§ 9.7 p.m.
§ BARONESS BURTON OF COVENTRY rose to ask Her Majesty's Government when and how they intend to correct the fiasco of the North Atlantic fare structure in the interests of both British travellers and British airlines; and what support they are receiving from other European countries. The noble Baroness said: My Lords, I am sure all of us who have waited for so long will be indebted to the noble Earl, Lord Ferrers, for the speed with which he moved those two Orders. This Unstarred Question is non-Party—indeed, I hope it is all-Party and none. It was essential that we put it down for to-day, both in the interests of British travellers and of British airlines. I happen to be the catalyst. As the House knows, I have been pursuing this matter of air fares on the North Atlantic route for some time. Perhaps I might add that it is not a route that I have been able to use myself, although I hope to do so, in common with many others, should we succeed in bringing down the fares.
§ Each of us speaking to-night—and many others in your Lordships' House—has been caused anxiety by replies we have received from Ministers. On Thursday last, March 1, I asked the noble Lord, Lord Drumalbyn, if there was any reason why, if the American airlines cannot fill their planes, we should not be allowed to fill ours. The only reason he could give me was the Bermuda Agreement, whereupon the noble Lord, Lord Reigate, asked if we had given notice to cancel it. The answer was, No. My Lords, that is not good enough. I think our airlines have been treated disgracefully. The passengers, the travelling public, have been ignored. I put the passengers second, because if the airlines do not flourish the passengers cannot expect cheap fares.
It seems to me incredible that if Pan Am cannot pay its way our own airlines should be prevented from paying theirs—
and at a profit. Is there any noble Lord who believes—indeed, does the Minister himself believe—that were our own scheduled lines in difficulties and the American ones prospering, the Americans would take any notice of our protests about fares? Of course they would not! Again, last Thursday, in reply to the noble Earl, Lord Onslow, the Minister said, and I quote:
It is not a question of air fares being dictated."—(OFFICIAL REPORT, 1/3/13; col. 753.]
It seems to me that to say this is not dictation is nonsense. Of course it is. And I see no reason why the Americans should dictate fares originating here. Surely that is a matter for our own Government. The Minister went on to say —and again I quote—
Air fares have to be agreed between the two parties to the agreement; that is, from where the flight starts and where it ends. They have to be agreed at both ends.
I wonder whether the Minister could answer this question: If the Americans will not agree to our fares, are we proposing to agree to theirs? Presumably this argument cuts both ways. If not, is it any wonder that we always get pushed to the back of the queue?
§ The House will recall that for many months now I have been endeavouring to explain to the Government that filling 'plane seats, even at reduced prices, is better than having them empty. As this is a non-Party Question, I will not embarrass the Minister by quoting some of his replies. Anyway, this fact is now agreed upon by our own airlines, who say they can do this at a profit.
The House will recall, too, that I have tried to stress the simple and equally obvious fact that cheaper fares on our scheduled airlines by means of APEX would mean that the scheduled airlines could compete with charter flights. Do the Government intend to let down our scheduled airlines on this question? If they do, there is little doubt that the United States airlines will cream off the low-fare traffic. The new advance booking charter (A.B.C.) system, even if agreed to, will not deal with this aspect. May I quote from the air correspondent of The Times (Mr. Arthur Reed), writing on Monday last, March 5:
Although British airlines—particularly B.O.A.C. and British Caledonian—will be participating in the ABC scheme, they fear the
majority of the traffic will be carried by United States airlines.
British carriers do not have the spare aircraft to use for charter flights, while Pan American and Trans World have fleets of jumbo-jets specifically earmarked for this type of traffic. In addition, the American charter lines have dozens of aircraft free now that their commitment to fly servicemen to and from Vietnam is almost ended.
The British carriers had hoped for a system under which they would have been able to 'top up' passenger loads on their scheduled services by offering cheap advance purchase excursion (Apex) fares to travellers prepared to book 90 days before travel.
§ I think we should fight on this matter and I think we should demand that the Government fight. It is not the slightest use speaking softly on this point. I think the whole affair is monstrous; and I hope that this House and Parliament and the Government will say, No.
§ 9.13 p.m.
§ THE EARL OF KINNOULL
My Lords, if I were asked what job I should least enjoy in the House, it would, I think, undoubtedly be to reply from the Despatch Box to the noble Baroness, Lady Burton, on the subject of air fares and IATA agreements. It is a subject so interwoven with complexities and so impregnated with jargon that only a few people —not myself, I fear, but clearly the noble Baroness—have mastered. The consolation to my noble friend is that he is given plenty of practice in the subject by the noble Baroness in her almost lone crusade. This is, I believe, her fifty-third Question on air terminals and fares.
Having said that, I think the House is indebted to the noble Baroness for raising this subject to-night with her usual crispness and clarity. I am sure that a great many others outside the House, particularly the casualties of the APEX scheme who booked and paid deposits only to find now their bookings cancelled, will also be grateful to the noble Baroness for raising the subject. The noble Baroness uses the word "fiasco" in her Question on the Order Paper. It is a somewhat severe word, but I would sadly agree with her that from the consumer's interest the scheme so far has been a fiasco. To be launched only last January by the national carrier, B.O.A.C., at a considerable cost to them—I am told£1½ million—and to draw an immediate response of some 17,000 bookings in four weeks, 1267 with their deposits, and then to have the scheme abandoned by early March, is frankly a tragic mess. It is a disappointing mess for those who have booked to benefit from this low cost scheme, and a costly mess for B.O.A.C. which, one understands, has now estimated a loss of revenue of some £8 million for this year.
It has been said that B.O.A.C. should have waited until all the ends were tied up before mounting the sales campaign. I believe this to be basically an unfair criticism, for both B.O.A.C. and British Caledonian needed time to mount their sales campaign for the season. The fact that the APEX scheme was eventually scrapped at virtually the last moment was not of their doing. I agree with the noble Baroness, Lady Burton of Coventry, that both British carriers and travellers have had a very raw deal in this matter. Despite the disappointment of people booked on the APEX scheme, one asks oneself what effect will the cancellations have on the two British airlines on the North Atlantic route. The cancellation will clearly force many travellers on to the charter arrangements. As 70 per cent. of the North Atlantic traffic is generated from America, and as the charter capacity of British airlines is already restricted, the benefit will clearly go to the American airlines this season. If this logic is sound, it would seem that the collapse of the APEX scheme is damaging to the British traveller, to the British airliner as to the share of their market, and to the economics of scheduled services across the North Atlantic.
My Lords, what I believe is important to-night, and what I hope my noble friend will clarify, is first what can be done for the unfortunate disappointed bookings that were placed with B.O.A.C.? Will B.O.A.C. be able to do something to help them? Secondly, what is the Government's attitude to pursuing the APEX scheme in the future? It clearly fills a popular demand for those who would travel the North Atlantic route. How close is agreement with America now over the A.B.C. charter scheme? Clearly the time is running out on this scheme as well. Is this scheme also in danger of foundering? It would be a serious setback for B.O.A.C. who, one understands, have sold a capacity of 1268 100,000 bookings, if this scheme were cancelled as well.
In recent weeks a good deal of criticism has been levelled at the part the Civil Aviation Authority have played over these negotiations. It would be helpful if my noble friend could set the record straight so far as he is able, for I believe much of the criticism has been unjustified For instance, it would be of interest if my noble friend could indicate something of the timing of the negotiations that took place with America. Were the broad principles of APEX, except the precise fare to be charged, agreed in January when B.O.A.C. started advertising? What was the reaction of the American C.A.B. to the fares filed by both the American carriers and the European carriers, and by how much did they differ?
The C.A.A., since its birth in 1971, has, I believe, shown a welcome lead in its attitude to charter and scheduled fares. Its philosophy, that part-charter is in future an essential element of the scheduled services (indeed some may say the survivor of the scheduled services) is wholly realistic. Its attitude that the scheduled fares should be based on true costs is again welcome, though not accepted by all countries. Its approval of the Laker Sky Train concept may have upset some, but it is very much in line with the thinking behind the Civil Aviation Act. Finally, its action to try to put a stop to the many undignified proceedings with certain errant affinity groups that we saw last year is again very welcome. I hope to-night my noble friend will be able to say that, despite the setback this year of APEX, the Government fully support the Civil Aviation Authority, B.O.A.C. and the British Caledonian Company in their efforts to try to reach agreement with the Americans for perhaps next season. APEX clearly offers what British air travellers want—a seat on a scheduled service. It would be a great shame if, because of certain internal problems across the Atlantic, this was never allowed to hatch.
§ 9.21 p.m.
§ LORD O'NEILL OF THE MAINE
My Lords, I have the greatest pleasure in supporting this debate initiated so wisely by the noble Baroness, Lady Burton of Coventry, even though I do not 1269 have the expert knowledge displayed by the first two speakers in this debate. Whenever I go to the West Cromwell Road air station I think to myself that but for Lady Burton this would be on the way out, and the unfortunate travellers from the centre of London would have to find their way to Heathrow in some way or another. So this is one of the many reasons why I rise to support the remarks which have been made by the first two speakers in this debate.
Unlike the noble Baroness, Lady Burton, who is such an expert on these affairs, I have had the good fortune during the last twelve years to cross the Atlantic at least twice a year, and I shall be crossing it once again next week. We have at the head of B.O.A.C., both in Canada and in America, two excellent chiefs—both of whom, incidentally, come from Northern Ireland and both of whom are my personal friends. I am sure they are shattered by what has happened.
Make no mistake about it, my Lords, B.O.A.C. was doing extremely well. They had a very good "commercial" on American Radio, with the portly Mr. Robert Morley advising everybody what a wonderful time they would have if they flew by B.O.A.C., and on my last visit to New York, last year, when I was coming back in a cab from mid-town Manhattan to Kennedy the cab-driver said, inevitably, after the first mile or two, "I suppose you would be English?" and I said, "Yes". He said "Would you be flying B.O.A.C.?" I said, "Yes", and he said "Oh, that commercial you have with that fat man saying 'Isn't it fun to go by B.O.A.C.'—it's just wonderful. If I fly the Atlantic next time I go B.O.A.C.". I went on one of the earliest Pan-Am Jumbos, and I have never had such ghastly service. An American business man sitting beside me said, "I will never go American again".
This is the competition which Pan-Am and, to a lesser extent, T.W.A., have been up against and I can quite understand the fear with which they contemplated the low fares which were going to be operated by B.O.A.C., and also of course by British Caledonian, who were coming into the market as well. Like the previous two speakers, I should like to express the hope that the Government will not take this lying down. I said—I think it was last 1270 week—rather jumping on to many other people's bandwagons, that maybe we could fly to Montreal and Toronto and the passengers could somehow go on to America from there, but I understand that Canada, under American pressure, also feel that they cannot get out of line. Obviously, the suggestion that I made last week is not "on".
May I finally say this. People criticise our national airlines because they are national lines. Are we really to believe that B.O.A.C., as a nationalised organisation, would have gone in for this in the big way that they have unless they had good reason to believe that these new cheap air fares were coming into Operation? Of course they would not. They were showing the same keen commercial enterprise which we should have expected from a private enterprise airline and I do not think that they should be blamed for slightly jumping the gun before all the details were finalised. It is tragic if we have to give in to this American pressure. We should not ignore the fact that Mr. John Connally has recently joined the Board of Pan-Am—the President's recent right hand man—and we in Britain must realise that in America things like this are done. Nobody is a greater admirer than I am of the Americans. We have over thirty American industries in Northern Ireland, and that is why I used to go there twice a year. But they are tough. We have to be tough, too, and I hope that the Government will not take this lying down.
§ 9.26 p.m.
§ LORD REIGATE
My Lords, too should like to support the noble Baroness in her very remarkable crusade—her series of crusades really, because her first crusade was with regard to the West London Terminal which I think ought to be named the Burton Terminal.
§ LORD REIGATE
We now have what one might call the longer term crusade to reduce the price of crossing the Atlantic—and I hope not only the Atlantic but to other places in which I have a vested interest, namely, the Caribbean. But, above all, I envy her for the way in which she has mastered the appalling complexities of the IATA structure, that awful 1271 straitjacket which is designed merely to keep a large number of airlines, many of which ought to go bankrupt, in being. There is one airline that now advertises more or less—let us call it Ruritanian Airlines—"Travel Ruritanian: no one else does." T.W.A. lures you across the Atlantic at the same price as any other airline by showing you three seats with only two people in them, and saying, "If you travel this way you may be lucky and have an empty seat next to you." In my experience, which was on Pan Am crossing to America last year, there was hardly anybody in the plane at all. It was an example to me of the actual fatuity of this whole price structure, when the world is filled with people wanting to cross the Atlantic at cheap prices and there were not more than 24 people in an almost empty plane.
I do not entirely agree with my noble friend Lord O'Neill of the Maine about Pan Am. I have flown Pan Am and I flew it again last year and had excellent service. Nor am I an entirely unadulterated enthusiast for B.O.A.C. since I tried to go "Earlybird" to the West Indies this year. Your Lordships will know that that quaintly named thing "Earlybird" is an attractive scheme by which you are supposed to book in advance and go for £99 instead of £170, or whatever the return fare is. You have to book three months in advance. Being cautious I booked five months in advance and found that on my particular day the "Earlybird" was full up. Eventually I had to travel at the higher fare only to find that the plane was not full at all. My wife elicited the information from one of the booking clerks that there are only 10 "Earlybird" seats on a plane which holds about 180 people. They could easily have filled it up had they not been quite so rigid in the application of the rules, and if they had had the purpose in their minds of filling that plane. I must express that slight grouse against B.O.A.C.
But I agree with the noble Baroness (and I hope that her crusade succeeds) in trying to bring IATA to its senses. Some of its members are very sensible. B.O.A.C. want this reduction, but there are a great many who are on the side of the Americans in not seeking a general reduction. What I have against IATA, among other things, is that they always seem to meet 1272 for so long in such delectable places, Geneva, Montreux, Bermuda, the Bahamas. I can think of several cities where they ought to stay—Reykjavik in the winter—till they have got a little sense in their heads. However, to be less frivolous, the noble Baroness referred to the supplementary question that I put to my noble friend last week when I asked whether we had given notice to scrap the Bermuda Agreement. My noble friend did not only say no; he said that would leave a very open situation. Had the opportunity been given to me to ask a further supplementary, I would have risen to my feet and said "So what!" Surely we want a very open situation. This is what the Americans want to avoid. I hope we shall know whether there is any step we can take to give notice, with our colleagues in Europe who think like us, to terminate that situation until a more satisfactory scheme can be produced.
Lastly, may I ask my noble friend whether his attention has been drawn to a suggestion recently put forward by that great expert on civil aviation, Sir Peter Masefield, a former constituent of mine, that there might be a North Atlantic shuttle service, run jointly between Pan American and B.O.A.C., with an alternative run by T.W.A. and British Caledonian. It has been calculated that this, on a 65 per cent. load basis in a 747, could be achieved for an air fare of £42 across the Atlantic. This is, so far as I am concerned, a new idea, and would be a good way of sweeping away the complexities of the present structure of air fares. I do not know whether the Government have given this thought, whether it has been considered by B.O.A.C. and so on. I think that the House, and indeed the country and all those who would travel by air, owe a deep debt of gratitude to the noble Baroness for her efforts.
§ 9.32 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)
My Lords, one often starts a reply in the House of Lords with the words "at this late hour". I want to say at this late hour that I congratulate the noble Baroness on her perseverance in coming here and bringing this very important subject before your Lordships; I agree entirely with what my noble friends have said 1273 in regard to her initiative. I have been asked to-night to put the record straight by my noble friend Lord Kinnoull, and this is what I will try to do in as short a space of time as I possibly can.
I think all my noble friends have recognised, and so has the noble Baroness (I should like to call her my noble friend, too) that it has very long been the policy of British Governments to encourage airlines to provide cheap air transport, both by way of scheduled services and by charter services. Your Lordships will recall that when the Prime Minister addressed the annual general meeting of the International Air Transport Association last September he said that with the large and growing demand for low cost travel, even over the longest distances, he was sure the future of the industry would depend upon how it responded. He went on to say that scheduled services would no doubt continue to serve the needs of those who require the facility of "on demand" and flexible booking arrangements; but that that was an expensive facility, and already there were many who did not require it and did not see why they should have to pay the added cost. The consequence was obvious: if the scheduled carriers did not provide simple and inexpensive transport those passengers would look elsewhere, and no one could blame them.
In pursuance of this policy the Govment and the Civil Aviation Authority have taken the lead in the development of new charter rules to replace the discriminatory Affinity Group rules which have become outmoded and increasingly disregarded. The entire concept has fallen into disrepute, leading to all sorts of undesirable consequences, such as the cancellation of services at very short notice and the stranding of passengers. Over many months of international negotiations very considerable progress has been made, and the new Advance Booking Charter rules will certainly be in operation in the North Atlantic area on April 1. Under these rules it will not be necessary to join a club in order to qualify for cheap charter travel. It was announced some six weeks ago that these new rules will apply from April 1 on routes between the United Kingdom, on the one hand, and Canada, Mexico, and, my noble friend, Lord Reigate, will be glad to know, the Caribbean area, and the northern part of South America, 1274 on the other. We wish to see advanced booking charters operating also to the U.S.A. and discussions with the U.S. authorities are at an advanced stage. I cannot go beyond that. The Civil Aviation Authority are also introducing on April 1 a system of licensing of travel organisers. With all these measures cheap and more reliable charter air travel will be made available to the general public on North Atlantic routes from April 1.
I want to make that clear before dealing with scheduled services. The Government and the Civil Aviation Authority are convinced that the scheduled services should be able to offer low fares in order to compete in the potentially vast low-priced market. Apart from offering the public a real choice of services at low prices we believe that in order to maintain the existing frequent and regular flights on a viable basis the scheduled services should be able to fill the significant numbers of empty seats at the less popular times. The British airlines also are convinced of the need of such low fare policies on the North Atlantic routes, and for many months they have given a lead in advocating them in IATA. They have tried to secure agreement to part-charter, advance booking group fares and advanced purchase excursion fares (so called APEX fares) at competitively low levels. Unfortunately, after many months of negotiations in IATA it became clear in December that there was absolutely no prospect of reaching agreement all-round, and the airlines each filed their own fares proposals with the Governments concerned. There followed a series of negotiations between the United Kingdom and the United States Governments. I think I should add that the United States Government, of course, had also to negotiate with the other European Governments who were not of our point of view. Although some limited progress was made, the gulf between the two sides remained wide, and these inter-governmental negotiations also have become deadlocked. The United States Government and their airlines disagree with our view that low fares on scheduled services will be economic. They believe that the only way of offering very cheap air travel is by way of charter service. They seem to hope that, although scheduled services have been getting progressively less competitive with the cheapest end of the air travel market, 1275 nevertheless sufficient passengers will prefer to travel on scheduled services to enable such services to be maintained at existing levels and to remain viable. That is not our view.
Having failed to reach any agreement with the United States Government, the Government and the Civil Aviation Authority held talks with the European Governments in Paris last week. As a result, we have concluded in the European Civil Aviation Conference that the only sensible course of action was to continue with the existing fares during this summer up to October 31. As I indicated, the members of E.C.A.C. are urging their airlines to implement this conclusion in IATA because it is IATA that enters fares subject to the approval of the Governments concerned. While there have been different viewpoints about new fares among European countries, we have a common view on what needs to be done at the moment: that is to keep the existing fares because there is no option. I must stress that, so far as we are concerned, this outcome is most unsatisfactory, but there is no practicable alternative for this summer. Under the bilateral inter-Governmental Air Services Agreements which regulate the operation of international air services, the Governments at each end of any particular route must be agreed on the level of fares to apply. If agreement is not possible on new fares levels for the North Atlantic, and if discussions were pursued to the point of complete confrontation, there would be a very real danger of services ceasing to operate altogether. Nobody wants that.
In the meantime, there remains the problem of North Atlantic APEX fares on which no agreement has been reached. Passengers have been booked provisionally and have been paying for very cheap travel at APEX fares we hoped to agree on for this summer. They were of course all warned that these fares remained subject to Government approval, and in the event the Governments on the other side of the Atlantic have not approved. The airlines plan to arrange for as many passengers as possible to be carried on charter flights as near to their intended date of travel as possible. Some of these passengers will no doubt still prefer to travel on scheduled services, 1276 and they will need to travel at one of the excursion fares and to pay rather more than they, and we, had hoped. For those passengers who will not be able to avail themselves of these alternatives, the airlines will arrange the refund of the money paid whether for fares or deposits. There will inevitably be disappointments, and I can only say that the Government, the Civil Aviation Authority, and the airlines share the disappointment.
I have been very glad that in this debate there has not been criticism of either the Civil Aviation Authority for permitting B.O.A.C. to advertise the cheap fares on which they hoped to get agreement in anticipation of that agreement, or of B.O.A.C. or British Caledonian. At the time when they did so, they genuinely believed that there was a fair chance of getting agreement. Had they not done so, and had agreement been reached, they would have been criticised for missing the chance of introducing the new fares on April 1. After all, an airline has to advertise some fare.
The American objection was basically that we were offering, provisionally of course, the lower fares on this occasion. That was their objection. Quite properly, the bookings were made provisionally, and that meant provided agreement was reached. When I was talking of a confrontation and things breaking down altogether, this is what is meant by an open situation. If you are working on a treaty and if you want to maintain your relations, you can only replace the treaty with another treaty.
What conclusion should we draw from these discussions? Some people have suggested that we should not accept the views of others and should revise international agreements if they do not allow our own views to prevail. I must make it plain, however, that, under any conceivable agreement on scheduled air services, between States which are sovereign in aviation matters, both sides must be in agreement on vital features such as tariffs. The lesson I draw from these discussions is not that the views which have been pioneered by the British Civil Aviation Authority and our airlines are wrong. On the contrary, I consider that we must continue our drive to persuade others—including, but not only, the Americans—using all means available to 1277 us, that changes must be made and that our fundamental objective is right; namely, to secure for the general public the lowest possible fares on scheduled services, commensurate with economic operations. We are not taking this lying down; we shall go on fighting.