§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Douglas Hogg.]9.35 am
§ The Secretary of State for Transport (Mr. Nicholas Ridley)
This is an opportune time to hear the views of hon. Members on aviation policy. I hope the House will understand if I am a little reticent. The debate comes at a time when the Civil Aviation Authority has not completed its review of civil aviation policy, crucial decisions on London airports have not been made, I am about to consult on the air travel limit and there is a review under way of Scottish airport policy. For those reasons, I can say very little on those subjects now. There are also inquiries and reviews in which I am quasi-judicial, or have an appellate role, or where statute places responsibility primarily on the CAA, and on which I can therefore say nothing. Finally, the debate also comes at a time when the Select Committee which is examining airports is conducting its researches in the United States.
However, it will be an interesting exercise to listen to the hon. Member for Kingston upon Hull, East (Mr. Prescott) and the massed cohorts of Labour Members behind him and hear how the Labour party's policies on civil aviation are shaping up. It was not even mentioned as a subject in its election manifesto. It will be more interesting to listen to the views of my hon. Friends on this issue and that, partly through force of circumstance, is what I want to do. It is important to hear what hon. Members think of these important and historical issues, because we are on the verge of a new era in civil aviation.
It might help hon. Members if I set out the broad principles that we are applying to civil aviation policy and the problems that we face in ensuring its successful development. It will provide a background to the debate and raise questions to which the hon. Member for Kingston upon Hull, East will no doubt wish to provide his answers. My hon. Friend the Parliamentary Under-Secretary of State will be happy to answer any questions and deal with any points outstanding at the end of the debate, if he is fortunate enough to catch your eye, Mr. Deputy Speaker.
The central question which I ask the hon. Member for Kingston upon Hull, East is whether he believes in the benefits of competition between airlines. Or does it fall into that category of competition which Socialists describe 596 as wasteful? We start with the reality of a vastly expanding market for air transport. Since 1962, excluding the Soviet Union, the number of passengers travelling by air has grown more than fivefold worldwide. In Britain in 1965–66, the seven airports now owned by the British Airports Authority handled 14.5 million passengers. In 1983–84 they handled 45.9 million passengers. Air transport has brought foreign travel within the reach of a vast number of people. It is used increasingly as a mode of domestic travel, particularly by business travellers, and it has immeasurably added to the quality and convenience of life. I see no signs that demand will slacken. As the world emerges from recession, and as standards of living improve, I have no doubt that demand and the desire to travel will increase. We estimate that by the year 2000 100 million passengers or more will use Britain's airports. To me, that is the central fact.
Our policies—I hope the hon. Member for Kingston upon Hull, East shares this view — must be directed towards satisfying that demand and giving the traveller what he or she wants. Air travel is no longer the prerogative of the better off; it has become a form of mass public transport.
When one considers closely the civil aviation scene, what comes across most clearly is the phenomenal growth in the liberalised and competitive sectors. For many years charter travel has been regulated liberally, and the number of chartered services at United Kingdom airports more than doubled between 1972 and 1982. As for scheduled services, since we introduced a more liberal regime in the Civil Aviation Act 1980 and encouraged additional scheduled services from London to Scotland and to Hong Kong, traffic on those routes has grown by 10 per cent. or more.
The United States has completely deregulated its internal air services, with the result that fares are generally lower, the variety of services is enormous, ranging from no-frills, cheap fare services to high quality, high-cost services. There have been extraordinary improvements in airline productivity and the restructuring of air networks more closely to reflect what passengers want. At the same time, safety has not been compromised and there has been no wide-scale abandonment of air services to small communities. I accept that some services have succeeded and some have failed. Some carriers have failed, but others have grown in their place. In all cases, success or failure has been decided by the users of the service, not by bureaucratic diktat.
The evidence of the benefits of competition is overwhelming. Therefore, our first priority is to extend the scope of competition wherever we have the opportunity to do so. Europe is the obvious candidate. It is called the Common Market. We want a common market in European aviation, and the lessons, although not necessarily the detail, of the American experience could be applied fruitfully to Europe. We must live with the reality that some of our partners are reluctant to move quickly in this direction, but the defences are beginning to fall. The Commission's second memorandum on aviation offers a modest way forward, and a high-level working group has been set up to get some real progress on this and to report by the end of the year.
However, I want to move faster. In May I demonstrated the Government's resolve by removing the requirement on United Kingdom airlines to consult other EC airlines on any route before setting fare levels. I am trying to negotiate 597 more liberal bilateral deals. We have succeeded in the first instance. The hon. Member for Kingston upon Hull, East taunted me at Question Time the other day by saying that the cheap fares to Amsterdam were a gimmick for the European elections. I must disappoint him about that, and he will have to remove any reference to it from his speech.
On Wednesday I met the Dutch Minister of Transport, and we concluded a bilateral deal which allows country-of-origin pricing between the United Kingdom and Holland. Any airline designated by either Government will be allowed to fly on any route between Britain and the Netherlands and to decide for itself the frequency and capacity of its services. That means that the cheap £49 return fare between London and Amsterdam, proposed by British Caledonian, British Airways, Air UK and KLM, can go ahead as planned. Subject to CAA approval, Virgin Atlantic should be able to offer a £20 single fare from London to Maastricht. That is a real achievement — in my opinion, a breakthrough.
That will be the thin edge of the wedge for lower air fares in Europe, and British airlines are following our lead by fighting for lower fares to European destinations. On Monday, British Caledonian announced plans for one-way fares ranging from £35 to Paris, £40 to Frankfurt and £40 to Geneva. Those proposals are subject to the other Governments agreeing, which they may very well not, but they would cut European air fares on average by about half, compared with business class tariffs. Progress towards greater competition in Europe is inevitable under the pressure of consumer frustration and the interests of the airlines.
The Government stand firmly as the champion of the consumer. We are the flag carriers for lower air fares. I have received many letters from consumer organisations and others who support our initiatives. I hope that the hon. Member for Kingston upon Hull, East will add his voice, although not, as is his wont, from a sedentary position.
§ Mr. John Prescott (Kingston upon Hull, East)
Clearly I was wrong on Monday, because the initiative did not run into the ground. Can the Secretary of State say whether information about the sixth freedom services and the conditions of the agreement are available, or will be available, to hon. Members?
§ Mr. Ridley
I shall write to the hon. Gentleman with the full text of the agreement, which is rather complex and perhaps not ideal for debate. I am grateful to him for his remarks, and I am sure that he will join me in hoping that we can widen this initiative to the entire European Community.
Competition comes first in the Government's policies, but it must be fair competition, and the European Community must do its duty and act against state subsidies to airlines. Competition must be fair in other ways, which is why I asked the CAA to conduct a review of civil aviation policy and the structure of the British aviation industry, to explore all possibilities for increasing competition and fairness. The issues are so important to the development of competition and a successful British civil aviation industry that we need the professionals to give us their best assessment. The CAA has published a preliminary assessment. It is now consulting the airlines and we hope to have its final report soon. I shall not 598 prejudge the review by offering views of my own. I realise the great interest in the CAA review, and I look forward to hearing the views of my hon. Friends this morning.
To realise the full potential for market responsiveness and innovation, it is essential to transfer British Airways into the private sector. But the question of the balance in the industry is a separate issue from the privatisation of British Airways. If there is a danger inherent in the market strength of BA, it would apply even more strongly with the airline in the public sector than if it were in the private sector. Our plans for privatising BA are progressing extremely well.
I pay tribute to the hard work of Lord King and his staff in turning the company round so spectacularly. BA's latest report shows an operating surplus of £268 million in the last financial year. The deficit on reserves has been reduced from £401 million in March 1983 to £54 million in March 1984. A year ago it reported that its liabilities exceeded its assets by £221 million. Now it has reversed that position and has a net worth of £126 million. We look forward to seeing BA in the private sector next year.
As the House knows, the Select Committee on Transport is studying the future of airports. I set out the Government's position last month in the evidence that I gave to the Committee. Let me first deal with the three London airports. We have an expanding and increasingly liberal and competitive market in aviation, but it depends for its existence on a finite resource—London airport space. Where airport resources are in short supply, how do we develop our airports policy to cater for demand and to preserve and extend airline competition?
As a result of examining the problem, I have concluded that the British Airport Authority's London airports cannot be treated in isolation from one another. They are all part of one system, so we have decided against privatising them separately. We will be looking at all the other options for privatising them together or introducing private capital into their operations.
Meanwhile, two issues connected with London's airports still have to be resolved. The first is Stansted. This, as the House knows, is the subject of a public inquiry. The inspector has not yet submitted his report, and it would be wrong for me to comment on the subject in any way.
The second issue is the implementation of the 275,000 air transport movement limit at Heathrow, which we are committed to introducing for environmental reasons. I do not wish to comment on that now, as I shall shortly issue a consultation paper setting out the options for containing demand within that limit.
§ Mr. John Wilkinson (Ruislip-Northwood)
Can my right hon. Friend nevertheless assure the House that there will be no question—as has been suggested in the press —of a surcharge on landing fees or some restriction of an artificial kind upon the mainly independent scheduled carriers which operate domestic feeder services into Heathrow? Those carriers would be drastically affected were the 275,000 limit to be imposed when terminal 4 comes into operation.
§ Mr. Ridley
My hon. Friend will no doubt wish to comment on the consultation paper when he has had a chance to read it—which will be very soon. When a commodity is in short supply and demand exceeds supply, 599 one can deal with that situation by means either of the pricing mechanism or of the ration book. My party has usually felt more inclined to use the pricing mechanism.
§ Mr. Tony Favell (Stockport)
Is my right hon. Friend aware that there is a great deal of concern in the north-west about the future of Ringway airport, following the proposed abolition of the greater Manchester council? There is anxiety about Ringway's ability to compete with the three London airports, as it will have to do. Will my right hon. Friend look into the matter?
§ Mr. Ridley
Not only am I looking into the matter, but I shall say something about it at the end of my speech.
§ Mr. Anthony Steen (South Hams)
Is my right hon. Friend aware that the 275,000 movements limit at Heathrow is already on the verge of being breached? Is he further aware that one of the reasons for that is that the British Airports Authority has given permission to British Airways to provide a back-up service for its shuttle services, and that it has also allowed British Airways to increase the number of flights on the shuttle services to Edinburgh, Glasgow and Belfast, so that more and more British Airways aircraft are landing and taking off at Heathrow? There are also executive aircraft—two, three and four-seaters — landing there. How does my right hon. Friend square that situation with the point that the private domestic independent airline should not be squeezed out because the big national carrier is given preferential treatment?
§ Mr. Ridley
There are 275,000 reasons why the limit is under pressure, and each one of them can be something that one is in favour of, or opposed to, as a concept. There are helicopters, too. The very light aircraft do not count towards the limit, but there are domestic flights, British flights, foreign flights and flights of all sorts. The problem is very difficult. I hope that the issues are fairly set out in the paper. I am sure that my hon. Friend will wish to read it. I am sorry that it is not available now, but the date was not chosen by me. I look forward to hearing the views of the House on the paper when it is published.
The House will know that, in consultation with my right hon. Friend the Secretary of State for Scotland, I have initiated a review of the British Airport Authority's Scottish airports policy, which will examine the case for change. We expect the review to be completed by the autumn. Meanwhile, we are preparing the disposal of the Civil Aviation Authority's interest in several small Scottish airports to local authorities or private buyers.
In my evidence to the Select Committee I made it clear that I was considering new arrangements for local authority airports. It is Government policy, inherited from the previous Administration, that airports should not in general be subsidised. They should be operated on a fully commercial basis. Some of the local authority airports take a commercial approach, but more could be done.
Our present thinking is that we might legislate to require the larger airports to become public limited companies. A practical first step would be for local authorities to convert their airports into company form. That would bring a number of advantages—a formal management framework, Companies Act accounts, transparency of subsidies and a framework which would facilitate the introduction of private capital and allow some flexibility of ownership.
600 We believe that the introduction of private capital would result in sharper management of local authority airports. We are not, however, proposing to require its introduction, but hope that local authorities will come to recognise the advantages and will introduce schemes for involving private capital voluntarily.
Mention of ownership brings me to those airports which are currently owned by metropolitan county councils or in which those councils have an interest. The White Paper "Streamlining the Cities" suggested that MCC interests should be transferred to the new joint boards acting as the passenger transport authorities. Following consultation, however, I now propose to invite the district councils concerned to reach agreement on detailed arrangements for the transfer of MCC interests direct to them, and for the continued running of the airports.
I hope that they will see the advantage of establishing an airport company at this stage. The airport interests could then be transferred to the districts by order. Only if they cannot agree by a certain date would the MCC interests be transferred by order to the PTA. I hope that the districts will be able to reach agreement between themselves on how the MCC interests in airports should be transferred.
§ Mr. Prescott
I have listened with care to the interesting statement just made by the Secretary of State. Has this policy been adopted because those airports cannot be sold to the private sector, or because the Secretary of State recognises that public money will have to be used to maintain loss-making airports in metropolitan areas?
§ Mr. Ridley
Not all the airports make a loss. Some of them are very profitable, although some are the reverse. It is right that local authorities should be able to subsidise the loss-makers if they wish to keep them on, and to profit from the profitable airports which they have created. There is nothing in what I have said which directs local authorities to do anything, unless we legislate to cause them to make public limited companies. I am interested in transparency of subsidy, separation of politics from management, and proper accounting, so that we shall have all the pre-conditions for good management.
That is as far as the Government should go. It would be helpful if the district councils could own their share in metropolitan airports as at present constituted, so that they would have a direct interest in them, perhaps by holding shares. They would then be able to influence the conduct of the airports.
Finally, I should like to say a few words about the environmental impact of aviation. Air travel has brought inestimable benefits, but there have been costs to the environment from increased aircraft noise. As part of our concern for the environment, the Government are determined to bring relief to those affected by aircraft noise. We have maintained the ban on the use by British operators after January 1986 of jet aircraft which do not meet internationally agreed noise standards.
Some airlines have urged us to postpone that date, but we have refused. An EEC directive will extend the prohibition to other member states' aircraft from 1987 and to all aircraft using the Community's airports from 1989 at the latest. As a result, the number of people affected by aircraft noise at Heathrow, for example, could be reduced from more than 1 million now to fewer than 300,000 by 1990.
§ Mr. Michael Colvin (Romsey and Waterside)
As a result of that, could my right hon. Friend be persuaded to re-examine the number of permitted movements at Heathrow?
§ Mr. Ridley
I must be honest with the House. My predecessors gave the figure of 275,000 and I should not like to suggest that we are trying to get out of that just because it appears inconvenient now that we come to the time. It is right that these issues should be debated widely. That is why we are publishing the consultation paper. There are two sides to the argument and it is right that the paper should be properly aired, because the last way in which the problem should be solved is by simply refusing to deliver an obligation which Governments have undertaken.
§ Mr. Toby Jessel (Twickenham)
My right hon. Friend implied that only 300,000 people would be affected by aircraft noise after 1990. Does he agree that the figures that he gave are based on the so-called noise and number index, a formula which attaches more weight to the average peak loudness of each flight than to the number of flights? Does he agree also that the method could be out of date, as it was produced many years ago when there were far fewer flights? Does he further agree that it is the sheer frequency of flights that is annoying to people who live under the flight path? The index needs to be revised, and not too much reliance should be put on the calculation of 300,000 people.
§ Mr. Ridley
It is difficult to know what is the right measure of noise at an airport. It is also unfair simply to measure the number of aircraft movements, as some aircraft are infinitely quieter than others. We do not have an entirely objective and impartial measurement of noise. A mixture of factors must be taken into account and I hope that right hon. and hon. Members will address themselves to this important point when the consultation paper is published.
We have been the first to extend the noise certification requirements to microlight aircraft, which are a potent source of irritation in some parts of the country. Our Civil Aviation Act 1980 gave the CAA a statutory duty to take environmental factors into account when considering whether to grant air transport licences. I said at the beginning that there was nothing about aviation in the Labour party's election manifesto. There was nothing about it in its latest European election manifesto either, despite the fact that our policy here is producing real benefits for travellers. The Labour party's view of Europe extends only as far as the "parish pump", but there was something about aviation in "Labour's Programme 1982" which read — [Interruption.] I am about to read Labour's programme.Labour is certainly not opposed to low air fares"—I am glad to hear that, despite the double negative.Butand this is a substantial but—fares policies must be consistent with a licensing system".[Interruption.] — I have never known an Opposition spokesman who was so eager to barrack when quotations from his party's documents were being read.
§ Mr. Cranley Onslow (Woking)
As it is crystal clear that we shall not have the advantage of hearing from a spokesman for the so-called alliance, can my right hon. Friend tell us about its aviation policy—if it has any?
§ Mr. Ridley
As usual, my hon. Friend has bowled me out middle stump. I apologise profusely for not being able to give an answer, but perhaps the right hon. Member for Western Isles (Mr. Stewart) will be able to help us.
The lukewarm and qualified support for cheap fares which is implied in the quotation which I read sits a little uneasily with all the rhetoric that we have heard from the Greater London council and its amanuensis on the Opposition Front Bench about public transport fares. It just underlines the point that when the Labour party talks about low fares it means fares buttressed by crippling subsidies, burdened by regulation and institutionalised inefficiency. Competition is the way to provide "fares fair" fares. Bleeding the taxpayer dry is not, so may I just ask the hon. Gentleman to clarify exactly what sort of licensing system he would impose on air travel? Would it allow competition, especially on air fares? Would it allow consumer choice? Or would he relegate the traveller to the whim of the over-cartelised, over-subsidised and overregulated world which, thank heavens, is now slowly crumbling away in civil aviation, though it continues to reign supreme in the mind of the Labour party?
§ 10.5 am
§ Mr. John Prescott (Kingston upon Hull, East)
I shall answer some of the pertinent questions asked by the Secretary of State but I hope that the House will allow me to arrive at them when I had planned to do so. I do not intend to duck them.
I am as surprised as the Secretary of State at how this debate came about. I did not want a debate on civil aviation as so many reviews are taking place. I also do not want to damage the possibility of the House debating the conclusions of those reviews. Government business managers tend to tell us that, because we had a debate on a given subject fairly recently, it will be difficult to find further time to debate the reports. Several aviation people have asked me whether I called for this debate and I want to put it on the record that I did not.
Government policy is motivated by the privatisation of British Airways and the liberalisation of routes and fares. The Secretary of State showed that competition is almost an end in itself for the Government—it is not a case of judging what is best for British aviation. As the right hon. Gentleman has set so many reviews in hand, it seems clear that he has decided that competition, as he has expressed it, is by far the best way in which to achieve the best interests of civil aviation. The Opposition have considerable doubts about that ideological posture.
As the Secretary of State said, there is no doubt that aviation is at a crossroads. We face important changes, which civil aviation must take into account. However, I am sure that we all agree that British civil aviation has been a most successful transport industry. The fact that the Secretary of State envisages 100 million people going through our airports by the end of the century reflects the fact that they are already used by 65 million people. It is generally recognised that Heathrow is the crossroads for the international air network. That is strongly to the advantage of British civil aviation.
British Airways is our largest international carrier and we have a successful charter and innovating industry. We should recognise that. Civil aviation is a major employer, a huge earner of foreign currency and makes a substantial contribution to the balance of payments. Although there is room for improvement — the Secretary of State 603 mentioned some areas — the story of British civil aviation is successful. Much of it can be attributed to historical reasons, as is the case with shipping, with which I am much more conversant. However, shipping and civil aviation have some common characteristics. They are both international industries, but something that has happened to shipping could happen to British aviation.
Civil aviation has a form of regulated competition. Even the Secretary of State does not talk simply of competition — he talks of "fair competition". That is a value judgment. In shipping, it is felt that Russian shipping is not fair but that other forms are. The matter is not left to the market mechanism; even the Secretary of State admits that. As his trip to Amsterdam shows, Governments must agree to the regulations involved to achieve a lower fare structure. Historic conditions in transport have given us supremacy in shipping and in aviation.
Network systems and regular services are maintained by international agreement and a certain amount of price fixing is a predominant feature. Shipping has now largely moved away from conference systems to open competition and our position in the world fleet ownership league has dropped from first or second to eighth or ninth. When the Government came to office we had 1,200 ships. We now have only 600. The people who have benefited from British investment and development in that international industry have been those who emphasised the need for competition — mainly the Russians and the flags of convenience fleets—and who have broken the regulatory controls in that industry to Britain's great disadvantage. It is thus vital to consider the benefits and advantages of general agreements of one kind or another in international competition.
§ Mr. Colvin
As the hon. Gentleman will know, a large amount of the cargo that used to be carried by ship is now more profitably carried by air. Does he agree that that makes it equally vital to consider the needs of air cargo in aviation policy?
§ Mr. Prescott
The most recent figures from British Airways show the success of air cargo. My point was that those who argue against international regulations and controls tend to be those who do not have much of the market and wish to achieve a larger share, which inevitably tends to be to the disadvantage of those who dominate the various sectors. The national interest is thus a major factor in this context.
The rules required for international competition may thus be quite different from those needed in the domestic sector. Indeed, the EEC document on aviation argues not for the deregulation or reduction of fares internationally, which the EEC regards as extremely difficult to achieve, but for movement towards fare reductions for intra-European traffic, a matter to which the Secretary of State has been addressing himself this week. We must bear that in mind in formulating our domestic air policy.
It is clear that world aviation is not run on the basis of laissez-faire competition. As the Secretary of State has said, it is often controlled by Governments and maintained by subsidies because of the requirement to maintain national airlines. This is one of the main differences between the deregulation that has taken place in the American market and that which may be proposed in Europe because the position of federal states is quite 604 different from that of national states. National states will wish to maintain their own airlines, probably at great cost, as has been the case in the past few years, and in their national policies they will judge questions of fare reduction and competition against that background.
The subsidies put into the national airlines take account of the recent depression in the industry. IATA states that in 1979 the airlines made a collective loss of £4.5 billion but finds evidence now of a move towards small profits on a revenue of about £50 billion. That gives some idea of the scale of the industry and its international and domestic implications.
In my view, therefore, the EEC was right to make a distinction between the European Community and the international sector in terms of competition. As the report shows, the problems of moving towards some form of deregulation or fare reduction are considerable. I do not necessarily accept all the EEC conclusions, but it is clear that the concept of competition must be considered on a different basis domestically and internationally.
The CAA interim report shows that we cannot wipe the slate clean but must start from the existing interlocking airline systems, the dominance of certain carriers and the objectives that we seek to achieve in our aviation policy, taking into account the bilateral negotiations with other countries in which Governments are inevitably involved.
As the Secretary of State stressed, the criteria and the questions set out in the CAA review reflect the Government's desire to pursue a policy of competition and to change the CAA criteria for considering the granting and renewal of licences to recognise that user interest should be on a par with the balance of operators, contributions to the balance of payments and all the other matters emphasised in the interim review. The review shows that the CAA is well aware of the Government's desire for solutions favourable to its thinking in terms of route substitution and removal, liberalisation, fare reductions and so on and has asked for further observations from all involved. Unfortunately, we cannot contribute to that thinking through today's debate as I gather that the closing date for evidence was 15 May. Today's debate will thus not be taken into account in the report expected in mid-July.
§ Mr. Onslow
The hon. Gentleman must have known that the CAA was anxious to obtain evidence from any qualified source. Can he say whether the Labour party submitted any evidence and, if so, what that evidence was?
§ Mr. Prescott
We met the CAA through our various committees. I intend to conclude my remarks by dealing with Labour party aviation policy, as the Secretary of State asked about it. Nevertheless, even if it is not spelt out in our manifesto, it is made perfectly clear in our transport policy document, which the Secretary of State went on to quote after complaining that we had no aviation policy.
The Government seem to be ideologically obsessed with competition as the main way to safeguard British aviation interests internationally. They should bear in mind the important analogy with the shipping industry in this respect. It is clear from the interim report that the CAA is well aware of the Government's intention to privatise and possibly to reduce the size of British Airways. I hope that any such reduction is still an open question for the CAA, as one gets the impression that it has reached a 605 conclusion more in line with the Government's ideas about competition and privatisation than with the future good of British aviation, although I reserve my judgment on that until the final report is published.
In considering these matters, we must fully assess the experience of deregulation in the United States. I doubt whether the time allowed for the review has been sufficient for the CAA to do that. That experiment has been described as a considerable success, but recent assessments show that even developments such as People Express are never easy. Such airlines start off with an awful lot of razzamatazz about better services and lower fares, but in aviation it is the long-run costs that count, as Laker and other people found out.
I do not know whether Virgin Atlantic will take off today. I thought that the Secretary of State might tell us about that. I read articles about it in the weekend newspapers, as many other hon. Members may have done. It seemed that on Tuesday the airline would get its certification, on Wednesday the plane would be painted and on Friday it hoped to take off. In the meantime, there is already a legal suit between the owners of the corporation about the legal and financial validity of the airline's background. I only quote what was in the weekend papers for all to see. That is all happening at the start of the exercise, before the service has even got under way.
I was able to travel to the United States with my family merely because Laker forced down the fares of British Airways. Many ordinary people, not wealthy people, could travel to the United States. The present management of BA is making its own innovations. Lord King is an impressive and powerful man, but there is no doubt that the fare cuts, which are of considerable benefit to travellers, would not have been made without the intervention of Laker.
The long-run consequences of the Laker operation were considerable. They raise the question of how we get a fair approach to fares policy that encourages people to travel on airlines. The aviation industry is a massive growth industry, with great potential. At least the Labour party believes in the sense of a reduced fares structure in public transport that leads to many people using transport more often. However, unfortunately, the Secretary of State has constantly brought forward legislation, and will do so again on Monday, with the express purpose of increasing fares and chasing people from the public low transport system.
There is a relationship between the fare charged and the use of the transport facilities provided. That principle is as applicable to buses and trains as it is to planes. It is one of the important points to bear in mind when considering the economics of public transport, but unfortunately it tends to be blurred in the rhetoric of exchanges in the Chamber. There is an ideological difference of opinion in the House about the proper way to finance public transport to maintain maximum utilisation. That is not evident in the rest of Europe, with its successful transport.
The experiments with Virgin Atlantic and People Express show that there is a demand. The big question is what size the airline should be, what markets it should aim at and how many seats it should make available. The Secretary of State's view is that one should leave it to price and competition. He referred to the domestic services that 606 he introduced by overruling the CAA—for example, the British Midland flights to Scotland. It has been said in the debate that there is excess capacity. That is one of the other aspects of competition. Changes in Heathrow flight movements come up against the ceiling of 275,000 flight movements, for environmental reasons. In the aviation industry, one cannot move far in one direction without creating consequences for something else. One cannot simply leave it to price and competition. That is not the best way of determining the best use of limited public resources, and we cannot accept it.
The Government appear to believe that the privatisation of British Airways is essential. British Airways stated in evidence to the CAA:Privatisation of British Airways is irrelevant to the issues of competition or the sound development of the aviation industry in the UK.Therefore, the judgment about whether one should privatise is political. Privatisation is not an essential condition for maintaining competition or achieving the competitiveness that the Government wish.
§ Mr. Ridley
In case the hon. Gentleman was trying to pray me in aid for that conclusion, I should like to state the Government's position. I said that, whether or not British Airways is privatised, the issues that the CAA was considering would have to be decided. It had nothing to do with privatisation. When there is a competitive environment in this country and Europe, it would not be fair competition if British Airways were not in the private sector. Otherwise, the long, deep public purse is available to subsidise those who lose competition, and that is not fair to those who do not have access to it.
§ Mr. Prescott
That is a reasonable point, but I should have been more convinced if the Government had applied the same argument to the private Rolls-Royce when they said that one could not allow that industry to collapse and the taxpayer to finance the company. In the case of a major airline carrier or airport, the Government cannot stand aside and say that the market will prevail. There was the same argument about the port of Liverpool, when the Government said that it would collapse, and had to bring forward legislation for its financial operation. That is the thinking of the Selsdon men who seem to be coming back to the Tory Government. Such an understanding of transport might be fatal for the industry that the Secretary of State is in charge of.
Therefore, the case for British Airways being privatised has not been established, although the Secretary of State tried to do so. A former Secretary of State for Transport, Sir John Nott, introduced the Civil Aviation Bill in 1979, which contained the powers to privatise British Airways, but the case has yet to be made.
There has been considerable talk about the inefficiency of British Airways, but I do not hear anyone making that case now. The Secretary of State referred to the remarkable turnround in British aviation due to the people in the industry, including Lord King. The right hon. Gentleman readily credited all those involved in that turnround, which can be measured in the profits, assets and reserves. BA's annual report refers to progress in the past 10 years. There have been impressive gains and developments. The real problem arose in 1981, when there were considerable financial difficulties. However, we have to bear it in mind that much of the turnabout was due 607 to 20,000 people being made redundant. The Government have picked up the cost of unemployment involved. I congratulate those involved in the financial turnround.
There have been criticisms about the rigid fares structure, but BA has announced that it is attempting to negotiate reductions in fares in several areas. It was actively involved in negotiations on the Amsterdam route, but the Secretary of State had to intervene to break the logjam. Therefore, in fare structure changes, the corporation is not necessarily the master in its own house.
The quality of service varies. I know that one can now get breakfast on the shuttle to Scotland. The fare structure is settled, and competition will now be on menus and services, with problems of excess capacity and the limited space available at Heathrow. There are more domestic flights, leaving less space for international flights, which threatens the development of Heathrow, in its contribution to the international airline hub network.
Civil aviation policy, certainly up to 1979, was largely agreed between Labour and Tory Administrations. That policy was designed to support the major character of British Airways and the role of the private sector within those operations, and to use the CAA as the regulatory body for guidance on the objectives that were to be achieved.
That changed on the introduction of the Civil Aviation Act 1979, when the then Secretary of State made it clear that he wished to privatise BA and make the CAA less involved in the regulatory process from the operators' point of view and to be more concerned with the user. Less priority was given to decisions concerning network, cross-subsidisation, the balance of payments contribution and airport policy, and that has been reflected in a number of decisions made since then—for example, the desire of Government to get out of being involved in negotiations, said by the former Secretary of State to involve 110 bilateral negotiations.
The result was that the Government soon had to overrule the CAA. In its decision on Cathay Pacific, the Government just could not stay out of the matter. On domestic services at Heathrow, the present Secretary of State overruled the CAA on the competition aspect. When it came to the possibility of British Midland Airways flying out of Glasgow to America, the Secretary of State, in the name of competition, overruled the CAA because that would have undermined the interchange network of the gateway facility at Prestwick. The right hon. Gentleman was up against the problem of airport policy in relation to route policy. All of these matters are interconnected and the reality is that the Government cannot rely on the market price mechanism to decide such major matters of policy.
§ Mr. Steen
Taking that point a stage further, is it not a fact that British Airways can cross-subsidise its domestic routes from its international routes, whereas British Midland Airways, by being refused that licence to fly from Glasgow to New York, does not get the international traffic from which to cross-subsidise its domestic flights?
§ Mr. Prescott
The hon. Gentleman raises an important point, with which I intended to deal. The argument we hear about breaking up BA's routes is that somehow they will go to BCal. But what about the other seven private operators? Will they not say, "If there is to be a share-out of routes, why should it be a duopoly instead of a 608 monopoly?" That is the reality of the situation and, when it is considered in those terms, one begins to see how we could undermine the dominant role that British Aviation has been able to retain, for the reasons which I gave earlier. They are the major problems that flow from the ideas of privatisation and competition that motivate the Secretary of State's thinking in this matter.
I notice a distinct difference between what the then Secretary of State, when launching the 1979 Act, said about privatising British Airways and the apparent views of the present Secretary of State. For example. the then Secretary of State said on Second Reading of the Civil Aviation Act 1979:I do not propose that any part of British Airways should be broken up or sold off.He said:British Airways are not a monopoly. They have to operate commercially in an increasingly competitive market.He went on to make it clear that, in his view, only a minority of the shares would be sold, and added that the real desire to get at BA was nothing to do with civil aviation policy. He said:The Treasury will relinquish control of the airline's finances. The commercial borrowings of the airline will fall outside the Government's accounts." — [Official Report, 19 November 1979; Vol. 974, c. 39, 40, 47.]It is monetarism, the Government's economic policy, that motivates them to remove the £2 billion that was seen as necessary for the reinvestment programme in British aviation, money that simply becomes part of the public sector borrowing requirement. In that sense, therefore, the Government are motivated not by a civilian aviation requirement but by their pursuit of monetarism. In that sense there is a coincidence between the ideological and monetarist, or competition, policy which the Government are pursuing and the disastrous effects of that policy on the nation's industrial development.
The sale of BA constitutes a major threat to British civil aviation. It even represents a threat to the interests of the taxpayer. We note that BA is being packaged for sale. We also note that the results last week were announced in a way designed to attract the attention of the City so as to get the best possible price, which must be the aim of the Secretary of State, although his track record in the disposal of public assets is, so far, absolutely lousy.
We must not forget that the turnround which has resulted in BA becoming efficient was achieved at a cost of 20,000 people going on the dole. I am not an account ant so I cannot make an expert judgment of the accounts of the company, but I can pray in aid what I suspect and fear, and I can perhaps best express that fear by quoting from an editorial in Accountancy Age, to which I referred at Question Time on Monday. It said, having considered the accounts:Everything from aircraft to the flagging value of sterling is coming to the aid of the flotation party, with the net result that BA's year-on-year improvement looks significantly more dramatic that it actually is … The airline is looking towards privatisation in the near future and is indulging in an undignified scramble to make its results look as good as possible—not to the taxpayer but to a small group of government officials and stockbrokers.That was a serious charge, and I trust that the Secretary of State will give it serious attention. That statement may not carry great weight, but it is a question of experts making an assessment of the accounts of a corporation which is at present owned by the state.
§ Mr. Nicholas Baker (Dorset, North)
If privatisation is successfully carried through and thereby further investment in BA ends, with no further taxpayers' money being diverted to BA — money which might otherwise go into the social services or to other perfectly good ends —there would be a benefit to the taxpayer, would there not?
§ Mr. Prescott
That is the type of balanced judgment that each of us must make when we see the package that is produced by the Secretary of State. When considering the taxpayers' interest, we must remember that we have written off some of this company's capital. Admittedly, that included £160 million in respect of Concorde, which I well understood. Various sums have been given since 1972, but if the company is becoming profitable, it could be expected to pay a return on those sums.
We must also consider the payment by the Treasury of the sterling guaranteed exchanges, which are estimated at £200 million, for the purchase of aircraft and borrowing abroad. Nor must we overlook the public dividend of £180 million. When all those figures are added up, we are in the region of £800 million, and that, according to my reading of the press, is the kind of money that the Government can expect to raise from the sale of BA; I understand that between £800 million and £900 million is in view.
If the Government were to receive that money to offset the debts in which they are involved, it is clear that the debt equity relationship would be disastrous. In other words, the Government will be forced either to write off further debts or to come to an agreement that a percentage of the money that they receive shall remain with the company so as to secure the sale. The timing of the sale is crucial in that.
These matters are of great concern because the rip-off of the taxpayer has been evident, as the Public Accounts Committee has readily shown, in relation to the selling of British ports, of hotels, in regard to the proposition affecting Sealink, and now aviation. There is every reason to believe that the desire to rush the sale of BA could be to the disadvantage of the taxpayer.
If BA has been returned to a profitable state, the British taxpayer, who has carried BA through its period of difficulty, should begin to benefit. Now that BA is a more efficient organisation, as everybody agrees, the British taxpayer, rather than those who buy into it, should benefit.
The challenge that is now placed before us by Sir Adam Thomson in his "blue book" in relation to the routes that he seeks to purchase at a charge of £200 million raises an important political question. It also raises important issues about the size of BA and whether other private operators are likely to demand their share of what is going. He poses another difficult problem — his solution to the BCal Gatwick versus BA Heathrow argument. The unions have estimated that perhaps 8,000 jobs could be affected, and that is causing great concern. It also reduces Heathrow's ability to compete with other international airports, and that fact cannot be ignored. There is a distinct possibility that we will direct the movement of British airlines to other airports. We must remember that when BA moved from Heathrow to Gatwick it was to the advantage only of the Spanish operator; it did not help BA or British civil aviation. We must not ignore the consequences of such moves.
We must be concerned about airport policy, especially its effect on regional airport development. A powerful case 610 has been put forward by the Campaign for the North. It clearly questioned the criteria for airport development, which must take into account the North-South disparities, regional development, jobs and the deprivation in certain areas. Those factors cannot and should not be ignored.
The problem will be made worse by selling the British Airports Authority and other municipal authority airports, where the profit motive will predominate rather than the maintenance of the infrastructure of the airport system, especially in Scotland. The Heathrow limit of 275,000 movements and the Minister's commitment to reduce them if they go above that figure begs the question. What criteria will be used to reduce either domestic flights, helicopters or international trading flights? That is a crucial question.
The decisions of the CAA are relevant to the Government's decisions on infrastructure problems, airports and all the interconnected problems. All that can be seen in the Amsterdam deal. I do not want to be churlish towards the Secretary of State. I said during Question Time on Monday that the deal was running into the ground. I expressed an opinion, but I was wrong. The Secretary of State intervened with the Dutch Minister to break the logjam, and cheaper fares can now apply. However they are measured, fares in Europe are too high. It is not acceptable to argue that they are at the right level. I welcome the fact that BA, together with British Caledonian, is to the fore in attempting to reduce fare levels, but the reality is that we need the agreement of the other countries involved. I await details of this agreement before making a final judgment.
But if we have given KLM the right to land anywhere, it is possible that it will be in direct competition with BA and other British carrier routes, as the Dutch Minister claims. Of course, KLM is not on the same scale as BA, but I remind the House that in the north we can see the adverts saying, "It's better to use Schiphol than Heathrow". Under the new agreement, it will be possible for KLM to develop the hub concept for the development of Manchester and the northern airports to the distinct disadvantage of development of British aviation policy. I reserve judgment on that matter, other than to say that the pursuit of competition for competition's sake will produce major disadvantages for both the airline operators and airport development.
The serious doubts about the international carriers' role and the share of routes for a privatised BA must be challenged. The reduction of the fare structure may have considerable consequences in aviation policy generally. The Labour party does not believe that simple reliance on competition and market forces will achieve a sensible solution for air transport services. The Government's policies have led to wasteful duplication of some services and the neglect of others. Increased capacities and the possibility of fare wars could undermine the financial viability of airlines.
The Labour party is certainly not opposed to lower fares, as we made clear in our transport policy document, but they must be consistent with a licensing system that ensures the sensible utilisation of capacity, the maintenance of a necessary network of service, the highest possible safety standards, the development of employment on the basis of satisfactory terms and conditions and adequate investment for future development in British civil aviation based upon a major public section carrier. The Labour party's policy is now on the record.
611 The Government must think long and hard before damaging the prospects of the industry, possibly for the remainder of the century. We await the civil aviation review with some anxiety and trust that this House will be given an opportunity to debate its conclusions before the Government act.
§ Mr. Cranley Onslow (Woking)
I shall try to be brief as many hon. Members wish to speak, and a great deal of time has been taken up by Front Bench speeches.
As this is a debate about civil aviation policy, I hope that my right hon. Friend the Secretary of State will not mind my saying that I am sorry that he did not say anything about safety, which should always take priority in our considerations, and especially about the recent CAA report on helicopter airworthiness. Perhaps my hon. Friend the Under-Secretary of State will find time to mention that important document when he replies to the debate.
Reading between the lines of the press release, the House may share some of my anxieties. It states:The greater part of the report is concerned with the long-term improvement of existing airworthiness standards which will affect the next generation of helicopters.Surely that is saying that the present generation is not as safe as it should be. My right hon. Friend knows that that view is held by the operators, among others. I do not speak on behalf of any particular operator, although the House knows of my interest in this section of the industry. It is important that action is taken because some things are seriously wrong in helicopter safety. It is the Government's responsibility to ensure that appropriate action is taken. I hope that my hon. Friend the Under-Secretary will endorse that.
The hon. Member for Kingston upon Hull, East (Mr. Prescott) raised the question of competition. Telescoping my argument considerably, I can assert, with a fair degree of accuracy, that the only people who make money out of transport are the travel agents. In due course, everyone else will lose part or all of their shirts—perhaps because of the way in which innovation comes in and the way in which the market changes, but principally because in the travel business the consumer always wants it cheaper. As consumers have more votes than the providers of transport, in the end Governments try to gratify the consumers. That is a good thing, but it can be carried to excess.
We must constantly bear in mind that the Government have a duty to ensure not only that where services are provided they are safe services, but that there is not unfair or cut-throat competition. That is recognised in the legislation on monopolies and mergers and in other legislation to protect the consumer against his natural desire to get something for less.
It is against that background that I want to say a few words about the policy that I hope the Government are beginning to formulate. I am not here to make a particular point on behalf of British Caledonian. Other hon. Members may do so, and I look forward to listening to them. It will be in nobody's interest if, at the end of the day, we have a British aviation industry in which BA and British Caledonian have giant status and use it to lean on the small man. Our objective must be to ensure that fairness prevails.
I admire the job being done by Lord King. I only wish that he had been available in 1970 when it would have 612 been possible to make an impact. The lost years in between are a matter of great regret to anyone who has studied the British aviation industry. I hope that the new commercial drive in BA will not be allowed to go too far. I am not confident — and I am not sure how many of my hon. Friends are confident — that BA can be relied upon always, and without supervision, to compete with total fairness.
The chief executive of British Airways recently 'wrote a letter to the Daily Telegraph. Hon. Members have received an enormous amount of mail on the subject and I garnered the following grain from the chaff. The letter, published on 1 June, said:Any suggestion that British Airways could use its resources to undercut competition by cross-subsidy ignores the vital fact that to do so would be costly and extremely damaging to group results, hardly the conduct to be expected of a privatised concern exposed to the pressures of the market place.The letter concludes:How interesting it is that now that our airline is strong and profitable and dedicated to serving the consumer and the national interest the complaint should be that British Airways is too competitive.The complaint is not that British Airways is too competitive, but that it is competing unfairly. We want a guarantee that, when it is privatised, it will not be able to do that. I should like it to stop now, because the evidence is profoundly disturbing.
Yesterday I met the managing director of one of the successful independent airlines. He said that when gathering quotations for charters for the 1985 season he discovered that British Airways was undercutting the average of the market by at least £1 a seat. He said that that was explicable on one of two grounds—either that BA knows nothing about the market, or that it is going in for predatory financing.
I give British Airways the benefit of the doubt. I am sure that it knows what it is doing, and therefore predatory financing must be involved.
§ Mr. Onslow
I do not need to.
The British Airways report and accounts, which discusses British Airways Helicopters Ltd., states:The outcome for the financial year was a drop in revenue and the loss of some long-held contracts to fierce competition.The report then relates the attempt that the company has made to expand markets overseas. It says that the Boeing Vertol fleet representsthe largest single commitment for the Engineering Department".The report continues:While continuing to look for overseas opportunities that will lead to profitable growth, the company recognises the importance of the North sea".I do not criticise British Airways on behalf of any of its competitors, but the House is entitled to the facts. I hope that hon. Members will accept that I am in a good position to give the House those facts.
Most people who watch the market agree that British Airways Helicopters Ltd. has not made a proper profit since 1981. Its operations may have shown a profit above the line, but not on the bottom line, and the report admits that revenue is dropping. Competition for overseas work is intense and prospectively very unprofitable, yet British Airways Helicopters is looking in that direction.
Those who observed President Reagan's tour of Northern Ireland will have noted that British Airways 613 Helicopters used Chinooks to carry the President's retinue. Of its six Chinooks, two are employed on contract, three are surplus to requirement and one is being repaired, probably after having been ditched. We should ask whether a sensible business man would continue that operation, or run it down and dispose of it.
If the company intends to continue to try to compete and win business by predatory methods, we are entitled to question that policy. There is no doubt that in many important respects, British Airways Helicopters, just as British Airways Air Tours, enjoys a signficant set of advantages in insurance rates in the way that it can spread overheads and in the financial write-offs that it can make.
It is not surprising that, when the independent airlines approach us about the formulation of civil aviation policy, they draw upon such evidence. Mr. Michael Bishop, Mr. Fred Newman and Sir Adam Thomson, who are intelligent and competent business men, have reason to ask how they can trust British Airways to be the arbiters of what is fair and what is unfair competition.
I hope that my right hon. Friend will bear in mind that it would be bad for the air transport industry as a whole and for the consumer if it were possible for one major company, or perhaps two, so to dominate the market that, by unfair competitive methods, they drive out companies which are entitled to a chance to operate under the rules of fair competition.
§ Mr. Donald Stewart (Western Isles)
I agree with the last point made by the hon. Member for Woking (Mr. Onslow). I intend to make a brief speech, because of the number of hon. Members who wish to take part in the debate. It is odd that we are having the debate today, in view of the reviews and the work of the Select Committee in the pipeline, but it may be useful for certain markers to be put down.
The Secretary of State said that the Select Committee was examining the major airports, but that the smaller airports, particularly in Scotland, were being reviewed by the Civil Aviation Authority. He said that sales to local authorities or private buyers were being considered. There is no possibility of the Western Isles island council obtaining the finances necessary, because of Government cuts. The council is having difficulty financing social services and education. There is not the slightest possibility that it would even consider purchasing an airport at which only four scheduled departures and arrivals take place each day. A number of charter flights use the airport, but not regularly. It is ludicrous to suggest that it might consider purchasing the airport. Private buyers are equally unlikely to be interested, because there would be nothing in it for them.
I welcome the return to profitability of British Airways highlands division. Complaints have been made over the years about the level of fares. For instance, I objected over a long period to the fares on the Viscount. On the flight from London to Inverness the traveller paid 8p per mile. When the identical machine was flown from Inverness to Stornoway, the cost to the traveller went up to 16p per mile — exactly double. That is unacceptable within a nationalised service.
I have no strong view about the Government's decision to sell British Airways. That is Government policy and I 614 am not opposed to privatisation in principle. Competition has already improved British Airways' services within the United Kingdom. However, the airline should not be sold in a manner that turns a public monopoly into a private monopoly.
The Secretary of State referred to the danger in the market strength of British Airways. As it has 80 per cent. of the market, I can see the point of that. The hon. Member for Woking referred to two airlines, but the main danger lies with British Airways, with its lion's share of the market. Route licences, for example, are public resources. They are not tied for all time to the potential purchasers of shares in the new privatised British Airways. The opportunities in the new situation must not be confined to those who may buy shares. Nothing will accrue to the public interest by a new British Airways with private capital on its present scale.
The Secretary of State referred to increased competition and fairness. That is the hub of the matter, otherwise the operation will achieve no advance for the public interest and for the air traveller.
§ Mr. Michael Colvin (Romsey and Waterside)
Along with the Civil Aviation Authority document "Consultation on airline competition policy", there came a letter which said that the authoritymay decide to revise some of the policies set out in its 1981 Statement — in particular those on competition and substitution.The arbitrary substitution of one route for another, or rather the dogmatic carve-up of British Airways route structure to try to encourage greater competition, is probably the most controversial subject that will exercise our minds in the debate, and I wish to concentrate my remarks on that key question.
The debate outside the House, which has been extremely active, has been led by British Caledonian, but it is fair to say that it has been well supported by a number of other private operators, and, rightly, free enterprise companies see this as a golden opportunity to have a go at British Airways. They will never get another chance like it. One can hardly blame them—they have a duty to their shareholders and bankers to try for a better slice of the business.
I agree with my right hon. Friend that a climate must be created in which British Airways can become more efficient in order to improve its international competitiveness. It has another prior objective, which is the privatisation—I should say denationalisation, because I think that privatisation is a dreadful word—of British Airways. The trouble is that having two targets leads to difficulties. If one tries to hit both at the same time, one probably finishes up by missing both.
I am sure my right hon. Friend will agree that, when he comes to consider civil aviation competition policy, if he puts the interests of the passengers first, the decisions which are made are also most likely to be in the best interests of everyone else concerned in civil aviation, and that includes the shareholders in the companies, because civil aviation is, above all, a service industry. As we have seen with British Airways, a little bit more of the fresh air of competition blowing through the market has led to a marked effect on the service that it has given to passengers.
615 A catalyst has been the objective of denationalisation, and the improvement in British Airways services has been brought about partly by the determined and aggressive leadership of Lord King, to which reference has already been made by hon. Members, and partly by the realistic way in which British Airways staff at all levels have joined in tackling its appalling overmanning problems. I agree that that has been done at a price to the taxpayer. Nevertheless, it has been achieved without any industrial unrest, and it is incumbent on us to congratulate the staff on the co-operative way in which they have led the drive for higher productivity and competitiveness. That is really the key—competition—as hon. Members have said.
I should like to give an example of the way in which the proposal to denationalise has persuaded British Airways to pull up its socks. The introduction of a competitor on British Airways shuttle routes to Edinburgh and Glasgow, brought about after an initial loss of custom, led to an end of the old minimal standards. Today, one has British Airways super shuttle services with breakfast, hot drinks and a free bar. It is significant that the total number of people flying between London and Edinburgh and London and Glasgow on the competing companies routes is growing more rapidly than at any other time. This is the effect of competition — mutual encouragement to improve.
What makes no sense to me is the proposal that a slice of British Airways routes should be compulsorily sold off to other airlines. That to me would be a Socialist sort of intervention which would emasculate an earning potential of a very clear success—precisely the sort of thing that the hon. Member for Kingston upon Hull, East (Mr. Prescott) would do if he were in power.
I should like to quote from what The Sunday Telegraph had to say about this on 10 June when Ian Watson, the city editor, wrote:The remaining threat to a successful privatisation early next year of British Airways is if the Government is swayed by British Caledonian's offer to snatch 20 per cent. of BA routes.He continued:The questions that the Government needs to consider are these: Is there any point in just handing routes over to another airline? How does that improve competition?I do not think that we have yet been told the answer to that question.
§ Mr. Colvin
There are plenty of other companies where part of the business makes a loss and other parts make a profit. I suppose that the retail trade, with the practice of loss leading in a supermarket, is as good an example as any. That to my mind is good marketing. No airline route will always be profitable. There are ups and downs. In any business — and civil aviation is no exception — often the successful routes have to carry those that are not so successful.
§ Mr. Robert McCrindle (Brentwood and Ongar)
In the light of my hon. Friend's reluctance to agree to transferring routes, as British Caledonian has suggested, may we have his view on the point made by our hon. Friend the Member for Woking (Mr. Onslow) on the freedom which that situation would give to British Airways, if it chose to do so, to encourage predatory pricing, to the disadvantage of the independent carriers?
§ Mr. Colvin
I think that predatory pricing is something that already happens in many businesses. It is part and parcel of the business, and there is no reason why a successful business should not undertake an aggressive pricing policy. When British Airways is in private hands it will no longer be a state monopoly, and, in any case, simply by moving British Airways and substituting another private company will not solve the monopoly problem.
§ Mr. Favell
My hon. Friend mentioned the good work of the employees of British Airways in recent years. Does he agree that it would be a poor reward for those employees if routes were hived off, particularly from provincial airports such as Manchester, where 1,000 employees of British Airways are concerned about their future?
§ Mr. Colvin
I agree absolutely with my hon. Friend, and I am glad that I have a few more allies on the Conservative Benches.
Handing over an air route to a different operator gives no extra choice to the customer. Swapping one airline for another adds nothing to consumer choice. What may well be needed is more competition between airlines, and that means more than one British airline operating on certain routes, bringing the passengers the benefits of true competition through real choice.
I wish to quote from British Airways annual report and tell the House precisely what the chairman, Lord King, has to say about this:If other British airlines wish to step up their existing competition with us on more routes they are, and always have been, free to seek licences to fly with us to destinations of their choice. We are willing to compete on all of our routes.In fact, British Airways already competes with more than 200 companies internationally.
§ Mr. McCrindle
Will my hon. Friend tell the House it is possible for a second British airline to enter into competition with British Airways on a foreign route when there is a pooling agreement between the foreign airline and British Airways which effectively renders further competition from a British airline impossible?
§ Mr. Colvin
It is not impossible, with respect to my hon. Friend. It is difficult, but it is certainly not impossible. Pooling is one difficulty, and the bilateral agreements with foreign countries is a problem, but it can be done. Within the European Community, for a start, there is tremendous scope for discussions with other partners and airlines in Europe as part of the drive for lower fares to carry out just such negotiations and to reach agreement so that there can be more airlines competing on the same routes. After all, in Europe one of the main difficulties is that, even if we privatise British Airways, we are still competing with nationalised airlines on many of the European routes.
In tampering with the route structure, British Airways could put privatisation out of the question for a number of years. The investors would want to see how the new organisation — for that is what it would be — would prosper over the next two or three years. They would not be really interested in investing, because they would suspect that what the Government could arbitrarily do once —to interfere with the company's assets—they could do again, and the potential investors would be absolutely right.
617 On 17 June an article in the business column of The Observer said that my right hon. Friend the Secretary of Statecan hardly hand out BA's route network (its effective growth factor) with one hand and expect shares offered to the public with the other to attract a stampede.The Daily Express said:Plans to privatise British Airways could be grounded even before they hit the runway if the Government takes away some of the airline's profitable routes.The Daily Express is absolutely right. Conservative Members want to see British Airways set free, able to conduct its affairs without the stifling hand of bureaucracy. The reasons are clear. First, the customer will benefit from further improvements in services. Secondly, the nation will gain as British Airways' considerable overseas earnings—more than £500 million a year net gain to invisible earnings—increase as the airline grows. Thirdly, there will be the benefit of the example to the nation of the great turnround achieved under the new management that my right hon. Friend the Prime Minister has put in.
All that is part of the new sense of realism that prevails in so much of British industry since the Conservative party took power in 1979. As recently as 1981, not only were the financial results of British Airways poor, but the standard of its services and the attitude of some of the staff were no cause for pride. Now, under lively leadership, the standard of service has risen, productivity was up by 9 per cent. last year, there was an operating surplus of £268 million, and £106 million of interest was paid on the airline's borrowings. That is not bad.
There is no doubt that the reduction of staff from 58,000 to about 38,000, the elimination of wasteful ways and the reduction in the aircraft fleet from some 250 aircraft to only 150 have all contributed to the notable success of British Airways. How foolish it would be to turn off such a success story just when Lord King and his dedicated team have demonstrated that they can bring home the bacon in successful competition with well over 200 airlines round the world.
When British Airways is privatised, as, I believe, is proposed, the Government will gain by being relieved of the responsibility of guaranteeing the airline's commercial debts. The point made by the hon. Member for Kingston upon Hull, East about the public sector borrowing requirement is valid. We know that the interest and due payments have all been made in full by British Airways.
§ Mr. David Ashby (Leicestershire, North-West)
Does my hon. Friend agree that British Airways is starting off with the great advantage of so much of its capital debt being written off already? It has an advantage over the private airlines, and it is public money that is being written off.
§ Mr. Colvin
I agree that BA is starting with a great advantage. As the Irishman said when asked the way to Dublin, "If I were you, I wouldn't start from here." It is a fact of life that BA has had an enormous slice written off, but we do not want to have to write off any more, and that is why it is being privatised.
After privatisation, BA will be free to make its own way, guided by professional, commercial and proven leaders, as has indeed been the case under this Administration. Surely nothing is less suited to the grey 618 hand of the civil servant than an airline. In making his final decision, I think that my right hon. Friend the Secretary of State will accept that BA, by its own efforts, has changed itself from a lame duck into a golden eagle. Now is not the time to clip its wings.
§ Mr. Sydney Bidwell (Ealing, Southall)
I welcome much of what the hon. Member for Romsey and Waterside (Mr. Colvin) said when he expressed caution about the possibility of breaking up British Airways. My prime concern today is to put to the House what I understand to be the collective view of workers in the aviation industry.
However, I should like first to remind the House that I have certain credentials for speaking in the debate. I am sorry that the other members of the Select Committee, which is currently studying the financing and management of the British Airports Authority, are not here. I believe that they are in the United States, although I am not sure whether they have got there yet. They want to see whether any lessons can be learned from the American experience. Last week, they were in Japan. However, I was not there, because the powers that be in the House said that they were not prepared to finance all the members of the Select Committee in carrying out an agreed programme involving a visit to Japan first and then the United States. I had a particular interest in wanting to witness the Japanese experience, but instead hon. Members now have the good fortune of hearing my voice here today.
I am, of course, disappointed that more of my hon. Friends are not here, but there are many reasons for their absence. Many of them have homes and constituencies in the north and have to travel enormous distances. They earmark Fridays for activities that they cannot take part in from Monday to Thursday. Indeed, from Monday to Thursday they are the most avid of attenders. At present, I seem to be the sole Back Bencher here, if one overlooks the presence of the hon. Member for Stockton, South (Mr. Wrigglesworth).
I should declare another interest, which is that I am sponsored by the Transport and General Workers Union. I served on the Transport Committee throughout the last Parliament and during the first year of this Parliament. I also worked for the Great Western rail company—which dates me a bit—and then for the nationalised railway industry. I often hear Tories talking about those days, but they are a bit naive about them. They claim that there was competition among the various railway companies, but before nationalisation that was far from being so because they carved out agreements with one another.
It seems that airline companies are bound to act in a similar way to those rail companies. Apart from the elements of competition that exist, they have interests in common. Those involved meet, and may even play golf together. In some instances, they may share the same freemasons lodge. Inevitably, they will swap notes and come to certain mutual arrangements that do not damage them. That is true whether we are talking about state arrangements with a little bit of side competition, or a gigantic and privileged company such as BA. That is inevitable, particularly when it comes to route competition. That is why the Civil Aviation Authority's activities have been indispensable.
The development of British Airways is not the object of the Select Committee's current inquiry. I hope that the outcome of its inquiry into airports will eventually lead to 619 some word of caution over what the Secretary of State apparently wants to do. I also hope that common sense will prevail. Indeed, so far it has. The work of the last Parliament overlapped, to some extent, with the work of this Parliament. As a result of the election, there are new members on the Select Committee, but there are still quite a few who served on it during the last Parliament. The Committee managed to kill the privatisation of heavy goods vehicle testing, although it had two Secretaries of State for Transport to contend with. The proposed privatisation was investigated following the proposals of a Conservative member of the Committee. He was alarmed that Tory Right-wing doctrine was overtaking common sense but, of course, he never expressed his feelings in that way.
The Committee decided to search out the truth. It went in search of people's feelings and it could not find anyone — it approached small operators and employees in virtually all sectors of the haulage industry—who was in favour of the proposed privatisation. I do not think that many could be found who would express themselves in favour of the privatisation of British Airways or the onward march of privatisation generally, which has failed dismally in so many instances, especially in the local authority sector. We are all aware of the sloganising against direct labour forces and Health Service laundry services, for example. The privatisation of these services has led to disaster and sub-standard performance. It is noteworthy that the Conservative-controlled authority of Barnet, in which the Prime Minister's constituency falls, has been reluctant to privatise its services in the helter-skelter approach that is urged by Right-wing members of the Tory party.
§ Mr. James Couchman (Gillingham)
Will the hon. Gentleman give the House some examples of areas in which the privatisation of Health Service laundry services has failed?
§ Mr. Bidwell
I am not prepared to be sidetracked. I can pass on to the hon. Gentleman the details that have been collected by the trade union movement, especially by the Trades Union Congress. I advise the hon. Gentleman to speak to Health Service workers. He should ask them what they feel about privatisation.
My principal task is to convey to the House the feelings of workers in the civil aviation industry. I agree with everything that was said by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott). He might be aware that there was a shop stewards' meeting at one of the hotels near Heathrow airport last Monday. I attended the meeting with the national aviation officer of the Transport and General Workers Union, Mr. Martin. The meeting produced the following motion:This meeting of British Airways/British Airports Authority Shop Stewards totally opposes the Government's short-sighted and doctrinaire policy of privatisation, especially its proposed sale of B.A. and B.A.A.To prepare the ground for privatisation British Airways has cut routes, sold off valuable assets and profitable subsidiary operations, and destroyed thousands of jobs. It has done so not to improve the level of service to passengers but to make the company an attractive proposition to speculators.B.A./B.A.A. Shop Stewards deplore this treatment of the nation's flag carrier.Stickers that express opposition to the proposed privatisation are appearing in cars and are becoming more numerous as time passes. If the Under-Secretary of State 620 would like to have one, I shall be quite willing to pass one to him. One sticker states "Don't sell the world's favourite airline". When the public realise what the Government are up to, I believe that they will take the same view as the shop stewards in the civil aviation industry.
The motion continues:We believe that the British taxpayer, who has invested heavily in B.A. and the B.A.A., is being short-changed by a Government for the sake of political dogma. And we believe that workers in the industry, who have given years of loyal service, are being seen as no more than expendable figures on a balance sheet.We therefore resolve to launch a campaign of action against the privatisation of B.A./B.A.A. The objective will be to keep B.A./B.A.A. as publicly owned and publicly accountable bodies.The campaign will begin immediately with a series of shopfloor meetings. All B.A./B.A.A. workers will be asked to write to the Secretary of State for Transport and lobby their M.P.s. There will be lobbies, meetings and demonstrations.Our message to the Government and to Management is clear. We will do all that we can to stop the sell-off. British Airways and the British Airports Authority will not be privatised.That is a straightforward declaration. I shall be pleased to listen to any Conservative Members who represent constituencies near airports if they can claim that their constituents are greeting the proposed changes with glee or enthusiasm. We were somewhat encouraged by the opinions expressed on the Floor of the House by wet Tories when we discussed the Government's proposals for the GLC. I do not know whether other Tories can be described as "dry". I like the term used by The Guardian, which is "and". I believe that the Secretary of State for Transport falls into that category. He expressed his views on privatisation long before he had the good fortune to be selected by the Prime Minister to become the Secretary of State. He is clearly an and Tory and a member of an ever-expanding circle within the Cabinet.
There are some more rational elements in the wings of the Tory party; I doubt whether the right hon. Member for Old Bexley and Sidcup (Mr. Heath) would see eye to eye with the Secretary of State. When the right lion. Gentleman was Prime Minister he sacked the present Secretary of State, who was then a junior Minister.
§ Mr. Ridley
I apologise to the hon. Gentleman for having only recently re-entered the Chamber. However, I wish to make it clear that I refused the position which was offered to me by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). It was the other way round from what the hon. Gentleman suggested.
§ Mr. Bidwell
We shall have to refer to the history books. The right hon. Gentleman must agree that in the upper Clyde there were some extremely unkind thoughts about him when he was a Minister in the Heath Administration.
The right hon. Gentleman should appreciate that historically British Airways has occupied a dominant position in the market, internally and externally. That was the result of the way in which it was formulated and expanded. But the workers are fearful of what lies ahead. The employees of the British Airports Authority and British Airways are equally fearful. I represent a constituency close to Heathrow airport, and many of my constituents are employed at the airport. My well-known constituency embraces Southall, which is my birthplace. Many Asians work in the airport and with British Airways 621 in many capacities, some of them doing very menial work, as one will observe if one flies from Heathrow. Therefore, the airport is a major employer.
§ Mr. Bidwell
I shall give way to the hon. Gentleman, because I regard him as one of the more rational Tories and because he has a constituency close to the airport and therefore will no doubt be making vigorous representations on behalf of the workers.
§ Mr. Ground
I am obliged to the hon. Gentleman. As he said, we have neighbouring constituencies. Have his constituents who work for British Airways welcomed the profit-sharing arrangements that they have begun to enjoy just this month? Does he welcome this aspect of the change?
§ Mr. Bidwell
I do not mind profits being shared among the workers if that is meaningful, powerful and extensive enough. Workers will not refuse such arrangements, as they are not in a position to do so. However, as Socialists, we want to see massive worker participation so that they have a hand in the distribution of the profits and a place in policy making and planning. We have gone some way towards that in British Airways, but there is much further to go. As Socialists, we are not opposed to a continued increase in worker participation in the management until both sides work equally together.
The fear for the future is felt not just by the lower-paid workers but by those on higher salary rates. Naturally, they will do their level best to make a success of a privatised British Airways. The workers fear for their conditions of service if more routes are hived off to other operators. They wish for a continuation of their conditions of service, holidays and pensions. When privatisation has taken place in other sectors of the economy and of British Airways' fringe activities that have been hived off, there has been no guarantee—in fact, there is evidence to the contrary—that their wages will be maintained and they will have what they consider to be a fair deal. That is dependent on the strength of the worker organisation.
In that regard, I shall allude to the offer for getting out of the present British Airways pension scheme, a scheme that has been worked out jointly over the years. The generous pension scheme has always been linked to the retail price index. The new scheme, of a lump sum payment according to length of service, will cheapen the scheme for British Airways because it will not be linked to the retail price index, regardless of where it goes. History shows that inflation will not always be held below 5 per cent. The unions have advised their members not to have anything to do with the new scheme — although some have—because it takes away rights from workers in different ways, according to whether they are young or old.
Any young person working for British Airways would be thoughtless if he went into the new scheme, because it cuts the level of his ultimate benefits. Constituents of mine came to me for advice long before I read what the TGWU thought about the new scheme. I have frequently given them advice to stay where they are in the old scheme. However, that is not the prime matter. Some could argue that the new scheme would be of benefit, especially if they 622 do not expect to live long after 65. If they have that feeling, they could take the cash, which would be exciting for them, as it always has been in redundancies, and schemes where jobs are carved up.
Why — this is a question for the House and the country — when we are thinking ahead about the practicalities of hiving off, privatising or denationalising British Airways, has the management been part of this? It is because it does not wish to frighten off investors. The pension scheme affects the value of British Airways and how much investment capital there is likely to be in a privatised set-up.
Recently I have been sent many documents, by small aircraft companies and big, and particularly by British Caledonian. The British Caledonian document has a cool logic that is far greater than that shown in the British Airways documents. Why should not British Caledonian, a major competitor of British Airways, whether nationalised or denationalised, advance its considerable fear that if this enormous change is made it will be shoved out in the cold by what is a movement from a state monopoly to a private monopoly? British Airways will have to retain its position to compete in international markets, as my hon. Friend the Member for Kingston upon Hull, East pointed out in his comprehensive speech.
There is a contradiction in any idea of privatising British Airways and sustaining it in anything like the shape or form in which it exists now. The British Caledonian document does not have this contradiction. In the past, the CAA, no doubt through a series of Transport Ministers, has decided what routes should be shared by British Airways. Naturally, when an enterprise is nationalised, that will continue to be the case.
I shall finish, because I know that many hon. Members are anxious to take part and I am anxious to hear from them, particularly when they show the divisions in the Tory party that may lie ahead. The watchword is absolute caution in what the Secretary of State is tying up. He is a Tory intellectual, although there is not a great galaxy of intellectuals in the Tory party. Unfortunately, he suffers from the deficiency of being doctrinaire as well. We are fellow artists and have collaborated in the annual exhibition of Member of Parliaments' art. The right hon. Gentleman is a brilliant water colour artist, and perhaps he would get better results if he stuck to that. I commend his artistic ability but it is one-track, while mine is warmhearted and widely spread, as he knows. I perceive a little chink of light in his intellectual armour. Since he has had the responsibility of this job, particularly when he and his hon. Friend the Under-Secretary of State for Transport gave evidence to the Select Committee on the future of the airports, he has shown that he has become a little more mellow with the advancing years.
I ask the Secretary of State to look at and read carefully a book which I commend to him. It is written by Dr. Peter Richards and is called, "Engineering a Merger". It goes over the history of worker-management collaboration. The Minister should understand that, because of that history of which workers in all sections of the aviation industry are proud, a powerful voice of concern and caution is being sounded. The Secretary of State should take note of that factor because we do not want anything like the stopping of Heathrow by the workers, which would not be in the British interest.
623 If the Secretary of State works himself into such a position, he will prove to be a rotten Secretary of State for Transport and he will last no longer in the job than did his predecessors.
§ Mr. Robert McCrindle (Brentwood and Ongar)
I declare an interest as a consultant to British Caledonian, but I follow that with the declaration that I am a long-time admirer of British Airways and have watched its recent progress with great satisfaction, remembering the years when that was not so. Nothing that I shall say from now on should be interpreted as an attack on British Airways. On the contrary, I wish it nothing but well in its privatised future.
I remind the House that I served on the Standing Committee that considered the Civil Aviation Bill which, in 1980, paved the way for the privatisation of British Airways. On that occasion I expressed what could be called minority views in the Conservative party, because I believed, and still do, that the double aim of the Bill was almost impossible to achieve. We sought to privatise British Airways and, naturally, to provide every possible way of maximising its earnings and profitability; but we also paid lip-service to the idea of competition encouraging the private sector and the independent airlines. I said then, and I repeat now, that those two aims are incompatible. It is because some chickens are coming home to roost that the Government have been forced during the past few months to turn their attention to the problem of how—not if and when—we should privatise British Airways. That is why we are having this debate this morning.
The question at the heart of the matter is whether a state monopoly will become a private monopoly when BA is privatised. Monopoly breeds inefficiency, and with the dominance of BA as it is constituted predatory pricing, leading to the elimination of independent airlines, is all too possible. I realise that British Airways will say, "But we have built a route structure and made ourselves efficient. Why should this be our reward? Why should this be the Government's approach now?" That is a justifiable argument up to a point, but we must remember that the priceless asset of the route structure enjoyed by BA was given to it and its predecessors by successive Governments. British Airways may have developed those routes, but the structure was given to it. Therefore, it is right for us to question whether, as it moves to privatisation, the route structure is inviolable. I suggest that it is not.
As to efficiency, if 37,000 people can now do the jobs which 59,000 people were believed to be necessary to perform, we are entitled to ask whether it is such a big deal, or whether there should have been movement in that direction long before the advent of Lord King and his efficient team.
The question is not whether we privatise BA or whether we want more competition. The queston is how can we use this golden opportunity, which is unlikely to recur perhaps for another generation, to achieve both objectives? How do we restructure the industry to ensure a successful British Airways and prosperous independent airlines? How can we ensure that a powerful state of competitive tension is created—what Sir Adam Thomson has called "the needle factor"?
624 Clearly there must be change if an environment is to be created in which the airlines prosper and the consumers benefit. Privatisation is not an end in itself. If I have one objection to the recent utterances of BA, it is to the suggestion that preserving the status quo is one option when the company is privatised. That is not so. Whatever happens, there must be change in the structure of civil aviation.
What should be done? First, we must remove the barriers to competition among British airlines. I heartily disagree with what my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) said about the freedom of airlines to come in, as though we had been standing back and doing nothing to advance our competitive interests. Secondly, we must end the bogus competition between British Airways and its foreign airline opposite numbers in the shape of pooling agreements. Thirdly, we must consider whether route transfers can be justified. We must also review the policy on Heathrow and Gatwick by taking action to equalise the opportunities for Gatwick airport to grow. That is not a revolutionary suggestion. It is still official Government policy, and one could be forgiven for wondering when initiatives will be taken in that direction.
I appreciate that, in the light of those suggestions as to what should be done, people will ask, "What barriers to competition or bogus competition from foreign carriers?" British Caledonian and other airlines cannot just step in and compete with British Airways, even if licences to do so are granted by the Civil Aviation Authority. The market is not open to new entrants, because British Airways and foreign carriers, often with the help of foreign Governments, will do their best to frustrate any move in that direction.
There are pooling agreements between British Airways and foreign carriers under which capacity on routes and revenue are shared. No doubt those arrangements are cosy and serve British Airways and its foreign competitors well. They may even be in the interests of Governments, for all I know, but they cannot be described as the best competitive background against which to view the future of British civil aviation. They are anti-competitive, and neither British Airways nor the foreign carriers are anxious to break them.
During the past few days, in the capable hands of my right hon. Friend the Secretary of State, there has been a massive change in routes between Britain and the Netherlands. The original idea, which was supported by KLM, the Dutch airline, and British Airways, was a restricted area of reduced fares which could be agreed between them; but now, after pressure from Air UK and British Caledonian, and—to his eternal credit—with the firm backing of my right hon. Friend, much more competition will be available on that route. The cheaper seats will be much more widely available without so much reference to a standby basis. That is competition in practice, and to spread it abroad must be good for the passengers.
§ Mr. Bidwell
The hon. Gentleman used the term "predatory pricing". That must apply to competition in all aspects of life, from flogging an apple on the barrow boy's stall to giant supermarkets. They will always branch off into such activities in order to bring greater custom. I 625 understand British Caledonian's logic, but I do not understand why the hon. Gentleman believes that serious competition means a carve-up.
§ Mr. McCrindle
Predatory pricing will be possible if a privatised British Airways with its present route structure takes advantage of the considerable opportunities which it will have simply to reduce its prices—even at the risk of losing for a considerable period—so as eventually to force its competitors out of a certain route. It may not necessarily do so, but, if privatised on its present basis with 83 per cent. of scheduled routes under its control, it could do so. That might lead to the elimination of the independent carrier.
§ Mr. Wilkinson
Why do my hon. Friend and other hon. Members who have spoken—although certainly not my hon. Friend the Member for Romsey and Waterside (Mr. Colvin)—believe that a privatised BA will be more prone to predatory competition in the market place than a nationalised BA which is not subject to the same disciplines in the form of responsibilities to its shareholders? Why is my hon. Friend not complaining as much about the status quo as about what might happen when the Government's policies are carried through and BA is privatised?
§ Mr. McCrindle
With a nationalised industry, checks and balances are imposed by Government. Those checks and balances will not exist when the Government have privatised BA. We cannot have it both ways. If my hon. Friend and I are united in our desire to see a free enterprise civil aviation industry in this country, with all the competitive opportunities which will flow from that situation and all the possible benefits to the consumer, we cannot bemoan the fact that checks and balances will no longer be laid down by the Department of Transport or the Civil Aviation Authority.
One might ask why routes should be transferred from BA. Why should one not simply set up competitive services from London Gatwick? I concede that there are one or two routes where that could be justified, but for the most part we are heavily circumscribed by bilateral agreements. The aim of route transfers is to try to achieve a balance. Even the most optimistic suggestions that have been made about route transfers would leave more than 60 per cent. of scheduled services of this country in the hands of BA. To privatise BA while calmly accepting the existence of that inbuilt advantage would be to lose a magnificent opportunity to put civil aviation on a much better basis.
I should like to quote from an editorial in the Financial Times of 20 June on the question of route transfers. The writer said:The second option—route transfer—is more attractive. Why should the Government regard potential investors in a privatised BA as the only possible recipients of BA's existing assets? The transfer of state assets should surely be an occasion on which all interested private-sector parties (including BCal and other smaller independent airlines) have a chance to tender for some of BA's assets.That, in essence, is my case — the case that I am making for a more balanced future for aviation. The case for competition is overwhelming. The case for ending sharing agreements is irrefutable. The case for transferring routes is very compelling.
626 I am not greatly concerned about whether BA should be privatised early or late in 1985. The market may well welcome a later date, as it will also have to cope with the privatisation of British Telecom, among other things. What is crucial is that the flotation, whenever it takes place, should be successful.
British Airways should not be barred from engaging in charter flights. Competition must be fair for BA as well as for other operators. There may well be an argument for some circumscription of BA's freedom to engage in that market, but it should not be barred from it altogether.
I want to see policies and competition that will make civil aviation in this country hum. With privatisation, change will be inevitable. We must use it. BA cannot expect privatisation with no accompanying changes. I have the greatest respect and admiration for Lord King, but it is not enough to say that everyone is out of step except our John.
§ Mr. John Wilkinson (Ruislip-Northwood)
I shall speak briefly and simply and, I hope, bluntly and clearly. We are privileged in that my right hon. Friend the Secretary of State has come to the House with an open mind and is prepared to listen to the views of right hon. and hon. Members before he makes up his mind on important areas of policy. The decisions that he must make can be reached only at Cabinet level, and he is wise to take the professional advice of the Civil Aviation Authority before reaching those decisions.
My right hon. Friend stressed that the enhancement of competition was at the heart of Government policy. That is entirely right. Enhancing competition should improve the quality of service to the travelling public, and that should be the primary aim of British civil aviation policy. A secondary aim should be to ensure a good return to the shareholders of the air transport company, and a third should be to ensure secure and prosperous employment for all engaged in civil aviation.
In looking at civil air transport and reviewing Government policy, it is important not to forget the influence that airport policy will have upon civil aviation policy as a whole, and the crucial impact of airport policy upon the privatisation of BA. From the decisions made about airports, especially in the London area, important investment decisions will flow, and the quality of the prospectus for BA will be affected.
It is a strange anomaly that, although additional passenger handling capacity will be provided when terminal 4 comes into service at Heathrow, the number of passengers which may be handled will be reduced to the arbitrary figure of 275,000. Furthermore, that will happen when the new noise regulations come into force, diminishing the adverse environmental impact of air transport movement upon the surrounding community.
§ Mr. Wilkinson
I am afraid that I cannot give way. I have promised to be brief.
I hope that my right hon. Friend will not feel hidebound by decisions taken in different circumstances. I hope that he will reconsider the position.
Secondly, we wish to place BA on the market at the most advantageous terms, securing the best returns for the Government. It would be extremely damaging and unwise 627 if we hobbled the privatised BA with an airports policy that was prejudicial to its commercial interests. BA has correctly advised everybody concerned that, if terminal 5 is not developed and BA is forced by Government diktat quite arbitrarily to divert some of its services to Stansted, that will have a damaging effect on its cash flow and result in additional costs of about £160 million a year, which will be taken out of its potential operating surplus.
There is another argument, which I am sure appeals to my right hon. Friend. I am speaking purely in aviation terms and am not prejudging the planning considerations before the inquiry that are being deliberated by the inspector. Development at Stansted, involving the transfer of personnel and the growth of the new town, will be much more costly to the Exchequer than extension to terminal 5 of the tube and the rail link from Feltham and construction of the motorway spur from the M25, which are preconditions for terminal 5.
Heathrow is a unique national asset of incomparable worth. It is the hub of air traffic in global terms, so we should maximise it. We can readily do that cost-effectively by developing the fifth terminal.
The timing of the privatisation of BA is a matter for the experts. The merchant bankers will do that and advise on the best methods of flotation. I recognise that the market is regulated, but it is the best arbiter of competition and the best mechanism for guaranteeing fairness. I do not think that we should have another Edwards exercise. At the beginning of the 1970s, Ronald Edwards advocated a second force in British aviation and, as a result, major routes were transferred from BA to British Caledonian, as a result of which British Caledonian became the most important independent sector schedule carrier in the United Kingdom. We should not have another such arbitrary exercise.
The result of the Edwards recommendations was British Caledonian being given a preferential position. If we now did what it suggests and allowed a Dutch auction for BA routes, the independence of the route licensing system would be negated. The transfer and allocation of routes would then tend to favour the financially strongest carriers, which could presumably make the highest bid. That would not be satisfactory for the smaller independents. If we are to have a civil aviation authority that does its job as a regulatory body fairly, the British Caledonian motion is not a sound one. It would be sound to float BA at an appropriate price in the market place, so the management of BA, trying to do their duty by their shareholders, would, if they thought it commercially fit and appropriate, give up some routes and perhaps sell assets on the market place in the perfectly normal way. If they thought it appropriate, they might even sell British Airtours Ltd., British Airways Helicopters Ltd. or any other operation which the independents would then buy. That would be the normal, right, rational and equitable way in which to proceed.
Many thousands of people have made a considerable sacrifice to get BA on its feet and to make it a sound international operation which is in the premier league of international carriers. The results are there for all to see. They have been achieved with minimal industrial aggravation, willingly and with impressive wholeheartedness. In that process, 20,000 jobs have gone—and BA is probably the biggest employer in my constituency. It would be decidedly odd if so many people who have worked so hard for so long to put BA on a sound 628 footing saw their efforts rewarded by their section of the operation being lopped off and arbitrarily transferred by the Government to some other carrier. It would also be unjust.
Having said that, I think that the Government are broadly on the right lines. I am grateful to my right hon. Friend for being so open-minded and for coming to listen to our views. I especially applaud his decision to put competition first and the steps that he has taken on, for example, the Amsterdam route, which shows how much can be done and how much we have to look forward to.
§ 12.5 pm
§ Mr. Patrick Ground (Feltham and Heston)
I greatly welcome my right hon. Friend the Secretary of State's statement. I especially welcome four aspects of it. The first is that he faces up squarely to the need to plan for the growth that will occur until the year 2000 and beyond. Secondly, he recognises that liberalisation is likely to lead to greater growth. Thirdly, I like the firmness of his commitment to the proposed 275,000 annual air transport movement limit at Heathrow. Fourthly, I appreciate his commitment to competition and his firm recognition that it is necessary to go to considerable pains to ensure that competition is fair.
The hon. Member for Ealing, Southall (Mr. Bidwell) mentioned public reaction to the present plans for BA. He accepted that the profit sharing scheme has been welcomed by employees. The offer of shares in BA will also be welcomed and appreciated by many BA employees and employees of the British Airports Authority will show a good deal of interest in the prospect of buying shares in that authority, just as interest has been shown in the purchase of council houses. The change in BA constitutes a substantial alteration in the atmosphere in the hon. Gentleman's part of west London. BA has become a much more robust and cost-conscious company.
My right hon. Friend the Secretary of State and others asked what difference there will be in competition and predatory pricing if BA is denationalised. The true distinction is not that which my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) outlined. BA is now much more cost-conscious and competitive and that will have a great effect on the varied activities of BA in many sectors of the aviation market.
I urge my right hon. Friend to pay careful attention to the fears expressed by small independent carriers in relation to particular sectors of the market or separate markets within the general aviation market. As my hon. Friend the Member for Woking (Mr. Onslow) has said, there is great concern about some of the practices of British Airways. I cannot accept the comments of my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) about competition. The Conservatives passed the Competition Act 1980 which defined uncompetitive practices. If the Government are to pursue a policy of competition, it is equally important to pursue the discipline of identifying uncompetitive practices and so far as possible eliminating them.
The objectionable feature of some of the practices of British Airways is that they are an exercise not of competition but of market power arising from the disproportionate size of the nationalised concern compared with others. That aspect must be considered in a thoroughly disciplined way, despite the Government's clear wish to proceed with denationalisation of British 629 Airways. It would be ironic indeed if in denationalising British Airways the Government caused fatal damage to independent carriers which had the courage and persistence to survive the recent very difficult period for the aviation industry only to face death by unfair competition at the hands of a dominant carrier.
My right hon. Friend the Secretary of State mentioned the decision not to split up the London airports, which is greatly to be welcomed. I believe that I am the first Conservative Member expressly to welcome it, but I am sure that many others share my view that that is the correct judgment both for London and for the industry.
I also welcome the positive attitude of the British Airports Authority to denationalisation. It is pleasing that such an attitude has been achieved without any change of management, as in some organisations in this sphere.
Like my right hon. Friend the Secretary of State, I am inhibited from commenting on Stansted, but for a different reason. I was professionally involved for six months in the terminal 5 inquiry and for seveal months beforehand reading the 175 days of transcript. I represented the views of a body—the GLC—which on that occasion supported Government policy. I shall say no more about that, save to make it clear that I do not accept the comments of my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) in this respect. All the matters that he suggested were outwith the scope of the inquiry were gone into at inordinate if not excruciating length, as my right hon. Friend the Secretary of State will discover when he studies the material.
I wish to refer to two matters regarding the effect of the aviation industry on the environment in west London generally. With regard to the helicopter link, studies have recognised that the effect of helicopter noise on areas such as Lower Feltham is especially irritating. The populations living under the Gatwick-Heathrow airlink were looking forward to the completion of the M25 because, according to the plans, it would mean the end of the airlink. It is thus a considerable disappointment to learn that, despite the imminent completion of the M25, the airlink may continue. Reference has also been made to the problem of air transport movements at Heathrow. The definition of air transport movements as it is intended to apply when terminal 4 is completed includes the airlink, so if it is stopped the same number of additional movements can be taken up. I hope that we shall have a statement on that today.
Another subject of increasing concern is the hazard of aircraft parts and blocks of ice falling from aircraft. At present, there is no assurance that residents can obtain compensation for damage or injury caused in this way. To recover damages, the individual who suffers must identify the aircraft from which the object fell and claim against the airline's insurance policy. Clearly considerable problems may arise. The owners and operators of aircraft may have an interest in knowing why a part fell off and sometimes even in recovering it, so in those circumstances tracing the aircraft is rather easier; much has been done by the Department and the CAA in this respect. The interest in blocks of ice, however, is naturally less, although blocks of ice weighing up to 50 lbs. —suitcase size—can cause a great deal of damage. I hope that the Department is carrying out detailed work on this problem.
630 Some people argue that the cost of insuring against such risks should be met by the Government, but I dissociate myself from that argument, because I believe that any such insurance should be paid for by the aviation industry, not by people on the ground. I reject the argument that is sometimes advanced, that it is satisfactory for the cost to be borne by individuals on their own insurance policies.
Therefore, I look to the Department for evidence of the work that is going on in this sphere. Similar problems have arisen in the past, for example with vortex damage, and solutions have been found to cover the individuals who suffer, at the cost of the aviation industry. I very much hope that we can move towards a solution on those lines in the case of falling aircraft parts and blocks of ice.
§ Mr. Ian Wrigglesworth (Stockton, South)
We should acknowledge the importance of the industry that we are debating, not only to those who work in it, the shareholders and the customers, but to the whole country. The civil aviation industry makes an enormous contribtuion to other industries as a service industry. It also makes a considerable contribution to our economy. I think that the House would want to recognise that. We should also acknowledge that, on the world stage, aviation is one of the industries of which we can be justifiably proud. It has been a success. We in the House will want to see that success continue and should do everything that we can to enhance it.
I regret that I missed the Secretary of State's speech, for which I apologise. I had long-standing engagements in my constituency last night and travelled back this morning to be here for the debate, but unfortunately could not make it in time to hear the right hon. Gentleman. However, my journey on the train from the north provided me with the opportunity to read the morning papers. The needle factor is apparent in the full-page advertisements of British Caledonian and British Airways. Both claim a great victory in the new charges for fares between this country and Amsterdam. That made me realise how important it is that the progress that is being made is continued.
The alliance wholeheartedly supports the movement towards greater competition in the civil aviation industry and, even more important, any movement towards greater deregulation. To a great extent, the present position is a hangover from the past. It comes from a time when the industry was a new-fangled thing. Many restrictions that are still held by Governments around the world are based on outdated fears that existed when the industry began and on outdated notions of national pride that are no longer relevant. We shall strongly support the Minister in the action that he is taking in Europe and elsewhere to increase competition and remove regulation from the industry.
I very much support the views expressed by the hon. Member for Brentwood and Ongar (Mr. McCrindle). I believe that the House has not fully recognised that there is a great difference between denationalisation and competition. One can have competition without denationalisation. One has, and has had, great competition between public and private sector bodies. One does not have to have privatisation to increase competition. The great fear is that there will be less competition if the privatisation proposal goes ahead.
§ Mr. Wrigglesworth
I see that the hon. Gentleman is agreeing with me.
The same applies to the Government's proposals to denationalise British Telecom. It has a greater monopoly of the market than British Airways. Therefore, far from being an instrument to increase competition, privatisation might be the opposite — it might be the enemy of increased competition. I am pleased that some Conservative Back Benchers see that. I hope that Ministers see it as well and will take it into account in considering their policy when the civil aviation review is complete.
There is a powerful case for increasing competition in this market, but one has to pay regard to the fact that strict regulations and bilateral agreements exist. Therefore, one must proceed with caution in order not to destroy our successful industry. I am not suggesting that we should throw off the traces, take a unilateral stand and embark upon deregulation and free competition ourselves if other Governments are not prepared to do the same. That would considerably damage our industry.
That brings me to the argument about the handing over of some of the licences from British Airways to British Caledonian, and other private operators. I hope that other private operators, not just British Caledonian, will be considered, although the latter has made the running on the issue, for which I admire it.
There is a powerful case for removing some of the routes from British Airways. It has too dominant a position in the market, which will not be easy to restrain once it is out of the public sector and into the private sector. It is fatuous to suggest that with the pooling and bilateral arrangements that exist one can have free competition on individual routes. Changes should be made to get a better balance in the market and so that the dominant position of British Airways is not retained.
I have studied the matter, and I believe that that should not undermine the position of British Airways in the way that has been suggested by some spokesmen. It is possible for British Airways and other operators in this country to sustain the success of our aviation industry. It does not require 82 per cent. domination of scheduled air services for us still to have a successful civil aviation industry. Therefore, I support the case on the ground of removing that dominant position of British Airways from the market. Whether it should go to British Caledonian or other airlines is a matter for consideration, but it is wrong and will not encourage increased competition if British Airways remains in that dominant position.
One cannot consider the airlines without considering the airports. The Secretary of State is probably right in his decision to retain control of the London airports in the way that he announced. However, I hope that he will not fully close his mind to the suggestion — I do not make a commitment on either my behalf or that of my colleagues — of either franchising or leasing one or more of the terminals at some of the airports to other airlines. I am not firmly committed to that, because I have not been able to go into all the ramifications of it.
Having said that we on this Bench are in favour of competition, there is something worrying about the fact that we shall have this monopoly control of the airports in the capital. We might introduce an element of competition and get greater equality between airlines by franchising or leasing terminals at airports. That is why I hope that the Secretary of State will not close his mind to the idea.
632 I am surprised that Opposition Members representing northern constituencies are not taking part in the debate. Half of Teesside airport is in my constituency — the boundary runs through the main runway—and therefore I have an interest in regional airport policy. My conclusion is not that, by Government or CAA decision, business should be pushed into the regional airports. My view is that if we can get the sort of deregulation and increased competition which we hope will result from the agreement between the British and Dutch Governments—if we can get cheaper fares in Europe and a freeing of air transport and travel in Europe on scheduled services — we will achieve increased business at the regional airports and a growth in that sector. We see in other parts of the world how domestic air services expand enormously when fares are reduced.
It is ludicrous that the air fare from Heathrow to my constituency in Teesside is more than £100, whereas under the new arrangement with the Dutch Government I shall be able to fly from Heathrow to Amsterdam for £49. If people from Teesside, Newcastle, Manchester and the other regional airports could fly to the capitals of Europe for fares of about that amount, there would be increased traffic, which would lead to the expansion of those airports. It would help the finances of Teesside airport enormously if the Home Office would allow us to have there the duty-free facility which we have been seeking from the Government for a long time.
§ Mr. Jessel
Is the hon. Gentleman being realistic? The cost of transporting passengers depends enormously on the size of the aircraft and the number of passengers it can carry. Obviously an aircraft which can transport 300 or 400 passengers will do so at much less cost per passenger than a smaller aircraft. That explains the different fares for the journeys which the hon. Gentleman described.
§ Mr. Wrigglesworth
We can take large aircraft in the airports in my region, but I am looking ahead. I am not suggesting that what I propose would solve all the problems in the next year or two. I am talking about a freeing of the whole market in Europe over perhaps a decade. One hopes that we will eventually be able to go to the airport and walk on to an aeroplane without all the frippery and flummery that has been built up around air travel over the years. Let us gradually get rid of the restrictions and difficulties.
We on this Bench strongly support the Government's movement towards deregulation and increased corn-petition. It is remarkable that the CAA still retains such enormous powers. If Conservative Members want to carry out witch hunts against quangos, I direct their attention to, above all the others, the CAA and the powers that it has in this market, some of which are almost unbelievable. Licences to operate are handed out almost like lollipops by the CAA and the Government, in an unsatisfactory and uncommercial way. It is really inaccurate to describe it as a market.
I want to see those restrictions removed, as is happening in the United States and elsewhere, so that we can achieve greater competition and lower air fares. That would benefit the consumer and many sections of industry', because there would be cheaper and better services, so enabling those industries to be successful, as I hope the British civil aviation industry will be successful.
§ Mr. Anthony Steen (South Hams)
I am glad to follow the hon. Member for Stockton, South (Mr. Wrigglesworth), because what he said made a great deal of sense—as it often does on these matters. The House, with him, will wish to congratulate my right hon. Friend the Secretary of State on achieving agreement with the Dutch authorities on air fares. I am sorry that my right hon. Friend is not here to hear the congratulations. Not, of course that the airlines have been responsible for high tariffs; but the Common Market Governments have been involved in refusing to relax the cartel. The timely intervention of my right hon. Friend, doing a deal with the Dutch, is a great step forward in the liberalisation of the skies and allowing free market forces to operate.
Some see the aviation industry solely in terms of aeroplanes and airline seats. It is far more than that—it is a complex, inter-related industry, and the airline is only the tip of the iceberg. Beneath that, there is the airport, air traffic control, airworthiness, regulatory authorities, fare structures, ramp handling and so on. All that adds up to a vastly increased cost in the running of airlines. I understand that airport charges alone account for 30 per cent. of the cost of domestic flights, and 6 per cent. of the cost of long hauls.
During the recession, a number of airlines went to hell and back to survive. There were no cheap tickets for that journey. Those who returned emerged slimmer, more competitive and with reformed working practices. Yet the infrastructure has remained antiquated and unchanged, with restrictive practices, positive discrimination and overmanning. Why has it not been subject to the same disciplines and changes as those in the airlines? Why are there still excessive landing fees at London airports? Why have not security charges been cut? Perhaps the Minister will answer those points when he replies to the debate. Will my right hon. Friend fix his gaze on those issues rather than only on fares?
If the submerged overheads continue to rise, that will spell disaster for many of the small airlines, with airports throughout the country hosting grounded aircraft with no one able to fly them, simply because they cannot afford to do so. The effect is solely that of public sector monopolies. Already, the threat to its existence has sharpened the BAA's approach. Some of us have been fortunate to have the benefit of its hospitality and to have enjoyed the facilities which it made available to hon. Members. But why did its chairman, when he opened the £5 million departure lounge at Heathrow last July, say that the new facility would be available to all airlines? He must have known then that it was to be available only to airlines with 757 aircraft—and the only airline with that aircraft is, of course, BA. Since then, BA has virtually had exclusive use of that lounge, despite my asking my right hon. Friend week after week, month after month, to explain why. It was four months before I was told that the lounge was occasionally used by Brymon Airways — and, of course, BA handles Brymon traffic.
Why did the chairman make that misleading statement when he opened the lounge? How sound is the BAA's judgment that development should go ahead from Heathrow to Gatwick when the single runway will soon be saturated — well before Heathrow fills all its slots? Instead of finding a way to create additional capacity, the BAA has applied its own working practices to the 634 problem, without taking account of the new working efficiency within the airlines. The fact that British Midland Airways and Brymon have shown that aircraft can be turned around at Heathrow in 25 minutes, rather than the 50 minutes that the BAA has recommended, illustrates that point well. The stands can be used only once an hour on a 50-minute turnround, whereas they can be used twice an hour on a 25-minute turnround.
Improved working practices have emerged because the airlines have been forced to improve them under the pressure of competition. That has not seeped into the British Airports Authority, which is more impervious to the speed of change than most quangos.
"Security" is the new password to justify any expense. It used to be fire regulations, but now it is security. The Minister will be appalled, as I was, to hear that 47 per cent. of British Airports Authority staff at Heathrow are involved in the security business. Nearly half BAA staff are engaged in security because the issue is sensitive and because the BAA has agreed to working practices which militate against the consumer.
The Secretary of State talked about the Dutch deal, but he should look at what happens at home on his doorstep at Heathrow. Is the Minister aware that operating an X-ray machine for screening baggage can be done by three people, but working practice calls for a six-man crew? Such overmanning and restrictive practices are repeated throughout the airport empire. The problem creeps into all monopolies. I term it the "monopoly management mentality."
If separate managements operated at the different airports, different philosophies would develop. Managements would be competitive and they would try to make their jobs more competitive and to provide better value for money. I hope that the Under-Secretary will be especially cautious when listening to the views of the authority about the way in which airports should be run. In view of the authority's restrictive practices, it is important to be cautious when taking its advice. If it has something to learn about running better airports, its recommendations should be considered carefully.
Let us consider, for example, the 275,000 movements at Heathrow. Whether to breach that is a major policy decision, but it need not be breached for a while. Special preference has been given to British Airways in its domestic services. The BA shuttle operates a great number of back-up planes. It has been able to increase its services to Edinburgh and Glasgow. That is acceptable, but the BAA has said that the limit of movements is being reached. British Airways is allowed to increase the number of its domestic flights, but other airlines have to fight tooth and nail for a slot in the terminal which they want to use.
That highlights the inconsistency of BAA policy and its discrimination in favour of British Airways. When it turns away international traffic, it loses substantial landing fees. Why does it allow the shuttle ever-increasing numbers of movements and back-up services? If the BAA was acting in the best interests of customers, it would be innovatory and be determined to use Heathrow to its maximum advantage. It does not do that.
The BAA is profitable. Certainly at Heathrow it makes a few bob, but how much more could it make if it did not suffer from restrictive practices. It would be more profitable if it came under separate private management. I want to make it plain that I have the highest regard for 635 the individual managers in the British Airports Authority. It is not their fault that they are part of this unmoveable and unwieldy quango with an unglamorous track record.
Let us examine the way that the British Airports Authority deals with British Midland Airways. Perhaps I should declare an interest as an adviser to British Midland Airways. The British Airports Authority did not take kindly to the Government's decision to uphold British Midland Airways' appeal to compete with a national carrier to Glasgow and Edinburgh. It did not oppose it, but it made it as difficult as it could for British Midland to operate. For example, it started by saying that there was not sufficient airport capacity for British Midlands Airways to operate and compete with the national carriers. It said that there were not enough slots. While saying that, it was giving more slots to British Airways to increase its shuttle services. It has been proved untrue. British Midland Airways has slotted into Heathrow and there has been plenty of space. The British Airports Authority had to give way because the Government overruled the Civil Aviation Authority.
§ Mr. Terry Dicks (Hayes and Harlington)
Is not the problem that my hon. Friend raises not about slots, but about the availability of slots on a particular day? I understood my hon. Friend to have said not that the slots were not available during the day, but that they were not available when British Midland wanted them to be on that day. That was the problem that faced the British Airports Authority at the time.
§ Mr. Steen
My hon. Friend makes a fair point. My point was that preferential treatment seems to be meted out to BA because it can put on its back-up shuttle when its main aircraft is full. If British Midland wanted to fill the slot used by that back-up shuttle, it was not allowed to do that initially. It is a discriminatory practice that has long existed in the British Airports Authority by which preferential treatment is given to the state carrier. It has been the traditional picture. If British Airways is to be privatised, we must end that preferential treatment by the British Airports Authority of what was the state carrier, but which will be another private airline.
§ Mr. Bill Walker (Tayside, North)
I am a little confused by my hon. Friend's comments on back-up facility, and I speak as someone who makes regular use of the services to Glasgow, Edinburgh and London. The back-up facility has always been available. There was a guarantee that, if one arrived 10 minutes before the aircraft took off, one was assured of a seat. I have never failed to get a seat in these conditions.
§ Mr. Steen
I may not have made myself clear to the House. The British Airports Authority, instead of welcoming the competition of British Midlands on the routes, has been as obstructive as possible about the existence of that carrier. It did not find a way of providing slots and giving preference to the shuttle back-up and all the other little planes that come in. It did not direct its mind to providing equal opportunties to the private airline.
To take that a stage further, when the chairman of the British Airports Authority opened the departure lounge at Heathrow last summer, he said that that facility would be available to everybody. It was not available to British Midlands Airways, and has not been available to anyone else, other than the odd Brymon plane which cannot fit in 636 anywhere else. British Midland had an enormouse battle to get the British Airports Authority to provide a lounge for its departures. It is only fair to inform the House that British Midland Airways is the second largest carrier into Heathrow, yet the British Airports Authority was not prepared to provide a lounge for it until it was taken virtually to the door of the court. It provided a £200,000 lounge to offset the £5 million lounge that it offered to BA.
The management of the British Airports Authority has been involved in a preferential relationship with the national carrier. If the same business managers are to run the same outfit under the private enterpise flag, the present restrictive practices will continue. It is easy for the Government to make statements about their philosophy of and support for private enterprise, but unless the tools of the job are provided such statements are empty and meaningless. Competition means having equal opportunities, and the provision of equal facilities and equal status. It is not just about permission to run competing flights.
In Glasgow and Edinburgh, new facilities are still not available to British Midland, yet it contributes £2 million to the coffers of the British Airports Authority in flying into Scotland. Why does BA receive preferential treatment in Glasgow and Edinburgh when it comes to gates and departure lounges, when the private operator is now putting £2 million into the BAA's coffers? Unlike the Dutch and American authorities, and despite increased revenue, the BAA's approach to competition is, to put it mildly, disappointing.
It might be useful for the House to learn something of the problems of ramp handling at Heathrow. The BAA has a monopoly on handling at Glasgow and Edinburgh, and does all the ramp handling. However, at Heathrow there are two handlers at terminal 1 —British Airways and Aer Lingus. The BAA has refused to allow British Midland even to tender for its own baggage handling. It has to have either British Airways or Aer Lingus. It cannot use British Airways, because it is in direct competition with British Midland on those routes, so it is forced, in a closed shop, to use Aer Lingus. It is, however allowed to look at other terminals. In terminal 2 there are three ramp handlers, and in terminal 3 there are eight. However, out of all the ramp handlers at Heathrow, only one is British —BA. All the other concessions are to foreign airlines.
There is a special reason why BMA wants to handle its own baggage. It cannot let BA do it because of the competitive factor and there has now been criticism from people in Belfast of the fact that it is using the Eire state carrier to do its baggage handling. The BAA has been intransigent and has refused to let that private carrier do its own baggage handling, even though it would save it about £500,000, which would be passed on to the consumer. Those are important points, and I hope that my hon. Friend the Under-Secretary of State will bear them in mind when considering what should happen about the BAA.
It is encouraging to see the great Lord King looking down at us from a great height in the Peers Gallery, listening to what we have to say. The House must admire his remarkable performance in turning BA from a floundering nationalised industry into a profitable business. That has happened during the past two years. Yet for the past 20 years private sector airlines have been operating under the shadow of BA, which has had greatly preferred status both internationally and on domestic 637 routes, and has enjoyed the protection of Government in putting up finance to buy aircraft and in providing financial cover for losses. The airline has operated m a very preferential and preferred position.
We all acknowledge the efforts that Lord King has made, but it is fair to say that he has made no greater efforts than all the private sector airlines have been making over the past 10 years to stay and survive. So, good though it may be, it should not be thought of by the Government as a miracle that BA has at last caught up with the private operators and is running an effective business.
Lord King has turned something slothful into something that private operators have been doing all along. Perhaps the Minister will give an undertaking that, while the civil aviation policy review is under way, BA's board will not be allowed to make definitive purchases of new aircraft for routes that are clearly subject to review. Will he explain, for example, the circumstances that gave rise to his approving the purchase of £9 million-worth of new aircraft for the Highlands and Islands routes, when they have already been defined as highly marginal? The Government made that decision, and the House demands an explanation.
More important is the commitment of British Airways to buy 14 Boeing 737s at a cost of £179 million, with an option on 17 more. I understand that the contract has been changed and that British Airways has entered into a commitment to buy 16—two extra aircraft— with an option on 15. The importance of the 15 options is that they all cover routes that are now operated by fully depreciated aircraft which have been written off. These are considered to be marginal routes for profitability. The 15 options should not be converted into firm orders until the civil aviation review has been submitted and British Airways has been privatised.
Seemingly the chairman of BA is making decisions to pre-empt the effectiveness of the review. Before it is privatised, British Airways is trying to put itself into a preferred position and other private operators' efforts will be thwarted.
British Airways is said to be moving into a £2 million advertising campaign. The hon. Member for Ealing, Southall (Mr. Bidwell) has demonstrated that that has already started. I wonder whether the Government want that sort of use to be made of public money.
Private operators such as British Midland Airways cannot cross-subsidise their domestic routes from profitable international routes, whereas British Airways can use its international profits by channelling them into its domestic routes. Airlines such as British Midland Airways have been prevented from flying on international routes by the appeal of the British Airports Authority to the Government. British Midland Airways requested that it should be allowed to fly from Glasgow to New York. The Government have stopped private enterprise operating in a competitive market.
The prospects for private airline companies are uncertain. There is more traffic than ever before and the uncertainty arises because the Government are opening the doors in favour of the state carrier and the state airport owner and not because competition is too fierce. To this extent, the Government are responsible for what happens.
§ Mr. Nicholas Baker (Dorset, North)
My prejudice towards travel is very much like the prejudice of my hon. Friend the Member for Aldershot (Mr. Critchley) towards oratory, in that I think that there is too much of it. I shall bear in mind the comparative lateness of the hour and make a few brief remarks. I have noticed that the longer contributions to the debate have tended to include the fewest points for my right hon. Friend the Secretary of State to consider.
I welcome the debate and I do not complain that the Government have not made up their mind. This is our opportunity to say how the civil aviation industry should be restructured and how British Airways should be put in a position for privatisation.
My right hon. Friend the Secretary of State will have to face some grave problems and I shall refer to four which I think he will have to tackle. First, he will have to decide whether to allow smaller airlines to develop. He will have to decide whether to release them from the check that is imposed upon them, thanks very much to the efficiency of BA. That is especially so in the charter sector. The small airlines feel that BA is dumping charter capacity on to the market.
The second problem to be faced is the bilateral system of agreement on routes and fares and the effect that it has on the market generally. It is possible to move to a multilateral system, but that will take a good deal of time. I welcome the deal that my right hon. Friend has done with the Dutch, but I am told that this may result in British airlines losing a considerable amount of business to them, BA being one. However, that is competition, and that is why I welcome it. I warn my right hon. Friend that the Civil Aviation Authority will claim that British airlines will lose business. That will be the nature of the report from the airlines.
The third problem is that of airports policy, and there have been a number of contributions about that. I shall put in a word for the environment. It is very easy for us in this debate to talk entirely about profitability and the development of industries, but the environment is increasingly a factor in airport policy, and rightly so, as is the effect on a region of the placing of airports and the development of business at airports. I welcome the point made by the hon. Member for Stockton, South (Mr. Wrigglesworth) about the need to help greater development of regional airports, which I hope my right hon. Friend will want to do. On environmental grounds, in the argument between a fifth terminal at Heathrow, if that is how it turns out, and Stansted, I would be against the development of Stansted.
My hon. Friend's fourth problem is simply that the customer is not getting the best possible deal as things are. I agree with my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) that the present position is not desirable in the long term. The present European fares are an example of how the customer is not getting the best possible deal.
There are various ways to introduce and develop competition that have not been discussed, and that is a pity, because there are many circumstances in which direct competition cannot be achieved. There is route competition between different routes which could be, and should be, developed, and there is also the indirect competition that customers enjoy when comparing the 639 services provided by one airline with those of another, even though they may be at different airports in different countries. Competition has to be fair, and I agree with a number of comments that have been made about the lack of fair competition.
I add my congratulations to British Airways on the great achievement of profitability that it has produced. In the days when I did a lot of international flying, I always flew that flag. I only wish that it would put the capital "A" back into its title. I have never been able to accommodate that change.
My right hon. Friend the Secretary of State has privatisation plans before him. He will find great difficulties in the time table that he wants to achieve. I hope that he will try to be objective when considering privatisation and agreeing the structure of the routes when he receives the recommendations from the CAA. I hope, too, that he will disassociate himself from his position as a shareholder in British Airways. It is right that some changes should take place in the structure of routes, and my right hon. Friend should consider this as early as possible this year. It is for him to do that, as no one else can. The pressures that have been put on the CAA to make the decision are unrealistic and are asking that body to do what it was not set up to do. I wish to see British Airways remaining the principal national carrier, despite the changes.
I shall conclude on what I think those changes should be and how my right hon. Friend should bring them about. There is a case for some reallocation of routes, and it is better that that should be done now. I disagree strongly with those who argue against this being done now rather than after privatisation. To leave it until after privatisation would be a serious fraud of those who take the shares, and it would be unfair on the management of British Airways. Some of British Airways routes are unprofitable, although it is impossible to tell from its accounts which those are. It is commonly believed that the Highlands and Islands services are unprofitable, as are some international routes from Birmingham and Manchester airports.
§ Mr. Colvin
The Highlands and Islands services are now some of the most efficient in the British Airways system. They have had dramatic staff reductions, their productivity is greater and they are well into profit.
§ Mr. Baker
I am aware of the improvements in efficiency, but many airlines believe that those routes are not profitable. British Airways should be prepared to make clear in the CAA review which of its lines are profitable and which are not.
My right hon. Friend must make some changes. He will have to get the parties together to agree some rescheduling, and they will have to decide, with the aid of his colleagues in the Treasury, how much revenue income the Government are prepared to lose as a result of BA being privatised in a slightly different form. British Airways, slightly changed and privatised, will be in a better position to serve the public than it is even now.
§ 1.6 pm
§ Mr. Bill Walker (Tayside, North)
I welcome the opportunity to speak in the debate because the present changes and possible changes in civil aviation will have a substantial impact north of the border. My hon. Friend the Member for Dorset, North (Mr. Baker) mentioned the 640 Scottish services, and as one who uses those services more frequently than most, I can speak from first-hand experience. My hon. Friend may be prepared to listen to what I say.
There is no doubt that the intervention of British Midland Airways on the routes from Edinburgh and Glasgow to London has improved services tremendously. It is also encouraging that the number of customers has increased. That is a splendid example of competition inspiring more people to use the facilities available. The super-shuttle service is just what it says, and I now have a splendid choice of departure times with British Midland and super-shuttle flights. That is especially important today because I, no doubt with many other hon. Members, must get home quickly to attend constituency engagements. It is important to me that the additional facilities are available, and all the Scottish Opposition Members appear to have used them already.
There is merit in setting up one holding company for the privatised British Airports Authority and in having separate public limited companies for the south-eastern airports and the four Scottish airports. That arrangement would provide cost and profit centres for the two separate areas of airport operations while retaining the strength and expertise of the existing BAA. I, too, complained about the facilities at Heathrow and elsewhere, and I am pleased that they have improved substantially during the past 12 months.
If we had Scottish control over Scottish airports, the people of Scotland could then make decisions about their airports, which is important with the continuing and ever-increasing demand for more Scottish devolution. I shall not go down that road today—I have never been happy with the idea—but we must recognise that the feeling exists.
It is time for a complete reassessment of the Scottish air transport system. Prestwick, for example, is under review. Prestwick has remained Scotland's international airport not because that is what somebody wants but because the terminal facilities there are far superior to those at Glasgow. There is no duty-free facility of any consequence at Glasgow, but there is a substantial one at Prestwick. Those who travel internally may not consider that to be important, but charter operators who operate from Prestwick have told me that they do not wish to move to Glasgow under present circumstances. They would require substantial improvements in the facilities available at Glasgow. A massive investment would be required to provide those facilities, and that may well mean that Prestwick will remain the principal Scottish international airport.
I am interested in services to the Highlands and Islands. I suggest that the new generation of twin-engined long-range vertical-take-off helicopters would provide a form of transport better suited to the Highlands and Islands than fixed-wing aircraft. Instead of providing massive subsidies — the Scottish Office is also providing subsidies for expensive airfields—it might be more cost-effective and more operationally effective to subsidise helicopter passengers for a short period until the traffic built up. The experience of the Scilly Isles is worth considering. Stornoway is a NATO base and will therefore continue to have an airfield, but on other islands we could scrap the airports and make use of the piers, which have facilities for customer handling, as heliports. On the mainland, we could make use of facilities at existing airports or, indeed, 641 bus terminals. Those are not frivolous comments. We in the Highlands and Islands recognise that the public purse has subsidised our transport for a long time. Subsidy will continue to be needed, but we want to find the most cost-effective answer for the nation. I believe that helicopters are the answer.
There is clearly a demand for Scottish airline operators to provide services into London Heathrow, but the operators are facing problems. The present number of movements allowed into Heathrow, coupled with the planning problems of taxi-ing at terminal 4, mean that there is little scope for improvement in services from Scotland to Heathrow, yet that is what is required. I believe that, as a matter of urgency, the permitted number of aircraft movements can and must be increased at Heathrow, as it has been elsewhere in the world.
The noise problem has been substantially reduced now that quieter modern aircraft are coming into service, and the number of movements permitted could reflect that substantial change. I also believe that — whatever happens about Stansted — an increased number of aircraft movements, together with the fact that aircraft will be carrying more people, will make terminal 5 necessary. If Gatwick is to be a hub operation centre, it requires a runway which will take commuter aircraft.
My hon. Friend the Member for Romsey and Waterside (Mr. Colvin) spoke eloquently about hiving off some of BA's routes. I agree with much of what he said, but before entering that argument I must put on record my admiration for the remarkable job that Lord King and his team have done. It was wrong of some right hon. and hon. Members not to acknowledge the massive scale of the problem that they have tackled and largely resolved. It is no mean achievement to turn round such a massive organisation. Perhaps I might observe, for the benefit of my hon. Friend the Member for Dorset, North (Mr. Baker), that Scotland's Highlands and Islands division is one of the best examples of all. The massive reduction in staff and the turnround is an example to everyone.
What were the terms of reference given to Lord King when he was asked to carry out this Herculean task? Do the Government have any residual responsibility to Lord King and his team? Were they made aware, when they were asked to tackle the job, that the slimmed down profitable airline, when privatised, might be required to give up some of its routes? The answer must have a bearing on the views of the Government and their supporters.
I welcome the introduction of genuine competition. Experience of Scottish routes shows how effective it is. However, we are still a long way from that in the long-haul international routes and in Europe. No one should pretend that pooling arrangements and bilateral agreements are competitive. I have no wish to see fine independent British airlines being submerged by any monopoly, whether British or any other. We must understand what monopoly is. I am worried about the problems that might be created by some of the ideas that I have heard floated. We want a healthy airline capacity, operators being able to function to the best of their ability and the pressures of the market place being taken into account when the privatisation package is enacted. Lord King and his team should be 642 given a fair package to operate, which reflects the challenge that they have accepted. Moreover, other airlines should not be put unnecessarily at risk.
My right hon. Friend will not be surprised that I wish to draw attention to the problems created by the introduction of the airway between Edinburgh, Glasgow and Aberdeen. The review that was promised some time ago —I shall not embarrass my right hon. Friend by saying how long ago — is taking a long time to complete. Meanwhile, the Scottish Gliding Union has suffered substantial damage. I must declare an interest as the parliamentary spokesman on behalf of British gliding. It is an unpaid job, just like all of my other jobs in this place. The visitors who bring their high-performance sail planes to use the unique site at Portmoak have almost completely vanished. The airway has become the deterrent that I and others involved in gliding feared. The wave has been operating because nature provides it regularly, but the airway has prevented access to the wave conditions. I do not believe that the airway is as busy where the wave operates as was at first expected, and at weekends the frequency of flights does not justify an airway.
Much of the aircraft movement that is claimed for the airway does not reflect the number of aircraft that leave the airway or join it just south of Aberdeen. Figures for civil aircraft movement in the RAF Leuchars military aerodrome traffic zone show that many commuter and charter aircraft fly directly from Aberdeen down the east coast, as I have previously suggested. It is clear from a written answer given by the Ministry of Defence yesterday that aircraft movement in the area has increased substantially since the introduction of the airway. In 1981, Leuchars logged 980 movements; in 1982, it logged 2,468 and in 1983 it logged 3,099. Anyone who believes that the commuter airlines are using the airway will believe anything. They use it for a short distance and then leave it to take the most direct and comfortable route. Only a fool flies over mountains at under 12,000 ft when it is bumpy.
The only party to suffer as a result of the airway has been the Scottish Gliding Union. The delay by National Air Traffic Services in producing the review report shows that there is a desperate need for an independent appeals procedure against its decisions. It is nonsense to claim that only NATS is professionally qualified to deal with air space matters. Indeed, I believe that an eminent professor who is qualified and acknowledged as an airspace expert is producing a paper showing the fallacy of that claim.
Ministers must acknowledge that the British Gliding Association has behaved responsibly and constructively throughout. Both it and I have been extremely patient, but my patience is now wearing thin and I may be forced, as once before, to call for the assistance and support of the more than 150 right hon. and hon. Members who take an interest in the well-being of gliding in this country to put pressure on the Government to ensure that democratic and fair access to decisions is available to bodies such as the British Gliding Association, because within our parliamentary system there is clearly a need for a review to deal with a quango that is exercising dictatorial powers.
Mr. James Coachman (Gillingham)
I rise somewhat diffidently to contribute briefly to the debate. I am not an enthusiastic flier, and the RAF found itself able to dispense with my services as a pilot within a very few hours of 643 flying. For me, the greatest joy of flying is the reassuring moment when the undercarriage makes firm and continued re-contact with terra firma. In the past few months, however, I have become increasingly interested in two contentious matters affecting the British Airports Authority —the long-running saga of a possible third London airport and the question of privatisation. In the few minutes available to me today I shall confine myself to the first issue.
Unlike my right hon. Friend the Secretary of State, I do not feel constrained not to comment on Stansted. I believe that the decision is long overdue and that as soon as the public inquiry is determined, if the answer is favourable, urgent action to alleviate the perceived shortfall in capacity in the 1990s should be taken.
I have no doubt at all about the validity of the case for Stansted. I believe that the Government's airports policy in 1979 was absolutely right. The invitation to the BAA in 1979 to consider the development of Stansted followed nearly 20 years of dithering. The Roskill and Maplin concepts had been and gone and plans for a massive new four-runway airport handling about 100 million passengers per year had been abandoned.
In 1979, the Government reaffirmed the policy to provide a fourth but not a fifth terminal at Heathrow and to provide a second terminal but not a second runway at Gatwick. That additional capacity, with Stansted in its present state and also Luton, will bring the London and south-east capacity to about 68.5 million passengers per year. That should suffice until the early 1990s, but there is broad agreement that demand will grow to about 84 million passengers per year between 1995 and 2000—that is, 15 million per year above the maximum planned capacity for Healthrow, Gatwick and Stansted in its current state.
The are no serious green field contenders, and Stansted with its two-mile runway and other facilities and with excellent road access via the M25 and M11 cries out for development into London's third airport.
§ Mr. Couchman
I am sorry. I shall not give way as I have only five minutes in which to make my speech.
Further intensification of the use of Heathrow and Gatwick would be unacceptable. The Government have placed a limit of 275,000 aircraft movements per year on Heathrow, and that limit is likely to be exceeded this year. Even if the limit, which includes helicopter movements, were relaxed a little, there would still be a need to constrain the 15 per cent. of aircraft movements made up by small turbo propeller aircraft on domestic services.
If the 38 million passengers per year capacity of a four-terminal Heathrow were to be fully used, with the limit imposed on movements, there would need to be a concentration on movements of large aircraft on international flights. There is not likely to be another quantum leap in passenger load capacities in this century.
Gatwick is not similarly limited by a ceiling imposed on air traffic movements, but its single runway means that a total capacity of around 160,000 movements per year is about all that can be contemplated. The 40-year covenant by the British Airports Authority not to develop a second runway at Gatwick more or less guarantees that Gatwick's capacity for annual air traffic movements is constrained to roughly the present level. There may be a significant 644 change in the balance of large and small aircraft movements and of scheduled as opposed to chartered flights. No doubt Gatwick's management will seek a greater share of the profitable interlining traffic.
For all those valid reasons, I believe that the development of Stansted, with the provision of a 15 million passengers per year terminal, is now urgent. It will be a significantly preferable development, in environmental terms, to further intensification of the use of Heathrow and Gatwick. In terms of enhancing employment opportunities for north-east London, Essex and even Kent, Stansted will offer a substantial benefit. That enhancement in employment opportunities would be considerably greater than any enhancement that ensued from further development of Heathrow and Gatwick.
The overriding points in favour of Stansted are the existence of an excellent runway, the motorway pattern and the feasibility of developing terminal facilities by the time a third major London airport is essential, if London's competitive edge is not to be lost to the continent.
It is interesting that 20 years ago some people considered that Gatwick would be a white elephant. Today, some people think that Stansted will be a white elephant. I am sure that the doubters would give way, in view of the success of Gatwick.
§ Mr. Nicholas Soames (Crawley)
My constituency interests in this matter are extremely diverse, in that at Gatwick airport there its the British Caledonian headquarters and its main operating base, a substantial British Airways presence and the presence of many independent airlines, as well as the headquarters of the British Airports Authority, the activities of which will be affected in no little way by the reviews that are being conducted. Therefore, I am gird about with problems.
I say to my right hon. Friend the Secretary of State that the PSBR imperative must, for once, take a back seal in dealing with this problem. It is a matter of crucial national importance. The industry is vital to the nation in every respect. It is not just a partisan argument between British Airways and British Caledonian. My right hon. Friend faces a difficult task, and I am glad that I am not in his shoes. His responsibilities go extremely wide. With fare structures, routeing, airports and aircraft movements, it is a formidable task.
I pay a warm and unqualified tribute to British Airways; to Lord King and Mr. Colin Marshall and his outstanding management team, who have wrought miracles with British Airways in the recent past. Particularly in my constituency, British Airtours has achieved a remarkable turnround. I also pay tribute to the enterprising spirit, resilience and guts of the independent airlines, which have had a long, hard struggle in past years, particularly British Caledonian, which has taken outstanding initiatives on European fares in the recent past.
In the CAA's interim assessment, the most telling sentence in that excellent paper read:Nose to nose competition between British Airways and British Caledonian exists on only two longhaul routes.In answer to a written question from me about the objectives of the Government's civil aviation policy, my right hon. Friend said that they wereto further the interests of users of air transport services by seeing that British airlines provide services that satisfy all substantial categories of public demand at the lowest charges, consistent with a high standard of safety, an economic return to efficient 645 operators, and the sound development of the civil air transport industry of the United Kingdom". — [Official Report, 18 November 1983; Vol. 84, c. 584.]Real progress has been and is being made in this matter, but the central problem must be attacked. The sheer size and dominance of British Airways does not stem from 39 years of superior performance in world markets. Although successive Governments — 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. At present, British Airways controls more than 80 per cent. of Britain's scheduled air service output. British Caledonian has 15 per cent. and the other independent airlines about 2 per cent.
My right hon. Friend made much of competition. By any standard, more than 80 per cent. of any industry's output must add up to a monopoly. To allow BA to be sold off intact would contrast sharply with the recent Government decision to refuse to allow P and O or European Ferries to acquire Sealink, on the ground of domination. Correcting the present imbalance would not, as some would have it, merely enable other airlines to grow at the expense of BA.
Britain's position at the aviation crossroads of the world, together with its immense and boundless expertise and enterprise, could enable a more competitively balanced British aviation industry to lead the world, not just by size but by its long-term success. We need a powerful state of competitive tension among British airlines which will force them to compete to be in the forefront of marketing, customer service, innovation and reputation. Only in such a competitive environment will efficiency and excellence be stimulated.
Claims that route transfers would ruin BA's chances of a successful flotation cannot be substantiated. However, I have some sympathy with, and understand, the burden of BA's argument in this respect. We await with great interest the CAA report, but the objective must remain constant and paramount, and that is the creation of an overall healthy British aviation industry for every airline.
The currency of airline and airport development is unquestionably the route licence. Only through the redistribution of this wealth can competition and the sound development of the British airline industry be achieved. In consequence, I am bound to support the arguments and proposals put forward by British Caledonian and the BAA in so far as they are vital to the development and interests of Gatwick airport, and that includes a substantial BA presence.
With a wide range of scheduled service products, Gatwick would become fulfilled in its politically designated role as an international gateway for London, and the livelihood and security of all in the area would be assured. It is of equal importance that the objectives of airline competition, combined with the sound development of the British airline industry, should be met.
§ Mr. Terry Dicks (Hayes and Harlington)
Like my hon. Friend the Member for Crawley (Mr. Soames), I have a strong interest in the subject under debate because 646 Heathrow airport is in my constituency, and I need not list the number of airlines and activities that are involved there.
Some may be forgiven for thinking that this is a day to attack British Airways. It is not, and any suggestion that BA has in some way done wrong by making a success out of what was an unsuccessful activity is totally out of court. It is criticised when it makes a loss, and now that it has made a profit it is still being criticised. Its management should be congratulated for what it has done.
In an ideal world, all suppliers should and would have unfettered access to the market. Unfortunately, we do not live in an ideal world and we must face the position as we find it. I know of no other industry where people seeking to obtain a better share of it would ask others in the industry to give up some of their profitable activities in their favour.
We must consider the problem at Heathrow, where the ceiling is 275,000 flight movements. Many people may not know that 60,000 of those movements are for small aircraft carrying fewer than 100 passengers. It is nonsense for a major international airport to allow 60,000 flight movements for small aircraft. Those movements should be directed to Stansted. I feel very strongly about that matter and hope that my right hon. Friend will take it into consideration when completing his review.
The BAA holds a monopoly position at Heathrow. It is the major employer and has a great impact on my constituency. Heathrow now has the highest peak time landing charges in the world. The BAA uses those high charges to cross-subsidise airports in other parts of Britain which, on normal commercial judgment, should have been closed a long time ago. It is nonsense that major airlines coming into Britain and wanting to use Heathrow should have to pay for the privilege of keeping open uneconomic airports such as Prestwick.
The duty-free shops at Heathrow and Gatwick have the highest charges in the world. It often pays people to shop in European supermarkets instead of using the facilities at Heathrow and Gatwick. I find that amazing.
The BAA has taken a dictatorial attitude towards the occupation of terminal 4. BA originally wanted the terminal for its sole use. It is a national airline, and I see nothing wrong with it wanting to put all its activities into that particular basket. But, for some obscure reason, the BAA has insisted that the smaller airlines should use terminal 4.
Another example of BAA's dictatorial attitude was shown towards BA when it requested flipover boards for flight information in terminal 4, rather than the television screens that people find difficult to read because they constantly change. The BAA would not allow that, despite the fact that the airline knows best how to meet its passengers' needs. The dictators at the BAA said, "We know what your passengers want and they will have it, even if no one else thinks that that is what they want." We must do something about the BAA.
The BAA wants to remain in being as a whole when privatisation comes. It wants to retain its unprofitable airports by switching money around the country. It wants to direct airlines to airports when, on a commercial judgment, the airlines would not make such a move. I find that a nonsensical policy and quite contrary to the commercial judgment that the Government want to bring into the civil aviation industry.
647 The BAA is opposed to terminal 5 because it wants Stansted to be developed. It wants to build on its empire and ensure that it retains a dominant position in the industry. It believes that it can direct airlines and passengers towards Stansted, regardless of the fact that they do not want to go there. Passengers and airlines see Heathrow as the London airport. Surely, if we are to have competition, consumer sovereignty must be taken into account. If people want to fly into Heathrow, perhaps on their way to central London or to Europe, they should be allowed to do so — provided, of course, that they are prepared to pay for it. They should not be told by either the Government or the BAA, "We know what is best. We know where you want to go, even though you think you do not want to go there."
In a document produced last year BAA said that concessions and contracts within the airports were let on a competitive basis. It said that competition was encouraged at all levels to ensure efficiency and responsiveness to consumer requirements.
Why take a different line on competition between airports? It is logical and necessary, and for the benefit of consumers, to break up the BAA monopoly. We should form "Heathrow Ltd.". The Secretary of State said that if we did that, Gatwick would not have a good time and things might go wrong for it; but I thought that competition was about placing one company, organisation or airport against another. If we are to have competition between routes for flights around the world, why not introduce competition between the airports? If Gatwick cannot make it and goes into the red, that is hard lines and bad luck. I thought that was what competition was all about.
It is strange that we should spend hours discussing competition between routes and airlines and say nothing about airports. The Secretary of State dismissed the issue out of hand and said that the London airports would be grouped together. Why? He said that we want to extend competition whenever we have the opportunity. We now have a heaven-sent opportunity to break up the incompetent monopoly of the British Airports Authority and to do something for the airlines and the passengers whom they serve.
The Secretary of State said that the Government were the champions of the consumer. I ask him politely to put action where his words are and show us that he is the champion of the consumer by breaking up the dead hand of the BAA at airports in London and elsewhere.
§ Mr. Toby Jessel (Twickenham)
I cannot agree that the British Airports Authority is a "dead hand" or an "incompetent monopoly". It seems to me to be extremely efficient in the way in which it runs the various airports round London. I do not receive many complaints about services from the large number of constituents who travel through Heathrow and Gatwick. All hon. Members who represent articulate communities receive large postbags, but I have received few letters over the years complaining about what goes on inside Heathrow. I think that the BAA does an excellent job on the whole, although one can argue about small matters, as one can on most things.
The Secretary of State referred to environmental aspects of airport policy, particularly in terms of noise nuisance. He said that the Government were "determined to bring relief" to people affected by aircraft noise. I was glad to hear that, but I stress that relief means less noise, 648 not holding the noise to its present level. When British Airways argues for a fifth terminal at Heathrow, it says that, because of the increased number of wide-bodied aircraft, the total noise will not increase. But it is not enough for the amount of noise not to increase; we require it to be less. My constituents want a substantial and permanent reduction in noise.
The Secretary of State gave examples of what he is doing to reduce aircraft noise. He mentioned quieter engines. I see that my hon. Friend the Member for Esher (Mr. Mather) is on the Front Bench. For 14 years, he and I have battled for quieter engines, along with other hon. Members representing constituencies near Heathrow.
It is essential to uphold the restraint on night jet takeoffs. It is equally essential to uphold the restraint on the number of Heathrow flights each year. A total of 275,000 movements sounds astronomical. Most people will not have worked out that it means 750 flights each day on average. That is a large number. It is more than enough, and it would be intolerable if that number were increased. I was glad to know that the Secretary of State has decided to take a clear line. I understand the difficulties in the range of options.
The number of movements has not been "reduced" to 275,000, as my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) said: it never was to be more than that. A planning condition was imposed when permission was given to build the fourth Heathrow terminal. It is not playing the game for someone who has received planning permission to come back later and demand that one of the crucial conditions should be broken in order to make more money. That would be an attempt to cheat, and the House should regard it as such.
The most important action that the Government can take to bring relief from aircraft noise is to refuse permission for the construction of a fifth terminal at Heathrow. The public inquiry was completed last year. I am aware that my right hon. Friends the Secretaries of State for Transport and for the Environment will both be in a quasi-judicial capacity, so I cannot expect my right hon. Friend the Secretary of State for Transport to comment much today on the inquiry report. However, I cannot do other than make it clear that there is tremendous strength of feeling among large numbers of peope living round Heathrow that a fifth terminal should not be built, which was said to be Government policy by a previous Secretary of State. The feeling is strong and widespread, and it must not be ignored.
Mr. Justice Glidewell, the inspector before whom the planning inquiry into the forth terminal was held, said in his report:It is in my view essential that if they"—the two Secretaries of State—decide to permit Terminal 4 they should at the same time reiterate that it is the Government's policy that there will be neither a fifth terminal nor any other major expansion at Heathrow.The aircraft noise problem remains serious. The noise distresses people and interferes with their lives in all sorts of ways. It prevents the quiet enjoyment of their homes and gardens, it interrupts the work of schools, offices and hospitals and worship in churches; it is a major nuisance in the communities affected by it.
In this context, it is essential that the Government do not rely too much on the statistics produced in the noise and number index. To say that only 300,000 people will 649 be affected by aircraft noise in a few years time, instead of 1 million, sounds doubtful. I would not believe that part of the brief with which my right hon. Friend has been provided without seeing some proof of this. I wonder whether the 300,000 includes my constituents. I have seen so-called "footprints" under the noise and number index which exclude Twickenham, although the concentration of flight paths over Twickenham is such that the planes fly over certain open spaces, such as Hounslow heath and Richmond park, as a so-called noise abatement measure. However, it means that the build-up areas in between have a severe noise problem with which to cope.
The noise and number index does not allow for the fact that constituencies such as mine, which suffer from aircraft taking off, although not from those landing, tend to experience the over-flying of aircraft taking off on eastbound take-off days when it is most likely to be fine weather. When there is a prevailing east wind, which determines the direction of take-off, and which often goes on for a spell of several weeks in the summer, the people living in those places experience the over-flying of aircraft taking off from Heathrow day after day and week after week at one of the periods of the year when they most want to be in their gardens. That is not reflected in the noise and number index, and it is another reason for regarding the index and its formula as suspect.
The road traffic aspect must also be considered. My hon. Friend the Member for Hayes and Harlington (Mr. Dicks) spoke of "consumer sovereignty" and said that if consumers wanted to use Heathrow they should be allowed to do so, and that that argument should be paramount. However, it is no use to the sovereign consumer to be able to use Heathrow if there are traffic jams and they simply cannot get through.
The departmental document of my right hon. Friend the Secretary of State for Transport was submitted to the public inquiry. That document, No. DTP25, said:it is clear that neither the M4 nor the M25 could take additional traffic"—which the fifth terminal would generate—without becoming very severely overloaded. The Department have no proposals for any further roads in the area, and indeed see no scope for providing any additional capacity in the M4/A4 corridor into Central London.Incidentally, at present there are problems on the A4 at the Talgarth road and Cromwell road intersection, because the GLC's traffic scheme has reduced the number of lanes into London from three to two. No doubt, Mr. Deputy Speaker, you have experienced the problem when driving into London from the west country. I cannot believe that that scheme will be allowed to persist indefinitely.
We are talking of an expansion of Heathrow by a fourth and fifth terminal. At present, 25 million to 27 million passengers go through Heathrow every year. The fourth terminal has been built, but has not yet been opened. When it is open, that number will increase to 39 million a year, and with a fifth terminal it would go up to 52 million or 54 million a year, or roughly double the present level with three terminals open. The Cromwell road has already reached peak capacity, and not much more traffic can get through. One has to accept the professional expert advice from the Department of Transport that there will be severe overloading and traffic jams.
I am equally concerned about the effect on the M25. My constituents and many other people have been waiting 650 for years for the M25 to be completely open. In a year or so, the south-west and western sectors will be fully open from Reigate hill round past the M3 and M4 to the north. There is a risk that with a fifth terminal the benefits of that road may be taken away from them. Most motorways are straight, or almost straight, so if they are severely overloaded and the traffic has to slow down to 40 or 50 mph, drivers do not usually take another parallel route.
However, a curved motorway such as the M25 would not have the same effect. If that became jammed up, drivers would be tempted to cut the corner, and to take a shorter route than that of the wide sweep encircling greater London. More of the traffic would then use roads in my constituency via Hampton Court bridge. Therefore, a fifth terminal would be damaging to the environment of those living on the western and south western outskirts of London.
The hon. Member for Kingston upon Hull, East (Mr. Prescott) referred to the Campaign for the North, which seeks to attract more air traffic to the northern airports. He has been supported by some hon. Members who represent constituencies in Essex and Hertfordshire and who are opposed to the expansion of Stansted. However, I suspect that the hon. Gentleman and those from the northern constituencies who think like him are unwittingly threatening the interests of hundreds of thousands of people who live round Heathrow.
It is said that Stansted should not be expanded because it would be better to attract more traffic to the north, and northern airports can take it. But if those northern airports fail to attract as many passengers as they hope for, a fifth terminal might go up at Heathrow if Stansted were dropped. Therefore, the policy of Campaign for the North would damage my constituents and those of many other hon. Members around Heathrow. That is not the intention of the policy but that could be the result. I hope that the consequences of the campaign will be considered further.
§ Mr. Prescott
With the leave of the House, Mr. Deputy Speaker, I should like to make a short contribution and leave sufficient time for the Minister to reply to the many issues which have been raised in a good debate. The contributions to the debate reflected the strong divisions of opinion that are represented in this place and the various interests that are involved.
My hon. Friend the Member for Ealing, Southall (Mr. Bidwell) rightly expressed the concern of those who are employed in the civil aviation industry. He emphasised that they have made great sacrifices and that there has been little industrial trouble in the industry.
Constituency interests have similarly been expressed, especially by those who represent constituencies near to airports. As the hon. Member for Twickenham (Mr. Jessel) said, there is a clear view on the development of future airports such as Stansted. There is a demand for more traffic to be handled in the north, and account must be taken of the problems of the Scottish airports.
The views that have been expressed have raised crucial airport development policy issues. The Secretary of State has said that there are a number of reports before him which he will attempt to bring before the House shortly. We shall be able to make our judgments when they come before us.
651 Helicopter and gliding interests have been taken up in the debate, and it is right that those interests should be properly ventilated.
The Secretary of State made it clear that if the 275,000 movements at Heathrow, which both Conservative and Labour Governments have endorsed, are exceeded when terminal 4 comes on line, he will proceed to cut back on the extra movements.
We have heard from those who are demanding more flights into Heathrow. It is suggested that there could be more flights following the introduction of quieter aircraft. I am sure that those living near Heathrow would not be happy if that solution were adopted. Equally, they would not be happy if helicopter movements became Boeing 747 movements. Such solutions would not give a great deal of comfort to those living in the Heathrow area. I hope that we shall hear the Minister's thinking on this issue. He has been frank enough to say that he does not wish the limit of 275,000 movements to be exceeded, but all the projections suggest that it will be exceeded at some stage this year.
Industrial interests have been well represented. The hon. Members for Crawley (Mr. Soames) and for Brentwood and Ongar (Mr. McCrindle) reflected the interests that have been represented by Bristow Helicopters Ltd. There is talk about the golden chance that is provided by the privatisation of BA, but it is seen as a golden chance to move in and strip BA. Bristow Helicopters Ltd. argue, "Why should BA take the helicopter traffic when we could handle it?"
The hon. Member for Brentwood and Ongar seemed to be suggesting that we should accept British Caledonian's point of view, which tends to reflect the dominance of two organisations. He would not mind if the competition went into the charter sector. That coincides with BCal's argument. There will be a remarkable similarity of approach following the privatisation of BA. It is clear that there are those who are shaking themselves up to get a share of the action.
There are strong forces that argue that the motivation of privatisation is a golden opportunity to take some of the routes that have been granted to BA because of its history as a large public corporation. Undoubtedly the big questions for us all, which the Secretary of State will also have to face, are, what is the optimum size for competition —will it be two operators, or seven—will we take the point that regional airports should have independent lines, and should they have a mix of international and domestic lines?
These matters are of considerable importance, because when British Airways is split up that will affect the situation in which there is a dominant carrier, which brings with it advantages. We may call it a private or a public monopoly, but there are advantages of size, not only in economies of scale, but in the negotiation of international competition. I shall not feel any better if there are six or seven private operators instead of one.
On balance, I do not want British Airways to be privatised. The Labour party has committed itself to taking it back into the public sector if it is privatised. If the argument holds that a dominant airline operator is an advantage to British civil aviation, I should have to accept that logic whether the airline is private or public. However, I have a political position, as does my party, that this should be a publicly operated company.
652 The other big concerns are route distributions and the problems of airport charges that will arise from that. I shall not spend long on this, but I point out that the criticism of high airport charges is one that can be made of our seaport charges as well. It would be useful to compare the costs of British airports with those of their continental competitors. It would be better to make an informed judgment rather than say that the level of charges is merely a reflection of size or of private or public ownership. That question will have to be answered.
It is obvious from the debate that any aviation policy has to take into account the interdependence of a policy for airports, a policy for the air operator, and route distributions. Therefore, will the Minister reply to two particular questions about the redistribution of routes? First, although this is a matter for business managers, may we have a debate on the reports that will come out? I assume that another civil aviation debate will have to take place within the 12 months, and before decisions are taken. If the CAA review comes out in mid-July and everyone is rushing to the market for the privatisation of British Airways, the least that the House can do is to look at those conclusions. As the Secretary of State has called for them, I hope that we shall have a chance to express our views on the judgments that are arrived at. Some signs as to the date of such a debate would be helpful.
Secondly, if the review makes it clear that the CAA requires extra powers to be able to redistribute these routes, and the routes need to be changed, can it be made clear that those routes belong to the state and to the nation, as hon. Members have said, and not to any one operator? That will make it a great deal easier to take this sector back into public control, because no operator can be guaranteed to maintain the route. The fact that competition requires changes in the routes also gives the opportunity to make an assessment of whether the airlines should be private or public. There are a number of ways to skin the rabbit, as we should bear in mind. That is one of the Government's dilemmas.
The hon. Member for Tayside, North (Mr. Walker) asked about privatisation of British Airways and whether Lord King was aware of what is going on. As I understand it, Lord King was appointed by Sir John Nott, so the speech made by Sir John when he launched the Civil Aviation Act in 1979, which I have already quoted, and in which it was said that there would not be a break-up of British Airways, must still be effective. If that was the remit given at the Dispatch Box, one can only assume that that must still hold good.
§ 2.4 pm
§ The Parliamentary Under-Secretary of State for Transport (Mr. David Mitchell)
We have had an interesting, useful and wide-ranging debate. "Mon Dieu et mon droit", which my children tell me means, "My God, I am right." It ranged from gliders at Portmoak in Scotland to whether Virgin Atlantic will fly this week. I can tell the hon. Member for Kingston upon Hull, East (Mr. Prescott) that it will fly this afternoon.
The debate has confirmed four general matters. First, aviation arouses strong opinions, raises powerful constituency interests and demonstrates a wealth of knowledge among Back-Bench Members that commands respect and deserves to be listened to.
Secondly, the problems and the opportunities of this rapidly expanding industry are immense and interrelate 653 like a jigsaw puzzle. One cannot slot in one piece without examining the general scene to see how it fits with the rest. That is recognised both by the Government and by the hon. Member for Kingston upon Hull, East.
Thirdly, we are poised on the threshold of many important decisions. We are not yet ready to make announcements, so we can take into account the views expressed in the House this morning, and we shall certainly do that. The hon. Gentleman asked me when we would next debate civil aviation. Of course, that is a matter for the usual channels, and I am sure that he will use them.
I have sat through almost the entire debate, because I believe that Transport Ministers must listen as well as talk. I have been listening to representatives of airlines and other operators, and I have listened today to the views of my hon. Friends and of Opposition Members.
On my fourth general point, my right hon. Friend the Secretary of State invited the hon. Member for Kingston upon Hull, East to state his policy. Alas, the hon. Gentleman was rather like Old Mother Hubbard — his cupboard was bare. We heard nothing new from him. The Labour party has a policy on ports, a sort of policy on shipping and one on railways, but the debate revealed that it has hardly any policy on aviation. Perhaps the industry is not old enough for that great theme of Socialist policy—to look back to the ideas, problems and solutions of the last century.
It may be that I am being a little unfair. The hon. Gentleman was honest enough to expose to the House the dilemma that faces him and his party. He has travelled to the United States and, because of the way in which Laker forced down fares, he has benefited from the competition that my right hon. Friend has chosen as the plank of his policy. He also genuinely wants other people to enjoy those benefits, but the magic formula for achieving increased competition is so alien to the Labour party's philosophy that he is in a great dilemma.
In politics one must start firmly from one's philosophy, out of which grows a policy that is put into effect in a programme. Our philosophy is clear: transport is there to serve the needs of the traveller and the mover of goods. It is not there to protect the industries that operate it. Our policy is to allow the pattern of transport services to be decided by customer use and to use competition to make choices available. Competition is the motivator of cost-effective excellence.
Our programme is well illustrated, first, by what has happened in the United Kingdom market. There has been a great opening of internal routes to competition wherever there is sufficient volume to warrant it. British Midland Airways now competes with British Airways. The shuttle, which was nothing to be proud of, has been replaced by the super-shuttle, and British Airways has every reason to be proud of what is has achieved. My hon. Friend the Member for Tayside, North (Mr. Walker) referred to that achievement, as did many other hon. Members. I remember the grim days when one could not even get a cup of coffee on the old shuttle. Now there are hot meals.
Increased competition has had three clear results for our internal services. There is greater airline efficiency, a vastly improved service for the traveller, and a growth in the numbers travelling. Those factors are the key to our attempt to secure the same advantages for the traveller in 654 the EEC, to which my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) and other hon. Members have referred. At the moment, there is a series of duopolies and cartels — a rich man's club. Some airlines in Europe see themselves primarily as providers of a service for the business man. They have not yet seen the scope that exists for the ordinary man in the street to use flying as a means of getting around.
There is a common market in goods. We all know the enormous extent to which the trade in goods has expanded since the treaty of Rome was signed. There is supposed to be a common market in services as well, but the surface of that problem has hardly been scratched. In aviation, it has hardly been touched at all. We intend to see that there is a real common market.
The diversity of markets in Europe demands a diversity of response. The operators should be able to exercise their commercial judgment in identifying markets with potential, seeking to cater for them and so encouraging them to grow. At present, we have the ridiculous situation that one cannot start a new service or fix a new price without seeking one's competitors' agreement. That cannot be regarded as acceptable competition. The dead hand of restriction has resulted in a dull market. I thank my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) for the sturdy way in which he has supported our attempts to remove the barriers.
We do not seek total deregulation. As my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) said, there is a problem in Europe connected with the existence of national airlines. Total deregulation would mean that some would grow and that the weakest would go to the wall. There is no volunteer for the ignominy of being the national airline that goes to the wall. We must therefore recognise the limitations and seek to reach agreement, but we must do more than that.
The European Commission's second memorandum is taking what we regard as faltering steps in the right direction. Senior officials have been put to work, and before the end of the year — probably early in the autumn—they will come forward with recommendations about ways in which liberalisation can be introduced via the machinery of a Common Market regulation. We hope very much that that will be achieved. However, I say to the House and to Europe that people are wrong if they think that that will be the end of the story and that, if the Commission's proposals are not accepted, matters will simply drift on. In another place, Lord Bethell has made it plain that there is a route through the European Court that could be used. If it were to be used, the result would be unpredictable. The national airlines would be prudent to recognise that it is better to make progress by agreement than to have progress forced upon them in a way that they may not welcome.
In his discussions with the Dutch Minister of Transport, my right hon. Friend the Secretary of State launched a frontal assualt on the lack of competition in Europe. Several hon. Members have paid tribute to his success. The requirement to consult competitor airlines before introducing a new service has been removed by the British Government, and the major expansion in competition between us and the Netherlands is not the end of the matter, as I believe that there will be a domino effect. We have established a bridgehead at Schiphol airport in terms of competition and lower fares. Unlike the British, who have to cross the sea to reach another national airport, 655 many Germans will get into their cars and drive to Schiphol rather than go to Frankfurt. There will also be many Belgians who will drive across the border rather than fly from their national airport. Pressure will therefore be put on the Belgian and German airlines to meet the competition which will otherwise erode their business. As that happens, the entire European system will break down. I envisage many benefits flowing from the bridgehead that my right hon. Friend has established.
We intend to bring scheduled flying into the reach of the common man and look forward to the day when people will talk not about the man on the Clapham omnibus so much as the man on the Paris shuttle.
Several hon. Members have mentioned the environment. Noise can be a potent destroyer of the quality of life. The Government care about the environment. We have maintained the ban on the use of noisy aircraft on the United Kingdom register after the end of December 1985. We support and will operate the EC directive that tightens up on noisy aircraft after 1987. Helicopters seem to have a special pitch of vibrating noise. My hon. Friend the Member for Twickenham (Mr. Jessel), my right hon. Friend the Member for Spelthorne (Sir. H. Atkins) — who led a deputation and had a long discussion with me about helicopters — and my hon. Friends the Members for Feltham and Heston (Mr. Ground), for Esher (Mr. Mather) and for Epsom and Ewell (Mr. Hamilton) have all actively taken up the problem with which I shall now deal.
British Caledonian and British Airways Helicopters Ltd. applied to the Civil Aviation Authority for a licence to operate between Heathrow and Gatwick for a further 10 years. The application aroused considerable interest among local environmentalist organisations, and the hearing took 14 days. In the light of the submissions made to it, the CAA decided that the application should be granted for the full 10 years. As the application fell within section 17 of the Civil Aviation Act 1980, which deals with cases of environmental importance, the authority gave notice of its decision to my right hon. Friend. My Department invited all of the parties to the hearing before the authority to make representations on the CAA's decision. My right hon. Friend and I have considered those representations with great care, and, in accordance with section 6 of the Civil Aviation Act 1982, we have consulted the authority and have its comments on our proposal.
Having reviewed all the evidence, my right hon. Friend and I have decided that, although we recognise the benefits to air travellers and operators of maintaining the Heathrow-Gatwick helicopter service for a further 10 years, in the light of the environmental disturbance caused by the service we could not justify allowing it to continue in operation once a suitable alternative coach service becomes feasible with the opening of the relevant sections of the M25. I recognise that the decision may be unwelcome in some quarters, but we must give due weight to environmental considerations in dealing with such cases.
Initially, we took the view that the helicopter service between the two airports should end one or two months after completion of the M25 so as to allow time for a fast coach service to become established, but the authority has recommended that the period should be four months. In the interests of a smooth transition from helicopter to fast coach service, we have accepted that advice. In accordance with my right hon. Friend's decision, a 656 direction will shortly be issued to the authority to revoke the licence four months after the opening of the relevant sections of the M25.
There was a need here to balance the environmentally desirable with the provision of a service to the public and jobs and wealth creation in the aviation industry. It is not easy to strike the right balance, but I hope that the House will agree that, on balance, the Government's decision is right, especially in the light of the super coach services to be introduced in place of the helicopter services.
Airport policy was discussed by several hon. Members, including my hon. Friend the Member for South Hams (Mr. Steen) and the hon. Member for Ealing, Southall (Mr. Bidwell). We have already announced that we do not intend to privatise the south-east BAA aerodromes separately, and we are still considering the options on how to introduce private capital. The hon. Member for Stockton, South (Mr. Wrigglesworth) suggested franchising, and we are certainly considering that. In particular, he suggested franchising a whole terminal to an operator. There are difficulties about matching requirement and terminal capacity in making that a reality, but we shall certainly consider the point.
A number of hon. Members raised the subject of Stansted. We expect the inspector's report before the end of the summer, but it will take some months to consider the result of that very important inquiry. As Ministers act in a quasi-judicial capacity in these matters, the House will understand if I say nothing more about that.
Existing policy on Scottish lowland airports has been in operation since 1946 and was reaffirmed in 1961. It is right that these matters should be reviewed from time to time, and that is what we are now doing. A consultation paper is to be published so that we can draw upon a wide spectrum of advice.
The question of the Highlands airfields was raised by the right hon. Member for Western Isles (Mr. Stewart) and by my hon. Friend the Member for Tayside, North. My hon. Friend suggested that we should get rid of all the aerodromes, get rid of fixed-wing aircraft and operate a helicopter service. Although a helicopter service would cost more, there is an initial attraction in the idea of getting rid of all the costs of fixed aerodromes. We have considered the idea, but the economics do not come down in favour of it. The right hon. Member for Western Isles said that some councils might not want to take over the airfields, and we take note of that point. Nevertheless, we intend to offer them to local authorities and the private sector. I am reasonably confident that that change will be made later this year. I shall return later in my speech to the point about ensuring fair competition.
Regional airports were mentioned by several hon. Members, especially my hon. Friend the Member for Dorset, North (Mr. Baker) and the hon. Member for Stockton, South. We have tried to do all that we can to help regional airports, and we have been generous with capital expenditure allocation approvals. We have authorised a substantial programme of developments at local authority airports, and capital expenditure allocations have totalled £185 million since 1979–80. That compares favourably with the much lower figures under the previous Labour Administration.
We have demonstrated in a practical way our commitment to help the regional airports to fulfill their full potential where it is reasonable and commercially viable to do so. The major problem that they face is finding 657 commercial traffic. Several hon. Members, including the hon. Member for Kingston upon Hull, East and my hon. Friend the Member for Tayside, North, referred to the air transport movement limit. A limit of 275,000, announced in December 1979, was based broadly on accommodating the expected demand pattern. In fact, the demand has not developed in the pattern that we expected. There is a lower proportion of very big aircraft. There were 258,000 movements last year. There is a danger that we shall exceed the limit of 275,000 by October 1985, when terminal 4 comes into operation. It is ironic—the House will recognise this — that after expenditure of £200 million, when the terminal comes into operation we might have to reduce the number if the industry does not do so itself in the meantime to accommodate the figure of 275,000.
Therefore, it is prudent to consider how that is to be done. We can do one of two things. We can push people out of Heathrow or induce them to go somewhere else. We are publishing a consultation document so that hon. Members can examine the ways in which it can be done. It could be done by either regulation or price. We want to have the views of the users, the operators and Members of Parliament. I shall arrange for that consultation document to be placed in the Library, when it is available.
I referred to both pushing and pulling. We want to attract people to Gatwick. The train service from Victoria to Gatwick is the best for any major airport in the world. It is a non-stop dedicated train going at 90 mph. It runs every 25 minutes and completes the journey in half an hour — dead on the dot. I did it yesterday. It is air-conditioned and clean. There is adequate provision for luggage. A friend of mine travelled from Scotland last weekend. He said to me, "My goodness, I travelled from Gatwick on the train; I shall not be going to Heathrow any more." He was impressed by the change. It will have a significant effect on the way that people choose to travel to London.
The future pattern of airlines and route structures was mentioned by several hon. Members. I recognise that this is a sensitive time for people in the industry, while the CAA carries out its review. It is right that it should be done well before the privatisation of British Airways is 658 considered. The issue is very sensitive, as my hon. Friend the Member for Romsey and Waterside recognised. People have referred to the feelings of Lord King and the BA staff who have achieved so much. I pay tribute to what they have achieved, but it would be wrong for me today to enter into any debate about the views that the CAA might express.
We shall take into account the points that were made in the debate, particularly the danger of predatory pricing, which was referred to by my hon. Friends the Members for Woking (Mr. Onslow) and for Feltham and Heston and by the right hon. Member for Western Isles and others. There are fears that BA might indulge in predatory pricing. I shall not make any comment at the moment. I should like to have firm evidence, if there is any.
My hon. Friend the Member for South Hams referred to BA's purchase of 14 Boeing aircraft before the CAA report is received. I assure my hon. Friend that those aircraft have not been purchased; they have been leased. Therefore, there is nothing in that deal that binds BA or anyone for the longer term.
Several other matters were raised by hon. Members, but unfortunately I do not have time to deal with all of them. I shall write to my hon. Friend the Member for Feltham and Heston about ice and other things falling from aircraft, although that is covered by most householders' comprehensive policies. I understand the concern of my hon. Friend the Member for Tayside, North about Portmoak. I shall write to my hon. Friend the Member for South Hams about the penetrating points that he raised.
The hon. Member for Ealing, Southall said that employees of BA did not want privatisation. I appreciate his view. It is fundamental to the division in politics in this country today. He believes in concentrating power, wealth and decision making in the hands of the state. We believe in spreading them throughout the community. The more who can have shares in the company — workers and others—the better, for they will have a genuine stake in the wealth of the nation. That is what we shall seek to achieve in the privatisation of BA.
Many who work for the company will welcome the opportunities, which there will be in various forms, to apply for shares, even for free——
§ It being half-past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.