Civil Aviation

HC Deb 25 July 1984 vol 64 cc1120-56 1.52 am

Sir Reginald Eyre (Birmingham, Hall Green)

The number of right hon. and hon. Members who have told me that they wish to take part in this debate on civil aviation and the Civil Aviation Authority's report has convinced me of the need to make a short speech to enable as many hon. Members as possible to take part.

I should like to make it plain at the outset that I strongly support the privatisation of British Airways and I wish it a most successful future as an airline in the private sector. I believe that it deserves that, and I warmly congratulate Lord King and all his staff on all they have done to restore British Airways from a foundering and loss-making nationalised industry into a suitable candidate for privatisation.

It must be acknowledged that that achievement has been brought about by Lord King and his team implementing the financial disciplines that all private airlines have had to maintain over the past 20 years to stay in business. Notwithstanding all that, I believe that it is right to summarise the nature of the interest and the real and understandable anxiety felt by the independent airlines at this stage in the march of events as the Government consider the report of the Civil Aviation Authority on airline competition policy and the interrelated matters of United Kingdom airports policy, the privatisation of British Airways and the future use and capacity of Heathrow.

It is clear that the main thrust of Government policy is to ensure a successful privatisation of British Airways, at the most advantageous price to the benefit of public funds and on the most convenient time scale available. I understand this, and the strength of the case behind it. However, at the same time, there is a perfectly reasonable case for asking that full consideration be given, with similar priority, to ensuring more effective airline competition, better prospects for the consumer and a mole evenly spread and financially sound United Kingdom airline industry and at the same time retaining, and not changing, proper, effective support for the emerging provincial airlines such as that at Birmingham, which is genuinely in need of stability as it develops the potential of its new terminal.

I have set out all these factors because, following the Civil Aviation Authority's report, there is great apprehension on the part of the entire private sector airline industry, both scheduled and charter, that its future prospects for any reasonable profitability and indeed its long-term survival are at stake. This apprehension about its future on the part of the private airline industry gives immense significance to this debate.

The basic cause of that apprehension arises from the feeling in the private sector that a nationalised industry that has enjoyed a preferred and privileged position in United Kingdom civil aviation should not be transferred with that position more or less intact to a similar dominant position in the private sector. Against this background, and referring to the CAA report, my information is that most of the independent airlines accept the report's analysis of the issues and the problems posed in providing effective airline competition. However, while the analysis part of the report provides a stimulating, intellectual tour d'horizon — an old Birmingham expression — of the issues upon which the Secretary of State must decide, it is the view of the majority of the independent airlines that the remainder of the report shows an incomplete range of options and practical solutions for the most pressing issues on which the Secretary of State needs to act to ensure a fairer balance between the present public and private sectors.

To illustrate this point of view, I refer especially to the CAA recommendation that British Airways' European routes from provincial airports, especially Birmingham, should be taken over by other airlines. More than any of its other recommendations, this conclusion underlines the serious flaw in the CAA submission to the Secretary of State. It has chosen the most vulnerable and weakest links in the entire route network of BA to offer to the other airlines. I emphasise that the staff at Birmingham have made special efforts to sustain profitability here. However, in contrast, the authority has left BA's principal network from Heathrow without any competition similar to the competition that the then Secretaryof State, my noble Friend Lord Cockfield, allowed when he licensed British Midland to compete directly with the British Airways shuttle routes from Heathrow to Glasgow and Edinburgh.

Lord King says that he welcomes competition, and we admire that robust approach. Nevertheless, the CAA report envisages the continuation of the effective ban on the operation of competing British airlines from Heathrow on international routes. The CAA report says in paragraph 18: British Airways' size and its entrenched position at Heathrow give it enormous market power. The combination of its scale, new found efficiency and competitiveness give it a formidable advantage over the other British airlines whether it competes directly or indirectly with them. This market power is a major national asset where the British industry is in competition with foreign operators but cramps the development of other British airlines, some of which are also facing strong competition. In these circumstances, it is important that the Secretary of State should give full consideration to amendments needed to airport policy to allow existing private British airlines to operate international routes from Heathrow and thereby to bring about some element of the competition which Lord King rightly welcomes.

It is clear from recent developments that Gatwick is more likely to become saturated sooner than Heathrow, because of its single runway operation. Following the development of quieter aircraft, the Civil Aviation Authority has recommended reconsideration of the forthcoming limit of 275,000 air transport movements at Heathrow. Evidence suggests that this could be raised above 300,000 air transport movements, thus giving the Secretary of State substantial opportunity to ensure that British Airways has the same effective competition on its international network from Heathrow as it now accepts on its domestic trunk routes.

Many, though not all, of the CAA's proposals, if implemented, would have the effect of enhancing and not reducing the profitability of British Airways, since BA would have fewer marginal routes and a higher proportion of more profitable operations. For this reason, the independent operators have concluded that BA is prone to overstatement of the effect on it when objecting to route transfer and licensing change proposed by the CAA.

Mr. Peter Snape (West Bromwich, East)

How will this competition on international routes come about with the agreement of overseas Governments, who are normally reluctant to grant licences to two foreign carriers on one route? No matter how politely the hon. Gentleman tries to put it. he is implying that Lord King, the chairman of BA, is overstating his case. Will he elaborate on that point?

Sir Reginald Eyre

The hon. Gentleman is right in referring to the need for international agreement on the routes in question. They have been obtained in the past and the Secretary of State, if he agrees with the line that I am developing, would undoubtedly do his best to be successful in those negotiations. I am trying to show that BA is in a very strong position and to spell out reasonably the cause of the anxieties and apprehensions experienced by the much smaller, independent airlines as we look to the future under privatisation.

Mr. Lewis Carter-Jones (Eccles)

I wonder whether the hon. Gentleman would clarify something for me in the short speech that he says he will make. Is he saying that the report does not recommend competition at Heathrow, or that he does not believe that there will be competition at Heathrow?

Sir Reginald Eyre

I said that there is an effective ban on competition on international routes at Heathrow. The hon. Gentleman is right, and I still seek to make a short speech.

When considering the privatisation of Sealink, the Secretary of State specifically excluded the tender of European Ferries, since the amalgamation of those two operations would produce a dominant market position in the cross-Channel ferry business. Paragraphs 22 and 23 on page 5 of the report refer, significantly, to that aspect: British Airways' dominance of the British airline industry in terms of scale bring it firmly within the meaning of the monopoly situation as defined in the Fair Trading Act 1973. It is true that British Airways competes with foreign operators on virtually every international route that it serves and although direct competition on such routes is typically duopolistic, there is on many of them additional indirect competition from sixth freedom operators or from charter services. Nonetheless such competition remins muffled to a large extent whether by the predetermination and sharing of capacity, by commercial agreements, by controls over international air fares, or by restrictions on the types of traffic which charter competitors may carry. Paragraph 23 states: British Airways is therefore very well placed to use international route profits to support expansion in other markets. Despite regulatory constraints, it could deploy this market power, almost at will, in any particular market where it chose to compete aggressively with other British airlines. It is this potential for exploiting its market power which frightens many respondents. British Airways argues that it would not go so far as to take predatory action against any other British airlines because to do so would be costly and because ease of entry and regulatory policy would soon result in a replacement for any carrier forced to leave a market. But there are many circumstances in which British Airways' commercial decisions, taken entirely for internal reasons relating to the achievement of long-term profitability, could be damaging to other British airlines simply because they are so much smaller. I am sure that the Secretary of State will give due regard to the Sealink precedent when further considering the present proposals for the privatisation of British Airways. Even if all the proposals in the CAA report were implemented, there would remain a strong imbalance and a dominant position for British Airways in the airline business. Therefore, without reducing his privatisation plans in anything but a minor way, the Secretary of State has scope for balancing adjustment.

Mr. James Hill (Southampton, Test)

There is no logic in that, because if British Airways makes a success of a route for which it has a licence—I am talking of the future—is there any guarantee that the CAA would not immediately remove that route because it was profitable and unfair to smaller companies?

Sir Reginald Eyre

I shall not presume to discuss future licensing arrangements. My speech relates to the Secretary of State's preparations for privatisation.

Dr. Alan Glyn (Windsor and Maidenhead)

My hon. Friend has given little attention to the important point made by those who work at BA. They work hard, the corporation is a success and they are extremely worried about the future. Will he say something about that?

Sir Reginald Eyre

I appreciate that point. My hon. Friend told me that he had received a number of representations, but the facts that I have given should reassure him about the enormous strength of British Airways and its future. I seek to show the reasons for the anxiety amoung the smaller organisations in the private sector.

Mr. Ted Leadbitter (Hartlepool)

The hon. Gentleman expresses anxiety about the smaller operators. British Airways became efficient and the slimming process under Lord King ensured the profitability of the publicly owned body. British Airways has rules and licences. Will there not be new fears for the smaller companies if BA is privatised?

Sir Reginald Eyre

I will give the hon. Gentleman an example, but he will remember that I have paid tribute to the work of Lord King and his team in making this nationalised industry efficient and profitable.

I must refer to one other worry of the independent sector. One of the most efficient sectors of British air transport is the package holiday charter airline business. Those carriers, including Britannia, Orion, Horizon and Intasun, have been the spearhead of bringing low air fares to the wide British public. They see their large investments put at risk as British Airways appears to dump many seats from its surplus capacity into an already competitive market. Those airlines strongly claim that BA's action, through British Airtours, is predatory and they feel that there should be a limit on British Airways in that market. It is not essential to the future success and prosperity of British Airways, with its domination of so many other routes.

I hope that the Secretary of State will be able to give informed and sympathetic consideration to the problems and anxieties that I have described, which are felt so strongly in the private airline sector. I hope that my right hon. Friend will find a way of responding to and easing those anxieties as he proceeds with the successful privatisation of British Airways.

Several Hon. Members

rose——

Mr. Deputy Speaker (Mr. Paul Dean)

Order. It will be obvious to the House that many hon. Members wish to speak in this three-hour debate. I appeal for very short speeches.

2.15 am

Mr. Alfred Morris (Manchester, Wythenshawe)

I intervene briefly to make a number of points of particular significance to Manchester international and other regional airports. Ringway, with its 6,000 employees and the 20,000 other jobs which are totally dependent on the airport's activities, is much the biggest source of employment in my constituency. It also has a regional role of the first importance to the north-west. In the view of all informed opinion in the region it is, in fact, as important to the north-west of England today as the Manchester ship canal was earlier this century. I speak, however, not only as a Member of Parliament with a major constituency interest but as chairman of the parliamentary group which liaises with the North of England Regional Consortium to protect and promote the interests of the regional airports.

The Civil Aviation Authority's recent report on "Airline Competition Policy" is, of course, only one of a whole series of major but unresolved issues which are now emerging for decision. The inspector's report on the Stansted/Heathrow terminal 5 public inquiries is expected to reach Ministers very soon. Similarly, the Select Committee on Transport must now be very near to finalising its report on the organisation and financing of airports. A further issue is the commitment by the Secretary of State for Transport to publish shortly a consultation document on air transport movements at Heathrow. There is also the policy review of Scottish airports, which the Secretary of State announced to the Select Committee, while decisions on the privatisation of British Airways and of the British Airports Authority are still pending.

Given all these uncertainties, it is hardly surprising that the civil aviation industry is now in such confusion. The confusion extends even to the definition of terms. What the CAA sees as competition, British Airways and others condemn as substitution. If there is no agreement about the definition of terms, how can we possibly expect rational discussion and sensible decisions? It must be said for the CAA's report that, by default, it does at least make one constructive contribution to the confused debate now proceeding. I refer to the illogicality of seeking to determine any of the issues now under inquiry or review in isolation from all of the others. All aspects of policy in relation to airports and airlines, not least the interests of passengers and those who live and work near airports, are essential to an effective strategy for civil aviation. If we can avoid ad hoc decisions, the opportunity now exists to guarantee a secure and successsful future for the civil aviation industry well into the next century.

The North of England Regional Consortium — NOERC—has campaigned since it was first set up in 1981 for a composite approach to the challenges facing the industry. That campaign has enjoyed a virtually unprecedented degree of cross-party support, both locally and nationally, and I must give the Minister notice tonight that our campaign will become even more vigorous over the months ahead. NOERC's main concern is to vouchsafe the rejection of the cynical proposal to develop Stansted as London's third airport. The solution we seek is the growth of regional airports. They include not only Manchester international airport but, among others, Leeds/Bradford, Birmingham, Newcastle and Liverpool.

Let me remind the House of my early-day motion No. 115, backed now by over 220 right hon. and hon. Members from every part of the House. That motion states: That this House, deeply concerned to achieve balanced economic growth throughout the United Kingdom, and believing that the proposed massive expansion of Stansted Airport would produce unjustifiable urban growth and congestion in North West Essex and East Hertfordshire, calls upon Her Majesty's Government to opt now for a policy which, while providing for a modest increase in activity at Stansted, subject to a fixed ceiling, would place the greater emphasis on taking all possible steps to expand the use of provincial airports to meet demand in the region of its origin, the case for which has been well documented and shown to be financially viable by various groups, notably the North of England Regional Consortium. That is the way to create jobs where they are most needed, to encourage tourism outside London, to promote inward investment and generally to assist in the process of regenerating ailing regional economies. NOERC's way forward rejects the spending of upwards of £1 billion of public money on Stansted, and the environmental disaster of foisting a major international airport on rural Essex and Hertfordshire would be avoided. I know that the Minister is unable at present to comment on this crucially important issue for the north of England. Nevertheless, this House must demand an assurance that there will be no final decision on the inspector's report until it has been fully debated here. That is an assurance I implore the Minister to give in replying to the debate.

The CAA's report is not only about the commercial interests of British Airways and British Caledonian. It provides an opportunity to assess how regional airports like Manchester can be actively encouraged to achieve the roles designated for them in the 1978 White Paper on airports policy and to maximise their contribution to regional growth and expansion.

Hijacking the Manchester routes of British Airways and handing them to private airlines on a plate, as suggested by the CAA, is most certainly not the way to encourage the further development of Ringway. It would gravely damage both employment prospects in an area where unemployment is already unacceptably high and further undermine confidence among regional business men. What is proposed is to let the vulture pick at the flesh of a vital and virile public enterprise. Instead of inflicting unmerited harm on British Airways, and the regional airports it serves, the need is for Ministers and the airport authorities to agree with British Airways what additional services the airline should be operating out of airports like Manchester over the next few years.

The Secretary of State for Transport, in a parliamentary reply to me last night, said: The Government have made it clear on many occasions that they regard Manchester international airport as the gateway airport for the north of England and have encouraged the airport's development to fulfil this role. What that undertaking requires to give it real meaning is an end to the scandal of forcing 40 per cent. of the United Kingdom's international air travellers who come from the regions to use airports in the south-east of England.

I hope the House will have noticed the statement by the Manchester International Airport Authority in The Times of Wednesday: The CAA's report … is another example of discrimination against consumers in the North. That is a very serious charge at a time when we are trying in greater Manchester alone to cope with male unemployment rates of over 50 per cent. in many localities and, in some, with rates that now exceed 60 per cent.

The House must recognise that the CAA's report, as it affects Manchester, is a cause for deep and widespread concern. British Airways employees in particular see the report as a stab in the back, given the commitment they have demonstrated in making an undoubted success of the airline over the last few years. To reward that commitment and achievement by threatening the jobs of over 50 per cent. of the airline's employees in Manchester is outrageous.

The Minister must not mistake the strength of feeling on this issue in Manchester today. Ringway is our principal public asset. By common consent, it is a major success story, and, before he comes to any decision on any matter affecting the airport, let the Minister genuinely consult those who achieved that success. Any Minister who seeks to undermine its growth will do so at his peril.

2.24 am

Mr. Julian Amery (Brighton, Pavilion)

This debate is important, as it might be our last opportunity to influence my right hon. Friend's decision on what course to follow on the Civil Aviation Authority report. I shall not attempt to follow the right hon. Member for Manchester, Wythenshawe (Mr. Morris), although he raised some important issues. I shall confine myself to the central controversy that arises from the report, which is whether the interests of the nation will be served by weakening British Airways in the interests of strengthening British Caledonian and other airlines.

We must take as our starting point the fact that our duty is to ensure the best possible service for the passenger, without subsidy from the taxpayer. I think that that approach commends itself to all right hon. and hon. Members. On that basis, I shall try to traverse some of the arguments in the report. I believe that we can dismiss at once the argument that BA enjoys a monopoly, although it is by far the biggest airline in the country. Indeed, it is the biggest international carrier in the world. We should not be ashamed of that. British Petroleum is by far the largest British oil company, but nobody would dream of saying that its operations at home and overseas could be called a monopoly. If BOAC had been a monopoly when I was ministerially responsible for it, it would not have been in the red. It could not have been if it had been a monopoly.

No international airline can be a monopoly because of the constant competition from other airlines. Wherever anyone wishes to go from Britain, with few exceptions, there is an abundant choice of available airlines. It is true that there are cartel or pooling arrangements between different airlines, but they will not be influenced by the transfer of routes. They call for greater competition, I agree, but what type of competition would help?

I suggest that there are only three ways in which to increase competition. The most important is multiple designation, or allowing several airlines to operate out of Britain to foreign destinations. We already have a few. For example, BCal operates to Paris out of Gatwick and BA operates to the same destination out of Heathrow. Rights have been secured, but have not been taken up, by independent airlines for similar multiple designations to Spain, Portugal and other parts of the world. Some have been taken up and others have not. That is the truest means of establishing competition.

Another is one which my right hon. Friend the Secretary of State recently negotiated with the Dutch Government. It is the so-called "freedom of the skies", and allows foreign airlines which go, for example, from New York to Amsterdam to pick up passengers in Britain. That method should be welcomed and there can be no great objection to it. The third method is the deregulation of fares, or allowing airlines which operate from Britain to the same destination to charge the fare that they think appropriate, within the regulations that conform to safety requirements. These are the only real means of competition, but they are not easy to achieve. It takes two to tango in this game.

I have had a good deal of experience of negotiation with Communist commissars, Byzantine bishops and oriental potentates, but never in my life have I found such tough bargaining as goes on over air traffic routes. It is far tougher than anything else that I have experienced.

We must remember that, even if the House were to wish to give effect to the idea of a transfer of routes from British Airways to British Caledonian or some other carrier, it would not be that easy to bring about. Our agreements with other countries are often framed in a form which designates the carrier concerned. If we were to change the carrier, there is no certainty that our negotiating partner would accept it. Often the routes were negotiated in circumstances in which we had a greater advantage than we might have today.

What is the object of the proposal to take certain routes from British Airways and give them to other airlines? It is an interesting concept, to which we should give our minds. It is. not competition, it is not really monopoly, but something which is described as "indirect competition".

What does the CAA mean when it talks about "indirect competition"? As I understand it, it accepts that British Airways is doing a remarkably good job at the moment. But it says that it would be healthier for the airline industry if the second carrier were to be rather stronger so as to be in a better position to take up new opportunities that may arise or to take over opportunities from British Airways if it were once again to go into decline. It is, in fact, advocating what might be called an insurance policy.

It is a curious kind of insurance policy. It is paying a high premium while neglecting elementary repairs to the roof. It is like trying to prevent any risk of one's trousers falling down by cutting strips from one's belt to make braces as well. That is a rather questionable over-insurance in today's circumstances.

I am confirmed in that view when the CAA tries to apply its insurance policy. The result is that it cannot find many routes which could with advantage be taken from British Airways and given to British Caledonian. In fact, it falls between two stools. What it gives to British Caledonian is not enough to make it a striking success and what it takes from British Airways may be just enough to make that a much weaker proposition than it is today.

The CAA recognises that weakness in its argument. What is alarming is that it suggests that that would be only a beginning and that later on it might arrogate to itself the right to transfer other routes. That needs a little thinking about. It will do the allocation. At the moment, it does not have the right. It has an important role to play in certification, registration, safety and so on, but is it to be made a sort of holding company for the industry as a whole? Conservative Members are in favour of privatisation where possible, but it is not much privatisation if at the end of the day British Caledonian and privatised British Airways are brought under the hat of a quango in the shape of a beefed-up CAA.

If we are determined to go on, as I hope we all are, with the privatisation programme, I doubt whether potential shareholders will be much attracted by the thought that the money they invest will be looked after not by Lord King or Sir Adam Thomson, but by the CAA.

Mr. Snape

Who does the right hon. Gentleman think should make these decisions?

Mr. Amery

In my day they were made by the appropriate Minister. Until now, it has been his job to negotiate routes with foreign countries. When all the airlines are privatised, they will be able to try to negotiate for themselves, but as this comes into the realm of foreign relations they will still need the support of a Minister. I believe that that is far more suitable than a new quango —a kind of IBA for the airlines.

Mr. John Prescott (Kingston upon Hull, East)

But the right hon. Gentleman voted for that in 1981.

Mr. Amery

The hon. Gentleman raises an important point. Who is to decide whether an airline is doing well? No Minister would try to do that, particularly if the airlines were privatised. The market would decide. If the airline does well, the shares will rise. If it does badly, they will fall. If the privatised British Airways does badly, that will be the time for British Caledonian or some consortium to buy up the shares and with them some or all of the assets, which really consist of aircraft and routes. That is how I hope the system will balance out. It is certainly the way that appeals most to those of us who want market forces to operate.

Mr. Robert McCrindle (Brentwood and Ongar)

If I understood him correctly, my right hon. Friend was suggesting that there was a case for returning these responsibilities from the CAA to the Secretary of State. In those circumstances, how could the Secretary of State continue to act effectively as a court of appeal? Or would a new quango be created for that purpose?

Mr. Amery

I think that my hon. Friend has misunderstood me. There are two aspects to this. Registration, certification and safety are the proper domain of the CAA. Negotiations with foreign Governments about routes come into the domain of foreign affairs, and a Minister has to be responsible. The independent airlines will also have a hand in this, but their success or failure in terms of routes allocated should be decided neither by the CAA nor by the Minister but by the operation of market forces. That is to say, if the airline is doing well, it will command public confidence. If it is not doing well, its shares will be taken over by others.

Mr. Hill

My right hon. Friend raises perhaps the most serious point in the entire document. The document states: The CAA does seek enhanced powers to take action in support of the sound development of the industry … It also means that the CAA will be more robust than in the past taking route authority away from carriers who fail to perform. What will the investors think of that?

Mr. Amery

My hon. Friend has weighed in gallantly with very good support for my argument. He has clarified the position better than I have done myself.

Another issue to be borne in mind is the fact that the British Airways board has transformed the position of British Airways in the past couple of years. It has done this by drastic surgery. Nearly 40,000 people lost their jobs in the process. That was achieved without major industrial disturbance because the chairman of the board gave absolutely clear-cut assurances that the route structure would not be affected. Who was Lord King to give that assurance? He gave it because he had written assurances from the Minister of the day, now Sir John Nott. So public faith is pledged in this respect.

It is a moral issue, but it is a practical issue too. I do not know how far we will go with our plans for privatisation, but this I can say. We will damage any possibility of further privatisation irreparably if we are found to be in breach of public faith. I hope that my right hon. Friend will talk closely to the Secretary of State for Trade and Industry. As a former airline pilot, he knows his job well, and he knows what the repercussions could be on the morale of British Airways personel if as a Government we were to be guilty of a breach of public faith.

What is to be done? It is always unwise to ask for a report from a commission if one is not sure what it will report. I think that my right hon. Friend is in danger of having put a banana skin in front of himself. I hope that he will tread carefully. If the Government were to accept the report, I am advised that legislation would be necessary. I think that that would be an unmitigated disaster, causing great divisions on the Conservative Benches, and perhaps in other quarters. It would be a long-drawn-out proceeding, it would certainly delay privatisation, and it would disturb the morale of British Airways and, indeed, of British Caledonian, because they would not know what the outcome was going to be.

I suppose that my right hon. Friend could sit on the report for some time, consider it and mull over it, and I dare say that the leadership of British Caledonian and British Airways would be able to contain the situation, although it cannot be good for morale or for potential purchasers.

Mr. Anthony Steen (South Hams)

My hon. Friend keeps referring to British Caledonian and British Airways. He is aware that there are a great number of other independent private airlines besides British Caledonian. He has not addressed himself to those.

Mr. Amery

I take my hon. Friend's point, but the issue with which I am trying to deal is the transfer of routes from British Airways to British Caledonian which is the most controversial aspect of what the report recommends. The report has not gone very far, certainly where international routes are concerned, in transferring them from British Airways to any of the other airlines. This point will arise later on, of course, but it is not an immediate point. Thus, when I refer to my right hon. Friend sitting on the report during the recess and not making up his mind yet, the people who will be affected are not the smaller lines but British Airways and British Caledonian at this stage.

Personally, I think that my right hon. Friend would do well to have the report referred back. My own judgment is that we would do best to reinforce success. British Airways is doing extremely well, and we should leave it to market forces to judge the future. What the Government can do is to look for opportunities for dual designation or multiple designation, to try to negotiate freedom of the skies, and to try to work for the deregulation of fares. Only these will give us real competition. Only these will give real benefit to the customer—to the passenger—and that without subsidy.

2.43 am

Mr. Lewis Carter-Jones (Eccles)

When I was awakened at five minutes to one, the policeman said to me in a jocular manner that took me back to 1940, "You'll be flying in about an hour, Sir," and I suddenly realised that I was going to speak on the subject raised by the hon. Member for Birmingham, Hall Green (Sir R. Eyre). The hon. Gentleman should be congratulated on bringing the matter forward, but that is not a substitute for a statement on the CAA report by the Secretary of State which I hope we shall have before the end of the Session.

The hon. Member for Hall Green mentioned the monopoly of British Airways as a result of which, he said, there is no competition from Heathrow. The CAA report refers to airline competition policy. What is quite clear —and on this I agree with the right hon. Member for Brighton, Pavilion (Mr. Amery) — is that the report contains not one word about competition. It is the biggest dog's dinner of all times. All that it does is to grant minor monopolies.

Let us consider Manchester. If we pull British Airways out, who goes in? We do not know. Is that competition? I accept Lord King's view: let British Airways stay in Manchester, let others come in, and let us have competition. We would welcome that. It would be helpful not only to the north-west but to the whole of the north of England and provide a substantial infrastructure for the economic expansion that we need.

Page 21 of the Civil Aviation Authority report shows that there is no question of who comes in or what will happen. Manchester, like Birmingham, will be left in isolation. There is no word about competition in the report.

The right hon. Member for Pavilion was right to say that the CAA's interim report states clearly that if section 5 of the report dealing with international routes is to be implemented, legislation is necessary.

Banana skins have been mentioned. Marsham street will soon be known as Banana grove, because the report plants a whole plantation of bananas. I have never known a Secretary of State slip on the skin of a banana that he grew. Legislation is essential.

Let us return to basics. The routes belong to the British people. They are the British people's asset. I should like British Airways to stay as it is, publicly owned and run by Lord King. If that is a declaration of faith, so be it. The promise was that if certain things were done BA could be privatised. If that happens successfully, I hope that the money from the sale will go to the British people. If the CAA makes a dog's dinner of it, the British people will pay for it. That is why the right hon. Member for Pavilion was right to say that at the end of the day the British people will pay.

I find certain parts of the report disturbing. They make me worry about the CAA. Paragraph 49 of the CAA final report is an example of slovenly thinking. If I were Sir Adam Thomson and could have sued the CAA I would have done so. The report says that the CAA would think of granting routes to British Caledonian after it has examined its accounts. That is a shabby thing to put in print. It is very worrying because such reports are around for 12 months. One would have thought that there would be discussions about accounts before the publication of such a report. I should not be surprised if Sir Adam wanted to take action against the CAA.

The report says that the CAA will make its recommendation in August. Since the hon. Member for Hall Green chose this subject for debate, a few hours ago we all received letters from British Caledonian and the CAA saying that they have now examined the books, and they are all right. That should have been done earlier. The CAA has turned out to be a lackey giving what it felt was required by the Secretary of State. I believe, however, that the Cabinet, and especially the Prime Minister and Chancellor of the Exchequer, will say that this series of banana skins will lose us substantial sums in the sale of British Airways. We have confusion, which is doubly confounded by a report that was supposed to clarify the position.

The right hon. Member for Pavilion was wise to suggest that the Secretary of State could do various things with the report. I think that the right hon. Gentleman was too polite to say what the Secretary of State really should do with the report. The report will cause nothing but embarrassment to the Government and severe hardship to the British people.

The unions have repeatedly said, "We were given certain promises. We believed that Lord King had a mandate. We believed that the Government were prepared to be honourable about this matter." That is precisely the point made by the right hon. Member for Pavilion.

I want British Airways to remain public, but, if it is to be privatised, let that be done at the best going rate. How can Lord King present a prospectus for sale with this report hovering around? [Interruption.] I do not see how he can. The report, which was meant to clarify the issue, has clouded it and made it even more confused. I take the point that it would be better if the industry were privatised. The Secretary of State should take on his proper role, issue hoops and have a competition. What is proposed is not competition, but the hiving off of little monopolies.

I shall finish my speech quickly because many other hon. Members want to speak. I believe that many hon. Members want to speak against the CAA report. I would not trust the CAA with my grandchildren's piggy-banks, after reading the sort of proposals in this report. It will be a cruel deceit to the management and work force of British Airways if the report is implemented. The report confuses an already confused position. How can Lord King possibly sign a prospectus for privatisation in those circumstances? He and his work force may easily be cruelly deceived. There is a better method of resolving the matter. I am certain that the Prime Minister will recognise how costly the CAA's proposals will be for the British people as a whole and the employment prospects for the north-west in particular. I suggest the abolition of the CAA—even though it does good work in relation to safety and control — and the handing over of its responsibilities to the Office of Fair Trading.

Mr. Alfred Morris

On a point of order, Mr. Deputy Speaker. I hope that you will agree that it is an important point of order. Are we satisfied that everyone who has intervened in the debate so far, however briefly, has declared any interest he may have in the subject under discussion?

Mr. Deputy Speaker

It is well known to the House that it is customary in debates for all hon. Members to declare interests, if they have any.

2.55 am

Mr. Nicholas Soames (Crawley)

I should like to begin by declaring an interest in that I am lucky to have in my constituency Gatwick airport. I therefore have several interests that I am sure Opposition Members will understand are very important to me. I have among my constituents British Caledonian and British Airways, and the headquarters of the British Airports Authority is in my constituency. In fact I am more girt about with problems than the Secretary of State.

I pay tribute to the staff of the Civil Aviation Authority, who, regardless of whether we agree or disagree with their report, have undoubtedly assembled a remarkable array of evidence in a comparatively short time. They have done an excellent job. This document must not be viewed—it would be a great mistake to do so — merely as an argument between British Caledonian and British Airways. It is not an argument; it is an attempt to set a strategy for the future development of an industry that is nothing short of crucial to the interests of this country. In considering the matter, I must also bear in mind the great importance of Gatwick to my constituents, an enormous number of whom work at the airport.

In assessing the report, it is important to understand that the changes proposed will not of themselves immediately encourage competition. I agree with the views that have been expressed on that. However, they will give British Caledonian and the other independents an opportunity to find a platform from which in future they may hope to compete with British Airways. The sheer size and dominance of British Airways does not stem from 39 years of superior performance in world markets. The House must recall that successive Governments, both Labour and Conservative, have, since 1945, rejected the concept of a single chosen instrument. The fact is that the largest international scheduled route network in the world arose from preferment at the expense of the independent sector. That is a fact of life. The Government must make up their mind this time. Do they want a single-airline industry or a multi-airline industry?

The CAA report acknowledges that Britain's position at the aviation crossroads of the world, together with its store or enormous expertise and enterprise, should enable a more competitively balanced British aviation industry to be a leader in the world—not just by size but by long term success. It is only in such a competitive environment that efficiency and excellence will be stimulated.

On many occasions I have paid warm and sincere tribute to the remarkable achievements of Lord King and his management staff in British Airways, but the noble Lord goes too far when he claims that these limited transfers would ruin British Airways' chances of a successful flotation. That cannot be substantiated and does not stand up, although I have some sympathy with the argument. I believe that in the past few days the noble Lord has done more damage to the chances of a successful privatisation than anything that was originally intended.

I would be deeply distressed if British Airways did not operate substantially from Gatwick. Although Airtours is to remain, it would be entirely wrong for what would still be the largest British airline not to operate some scheduled routes from Gatwick. It would also be entirely wrong if in future Airtours, which is extremely effective and efficient and a major asset to Gatwick, were to be interfered with for being too competitive and too good at its job. The CAA should think again on the implication of its report.

My right hon. Friend must try to achieve a healthy and broad industry overall—not merely British Caledonian or British Airways but the smaller independent airlines which have a vital contribution to make.

The currency of airline and airport development is the route licence. It is only through the redistribution of this wealth that competition and the sound development of the British airline industry can be achieved. In consequence, I am bound to support the arguments and proposals put forward—and to some measure accepted by the CAA report—by British Caledonian and the British Airports Authority in so far as they are vital to the interests and development of my constituency and Gatwick airport. That includes a substantial presence of independent airlines at Gatwick.

With a wide range of scheduled service products, Gatwick would become fulfilled with British Caledonian and British Airways in its politically designated role as an international gateway for London, and the livelihood and security of my constituents would be enhanced. Of equal importance, the objectives of airline competition combined with the sound development of the British airline industry would be met.

3.3 am

Mr. Tony Lloyd (Stretford)

I thank the hon. Member for Birmingham, Hall Green (Sir R. Eyre) for choosing this subject for debate. It comes at an apposite time. I do not wish to continue in the same vein as the hon. Member for Crawley (Mr. Soames). I shall leave the hon. Gentleman to his reveries and return to the more important matter regarding my criticisms of the Civil Aviation Authority report, and its basic irrelevance to the needs of the British airline industry.

As my hon. Friend the Member for Eccles (Mr. Carter-Jones) said, it is clear that the CAA attempted to do nothing more than to conform to the ideology of its political masters. It presented the report that it was expected to present. It prejudged the whole issue. As early as December 1983 it talked about favouring a competitive solution. Although the report may be hign on the rhetoric of the benefits of competition, it provides remarkably little evidence of those benefits.

We must recognise that, in the airline industry, competition per se is not the simple answer to all our problems. As the right hon. Member for Brighton, Pavilion (Mr. Amery) said, we should consider the interests of the consumers. Competition does not necessarily guarantee those interests. When we had some competition in the days of Laker, when there was massive over-capacity in the industry, we saw that it simply was not in the long-term interests of consumers precisely because of the massive capital costs necessary to run a modern airline.

The report hardly dwells on competition; it dwells almost entirely on the need for substitution. To draw an analogy with football, it is as if Manchester United—much as I had my hopes pinned on it—achieved success in the league championships by chopping off the legs of Liverpool footballers. That is precisely what we are doing to British Airways. In order to enhance competition and the interests of other competing airlines, we must in some sense cripple British Airways and ensure that it can no longer play the role that it does.

British Airways is large, and, being large, it is very efficient. There are economies of scale in running an airline. British Airways is a remarkably efficient airline now. Tribute should be paid to the work force and its present management.

Both sides of the House would welcome it if the Minister would tell us when we can expect a statement from his right hon. Friend on the CAA report. On Monday of last week he told me that he had only just received a copy of the report and was placing copies in the Library. The Secretary of State said: I shall be considering it urgently and will announce the Government's response to the recommendations as soon as possible."—[Official Report, 16 July 1984; Vol. 64, c. 4.] While we welcome the fact that the Secretary of State intends to respond "as soon as possible," that is in contrast to the fact that the report had been heavily leaked by Mr. Colegate who, in the media the previous Friday, told us virtually everything that was in the report. Therefore, the House has a right to demand that a statement should be made before the recess. I hope that the Minister will tell us tonight when the statement will be made.

My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) mentioned Manchester. Manchester has not been uncritical of British Airways in the past, because we feel that it could have done more. The answer to the problems of Manchester and the north-west is not to withdraw British Airways. As my hon. Friend for Eccles said, the answer is to introduce other airlines to provide competition. If British Airways is to be kicked out of Manchester, that will have a dramatic effect upon the airport. It will become a third-rate airport, not the international class A gateway airport that Manchester has been promised in recent years.

As regards intercontinental schedules services, the report says: British Caledonian is the only British airline immediately capable of filling this role. However, in the Daily Telegraph British Caledonian is on record as saying that it has no interest in coming to Manchester. Manchester is being offered not competition, but substitution, and not the substitution of the one airline that the CAA feels might be able to do the job. Manchester will end up as a banana republic as a result of a Secretary of State who, as my hon. Friend the Member for Eccles said, makes the banana boat a matter of reality.

If Manchester loses British Airways, it will be divorced from the Heathrow hub of the British airline industry. Manchester will no longer be seriously considered part of the national matrix of airline routes. The impact on the economy of the north-west would be devastating.

As my right hon. Friend for Wythenshawe said, the area wants, not further decline, but something that will enhance the ability of the area to pick up and regenerate. An airport and an adequate airline service are critical. At other airports, such as Liverpool, where British Airways has pulled out, it is plain that there has been a deterioration of services.

British Airways staff have invested as much as the nation in British Airways. On 19 November 1979 the then Secretary of State for Trade said: I do not propose that any part of British Airways should be broken up or sold off. I propose that the airline as a whole should be quoted and it will then be for the board of directors to take decisions on how they organise their business." — [Official Report, 19 November 1979; Vol. 974, c. 47.] The British Airways work force believed that. If it is decided to chop up parts of British Airways, it will be cynically—

Mr. Gerald Howarth (Cannock and Burntwood)

Does the hon. Gentleman agree that there is a distinction between British Airways and its component parts, such as the air tours, hotels, and so on, and the routes? Sir John Nott's statement should not be taken as suggesting that the subject of route transfers was closed for all time.

Mr. Lloyd

The distinction that the hon. Gentleman draws cannot be seen in the statement that Sir John Nott made. He did not propose that "any part" of BA should be broken up or sold off. "Any part" does not allow for the exclusion of one part because it now suits Conservative Members.

Mr. Michael Colvin (Romsey and Waterside)

At about the same time, Sir John Nott also said: There will be no arbitrary reallocation of routes."—[Official Report, 20 July 1979; Vol. 970, c. 2192.] Is that not the quotation that the hon. Gentleman is really seeking?

Mr. Lloyd

I thank the hon. Gentleman for his assistance on this point. He is confirming my point that it would be a vicious betrayal of the employees of BA, both in Manchester and throughout the country, if the sacrifices that they have made through enormous job losses and so on over the years were to be rewarded by them finding themselves in the dole queue, after their jobs have been sold down the river in the interests not of the customer nor of the nation but of those who wish to make money out of national property.

3.11 am

Mr. Alan Haselhurst (Saffron Walden)

Although our proceedings will be anxiously observed in many quarters, this should not be the definitive debate on the future of the aviation industry, especially as it is being conducted at this hour in the morning. I could not hope, in what must be a short speech, to do justice not only to the report but to the airlines and interests that are concerned by what is in the report.

The CAA report should be welcomed as at least a contribution to the discussion. It may represent the view of the consumer interest in civil aviation, but that does not mean, just as when we read a report from the Consumer Association Which? magazine, that we have to accept the recommendations as to what might be the best buy. We want to test the different points of view being urged on us against the tenets of the CAA report.

Perhaps we should go further in trying to make the right decisions for the future of the civil aviation industry. The Government have an almost unique opportunity to make decisions that will have a long-term effect on the shape of civil aviation. Many matters, not just those in the CAA report, are coming up for adjudication soon. I hope that the Government will allow themselves time to reflect on the whole picture that those, parts make up.

The Government are committed to the privatisation of British Airways, and I do not quarrel with that. However, the Government might almost be embarrassed by the success that Lord King and his staff have had in running BA recently. The most difficult argument that the Government have to face is that Lord King has done a remarkable job, with the support of all the employees of BA. Because the improvement in BA has been carried through with the full-hearted commitment of everyone in that organisation, and promises have been made and commitments given in the organisation as to its future, it is hard to break faith with those who have contributed to the success. That is a difficult argument to overcome, and other points will have to be set against it.

I hope that privatisation will not so dominate the debate that all other considerations are made subservient to it. We should not say, "Damn the torpedoes and full speed ahead," because what we can do to get our future policy right can be affected by our attitude towards competition and airports. The Conservative Administration cannot ignore the need for competition, provided that it is genuine. I accept that route substitution is not necessarily competition. It is difficult to define genuine competition in this business. We should be doing a gross disservice to competitive forces and interests if we made a hasty judgment on any of these matters.

The adjustment of routes, in certain circumstances and to a certain extent, might play a part in restructuring the British civil aviation industry. For example, if more attention were paid to the contribution which regional airports could make to the development of civil aviation, we might consider in detail the CAA's proposals on the development of routes from provincial airports to continental destinations.

I understand that the interests which represent Manchester, for example, would not necessarily accept that more airlines should come on to routes in replacement of British Airways. However, it might be argued that another airline which does not have an interest in Heathrow could offer more vigorous competition to BA, operating only out of Heathrow, in developing some continental routes. That is one argument which should be considered in due time against some other considerations that arise.

If we are to get the picture right in civil aviation, we must also consider airport policy. We cannot take an undistorted view of the situation without sight of the Stansted and terminal 5 report. As that report is not available, neither the House nor Ministers can take a view on the subject. To make an early judgment on the CAA report might prejudice the quasi-judicial position of Ministers in relation to the report of the inquiry.

In recommendation No. 7, the CAA says that the Government should reconsider the possibility of increasing available capacity at Heathrow and Gatwick. That goes beyond the scope of even the wide remit that Graham Eyre was given when he was asked to take the chair at the inquiries into the planning applications affecting Stansted and terminal 5.

If it was decided, to whatever degree, to enhance BCal's position at Gatwick, to imply that BCal should be a more successful airline and that Gatwick should be a more successful airport, we should inevitabley come up against the possibility that the present physical limits of Gatwick would be reached; then what should we do about the second force airline that we would be purporting to create?

If, however, British Airways' view is taken on the best way to exploit the British competitive airline effort, we must accept that BA should be enabled to utilise Heathrow to the best advantage of BA. That in turn has a distinct impact on the argument about whether there should be a fifth terminal. All these matters cannot be isolated from the arguments about the routes structure and the future of certain airlines.

It is crucial for the air transport movement limits at Heathrow to be considered in this context, for they are an integral part of the whole issue. It would be a travesty to take decisions on certain matters in isolation from other decisions that must be taken.

We are bound to hear about binding promises that were made in the past. From our different points of view, we all have sensitivities about some of those promises. If BA wishes to rely on a statement that was made in the past, it must recognise also that other statements were made, some of which it might not wish to have binding force.

I understand that British Airways does not agree with the statement that there should be no fifth terminal at Heathrow. Some of us may be upset by the commitments given in respect of Stansted or Gatwick, or in respect of noise limits and aircraft movements at Heathrow. If there is to be a fresh look at British civil aviation policy, everyone must accept that all bets are off — all past commitments must be put into the pot together. It is no good saying that some commitments are more holy than others; we must consider them on the same basis.

The employees in the industry are naturally worried. British Airways does not wish to be robbed, and the independents do not wish to be frustrated or extinguished. We should not take any of these matters lightly, but I cannot envisage a loss to anyone if we allow a decent period of reflection on the full picture, including all the elements that I have mentioned. The state of the market could have just as potent an effect upon the proceeds from the sale of British Airways as could any factor that has been discussed in the debate.

I hope that Ministers will not allow one factor to dominate, but will consider the entire picture —although, of necessity, their reactions to the advisory reports that they have received and their subsequent decisions may have to be delayed to some extent. There need not be substantial losers in the drive to maintain a healthy civil aviation industry that can expand in the competitive world market on its merits. However, there are burdens and benefits, which must be shared among all. Ministers could find a way of doing that equitably and thus satisfy most of the interests that are being urged upon them tonight.

3.21 am

Mr. Ted Leadbitter (Hartlepool)

Anyone who has taken even a partial interest in the fortunes of British Airways during the past few years cannot help but come to the conclusion that it has been a marvellous success story. The chairman, executive board members and work force have co-operated and made many sacrifices, including the loss of 23,000 jobs, to provide a slimline organisation the like of which must prompt hon. Members to say that British Airways and our civil aviation industry have been outstanding successes.

Now there is to be a change of ownership. I have had some frank words with Lord King recently in my capacity in the parliamentary Labour party's departmental committee on transport, and there is nothing I respond to better than a man who calls a spade a spade. I said to Lord King, "You do not care who owns this organisation as long as you manage it," to which he replied, "That is right."

I repeat the point which I put earlier to the hon. Member for Birmingham, Hall Green (Sir R. Eyre). This issue has nothing to do with the efficiency or viability of the organisation, or with the input, loyalty and consideration of the present work force; it relates only to the change of ownership. If there was no problem about the routes when the company was publicly owned, and if Lord King continues to be chairman when the company is privatised, why are the other operators afraid?

I am an interested layman in these matters. I use my experience, limited as it is, to make judgments. If there have been 122 submissions to the CAA, seeking to cream off some of British Airways' routes, why were those applications not made when BA was in public ownership? That is a logical question.

I am not criticising British Caledonian or any other private operator. Hon. Members wish all operators to be successful, but we must address a question that has not yet been answered. British Airways is efficient and profitable. Why should the same company—perhaps with the same chairman and the same board, but under new ownership —raise new fears for the other operators?

Little has been said about the BA work force. Irrespective of our political allegiances, we have regard for those who work successfully in industry. It is a problem if work forces do not respond to circumstances in the industrial world. There is abundant evidence that British Airways has had purposeful managerial direction and a response from the work force.

We must take an interest in the pensions, conditions and pay of that work force. To achieve viability, the workers have suffered a loss under each of those three headings. There has been a pay freeze, a loss in real wages, reduced benefits in the pension scheme and the risk of agreements —insurances for the work force—being put in jeopardy.

Mr. Steen

Will the hon. Gentleman give a thought to the future of the many independent airlines in private ownership——

Mr. Snape

Which one pays the hon. Gentleman?

Mr. Steen

There is no need to declare an interest when asking a question. If I am called to speak, I shall declare an interest.

Many private airlines have been operating for decades with dedicated staff taking low pay. Will the hon. Member for Hartlepool (Mr. Leadbitter) say something about what should happen to those people?

Mr. Leadbitter

That is not a difficult intellectual exercise. I could get a backward boy out of a class that I once taught to answer the hon. Gentleman's question. The hon. Gentleman has an interest in a particular operator and it is time that he said so in the Chamber. But he must be intellectually honest with himself. British Airways is in public ownership and before the talk of privatisation other operators had no interest in its routes. The interest arose only when privatisation was proposed.

British Airways is not afraid of competition on any of its routes. I respect Conservative Members' views on private enterprise, but BA is not free to compete, because the CAA is laying down ground rules that confound private enterprise policies. If the CAA will respond, BA will be happy to compete with any operator on any of its routes.

I do not agree with Lord King in all respects, because he is a privatisation man, but he is a man of considerable competence. We must not allow our political philosophies to interfere with realities. If BA is privatised, he will chair the company as he has chaired the public body. He will not be afraid openly to compete in accordance with market forces provided that the CAA keeps its nose out of it. We shall then see who will get the market on the criterion of efficiency.

We have a common cause. If I am not afraid of private enterprise operations and private enterprise theologians are not afraid of privatisation, what are we arguing about? The nigger in the wood-pile is the CAA— [Interruption] That expression is part of the vernacular of my area. There is no objection to the rules of competition, but the interests of the work force, who have put so much into BA, must be considered. The CAA is in a position to offer considerable help to BA, and the sooner it does so the better.

3.35 am

Mr. Terry Dicks (Hayes and Harlington)

I have to declare an interest. Heathrow is in my constituency, and British Airways plays a big part at Heathrow. Many of the staff threatened by the CAA report live in my constituency.

I congratulate the management staff of British Airways on turning a loss-making airline into a profitable one. The number of staff has been reduced by 23,000. That change was based on an assurance, given in the House on 20 July 1979 by the then Secretary of State, that there would be no arbitrary reallocation of routes. Regardless of what any of my colleagues may say, that statement was made in good faith and accepted in good faith by British Airways and. more importantly by the staff of British Airways, and we have to stand by it. If we do not, what politicians say will have no credibility.

I have great confidence in the Secretary of State's desire to increase the benefits to the customers that can be provided by the airlines striving in competition against each other, but I am equally confident that the steps proposed in the Civil Aviation Authority's airline competition policy review are not the answer. The authority pessimistically and wrongly dwells on the reduction of British Airways' scope and size as though there is some merit in this dismal approach, when the opportunity is clearly before the industry of very substantial growth.

All over the world, civil airlines are beginning to forge ahead in recovery from the recent depressed years. It is open to British airlines to join in and benefit, and indeed British Airways is very substantially leading the way, as can be seen by the fact that last year BA made a profit of £214 million.

The dreary proposal of substitution, or deliberately and compulsorily removing one airline to replace its services with another—always assuming that British Caledonian is financially able to cope with the responsibility, and there are doubts about that — is bureaucratic interference which would make many extra jobs for aviation civil servants but would just as certainly produce no extra choice for passengers. How can taking one plane off and replacing it with a plane flying in different colours create extra choice? Clearly, it cannot. Only a dyed-in-the-wool bureaucrat could believe that anyone could be taken in by that.

There will be rejoicing in the boardrooms of Lufthansa and Air France if this misguided review is accepted by the Government, especially as the alternative airline, British Caledonian, is over-manned and inefficient. Germany and France will benefit and Britain will lose, because the powerful, Government-backed airlines of Germany and France, and many other countries will scoop up the business which this review, for doctrinaire reasons, carelessly offers them on a plate. The idea that services out of Gatwick to mainland Europe should be built up by reducing our links from Heathrow to European cities offers the stark spectre of a declining Heathrow and a triumphantly advancing Frankfurt airport, and all by courtesy of the Civil Aviation Authority.

There is a way ahead, and the Secretary of State for Transport has pointed to it. It is perfectly possible, by the kind of ardent negotiations that he conducted with the Dutch, to bring about improvements beneficial to the passenger. Dual designation, by which additional independent British airlines will fly in competition on British Airway's routes, is perfectly possible. The Government's bilateral agreements which govern these matters are, as the term suggests, agreements. There is plenty of room for negotiation to put more than one British carrier into our part of the routes. That is where real competition can be brought in. Nothing else will do.

I have one other grave doubt about the direction in which the Civil Aviation Authority is endeavouring to go. Paragraph 88 of the review sets out the authority's attitude in all its arrogant clarity. The authority proposes — no less — that it be given substantial further powers to conduct its licensing functions — by which it means taking routes away from one airline and giving them to another— in the manner which it considers is best". That is the language of self-expanding bureaucracy.

Mr. Soames

My hon. Friend talks about bureaucracies and over-manning. Will he consider British Airways at Manchester, where it employs a staff of nearly 1,000 to handle 35 flights a day? British Midland Airways in its entire establishment employs 1,250 people. Can my hon. Friend account for that difference?

Mr. Dicks

I am afraid that I cannot. I can only say that BA has reduced its staff from 59,000 to 35,000 and now runs a profitable and effective airline.

Paragraph 88 of the report could have been written by someone in the Kremlin who has no idea of consumer choice and what it entails. The proposals that would enable the authority to shift any airline's routes around "as it considers best" amount to a disreputable attempt to nationalise on the quiet the very industry in which the Government rightly intend to end state ownership. There is only one way for the passenger to be given more choice and for millions more to enjoy flying — real extra competition.

My right hon. Friend the Secretary of State can bring that about in international negotiations, as he has already shown. That is not the intention of the authority, which is discredited in the eyes of many people and needs a drastic overhaul. I could almost ask for an investigation into the operation of the CAA. Its review should be confined to the waste paper basket.

As to BA's so-called monopoly, of the passengers who used British airports in 1983, 31 per cent. used BA, 32 per cent. used foreign airlines and 37 per cent. used other British carriers. That is hardly evidence of BA being a monopolist. As for the impact of the CAA's proposals on privatisation, there can be no doubt that taking away successful routes from BA will have an adverse effect on the sale of BA shares. Advice from the City and elsewhere suggests that privatisation could be delayed by years. I cannot believe that the Government would want that to happen. The CAA report should be rejected and BA should be left alone to allow its management staff to get on with running a successful airline.

3.41 am

Mr. Kenneth Warren (Hastings and Rye)

Conservative Members should remember that the objective which the Tory Government gave Lord King was to line up BA for take-off into private ownership. To achieve that, he has delivered, and has had to deliver, a company the quality of which will attract people to invest in air transport when, historically, such investment has been glamorous rather than profitable. BA and Lord King have delivered a high quality product and considerable customer satisfaction. The staff and leadership of BA—people such as Colin Marshall and Jim Harris—should be praised for the excellence of their effort while competing with the world's top airlines.

BA has now joined the top flight of world carriers. It now ranks with Delta, Cathay Pacific and Swissair. It has achieved all the targets which the Government set. I would have hoped that my right hon. and hon. Friends would be cheering, but I fear that we are tearing ourselves in two over the CAA report. I am anxious that we should not lose sight of the objective that Lord King was set —production of a company which we can propel into denationalisation as quickly as possible. The CAA report is a device which could delay privatisation. There is no doubt that paragraph 88 enables the CAA to enlarge its powers for its own aggrandisement, not for the benefit of privatising BA or helping the Government. The CAA has proved in paragraph 88 that none of the route transfers that it recommends can occur without legislation being presented to the House. I doubt whether I should vote for such a procedure.

I should like to justify my claim that the CAA has no right to what it asks for in paragraph 88. One has only to look at the start of paragraph 4 to see the naivety displayed which is not worthy of an agency responsible to the Secretary of State. The CAA says: The Government's policy objectives for British civil aviation have evolved progressively since the … war. That simply is not true. There has not just been one Government. There have been loads of Governments and a lot of hiccups all the way. The report then goes on to say that the operation of air transport monopolies did not provide the public with the best and most efficient air transport system". There is no criticism of the regulatory system in Britain which is enshrined in air transportation — noncompetitive methods of operation such as pooling of revenues with international airlines, restriction of the frequency of operation, the enhancement of bilaterials and a price-fixing system which is to the detriment of passengers and the development of trade in Britain.

Paragraph 6 begins to go into the hypothetical world in which the CAA seems to operate. It starts by saying: It is sometimes argued that a single major British airline would be stronger". It does not say who argues that. It does not seem to know that in the Civil Aviation Act 1971 the prime entry made by the Conservative Government, which came from the Back Benches — my hon. Friend the Member for Woking (Mr. Onslow) was instrumental in that—was that at least one other carrier will operate. That is the Act around which the CAA revolves. It set up the CAA. To move into the hypothesis which is generated in the document and the audacity with which it says that The greater efficiencies and lower costs which British Airways has now achieved result in some part at least from the consistent policies of this Authority is to ignore the fact that the result has been due 95 per cent. to Lord King and 5 per cent. to the CAA.

For the CAA to preach about the problems of monopoly and to quote Gibbon does nothing but show that it is hot on classics and poor on knowledge of management. It even goes so far as to quote a past member of British Airways in a letter to the Financial Times on 20 June this year without seeming really to be aware that the man had not only left British Airways but that British Airways did not support the philosophy that he put forward.

The CAA has singularly failed to face the fact that we do not need to generate competition in Britain in order to make our airlines effective. We have competition —world competition. To think that British Airways has a monopoly out of Heathrow is to deny the size of Lufthansa, Pan American, TWA and all the other airlines flying in and out and competing for the same passengers.

Mr. Colvin

On the important question of monopoly, the CAA has made another fundamental error. In the document it refers to the definition of a monopoly under the Fair Trading Act 1973. It says that it thinks British Airways is a monopoly. It goes so far as to quote the Act, which says: A monopoly situation is deemed to exist if one person, company or group of companies has at least a 25 per cent. share of a relevant market in the United Kingdom. Local monopoly situations exist if the 25 per cent. test is fulfilled in part of the country. Surely that means that British Airways, domestically, could be argued to be a monopoly, but internationally it is not because the Act does not apply internationally. What it says is absolute rubbish. Total deregulation of internal routes is a good idea, which I would support, but internationally is is a load of rubbish.

Mr. Warren

My hon. Friend is right and I am grateful to him for making that intervention.

In conclusion, I draw the attention of the House to the statement in paragraph 12, in which the CAA says that economies of scale and in operating costs may not exist beyond a certain limited threshold. That rather lines up with my hon. Friend's intervention. It makes that statement immediately qualifies it and offers no proof whatever. It continues: The authority thus has to consider", certain things. Having given no proof, it launches into a policy which I regard as entirely unacceptable. I see no reason why we should consider a document which is no more than a barrier to the privatisation of British Airways, which I hope will take place as quickly as possible, and I urge my right hon. Friend the Secretary of State to take the necessary action.

3.50 am

Mr. Neville Trotter (Tynemouth)

The report begins by pointing out that air transport is one of the limited number of industries in which the United Kingdom has excelled in recent years. We are talking about a success story. The difficult decisions to be made in the future must be considered against that background, but we must ensure that we get the foundations right for the future. We must not damage the assets that we have. The Government have got themselves into an almost impossible situation because they have asked those who wish to change the staus quo to express their views, and naturally everyone has done so.

The one factor which is left out of the report but which I believe gives us some hope of solving the problem is growth. The Government must bear in mind that there will probably be constant expansion in the industry. Nevertheless, at 4 o'clock this morning we cannot possibly decide what our policy should be. I do not believe that a speedy answer is possible. There is the problem of Stansted and terminal 5. We cannot possibly decide on policy for the future until we have solved the problem of the London airports which are vital to the future of British Airways, British Caledonian and all the other excellent British companies. It has been suggested that British Airways may lose a great deal of money if it is forced to go to Stansted, but I do not believe that that will arise. I have always favoured a fifth terminal at Heathrow, whatever the arguments against it by the British Airports Authority. At any rate, until that question is decided, we cannot make meaningful decisions on this very important matter.

Interestingly, the CAA report suggests that it is possible to increase the number of movements at both Heathrow and Gatwick. That will affect the options available. There seems little point in encouraging more activity at Gatwick if we are to come up against a runway limitation in the very near future.

The main consideration must be how to achieve the best possible service for passengers. We should all like that to come about as a result of competition, with choice for passengers, the lowest possible prices and the best possible service. As we know, however, international aviation is far from being a free market. It is the most highly regulated market in the world. The Government are to be commended on their efforts to achieve some relaxation and on their initial success across the Channel to the Netherlands. We must hope that that will gradually spread to other European countries, but it would be overoptimistic to expect much speedy progress in that direction.

That being so, we are really talking about the allocation of monopoly, and there is no easy answer to the problem of how to carve up the monopoly cake among the various worthy applicants.

Mr. Colvin

It is not a monopoly.

Mr. Trotter

My hon. Friend is right, inasmuch as there is great competition from Pan-Am, TWA, KLM and the other international carriers, but on the vast majority of international routes there is sufficient traffic for more than one British carrier to be licensed. We therefore have to decide which of our carriers is to operate on which route.

Mr. Snape

If one carrier replaced another, would that not be a monopoly?

Mr. Trotter

That is exactly my point. We are talking about a monopoly from the point of view of the United Kingdom part of the industry. There will be competition from Air France to Marseilles, but there will be only one British carrier to Marseilles. Paris would be an exception, as the hon. Gentleman knows, because there would be two British operators to Paris. In essence, though, we are talking about one British carrier. Which should it be?

We must not lose sight of the need to privatise the industry, and I do not believe there should be undue delay in deciding what we will do. However, I believe that it is not practical to make a decision before the House goes into recess. I doubt very much whether my hon. Friend in reply will suggest that the Government will do that. A hasty decision is unlikely to be the right one. Indeed, I do not see how it could be, unless the Government were simply to say no to the entire report—in which case, why did they commission the report in the first place? If the Government were simply to say yes to the whole report, we know that legislation would have to be introduced to carry out the compulsory transfers, which inevitably would delay privatisation. Therefore, there can be no speedy solution to the problem in the next few days. I suggest that we await a debate in the House following a statement after the summer recess.

I pay tribute to the staff of all the independent airlines. British Caledonian, for example, has always had an excellent reputation for looking after its passengers throughout the world, and it has the highest standards. One of the features of the British industry is the efficiency of the various operators.

Hon. Members on both sides of the House have acknowledged the remarkable achievements in BA. Lord King and Colin Marshall have revolutionised that major airline to the benefit of the country. That shows through in the attitude of the staff. Most of us travel internally, rather than internationally, and on the flights to Newcastle there has undoubtedly been a dramatic change. It is now unknown for problems to arise as a result of the attitude of the staff, which was not the case a few years ago. One must pay tribute where it is due.

I am conscious of the uncertainty as to the future that must be felt by the staff of British Airways in the light of the report. My message to the staff of BA is that they work for a great airline. It will continue to be a great airline in future; to be the national flag carrier for Britain; to have the word "British" on the side of its planes; to dominate the British aviation industry; and, with its excellent management and staff to be prosperous, as every hon. Member wishes it to be.

I believe that any adjustments that are ultimately decided, if that has to be the case—and it probably will be—can be met by the growth of the industry. I do not believe that it would be practical to transfer from BA at the stroke of a pen any significant part of its network. If the changes introduced are spread over a number of years, they can be effected in a period of growth to avoid the adverse effects that some people have suggested.

My solution would be to ponder the report into the autumn and to come back, if possible, with some agreed solution. I know that it is not easy to envisage Lord King and Sir Adam Thomson agreeing, but this is a challenge to Ministers to try to reach some agreed solution rather than to go through the procedure of legislation, and thus to the privatisation of BA that the Government and their supporters wish to see.

4 am

Mr. Nicholas Fairbairn (Perth and Kinross)

I declare an interest. I am a passenger. I travel frequently on British Airways, British Caledonian and British Midland. When I was first elected I had a choice of travelling first class or tourist by British Airways or by British Caledonian. Eventually, British Caledonian provided a service which caused most Scottish passengers to transfer to that airline. British Airways created the shuttle service because it had too many crews and too many aeroplanes. It had to pretend that it needed two aeroplanes and two crews. That is what the shuttle was about.

Along came British Midland 18 months or two years ago. All of a sudden everyone travelled by British Midland, because it provided a better service——

Mr. Soames

And better sausages.

Mr. Fairbairn

The image of a burnt sausage is about as good as any which could be created for the Opposition spokesman, the hon. Member for West Bromwich, East (Mr. Snape), although a beefburger might be a better description.

Competition was introduced, and one could travel in one of three ways. One could travel freight by British Airways or passenger by British Caledonian. One could also travel British Midland, with an excellent service. That caused British Airways to create a service which people wanted to use. In the last 10 years three services have competed for passengers between Scotland and England. They have survived or perished as a result of the service that they provided. Competition has caused no difficulties. There was no suggestion that British Airways had the monopoly or dominance.

British Airways was compelled to improve, to rationalise and to reduce its work force, as it has under Lord King, because it intended to privatise. It is amazing to hear Opposition Members congratulating a nationalised airline on doing what a private airline compelled it to do —to employ half the number of people that it once employed and to provide a service of which employees could be confident and proud. That was achieved by competition.

On the internal routes no one was frightened by British Airways. I do not see why anyone should fear British Airways when it is private. The customer should be able to choose the airline which offers the lowest price and best service. In my experience, both have been achieved by competing services. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), who is the spokesman in the House for British Caledonian, will know that I have no preference for British Airways, British Caledonian or British Midland. I admire them all. I know those who run them. Each has achieved the passengers that it deserves.

Frankly, I am against quangos and bureaucracies. A passage in this abominable and conceited report seems to demonstrate the fact that, whatever else the Minister does, he must not increase the powers of the CAA—the Civil Airports Authority, the Civil Airlines Authority, the Civil Aviation Authority, or whatever it is. I hate initials. The fact that one does not know the words for which they stand shows that they are a trap. If ever there was a warning to a democracy, it was surely the relevant words of Gibbon, which the report quotes and which could never be better used than against the CAA. The report quotes Gibbon as writing that the spirit of monopolists is narrow, lazy and oppressive: their work is more costly and less productive than that of independent artists; and the new improvements so eagerly grasped by the competition of freedom, are admitted with slow and sullen reluctance in those proud corporations, above the fear of a rival, and below the confession of an error". If ever there was a description of the CAA's report, it is contained in those words.

I ask the Minister not to increase the CAA's power in any way and not to allow the CAA to be the referee in deciding the good and bad airlines. Let that process be done by competition and the passenger. It is important to say to British Airways that we will not permit only it to fly out of domestic airports to European or foreign airports. That would be grossly unfair. It is utterly wrong to say, "We shall take from Caesar and give to God." Let the airlines compete.

Mr. Soames

My hon. and learned Friend says that the passengers should decide. Is he aware that the Air Transport Users Group, which is a influential body, has come out strongly in favour of the report on the very ground that my hon. Friends raised earlier this evening?

Mr. Fairbairn

I appreciate that point, but I am suspicious of people who organise attitudes as air transport users. I am an air transport user. I am not a group but a passenger. My decision whether I fly British Caledonian, British Midland or British Airways determines the service. That criterion should determine which airline has the routes.

Mr. Michael Brown (Brigg and Cleethorpes)

rose——

Mr. Steen

rose——

Mr. Fairbairn

I am becoming so popular. I give way to my hon. Friend the Member for South Hams (Mr. Steen).

Mr. Steen

I agree with my hon. and learned Friend's arguments, but the weakness in his case is that on the British Airways routes out of Heathrow to Europe and other international airports a cartel will prevent competition from private airlines other than British Airways when it is privatised. According to his argument, my hon. and learned Friend would say that that is wrong, and I would agree with him. That would mean that British Airways would be the only British carrier to fly to Europe and internationally from Heathrow. If my hon. and learned Friend extends his argument to Glasgow and Edinburgh, and to various other airlines, does he agree that other domestic private airlines flying only in and around Britain should be allowed to compete against British Airways out of Heathrow?

Mr. Fairbairn

That would have been an impressive argument were it not for the fact that my hon. Friend made it before British Midland, which he represents, was able to break a "duopoly" of British Caledonian and British Airways flying into Edinburgh and Glasgow. What happened? British Midland came along and broke those airlines. Not only did it break them, but it almost ruined British Caledonian operating out of Edinburgh and Glasgow and made British Airways provide a service, so I am unimpressed by that argument. It can do exactly the same in the international and European scene as it did within Britain.

Mr. Michael Brown

I support what my hon. and learned Friend has just said. Is it not a good idea to bear it in mind that the slogan of British Caledonian is "We never forget that you have a choice."? Are not the fears of British Caledonian and other operators allayed by the very advertising on which they are engaged?

Mr. Fairbairn

I agree with my hon. friend on that matter. Many years ago I suggested to the chairman of British Caledonian that it should have an advertisement which said, "There are two ways to go from Scotland to England—you can go freight by British Airways, or passenger by British Caledonian." At the time, British Caledonian said that airlines were not supposed to be in competition but were supposed to love one another. They have got close to it recently, in their advertising. On the one airline there is the air stewardess who offers one all, and on the other she offers one nothing.

Therefore, one has a choice, and one should have a choice. However, this is important. The Government gave an undertaking to Lord King, then Sir John King, that if he transformed—as he did—a nationalised industry from a public bureaucracy serving nobody except itself, union-dominated, overmanned, fat-bellied and unsatisfying, into a public service that could be privatised, the routes would not be arbitrarily reallocated. That undertaking is not something that can become a breach of faith, when he has achieved the objective that he was set as an honest and good Scotsman. One of the characteristics of Scotsmen, we like to think, is that we do not break our word. Lord King kept his. I trust that the Government will keep theirs.

4.12 am

Mr. Peter Snape (West Bromwich, East)

The House is grateful to the hon. Member for Birmingham, Hall Green (Sir R. Eyre) for initiating the debate. It is indicative of the concern felt on both sides of the House that there has been such a good attendance, despite the extremely late hour, and that there has been little support for the Civil Aviation Authority's extremely controversial report.

I say hesitantly that the CAA's report is a predictable response to a directive from the Government, bearing in mind the views often expressed by the present Secretary of State. It is somewhat characteristic of him that while civil war has almost broken out in the aviation industry, and everyone in the industry has expressed definite views, the Secretary of State has not. On most occasions the right hon. Gentleman's lethargy would go unnoticed—it is part of his charm, if that is the right word. However, when British Airways, British Caledonian, the CAA, the British Airports Authority and various municipal airports are all busy filling the columns of our national newspapers with vitriolic attacks on one another, the Government's apparent indifference is not merely unhelpful but damaging to one of this country's most successful industries.

Instead of responding to the review, the Secretary of State seems to be intent on taking the CAA's recommendations a little at a time. Yesterday, for example, a press notice was issued rejecting British Airways' appeal against the CAA's decision to give the new Riyadh route to British Caledonian. The Secretary of State has sat on that appeal since March. However, being the man that he is, the Secretary of State chooses to make the decision that was announced in yesterday's press release at a time which is likely to increase the confusion and uncertainty in the industry.

The Secretary of State appears to be implementing the report piecemeal and pre-empting what should be a decision which is debated and decided by the House. I do not know how the Government of Saudi Arabia feel about that press release. I understand that they are not over-keen on the prospect of the second force airline from the second London airport flying to their own new airport in Riyadh.

I suggest that the Minister owes the House an explanation as to why the timing of the announcement is so peculiar, bearing in mind the controversy which surrounds it. Will the Secretary of State refrain from implementing any more of the CAA's recommendations until at least a statement about them has been made to the House? I hope that the Minister can assure us tonight that the Government will make such a statement before the summer recess. I warn him that if that statement is to be made as other Departments, Ministers and, to be fair, other Governments have made similar statements—on the last day before the recess in a planted written question—there will be a row.

I disagree with the hon. Member for Tynemouth (Mr. Trotter). I hope that the statement will be made in the knowledge that the aviation industry, in general, and the airport business, in particular, cannot be expected to wait during the summer for a ministerial pronouncement about, what is to it, a life or death matter for the future prosperity and success of this great industry.

Mr. Hill

Does the hon. Gentleman agree that the City page in The Standard has already assumed that British Caledonian is not only to get these routes but that it will double its profits next year? How are the investors in the market place to make up their minds if we do not get a statement from the Government?

Mr. Snape

My concern for investors is perhaps not as great as that of the hon. Gentleman. The City editor of The Standard, Mr. Neil Collins, is, I understand, a failed Conservative candidate. Whether or not we can place much credence on his views and opinions in The Standard is for the hon. Gentleman to judge. He outlines a difficulty which the House faces and which the Secretary of State is duty bound to recognise.

Mr. Carter-Jones

Does my hon. Friend agree that the hon. Member for Birmingham, Hall Green (Sir R. Eyre) has done the House a favour by setting the pattern for the debate, in that this is not a substitute for a statement by the Secretary of State? The hon. Gentleman made his speech, we have all spoken, and the Minister will reply. [HON. MEMBERS: "Some of us."] I hope that other hon. Members will have a chance to speak. If a statement is made, we can ask questions about it. That is the importance of the Secretary of State first making a statement.

Mr. Snape

I am grateful to my hon. Friend for that intervention. As he says, there are Conservative Members who still wish to speak. I hope that they will have an opportunity to do so, but I am not responsible for the constraints that are placed on these debates.

Hon. Members on both sides of the House have been united by their general dislike for the CAA's somewhat shoddy report, and a statement from the Government is surely necessary. I do not believe that the Government are sure what their policy for the industry should be.

We know that the Treasury does not appear to be interested in the future of civil aviation. It wants to get its hands on the money as quickly as possible, whatever the long-term cost to the counry. Its only interest appears to be to reduce the public sector borrowing requirement. If it is necessary to privatise British Airways sooner rather than later to do so, that, in its view, is eminently desirable. I can well understand that, as a former Treasury Minister, the Secretary of State for Transport would have some sympathy with that view.

One of the reasons why the Secretary of State is in such difficulty, as the debate has shown, is that he has constantly ducked out of taking decisions. His predecessor changed the role of the CAA so that it was put in the position of taking decisions which are, in my view, and, I believe, that of the right hon. Member for Brighton, Pavilion (Mr. Amery), essentially political. Instead of acting as it was intended—as a regulatory agency—the CAA has become a body which has to make judgments about policy and increasingly about politics.

We warned when the legislation was debated in the House that the changed role for the CAA, as envisaged by the Government, would be unworkable, and so it has turned out. Within months of the Act coming into force, the Secretary of State has reversed the CAA's decision on Cathay Pacific's Hong Kong route. More recently, the Secretary of state has had to intervene in a CAA decision on the British Midland shuttle.

The Opposition believe that the CAA should be a regulatory body — no more, no less. It is for the Government and the Secretary of State for Transport to take decisions about aviation policy, not an unaccountable body. I always thought that the Conservative party despised and disliked quangos. Yet it is here handing over decisions that we believe should be made by the Secretary of State. Surely such decisions should not be made by quangos such as the CAA.

The Opposition's anxiety about that state of affairs has increased over the past few days. Only yesterday, Mr. John Dent, the chairman of the CAA, made an unprecedented and personal attack on the chairman of British Airways. It is worrying when the chairman of a Government body makes such a personal attack on the chairman of a nationalised industry. Moreover—I quote from the Financial Times, a reliable source, I should think, —when Mr. Dent goes on to say that BA's reaction is having the effect of delaying privatisation and minimising the price the Treasury will get, one begins to wonder who is Secretary of State for Transport and who is the chairman of that quango.

I believe that it is little short of disgraceful for such an attack to be made by the chairman of the CAA. If Mr. Dent wishes to involve himself in political argument and acrimony, he should get himself elected. He should be sitting where the Secretary of State is sitting. To make an attack such as that is appalling. I do not know what the right hon. Gentleman's view on these matters is, but I hope that, at the very least, Mr. Dent will be told how distasteful that attack on Lord King was.

The Secretary of State, rather than handing over political decisions to the CAA, should be casting around —the Government are good at doing that—to find, from their point of view, a more sympathetic and worthy figure to chair the CAA. If we are to take any report by that authority seriously, all hon. Members will have to be confident that such a report is impartial. We do not wish to hear the chairman of such a body acting as an echo-chamber for some of the more predatory interests in the private sector of aviation. That is what he was doing yesterday.

The main flaw in the CAA report is that what it is recommending is not competition. Broadly, there are three options for the industry. First, a major public sector flag carrier, with a smaller, second carrier, as the Edwards report proposed, and as the Labour party accepted then and supports now. Secondly, there can be regulated competition, with private carriers of varying sizes with designated routes. Thirdly, there can be complete deregulation and double designation on routes to ensure proper competition. After all, that is what the Conservative party regards as competition.

The option for which the CAA has gone is regulated competition. It is not competition of the kind that the Secretary of State never tires of espousing. It is the substitution of one monopoly for another. Hon. Members on both sides of the House would be grateful for an explanation of such competition from the Under-Secretary of State.

The problems posed for the Government in this report do not stop at British Airways or British Caledonian. The report exposes the woeful lack of a national airports policy. Apart from the ill-conceived idea of privatising the British Airports Authority, the Government do not have a clue about airports policy generally. The implications of the CAA report for the regional airports in particular are enormous. If the Government accept the recommendation to take BA routes away from developing and successful airports, such as Manchester and Birmingham, they will not only threaten the viability of those airports and the many thousands of jobs connected with them, but hang over the heads of the people who work in those airports a sword that is already causing them a great deal of concern.

Already, since the publication of this report, I have received two letters from constituents, one of whom is employed by BA at Birmingham airport—the airport that concerns the hon. Member for Hall Green. Mr. John Biddlestone says: We in British Airways welcome competition, we compete worldwide with airlines such as Pan American, Lufthansa, Swissair etc., and our extensive integrated network is our greatest marketing strength, which enables us to provide a better service to our customers. The substitution of another airline in the place of British Airways would be to the detriment of UK civil aviation. I did not solicit that letter. I received it only yesterday.

I received another letter, again from somebody whom I have never met, Mr. George Court, who lives in my constituency. He refers specifically to one of the smaller private airlines, whose interests are espoused by the hon. Member for South Hams (Mr. Steen). By his interventions, that hon. Member has been determined to prove to British Midland Airways that, even if he could not catch your eye, Mr. Deputy Speaker, he was here earning his corn at 4.29 on a chilly morning.

My constituent, Mr. Court, who also works for British Airways, writes: If the report of the CAA was going to give the customers who use our flights a better service, we would all agree that they would benefit and gain by these changes. But as it is, they will be on the receiving end of a raw, inferior deal by the proposed substitution, e.g. British Midland Airways. Granted the flying staff are reasonable, what makes them a poor man's outfit is their lack of computerised check-in facilities which makes for longer delays, antiquated ground equipment which keeps breaking down (hence the necessity to keep borrowing ours) and their fairly old aircraft and lack of back-up facilities as a whole.

Mr. Gerald Howarth

rose——

Mr. Snape

Is the hon. Gentleman seeking to defend some pecuniary interest, or does he have a genuine matter of concern to express?

Mr. Howarth

I have no pecuniary interest in British Midland Airways. I tried that airline the other day. I decided to fly to my constituency, and I went from Heathrow to Birmingham international airport. Not only was the service at Heathrow excellent, the flight —admittedly, in a somewhate older aeroplane—extremely comfortable and the service good, but we arrived two minutes early at the new Birmingham airport. The remarks made by the hon. Member for West Bromwich, East (Mr. Snape) are unworthy and represent a cheap jibe against a company which, in difficult circumstances, is doing a grand job. I am not paid by that company. I resent the hon. Gentleman's remarks. I am here as an independent representative of my constituents.

Mr. Snape

I merely quoted from a letter written to me by a constituent. If he wishes, the hon. Gentleman can see the letter to be sure that I quoted it accurately.

The whole business of which airline flies from where and which routes are taken from BA is one reason why the staff of our nationalised airline are so infuriated by the very tenor of this debate. Let us remember that not just Lord King—like some of my hon. Friends, I pay tribute to him for his stewardship of BA as its chairman—but the combined efforts of the whole staff have brought the airline to its present successful position. It is a poor reward indeed to tell them, "At best, your future is uncertain. At worst, the reward for your efforts is the sack."

Mr. Steen

rose——

Mr. Snape

No, I will not give way. British Midland Airways has had its say.

Mr. Steen

On a point of order, Mr. Deputy Speaker. The hon. Member for West Bromwich, East (Mr. Snape) has been making snide remarks throughout the debate. Having made an imputation about my connection with British Midland Airways he now refuses to give way to permit me to give a proper answer.

Mr. Deputy Speaker

Order. That is not a point of order for me.

Mr. Snape

The hon. Member for South Hams should not be so sensitive. I appreciate that he is motivated by the finest of Conservative principles—money. He is paid by British Midland Airways to put that company's position in this House——

Mr. Steen

rose——

Mr. Snape

No, I will not give way to the hon. Gentleman. I have not finished with him yet. He is paid to do that, and he does it to the best of his ability. He cannot expect the degree of respect that he might receive were he to speak in such a way that the House could feel that he believed in what he was saying.

Important questions have been posed about the future of Gatwick and Heathrow airports. The CAA report makes it clear that the Government will have to make some difficult decisions about capacity, air traffic movements — the 275,000 movements at Heathrow have been mentioned in the debate——

Mr. Steen

On a point of order, Mr. Deputy Speaker. The hon. Member for West Bromwich, East has said that my interest in aviation is solely related to the fact that I am retained by or involved with British Midland Airways. That is an imputation——

Mr. Deputy Speaker

Order. That is a point of argument, not a point of order.

Mr. Snape

We have debated the 275,000 air traffic movements at Heathrow and the runway extension at Gatwick. We have also discussed the fifth terminal at Heathrow and the development at Stansted, Those important questions need some answers before the summer recess. The Opposition's worry is that the Government are not addressing themselves seriously to the many problems. Indeed, we believe that they are already undermining the future of our airports.

The recent announcement on cheap European Air fares was welcomed by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott). Hon. Members on both sides of the House would agree that European fares have been prohibitive, but cheap fares must be consistent with a licensing system that ensures a sensible utilisation of capacity and the maintenance of the current network of services. Cheap fares must also be consistent with the protection of our aviation and airports industries. The Secretary of State announced the carrot of cheap fares; but he has not yet mentioned the stick. The implication of the open skies, or sixth freedom, agreed with the Dutch Government, is that foreign airlines, in return for cheaper fares, have almost unrestricted access to our airports. The agreement reached at The Hague will undermine our hub airports in London and the operations of our successful airlines, especially British Airways and British Caledonian. If there is any celebrating of that agreement, the details of which the Secretary of State has trumpeted far and wide, it is more likely to occur in Dutch than in British aviation.

The Parliamentary Under-Secretary of State will say tonight that he has few comments to make on the report. The debate has illustrated the fact tht the CAA review poses more problems than it solves. It creates uncertainty and bitterness in British Airways, which can be dispelled only by a comprehensive statement by the Secretary of State before the summer recess. It is unfortunate that our procedures do not allow us to vote on this matter now, because, judging by the speeches that we have heard from hon. Members on both sides of the House—

Mr. Prescott

The opposition is on the other side of the House.

Mr. Snape

Yes; the Government have brought their opposition with them this evening. If we could have a vote, we would, on the basis of this debate, defeat the CAA proposals. I hope that when those matters are voted upon, Conservative Members — instead of being so brave and bold at 4.38 am, when there is no possibility of a vote — will for once have the guts to take their principles into the Lobby and defeat a shoddy report that is bad for British Airways, British civil aviation and for the most successful and profitable industry that we have.

4.38 am

Mr. James Hill (Southampton, Test)

I have followed the debate this evening, and I must declare, not an interest, but a loyalty. I served with British Overseas Airways from 1947 to 1958. I pioneered some routes to Australia and through central Africa. We have been talking about licences this evening, but all those routes had to be pioneered. They were not pioneered by any of the airlines which have been mentioned this evening. They were pioneered by Imperial Airways, British Overseas Airways and British South American Airways. Hon. Members will recall the dreadful tragedy of the loss of Star Tiger and other aircraft operating to South America. I did about 9,000 hours and perhaps I should not be taking part in the debate, because I probably have a bias towards British Airways.

Nevertheless, it is right for us to criticise the report of the CAA. I served on the Standing Committee that brought this monster into being and it is growing like Topsy and wants even more powers. Every airline will be held to ransom by the CAA if my right hon. Friend the Secretary of State for Transport does not make the final decisions.

The report must be scrutinised and we must have a full debate and a statement by the Secretary of State. The marketplace does not know where to go. Conservative Members want to cultivate the marketplace. We are wishing privatisation and the British Airways staff want to buy the shares, but they want security and they want to know what they are buying and what their options will be.

The staff of British Airways have done a good job. One of the turning points in the resuscitation of the airline was when the loyal staff broke the strike of the baggage handlers at London and, in their spare time, loaded and unloaded aircraft. That might not appeal to Labour Members, but it certainly appealed to me. Those staff were determined not to let their airline be crushed.

The staff have accepted redundancies and early retirement. Within the past few months their pension arrangements have been turned over and they have accepted that, for the sake of the corporation. There is tremendous loyalty among the staff.

Routes that were pioneered by the corporation are being taken away. It may be said that only a few routes are affected—those to Jedda and Dubai, for example—and that not much business will be lost, but that is only the beginning. In future, every time that British Airways makes a success of a route it will not know whether it will still have the licence in the following year. If the Secretary of State lets the chairman of the CAA have his way, British Airways will be under threat all the time.

I do not say that there is anything wrong with competition. Commercial markets have to be fought for. Airlines come and go; Air Florida has gone, Pan-Am is in difficulty and other airlines are having to come to terms with market forces.

If we can get through the privatisation, without involving the CAA report, British Airways will show what it is made of, we shall be proud of it and there will be no more difficulties.

4.45 am

The Parliamentary Under-Secretary of State for Transport (Mr. David Mitchell)

The fact that so many right hon. and hon. Members have remained in the Chamber through the middle watches of the night is eloquent testimony to the intensity of interest in the future pattern of aviation. Their speeches have demonstrated the powerful feelings of many hon. Members about the report of the Civil Aviation Authority. Accordingly, I congratulate my hon. Friend the Member for Birmingham, Hall Green (Sir R. Eyre) on having initiated the debate. The House has reason to be grateful to him, and Ministers are especially appreciative of the opportunity that he has given them to listen to hon. Members' views as we formulate our responses to the authority's recommendations.

The conclusions and recommendations which the authority reaches in its report fall into two basic categories. There are, first, those which appertain to the policies of the authority and, secondly, those which either call for action from the Government alone, or which need action by Government to expand the authority's future role. Those which fall into the second category are the more controversial proposals, as the debate has amply demonstrated.

The authority has recommended that routes be transferred, but there are no powers at present to enforce such transfers, and those that were used after the Edwards committee's report, for example, to set up British Caledonian as a second-force airline have long since elapsed. Whether or not powers are taken to effect route transfers, the authority sees a continuing need for it to take decisions that are designed to secure the sound development of the industry.

A number of hon. Members have spoken about access to London's airports. The authority has made two recommendations. First, it suggests that the Government reconsider the possibility of increasing available capacity at Heathrow and Gatwick. As the House will know, we have only recently reaffirmed our commitment to introducing a limit on air transport movements at Heathrow when the fourth terminal opens towards the end of next year. Accordingly, we shall shortly be issuing a consultative document setting out some of the options for implementing the ATM limit.

My right hon. Friend the Secretary of State and I must now decide whether and to what extent the case has been made for trying to change the structural balance between Britain's airlines. It is clear that there is no unanimity either among hon. Members or among the airlines themselves about a structural balance. It has been argued that, large as it is in domestic terms, British Airways is not especially large internationally. In any event, if faces an overseas competitor on each of its international routes. Moreover, it has been suggested that bilateral constraints usually make it impossible to add a second British carrier to many overseas routes. To substitute another British airline for BA adds nothing to competition.

Mr. Prescott

Precisely.

Mr. Mitchell

I am responding the issues which have been raised in the debate and I propose to continue doing so. The hon. Member for West Bromwich, East (Mr. Snape) asked me about the Riyadh appeal decision. The decision to uphold the authority's award of the Riyadh route to British Caledonain does not prejudice our responses to the authority's report.

Mr. Alfred Morris

rose——

Mr. Mitchell

It does not amount to implementation by stealth, as the hon. Member for Kingston upon Hull (Mr. Prescott) alleged in a letter to my right hon. Friend.

Mr. Prescott

It does.

Mr. Mitchell

It does not, and I shall explain why.

Mr. Morris

Will the Minister give way?

Mr. Mitchell

I cannot give way, because only three minutes remain before the debate must come to an end. Riyadh is a new route which has only recently become available with the opening of the new international airport there. Until recently only Saudia could fly it. It was open to the CAA to choose between the applicants for this new route on the basis of competing claims. As it was a new route, any decision that the authority made could not reasonably be held to prejudice its review. For the same reason, in supporting the CAA's conclusion, my right hon. Friend has not prejudiced consideration of the authority's report.

The hon. Member for West Bromwich, East attacked my hon. Friend the Member for South Hams (Mr. Steen) for having some sort of retainer from one of the airways companies. That comes ill from an hon. Gentleman who sits on the Opposition Benches with a retainer from a trade union.

Mr. Snape

rose——

Mr. Mitchell

The hon. Gentleman has taken up so much time that there is hardly a moment left for me.

My hon. Friend the Member for Saffron Walden (Mr. Haselhurst) said that there was no compulsion on the Government to accept the recommendations of the CAA. That is quite right, but nevertheless the authority has produced an important document which we must consider carefully.

Watching the debate has been like watching an aerial chess game in which the king is locked in combat with the knight and a bishop and their allies. Sometimes there were even attempts to change the colour of some of the squares. Hon. Members have asked for a decision, either tonight or before the House rises, and a statement from the Secretary of State. We will produce our decision as soon as we can. If we can do it before the House rises, we will. However, it would not be right to reach a decision in such a rush that it could not be given proper consideration. If that means that we have to make a statement after the House rises, I am sure that hon. Members will understand that we cannot wait until October, leaving all the operators in a state of uncertainty. I am sure that all those in the industry who wish to preserve the health of that industry —whatever their views—will agree with me about that.

Hon. Members have drawn attention to the interrelationship between route structure policy and airport development. Hon. Members representing Manchester, Birmingham and a number of other regional airports have made clear their view that the Secretary of State should take account of the effect of policy changes on the pattern of airports and the prosperity of the various airports that will be affected by his decision.