§ 3.41 p.m.
§ LORD BESWICKMy Lords, with permission, I will now repeat the Statement regarding the British United Airways and the B.O.A.C. proposed takeover to which I referred earlier. It is as follows:
"The proposed purchase of British United Airways by B.O.A.C. results from an initiative by the principal shareholder in B.U.A., the British and Commonwealth Shipping Company. The negotiations took place between a willing seller and a willing buyer.
"B.O.A.C. sought the Board of Trade's approval for this investment. The Board of Trade came to the conclusion that it was acceptable in principle, subject to their being satisfied on a number of financial points.
"The Government's policy remains as set out in their White Paper of last November. This was to welcome a merger of independent airlines that 616 would have strengthened the industry. The Government could not, however, accept as a condition of such a merger the transfer of a significant part of the Air Corporation's routes.
"Following the issue of the White Paper, B.U.A. sought from us a guarantee that such transfers would take place, on the lines of the applications they had already made to the Air Transport Licensing Board to take over by stages all of B.O.A.C.'s African routes. We could not, consistently with the policy in the White Paper, give such a guarantee for this or indeed any substantial transfer.
"In view of the British and Commonwealth Shipping Company's apparent unwillingness to participate in a 'second force' without such a guarantee, and their decision instead to offer B.U.A. for sale to B.O.A.C, there was no ground of policy for the Board of Trade to make any objection of principle.
"It has now been reported in the Press that Caledonian Airways propose to make a competing offer to purchase B.U.A. and have applied to the Air Transport Licensing Board for B.U.A.'s routes to be transferred to them. It is for the shareholders in B.U.A., in the first instance, to consider any such offer and for the A.T.L.B. to consider in the usual way any applications that have been made to it. But I shall of course be glad to consider any points that Caledonian may wish to make to me.
"As far as the proposed purchase by B.O.A.C. is concerned the Government are awaiting further financial information before reaching a decision."
§ THE EARL OF KINNOULLMy Lords, I am sure that the House is grateful to the noble Lord for repeating that Statement although I doubt whether many Members will particularly welcome its contents and the possibly disturbing effect that it may have on civil air transport. I wonder whether the noble Lord could advise us on what ground the Government consider that such a tie-up between B.O.A.C. and B.U.A. will assist their White Paper policy. Secondly, how would it assist, in particular, the principle of competition which both the Edwards 617 Committee and the White Paper agreed was important? Thirdly, how will it assist the viability of a second force? Could the noble Lord also give us an assurance that the decision as to which airline shall operate the licences currently held by B.U.A. will be left to the body set up by Parliament; namely, the A.T.L.B.?
§ LORD BYERSMy Lords, may I ask the noble Lord, before he replies to that question, whether we can read into the Statement that the Government have now given up the idea of creating a second force private enterprise airline in this country? If they have not, is there not a lot to be said, since British Eagle have now gone, for trying to encourage Caledonian Airlines to take over the mantle of B.U.A. rather than fit it into the nationalised system?
§ LORD BESWICKMy Lords, the noble Earl says that he feels that the House will not be able to welcome what I have said. But what I have said is simply a statement of the facts of the situation. The fact that this company went around asking to be taken over, has nothing to do with the Government. I am simply stating the facts: this is what they did. The noble Earl also asked whether this fits in with the White Paper. The answer is, No; it does not. But, again, B.U.A. apparently did not take this into account when they conducted their affairs in the way they did. As to the third question, about the A.T.L.B., I stated in my original remarks that Caledonian have now applied to the A.T.L.B. for B.U.A.'s routes to be transferred to them. This application will be considered in the first instance by the A.T.L.B. and then, if there is any appeal, by the Government.
I was asked by the noble Lord, Lord Byers, whether it would not have been better to encourage Caledonian to take over B.U.A. There is a case, if you are planning the affairs of aviation, for that. But in this situation a private company went in a confidential way to a Government Department, and it would have been a breach of confidence if, following that, the Government Department had begun negotiating with a third party.
§ LORD BYERSMy Lords, I hope the noble Lord will allow me to correct that. I did not suggest that the Government should have done that. What I was asking was, since this has now happened, would 618 it not be better if Caledonian were now encouraged to take over B.U.A. rather than to put B.U.A. in the nationalised sector in which case we have a very thin private field?
§ LORD BESWICKMy Lords, Caledonian Airways now have an opportunity which they have seized; and it is a question of whether the shareholders of B.U.A. and the finacial interests of Caledonian Airways can come to an agreement.
§ LORD GRANVILLE OF EYEMy Lords, is the noble Lord saying in his reply that, whereas the proposed take-over is not quite consistent with the White Paper or with Government policy, the Caledonian offer would be consistent with Government policy and the White Paper? Further, can he say that if B.O.A.C. in fact do take over B.U.A. they will be doing charter and trooping work?
§ LORD BESWICKMy Lords, if the two private companies had come to an agreement to merge, or for one to take over the other, it would have been in accordance with the general proposals set out in the Government White Paper. This is true. I could not quite follow what the noble Lord said about charter work or trooping. Whatever B.U.A. have been doing will of course be the responsibility of any company which takes them over.
§ LORD BALFOUR OF INCHRYEMy Lords, assuming that this merger takes place, is it not clear that its impact must be so great upon civil aviation that many of the conclusions and recommendations of the Edwards Committee must go by the board, and therefore that many of the premises of the Government White Paper must be amended in that the second force becomes a distant shadow and competition on the main domestic services is abolished? Therefore, once this merger has gone forward should not the Government consider issuing a fresh White Paper and certainly look again at their proposed legislation?
§ LORD BESWICKMy Lords, B.U.A. were a very significant part of the aviation scene, but if they were found to be less substantial than was at first thought I do not think it necessarily means that Government policy must be recast.
§ LORD BALFOUR OF INCHRYEMy Lords, does it not alter both the domestic and the foreign basis of the Edwards Committee recommendations?
§ LORD BESWICKMy Lords, it is, I think, a question of emphasis rather than of a change of principle. It may well be that, in consideration of the facts disclosed in this matter, these independent operators were not as well-founded as they appeared to be at the time when the Edwards Committee were making their investigations. Nevertheless, I should have thought that the general principles behind the Edwards Committee's recommendations still stand.
§ LORD NUGENT OF GUILDFORDMy Lords, may I put one further question on this point? Is the noble Lord aware that if B.O.A.C. take over B.U.A. completely, the private sector will be very weak? Is he aware that the private sector has a valuable contribution to make and that this was well demonstrated by the revival of the South American route which B.O.A.C. could not make profitable? Does not the question follow: do the Government really wish to see developed a second force of private airlines, and if so, what will the Government now do, by means of the transfer of routes, to encourage the remaining private airlines and make them a viable effective force?
§ LORD BESWICKMy Lords, I must confess that to some extent I cannot follow the reasoning of noble Lords opposite. They are advocating the virtues of private enterprise, of private companies. They want us to allow these private companies to have more scope for their enterprise. This private company, of their own volition, sought to sell themselves to a public corporation. Is the noble Lord saying that we should tell them they should not do such a thing?
§ LORD NUGENT OF GUILDFORDMy Lords, the noble Lord is not being entirely fair. Is he aware that B.U.A. asked for certain transfers of routes in order to make themselves viable in this very competitive world and that this was the kind of concept that the Edwards Committee visualised? Is the noble Lord aware that if he genuinely wants to see a second force, he really must do something to help it happen?
§ LORD BESWICKMy Lords, I cannot think that the noble Lord, Lord Nugent of Guildford, or any of his friends, had they been in power, would, in advance of any legislation, have given guarantees to B.U.A. for which B.U.A. asked. It would have been quite wrong in the circumstances, irrespective of the merits of whether you should carve off gratutiously part of the Corporation's network. So far as the independent companies are concerned, there are some good, sound, enterprising companies which are making a profit, which are expanding. I hope that they will continue to expand and, given the legislation which the Government are contemplating, will have a better opportunity in the future than they have had in the past.
§ LORD MERRIVALEMy Lords, if B.O.A.C. take over B.U.A., will B.O.A.C. be competing with B.E.A. on routes now operated by both B.E.A. and B.U.A.? For instance, the London-Gibraltar route? If that is not the case, what will be Government policy, or B.O.A.C. policy, in this respect?
§ LORD BESWICKMy Lords, I think that the noble Lord's question is a little too detailed for me to give a satisfactory answer to now. It was contemplated, or it is contemplated, that if the B.O.A.C. take-over goes through, certain of the routes taken over by B.O.A.C. will be made over to B.E.A.
§ LORD GRANVILLE OF EYEMy Lords, I apologise for asking a further question, but are we to understand from my noble friend's Statement that it is intended that if B.O.A.C. take over B.U.A., B.O.A.C. will be able to finance this purchase out of their own resources? Or does it mean that B.O.A.C. will have to come to the Government for assistance?
§ LORD BESWICKMy Lords, I understand that the Corporation could finance this out of their present resources.
§ LORD LINDGRENMy Lords, does this not mean that in fact B.O.A.C. are coming to the aid of the private investors, who, but for the action of B.O.A.C, would have lost the money they invested in the undertaking?
§ LORD DRUMALBYNMy Lords, is it not the case that the Government reserve to themselves the right to look into all kinds of mergers to see whether they are in the national interest? Surely in this case they will consider this merger from that aspect and, if necessary, will arrange that only parts of B.U.A. are taken over, and that a certain amount is hived off in other ways?
§ LORD BESWICKMy Lords, so far as the question of mergers is concerned, taken as an industrial problem there was nothing about this proposed deal which would have contravened any of the principles which the Government follow. In principle, they accepted that this merger was justifiable. But I must say that in the aviation field, where we ought to try to plan the routes properly, responsibility in the first place is with the Air Transport Licensing Board. There are applications now before that Board and I have no doubt that they will be looked into very carefully.
§ THE EARL OF KINNOULLMy Lords, I do not think that the noble Lord gave the assurance about B.U.A. licences for which I asked. I asked whether the licences currently held by B.U.A. will be left to the body set up by Parliament, namely, the A.T.L.B., to decide upon their future? Secondly, would not the noble Lord agree that perhaps the main reason for B.U.A. having discussions with B.O.A.C. in the first place was because they had to plan their future regarding the next generation of aircraft, particularly the jumbo-jet, and they could hardly do that with no assurance of any Government support?
§ LORD BESWICKMy Lords, I cannot give the noble Earl a categorical assurance about each one of these licences. As I have said, they will be looked at by the Air Transport Licensing Board. I am not sure what powers the Board have to revoke; I am not sure whether they could put a limit on a licence. There is a time period for most of the licences and it could well be that the Board will allow them to run out within a particular time span. I cannot therefore give a categorical assurance. All I am saying is that Caledonian now have applications before the A.T.L.B. and these will be considered. As for the noble Earl's second question, which I 622 have almost forgotten now, I think he was asking the same question as the noble Lord, Lord Nugent of Guildford; namely, could an assurance be given to B.U.A., which it would be quite wrong for any Government to give.