HC Deb 09 December 1986 vol 107 cc295-312 11.24 pm
The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer)

I beg to move,

That this House takes note of European Community Documents Nos. 5938/84, 7932/1/86, 8324/86, 8109/86 and 9132/86, on the liberalisation of air transport in Europe, and fully supports the Government's determination to press for such liberalisation in the context of the 1992 deadline for the completion of the Community's internal market. The Government very much welcome the decision by the Scrutiny Committee that the latest Commission proposals on liberalisation of air transport should be debated. The proposals, produced just before the summer break, form an important element in the current negotiations. They update the Commission's original policy paper, which is called memorandum No. 2, on which there is also an outstanding commitment to a debate. It is clearly sensible to take the old and new Commission proposals at the same time, and also to take the proposal for amending the 1983 Community directive on regional air services, which to a large extent forms part of the package now under consideration.

This debate comes at a crucial moment. We are approaching the conclusion of the British presidency, in which one of our main aims has been to try to make worthwhile progress with liberalisation. That means cheaper fares, more competition on routes, greater commercial freedom to mount capacity, and application of the Community's competition rules.

Those elements must be taken together as a package. Liberalisation will not, in practice, have much effect unless all the elements of the package are in place. Of course, at first sight, fares appear to be the most important aspect, but cheaper fares will not come about simply by relaxing fares regulation. They will come about only if it is possible for airlines to compete on routes and on the level of services. Under our presidency, we have been trying to secure agreement in Europe to a package covering all those elements, so that after far too long—that is our view and, I suspect, the view of many hon. Members—Europe can begin to have the air services that it needs.

Our campaign goes back to 1979, but the development that first allowed us to put real pressure on other Community countries was the publication in 1984 of the Commission's second memorandum. The Commission proposed that, for the first time, airlines should be free to propose fares without first consulting the other carriers on the route. It proposed that fares should be automatically approved, provided that they met certain criteria, and it proposed that, up to a limit of a 75–25 split of the capacity in the market between two countries, airlines should be free to mount what capacity they thought commercially justified. Finally, it proposed that, if such liberalisation could be agreed, airlines would be given wide-ranging exemptions from the application of the treaty's rules on competition.

That approach was broadly acceptable to the Government, with one proviso: the Commission failed completely to include proposals for opening entry to the market so that new airlines could start services competing with the carriers and so that new routes could be started. That omission was a fatal flaw which we said at the time would have to be put right. From 1984 until this year, progress on those proposals was desperately slow. Only Britain, the Dutch and the Commission were seriously interested in applying the principles of the treaty to air transport, and we faced intense opposition from other member states and their airlines.

The position began to change only as a result of three things. First, the success of our bilaterally negotiated agreements with the Dutch and, later, the Belgian, Luxembourg and West German Governments established a new climate for discussions in the Community. Secondly, the succession of the Dutch and British presidencies this year created a major window of opportunity which, in the enlarged Community, will not occur again for five years. Thirdly, the important European Court judgment in the now famous Nouvelles Frontieres case earlier this year confirmed that the competition rules apply in principle to air transport, and enabled the Commission to take the first steps towards applying them in practice.

Those developments brought considerable pressure to bear on the negotiations, and during the first few months of this year it became clear that some amendments were needed to the Commission's proposals in memorandum No. 2. Therefore, the Commission produced the further proposals which are the immediate cause of this debate. More specifically, it proposed some technical additions and changes to its proposals for group exemptions; revised ideas on fares designed to take up the concept of fares zones, which are favoured by most member states, but with a more flexible approach to the conditions attached to fares; and it proposed introducing new safeguards within the maximum 75–25 per cent. capacity sharing range. It also, separately, introduced amendments to remove most of the restrictions in the 1983 regional services directive, and to widen its scope to cover routes between category I and category II airports.

Before the Commission's new ideas were generally available, however, the Dutch presidency was able to secure unanimous acceptance, at its final Transport Council, that the agreed 1992 target date for completion of the internal market applies to air transport, and that, in order to achieve that target, which must mean full liberalisation. A first step should be taken quickly. The Dutch secured agreement that the first step should last for three years. Taking us to 1989, and leaving three further years for a more radical second stage.

May I now consider the developments under our own presidency which have taken us to the point at which it may at last be possible, given a further effort by other countries, to agree on a first step which will bring real and quick benefits to travellers and to airlines.

The Government decided, having considered the Commission's proposals, and having established the attitude of other countries, that it would be necessary to put forward our own package, based to a large extent on what the Commission had suggested, but adding the substantial and vital ingredient of market access. My right hon. Friend the Secretary of State for Transport therefore put our presidency proposals to an informal meeting of Transport Ministers, here in London, in early October.

On fares, we envisaged provision for airlines to make unilateral fares proposals, without having to agree them with other airlines, combined with a new, fast arbitration procedure for circumstances where one Government or airline seeks to block the fares proposed by another. Equally important, we have proposed that, for cheap fares, airlines should, within wide ranges, have complete commercial freedom in terms of prices, and should be allowed to offer such fares with far less restrictive conditions than has been the case up to now. In particular, the nonsensical requirement that to make use of a cheap ticket one has to stay either six nights or a Saturday night would be swept away, and airlines would be able to price their tickets on the basis of time of day—the so-called peak or off-peak pricing.

This of course, is the concept which British Caledonian has experimented with on the few routes where other European Governments have allowed them to do so. As the House knows, the experiments have shown the existence of hitherto untapped markets, and it has given passengers an attractive choice of fare types with some markedly lower prices.

Our objective for fares remains unchanged—the removal of all restrictions on conditions, and full commercial competition—but, as a first step, our proposals would represent a major advance towards that.

Sir John Osborn (Sheffield, Hallam)

My hon. Friend knows of my interest in these matters. I welcome the fact that he is referring to the Community documents here and he knows that I have had conversation with members of the European Civil Airline Conference and the European Airline Passengers Association. However, the Council of Europe deals with other airlines outside the Community. Can my hon. Friend tell us to what extent the proposals will affect airlines outside the Community rather than those airlines inside the Community?

Mr. Spicer

I will certainly do that when I conclude. I will consider the implications of greater liberalisation within the Community for real relations outside and the competitive advance of European airlines against other airlines. If I may, I will leave that point until the end of my remarks.

On capacity, we have proposed that, by the third year of a first step, shares of total capacity could, where airlines judge it sensible, be able to vary within a range of 60 per cent. to 40 per cent. This not only represents a significant step towards the Commission's eventual target of 75 per cent. to 25 per cent.; it will in fact allow as much growth as our airlines are likely to be capable of using within the period, and will create room for new carriers on all the major routes where capacity restrictions bite at present. Clearly we shall insist on going beyond this, and on to full freedom, by 1992. However, as a first step, our 60 per cent. to 40 per cent. proposal would remove all the serious immediate constraints.

Mr. Anthony Steen (South Hams)

Why are we waiting until 1992? That is a long time to wait. Will my hon. Friend also say something about the French?

Mr. Spicer

My hon. Friend may know that 1992 was the date agreed by the Heads of Government for the full internal market. The great breakthrough was achieved this year when the 1992 arrangement—it had been in doubt—was agreed to. It was a major step forward. It determines the impact that our own package will make because that can be seen as a step in that direction. That is important and fundamental.

I am not sure what my hon. Friend wants me to say about the French. Perhaps he will be more specific.

Mr. Steen

My hon. Friend the Minister will correct me if I am wrong, but, whereas all the other European countries have been happy to discuss liberalisation with him, the French have been extremely tardy. I am even advised that they may not be prepared to see my hon. Friend. Will he tell us about that?

Mr. Spicer

France is one of the six countries which have not seen fit to go along with the arrangement on fares, but the relationship with the new French Government, in particular, has been cordial. I cannot speak for the French, but I sense that they are becoming increasingly persuaded to accept some of our arguments. We shall be seeing the French Minister before the Council meets on Monday morning.

In addition to the proposals on fares and capacity, we decided that to produce a balanced package we must go further than the Commission has suggested on market access. We have, therefore, taken up the Commission's limited ideas for liberalising routes from regional to "hub", but have said that market entry on these routes should be liberalised for all aircraft and not only for those up to 70 seats. We have gone on to say that, while aircraft with more than 70 seats should be counted within the overall capacity range that has been agreed, smaller aircraft should be freed from all capacity control.

Perhaps most important of all, we have included proposals for ensuring that there can be head-on competition between as many airlines as each country separately wants on all Europe's major trunk routes. Multiple designation is fundamental to competition, and is the first and most vital step to getting the passenger a better deal. The Government have never understood the Commission's failure to produce proposals on this, but we have now taken steps to put this right.

Taken together, these ideas on market access amount to a major step forward, which would sweep up the most important ideas in the Commission's proposals for amending the regional services directive and add the major missing feature. If our proposals are accepted, we envisage that exemptions from the competition rules could be granted, but only for the three years of the first step, not for the seven years originally proposed by the Commission.

How have these ideas been received? That is what lies behind the questions of my hon. Friend the Member for South Hams (Mr. Steen). The Transport Council met in Brussels last month, 11–12 November, and had the most extensive and detailed discussion of air transport in its history. It did not come to an agreement, and the press and, I suspect, the hon. Member for West Bromwich, East (Mr. Snape), who is laughing from a sedentary position, saw this as a failure. That certainly applies to the press. We were able, however, to secure the support of 10 countries—every one except Greece and Denmark—for our proposals on capacity, and that of nine countries for those on market access, where Greece and Denmark were joined by Spain in dissenting. The House will recognise, given the previous hostility in Europe to any changes, that these figures represent a major shift in the position of restrictionist countries.

Only on fares were we left with apparent deadlock. The Council was evenly divided over our proposals, and it became clear that we would have to work very hard, in bilateral discussions, to persuade those concerned that we were right.

The Government see the issue of fares as crucial to the argument. There can be no further concessions on our part. It is for the countries that are doubting us on this matter to think again about their positions. If they are unable to do so, there cannot be an agreement this year, and the procedures which the Commission has started to apply in introducing the competition rules will inevitably be carried through to completion. The House will recall that the Government have made it clear that, in the absence of agreement, we would have to try to apply the competition rules unilaterally, under article 88 of the treaty, although that would be an unprecedented step that would take time to implement.

Since the last Council, my right hon. Friend the Secretary of State and I have seen the Ministers of almost all the countries which had previously opposed our ideas on fares, and those few which have difficulties on capacity and market access. It is becoming clearer by the day that there is a real desire on the part of most of them for agreement, and a growing recognition that agreement must be on our terms.

Against this background, the Government have decided to provide further time for discussion of this issue at next week's Transport Council to see whether the positions have changed. If we can secure support for all aspects of our proposals, it will represent a major step forward, making the 1992 goal achievable, and bringing early benefits to travellers and to airlines.

I ought to add that we have throughout our campaign had the fullest support of our airlines. They have fought battles in parallel with their European competitors. That has been of great help to us. Next week's Council presents us with a chance—some might say a hope—of success. We cannot guarantee it, because our ideas still go further than most countries would really like, but there is a chance.

Our success in opening up European air routes to greater competition will be to the lasting benefit of the travelling public and of those airlines which attract more business and to the European aviation industry as a whole, which will be better placed than it is today to face the competitive pressures not from inside Europe, but from the United States and the far east. For that reason, the timing of this debate is ideal, and I ask the House to support the Government's strategy.

11.41 pm
Mr. Peter Snape (West Bromwich, East)

I was struck, listening to the Minister, who made a bravura and eloquent speech, by the parallel with the return of the Kaiser's army to Germany in 1918. They might have had holes in their socks and empty ammunition pouches, but the band was playing and the flags were flying. Does anyone think that if there had been the great triumph to which the Minister referred, we would be here at dead of night in a comparatively thinly attended House to hear about it? It would have been trumpeted from the rooftops and the Prime Minister, who referred to herself this afternoon as the leader of the pack, would have been boasting of her Ministers' achievements.

There are, of course, no real achievements to point to, and not even the eloquence of the Minister can convince us otherwise. I remember listening to the Minister's brave words when, on 22 October, he said that the aim of our presidency is to devise a specific package for the first three-year step towards full liberalisation. On that litmus test, the Minister has managed eloquently to gloss over the failure even to move towards that objective. As he implied, on 11 and 12 November, the Government devoted the entire EEC Ministers meeting to air fares. We awaited the results of that meeting with bated breath. I fear that the results were sparse enough not to merit comment in the Minister's speech.

As the Minister said, in June, the European Court of Justice ruled that fare fixing broke the treaty of Rome and was illegal. One would have thought that that would have provided the United Kingdom with the ideal chance to move ahead. We were building on the previous six-month presidency of the Dutch who, the Minister said, have also pressed for liberalisation. Why the failure? Let us not shirk that word because, regrettably, it was a failure. In part, the Government have had to change course because they must safeguard their top priority, the flotation of British Airways. No brave words from the Minister could be allowed to prejudice that flotation.

Notwithstanding the difficulties which the Minister referred to earlier, I understand that on 3 October, his right hon. Friend the Secretary of State, at an informal meeting of EEC Ministers, suggested that he would tone down his demands for liberalisation. Is it true that, instead of ensuring that 75 per cent. of any route was open to competition, within three years, according to my information, that 75 per cent. was to be replaced by 55 per cent. and then moved back up to 60 per cent.? Is it true that that was the compromise put forward by the Secretary of State? Is it also true that the right hon. Gentleman's Dutch equivalent—if the newspaper article was correct—said that there was too much water with the wine in those proposals?

The Government, when they set off on the road to liberalisation, made continual reference to the great success of deregulation in the United States. There is less talk about deregulation now because in the United States and elsewhere it is not perceived to be the great success that it at first appeared. Deregulation has become liberalisation. The Government say that they believe in the fullest possible deregulation. The Department of Transport has pursued that policy with regard to bus services outside London. But the Government cannot expect to be taken seriously if they change policy in order to sell off British Airways. The present stance taken by the Department of Transport in the aviation world is that nothing must be allowed to prejudice the great flotation when it occurs.

The lessons of deregulation in the United States provide us with warning signals. It is true that, in the early part of the 1980s, it appeared that deregulation was a great success. New carriers came into existence, lower fares were offered and there was extra competition which largely benefited the air traveller. Things have gone somewhat sour in recent years.

It appears that seven United States companies now control about 80 per cent. of passenger journeys within the United States. When we compare deregulation in United States and liberalisation in Europe we are not comparing like with like. The Minister should learn something from the American experience and not damage one of the few industries within the United Kingdom which is still expanding, despite Government activities over the past seven years.

To embark on the road to complete liberalisation—the Government have not done so; they have only talked about it—would have serious effects on the profitability of many British airlines.

The proof given to justify the United States example, at least until recently, was that EEC fares are much higher than they should be and could be brought down to the price levels in the United States if the policies which the Government profess to advocate were implemented.

First, let us dispose of one fallacy. Most of the policies of liberalisation which the Government advocate will not come about, because there is no legislation that the House can pass and no directives that emanate from the Council of Ministers which will make the Italians take any action that will prejudice the future prospects of Air Italia or the French co-operate in a way which they perceive to be against French interests.

That might be distressing for a liberaliser such as the Minister, but we should not allow his obvious distress to blind us to the truth. No legislation emanating from anywhere can or would compel other European Governments to act against their perceived national interests, especially when that national interest has to do with the profitability of the national airline.

Mr. Rob Hayward (Kingswood)

Is the hon. Gentleman suggesting that we should not make the effort to act on behalf of consumers?

Mr. Snape

No, I am not making any such suggestion. If the hon. Gentleman will contain himself for a few moments, I shall in my customary tentative fashion make some suggestions which may meet the requirements of British consumers and his sentiments. But first, we should dispose of the propaganda that has emanated from the Department of Transport in recent months that we are on the brink of an enormous breakthrough and that on the morrow will come this bright new dawn of liberalisation, because it will not.

Nevertheless, I agree with the hon. Gentleman that there are certainly routes within the European Community and elsewhere where the fares charged are much higher than those of United States equivalents. We are not comparing like with like because, unlike the United States, Europe has a large and comparatively cheap charter market. Indeed, 60 per cent. of all travel within Europe is on charter flights. For most people who fly once a year on holiday, the only time they use an aeroplane is on such a charter flight. It would help them enormously if the charter anomalies, which I hope the hon. Gentleman agrees exist, were dealt with, but the Government are set on cutting scheduled fares and, in the words of the Minister, on having no restrictions to competition on scheduled routes.

If that is the Government's policy, the obvious question is: who will pay? Somebody must pay for the extra capacity which fare cutting is hoped to generate, but that is normally ignored. In the United States the result of widespread deregulation has been to cut expenditure on matters such as safety. Not that I would suggest that what has taken place there, with heavy fines levied by the Federal Aviation Authority on airlines that have cut routine safety matters, would he repeated in Europe. In a fully deregulated or liberalised market the pressure on airlines, especially the small ones, to cut what may be seen as non-essential maintenance is undoubtedly enormous.

I do not know whether the hon. Member for Crawley (Mr. Soames) will be participating in the debate. He is showing some unusual signs of restiveness for this time of the night. I have not taken up nearly as much time as his hon. Friend.

Mr. Nicholas Soames (Crawley)

He is a Minister.

Mr. Snape

Of course he is a Minister. The hon. Gentleman, with his traditional loyalty, would never criticise a Minister. After all, he hopes, whether by a chartered airline or a cut-price route, to sit there himself at some time in the future. If the hon. Gentleman will bear with me for a moment or two, I promise not to keep him too long.

We shall no doubt hear from the hon. Member for South Hams (Mr. Steen), who diligently represents the interests of British Midland Airways, to name but one. Mr. Michael Bishop and his colleagues at British Midland are desperately anxious to see the fullest liberalisation of scheduled air carryings within the EEC.

If Mr. Bishop and the hon. Gentleman were told that that great liberalisation would come overnight, I am not sure what the hon. Gentleman's reaction would be, because he is fairly unpredictable, but I dare say that Mr. Bishop would blanch somewhat at the prospect.

Whatever their public pronouncements, the management of Britain's airlines worry particularly about two things, first, they worry about the future once British Airways is privatised, if privatised it is going to be, because, although they all profess to be in favour of that privatisation, it does not stop them writing to hon. Members on both sides of the House to say that, once the privatisation has taken place, we must regulate a privatised British Airways to see that it does not behave in a predatory fashion towards other airlines and their routes. One can understand that view, somewhat illogical though it might be. Secondly, as business men, they do not want the precarious existence that a fully liberalised regime would bring about. They want some long-term guarantees of the security of the market in which they operate.

Despite the Minister's brave words earlier, there was not a great deal of content in what he had to say. We understand the Government's avowed intention to move towards this great liberalisation, but we do not really feel—[Interruption.] I am not sure whether the strange noise that I can hear is coming from the watch of the hon. Member for Crawley or some other piece of equipment, but I shall regard it as the final whistle and urge the hon. Gentleman, unlike his hon. Friend the Minister, to exercise a little realism on liberalisation.

The Government's brave words have not been translated into deeds and the Opposition's forecast, without defending some of the high fares that are prevalent on many routes, is that they will remain as brave words and there will be comparatively few brave deeds to follow.

11.58 pm
Mr. Kenneth Warren (Hastings and Rye)

I follow the hon. Member for West Bromwich, East (Mr. Shape) with a little more hope than he expressed. I am rather sad that he should be so sour even at this late hour. It would be nice to know that he thought it was a good thing that we should be making progress on a measure that we have not thought it worth while debating in the House for years because it was a waste of time debating the possibility of lower air fares when no progress was being made.

I pay tribute to my hon. Friend and the Government for the fact that they have exercised initiatives which we have been waiting for over a decade to hear. I hope that they will go on exercising those initiatives and carrying them into action beyond the present.

The volume of paper does not decline the older the EC becomes. We are supposed to attend to six colossal thick documents in order to debate the matter. If there is anything that my hon. Friend can do to cut down the amount of paper that floods in from the EC, he will be rendering us a singular service. I say that because, while I would not pretend to have gone all through the documents, it is extraordinary how few times the person, the passenger, is mentioned. We learn only of regulations. As usual, the European Community is missing the trick.

When I served on the Council of Europe some 10 years ago, we had endless debates about the need to reduce air fares and give passengers a better chance of flying Europe. Everyone attending the Assembly in Strasbourg agreed and all voted in favour of resolutions to that effect—even those I moved—but when next the subject came up we found that nothing had been achieved.

I am concerned about the pace that the EEC has set itself to achieve this unbelievable competitiveness that has eluded Europe so far. Can it be achieved in six years? While 1992 may seem a long time hence, looking back six years does not seem to take us back far. The fact that document 7932 has taken two and a half years to arrive in this House, let alone in other Parliaments in the Community, makes me feel that not much will happen and I hope that the Minister will kick the other members of the Community—

Mr. Steen

Very hard.

Mr. Warren

I agree, particularly the French—to make sure that they get on and achieve by 1992 the task that their citizens expect them to achieve by then.

Hon. Members will welcome the chance to move towards an open market, but may be told, on the question of air fares, whether the airlines are required to consult—for example, in this country the Civil Aviation Authority or the Government—before introducing new fares?

While we want to see the cost of flying reduced, that should not occur at the expense of any diminution of the air safety standards which we accept as normal and which in this country are of the highest in the world. A provision on air safety standards should he written in to give that assurance.

I hope that the cost of flying in Europe as well as inside the United Kingdom will be seen in terms of the cost that it imposes on our trade competitiveness in dealing with our competitors in the United States who are trying to fulfil the same trade task.

Document 7932 troubles me in capacity terms in view of differences in paragraphs 3 and 6 of the helpful memorandum produced by the Department. Paragraph 3 says: either country in a bilateral relationship would be allowed to vary its capacity, but paragraph 6 says: The proposals, if adopted, would override the UK's air services agreements". If we are to override such agreements I shall be delighted, because they have worked actively against the interests of the passenger since they were introduced in Europe. It would be helpful to know whether this proposal overrides

the UK's bilateral air service agreements. Are we to understand from the explanatory memorandum that new airlines will be allowed to enter and leave routes? How will they be able to do that? The Minister may not be able to answer these questions in detail tonight. It would be helpful if, in due course, attention were paid to these issues before we lose the presidency. After all, paragraph 3 states: any country should, as a safeguard, be able to intervene in the market". What will such intervention mean? Will any country be able to freeze out any airline or other country from operating on a particular route?

The Minister has had correspondence with Mr. Alastair Tucker, a well-known aviation consultant, about document 9132. I wish to register the concern that is felt in the air transport industry about other problems, such as the question of computer reservation systems, which reside within this determination to give liberalisation.

At the moment, it is very much the right of particular airlines to allow others to enter or not to enter their computer reservation systems. As a consequence, passengers do not have the freedom to book on other airlines if they cannot get satisfaction within one airline's computer system.

We must ensure that the competition directorate in the EEC provides what is required and what is stated in explanation document 9132/86, where it says: The Government is aiming to secure agreement during the present UK Presidency on a general community regime for civil aviation covering fares; capacity; application of competition rules". These competition rules should cover the protection of passengers so that they know that if they want to get a reservation they will not be restricted to particlar airlines by the computer reservation systems in the Community and that they will fly with the airline with which they are booked. There are some rather hairy situations in the German reservation system, where one can book on Lufthansa and end up on another airline.

I make a plea to my hon. Friend. After the many years of trying to get deregulation and cheaper flight regimes in Europe, which we would all welcome, can we ensure that the wheel is not invented yet again? The hon. Member for West Bromwich, East spoke with some disparagement, I have no doubt from personal experience, about what he believes to be the lack of success of the deregulation system in the United States. In fact, in general it is considered that deregulation has been a success in the United States.

What is wanted—and this is where the Americans have erred—is information for Europeans about the route patterns that will be available to passengers, and the frequency of services, so that we can achieve customer satisfaction, which, as I said earlier, is not mentioned in the documents.

My hon. Friend the Minister said that the ideas that we put forward from this country are more numerous than most countries in the Community would like. So be it. I think that we should be the pace setter in this matter. We have always been proud to be a leader in aerospace. I ask the House and the European Community to remember that we are supposed to be representing the citizens' interests in travel, and that should shine out more strongly in our declarations.

12.7 am

Mr. Stephen Ross (Isle of Wight)

The hon. Member for Hastings and Rye (Mr. Warren) is an expert on this subject. I am certainly not an expert, so I am somewhat encouraged to learn from his speech that he does not entirely understand all the documents, or even the Minister's explanation. Therefore, I feel slightly more confident about asking one or two questions than I did a few moments ago.

I am in favour of liberalisation but not of total deregulation. I think that the Government will learn a lesson on deregulation with the buses and perhaps they will be able to apply it to the air transport industry. I believe that what has happened in the United States with People's Express airline going bust and other things cannot really be a very good story. It may be that the seven major companies that are now left are competing well with each other and fares may have fallen, but there have been some disastrous job losses in the interim.

I have no doubt that the Minister's heart is in the right place and that he has tried very hard. Despite our presidency of the Council of Ministers, we have not, in all honesty, made as much progress as we would have liked. However, I wish the Minister well next week. In the brief to document 7932 we are told that the Commission now hopes to facilitate early agreement on a first step towards full liberalisation by the target date of 1992". The Minister hailed that as a breakthrough; therefore, I shall accept it as that. However, there are nearly six years to go and in the mean time fares to most member states are grossly over-priced. I travel to the Western European Union, which meets in Paris, and I am staggered by some of the fares. The explanatory memorandum can only report that the Government will aim to secure agreement to a worthwhile 'first step". There is less than a month to go before the Belgians take over the presidency, so next Monday's meeting obviously is important.

Document No. 8324, to which the Under-Secretary of State referred, applies to the position of companies such as British Caledonian, which has had an agreement with other airlines in Europe. Is the exemption to be permitted only for a limited period—three years? One has some sympathy with British Caledonian which has had a pretty lean summer. I am sure that its actions have been in the best interests of the airline and of the consumer.

Document No. 424 makes a minor concession, to which the Under-Secretary of State referred, to regional Community airports and aeroplanes with fewer than 70 seats. The hon. Gentleman said that more wide-ranging proposals had been submitted by us, and presumably they will be discussed on Monday. Does that limited agreement mean that when the docklands airport comes into operation aeroplanes with fewer than 70 seats will be able to operate from the docklands STOLport into the main city airports of Europe, or will they have to operate from regional airports? That is a vital question. I support the docklands STOLport and think that it has a great future if aeroplanes flying from it can fly to the main cities of Europe.

The Under-Secretary of State did not refer tonight, although he may have done in the past, to the report last January by the National Consumer Council in which it made 29 recommendations to the Government. May I take it that the recommendations are generally approved of by the hon. Gentleman and that they have all been taken fully on board?

I wish the Under-Secretary of State well on Monday. I hope that he makes progress. I congratulate him on what he has done, but I wish that he could have done a bit more.

12.11 am
Mr. Nicholas Soames (Crawley)

I endorse the charitable instincts of the hon. Member for Isle of Wight (Mr. Ross), who regularly acts in that manner on these occasions. I am afraid that the same cannot be said of the hon. Member for West Bromwich, East (Mr. Snape), who suffers from a serious deficiency in his party—he is not only clever but sensible. In the words of the Daily Telegraph sketch writer today in respect of another of the hon. Gentleman's colleagues, in the Labour party that is about as much use as a vulture with a glass eye.

This is an important debate as far as I am concerned, because I have a substantial constituency interest in these matters. Gatwick airport is in my constituency and a number of the airlines affected by these directives are based at Gatwick.

As predicted by the hon. Member for West Bromwich, East, I want to congratulate my hon. Friend the Under-Secretary of State and my right hon. Friend the Secretary of State on the progress that they have made in the past few months. Much of the criticism directed at their progress has been entirely the fault of their Department. There is too much talk in Government generally about breakthroughs, achievements, triumphs and God knows what else in the relentless quest for satisfactory presentation of propaganda, but we all know that these are very complex arrangements that require detailed and careful negotiation between a large number of countries and that there will not be achievements overnight on anything like the scale that we would like. I hope that we will not continue to raise the temperature of expectation but will continue with the estimable, satisfactory and good progress that the Government have made in the Community in the past few years.

In the spirit of the comments of the hon. Member for Isle of Wight, I wish my hon. Friend the Under-Secretary of State and his colleagues every success in the European Council in a difficult and important negotiation. To doubt the Government's commitment to liberalisation is absurd, because, self-evidently, just from reading the documents and knowing a little about what is happening, the Government have already created a firm framework for reform.

Air transport has proved to be a fantastic generator of jobs. The hon. Member for West Bromwich, East and I know that a healthy aviation industry is of great benefit to this country. The hon. Gentleman knows that, apart from the creation of an enormous number of jobs in the aviation industry, it results in many jobs in the tourist industry—not just seasonal jobs but, to an increasing extent, long-term jobs. It is important for all our airlines that there should be a satisfactory outcome to the negotiations.

As for document 9132, I hope that my hon. Friend will attach particular importance to the development of regional airports and to the job creation opportunities that should be provided in the more remote parts of the United Kingdom that do not enjoy the benefits that are to be found in the south of the country and in London. No single reform could do more to put flesh on the bones of a people's Europe than the liberalisation of air transport. The advances in air transport have done more than practically anything else to promote the concept of a wider and a more united Europe. I hope that my hon. Friend will use that argument to good effect.

I am convinced that the Government's fares policy is right. All the evidence, particularly that of British Caledonian in my constituency with its issue of "timeflyer" fares, suggests that the concept of off-peak pricing in aviation works satisfactorily. It strengthens the commercial position of those airlines which use it and it provides a product that is highly attractive to customers. There is a very long history of much publicised cheap fares which turn out to be almost unavailable to the public because of the restrictive conditions that are imposed. It clearly makes sense, as a first step, to put this right in the way that my hon. Friend has proposed. The Government should also make it irrevocably clear that they intend to give airlines full commercial freedom regarding conditions at the earliest possible opportunity. It would be wrong to leave that until 1992. It should be implemented as a second step.

It is also important to bear in mind the role that is played by the smaller airlines in introducing real competition in the market, provided that they are allowed in. Head-on competition is healthy on those routes that can sustain it. It is also valuable to have easier market entrance on secondary routes. It allows new markets to be developed and new comparisons between airlines to be made. I urge the Government to be resolute and firm and to insist that their suggestions about market access are accepted by the Council as part of the current package.

There has been talk of unilateral action by the United Kingdom. I urge my hon. Friend to be extremely cautious and not to be pushed into adopting what could be a simplistic approach. The airline industry depends upon international co-operation. Airlines are highly vulnerable, as British Caledonian can testify, to rows between Governments. If the disruption is severe, with adverse consequences for basic forms of co-operation, the traveller as well as the airline undoubtedly suffers. It is right that the Government should have a "bottom line", but they should do eveything possible to secure a negotiated settlement in Brussels at the earliest opportunity.

I ask my hon. Friend to attend to one very important matter—the absolutely chaotic conditions that prevail in the cargo market. My hon. Friend's officials were extremely helpful over a cargo airline that phoned me the other day. It was having dramatic difficulties. It was literally within six or seven hours of having to undertake a contract that it might not have been able to fulfil. I am happy to furnish the details to my hon. Friend, but I know he will agree that it is extremely important that not only people but also goods should have great ease of entry to these enlarged markets. I congratulate my hon. Friend on the progress that he has made and wish him every success in the Council.

12.20 am
Mr. Rob Hayward (Kingswood)

I apologise to the Minister for not being present at the start of his speech. I was unavoidably detained elsewhere, and I hope that in my speech I will not cover ground that he has already covered.

To be confronted with a great mound of Euro jargon and to wade through it paragraph by paragraph has proved extremely difficult, if not impossible. I tried to find references to the role of airports in terms of the provision of capacity and flexibility. It is important that one should bear that in mind, especially when some airport authorities say that their runways and terminals are at, or in some cases above, capacity. They are probably more capable than the Government in periods of liberalisation to influence the way that airlines operate, because operation is determined by the provision of services.

I share the disappointment expressed by my hon. Friend the Member for Crawley (Mr. Soames) and by other hon. Members that the hon. Member for West Bromwich, East (Mr. Snape) failed to make proper reference to consumers and their interests, and set about denigrating the changes that have taken place in the United States. If one looks at safety in the United States contained in, I think, the McGill university study carried out in the mid 1970s, one sees that air safety was higher in the United States than anywhere else in the world.

Mr. Snape

That was before deregulation.

Mr. Hayward

The hon. Gentleman says that that was before deregulation. The point I was about to make is that there is no evidence to show that since deregulation those safety standards have fallen.

Mr. Snape

The Federal Aviation Authority's Donald D. Engen has linked the heated competition spurred by deregulation of the airline industry to a falloff in spending on critical airplane maintenance … The FAA inspectors discovered 78,000 safety violations and fined the airlines a total of 9.5 million dollars since deregulation. That does not square with what the hon. Gentleman is saying.

Mr. Hayward

The hon. Gentleman has not chosen to refer himself to the safety violations that occurred during the period of deregulation. His choice of quotations is astute. The hon. Gentleman should provide comparable figures for the position before and after deregulation, because they would be much more relevant. It is worth emphasising that the CAA has found those violations despite deregulation. In other words, the system still works.

The hon. Gentleman said that a series of mergers and takeovers had taken place in recent months in the United States. In 1986—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. Let us return to air transport policy within the EEC. That is what the debate is about.

Mr. Hayward

I apologise, Mr. Deputy Speaker. In relation to liberalisation, the opportunity to compete on different routes is important and there is a United States parallel that one must bear in mind. In terms of price levels and the opportunity for different airlines to operate within Europe, when liberalisation goes ahead we will find that in Europe as in the United States, after a transition period the number of airline services available—whether from London to Milan or any other service in Europe—will rise. The number of airlines offering the service will increase, as has been the case in the United States—even after the transition period.

I should like to make one or two observations about the documents. In document No. 7932 I welcome the section on capacity at paragraphs 9, 10 and 11. I am somewhat worried that the countries about which the hon. Member for West Bromwich, East spoke will choose to use paragraph 12 excessively, because it gives them an opportunity to,

reach agreements to apply greater restrictions on their right to intervene … I ask the Minister to concentrate on such a paragraph when dealing with matters of capacity and, if possible, to water it down. It gives excessive opportunity to states to intervene, and I know why it is there.

The hon. Member for Isle of Wight (Mr. Ross) and the hon. Member for Crawley referred to document No. 8324. I welcome a joint operation between different airlines if it provides a facility to operate from two different, relatively small locations to a location in other parts of Europe or other parts of the world. We should not have to use the main airlines in the main cities for every single major route that we wish to follow. It is important that people in provinces in countries throughout Europe should have the opportunity to twin with provinces in other countries and then fly on from there to capital cities rather than be forced to use London or, as is increasingly the case, Manchester, which I welcome.

I welcome the operation into which British Caledonian and Sabena have entered. I hope that that example will be used by other airlines in other parts of Europe, as and when these documents are approved, in the way that will best suit British airlines. There is no doubt that British airlines are in the best position today to cope with a more liberalised system of air transport. Therefore, this is yet another example of British industry being in a position to compete well with European airlines if it is given the opportunity.

12.25 am
Mr. Anthony Steen (South Hams)

I congratulate my hon. Friend the Member for Kingswood (Mr. Hayward) on his measured speech, to which the House listened with great interest. I also congratulate my hon. Friend the Member for Crawley (Mr. Soames) on his fervent and enthusiastic speech. He is always worth listening to.

It is regrettable that the Members on the Labour Front Bench are always so sour. We realise that the hon. Member for West Bromwich, East (Mr. Snape) has a job to do, but it is painful, at this hour of night, to hear his siren voice complaining hour after hour about whatever the Government have done. Not a debate goes by without the hon. Gentleman complaining that whatever the Government do is wrong. It is probably worth examining Hansard to see when he has ever said anything decent or nice about the Government's initiatives.

Mr. Stephen Ross

The hon. Gentleman may not be on the Channel Tunnel Bill Committee, but if he reads some of the speeches of the hon. Member for West Bromwich, East (Mr. Snape) he may be surprised.

Mr. Steen

I should be surprised. We will not be drawn into a discussion about the hon. Member for West Bromwich, East. He has attracted enough attention this evening. We all enjoy listening to him, but this evening he let us down badly. Not only was he sour; he was boring.

Mr. Snape


Mr. Steen

The hon. Gentleman should resume his seat. I remember when, on another occasion, I wanted him to give way to correct a mistake that he had made, and he refused. The best place for the hon. Gentleman is a sedentary position.

I wish to make a short speech. At this time of night the House does not want to hear too much more on these complicated documents. It must be right that airlines should compete freely. It must be wrong that a Government should distort market forces. It is quite wrong that a European Government or this Government should say where airlines should fly and at what price. It must be obvious that an airline should be able to fly wherever it likes, and at whatever price it likes, provided there is space to do so and it considers that it can do it at a profit.

It is equally wrong that cartels should allow British Airways and Lufthansa, for example, to carve up one route to the exclusion of all other airlines and to make profits that avoid any real competition. Whether Lufthansa makes the profit, or British Airways makes the profit, does not matter. They share the journeys and they share the profits and losses. That is not competition, and it works against the consumer. That is obvious. I am sure that all hon. Members welcome competition, and should welcome competition, if it brings down the cost to the consumer. There is no better example than what happened on the Amsterdam service.

At this stage, I willingly declare an interest in British Midland Airways. If I do not declare my interest at an early stage of my speeches, the hon. Member for West Bromwich, East mentions it every time. It is well known that I am interested in and represent the interests of—

Mr. Snape

The hon. Gentleman is doing very well.

Mr. Soames

My hon. Friend is doing very well.

Mr. Steen

I am grateful for the interventions of my hon. Friend and the hon. Gentleman. I try to do my best. It is a first-rate airline, and it has brought competition into this country. If any hon. Member had wanted to fly to Amsterdam a year ago, he would have had to pay twice as much as the price now being offered by British Midland. A single fare costs £39. That must be great progress in liberalisation and free competition.

It is no good having competition if airlines cannot fly into the airports of their choice. I welcome the inquiry that the Minister has set up in the past few months. I think that this is right. Some of the principal airlines, the Civil Aviation Authority and the British Airports Authority are looking at ways in which more airlines can go to Gatwick and Heathrow and whether more space can be made there. The Minister must realise that, regardless of the sterling work that the Government and he personally are doing to liberalise that area and allow planes to fly in and out of whatever country they like, the BAA must also play a part in encouraging competition. If my hon. Friend is way ahead in the market place in getting airlines to fly anywhere in Europe, it does no good if the BAA discriminates against the independent airline approach so that airlines cannot get into Heathrow or Gatwick and are forced to fly elsewhere.

The Minister must consider the problems that arise for the smaller airlines if they cannot fly to Heathrow or Gatwick because the costs that the BAA is imposing on them discriminate against them and they have to go to Stansted, Luton or elsewhere. The Minister must lean heavily on the BAA to see that it provides a fair service and does not take a hostile attitude towards the independent sector. He must realise that whatever good work he may do in Europe, the BAA could put paid to the concept of liberalisation if it did not help put that into practice.

The Minister has come here to give us a short report. He has come here because he feels that the House wants to know what he is up to. We all know that he is doing a first-rate job. We congratulate him, and we look forward to another debate early in the new year, so that we can hear about the progress that he is bound to make.

Mr. Deputy Speaker

Does the Minister want to speak again?

Mr. Michael Spicer


Mr. Deputy Speaker

Mr. Michael Spicer.

12.32 am
Mr. Michael Spicer

That is a lukewarm invitation, Mr. Deputy Speaker. I shall try to respond quickly. Perhaps I will be allowed two or three minutes to try to answer one or two points, because it has been an interesting, short debate. Hon. Members on both sides of the House might like me to comment briefly on one or two matters.

The hon. Member for West Bromwich, East (Mr. Snape) chided us for not doing enough about competition. That was a remarkable event in itself. He then spoiled his speech by seeming to argue against lower fares in Europe. If our proposals were not worth having, they would not be opposed as vigorously as they are by the restrictive countries.

My hon. Friend the Member for Hastings and Rye (Mr. Warren) referred to consultation. It is our proposal that automatic approval should be given for new types of fares, so there would be no element of consultation. Air safety standards came up in my hon. Friend's speech and others. There is no question of them being affected. The CAA remains in charge, and the standards will be rigorously applied by the CAA. If we reach agreement, it will override air service agreements in the way suggested by my hon. Friend.

I was most grateful for the comments of the hon. Member for Isle of Wight (Mr. Ross). Sometimes it is not easy to praise people across the Floor of the House, but it is extremely useful as we go into negotiations next week to have had his support. But I do not wish to embarrass the hon. Gentleman, so I shall not continue. I assure him that, under our proposals, the competition exemptions will last for three years. I share entirely his interest in and enthusiasm for the Docklands airport. Whether it will be a category I or category II airport will be a matter for negotiation, since it is a London airport, but if it is a category I airport, as we believe it should be, under our regional proposals—my hon. Friend the Member for Crawley (Mr. Soames) said that it was important to press on with them—the traffic that it could accept and distribute would be greatly liberalised. I assure him that we are completely in favour of the National Consumer Council report.

My hon. Friend the Member for Crawley asked us not to raise expectations too high. That is wise advice. It is extremely difficult to obtain the agreement of 11 other countries, some of which—until recently the majority of which—believed that it was in the interests of their countries and their airlines to be highly restrictive. On most issues, persuading 10 out of the 12 to come our way has been a great struggle and a tremendous achievement. To persuade the others, especially on fares, will be a great problem. I agree that we should not raise expectations. Nor should we give up on the struggle.

I agree with my hon. Friend the Member for Crawley that it would be far preferable to have a negotiated settlement. His argument that a settlement would be highly critical to the development of a wider and stronger Europe, especially as it faces competition in aviation from outside, is absolutely right. It will best be achieved through negotiation and agreement. Of course, if it cannot be negotiated, the Commission has already made it clear that the relevant articles applying the competition rules would begin to apply. But I agree that that would cause difficulties. Those who argue that this is a simple way through underestimate the difficulties involved.

I should tell my hon. Friend the Member for Kingswood (Mr. Hayward) that the strength of British Airways is undoubtedly a factor in negotiations. But there are 52 airlines in Britain, some of which are among the best in the world, let alone in Europe. I was not sure whether my hon. Friend was referring to co-operative operations between airlines or linking different airports, especially regional airports, but we shall need some of both.

My hon. Friend the Member for South Hams (Mr. Steen) made an important point. Some say that there has not yet been an effect on air fares, but he gave the perfect example of the Amsterdam route, which is becoming much more liberal. The effect on air fares is becoming considerable. He asked me to bear in mind, in the liberalisation programme, the fact that we must have access and capacity at our airports, especially the London airports. That is why we decided to progress with Stansted, and why we retained traffic distribution powers at Heathrow.

It is a disgrace that the principles of the treaty of Rome have not yet been applied to air services as they have been applied for a long time to manufacturing products. The Government's goal remains to put that right as quickly as possible so that consumers can get a better deal from air services, and so that our airlines, which are among the strongest and most efficient in Europe, can compete properly and win the traffic and markets that they deserve.

Question put and agreed to.

Resolved, That this House takes note of European Community Documents Nos. 5938/84, 7932/1/86, 8324/86, 8109/86 and 9132/86, on the liberalisation of air transport in Europe, and fully supports the Government's determination to press for such liberalisation in the context of the 1992 deadline for the completion of the Community's internal market.

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