CIVIL AVIATION POLICY

HC Deb 11 February 1976 vol 905 cc442-52

The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore)

With permission, I will now make a further statement about civil aviation policy.

Last July, following my review of civil aviation policy, I told the House that I had concluded it was no longer in the interests of our aviation industry or the economy generally to allow competition between British airlines on long-haul scheduled routes. Accordingly it would in future be our general policy not to allow more than one British airline to be licensed on any given long-haul route. Instead British Airways and British Caledonian Airways would have separate spheres of interest for their long-haul scheduled services.

Since my last statement there has been a series of detailed discussions between BA, BCAL, the Civil Aviation Authority and myself about how the airlines' existing route networks could best be adjusted so as to consolidate their respective spheres of interest. I have now decided that in Africa, where BA and BCAL at present operate competing services, East Africa and the Seychelles should in future be in BA's sphere of interest and Central Africa, including Zambia, in BCAL's. This exchange should enable both airlines to achieve considerable cost savings through deploying their resources more effectively.

Outside Africa, BCAL will give up the licences to operate scheduled services to New York, Los Angeles, Boston, Toronto and Singapore via Bahrain, which it holds but is not at present exercising. It will also end the exempt charter service it operates to Singapore. However, it will retain the right to serve Atlanta and Houston—a route for which BA does not hold a licence—and will be the sole British airline to operate this new route when it becomes available. In addition, BCAL's sphere of interest in South America will be extended and it will take over services to Venezuela, Colombia and Peru from BA.

In making this rearrangement of routes, my objectives have been, first, to reinforce the competitive strength of British airlines in the fierce international environment in which they operate; secondly, to arrive at a result which is as fair as possible to both airlines; thirdly, to safeguard employment in the airline industry; and finally, to produce a settlement that would last for a substantial period ahead.

I believe that the decisions I have taken go a long way towards meeting these objectives. BA and BCAL will now be free to concentrate on meeting the challenge from their real rivals, the foreign carriers. BA will be able to plan the development of its services on major routes throughout the world free from the uncertainties of "double designation" licensing. Similarly, BCAL will have scope in South America, West and Central Africa and on the new Atlanta-Houston route for future expansion of its long-haul services. As regards the third objective, I am satisfied that no redundancies will result from the rearrangement of routes, and, indeed, that the employment prospects for both airlines in the longer term should be improved. Finally, the new policy will, I hope, give that stability in regulating the airline industry which is essential for effective long-term planning.

I have given further consideration to the proposed Laker Skytrain service, but I remain convinced that in the conditions likely to prevail in the North Atlantic market for the foreseeable future Sky-train would generate relatively little new traffic. It would, however, add excess capacity and would do substantial damage to BA's existing services. Moreover, having regard to the existing facilities that are available for cheap travel, it would confer no really worthwhile benefits to the consumer. [HON. MEMBERS: "How do you know?"]

The CAA, while sharing my view that conditions are still not suitable for Sky-train, would prefer the licence and designation to be kept in being and, more generally, that wider discretion should be left to the licensing system in the control of long-haul scheduled services. However, I see considerable disadvantage in prolonging the present uncertainty and have accordingly told Laker Airways that its designation will be withdrawn. [HON. MEMBERS: "Shame!"] I am confident that the airline will continue to build up its already extensive charter business, particularly with North America, and my Department will continue to support it in this.

The position of the other independent airlines will on balance be unchanged by the policy changes I am making. I believe that they will continue to make an important contribution to our civil aviation effort.

The decisions I have announced today, and my proposals for new policy guidance for the Civil Aviation Authority, are set out in more detail in a White Paper, copies of which are now available in the Vote Office. I hope that we shall shortly be able to debate the proposed new guidance, which will require the approval of Parliament before it comes into effect.

Mr. Higgins

The Secretary of State will appreciate that this is a highly complex and important set of proposals which is not easily dealt with by question and answer. Will he indicate whether a Bill or a Statutory Instrument will be required? We welcome his assurance that there will be a debate, but we would not regard a debate of, say, one and a half hours as adequate for a matter as important as this.

On the broad question of the relationship between British Caledonian and British Airways, we welcome the right hon. Gentleman's support for the second force concept, but what is now necessary is a framework within which the airlines can undertake investment particularly in broad-bodied aircraft. We shall need to study carefully the right hon. Gentleman's specific proposals for routes, but we certainly agree with him on the need for a period of stability in which the second force concept can be allowed to develop.

We are concerned that the Secretary of State has given the Civil Aviation Authority authority in these matters. In the past, as in the present, he has given it guidance, but he is now retaining, in effect, a two-tier system. That gives particular cause for concern over his decision about Laker Airways. That concern will be felt in all parts of the House. I believe that this is not a party matter. We are unhappy that the right hon. Gentleman's dogmatic determination to end dual designation outside Europe should be operated in such a way as to inhibit the enterprise of Laker Airways. The potential benefits which we believe would accrue to the consumer will thereby be lost.

The right hon. Gentleman will fully understand that there is great concern about this matter, and I hope that he has not ruled out the possibility of further discussions about it. Did he reach his decision on the basis of figures agreed with Laker Airways? If not, will he give an assurance that he will publish his own figures and those of Laker Airways so that the House may take a view on this important issue?

The right hon. Gentleman referred to the need to end uncertainty. If the CAA believes that the licensing and designation of Laker Airways should continue, and if Laker Airways is also taking the same view, who is worried about the uncertainty?

Mr. Marten

On a point of order, Mr. Speaker. The Secretary of State said that the White Paper was now available in the Vote Office. I believe that it is there, but the Vote Office will not release it because it says there have been no instructions to that effect.

Mr. Speaker

If I am able to give long-distance instructions, I shall do so at once. Perhaps someone will see that the document is available.

Mr. Shore

Of course I accept that a document of this kind is complex and detailed. That is why I was a little alarmed to hear that the White Paper was not immediately to hand. It should be. It is certainly not my intention, with the co-operation of the Leader of the House, that this matter should be dealt with in a one and a half hours' debate. I am not proposing legislation, but I am proposing the proper affirmative resolution procedure. I hope that that will be coupled with a substantial and proper debate on all the wide ramifications of these proposals.

Second, on BA and BCAL, I note what the hon. Gentleman said and I accept that he is right to come back to this matter when he has seen in greater detail the material in the White Paper. But I am very glad that he has stressed what has been very much in my mind—the need for British aviation as a whole to have as long a period of stability as possible. It needs to be spared the constant threat of change if it is to plan for the future.

Third, on the Skytrain proposal, I understand that hon. Members are unhappy about that. Indeed, I should have been very surprised if I had not heard the kind of noises that I did when I made my statement. There is, however, a case which will have to be put and I shall be only too pleased to do so at the right time. The difficulty with figures—I shall produce all the figures I can—is that a dozen or more assumptions must be fed in to give any meaningful result as to the probable effects of Sky-train. Those assumptions are the critical things that one has to consider before reaching a conclusion.

I have put to the House the points on which the CAA differed from me—I have made no attempt to conceal them—but they are a relatively narrow area and beyond that there is a substantial measure of agreement.

Mr. Russell Kerr

Is my right hon. Friend aware that his decision to protect the blue riband transatlantic routes of British Airways will meet with a warm welcome in all fair-minded sections of the House? Will he also bear in mind, however, that there is still a need to look to an even cheaper form of transport than has so far been possible by the main transatlantic carriers? Therefore, will he carry the ball onward from the imperfectly-thought-out Laker idea to see what might be done towards encouraging British Airways to encourage a third-tier form of service?

Mr. Shore

I am sure that my hon. Friend speaks for virtually everyone on this side, and, I hope, far more broadly, in what he said about preserving for BA, which is our flag carrier, these important Atlantic routes. Anyone who thinks that there is not already competition on these routes needs his head examining. It is the toughest of all the air service markets.

As for innovation, one thing that we must take into account is that in the three or four years since the Skytrain proposal was made a whole series of innovations has been introduced by, among others, British Airways, including, of course, far cheaper charter and APEX forms of flight across the North Atlantic. The whole price differential which at one stage was so markedly favourable to Skytrain has now been enormously eroded and in some cases totally closed.

Mr. David Steel

Nevertheless, does not the Secretary of State accept that the public will be dismayed that he has proved too conservative a Minister to try the innovation of Skytrain? On the wider and more important parts of the review, does he accept that both major airlines have been messed about over the past six years in an atmosphere of total uncertainty between Governments? If, as his statement suggests, he will produce a settlement which will last for a substantial period, is that not the most important outcome? Would he not agree that what we require now is a real opportunity for both British Airways and British Caledonian to be able to use the divisions that he has created for them, and for a long period of stability ahead?

Mr. Shore

I very much welcome what the hon. Gentleman says about the need for and the possibility of getting a period of stability, because the time scale in which this industry operates is bound to be a long one. I hope that that is understood everywhere. As for his first comment about my being too conservative, hon. Members on both sides do not really seem to have taken account of the weight and scale of the proposed innovation. This is not just a fly to be brushed aside.

At the moment, British Airways carry on the New York run about one-third of a million passengers a year. We estimate—I think it is a reasonable estimate—that if a British Skytrain went into service an American Skytrain would come in as part of the Americans' complementary service on the same route. Those together would have a capacity greatly in excess of the whole of British Airways' present passenger numbers to New York. That cannot be dismissed as a light matter.

Mr. Conlan

My right hon. Friend the Secretary of State has told us that there has been lengthy discussion with the airlines themselves and with the CAA. What proportion of the package that he has announced has been agreed with the airlines and what proportion is being imposed upon them against their will?

Mr. Shore

It may not surprise my hon. Friend to learn that both the main airlines, BA and BCAL, would have liked more than I have felt able to offer, but I think that both would agree that this is a tolerable and not unfair settlement. But they must speak for themselves.

Mr. Donald Stewart

I thank the right hon. Gentleman for his support for the idea of a debate, since many of us are extremely disturbed by the implications of the policy that he has announced today. Would he accept that many people would like to see more competition for British Airways in view of its mean and spiteful attitude towards the competition provided by BCAL within the United Kingdom, as exemplified in its document of 6th February?

The right hon. Gentleman mentioned routes held by BCAL but not operated. Are any of them routes for which it has received licences which have not been confirmed? As for Skytrain, does he not take into account the advantage which might accrue with the ordering of new machines and Rolls-Royce engines if the route went into operation?

Mr. Shore

Many of these matters will come out better in debate, but on the last point the hon. Gentleman must accept that the somewhat ambitious proposal for a new Rolls-Royce-engined version of the DC10 could not possibly come into being as a result of even the most ambitious of Laker Airways' activities. It would need the backing, as we all know, of a major carrier. So we must put that on one side. As for the question of routes in general, that will be a matter, within the terms of the new policy guidelines, for the CAA to examine in the usual way.

There is no lack of competition on domestic routes. I am not sure that the hon. Gentleman is voicing the interests that he seeks to protect. I do not think that BCAL would welcome more competition on domestic routes, particularly to Scotland.

Mr. Maxwell-Hyslop

Has it not occurred to the Secretary of State that, with the falling standard of living in this country, it is likely that the number of people who wish to use a Skytrain service because they cannot afford the cheapest scheduled services is increasing rather than decreasing and that, therefore, it would significantly increase the total air travelling public rather than merely redistribute it?

Mr. Shore

That is just the hon. Member's hope—not that our standard of living is falling, I hasten to add, but that more people would be attracted if this form of reduced price service were introduced. I repeat that there are already a number of very reduced charges for transatlantic travel, both in terms of APEX scheduled flights and in terms of special charters.

Mr. Les Huckfield

Does my right hon. Friend accept, however, that this confirmation of the mixed economy and the endorsement of the second force goes very much against the policy commitment of this party and the assurance by the last Conservative Government that no more routes would be transferred from British Airways to British Caledonian? Nevertheless, will he recognise that some of us on this side accept that Skytrain would interrupt and make uneasy the present fares stability that we have on the North Atlantic and that we recognise that his decision at least preserves continuity of employment at Gatwick?

But when shall we come to the end of this process of parcelling up the world between British Airways and British Caledonian? Surely, if British Caledonian cannot survive after this lot, it should not be allowed to do so.

Mr. Shore

I think this new White Paper and these new proposals offer the kind of stability which the earlier White Paper did not offer, and I hope that it has a very good chance of sticking.

I am aware that at the time in 1971—entirely accept that it was the right thing to say—we on this side of the House said it was entirely wrong that the West African route should be taken from British Airways without compensation and given as a dowry on which to launch a dual designation policy. That was as much as we said. I have to consider what now to do with what has already been given, in the terms of the 1971 transfer of routes, in applying dual designation routes which BCAL has acquired in the last four years. I have tried to reach a balance which is, I hope, not unfair to both airlines and, above all, which avoids what would otherwise produce a great deal of unemployment.

Mr. McCrindle

In view of the legislative process to which the Secretary of State referred and the uncertainty, until the whole operation is carried out, that his statement today will create, can he give an estimate of the date of the change-over of these routes? Can he say what effects, upwards or downwards, his decisions are likely to have on the staff of BCAL and BA respectively? Is he satisfied that the South American routes given to British Caledonian are profitable without access to the lucrative East Caribbean?

Mr. Shore

I am anxious to end uncertainty as soon as possible. Therefore, a great deal depends upon how quickly the House can have an opportunity of considering these proposals and reaching a decision. If the House consents, as I hone it will, the major transfers which I have outlined in Africa and in Singapore can have effect, with the agreement of both airlines, by 1st April, which I am sure will be of great benefit to all concerned. The Latin American routes can be dealt with a little later on but, I would hope, well before the end of this year.

Mr. Thorne

Can my right hon. Friend say whether these proposals will contribute to an improvement in British air services throughout Europe? Will they raise demand for civil aircraft and thus improve the general position of the aircraft industry?

Mr. Shore

It is very difficult to say what will be the effect of these proposals, on traffic in Europe. Basically, we are not making any substantial change in the situation on the short-haul routes. The major part of the policy statement is concerned with the short-haul scheduled services. I am afraid that I cannot give a judgment on my hon. Friend's question.

Several Hon. Members

rose——

Mr. Speaker

I shall allow one more question on this matter. There is a lot more business to come before the House.

Mr. Warren

Will the Secretary of State confirm that yesterday he told Mr. Laker that the designation of Skytrain would not be withdrawn until the proposals had been approved by both Houses of Parliament? Does not the right hon. Gentleman's decision on Skytrain, by its failure to recognise, encourage and reward personal enterprise and innovation, sum up all that is wrong between the Government and the people of this country?

Mr. Shore

I am in favour, as I think we all are, of encouraging private enterprise and initiative in a large number of areas, but in this sphere of air services I think we all understand that it is very easy, by simply plundering a particularly good route and giving it to a certain operator who has no special responsibility, to make a killing for one airline on one particular route. We therefore have to be sensible about it. There is the analogy, to which hon. Members often refer, that it is easy enough to put on a private bus service from Marble Arch to Westminster and make it pay, but one knows very well that this will be done only at the expense of London Transport.

The hon. Gentleman asked me about talks with Mr. Laker. Of course, any proposal that I make to the House in the form of a White Paper is dependent upon the approval of the House before such a proposal comes into operation.