HC Deb 05 November 2001 vol 374 cc75-90

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kemp.]

7.13 pm
John McDonnell (Hayes and Harlington)

Because of the nature of this debate and the wide-ranging interest, other hon. Members may wish to catch your eye, Madam Deputy Speaker. I would welcome the exercise of your discretion to enable that to take place because of the scale of the problem that we are dealing with.

Heathrow airport is the national centre of the United Kingdom's aviation industry and is located in my constituency. I have sought the debate to discuss the current crisis in the aviation industry. I do not wish to be alarmist, but I do not use the term "crisis" lightly.

Prior to 11 September, the aviation industry, airport operators and all the associated companies were experiencing a cyclical downturn associated with the overall downturn of the world economy, especially the American market. That was nothing unusual. We have been through downturns before. To use an appropriate expression, we expected a soft landing when the downturn bottomed out, after which the markets would begin to pick up again.

Prior to 11 September, several firms had announced a tightening of their belts and associated voluntary redundancies. Again, it was nothing that we had not experienced before. The aim was to get through the downturn with the least pain possible and to prepare for the upturn in demand, estimated to occur within about 12 months. September 11 and the horrific attack on the World Trade Centre changed all that.

The pre-existing downturn was exacerbated dramatically by the terrorist attack. A predictable fall in demand, the impact of which was generally assessed as lasting 12 months and which was thought manageable, was immediately transformed into a crisis of significant proportions for those working in the aviation industry and for communities heavily dependent on airport operations, including communities in my constituency and others located around Heathrow.

I run through just some of the public announcements that have been made since 11 September by airport operators and the aviation industry which will result in job losses. Since 11 September, British Airways has announced that 5,200 jobs are to go, on top of the 1,800 previously announced due to the economic slow-down. Virgin has recently announced 1,200 redundancies. British Midland, which has a lower exposure to the transatlantic impact, is nevertheless grounding eight aircraft and cutting 600 jobs.

European airlines have been similarly affected. Swissair has filed for bankruptcy. Lufthansa has cut one United States route, grounded four aircraft and shelved orders for new aircraft. KLM has cut capacity by 5 per cent. Alitalia has cut staff by 12 per cent. Aer Lingus has cut scheduled services by 25 per cent. Austrian Airlines has cut capacity by 10 per cent. Air France has removed 17 aircraft from service and Sabena has filed for bankruptcy.

United States airlines have been hit equally hard, if not more so. United Airlines has announced 20,000 job losses worldwide and a 20 per cent. cut in flight schedules. American Airlines has laid off at least 20,000 employees in order to survive and reduced capacity by 15 per cent. Continental Airlines will lay off 12,000 employees. Northwest Airlines has cut 10,000 jobs.

Aircraft manufacturers are also feeling the impact of 11 September. Boeing has announced cuts in jobs of 20,000 to 30,000. The impact on passenger traffic through Heathrow has been around 20 per cent. Air traffic control has experienced a 20 per cent. reduction in support staff, as was announced recently: initially, it was announced that 1,100 jobs would go, but over the weekend we read that that could go up to 2,000.

Mr. Martin Salter (Reading, West)

Does not my hon. Friend recall that many of us who were extremely unhappy at the proposed part-privatisation of National Air Traffic Services received assurances that it would not lead to cuts in the standard of service, nor indeed, in the support infrastructure upon which air traffic controllers depend? Given the cataclysmic events of 11 September, the contraction in the industry, the decision recently announced by the Government to put on hold the second Scottish air traffic control centre, and that a number of the airlines that he listed that are making substantial job cuts are members of the Airline Group, the consortium that is the Government's strategic partner, does he not think that now is an excellent time for Ministers to show the same pragmatism and realism towards NATS that they showed towards Railtrack, before it is too late?

John McDonnell

I fully concur with my hon. Friend's views. The NATS privatised business plan is now unworkable. It is time to rethink the whole proposal and introduce the trust option that was put forward by me and my hon. Friend in the debate on the privatisation of NATS. In fact, the trust route is being used for Railtrack itself.

Mr. Salter

I thank my hon. Friend for being so generous in giving way, although he has some time at his disposal. If it is right and proper—I believe that it is—for the Secretary of State for Transport, Local Government and the Regions to say that there is an essential contradiction between the interests of the travelling public and the interests of the shareholders vis-à-vis what was formerly Railtrack—that botched and barmy privatisation as we have called it—does not the same logic apply to the very service that we depend upon to ensure that aircraft are kept apart and that the travelling public can continue to use the airline industry with confidence and safety?

John McDonnell

There is a need for consistency from the Government on transport overall, and that consistency must apply to air traffic. In the current difficult circumstances for the aviation industry, we could do without the problems associated with air traffic control and the inherent dangers of the system that has been proposed. I agree that there should be a complete rethink: we should go back to the drawing board and reconsider the trust option.

Mr. Geoffrey Clifton-Brown (Cotswold)

Is the hon. Gentleman aware that NATS was to have funded its business plan with investment of £1 billion, but that because of the problems of the airline partners that funding will almost certainly no longer be forthcoming? Will not the Government have to rethink the whole NATS privatisation plan?

John McDonnell

A rethink of the overall proposal is inevitable. We are not talking only of future investment but of future solvency: that is my main concern. The job losses already announced and future possible job losses will put the whole system at risk.

The announcements that I listed are based on staff lay-offs—often worldwide—throughout the companies involved. However, because Heathrow airport is a focus for the operations of many of those companies, a significant proportion of the job losses will fall on Heathrow and its communities. Even the job losses announced by European and American airlines will have a major impact at Heathrow, because most of those companies maintain substantial operations at the airport.

The impact is being felt not only by the airline operators but throughout the lengthy supply chain of the aviation industry. It is estimated that about 180,000 people are directly employed in the aviation industry, but that about 200,000 people work in its immediate supply chain, providing goods and services to the industry. Evidence is appearing that depicts the impact of the combination of the already existing downturn and 11 September on the multitude of supply firms. Orders are not coming through, bookings are falling and telephones no longer ring in offices with the usual demand for service delivery. Many of those firms are small and are those that employ the lowest-paid staff. Such companies are least able to provide reasonable redundancy packages and support measures for staff leaving their employment.

A large proportion of the staff affected by the current crisis—especially the lower-paid staff—live in the communities surrounding Heathrow airport. According to figures published last year, direct employment at Heathrow is about 68,000. For every person directly employed at the airport, it is estimated that there are three in the supply chain. Eighty per cent. of the workers directly employed at Heathrow live in the surrounding local authority areas, putting about £2 billion into the local economy. More than 25,000 directly employed workers live in the three immediate boroughs of Hillingdon, Ealing and Hounslow.

There is a paradox in that although the development of a massive airport such as Heathrow brings with it the advantage of large-scale employment, it also has the disadvantage of increasing demand for land, thereby raising land prices and providing other sectors of industry with an incentive to sell their sites and move to cheaper locations, thus squeezing out those sectors. Local economies have become heavily dependent on Heathrow so when the aviation industry catches a cold, our communities risk pneumonia.

Mr. Salter

Will my hon. Friend share with the House his view as to the effect of this dramatic decline in the industry on the plans for Heathrow terminal 5? Those plans have given rise to some controversy across the whole Thames valley.

John McDonnell

There is an argument that the current problems might bring the terminal into existence more swiftly. I would argue that we should stand back and consider the future demand for a fifth terminal, and that we should adopt a more planned approach to aviation development in the south-east. For example, there is a proposal to develop Marinair, rather than building a fifth terminal. That would give us greater long-term capacity as well as some breathing space. However, I await the announcement about terminal 5 and I am sure that the Under-Secretary of State for Transport, Local Government and the Regions will not want to comment on that issue tonight.

I have lived in my community for more than 25 years, representing it on the Greater London council and in Parliament. I went through the three recessions under the previous Conservative Government and witnessed the effects of unemployment on my community. That Government's commitment to market-oriented, noninterventionist policies meant that they failed to act to assist my community during that period. We lost most of our manufacturing base, and only after four years of Labour Government are we beginning to get back on our feet. That is why I am asking—pleading—for an interventionist approach from the Government.

It has been suggested that the current problems faced by the aviation industry will be as temporary as those experienced during the Gulf war or in previous downturns. I differ strongly from that view. The fact that civilian aircraft were used as a weapon in the 11 September attack and that the present war is predicated on a long-haul approach to tackling terrorism means, in the view of many people, that the current recession in the industry will be deeper and longer lasting. In that situation, the Government cannot stand back or fail to intervene.

Today at Heathrow, I convened a meeting with the airport community partners—the airport operators, the British Airports Authority, trade unions, community leaders and local MPs—and the Minister for Transport. We held a useful discussion and agreed to form an airport community task group to prepare a programme—an agenda—for a co-ordinated approach to tackle the recession that faces us, considering short and long-term measures to address the crisis.

The proposals include, first, support for individuals. We want to establish a form of early-warning system to predict the announcement of lay-offs. We want to provide a co-ordinated system of advice and assistance on issues such as welfare benefits, redundancy payments, retraining and employment opportunities for those workers threatened with unemployment as a result of the crisis. We want to bring together local advice agencies, the Department for Work and Pensions and the Employment Service to provide that facility for people threatened with, or experiencing, the loss of their job.

We want to consider advice and assistance for alternative employment through the Employment Service, which has already established an initiative as a result of previous crises in other industries. That could be valuable in our area.

We want to examine how to set up retraining options through the Learning and Skills Council, working with local colleges and training agencies to ensure the reskilling of people who will be displaced from their existing jobs. Some of them may return to the aviation industry, but we want to make sure that they have updated skills, thus giving them greater employability.

Secondly, we considered support for the industry itself—for the companies. We are concerned about the additional costs that they are bearing as a result of the crisis and examined several measures to assist them. That is not a soft option; it is not backing losers: it is about finding short-term support to help to tide us over the current crisis. Some of the proposals included the following: to extend at no cost to the industry the period in which Her Majesty's Government acts as insurer of last resort from 30 to a minimum of 180 days": to secure rapid agreement from other governments to achieve a uniform worldwide limit on third party liability and the corresponding insurance indemnification requirements"; to provide allowable financial assistance for tour operators— and airline companies— to cover the exceptional costs incurred and revenues lost as a direct result of the four day closure of North American and other affected airspace"; and to ensure that airlines do not incur additional costs in meeting the enhanced security". The protection of the public demands assistance from the Government to ensure the highest levels of security.

Another proposal was for a promotional programme to get people flying again—to renew their confidence in the aviation industry. Historically, flying is the safest form of travel and we should remind people of that, and that we are working together to ensure that it continues to be so.

Mr. Clifton-Brown

The hon. Gentleman has touched on the issue of confidence, which is extremely important in encouraging people to travel by air. As we are losing a great deal of transatlantic business, our airlines—among all the European airlines—are particularly badly hit, so does the hon. Gentleman agree that the British and American Governments must do all they can to work together? In that connection, does he endorse the fact that the French have come up with a bilateral agreement with the United States—whereas our Government have still not been able to do so? Does he agree that we should put every possible effort into concluding such a bilateral agreement?

John McDonnell

Those at this morning's meeting argued that there should be a level playing field across Europe and the United States and that those negotiations should continue apace. 1 believe that Ministers are visiting America this week to hold discussions to enable that to happen.

Several of company and trade union representatives at the meeting made the point that George Bush's Administration has sunk £6 billion of support into the airline operators to ensure that they get through this period. We shall look for some form of assistance—again, on a selective basis and in response to real need—to get through this crisis.

Security and the restoration of confidence were critical to our discussions. There have been continued security lapses at some of our airports, which we do not want to highlight too much because, in general, the security is good, but there is still a need to tighten it up. We must be firm with those companies that avoid their responsibilities by allowing unvetted staff to operate air-side and, as was said this morning, by preventing their staff from discussing security problems with the inspectors.

The third issue discussed was support for the communities affected by the aviation crisis, because it was felt that we need to reappraise existing regeneration initiatives to take account of the latest situation. For example, many of the single regeneration budget programmes around Heathrow will end in the next 18 months. Community leaders argued this morning that additional funds are needed to support regeneration initiatives, for example, training, retraining, new enterprise promotion and development in the airport community areas.

The fact that the SRB is running out at a critical time, just as our communities need it, is unfortunate, so there is a need to examine whether additional resources can be provided, possibly through the central pool that the Mayor of London will hold at the end of the SRB period. However, because of competing demands on that central pool, there is an argument that additional resources should come from the Treasury direct to London to help us to tackle the current problems.

The other issue raised in this morning's discussion was the problem that local authorities around Heathrow have in bidding for additional funds under other regeneration schemes. The problem is that with high levels of employment around Heathrow, the local authorities do not necessarily score well in the deprivation indices because unemployment has a great influence on those indices. However, those indices do not take into account the quality of employment, so we may have high levels of employment, but, unfortunately, there are also high levels of low pay. The deprivation indices must be reshaped to ensure that moneys are awarded according to the quality of life of the local people in those communities.

We felt that all those matters should be open to negotiation with central Government to reflect the current crisis. We want the work of the existing agencies, such as the London development agency and the Learning and Skills Council, to be co-ordinated to assist in the short term and to consider the longer-term problems, so that we can rebalance our local economies to avoid overdependence on the airport if a further downturn occurs.

The long-term solutions were the fourth issue discussed. Obviously, there is a strong argument for continued investment in the infrastructure to keep ahead in such a competitive market. Apart from terminal 5, crossrail was also mentioned as one of the key projects needed to keep Heathrow at the forefront of the world's aviation industry. However, all the operators recognised that the airport must be a good neighbour to its surrounding communities and that the environmental impact of such measures should be addressed.

As a result of this morning's discussions, we have agreed that we will convene the task group and aim to submit a briefing paper to Ministers, including those at the Treasury, within weeks. There is a real sense of urgency about the matter. We aim to identify a programme of readily available and implementable measures for the Government. We want to work together to get our own communities through the current crisis and to return to the stable economic climate that we have experienced in recent years.

Heathrow is the logistical centre for this country; it is also a logistical centre for Europe and for the world. We must not allow the current crisis to undermine its pre-eminence in that role. On Thursday, the Transport and General Workers Union will lobby the House. Many workers from Heathrow will come here to express their concerns about the threat to their livelihoods. We need to give them a clear view that we appreciate their concerns and will stand by them, so that we can see them through the current crisis.

7.34 pm
Mr. John Randall (Uxbridge)

I congratulate the hon. Member for Hayes and Harlington (John McDonnell), who is my constituency neighbour, not only on obtaining this debate but on managing to ensure, by good fortune, that we have more time than the half an hour normally permitted on many of these occasions, which has allowed other hon. Members to contribute.

My constituency borders Heathrow, and many of the problems that the hon. Gentleman has outlined affect my constituency, especially in the southern half around West Drayton and Yiewsley. However, as he said, such issues do not just affect the aviation industry; there is a huge knock-on effect locally—for example, on the hotels and some of the other service industries in the area. I declare an interest: I am still a director of retail outlet in Uxbridge, so I know that consumer confidence is also affected. A new shopping centre has opened in Uxbridge, and the viability of such developments is also dependent on the confidence of the local economy. I am pleased to report that consumer confidence is holding up in the pre-Christmas rush.

Without repeating too much of what the hon. Gentleman said, there is another knock-on effect. Many of the local organisations connected with the airport—in particular, the British Airports Authority and British Airways—contribute to the local economy by being involved in voluntary schemes, such as the Hillingdon Partnership Trust. When they begin to feel the pinch, there will be a knock-on effect on many of our community projects.

One or two controversial issues have cropped up at the same time as the crisis in the aviation industry. The ruling on night flights will put some hon. Members in a difficult position. Although we advocate help for the aviation industry and want people to have confidence, we are pleased that the ruling might, if the Government take it on board, provide relief for many of our constituents. However, we have to consider the economic effect that that will have on the airlines.

I should also like to echo the comments made about NATS, because those services must be reconsidered in the light of recent events.

The hon. Member for Hayes and Harlington referred to the TGWU's lobby on Thursday this week, and I am pleased to say that it has been very active—I was even accosted at half-term at the excellent match between Uxbridge and Cirencester Town. My hon. Friend the Member for Cotswold (Mr. Clifton-Brown) will be delighted to know that that match ended in a three-all draw, with the replay tomorrow. A great deal of local concern has been expressed about the impact of all the job losses and their effect on people's perception of the local economy.

As the hon. Member for Hayes and Harlington said, we have been very lucky in many respects. We have felt the benefits of the airport, but, as he said, we have put all our eggs in one basket. Now that that basket has been severely rattled, we are very concerned that, as he said so eloquently, when the aviation industry sneezes, we shall end up with pneumonia. That view is widely held in the local area.

Our overarching desire is to try to ensure that our aviation industry has a level playing field, to which the hon. Gentleman also referred. I should also like to congratulate him on convening the meeting that he mentioned and the Minister for Transport for agreeing to be involved with the taskforce. I am sorry that I could not attend this morning because of previous engagements, but I congratulate the hon. Gentleman on acting quickly.

The TGWU is looking for other measures, and I am sure that the Treasury has its own ideas, as, I suspect, has the shadow Treasury team. The TGWU is looking for an immediate freeze on air passenger duty and, particularly, for compensation for the lost four days in the immediate aftermath of 11 September when many flights did not take off. A great deal of money was lost.

The hon. Gentleman referred to security, and I agree that the issue must be considered. There will be additional security costs and the aviation industry and the airlines, in particular, might find them to be what might be described as a burden. Although we all want further security measures to be introduced, they will create extra costs at a time when airlines' income is falling.

The hon. Gentleman and I might slightly disagree about terminal 5. I think that an early statement would restore local confidence in the airline industry. I have strong environmental concerns, but the construction of the terminal might provide opportunities that would benefit the local economy. We have had many discussions on that point in the past, and I accept that we might have to agree to differ on it.

It is not my job or that of anyone in the House to tell businesses how to run their enterprises, but it is interesting to note that some airlines have not suffered the same impact recently. I understand that the transatlantic routes of airlines such as British Airways are a particular problem, but I wonder whether the airlines have been as quick in promoting confidence in air travel as they might have been. Perhaps they could have been a bit more generous in discounting flights in the way that some of the low-cost airlines have done. Those airlines have been quick off the mark and that fact has been reflected in their figures.

I agree entirely with the hon. Gentleman about the continuation of the regeneration budgets. Perhaps we could extend the single regeneration budget beyond the next 18 months or we could look to the Mayor of London for help. As the hon. Gentleman pointed out, we are constantly told that we are in for a long haul and that might mean that the aviation industry will not emerge from its current problems as quickly as we would like.

The hon. Gentleman referred to crossrail, and we have always accepted the need to be good neighbours. The aviation industry provides jobs even though some of them are low paid. Therefore, if we expect it to be a good neighbour to our constituents, it is beholden on our communities to be good neighbours to the industry in times of trouble. Even the people who are not directly affected by job losses in the industry recognise that we need to ensure that the local economy does not suffer the consequences that some of us fear that it might. I therefore urge the Minister to consult his colleagues to ensure that the problems that I have described are tackled urgently.

7.43 pm
Mr. Geoffrey Clifton-Brown (Cotswold)

The House knows that I am used to being adaptable. Within days of my appointment to the Opposition Front-Bench team, I was shuffled from my responsibilities for matters involving the Department for Environment, Food and Rural Affairs to those relating to the DLTR. However, you, Madam Deputy Speaker, have advised me that I should not speak from the Front Bench in this debate because it might create a precedent even in these exceptional circumstances. I am therefore delighted to take part from the Back Benches in the debate initiated by the hon. Member for Hayes and Harlington (John McDonnell).

The debate is timely, and the hon. Gentleman covered the issues in a measured and constructive tone. The last thing that anyone would want to do is exacerbate the situation by causing further alarm. Unless we can instil confidence in the general public that they should continue to travel by air, the terrorists will, in a sense, have won. We therefore need to move forward in a constructive fashion.

The hon. Gentleman described many of the lay-offs that have taken place and I do not want to add to the list. However, they are a sign of the pressure that has been put on the airline industry—I use the term in its widest sense—since 11 September. However, the problems do not all result from then; a certain amount of restructuring was due to happen in any case.

It is not all bad news. For example, this evening's Evening Standard reports that Ryanair has just announced increased profits. They have risen by 30 per cent. to 102 million euros in the six months ending in September compared with analysts' expectations of 89 million euros. In addition, revenues were up by 29 per cent. The newspaper quotes Ryanair's chief executive, Mr. O'Leary. Describing his rivals, he said: 'Many have used the events of 11 September as an excuse to cover their continuing losses but they were loss making well before then and will continue to be so.' He praised European Transport Commissioner Loyola de Palacio for 'doing a fine job' preventing 'basket cases' from receiving more State aid. That may sound pejorative, but Ryanair has shown that there is still hope in the airline industry.

Ryanair is talking about purchasing more second-hand planes. The Evening Standard reports: It is also talking to owners of 600 second-hand 737s as well as planemaker Boeing about buying 50 more aircraft. There is some good news about, and we want to spread it. Anything that the Government can do to encourage the future of the airline industry would be welcome.

I strongly echo the words of my hon. Friend the Member for Uxbridge (Mr. Randall). I hope that there will be an announcement on terminal 5 very shortly and that, when it comes, it will not follow the precedents that the Government have set recently. I hope that a full statement will be made to the House before the press is informed, so that we may play a full part in scrutinising the announcement first. Will the Minister take that point on board? I know that there has been controversy about terminal 5, but the industry will gain confidence if it knows where it is going.

The infrastructure of London's airports has been mentioned. The number of job losses at Heathrow is likely to be substantial, but the Government could consider a number of options. Last week in Westminster Hall, I made the point that we need to consider the infrastructure used for travelling between London's airports. There is still a poor service between the two major airports of Heathrow and Gatwick, but surely we could consider providing fast rail systems or improving the M25 so that bus travel is quicker and more predictable.

In Westminster Hall, attention was drawn to the Thameslink rail link between Luton and King's Cross. I travelled on it recently and it is still a relatively poor service. It stops at every little station when we want a high-speed rail link between King's Cross and Luton. In fact, as on the link between Paddington and Heathrow, one should be able to check in one's baggage at King's Cross. Even in the current security situation, the ability to check in baggage could be used at more of the terminals that link central London with major London airports, and in respect of links between airports. That would make travel easier for people changing from domestic to international flights.

The hon. Member for Hayes and Harlington mentioned the NAT'S privatisation programme. The debate on that will have to be reopened in light of today's uncertain circumstances. We need to be clear about the direction that our airspace control is taking. If the second planned airspace terminal at Prestwick is not going ahead—the Minister is shaking his head—he needs to explain where the investment for Prestwick and West Drayton is coming from and where he expects it to go. As I said, if the £1 billion investment from the consortiums is not forthcoming, where will the money come from to fund those two improvements? We need to know that fairly shortly.

The hon. Gentleman also mentioned the Government's role as insurer of last resort. They could provide stability for the industry. The first offer to be insurer a last resort was only a day or two away from running out when the Government announced that they would pay the premiums for another 30 days. We need to know the Government's plans. They should not leave it until the day when the arrangement runs out. Let us try to provide certainty.

The hon. Gentleman said that we should extend the period from 30 days to 180. As I have no technical expertise, I do not know whether that is right, but it seems to me that a longer period would be of great benefit to the industry. Unless there is another terrorist outbreak, I do not think that that would be too expensive. If there is another terrorist outbreak, they will spend a lot more on unemployment benefit and so on. It would surely pay to keep some stability in the industry, and that is one way of doing it.

The hon. Gentleman mentioned negotiating with the European Union on what specific help can be provided when the single regeneration bid ends, because that is causing uncertainty. Conversations with the relevant directorates general in the EU on what could be done to the state aid rules in such exceptional circumstances would pay dividends. There is a significant threat of job lay-offs, and a number of jobs have already gone. The Government could talk to the EU about that.

While the Government are finding out what can be provided for the airline industry, they should consider targeted help for security measures. We know that they are receiving more than £1 billion in airport passenger levy. The Government have increased the rate and are now bringing in that substantial sum. Although that is going into the general Treasury coffers, it would be wrong in such exceptional circumstances for the cost of increased security measures to fall on an individual airline. Carefully targeted measures would be helpful. Again, 1 do not think that that would be too expensive.

I welcome the hon. Gentleman's eminently sensible initiative to bring everyone together in a taskforce, especially members of the TGWU. I was not aware that it was going to lobby the House on Thursday, and the debate is timely. Many of its members must be apprehensive. It is incumbent on all hon. Members to see what can be done to ensure that as many jobs are preserved as possible and to bring all Government agencies together to decide what can be done to help people who are going to lose their jobs. I was especially impressed with the hon. Gentleman's idea about the Learning and Skills Council. That is a positive initiative to retrain people who lose their jobs, perhaps to re-enter the industry with new qualifications and skills when it revives and expands.

I do not want to detain the House. The Minister can do a great deal to reassure the industry. That would be tremendously helpful. We all need to chart a way through the crisis so that we shorten the recession as much as possible. Every measure will help, including talking to the European and American authorities. We know from tonight's Evening Standard that British Airways is about to drop out of the FTSE 100, which is a serious development. Its profits and share price have plunged. No one wants that. We all want it to recover quickly. One reason why it has taken such a dive is that of all European airlines, it is one of the most dependent on the transatlantic trade. Anything that the Government can do, including concluding a bilateral agreement, would be beneficial.

7.57 pm
The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Mr. David Jamieson)

I congratulate my hon. Friend the Member for Hayes and Harlington (John McDonnell) on securing the debate and providing the House with an opportunity to discuss this important subject. I thank him for making so many vital points, and for the calm and measured way in which he raised them on behalf of his constituents.

I want to respond in full to many of my hon. Friend's concerns, but I shall deal first with the comments made by the hon. Member for Uxbridge (Mr. Randall). I am glad that consumer confidence is still high in Uxbridge. I am sure that the good people there are delighted to have a Labour Government who have enabled that to be the case. The hon. Gentleman raised a number of important issues, which I shall address.

The hon. Member for Cotswold (Mr. Clifton-Brown) is temporarily on the Back Benches. I look forward to seeing him on the Front Bench again. He said that he had been assigned to the DLTR; I think he meant the DTLR—the Department for Transport, Local Government and the Regions. That is my Department, and I hope that he is shadow spokesman for it. The hon. Gentleman made the important point, which needs to be made, that some airlines are doing well. Tonight we are discussing some of the industry's problems, however.

The hon. Gentleman will not have to wait long for an announcement on terminal 5, but I cannot tell him what it will contain. He also mentioned National Air Traffic Services, as did my hon. Friend the Member for Reading, West (Mr. Salter), who has a long history of raising that subject. We have not received a request for financial assistance from NATS. We have agreed only a pause in the building programme at the Scottish centre, which we had to do following the events of 11 September. We are firmly committed to the two-centre strategy.

Mr. Clifton-Brown

Will the Minister confirm that, when we finally have an announcement on terminal 5, it will be made first to this House and not to the media?

Mr. Jamieson

I assure the hon. Gentleman that this House will be fore-informed of any announcement that we make.

The Government recognise the great importance of the aviation industry to the United Kingdom economy and are therefore paying close attention to the industry's current problems, as so well articulated by my hon. Friend the Member for Hayes and Harlington. We acted quickly in response to the events of 11 September to counteract the failure in the aviation insurance industry market and to enhance security measures at all UK airports. We are actively considering the payment of emergency aid to airlines for the four days when United States airspace was closed, in accordance with European Commission guidelines.

In addition to those practical measures, we are doing what we can to restore confidence in air travel. For example, last week I undertook a programme of visits to UK airports—I went to Gatwick, Edinburgh, Birmingham and Bristol, and a few weeks earlier I had visited Plymouth airport—to help boost morale and encourage consumer confidence in air travel. I pay tribute to people who in recent weeks have worked extremely hard in many of our airports to ensure that they are even safer than before. I know that many of those people have worked under enormous stress and pressure in recent weeks. I give credit to them, especially my hon. Friend's constituents.

Some 180,000 people in the United Kingdom are employed in the aviation industry—an industry with a gross domestic product similar to that of car manufacturing—with up to three times as many jobs supported indirectly. Moreover, the UK aerospace industry employs around 154,000 people, contributing almost 1 per cent. of GDP. Aviation is particularly important to local economies around major airports. As my hon. Friend said, Heathrow airport accounts directly for 68,000 jobs and is by far the biggest employer on a single site in London.

I am pleased that my right hon. Friend the Minister for Transport was able this morning to meet my hon. Friend, fellow Members and representatives of the air transport industry, trade unions and local communities to discuss the situation of Heathrow airport and its surrounding areas. I understand that the discussion was constructive and wide ranging, and that those present agreed to engage in a regular exchange of information on the state of the industry during this difficult period. I also understand that the employment market in the areas surrounding Heathrow is holding up well at present, but it is obviously important that all concerned should be in a position to react quickly to any deterioration in the situation. I take particular note of my hon. Friend's comments about low pay in his area.

My hon. Friend talked about the task group of the airport's community partners that is being set up, and I was pleased to hear that. As he rightly says, there needs to be a programme for a co-ordinated approach. I certainly look forward to receiving the briefing paper from that group. I know that the Department for Education and Skills is involved and that the Employment Service will be actively involved. I assure my hon. Friend that Departments and particularly the Employment Service will be giving every support to people who may be facing redundancy. I suppose that one good point is that the economy is doing well, and we should be thankful for that, but that is probably small comfort to people who may be losing their jobs in the weeks ahead.

There can be no doubt that the aviation industry has suffered a body-blow as a result of the terrorist attacks of 11 September. Not only was air transport chosen as the instrument of terror in those attacks, but the industry has become the most prominent casualty in the subsequent economic fallout. The International Air Transport Association has predicted a collective industry loss of £7 billion for 2001. Many are saying that the effects will be worse than those experienced following the Gulf war. It is clearly too early to tell precisely how badly the effects will be or how long they will last, but traffic figures published by the Association of European Airlines for the five weeks up to 14 October showed that the north Atlantic market was down by about one third compared with the same period last year, while European traffic was down by about 10 per cent.

Mr. Clifton-Brown

The Minister will be aware that the American Government made available selective aid of $15 billion to their industry. Will he confirm that he is urgently talking to his European Commission counterparts to see what selective state aid either the EU or the British Government might be able to give to our airline industry?

Mr. Jamieson

I assure the hon. Gentleman—we made this point the other day in a similar debate in Westminster Hall—that we are having, have had and are still having active discussions with our European Community partners. He will know that the matter is within European Union competence. We are certainly considering how we can ensure that our industry is not disadvantaged.

We must put the crisis into context. European and charter traffic has been less badly affected—I certainly found that when visiting airports around the country—and the low-cost sector continues to register very strong passenger growth. The wider economic picture is far from gloomy. My right hon. Friend the Chancellor has said that he is "cautiously optimistic" about the future, with UK interest rates and inflation low, and public finances stable. Nevertheless, we appreciate the fact that scheduled long-haul carriers are facing genuine difficulties. I am aware that British Airways has only today announced a 25 per cent. fall in traffic for October compared with the previous year.

The current uncertainties inevitably translate into lost jobs throughout the aviation industry and in the service industries supporting it. Most of the main UK airlines have already announced redundancies. British Airways, for example, has announced that it will shed 7,000 jobs. I know that airlines are making every effort to achieve those cuts by voluntary means, but each lost job can be and will be a personal tragedy affecting families and communities in areas such as my hon. Friend's constituency.

It is important to point out that the aviation industry was, by common consensus. in trouble before the events of 11 September, which was due primarily to the economic downturn and high fuel costs. The European industry in particular has long been overdue for restructuring. For example, it cannot make sense for 17 European carriers to offer scheduled services across the Atlantic, against only seven US carriers. The problems experienced by many European flight carriers stem from long before 11 September, although clearly those events have compounded the problems.

Nevertheless, following the attacks in the United States, the industry has had to face new problems. Initially, US airspace was closed for four days. Then there was the decision by the insurance market to limit its exposure to future terrorist attacks by withdrawing third party war risks cover—a decision that threatened to ground the entire industry. Circumstances dictated that security measures needed to be tightened, and the response of a significant proportion of the travelling public was also predictable—they cancelled their reservations or simply declined to book.

Despite the Government's long-standing policy not to intervene in the aviation market, such exceptional circumstances clearly warranted Government action. The Government took immediate steps to counteract the failure in the insurance market. Within a few days and before the imminent withdrawal of cover had grounded the entire UK fleet, we made available to our airlines and related industry the necessary third party war risks cover. Indeed, so quick off the mark were we and so effective was the remedy that we devised that our lead has been widely followed throughout the world. Although initially for one month, the coverage has recently been extended to 23 November. We shall, of course, reconsider that during our discussions with the airlines, but it might be somewhat premature to extend coverage now in the way suggested by the hon. Member for Cotswold. The situation unfolds further daily and we have to consider our policies on the same basis.

Despite the few deplorable lapses that have been reported in the past few weeks, standards of security in the UK before 11 September were among the highest in the world. During my recent visits to airports, I have seen the extremely high standards of both pre-existing security measures and the enhanced measures implemented since 11 September. Nevertheless, we have enhanced security measures at all UK airports and for airlines leaving this country. In addition, we are carrying out a fundamental review of aviation security to ensure that air travel is as safe from terrorist attacks as we can make it, while at the same time balancing security with our freedom to travel. I am sure my hon. Friend the Member for Hayes and Harlington welcomes BAA's estimate that 150 extra security staff will be needed at Heathrow. I understand that the response to advertisements placed in the local press has been good.

Aid to airlines is controlled by the European Community, which has exclusive competence for monitoring state aid that distorts or threatens to distort competition in so far as it affects trade between member states. The European Commission acted quickly to address the repercussions of the terrorist attacks for the air transport industry. It issued a communication which reiterates that member states must not depart from Community rules on state aid, but sets out how the Commission will interpret the rules in the current situation. The extra costs of security, losses directly attributable to the closure of US airspace and the provision by Governments of insurance cover are identified as areas where state aid would be justifiable. The Government are currently considering whether further aid to UK airlines should be made available, taking those guidelines into account.

On 16 October, my right hon. Friends the Secretary of State for Transport, Local Government and the Regions and the Minister for Transport attended the Transport Council in Brussels. They strongly supported the Commission's view that it would not be in the industry's long-term interests to bail out individual airlines that are, by any objective measure, no longer viable. UK airlines have always performed well when they have been able to compete on fair terms in the marketplace. My right hon. Friends made clear our disapproval of proposals by some member states to distort the market by propping up their flag carriers with inappropriate state aid.

UK Ministers also took the opportunity to promote our views on restructuring the industry. We consider it vital that the repercussions of 11 September act as a spur rather than a brake to airline consolidation, but it is not for Governments to engineer consolidation. That is for the airlines, acting on their own commercial judgment, whereas it is our duty to ensure that the regulatory framework facilitates change. One of the obstacles to intra-European Union airline mergers is the attitude of prospective third-country bilateral partners. Strict adherence to outdated ownership and control restrictions on the part of other countries might seriously impede the consolidation that we in Europe need. Looking to the future, we have a successful base on which to build.

Mr. Clifton-Brown

Does the Minister agree that one of the reasons for the phenomenal growth in the number of air passengers in the past 10 years has been the real-terms decrease in air fares? Will he be vigilant against excessive consolidation in Europe, which might result in competition becoming less intense than it has been in recent years and the fall in air fares being reversed? A real-terms increase in fares would be an additional deterrent to air travel.

Mr. Jamieson

The hon. Gentleman is right to say that air travel costs have fallen in real terms. It is also true that people have more money in their pockets: our economy and, by and large, the economies of other European countries are doing well, so more people are travelling. However, I take the hon. Gentleman's point. We must ensure that there is proper competition in the market.

The UK has a wide range of quality airlines, including a very successful no-frills sector. That is underpinned by some of the most successful airports in the world: Heathrow serves more international passengers than any other airport in the world, with Gatwick sixth on that list. It is impressive to note that travellers to and from the UK account for 25 per cent. of all international air travellers. We want that success story to continue. Some will say that in the current circumstances, it is all a question of survival, not expansion, and that might be true in the short term, but I am confident that the industry is resilient enough to secure future growth.

The Government remain committed to addressing the long-term future of UK aviation. We have a manifesto commitment to publish a new White Paper next year: in it, we intend to set out our plans on aviation and airports for 30 years ahead, and that work continues with energy. Over a 30-year period there are bound to be severe shocks to the industry—the past 30 years has seen its share of such shocks, whether as a result of terrorist action or of increases in the price of oil, but, despite that, world aviation has grown continuously during that period, with declines proving to be but temporary.

Governments around the world will be doing their best to ensure that any pause in economic growth is as small and as short as possible. Our long-term forecasts are based on trends driven largely by growth in national and world GDP, and we are confident that demand for air travel will eventually come back into line with long-term forecasts. Our aim therefore remains to produce a White Paper that provides a framework for the sustainable development of aviation and airports in the UK. It will attempt to balance the social, environmental and economic impacts of the industry while remaining consistent with the principles of sustainable development.

The UK has long been a world leader in aviation, and despite the current difficulties it will remain so. The prognosis for UK aviation is very encouraging, albeit that the current economic difficulties may have wrought permanent changes in the industry. I look to the future with confidence and foresee a stronger European aviation industry, with the UK maintaining its vanguard position.

I am pleased to have been able to set the comments made by my hon. Friend the Member for Hayes and Harlington in a broader context tonight. The Government understand the special difficulties facing his constituency; we understand, too, that trade unions and others will be concerned about job losses in the area. However, I assure him that the Government are doing everything we can in difficult and somewhat unpredictable circumstances to ensure that the problems do not last long, and that the situation does not become permanent. I hope that we will in future be able to have a debate in which we can agree that the fortunes of the people in his constituency and of Heathrow have risen as we expect them to.

Question put and agreed to.

Adjourned accordingly at eighteen minutes past Eight o 'clock.