HL Deb 04 December 1956 vol 200 cc752-63

4.26 p.m.

Order of the Day for the Second Reading read.

THE EARL OF SELKIRK

My Lords, the purpose of this Bill is to extend the powers of the two Airways Corporations to borrow, from the existing limits which were set up under the Act of 1953. This is, in fact, the third time, since the Civil Aviation Act, 1946, that Parliament has been asked to authorise an increase in the capital facilities of B.O.A.C. And the limits have been increased from £50 million in 1946, 60 million in 1949, when it took over the authorised capital of B.S.A.A., to £80 million in 1953, and it is now proposed to raise this figure to £160 million. It is the second time that the British European Airways limit will have been increased, from £20 million in 1946 to £35 million in 1953, to the figure of £60 million proposed in this Bill.

The reason why this is necessary is twofold. First, the last ten years have been a period during which air travel has expanded very rapidly, and we have every reason to believe that expansion will continue for some years to come. To meet expansion, and to replace aircraft as they become obsolescent, practically the whole fleets of both B.O.A.C. and B.E.A. wll1 be replaced by 1962–63. Of rather over fifty aircraft, which B.O.A.C. are operating to-day, it is intended that all will be replaced by nearly half as many aircraft again, bigger, faster and more expensive. The position is very much the same with B.E.A., though the replacement may not be quite so complete, as they have already partly re-equipped themselves with more modern aircraft.

Secondly, the two Corporations will have not only more aircraft to do their work, but considerably more expensive aircraft. And, indeed, it is probably true to say that aircraft on similar routes will, over a period of fifteen years, cost anything from three to four times as much as they did. For instance, Boeing 707 will cost about five times as much as the present aircraft we have flying the Atlantic —the Boeing Stratocruisers.

This is, of course, strictly an enabling Bill, by which Parliament authorises the increase of capital of both the Corporations. The Bill, however, does riot of itself permit the Corporations to use the powers except with the consent of the Treasury. That means, in effect, that the amount or, cash to be advanced to the Corporations will be a matter of agreement yearly 'between the Treasury and the Corporations themselves. The House will also notice subsection (2) of Clause I which enables B.O.A.C., should they so desire, to borrow either from the International Bank of Reconstruction and Development, or from the Export-Import Bank of Washington. This is an enabling power which may be necessary and the Corporations may wish to use, particularly in the purchase of Boeing 707 aircraft, the initial delivery of which they hope will commence before the end of 1959.

This is a considerable expansion of borrowing powers, and I feel I ought to give some short explanation of how it is made up. So far as B.O.A.C. are concerned, expenditure during the next five years on aircraft which have been, or will soon be, ordered, amounts to about £127 million. if you add to this figure £10 million to £15 million for other capital expenditure, it gives a figure of £140 million in five years. The present borrowings amount to £60 million, which gives a total of £200 million. After allowing for sums raised internally, B.O.A.C. look like requiring a total borrowing power of about £160 million. This leaves a margin which may be necessary for contingencies and the purchase of additional DH.118s. As I have stated, details of these borrowings will require Treasury consent.

B.E.A. have ordered, or have an option on, aircraft amounting to £52 million in value. Allowing £13 million for additional capital expenditure, it brings B.E.A.'s additional requirements to £65 million. Present borrowing are £16 million, showing a total requirement of £81 million. After allowing £25 million for sums raised internally, it gives a total requirement of £55 million against the figure of £60 million shown in the Bill. That margin has been deliberately left, and, indeed, envisages the possibility that B.E.A. might require jet aircraft, if they can find aircraft to suit their requirements, and also helicopters.

This is a big step, and by agreement with these measures I suggest that Parliament will be showing two things. They will be showing, first, the confidence they have in the Corporations; and, secondly, the importance which they Attach to the work which is being carried out. Although these aircraft are much more expensive, their operating cost should be substantially lower, and accordingly it will make it possible for airlines to offer reduced fares and thereby to reach a wider market. It is now ten years since the Act of 1946 was passed Both Corporations have ceased to receive any subsidy, and last year they operated with a profit after covering all expenses, including that on capital. Although we cannot assume that in this highly competitive business they will necessarily make a profit every year, we can take encouragement from this result and offer our warmest congratulations to all those who have played their part in achieving it. But, having said that, I do not wish to be taken as saying that we are satisfied with the percentage of world traffic which the Corporations are carrying. We are not. We believe that it should be higher, and the steps which we are now taking are intended to have material results in achieving this objective. I beg to move.

Moved, That the Bill be now read 2a. — (The Earl of Selkirk.)

4.34 p.m.

LORD OGMORE

My Lords, I rise to give a welcome to the Bill. Its provisions are obviously needed, first, because owing to inflation the ceiling has had to be raised —through the years money buys less and less; and secondly, because, as the noble Earl has said, new aircraft will be needed soon by the Corporations, and aircraft are becoming ever more elaborate and ever more expensive. Indeed, in a few years' time, when the large supersonic transport aircraft are ordered, the figures will go up astronomically, and I can quite see that the noble Earl, or his successor, whoever may be in office at that time, will be coming to this House for a much larger increase than the present one.

The third reason for this Bill is that we have to buy aircraft from the dollar areas. I particularly commend this aspect of the Bill. The noble Earl will remember, even if the rest of your Lordships do not, that a few months ago we had a debate in this House on a statement by the Minister of Transport and Civil Aviation, in which he laid down the maxim that the air Corporations should "buy British and fly British." I am glad that he now realises that, to be competitive, the airlines must buy the best machines and the most suitable machines for their purposes, wherever those machines are made.

There is no nationalism in the air —and that is a very good thing, because if we did have the "Buy British" maxim, then others might be tempted not to buy machines from us. Only this morning there is a report in the Press that Lufthansa, the German airline, are buying seven to nine Vickers' Viscounts for delivery in 1958, in addition to the many Viscounts that have been bought by other airlines in Canada, America and on the Continent. We have recently seen that Rolls Royce have received an order for 2,500 turbo-prop engines, most of which will be going abroad, a large number to the United States and Canada. Only to-day in the Press there is an item of news that North East Airlines, an American Company, are buying five Britannias, to cost more than £6 million, for delivery next autumn, and that B.O.A.C. have released some of their Britannias for the purpose. This shows that it is ridiculous for us, of all people, to talk about nationalism in the air.

This virtual doubling of the borrowing powers and the Treasury guarantee— upon which, unless I misheard him, I did not hear the noble Earl say very much —should lead us to ask serious questions in this House. We are entitled to be told where it is expected that the airlines are going in the next few years, with the money made available to them and with the Treasury guarantee. Where is the British aircraft industry going? At the present moment hardly any airlines in the world make a profit, when overheads, contingencies, replacement of capital and so on, are taken into account, even on the present capital structure of the airlines. What is the future prospect for repayment of these loans? I think we ought to have some indication of how the debtors expect to repay the amounts they are now asking leave to borrow.

I think it is fair to say, as the noble Earl has said, that there is a prospect of considerable expansion in the air in the next few years, and the recent unfortunate situation in Suez and Egypt has not in any way lessened the prospects for aircraft, as regards both freight and passengers. In fact, it is true to say, I think, that the blocking of the Suez Canal, and the difficulties connected with it, will presumably be experienced for some time to come, and will have a considerable effect upon aircraft, passenger and freight markets. Moreover, freight, in any case, is expected to increase by about 60 per cent. over the next five years. It seems to me that there are limitless opportunities for the air Corporations, for both freight and passengers, if they can get one thing right —that is, price. There is an enormous potential market for air travel if it is brought within the scope of people who desire to use it —that is, the ordinary man and the ordinary woman. In the air, so far as the passengers are concerned, we are to some extent in the same position as the motoring industry was before Henry Ford put his T.1. model on the roads. The aeroplane is still the vehicle of the very well to do. It has not as yet touched the mass of the population and for one reason and one reason only— the price.

I would ask the noble Earl this question, because it affects very much the Corporations' ability to repay the amounts they will borrow: are the airlines looking at the problem from this point of view? Are they looking at the service they provide as a product, like any other commercial product? Here is a vast untouched market. Here is a product which is required. We can sell this product in the market providing we get the price down. It is a simple matter. The noble Lord. Lord Macpherson of Drumochter, has, no doubt, often faced this problem in his business, and many others of your Lordships have also faced it, and have solved it. Successful businesses have been able to get down the price of the product so that the people who desire it can buy it. That, simply, is one of the important problems of the aircraft industry, as I see it. I am not sure that they are solving it because I am not sure that they really see themselves as selling a product. Air travel is a new thing, arid they do not realise that it is now, to a large extent, on the same basis as the business of a bus company. You have certain services, you want to sell the seats for those services and you must get down to it and make the services available to the people who require them.

This leads me to the further question: are the Corporations developing the right kind of machines for this traffic? We has e heard from the noble Earl about the vast expense of the new machines —I think he said their cost is seven times as great.

THE EARL OF SELKIRK

Five times.

LORD OGMORE

Five to seven times the cost of the present machines, although those machines will, in fact, carry only double the weight, and presumably they will not carry double the passengers.

THE EARL ON SELKIRK

But they will go faster.

LORD OGMORE

As regards this "fast" business, I am not sure that the airlines—if this is the view of the airlines —are not attaching too much consideration to speed. After all, when we get up to a speed of several hundred miles an hour, it really does not matter to anyone whether he is going fifty miles an hour faster or not. That is my view. But the expense entailed in the effort required to enable him to go 50 or 100 miles per hour faster is enormous. It is the same in regard to sea travel. We all know that if you push up the speed of a ship by ten knots, it means a fantastic extra expense. Similarly, if you expect the aircraft to go 10,000 ft. or 20,000 ft. higher and 200 miles an hour or even 100 miles an hour faster, then there is an enormous increase in cost. I have wondered for some considerable time about that. The interjection of the noble Earl shows what is being thought in those circles. I am rather worried whether they are not going for ever more expensive, faster, higher climbing and higher cruising aircraft, and, by so doing, are making the cost of the service so ex pensive that hardly anybody, unless he is supported by business, can afford to take advantage of it. I have just been to Lagos in West Africa. I think the return fare was £240. That is a considerable sum, and the fares for other places of that sort of distance away are similar. With present-clay taxation and the difficulty of saving any money at all, it means that, unless you are going out on business, as, indeed, I was, it is practically impossible to go by air to various parts of the world, however much one wishes to do so.

There is one further point. Even if we have the money for these aircraft —the dollars which are going to be borrowed from the Export Bank, guaranteed by the Treasury, and the money which presumably wilt come out of sterling assets —will it really be of any use if the Corporations cannot get the pilots? I was rather perturbed to see in The Times to-day an article from the aeronautical correspondent, to this effect: Britain is faced with a serious shortage of civil air transport pilots. British European Airways need 30 for immediate training in readiness for the next summer season British Overseas Airways require 150 over the next, two years as well as navigators and a limited number al' engineer officers. It is estimated that over the next three years the total requirement for British air transport, including the independent companies, is approximately 250 pilots. Having `combed' the United Kingdom thoroughly, both Corporations are now having to seek recruits in the Dominions. B.E.A. have been advertising for pilots in Canada, Australia, and New Zealand.… After a year's intensive advertising campaign in Britain, B.O.A.C. have now reached the stage at which the response is negligible, and se they are advertising in Australia. The corporation's additional pilot requirement is equivalent to one-fifth of their existing staff of 748 pilots, of whom 45 are also navigators. A B.O.A.C. spokesman told your Correspondent: We really need as many pilots as we can get.' To some extent the present shortage of civil transport pilots is a consequence of the fall in the number of men leaving the R.A.F. and Fleet Air Arm. That is rather a disturbing position, and I am wondering whether the industry —it is not only the Corporations, of course, because the charter companies are also concerned —have not really fallen down in making the necessary provision for the supply of pilots, especially when they must have known that the supply of pilots from the R.A.F. was going to dry up with the virtual coming to an end of the short service commission or, at all events, with far fewer men taking up the short service commission. That is one point upon which I think much will depend: much will depend upon whether the airlines are able to use the money they arc now going to borrow, in the best possible way. I would ask the noble Earl to give us some indication whether, in fact, a really thorough campaign of recruitment is being carried on by the air Corporations. I should have thought that it was a matter for the industry as a whole rather than for the air Corporations, because the charter companies will need pilots just as much as will the air Corporations. The noble Earl said a word about helicopters and about the spending of some of the money by B.E.A. on helicopters.

THE EARL OF SELKIRK

That is provisional.

LORD OGMORE

So far as civil aviation is concerned, I have felt that the helicopter position has been disappointing. In a country like this, one would have expected helicopters to be developed to a much greater extent than they have been. We have a dense population. For that reason we have airports at some distance from the towns, so that often it is quicker to go by train than to go out to an airport, take an aircraft and then land at the outskirts of the town to which you are going. At first sight—I must say that some years ago it was my first sight —the helicopter would seem to be particularly suitable for this country, but for some reason it has never developed. We hear what a great help helicopters have been in carrying men back from the battlefield in all theatres of war, particularly recently in Suez. Wounded men were taken by helicopter straight back and in about twenty minutes were in hospital in the fleet carrier outside. In military and naval operations the helicopter is being used more and more, with tremendous effect, with a great saving of life and so on; yet in civil life we hardly ever see the helicopter at all. There used to be one that occasionally buzzed over, or near, our Chamber on its way to the South Bank, but even that one, for some reason, possibly because of objections on the part of some of your Lordships, seems to have disappeared; and to-day we hardly ever hear or see helicopters at all. Perhaps the noble Earl can give us an indication of what has happened to them. With those comments, I support this Bill and commend it to your Lordships.

LORD FARINGDON

My Lords, may I ask the noble Earl a question? I was a little puzzled by one phrase that he used. He said that this was an enabling Bill, and that all expenditure by the Corporations would have to be authorised annually by the Treasury. Surely that cannot be correct. Surely, the Corporations' policy must be stretched over a much longer period than annually? Must not the Treasury authorise an expenditure for a longer period in the future than merely a period of one year?

4.52 p.m.

THE EARL OF SELKIRK

My Lords, I should like to thank those noble Lords for what they have said. May I answer the noble Lord, Lord Faringdon, shortly? The programme is agreed over a much longer period. I can give the noble Lord the details of it broadly, but this is a matter which has recently, under the Finance Act, been brought under rather closer Treasury control, with a view to ensuring that, if and when the Corporations wish to issue stock, they do so at times which are convenient to the Treasury, bearing in mind the whole situation in the money market. I think the noble Lord may rest assured that it would be impossible to do this other than annually.

The noble Lord, Lord Ogmore, has dealt with a number of subjects, and with a great deal of what he said I am in agreement. I wonder whether he would mind if I leave the subject of pilots until our debate next week. I have not looked at that matter recently, and I would rather speak more authoritatively than I can at the moment. Perhaps I may do the same with the question of helicopters. I myself recently, when I was in Korea, went up in a helicopter belonging to the American Army, and I was greatly impressed with the facilities which it presented there.

I agree with the noble Lord that the Corporations must have the best aircraft if they arc to compete effectively in world conditions —I do not think the importance of that can be over estimated. I entirely agree with him there. But I do not think the noble Lord. in saying that, meant to say that we were buying nothing but American aircraft.

LORD OGMORE

No.

THE EARL OF SELKIRK

I thought not, although the noble Lord did put some emphasis on that matter. But he knows very well, if I may just repeat it, that the whole of B.E.A. is equipped, and will be equipped, with British aircraft; and of the future purchases of B.O.A.C. something like 80 per cent. will be British aircraft. With all its difficulties. and occasional failures, the British aircraft industry is still producing a large number of successful aircraft.

LORD OGMORE

The noble Earl will remember the debate we had not long ago. I said then, and I repeat, that the airlines mast be able to buy the best aircraft and the most suitable for their purpose. wherever they are made. If they are made here, so much the better

THE EARL OF SELKIRK

My Lords, I feel that is undoubtedly the case. I also find myself in agreement with the noble Lord in that respect.

He also asked a question about the commercial airlines not having enough commercial sense. I have asked myself that question, and I am never entirely satisfied what is the right answer. either here or elsewhere. We must all remember that, within certain limits, the inter- national airlines of the world, not only those here but all airlines, are in a slightly privileged position, became nearly all countries regard international airlines as privileged organisations to some extent. I think that is a fairly world-wide basis. It may he that they do not have enough commercial sense to seek art new traffic. At the same time, it is fair to say that a great deal has been done in this respect. There is the introduction of tourist traffic. which I am told will be carried quite a bit further in a year or two, particularly on the Atlantic route. I do not think it is true to say that aviation to-day is the perquisite of the well-to-do. At present a great deal of immigration, and movement of all sorts, is carried out, not at a high standard of service but at relatively low fares. I agree that these companies should be commercial in their outlook, but I certainly should not leave the impression that the standard set by the two Corporations in approaching their work is any less commercial than that of any ether country.

I never can find myself in complete agreement with the noble Lord on the subject of speed. In my opinion, speed is a fundamental advantage in flying. It is not just a question of travelling 100 miles faster or slower: if you ask a passenger whether he would like to take two hours or six hours to get to his destination, such is the lethargy of human beings that almost all of us would say six hours. That, I am afraid, is true of everything. But when it comes to flying the Atlantic, we shall be reducing our passage time between New York and London, when the new aircraft come into operation in 1960–61, from between fourteen and eighteen hours to about seven to nine hours, and that means to gay that one aircraft can make exactly twice as many journeys as an aircraft at the present time. That is an enormous economic advantage. It means, in fact, that the aircraft can do much more work than is possible at present. I have not gone in great detail into the calculation of increased traffic, but we believe that there will be increased traffic, judging both by the development in recent years and by the prospects for future years, and it is with that in mind that we think that the proposals in this Bill are necessary. I am grateful to the noble Lord opposite for the welcome which he has given to the Bill.

On Question, Bill read 2a, and committed to a Committee of the. Whole House.