HL Deb 17 December 1968 vol 298 cc775-97

6.12 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are aware of the concern now felt at both the short and long term future of the independent airlines, and what action they intend to take beyond just waiting for the Edwards Committee to report next year. The noble Earl said: My Lords, perhaps I should say at the outset, as I believe I shall not have a chance to say it at the end, that I am glad to see there are some other speakers on the list besides the noble Lord, Lord Beswick, and perhaps I should thank them in anticipation of what I hope will be a most interesting short debate.

Perhaps I may say straight away that the reason I have put down this Question tonight is because I believe that over the past year a cloud of uncertainty has been gathering over the heads of the independent airlines in regard to their future role in the industry; and I believe that this uncertainty is proving harmful both to the independent airlines and to the industry generally. This cloud has been somewhat magnified in recent weeks by the sudden and unexpected collapse of two of the independent companies, leaving increased doubts in the minds of many people. I hope very much that tonight the Government will welcome this chance to dispel some of the anxieties and uncertainties that exist and to give a firm assurance that the independent airlines will have an important role to play in the airline industry in the future.

I am sure that the causes of the uncertainty are well know to the Government. In addition to the difficult trading conditions experienced by the airlines, they have suffered, in the last two years in particular, the restriction on travelling, and also the freezing effect that the setting up of the Edwards Committee has had, and will continue to have until the Committee's Report is published, on the long-term planning of the independent companies. The second major cause, I believe is the growing feeling of hopelessness at the present unbalanced system of licensing—a fault which I suggest needs urgent correction if any independent company is to stay in the forefront of the airline industry.

As the House will know, there are today something like 30 independent airlines operating: some large, some small, varying enormously in their contribution and investment in the aviation and airline industries. They range from Strathallan Air Services, with a fleet of one Dove and two Piper aircraft, employing a staff of 12, to B.U.A., with a fleet of three VC 10s, ten BAC 1–11s (and a further eight on order), three Viscounts and employing over 3,000 people. All in all, the independents are at present responsible for the majority of the inclusive tour services but for only 10 per cent. of the scheduled services, the other 90 per cent. being handled by the Air Corporations.

Obviously, the very small companies are not so concerned with either the Edwards Report or the licensing system, but the larger companies are concerned because they have to budget ahead. They have to convince their financial backers of an assured future. B.U.A., for instance, in the 1970s, I am told, all being well can see a capital investment programme of over £100 million, buying in most cases British aircraft. It is with the larger independent companies that I wish to concern myself on this Question, and one of the first things I should like to ask the noble Lord, Lord Beswick, is whether the Government have been in contact with these larger independent companies since the sudden collapse of British Eagle and Transglobe, to satisfy themselves that the holidays of many people already booked on inclusive tours are not in jeopardy. I shall be glad if the noble Lord can also advise us whether the scheduled services which British Eagle operated in the past have all now been taken up by other companies.

One of the primary questions with which the Edwards Committee must be faced while they prepare their Report, and one which is vital to the long-term future of the independents, is the role of both the independents and the two State Corporations, and the relationship between them. The value of the independents in the industry, as I see it—and it is of immense value—is fourfold. In the first place, they offer a vital stimulant of competition to the State Corporations, and there is clear evidence that this has already proved beneficial. Secondly, they can play an important part in the fierce struggle which the British airline industry must face in the future if it is to retain its rightful share of the world market over international routes.

Thirdly, the independents play an important and valuable role as foreign currency earners. For instance, B.U.A. have earned over £5 million on their South American route since B.O.A.C. opted out of it and said it was uneconomical. I am told that B.U.A. are now making substantial profits on this route, with, one may add, the help of British aircraft. When the noble Lord replies perhaps he could tell us what is the Board of Trade's estimate of the foreign currency earnings of the independents over, say, the last three to five years. This would be an interesting piece of information.

The fourth advantage of the independents, as I see it, is that they offer to the British aircraft industry an immense value of orders. Again, I believe that it would be of interest if the noble Lord who is to reply could advise us what figures the Board of Trade have for British aircraft orders placed by the independents over the last five years. It is, I believe, a sizeable sum, and it represents a market that the British aircraft industry cannot afford to lose. The best example of the importance of it is perhaps the BAC 1–11, which was virtually fathered, nurtured and baptised by B.U.A. and which is now proving the most successful aircraft that the British Aircraft Corporation have had since the days of the Viscount.

Having considered the advantages of the independents. I believe that if one then looks at the record of the two State Air Corporations, in comparison with the independents, one sees two clear things. In the first place, the State Air Corporations have in the pas been heavily subsidised—particularly B O.A.C. —and would not for long stand the test of operating as a normal commercial concern. Secondly, they have bean protected by the responsible Minister, the President of the Board of Trade, almost to the extent of "cotton wool" wrapping against competition from any home independents. I am not myself one of those who advocate the de-nationalisation of the State air corporations; I believe that the public and private sectors are complementary. But there are aspects of their record, I suggest, which must be frankly disturbing.

If one takes, first of all, B.O.A.C. one sees that in 1962 they held about 13 per cent. of the scheduled North Atlantic route. This was equal at that time with T.W.A., which held a similar percentage. To-day, B.O.A.C.'s share of that market has dropped to 8 per cent. and T.W.A.'s share has risen to 19 per cent. B.O.A.C. are the only British carrier operating on that route, and they have jealously guarded that fact. While one appreciates their endeavours to show profits, I believe it is the British share of the world market on these international routes which is the prime issue that the Licensing Board and the Appeal Commission should be considering. How can we ensure that British carriers obtain and keep their proper share of the world markets? This, I believe, is the vital question. In view of B.O.A.C.'s drop in their share of the North Atlantic route, it would be interesting to know from the noble Lord, Lord Beswick, what percentage of British travellers now flying to America fly with B.O.A.C. I hope that perhaps the noble Lord will be able to answer that question later.

The other example I should like to quote is the case of the London—Algiers route. I believe I am right in saying that at one time the A.T.L.B. granted to B.U.A. a licence for that route, but with the condition attached to it, "Use it or lose it". B.E.A. appealed against the licence award, presumably on the grounds of wasteful duplication; the appeal was allowed, and B.U.A. lost their licence. B.E.A. were granted a licence, but to this day, for some reason, they have never operated that route. This protectionist attitude, although perhaps understandable to their own interests, leads one to the conclusion that the present licensing system is one of the real causes of the independents' difficulties. It is at present, in my opinion, the stumbling block to their future growth and prosperity. I believe that, unless the licensing system is given an urgent overhaul, time is fast running out and a front-line independent air line will be unable to continue to operate on an economic basis and still be able to reequip itself with the jumbo-jets and European airbuses of the future.

The requirements needed for a healthy and competitive front line independent airline are, I believe, quite clear: first, a better share of frequency of services on the domestic routes; and, secondly, a greater share of the international routes. I do not expect an answer from the Government on this point this evening since obviously it is one of the matters being considered by the Edwards Committee. But I should like an answer from the Government to-day on the second half of the independents' problem; that is, the delay and the freeze that has resulted from the delay in the publication of the Edwards Committee Report.

The noble Lord, Lord Beswick, will not need reminding of the words of the former President of the Board of Trade when he set up the Edwards Committee in July, 1967. On July 26 he said this: Whilst the inquiry must be thorough, it is also important that it should be completed quickly. I hope it will be able to make at any rate a first report, with recommendations, in Spring, 1968. That forecast has gone sadly astray, but in view of the effect this delay is having on the independents I should be obliged if the noble Lord could give us an answer tonight to three questions. What is now the anticipated date for the publication of the Report? How soon do the Government anticipate being able to put into action the recommendations of that Report? Will the Government give an assurance that they will consult the various interested parties in the industry before introducing legislation? I believe that the best service the noble Lord could do for the independents to-night would be to answer those questions, and at the same time give a firm assurance to the independents that they will have an important role to play in the future so long as they meet the strict criteria already applied in public air transport services.

6.25 p.m.


My Lords, considerable anxiety has been expressed on all sides of the House about the financial disasters that have overtaken some independent airlines recently. We on these Benches are extremely sympathetic with all those men and women who have lost their jobs because of these disasters, and we are no less anxious than is the noble Earl, Lord Kinnoull, to know what now may best be done to see that this sort of thing does not happen again. As your Lordships know, the Government have set up a Committee known as the Edwards Committee, which has very wide terms of reference, to examine the economic and financial aspects, together with the prospects of the British civil air transport industry.

I cannot help feeling that as the Edwards Committee is now at work the noble Lord's Question may perhaps be a little out of time. I am sure he would not claim, and I certainly would not claim, to know all the facts and figures and other evidence that will be examined by the Committee and is being examined by the Committee, facts which are complicated, technical and numerous. I am therefore wondering whether the Question and anything that I may say may well be pre-empting what the Committee's findings may be. In these circumstances, I think perhaps it would be wise not to try to delve into a detailed examination of this particular case. The details are enormously complicated and I think it would be wise to stick to a few main generalities. I propose to make one or two remarks on this basis to your Lordships and I hope not to take up too much time.

One of the basic difficulties of the whole situation is the allotment of opportunity, that is, the allotment of routes. Human nature being what it is, it has not been surprising to find in the past that when a route has been pioneered and built up at considerable expense into a route that now generates good traffic there has been a rush to secure this route by a lot of companies. It is quite natural. The position really is that there are too few good routes being chased by too many companies. If your Lordships will permit me to use the expression, I think the 64,000 dollar question is to estimate the amount of traffic this country can get now and in the foreseeable future relative to the number of companies that traffic can support in a continuing viable condition. It is a hideously difficult and complicated problem, and one which the Air Transport Licensing Board has been trying to cope with, not always to the complete satisfaction of all the applicants.

As I understand the noble Earl, Lord Kinnoull, he is convinced that the Air Transport Licensing Board shows bias against the independent operators. In its Seventh Annual Report on the policy of granting licences for operating in parallel on scheduled services, the Board says in effect that if the absolute volume of traffic on a route and equally the rate of growth can be shown as being substantial, then on these two factors an application to operate a service in parallel probably can be regarded as prima facie acceptable. I assume, of course, that everything depends on what is meant by the word "substantial" in relation to costs. I should not have thought that that was evidence of a bias against the independent operators; in fact rather the contrary.

On the subject of policy, the feeling on these Benches is that there is room for an independent company in addition to the Corporations; but except in most exceptional circumstances, we would not like parallel running, and we should certainly not recommend a free-for-all position that could lead only to a general deterioration in standards and general financial misery later on. It could well be that the role of the independent operators in future, commensurate with the national interest, will not be a large one. It may also be possible that at this moment there are a few small companies which, with the present recession of traffic, are finding the going getting harder and harder. It may be that an amalgamation might be the solution here, presenting a greater reserve to enable them to weather these troughs in traffic.

I should like to make a remark about complications arising on international services. As your Lordships know, when you want to fly foreign the route is subject to a bilateral air agreement between the Governments concerned. The basis of this is that both sides should have an equal opportunity of carrying the traffic offering. If one Government chooses to nominate more than one operator on its side of the fence, then those operators have to share the national share of the traffic. For example, supposing you want to run a service to France, if the British Government decide to nominate two operators on the route then they will have to divide up the British 50 per cent.; the French, of course, will hang on to their 50 per cent.

I should like to make a remark on the vexed question of payloads. This is a difficult question, but with the ever-increasing cost of equipment and operation it is, except on exceptional routes, necessary to obtain a high load factor if you are to break even. That is difficult enough with one operator on a route, but with two operators on the route it is twice as hard, and with three it becomes three times as hard. This is something that has to be looked at with great care when one is thinking about parallel operation.

On the question of fares and tariffs, we should all like to have cheap fares; of course we should. We do not want to have to pay any more than is necessary. But a position can be reached in an effort to obtain public popularity so to depress a firm that even with a 100 per cent. load factor that firm cannot break even. In that situation, unless the operator is operating a social "must" service he is faced with three alternatives—he goes out of business, he gives up the route or he "jacks" up the fare.

On the subject of competition a view has been expressed that competition is good for the soul of air transport. Within the United Kingdom it is arguable whether, and to what extent, this is really so. But when you go overseas the foreigners put up fierce and continued competition, without the British having to compete with themselves.

I should like to wind up by saying that I hope that when we get the Report of the Edwards Committee we shall find that all these tremendous problems have been resolved. I am sure that is the wish of your Lordships' House. I would join with the noble Earl, Lord Kinnoull, in thinking that it would be most helpful if the noble Lord who is to reply could give us a date when we may expect this Report to be published. Presumably this will be followed by a White Paper and a debate in your Lordships' House.

6.35 p.m.


My Lords, I wholeheartedly support the noble Earl, Lord Kinnoull, in his Question and his subsequent remarks, and should be grateful if the noble Lord, Lord Beswick, would accept in his reply the fact that the failure of two British indepedent airlines within a few weeks is giving rise to certain concern, and it is felt that Her Majesty's Government should demand that the Edwards Committee make an interim Report. In view of the fact that the British independent airlines are finding it difficult to await the Committee's Report with patience, can the noble Lord give the House an assurance that the Report will be published next March and that Government action on it will not be delayed?

I went to see Caledonian Airways last week, and I should like to quote a statement made by the chairman and managing director who, in a letter to The Times on the fourth of this month, said: I have no doubt whatsoever that the private sector has a continuing and growing part to play in British air transport. I do not share the view of those who seem to think that the whole of the private sector is now in jeopardy because of the failure of British Eagle and Trans-Globe". I accept that as good sound thinking.

Certain criteria must in future be applied to all British airlines providing public air transport services. Such criteria would cover financial capability, managerial competence, operating standards and services to the public in the public interest. This, I understand, was a matter raised in evidence before the Edwards Committee some months ago. The independent airlines and I myself believe that the interests of the industry and the public can best be served by a policy based on the principle of equal opportunity and equal obligation which these criteria would effect. I hope the Committee will give due consideration to this point.

In conclusion, I do not doubt that while awaiting the Edwards Committee Report those airlines which have already satisfied the four criteria I have mentioned can continue to operate soundly and profitably. Before I sit down, I should like to say that those who have the interest of the private sector at heart can surely show this by discouraging idle and sometimes potentially damaging speculation.

6.38 p.m.


My Lords, in rising to support my noble friend Lord Kinnoull, I should like to start by saying how wrong he is in thanking us for following him. Really, one must thank him for putting down this Question and giving us Back-Benchers a chance to make some points and perhaps extract some information from the Government. The matter under debate is now one of great urgency. I suggest that we, the industry, are being put in an impossible position by having to wait this extended time for the Edwards Committee to report. As my noble friend said in his opening remarks, the original idea was that we should have a Report in the spring of 1968. I understand that it is now doubtful whether we shall get a Report even in the spring of 1969.

This uncertainty is of great moment to the independents, and it has been accentuated and aggravated by the Government continuing the £50 travel restriction which they announced last November. At that time, there was a widespread belief in the airlines industry and also among travel agents that the Government would, if not remove the travel restriction at least increase the allowance, thus enabling people to have a second holiday abroad each year. As your Lordships may know, the restriction of £50 on overseas travel is not a restriction on the total value of the holiday, but only on that part of the holiday that is spent in foreign currency; in other words, for the hotel bookings and so on. This means that the V-form amount, as it is called, comes out of the £50 travel restriction.

It is, therefore, true to say that the total allowance of £50, though it may be, and indeed is, sufficient for one holiday a year, is not sufficient for two holidays a year. The independent airlines rely a great deal for their profit—and I emphasise the word "profit" here—on the winter holidays. They are, of course, much smaller in total volume than the summer holidays; nevertheless they do comprise what is essentially the profit in the independent operation. The Government's imposition and continuance of the £50 restriction has certainly taken the profit away from the independent operators.

However, the problems do not arise simply from the uncertainty of waiting for Edwards and the continuance of the £50 travel restriction. I should like just briefly to look at some of the other problems facing the independents. Not all of them are susceptible to Government correction, but at least I should like to put them before your Lordships. First, I should like to talk briefly about the problems of the supply of fuel for independent airlines. The problems the inde- pendents face here are quite different from those faced by the State Corporations. There are two principal suppliers and a third group of suppliers supplying fuel to the independent airlines. First, there are Shell Mex and B.P. Ltd. who, as your Lordships will be aware, are the marketing firm for Shell and B.P. They control, I understand, around 85 per cent. of the outlets. Secondly, there is Esso Petroleum, who control only at out 10 per cent. of the outlets, leaving only 5 per cent. controlled by the remainder of the companies, mostly branches of European concerns.

Fuel uplift by airlines is generally done against what are called carnets, or credit cards, and of late there has grown up a policy—at least between the two principal suppliers, Shell Mex and Esso—to call for enormous deposits before they are willing to issue these carnets. Their point of view is understandable; the failure in the past of various airlines has caused them considerable financial loss, and they seek to guard against it. However, in the monopolistic position they hold they are now in a position to extract from airlines enormous deposies—and here we are talking about tens of thousands of pounds—entirely interest free. I say that that is so as regal-is both the two principal suppliers. There is, I understand, an agreement between the two principal suppliers, Shell Mex and Esso, to apply broadly similar trading terms to all of their customers. In other words, the airlines are not free to go from one supplier to the other in order to obtain better trading terms.

These difficulties are accentuated by the fact that the price of the fuel, once an agreement has been obtained to purchase it, varies very widely from airfield to airfield. For example, for uplifting fuel at London Airport one pays approximately 10d. a gallon for turbine fuel, but if one goes to one of the smaller provincial airports, such as Cardiff or Birmingham, one pays vastly more. Indeed, at the other end of the scale one can pay as much as 1s. 10d. a gallon for turbine fuel: the same product, from the same refinery, being supplied to the same customer, but at a price difference of at least 100 per cent. The reasons given by the suppliers for these variations in price are the relative distance from the refinery and the different quantities of throughput at the different airports. However, these greater fuel costs which, by and large, fall on the independents because it is they who operate from the smaller airports, seem hardly justified by the scale of operation or by the alleged distances from the refinery.

I should now like to come to a point my noble friend Lord Kinnoull went into in some detail, and which really is the crux of the independents' problem, and that is the question of licensing. As your Lordships already know, the independent sector relies very heavily on B-licence operation, as it is called—that is, charter licence operations—for the back-bone of their business, and it is fair to say that hitherto the Air Transport Licensing Board have been pretty liberal with their granting of licence applications of this kind. Indeed, had they not been there would be no independent sector in the air transport industry, because the scheduled service licences are, of course, zealously guarded by B.E.A. in the case of the shorter-haul operations and by B.O.A.C. for the longer-range ones.

In this connection I should like to consider briefly the question of the revocation of the British Eagle Trans-Atlantic B licence. That is the licence they held to operate to Bermuda and the Bahamas, which licence was revoked some two weeks before British Eagle closed down. From the reports we have read in the press we are led to believe that the cancellation of this licence was the direct cause of the breakdown of British Eagle's negotiations for refinancing their operations. Whether the reports we have read are correct or not I cannot say, but if they are correct—and they were widely circulated—then the Air Transport Licensing Board have a serious burden of responsibility to bear in the question of this closure, or rather of this withdrawal of the British Eagle licence.

It is my contention, and I know the contention of many others in the industry, that their acceptance of the B.O.A.C. application to cancel the British Eagle licence was entirely unjustified. If one reads the reasons that have been advanced by the Air Transport Licensing Board for their agreement to revoke the British Eagle licence, one comes to the immediate conclusion—at least I did— that they were meddling in the commercial affairs of B.O.A.C. and British Eagle to an extent that was quite unjustified. How on earth can they be commercial judges of what is best for British Eagle or what is best for B.O.A.C.? They have no commercial experience. They say, in their reasons for their revocation, that British Eagle submitted no evidence to rebut the B.O.A.C. charges. That may indeed have been unfortunate, but to revoke a licence on no evidence seems a strange way of going about their task. What information the President of the Board of Trade had before him when he heard of the B.O.A.C. application to revoke the British Eagle licence in connection with the British Eagle state of affairs I do not know, but the President of the Board of Trade has powers to direct the Air Transport Licensing Board to refuse applications. Why did he not invoke those powers on that occasion?

There are some further points, and really these symptoms were evident in the British Eagle case as well. I mentioned how it was reported that their efforts to raise capital had fallen down when it was heard that the Bahamas licence had been revoked. I suggest, and indeed I know from my own personal experience, that the financial powers in the world are very suspicious of investment in the independent airline sector because of the uncertainty of the licensing position. If we are to secure a more healthy independent sector than we have at present, then new capital is urgently required in all the companies—at least in all the ones on which we have information. That capital will not be forthcoming unless a firmer and more exact licensing policy is publicly declared and seen to be viable.

In that connection there is a strong argument for the independents to have, as various noble Lords have suggested, a larger slice of the cake, particularly on some of the domestic scheduled services. B.O.A.C. and B.E.A. have access to public funds, not only for capital purposes, which one can understand, but for revenue deficit purposes. One remembers that B.O.A.C. had written off in one fell swoop all their deficit for the last 10 or 11 years; and one also remembers, as the noble Lord, Lord Beswick, told us a few days ago, that B.E.A. had been granted £25 million or more as allowances for operating the Trident 3. It seems hardly fair, if these sums are so readily "dished out", that the State Corporations should now be allowed also to "muscle in" on what hitherto has been the prerogative of the independents; namely, the B-licence service. Recently B.E.A. have been applying for, and getting, licences to operate inclusive tours, which ought not to be any concern of theirs.

The two important points which we must consider are, first, the uncertainty of the matter while we are awaiting the report of the Edwards Committee (and I would ask whether the Government would urge the Edwards Committee to expedite its main report and, if possible, to produce an interim report); and secondly, whether the Government will give an undertaking or some indication as to their plans with regard to the £50 travel restriction.

6.52 p.m.


My Lords, I agree with the tribute which the noble Lord, Lord Trefgarne, paid to the noble Earl, Lord Kinnoull, for asking this Question on civil aviation. Civil aviation is indebted to the noble Earl for the way in which he ventilates the problems in your Lordships' House, as is right, in seeking fair play for the independent airlines. We all want to see fair play for the independent airlines, and we very much regret what has happened quite recently to a fairly large airline. Nevertheless, the noble Earl is asking for a Government statement, a statement which must depend on the Report of the Edwards Committee.

The problem of the independent airlines, and of anybody else who attempts to survive and struggle on against terrific competition, is a problem of capital and reserves. It is impossible to try to run an airline in competition, both in the United Kingdom and overseas, unless you have adequate capital and reserves. Airlines have to deal with setbacks and the problems of devaluation, and if they do not have the reserves, as have the large corporations such as B.E.A. and B.O.A.C. and all the great international airlines, then they simply cannot weather the storm. This is the story of what has happened recently. This is a "big boys league"; it is not just a matter of finding a few people who are air-minded, buying aircraft on hire purchase, to using sealing wax and string and trying to make a go of it. It is just not that sort of situation any longer. All over the world to-day the tendency is for air corporations to become bigger and to consolidate, and even in our time we may see an increasing tendency towards international rather than national airlines.

I am sure that the Government wish to give every possible help and fair play to the independents, but if they wish to set about the business of scheduled air services then, if there is one industry in this country which ought to merge, it is the independent airlines. If they can get together and make a fairly large corporation, as we did in the old days with British Airways, then they will get the capital behind them. I am sure that we all want to see them given every opportunity, but we have to wait for the Edwards Report. In their own interests they should get together and consolidate their capital and reserves.

6.57 p.m.


My Lords, I have had an interest in air transport long enough to recognise an aviation enthusiast when I see one; and I immediately put both the noble Earl, Lord Kinnoull, and the noble Lord, Lord Trefgarne, in that category. The noble Earl, Lord Amherst, and my noble friend Lord Granville of Eye have both had considerable practical experience in these matters and I was glad to have their observations. My noble friend Lord Buckinghamshire comes from a corner of the country which has a very special interest in aviation problems. I suppose that Southend Airport, and the companies which have operated from there, can be looked upon in many ways as pioneers, and I know the great interest in aviation taken by my noble friend. I shall endeavour to reply to what has been said in the same spirit of interested enthusiasm for the future of British air transport; and if I do not answer all the questions which have been posed this evening, I hope it will be accepted that I appreciate the spirit in which they have been put.

The questions which have been put to me have been set against the regrettable failure of two operating companies, and I have been asked by the noble Earl whether the Government have knowledge of other likely casualties. First of all, I should like to say—and I say it more strongly to some than to others—that the worst service that could be rendered to this hard-working and imaginative sector of the air transport industry would be to cast doubt upon its viability. Some have added to the atmosphere of doubt which developed after the British Eagle and Transglobe failures. On the other hand, I notice that the chairman and managing director of Caledonian Airways (my noble friend quoted part of what he said) was moved to go on public record as saying: I do not share the view of those who seem to think that the whole of the private sector is now in jeopardy. That seems to me a much more robust and relevant attitude to adopt.

I was asked whether any inquiries had been made by the Board of Trade. They have of course been made, and the inquiries suggest that the view taken by the chairman of Caledonian Airways is one which can be applied to the private sector of this industry as a whole. We have no evidence at all to suggest that any other independent airline is about to collapse. Indeed, despite the pessimism of the noble Lord, Lord Trefgarne, the figures for package holidays next year are well up on the figures this time last year, and the situation of some of the independent airlines has been greatly eased as a result of the special winter tariff for inclusive tours, which seems to have resulted in a 2½fold increase in winter traffic. In the present economic situation I do not think that one should come along here and demand the removal of this temporary travel allowance. Two holidays a year is fine, but it is not a lot to ask if, in the present situation, some have to forgo two foreign holidays a year.


My Lords, I do not want to take the noble Lord up on that point, but I would refer to what he said about the Board of Trade having no information about further collapses. There is a strong rumour that Transglobe is to be refloated. Could the noble Lord tell us whether he has any information to give us as to whether they have applied for their licences to be restored?


My Lords, I rather fancy that the noble Lord is mistaken. He is probably confusing the companies, but I would rather not go into that kind of detail. I would say this to him. An industry, like a country, can talk itself into trouble. Neither in the case of this industry nor in the case of this country should we dabble too much in defeatism. I do not think that is called for. Having said that, I recognise at once that the fundamental inquiry now being undertaken by Sir Ronald Edwards and his Committee is bound to create an unsettled atmosphere; or probably it would be fairer and more accurate to say that the atmosphere of uncertainty which led to the setting up of the Committee of Inquiry cannot be dispelled until the Committee's Report is received and the Government's attitude is known.

This fact has led some interested people—all from the best of motives, I am sure—to demand that the Committee's findings should be expedited, or that some interim Report should be issued. I absolutely agree with what was said by the noble Earl, Lord Amherst; and, again, I could go to the Caledonian Company for support, because I noticed that in their news-sheet, which my noble and learned friend on the Woolsack was glancing at recently, they said: Nothing could be more harmful for the airline industry as a whole than for Professor Sir Ronald Edwards and his colleagues to be stampeded into producing a hasty stop-gap Report". I would go along with that absolutely.

The noble Earl said that in the initial statement setting up the Committee the then President of the Board of Trade suggested that he would ask for an interim Report. But as a matter of fact, in a further Answer to a Written Question in the Commons on February 7 of this year the Minister of State at the Board of Trade said: My right hon. Friend has decided not to press the Committee for an interim report. The Committee are pursuing their very large task with energy and thoroughness and he considered that it will be more satisfactory to await a fully considered and final report."—[OFFICIAL REPORT, Commons, 7/2/68, c. 135.] In answer to the question which was put to me, I may say that it is expected that the Report will be received by the end of March although, as the present Minister of State at the Board of Trade said on a later occasion in the Commons: We have discussed with Sir Ronald Edwards whether there would be any possibility of advancing this date". I do not think it makes much difference whether or not it comes along a week or two earlier. If it is possible to advance it by a week or two that will be done. The intention is that the Government will state their attitude to the Report shortly afterwards, and by that I mean certainly within a matter of weeks. So I would make two points. First, I think it would be wrong to ask for an interim Report; and, secondly, it would be equally wrong for the Government to delay making their attitude known once the Report has been received and published, as it will be practically straightaway after the President receives it.

The noble Earl asked me one or two questions which really expect me to anticipate the Report's recommendations, and I think most noble Lords will understand why I cannot be drawn upon that. However, there are two points on which I might comment. First, there was the suggestion that we were placing too much responsibility upon one man and a part-time Committee, if we want them to find the answers to all the problems of this fast-growing industry. I doubt whether any committee could have done much more to get to the truth of things, and certainly few committees could have been helped more by outside opinions and advice. I do not think the noble Earl, Lord Amherst, need have any fears about appearing to pre-empt the recommendations, for what he has said will, I am sure, be considered and welcomed. Of course, no one expects the Committee to dogmatise about every route or every company, but I shall be surprised if they do not present a pretty fair picture of the outlines of the industry as a whole. And while not giving all the answers, I shall again be surprised if the recommendations have nothing to say about procedures or machinery for providing answers. In other words, what is needed here is not a blueprint for a static industry, but a recipe for a dynamic and growing industry.

I have been asked some specific questions. The noble Earl asked me about the foreign currency earnings. I cannot answer that question without having time to dig into it. In any case, I do not really think it is important in this matter. Clearly, whatever they earn is welcome. Equally clearly, it will not be as great an amount of foreign currency as that earned by the two Corporations. If they earn more then that is fine, but I do not think that that point alone should settle the issue one way or the other.


My Lords, I think it is surely of great importance, because it would be interesting to see whether the figures have been rising or falling. This is one of the points which should be considered.


It may well be, my Lords, and I will see if I can get the figures. But if, as the noble Earl said, their activities have been restricted, if the amount of foreign currency earnings is also low in comparison with the Corporations', it is not necessarily e good argument to say that this is something which should be held against the private sector. It is simply that they have not as yet had the opportunities. That is the only point I try to make.

The noble Earl asked me about the comparative purchases of British aircraft by the private and public sectors. He was kind enough to give me notice of this and I have tried to get him figures. It depends partly upon definitions, whether one includes spares, and precisely what dates one chooses. Over the past four years, orders placed by the independent companies for British aircraft amount to about £70 million. Over the same period the Corporations—I might add that this really means B.E.A. —have ordered around £150 million worth of British aircraft. But, again, if I was the noble Earl I would not draw any extreme conclusions from these figures. One can take another period which would show the Corporations in an even better light, and although it is a fact that for the large, long-range aircraft B.O.A.C. have been looking to the United States in recent years, nevertheless over the postwar years as a whole it would be quite wrong to make out that the Corporations have not supported the British aircraft industry. Moreover, I would add that it does not help the kind of objective overall assessment that we need if we try to make out that one sector is better than the other. I am certainly not going to respond to the provocation, if I may so describe it, of the noble Lord, Lord Trefgarne, and enter at this point of time into a dialogue about the respective merits of the private and public sectors. I thought none of us wanted that sort of matter to be argued out in this kind of Chamber. This is the kind of thing which should be looked at professionally, coolly and objectively by the Edwards Committee, and that is precisely what they are doing.

I was asked what has happened to the routes previously operated by British Eagle. B.E.A. are now operating the London-Tunis service, and Cambrian Airways have been given exemption from the normal licensing procedures and are now operating the London/Liverpool, London/Chester and Liverpool/Glasgow routes. Similarly, B.U.A. are operating the London/Glasgow service. All these services, together with the remainder of the former Eagle licences, for which there are several applicants, come up for reconsideration by the A.T.L.B. in January.

The noble Earl asked me about the London/Algeria service. The facts are as he himself has stated, although there are some additional relevant facts. The initial application was made in 1966 and the appeals carried the issue over into 1967. During this period the conditions in Algeria have changed somewhat, and in B.E.A's. commercial judgment now is not the right time to start the service. If B.U.A. have a different commercial judgment, if they think that B.E.A. are being too pessimistic about this, then of course it is perfectly open to them to renew their application. The fact that they have not done so rather suggests that they are inclined to agree with the line taken by B.E.A.

I was also asked by the noble Earl about the percentage which B.O.A.C. have of the transatlantic traffic. This, I know, is a good—I will not say debating point, but a very interesting point to make. It is quite true that the percentage of traffic which B.O.A.C. now secure on the Atlantic has gone down. The Corporation would make out that there is no point in putting on additional capacity and getting additional traffic if it is not profitable traffic. On the other hand, their purchases of the new large aircraft—the super VC 10s, the Boeing 707s, and the new 747s—will ensure that they do have adequate capacity, and one would expect them not only to hold on their present percentage but to increase it.

The noble Lord, Lord Trefgarne, asked me about fuel supplies. I am bound to say that I agree with him that it is understandable that the oil companies are rather careful now before they grant extended credits. As I understand the position, they have some very sophisticated arrangements at various airports with different companies. It is not for me here to go into the commercial agreements which these commercial companies have, but if the noble Lord thinks there is here an element of monopoly which ought to be looked at, then I think it ought to be considered separately. He asked me, too, about the revocation of the Bahamas licence. Again, I do not believe it would be helpful, either to British Eagle or to a general consideration of the problem, to go into all the details of that Bahama service. It is sufficient to say that it was not that revocation that was the cause of British Eagle's financial difficulties.


My Lords, I wonder whether the noble Lord would allow me to interrupt him. I did not actually say that it was the cause of the financial difficulties: it was the cause of the breakdown of the negotiations for recapitalising British Eagle.


My Lords, if the noble Lord wants me to go into details, it was the fact that negotiations were going on about renewing advances from a certain finance corporation when they read in a newspaper information which they expected they might have had from the company. It was at that point that they went a little more carefully into the whole business. But, as I say, I honestly do not believe it advances this consideration very far if we go into that kind of detail.

I was asked whether I would give some assurance to the independent companies about the future. To do this obviously comes near to anticipating the Edwards Committee findings. Nor do I think it would be helpful to individual companies to hazard guesses about those findings. I content myself, in response to the questions that were put to me, by repeating the phrase used by Sir Anthony Milward when he said: We are likely to have a mixed economy in the air transport industry. I would forecast (this is my view, not Sir Anthony's) a place in that economy for an enterprising, adequately capitalised and well-managed company. With that, I join in the general thanks that have been offered to the noble Earl for introducing this discussion.