§ Motion made and Question proposed, That this House do now adjourn.—[Mr. Major.]1.12 am
§ Mr. Anthony Steen (South Hams)
This debate is about an issue that is central to the future of the British airline industry and particularly the future of domestic, independent, privately owned airlines. I am grateful that there are so many right hon. and hon. Friends attending the debate tonight, because they, like I, appreciate the importance of this issue.
From 1 April, the short-haul domestic and European flights into Heathrow in narrow-bodied aircraft will have their landing charges increased, while long-haul international flights into Heathrow in wide-bodied aircraft will have their landing charges reduced. The landing charges for the Short Brothers 361, which is flown by British Midland Airways, Air-UK and Air Ecosse among others, will rise from £64 to £156—an increase of 144 per cent. The landing charges of a Bryman de Havilland Dash 7 will rise from £93.60 to £156—an increase of 67 per cent. For a Boeing 747, however, charges will fall from £483.21 to £156 — a reduction of more than a third.
The memorandum of understanding signed last year by the United States and British Governments has created this problem and led to an alteration in the method of calculating landing charges at Heathrow, but nowhere else. Heathrow is to switch to a flat charge, whatever the weight of the aircraft or its potential damage to the runway. This flies in the face of document 9082/2, paragraph 14, dated November 1981, produced by the International Civil Aviation Organisation. This specifically states that landing charges should be weight-related. This results in United States and other long-haul airlines having a cut in costs while every independent private British airline will have its overheads dramatically increased.
The British Airport Authority's totals for landing charges a year reflect the position well. For 1984–85, landing charges totalled £7,916,000, which is to be reduced to £4,012,000 for 1985–86—a decrease of 49 per cent. for the biggest and noisiest planes. On domestic flights, landing charges will rise from £3,559,000 this year to a proposed £5,250,000 next year, an increase of 47 per cent. for the quiet planes of the domestic airlines.
What an outcry there would be if the Department of Transport were to raise the £100 private car tax to £1,000 a year and reduce the tax on giant juggernauts from the present £3,100 to £1,000, so that both paid a flat rate regardless of size, wear and tear on the roads and damage to the environment.
I declare an interest in British Midland Airways, but I am also interested in Dan Air, Air UK, Brymon and other small private airlines. All find that their landing charges and other airport expenses cost more than the fuel needed to run their planes; British Midland Airways' landing charges are now 36 per cent. of costs, whereas its fuel charges are 29 per cent.
On the east midlands to Heathrow route, British Midland will find a 32.58 per cent. increase in landing charges and a 47.1 per cent. increase in all its charges. Birmingham to Heathrow landing charges will increase by 32.8 per cent., or overall by 48 per cent. Brymon's landing 801 charges per day go up from £687.30 to £1,012.50 at Heathrow alone. How are these increases to be financed? Only by passing them on to the consumer.
The British Airways Authority's statement of principle dated 21 February 1985 said on page 3 in paragraph 9.4 that the authoritybelieves in the practice of gradualism with regard to landing charges.If gradualism is an increase of 48 per cent., will the Minister ask the BAA for its definition of rapid change?
The BAA argues that the overall increase, taking all British Midland air routes together, is not that high—only 14.2 per cent., or three times the rate of inflation. To reach that figure, however, the BAA has had to engage in a cross-subsidy exercise, putting all British Midland Airways' charges together. By doing that, BAA is flying in the face of Government policy, as enshrined in the Civil Aviation Authority guidelines on pricing. In its statement of policy on air transport licensing for 1979–80, the Civil Aviation Authority said:As a matter of principle, however, it is unacceptable that one passenger should be charged on a continuing and structural basis the cost of providing to another passenger the facilities which he himself does not need. Nor should passengers on profitable routes bear the costs of operating other routes which cannot be operated economically, even after emerging from the development stage.In 1981–82, the Civil Aviation Authority stated:the Authority will seek to ensure that users are charged only for those product features they require. The Authority aims progressively to diminish discrimination and cross-subsidisation between routes and between fare types.For 1985–86, the CAA reiterates:the Authority will seek to ensure that users are charged only for those product features they require. The Authority aims progressively to diminish discrimination and cross-subsidisation between routes and between fare types.The BAA has done the same with British Airways' charges, cross-subsidising landing charges for narrow-bodied short haul routes with those for wide-bodied long haul routes, and has come up with a global figure of 4 per cent. as the overall increase for British Airways—below the rate of inflation. The state airline has been able to offset the dramatic increase in landing charges for domestic and European flights against the dramatic decreases in charges for long haul flights.
It is not only cross-subsidy on landing charges, however, for rumour—from the mouth of the stable boy rather than the horse—has it that British Airways lost £7.5 million on domestic routes last year and sustained its predatory actions only through cross-subsidy on an enormous scale.
The BAA argues that it is forced to increase landing charges at peak hours through opportunity costing, by which it places a value on a slot. It has warned that if that does not work—whatever that means—it will be forced to introduce rationing charges. As that was a point heavily criticised in discussions of the delayed Civil Aviation Bill, as the 275,000 air transport movements limit has not come into force, and as terminal 4 will not come on stream until the spring of 1986, will the Minister find out the basis on which the BAA is now introducing opportunity costing?
If the rationale behind opportunity costing is based on demand and lack of space, why, since Heathrow is only half as congested as Gatwick, does the BAA propose to continue with weight-related charges at Gatwick and all other BAA airports but not at Heathrow?
I have criticised the dramatic increase in landing charges for domestic airlines at Heathrow. The BAA is 802 placed in a difficult position. I hope, however, that it will do its utmost to support and encourage private enterprise in the smaller independents. The increases by the Labour-controlled Manchester airport are even worse, resulting in a £13 million profit this year, which has been channelled into the local authority.
A policy which could work against our independent airlines will rapidly disadvantage our regional airports, which act as engines of growth for regional economic revival. Our domestic operators must be able to run highly competitive services into Heathrow where interlining takes place with international routes. Any unnecessary increase in fares as a result of increased landing charges, jeopardises the domestic services, threatens the viability of our domestic airlines and could sever our regions' international connections.
I welcome the attendance of so many of my hon. Friends. My hon. Friend the Member for Warwick and Leamington (Sir D. Smith), but for his European duties, would have been in his place tonight to express his disquiet about landing charges on the Birmingham to Heathrow service and to add his voice to that of my hon. Friend the Member for Birminham, Hall Green (Sir R. Eyre), who feels equally strong about the matter.
In recent years, there has been a growing interest, especially among business men, in short haul domestic and international air services from local and regional airports. I quote selectively from Michael Donne in last Monday's Financial Times:One of the principal catalysts for this interest has been the emergence in recent years of a new generation of small economic airliners, … which have made it possible for many operators to launch new, profitable short-haul domestic and international operators.The significance of this development should not be underestimated. For much of the post-war period, the history of UK civil aviation has been littered with the wreckage of plans for new air services, that foundered because the airlines involved did not have aircraft of the appropriate size. They started operators with aircraft far too large for the traffic densities available, with the result that they lost money, and went out of business.The emergence of the new generation of small, cost-effective turbo-propellor airlines has substantially changed the situation … Moreover, their quieter noise levels make them acceptable neighbours for surrounding cost-conscious communities.It is precisely these aircraft which will be worst affected by the new British Airports Authority landing charges. It appears that these are designed just to please the Americans.
British Midland Airways, Air UK and Brymon fly the new breed of super-quiet aircraft whose noise footprints do not reach beyond the perimeter of the airport at Heathrow, yet they have absolutely no incentive to continue this investment, as it is on the super-quiet aircraft where the largest increase in landing charges is taking place. I welcome the support of my hon. and learned Friend the Member for Feltham and Heston (Mr. Ground), and my hon. Friends the Members for Surrey, North-West (Mr. Grylls) and for Richmond and Barnes (Mr. Hanley).
Why does the highly profitable BAA need to rob the British domestic sector in order to make good the revenue lost from the American carriers? Why do British travellers have to subsidise American travellers? Why should regional airports be the losers? How are the smaller airlines supposed to absorb yet another increase in the costs of running vital feeder flights? Why does the environment have to suffer as a result of the disincentive towards investing in the quietest aircraft?
803 The chairman of Brymon Airways has put the matter so well:The British premier airport should consist of an interwoven mixture of short-haul and long-haul flights together making up the total air transport product, and tariffs should be aimed at encouraging this mixture with a scale that takes account of the sector distance preceding and following Heathrow movements, rather than aiming at a flat-rate transit charge per passenger irrespective of their journey distance and fare paid.The proposed new landing charges give a new twist to the Robin Hood theme, where the poor of Nottingham and the regions are now being robbed to help the rich transatlantic passenger.
§ Mr. Bill Walker (Tayside, North)
I must declare an interest, as I am the chairman of an airline. However, anything that I say this evening will not be directly related to the planned operations of that airline. I shall speak as someone who I judge to be a friend of the British Airports Authority.
The BAA is an essential and profitable part of the air transport industry of the United Kingdom. It is up to it to nurture and facilitate the growth and development of United Kingdom commuter airlines. The level of landing charges can therefore be seen either as an attempt to promote growth or an attempt to stultify it. It must examine carefully its policy on landing charges as they affect the development of the commuter airlines.
I hope that there is no truth in the allegations that I heard earlier today to the effect that in future the credit facilities which until now have been available to domestic commuter airlines are to be altered savagely to the detriment of the airlines. If this were to happen, I should see it as a deliberate attempt by the profitable part of the British air transport facility to take advantage of the less profitable, more difficult and higher risk area. The losers could be only those who try to commute from various parts of the United Kingdom. As a regular commuter from Scotland, I have something to say about the matter. I should look with some hostility on any move that was seen to be a deliberate attempt to reduce the facilities that are presently available to commuter airlines.
§ Mr. David Ashby (Leicestershire, North-West)
The east midlands airport is within my constituency. British Midland Airways, other domestic airlines and Orion airways, operate from that airport. This pricing policy is an attempt to deal differently with the Civil Aviation Bill. Capacity at Heathrow airport is being dealt with by pricing out the super quiet aircraft.
The private sector is suffering. Private sector airlines, such as British Midland Airways, will be squeezed out, with the advantage going to foreign airlines and our large airlines which operate on protected routes, and therefore are happy.
The Government have a part to play because of the memorandum of understanding. On consideration of the Civil Aviation Bill, my right hon. Friend the Secretary of State said:One option might be to raise landing fees, on the assumption that the airlines prepared to pay the most for slots would be those that would make the most productive use of them. However, we believe that landing charges would have to be more than doubled to produce a significant reduction in demand, since they form a 804 relatively small proportion of an airline's operating costs. That would be very hard on small airlines and commuter airlines, which have a part to play."—[Official Report, 21 November 1984; Vol. 68, c. 306.]I call on my right hon. Friend to follow those words through and to do something about these excessive landing charges.
§ Mr. Patrick Thompson (Norwich, North)
I am grateful to my hon. Friend the Member for South Hams (Mr. Steen) for allowing me the opportunity to intervene. Norwich airport lies in my constituency and Air UK operates out of it. If the British Airways Authority continues to squeeze the small airlines as it is doing at present, in the long-term this will mean lost jobs for Norwich. Like my hon. Friend the Member for South Hams and other hon. Friends, I am concerned about the proposed increase in landing charges. Air UK has cited an increase of 85 per cent.
The position at Heathrow is unique. The landing charge for a 747 during peak hours is identical to the landing charge for the small aircraft, the Shorts 360 and the F27. That cannot be right, especially since Air UK uses Heathrow at those peak times.
§ Mr. Steen
Is my hon. Friend aware that there is now no shortage of space at Heathrow? As the limit has not been fixed at 275,000 movements, 50,000 or 60,000 slots are spare. It is odd that BAA has decided on financial measures that are not weight related for domestic airlines at Heathrow, but that traffic that is much more crowded still incurs the old weight-related charges.
I entirely agree with my hon. Friend. This confirms the case that has been put across tonight, that the proposed landing charges are unfair on the small airlines. Apparently, consideration has not been given to the fact that the small aircraft are quiet. The environmental point is worth putting across. I support my hon. Friend in that idea.
Norwich and east Anglia have good industrial and growth prospects. Surely those who live in the area have an equal right to travel to Heathrow. My hon. Friend the Under-Secretary of State should take that aspect into account when planning. I hope that he will have the interests of the small airlines at heart and will insist on fair landing charges that ensure competition and improved services for people, especially those from Norwich and east Anglia.
§ Mr. David Maclean (Penrith and The Border)
I am grateful to my hon. Friend the Member for South Hams (Mr. Steen) for allowing me to intervene briefly. I can usefully add little to his excellent exposition, although he delivered it at breakneck speed, causing great consternation to the Hansard writers.
The House will shortly be asked to vote on a coherent airport policy. We all want such a policy, although we may disagree about the size of Stansted, terminal five, and so on. If we allow the proposal for a 144 per cent. charge on the Air Ecosse flights from Carlisle to Heathrow to go through, even if it is ameliorated to a 72 per cent. charge, it will destroy regional airports like Dundee, Carlisle, Leeds, Bradford, Norwich and East Midlands. If that happens, we shall not have a coherent airports policy 805 which would work in this country. We must have a coherent airports policy. To have that, we cannot allow this charge to go through.
§ Mr. Gerald Howarth (Cannock and Burntwood)
I am grateful to my hon. Friend the Member for South Hams (Mr. Steen) for allowing me to intervene in the debate, too. My constituents use Birmingham international airport and are directly affected by the proposal of the British Airports Authority which would increase fares from Birmingham international to Heathrow by about 12 per cent. I believe this to be against the interests of my constituents. I also believe it to be hostile to the interests of Heathrow, which in part depends upon the domestic feeder services, both in and out, to maintain its preeminent position in Europe, and to the interests of the regions.
I particularly deplore the 144 per cent. increase in landing charges for the Shorts SD360 which is a "good neighbour" — an American expression — aeroplane, in that its noise footprint scarcely extends beyond the airport perimeter.
Finally, I believe that this problem really arises because the British Airports Authority is required by the Government to finance its capital programme out of revenue. I believe that capital developments of this nature should be financed from long-term bonds raised on the capital markets. If there is one message that I can give to my hon. Friend the Under-Secretary of State for Transport, it is that these developments should be financed on a long-term basis.
§ The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer)
It is a great tribute to the pulling power of my hon. Friend the Member for South Hams (Mr. Steen) that at this late hour the debate has attracted so many contributions. My hon. Friends the Members for Cannock and Burntwood (Mr. Howarth), for Tayside, North (Mr. Walker), for Penrith and The Border (Mr. Maclean), for Norwich, North (Mr. Thompson), and for Leicestershire, North-West (Mr. Ashby) have all made powerful points. They will perhaps forgive me if time does not allow me to answer their points directly in great detail.
I turn in detail to the speech of my hon. Friend the Member for South Hams. The debate that he has launched gives me the opportunity to reaffirm the Government's firm commitment to a multi-airline policy, to the further liberalisation of domestic air services and to ensuring that domestic services from regional airports have access to the London airport system. My hon. Friend, with his knowledge of the aviation industry, will know that all these policies place increasing pressure on airport capacity in the south-east. The questions that he has put before the House tonight certainly bear strongly on one major constraint—runway capacity at Heathrow.
To give a full answer my hon. Friends I would need to discuss the Government's strategy towards airports not only in the south-east but in the regions. This point was made by my hon. Friend the Member for Penrith and The Border. My hon. Friend the Member for South Hams will know that until my right hon. Friend the Secretary of State for Transport and my hon. Friend the Minister for Housing and Construction announce their decision on the 806 inspector's report on Stansted and terminal 5, that is impossible for me to do. Nevertheless, I can give answers to some of the points my hon. Friend has raised.
My hon. Friend has asserted that the BAA's proposed charges at Heathrow for 1985 are intended to ration access and, what is more, to do so in a way which discriminates against the quieter aircraft operated by the smaller independent British airlines in favour of the large aircraft which generate more revenue per movement for the BAA.
I remind my hon. Friend that the matter of airport charges is for the British Airports Authority, and my right hon. Friend the Secretary of State cannot intervene. The Airports Authority Act 1975 does, however, require the BAA to consult users, and I have encouraged the authority to provide a full exchange of information with the airlines so that they can comment on any proposal to increase charges. I am pleased to say that in the present instance, having consulted the airlines, the BAA substantially modified its charges from those which were originally proposed.
§ Mr. Spicer
My hon. Friend is correct. I was going on to say that the BAA has modified its original proposals by introducing, in the way that my hon. Friend implied, a peak/off peak differential for aircraft up to 50 tonnes. The landing fees for those aircraft will not now increase at all in off peak periods and will be subject to the new flat fee only in peak periods which extend from 7 am to 10 am and from 5 pm to 7 pm from April to October.
We have to accept that the BAA is constrained by international agreements. Those were reinforced by undertakings given in the out-of-court settlement agreement to the recent legal action brought by 17 foreign carriers which was resolved only two years ago.
The BAA is required to relate the structure of its prices to the structure of its costs — those being the full economic costs to the community. That precludes discrimination either in favour of or against any class of user. As a nationalised industry, the BAA also has to have regard to an overall objective of securing the most efficient allocation of resources. That means that it must ensure that charges for peak usage bear some relationship to opportunity costs where there is scarcity of capacity.
My hon. Friend has mentioned that the BAA has abandoned the weight-related runway charges favoured by ICAO. That is increasingly true of Gatwick as well as Heathrow. However, as my hon. Friend will know, airport charges consist of three elements — a landing fee, a passenger charge and an aircraft parking charge. In recent years the emphasis has been moving away from the weight-related landing charges towards the passenger charge since that is where the bulk of BAA's costs lie, and that move clearly benefits the smaller airlines.
Present traffic revenues at Heathrow break down as follows — 20 per cent. from landing charges, 60 per cent. from passenger charges, and 20 per cent. from aircraft parking charges. As a result, large aircraft pay considerably higher airport charges than small aircraft even though, during peak runway periods, their landing fees are the same.
The effect of the new structure will be to increase the overall average airport charges at Heathrow by 1 per cent. 807 That means that the airport charges paid averaged across the total number of passengers will increase from £3.53 to £3.57 per passenger. In its present pattern of activity, British Midland Airways average charge on a per passenger basis will increase from £2.22 to £2.54, an increase of 32p per passenger. Charges paid on individual services will, of course, vary according to the scheduled operating time. Those in off peak periods will not increase at all.
My hon. Friend has said that the increases would seem to be discriminating against the quieter aircraft. Airport charges are intended to reflect actual costs, though noise rebates have meant that the operators of non-noise certificated jet aircraft have been paid more than the operators of quieter aircraft. The BAA has decided to discontinue the noise rebates and instead to surcharge noisy aircraft, but the purpose is the same. Those higher charges would help to pay for the measures to alleviate the effect of noise, such as noise insulation grants. The BAA is giving thought to the noise-related charging schemes which might be used in future when all aircraft meet the noise certification requirements.
I am sure that there will be general support for noise surcharges. For their part, the Government have taken the necessary steps to ban the use of aircraft, other than Concorde, which are not noise-certificated.
The White Paper on aviation competition policy has made clear the Government's commitment to a strong 808 independent sector of the aviation industry. I assure my hon. Friend that we support the independent domestic airlines and their continued presence at Heathrow. Perhaps I should say in passing that BMA currently carries charges per passenger at Heathrow which are only 63 per cent. of the Heathow average. I realise that he was speaking not just about BMA. After April, those will be only 71 per cent. of the average charges at Heathrow.
That having been said, I assure my hon. Friends who asked for such an assurance that when we come to announce our overall policy on airports—this is perhaps the most important part of what I have to say—we shall pay full regard to the importance of developing a domestic airline industry comprised of several independent operators.
We shall also have strong regard to the requirements of regional airports. That means that we must ensure proper access for smaller airlines and smaller aeroplanes to the London system. I believe that will meet the main thrust of the argument of my hon. Friend the Member for South Hams.
We cannot, however, ignore the fact that runway capacity in the south-east is now scarce. It is bound therefore to be expensive. The Government will be addressing themselves to this problem in the next few months.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-one minutes to Two o'clock.