Aviation (Hansard, 29 June 1992)

§ 4. Mr. Jonathan Evans:
To ask the Secretary of State for Transport what is the Government's policy on the future of state aids for the aviation industry.

§ Mr. MacGregor
In the light of the important agreement on the single market in aviation reached at the Transport Council on 22 June, the removal of state aids in aviation is now more crucial than ever.
We believe that state aids that distort, or threaten to distort, competition undermine the effective operation of the market and so harm the interests of air passengers. We will therefore continue to press the Commission to use its powers to control these subsidies strictly, particularly where they are used to shore up inefficient carriers or to finance major expansion plans and acquisitions.

§ Mr. Evans
Is my right hon. Friend aware that the agreement that he was able to reach in Luxembourg has been widely welcomed? At least Conservative Members recognise it as a significant step forward in the introduction of greater choice and competition. Will my right hon. Friend ensure that the great success for which he was responsible is carried forward, thus securing more genuine competition with all European airlines?

§ Mr. MacGregor
I am grateful to my hon. Friend. The agreement came at the end of 10 years of negotiation in which the British Government took the lead. It represents a major landmark in the development of the European aviation industry, and is far the most significant advance in the opening of European skies to full competition.

§ Mr. Prescott
When is it coming in?

§ Mr. MacGregor
The answer to the hon. Gentleman's sedentary question is that 90 per cent. of the arrangement will come in on 1 January next year. Contrary to some press reports, it is coming in pretty quickly.
I very much take the second point made by my hon. Friend the Member for Brecon and Radnor (Mr. Evans). I assure him that we shall use our presidency to steer the Community towards better-defined guidelines on state aids, which would have to be followed strictly—I emphasise the word "strictly"—by member states wishing to give aid to their airlines.

§ Mr. Sproat
I warmly congratulate my right hon. Friend on what he and his officials achieved in Brussels last week. Will he assure the House that he will use the British presidency to ensure that the great potential benefits that he won for passengers are not diluted, delayed or rendered useless by other EC Governments subsidising their own state airlines—as they are still doing—or by, for example, abuses of airport slot allocations or other anti-competitive or anti-consumer local working practices?

§ Mr. MacGregor
The agreement that we reached sets the very significant background to the agreement. As the chairman of British Midland said, it opens up tremendous opportunities. I recognise, however, that there are other steps still to be taken and that there are other significant areas still to be tackled. That in no way undermines the very important advances that we have seen as a result of the agreement. As my hon. Friend rightly mentioned, they are in the areas of state aid which, as I have already said, we shall be taking forward during our presidency. I hope that we shall be able to complete the competition package. I recognise also that slots represent another important aspect in opening up the markets.

§ Mr. Snape
Will the Secretary of State stop reading out his press releases? Does he accept the view of Sir Colin Marshall, the chief executive of British Airways, that 568 The agreement is not as much as we"— meaning them— originally hoped for and nowhere near as much as we would have liked"? Does he also accept the view of Mr. Ian Wild, airline analyst at BZW, who said that The EC agreement seems to be couched in such restrictive terms and with so many conditions that it will be a practical impossibility for anyone to achieve radical change"? Are they talking about the 90 per cent. or the 10 per cent?

§ Mr. MacGregor
I disagree with both comments, particularly the last. There has been a failure by whoever said it to understand just how significant the advances are. The safeguards to which he refers are safeguards to protect passengers against predatory air fares. Both Mr. Richard Branson and Sir Michael Bishop warmly welcome this agreement and understand the importance of this advance. Of course, the agreement does not complete everything. There are still important areas to be tackled in what up to now has been a restrictive and protected market. However, I beg the hon. Gentleman to understand just how significant the advances are. I have already said that we shall be tackling those other areas. We believe that 90 per cent. of what British Airways needs in order to compete more widely in the European markets has been achieved. There is a transitional period on one point, and even there we have negotiated down the period of the transition.