decision of his right hon. Friend the Secretary of State as the review is still taking place, but I want to convey to him the concern of myself and several of my hon. Friends about the direction which that review now appears to be taking.

Even if this exchange of routes comes to pass and even if, as he may be tempted to say tonight, that exchange of routes may benefit both airlines, that exchange of routes represents one more piece or slice of financial assistance to British Caledonian which goes beyond the "once-for-all" declaration that was originally made when British Caledonian was set up. In other words, though it was a Conservative Minister who said that £6 million worth of route transfer to British Caledonian was a "once-for-all" transfer and was all that was to be available, here we have the rather worrying spectacle—I realise that my hon. Friend may still be in the position of presiding over the review—of a Labour Government appearing to condone or to be concerned with yet another transfer of routes to help that same private enterprise carrier.

Even if this exchange of routes goes through, will we be told that this again will be the last blood transfusion that British Caledonian will require? Will we be told that this, too, will be a "once-for-all" transfer? In fact, will we not be confronted with the same position in 12 months when British Caledonian will be coming back and perhaps another Secretary of State for Trade or another of my hon. Friends on the Front Bench will be saying that this is the last kind of transfer?

I am bound to say that many of us feel that a gradual cannibalisation of British Airways is taking place simply to keep alive the fledgling private enterprise carrier, British Caledonian. Perhaps some of the forecasts which have been made and some of the portents which have already been drawn look blacker than that.

Many of us are worried that ultimately we could see the dividing up of the world into spheres of operation along the same kind of lines as Air France and UTA being public and private carriers in their country, so that we end up with a situation where British Airways and British Caledonian divide the world up between themselves.

The reason for the existence of British Airways is not to share its routes with other carriers. I have always thought that British Airways should be the national flag carrier. It is a publicly-owned flag carrier, and it ought to remain so.

However, there is an even more serious consideration. I cannot think of an airline other than British Caledonian which has had more protection and assistance. Originally, when that airline was set up, it was given £6 million-worth of public routes as a kind of transfusion. In addition, the basic purpose of the Civil Aviation Act, particularly in Clause 3, was so that British Caledonian could be kept alive. On top of that we had that famous White Paper giving policy guidance to the Civil Aviation Authority which again said that British Caledonian had to be given priority in the assignation of new routes.

Yet we are again told, or so it appears, that despite all that assistance, despite the £6 million to get the airline off the ground, despite the Civil Aviation Act ensuring its continued existence, despite the White Paper guidance saying that it ought to have priority for new routes, British Caledonian still needs further assistance. How much more assistance and inducement is private enterprise to be given, particularly by a Labour Government, when it has so demonstrably failed in civil aviation policy?

I cannot help feeling that the House needs reminding—I do not think my hon. Friend needs that much reminding—that the Edwards Report on civil aviation policy was born at a time of completely different conditions from those which now face the country. When Edwards reported, there was a period of growth during which United Kingdom civil airlines saw about a 10 per cent. decrease increase in traffic. Last year, British airlines saw about 10 per cent. decrease in traffic, and some of the projections being made for the future are even more gloomy.

The whole background and context of civil aviation policy has changed since the issuance of the Edwards Report, and I say to my hon. Friend that, on reading between the lines, I am becoming concerned about what seems to be happening in this civil aviation policy review. It now seems that although the context in which the policies that were recommended by the Edwards Report has changed, we still seem to have the possibility that British Airways and British Caledonian may be asked to partition Central and East Africa and parts of South America between themselves.

In fact, it may even be that if this exchange of routes goes one way—and again I am reading between the lines—we shall have the situation that British Airways is asked to yield to British Caledonian routes in South America in exchange for routes in Africa. I do not believe that that kind of exchange could be beneficial to British Airways, because that would again deprive British Airways of the possibility of the worldwide coverage that it ought to have.

I am concerned to hear that one of the bargaining counters that British Caledonian appears to be using is that it might start using routes which it has been granted in the past but which until now it has never shown any sign of using What kind of a bargaining counter is this? Is it really part of the bargaining that is going on between the two airlines that British Caledonian is offering to put in the pot routes which it never intends to use? It seems to me that in the bargaining that is taking place many things could happen to the detriment of British Airways.

My hon. Friend knows that the birth of Caledonian Airways was due mainly to charter flights and charter services from the West Coast of America and the Far East. If British Airways has to bear the brunt of civil aviation regulations because it operates mainly scheduled services while British Caledonian does not have to bear the full weight of such regulations because it operates mainly charter flights, that again is something that bears unfairly on British Airways. If we are to have regulation of scheduled flights, there ought to be regulation of charter flights too because, once more, it seems that while British Caledonian will continue in comparative freedom with charter flights, British Airways will have to continue with the regulation of scheduled flights.

I recognise that my hon. Friend cannot give the House a final answer on this matter this evening. I recognise, too, that the civil aviation policy review is still proceeding apace. I want to convey my concern and that of the unions in civil aviation that a Labour Government seem to be flying in the face of a policy commitment. I know that my hon. Friend cannot yet pronounce on this policy. This party has never favoured a mixed economy in civil aviation and the whole direction in which the policy framework has been enunciated appears to be going further and further away from that policy commitment.

2.55 a.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

I am grateful to my hon. Friend the Member for Nuneaton (Mr. Huckfield) for this opportunity to enlarge on the thinking behind the statement of the Secretary of State for Trade on 29th July, when he announced his conclusions after reviewing civil aviation policy. I recognise that my hon. Friend has strongly-held and expert views on civil aviation, which he has expressed with his customary clarity, but if I were to follow him into discussing the current negotiations between British, Airways and British Caledonian, I should be in danger of frustrating their whole purpose, the achievement of a consensual and lasting approach to civil aviation problems. I am sure that he will forgive me if I do not go into too much detail. I recognise his concern. The problems he mentioned were well considered by my right hon. Friend and myself before the conclusions were announced to the House.

My hon. Friend has traced, with his considerable knowledge of the air transport industry, the course of events since the Edwards Committee's Report and the subsequent formation of British Caledonian Airways. The policies advocated by Edwards had the general support of both sides of the House, and this was underlined in the Labour Government's White Paper "Civil Aviation Policy" of 1969.

However, as we said then, the Government would not accept that the formation of a second force airline should be made conditional upon the transfer to it of a significant part of the Air Corporations' route networks. This was a view we maintained later when the Tory Government transferred certain routes to British Caledonian on its establishment, notably the trunk route to West Africa.

One aim of the review of civil aviation policy we announced last December and completed this summer was therefore to consider whether reversal of these route transfers would be consistent with preserving the stability of the United Kingdom industry and enabling it to acquire the largest possible share of the world market.

I should remind the House that there was another major reason for the Government's decision that a review of civil aviation policy was needed. This lay in the changes which have taken place in the air transport market since the Edwards recommendations were adopted, and to which my hon. Friend alluded in his remarks.

The Edwards recommendations were made against a background of optimistic forecasts that during the 1970s traffic carried by United Kingdom airlines would be doubling roughly every five years. However, the air transport industry, both in the United Kingdom and worldwide, has been hard hit by the oil crisis and general recession of the last two years. Since the autumn of 1973 not only has the previous growth in traffic been halted, but most sectors of the market have experienced a serious decline in demand.

It is only right to say that British air-lines have fared better in this difficult period than most of their international competitors. But British Airways, after making profits in the first two years since the merger of BOAC and BEA, made a loss of £9½ million in 1974–75—rather less than was originally forecast and that says much in tribute to the work of British Airways—and British Caledonian was obliged in November 1974 to make drastic cuts in its operations. In these changed economic circumstances it seemed necessary to consider whether the structure of the industry developed by civil aviation policy since Edwards still remained appropriate.

My right hon. Friend the Secretary of State for Trade announced the conclusions the Government had reached on the review in his statement last July. As he said then, it is difficult to draw final conclusions from the limited experience available of the advantages of maintaining two British scheduled carriers on a single international route, but it is clear that in the current and foreseeable airline operating environment there will be few, if any, routes on which we could hope to introduce a second United Kingdom carrier on terms which would enable both airlines to operate profitably, and which might enable us significantly to increase the British share of revenue on the route. Indeed, the experience of BCAL on the North Atlantic routes shows just how difficult it is for a second United Kingdom airline to challenge successfully the position of established carriers on that kind of route. One might cast some doubt upon the wisdom of British Caledonian in embarking upon that in the first place.

The Government reached the conclusion, therefore, that it no longer remains in the national interest to seek to have more than one British carrier serving any given long-haul scheduled route. For the foreseeable future it will be our policy not to license more than one British carrier on such routes. Nevertheless, after careful consideration of the evidence produced by the review we believe that it remains in the interest of United Kingdom civil aviation as a whole—it is in that respect that we have to consider it—that British Caledonian should continue as a major scheduled carrier and as a second centre of airline expertise.

It is in that respect that I have to differ from the conclusions drawn by my hon. Friend. I know perfectly well that he and some others of my hon. Friends believe that it should have been the Government's policy to absorb British Caledonian into British Airways one way or another. A number of choices were avail- able. However, the choice between two British airlines is valued by many users of services on a number of domestic and European routes, and as British Caledonian is the major scheduled operator from Gatwick, which will in any case need to be developed rapidly as part of the Government's national airport stategy, it is right to point out that the consumer has a choice between two London airports on many routes.

A major factor which weighed extremely heavily in our considerations was the future of the 5,000 or so employees of British Caledonian at Gatwick. This is not a point to which my hon. friend alluded, although I know that he is not oblivious of this factor.

Nationalisation of British Caledonian would inevitably have been followed by its absorption into British Airways. This would have led both to dislocation of scheduled services from Gatwick and unemployment among former British Caledonian employees. Indeed, one cannot additionally fail to consider the consequential unemployment that might have followed a decline in the use of Gatwick as a result of the demise of British Caledonian.

The Government believe that there is still scope for an independent British Caledonian, and indeed the airline's staff were anxious to retain its separate identity. Although it is not within the Government's power to guarantee British Caledonian's future, in the relatively brief period of its existence it has made a worthwhile contribution to British civil aviation and the Government believe that it is right to take such action as is open to them to enable the airline to continue as a successful operator, but we do not intend to bolster British Caledonian at the expense of British Airways. We do not intend to cannibalise British Airways' route network to benefit British Caledonian.

I do not think that the parallel with Air France and UTA is any guide to the Government's intention. The situation there was quite different historically and in respect of a number of matters, and it is not our intention to pursue similar policies to those prevailing in France.

We intend that BCAL should have a sphere of influence for its long-haul scheduled services based largely on its existing West African and South American operations. This sphere of influence, and that of British Airways, will be consolidated by a limited exchange of routes between the two which, it is hoped, will prove of mutual advantage to both, and which will be both reasonably balanced and operationally sensible. I emphasise that the exchange of routes is to be a limited one. It is an exchange of routes, not a give-away, as happened under the Tory Government in a manner which merited the condemnation of the Labour Party and which I believe to this day was utterly wrong.

I have indicated that I cannot say very much about the route rationalisation talks, but what is aimed at is that we should have a relationship with British Airways that will lead to closer co-operation between the two and, therefore, will lead to an increase in the value of the routes as far as the United Kingdom as a whole is concerned. We believe that the policy outlined by my right hon. Friend will provide British civil aviation with the right foundation from which both to meet the current pressures faced by the industry and to employ fully the opportunities which will again arise in the future when we put the present recession behind us.

Our intention has been to make changes in policy only where these are clearly needed. It is our aim to produce a policy framework for the industry which will command general support and, indeed, I hope the support also of my hon. Friends in due course when they see how the route rationalisation talks have worked out. We want the industry to be able to plan ahead for the long term with confidence in the stability of policy, which we believe is a vital ingredient of success.

It will be necessary in the new Session for revised policy guidance for the Civil Aviation Authority to be brought before the House for approval. My right hon. Friend has already undertaken that there will be a White Paper explaining the Government's proposals. There will, therefore, be a further opportunity for debate of this important subject. At that stage the negotiations which are currently going on may well have reached fruition. I hope that will be so.

I bear very well in mind the observations made by my right hon. Friend in the form perhaps of a shot across the bows, but I urge him to believe that what we are seeking to do is to work out a rationalisation policy in the current circumstances which prevail in the aviation industry of this country. He has criticised us for departing from previous policy which was laid down both when we were in Government and in Opposition. Circumstances have changed remarkably since that time. I stress that we have to bear in mind the employment prospects of thousands of people, not only those who are employed by British Caledonian but those who are heavily dependent on British Caledonian. It would not have been right for us to have ignored the strong representations made by working people who were faced by the prospect of a close-down of British Caledonian or its absorption into British Airways. These are crucial factors which I am sure we are right to take fully into account.

Question put and agreed to.

Adjourned accordingly at nine minutes past Three o'clock a.m.