§ 3.53 p.m.
§ Lord WINTERBOTTOMMy Lords, with the permission of the House, I shall repeat a Statement which has been made in another place. The Statement is as follows:
"Last July, following my review of civil aviation policy, I told the House that I had concluded it was no longer in the interests of our aviation industry or the economy generally to allow competition between British airlines on long-haul scheduled routes. Accordingly it would in future be our general policy not to allow more than one British airline to be licensed on any given long-haul route. Instead British Airways and British Caledonian Airways would have separate spheres of interest for their long-haul scheduled services.
"Since my last Statement there has been a series of detailed discussions between BA, BCAL, the Civil Aviation Authority and myself about how the airlines' existing route networks could best be adjusted so as to consolidate their respective spheres of interest. I have now decided that in Africa, where BA and BCAL at present operate competing services, East Africa and the Seychelles should in future be in BA's sphere of interest and Central Africa, including Zambia, in BCAL's. This exchange should enable both airlines to achieve considerable cost savings through deploying their resources more effectively. Outside Africa, BCAL will give up the licences to operate scheduled services to New York, Los Angeles, Boston, Toronto and Singapore via Bahrain, which they hold but are not at present exercising. It will also end the exempt charter services they operate to Singapore. However they will retain the right to serve Atlanta and Houston—a route for 105 which BA do not hold a licence—and will be the sole British airline to operate this new route when it becomes available for international services. In addition, BCAL's sphere of interest in South America will be extended and they will take over services to Venezuela, Colombia and Peru from BA.
"In making this rearrangement of routes, my objectives have been, first, to reinforce the competitive strength of British airlines in the fierce international environment in which they operate; secondly, to arrive at a result which is as fair as possible to both airlines; thirdly, to safeguard employment in the airline industry; and, finally, to produce a settlement that would last for a substantial period ahead.
"I believe the decisions I have taken do go a long way towards meeting these objectives. BA and BCAL will now be free to concentrate on meeting the challenge from their real rivals, the foreign carriers. BA will be able to plan the development of their services on major routes throughout the world free from the uncertainties of 'double designation' licensing. Similarly, BCAL will have scope in South America, West and Central Africa and on the new Atlanta/Houston route for future expansion of their long-haul services. As regards the third objective, I am satisfied that no redundacies will result from the rearrangement of routes, and indeed that the employment prospects for both airlines in the longer-term should be improved. Finally, the new policy will, I hope, give that stability in regulating the airline industry which is essential for effective long-term planning.
"I have given further consideration to the proposed Laker Skytrain service but I remain convinced that in the conditions likely to prevail in the North Atlantic market for the foreseeable future Skytrain would generate relatively little new traffic. It would however add excess capacity and would do substantial damage to BAs' existing services. Moreover, having regard to the existing facilities that are available for cheap travel it would confer no really worthwhile benefits to the con- 106 sumer. The CAA, while sharing my view that conditions are still not suitable for Skytrain, would prefer the licence and designation to be kept in being, and more generally that wider discretion should be left to the licensing system in the control of long-haul scheduled services. However, I see considerable disadvantage in prolonging the present uncertainty and have accordingly told Laker Airways that their designation will be withdrawn. I am confident that the airline will continue to build up their already extensive charter business, particularly with North America, and my Department will continue to support them in this.
"The position of the other independent airlines will on balance be unchanged by the policy changes I am making. I believe they will continue to make an important contribution to our civil aviation effort.
"The decisions I have announced today, and my proposals for new Policy Guidance for the Civil Aviation Authority, are set out in more detail in a White Paper, copies of which are now available in the Vote Office. I hope that we shall shortly be able to debate the proposed new Guidance, which will require the approval of Parliament before it comes into effect."
My Lords, that ends the Statement.
§ 3.59 p.m.
§ Lord BELSTEADMy Lords, I thank the noble Lord for making this Statement, which is a major departure from the policy of civil aviation expansion which was outlined by the Edwards Committee in 1969. I have sought to make it clear on a previous occasion that I appreciate the reasons which have impelled the Secretary of State to look again at civil aviation Policy, although it can be argued that it is questionable and that this Statement is now rather late in the day when, as we hope, the recession in civil aviation may possibly be over. However, I welcome the fact that this Statement has been made. The Secretary of State's intention to give British Airways and British Caledonian separate spheres of influence will obviously have only a marginal effect on British Airways, but a considerable effect on British Caledonian. British Caledonian have faithfully carried out all the aims and objectives which were set by the Edwards 107 Committee for the second force airline, and it is clear that the Secretary of State's decision could have considerable consequences. I welcome the Statement for that reason.
In doing so, may I ask the noble Lord to give us some information on several points. British Caledonian have been a value foreign currency earner. Is the Secretary of State satisfied that the potential profitability of the new routes to be transferred to British Caledonian is going to compensate, at any rate approximately, for the prospective loss of the scheduled services for which they were duly licensed and which are now to be given up? May I say at this point how glad I am to hear the decision of the Secretary of State regarding the Atlanta and Houston routes. Secondly, may I ask whether, in the opinion of the Secretary of State, the transferred routes will allow British Caledonian to develop, especially as regards the introduction of wide-bodied jets into their fleet? Thirdly, in view of what was said towards the end of the Statement, will what is projected there and in the White Paper require any legislation?
Lastly, I must say that I am more than sorry that the Government cannot support the Laker Skytrain. I would particularly deprecate the difference of opinion which apparently has arisen between the Secretary of State and the Civil Aviation Authority as to whether the Laker licence and designation ought or ought not be withdrawn. The fact is that Mr. Laker believe she can provide a unique service across the North Atlantic, and it is tragic that the Government are not prepared to contemplate this even in the longer term, despite the view of the Civil Aviation Authority. The White Paper will allow us to debate the matter further, but I should like to express the hope that no hint will be contained in the White Paper that any impediment will be put in the way of any of our national flag carriers developing their services when the hoped-for increase in civil aviation throughout the world comes about.
§ 4.2 p.m.
§ The Earl of KIMBERLEYMy Lords, we on these Benches would also very much like to thank the noble Lord, Lord Winterbottom, for reading the Statement. I should like to congratulate 108 Her Majesty's Government on the promise to produce a White Paper shortly, in other words, "before the swallow dares", as the noble Lord, Lord Winterbottom, said the other day. However, so far there is no mention of the passenger or the consumer, and therefore if, as a result of altering the various routes of both companies, many complaints are received from passengers, I hope that perhaps the routes might be reconsidered.
I am also very happy to see that British Caledonian—and I am sure that others of your Lordships will join me in this—are to remain as one of the flag carriers. Could the Government tell us how long it will be before the negotiations are finalised regarding the Atlanta and Georgia route? Also, could the Government assure your Lordships that the negotiations are proceeding with great rapidity on the Australian routes for the British Airways Concorde, and that they are pressing on with these? Perhaps the noble Lord, Lord Winterbottom, could tell us something more about that. May I say that I hope the forecast of redundancies through the rearrangement of routes will prove to be correct.
With regard to the Laker Skytrain, the Statement begins by saying that the Skytrain would generate little new traffic on the already overcrowded North Atlantic route, but that it would therefore affect British Airways. The Statement goes on to say later that the Secretary of State hopes that Laker Airways will continue to build up their already extensive charter business on that route. This seems to be somewhat puzzling. I should, finally, like to endorse the hope that now the White Paper has been published the airlines will get on with the job of challenging their real rivals, that is foreign competitors, instead of each other.
§ 4.6 p.m.
§ Lord WINTERBOTTOMMy Lords, I should like to thank both noble Lords who have spoken for their very positive reaction to the Statement which has been made. The noble Lord, Lord Belstead, asked whether it was not a little late in the day. My right honourable friend the Secretary of State was very anxious to reach an agreement between the two main flag carriers which, we must frankly admit, may not be totally satisfactory to 109 either, but which nevertheless is reasonably fair. The agreement which has been indicated would last for a considerable period; the area of disagreement was narrow and the area of agreement wide, so I think we can say that this has been achieved. He did not state the reasons for supporting what we are doing, but we must never forget the impact of the use of the oil weapon by the OPEC countries, which led to the sudden fall in traffic on world airlines and which led to a contraction of the number of seats available over the Atlantic and elsewhere.
Referring to the foreign currency earnings of British Caledonian and compensation for their lost routes, I think it is true to say that they are trading in two of the fastest growing areas of the world. Venezuela is an oil-rich country and is fast expanding, and in fact the whole of the South American continent, which is in economic effervescence, is now open to British Caledonian. They should be able not only to build up the successful services they have already created but expand them and presumably, if they find it necessary, to bring on to their routes the wide-bodied jets which would carry the increased trade that may be generated.
I do not think that legislation will be necessary. I say that subject to correction, but what has been announced today is a question not of legislation but of Parliamentary approval. For this reason we shall be having another opportunity to discuss the matter in detail in due course. This will provide the opportunity for further discussions of the disagreement which has arisen between the Government and the Civil Aviation Authority. The exact balance between an advisory body such as the Civil Aviation Authority, with its licensing powers, and so on, and the Government is a matter of substantial importance and one that is worthy of a wider discussion than we can give it today.
The noble Earl, Lord Kimberley, mentioned the very important point of the time-scale during which British Caledonian could expect to operate the Atlanta/Houston route. I cannot answer that, because this matter involves the decision of the American authorities as well as our own. However, I will write to the noble Earl and, if necessary, 110 inform the House of the expected time-scale involved. That area, again, is an oil-rich area with a very large passenger potential for British Caledonian. As to the Concorde routes, I speak without precise knowledge, but obviously British Airways are furthering this great aircraft. The State of Victoria has agreed that it should be given an experimental period of operation of some 18 months, and one assumes that British Airways will grab this opportunity with both hands.
Finally, I should like to refer to the question of generation of new traffic by the Laker Skytrain concept, which was mentioned by the noble Earl, Lord Kimberley. Unfortunately, this is an area which is full of suppositions which are not easy either to confirm or deny.
I understand Mr. Laker believes that he would have a two-years' monopoly on the North Atlantic route if he introduced the Skytrain. But I believe—and I speak from the point of view of the British Government—that no American Government would enable this project to come into being unless American airlines were permitted to have the same rights to operate a shuttle service across the Atlantic. So that assumption is not necessarily valid.
There are various estimates of the amount of new traffic to be generated. There are Mr. Laker's own estimates, there are the Civil Aviation Authority's estimates and there are the British Government's estimates. All these estimates of new traffic differ and to get a correct one is not possible. There is a vast area of supposition. All one can say is that British Airways provide very similar cheap facilities across the Atlantic, with their Apex and ABC charters, and if peole are willing to take advantage of being able to book on the sespecialised scheduled flights they will not be paying substantially more than if they use the Skytrain concept. Certainly, they would not undergo the possible uncertainty of having to await the filling of the aircraft before it set off across the North Atlantic. I have tried to answer the two noble Lords as best I can. It is a complex subject and perhaps it is worth a debate.
§ Lord WYNNE-JONESMy Lords, the Statement of the Government is very welcome, in particular that part of it which states it is hoped that the solution will last for some period, because these 111 reversals are very damaging to air transport. But I should like to ask my noble friend a question concerning the possible effect of the draft proposals which have come from the EEC with regard to air transport. These proposals, if I understand them correctly, would involve every national of any of the countries in the European Community coming over to this country and competing in setting up a service from this country. So if in a few years' time Mr. Laker were again to come forward with a Skytrain proposal and, at the same time, someone from France, Germany, Holland or Italy were to come forward with a similar proposal, then our licensing authority would be bound to consider them on exactly equal terms. That could mean that the licence would go to some other country rather than to an airline in this country. What is the attitude of Her Majesty's Government towards this point?
§ Lord BALFOUR of INCHRYEMy Lords, may I ask the Minister three questions—
§ Lord WINTERBOTTOMMy Lords, with the permission of the noble Lord, Lord Balfour of Inchrye, I should like to reply to that complex and rather difficult question while it is fresh in my mind. I cannot answer my noble friend's question. It is obviously of major importance, and it really impinges on the relationship between the powers of the Community and those of our own Civil Aviation Authority. Perhaps this is a subject which my noble friend may care to raise when we debate this subject at a later stage, which we shall have to do.
§ Lord BALFOUR of INCHRYEMy Lords, this is a very important question. Does the Minister agree that it is not an unfair description of the policy to say that it is a closed shop carve-up of the world by our main scheduled airlines? Maybe it is the right policy for this country, because, as he knows, competition can show up not only from foreign airlines but between two British airlines going to different destinations; for example, in the way of performance, manpower, maintenance, et cetera. Does the noble Lord agree that this policy can succeed only if three parties have confidence in it—the two main parties being British Caledonian and British Airways, and the 112 third the party which was mentioned by the noble Earl, Lord Kimberley, but which has not been mentioned by the Minister; that is, the consumer? Provided the public are satisfied that it is a fair "do" for them, and the two partners build up a relationship which is good and sound, then I think the policy will succeed. I trust the noble Lord will agree with that hypothesis.
My second question is this. Is the Minister's mind still flexible as regards some modifications of the general outline in this White Paper? Desirable modifications, both technical and non-technical, may be exposed by public comment and one would like to have an assurance that the Minister has not closed his mind. My third question is a very simple one. The Minister stated that there would be a debate in another place. Will he and the noble Lord the Leader of the House fully support the idea that we should also have a debate in this House?
§ Lord WINTERBOTTOMMy Lords, working backwards, I would first say that the question of a debate will be settled through the usual channels. Secondly, on the question of the importance of the consumer, we had a valuable short debate in this House about a month ago and people said some very kind things about British Caledonian, which I am certain we should like to endorse. The noble Lord himself really answered his first question, and I would agree with him that competition is of the greatest importance in keeping any organisation efficient and watchful as regards the interests of the people to whom it is selling its services. British Airways and British Caledonian, acting independently in their various areas of responsibility will be kept tuned by the competition which they have to face from American and other international airlines. I am satisfied that there will be no lack of competition to keep them up to the mark. Would the noble Lord be so kind as to repeat the second question?
§ Lord BALFOUR of INCHRYEMy Lords, I asked whether the Minister's mind is still flexible as regards modification?
§ Lord WINTERBOTTOMMy Lords, what my right honourable friend said was that he hoped that the proposals 113 included in this Statement today were a sufficiently good compromise to last for a substantial period. I think my right honourable friend said 10 years. But that is not for ever and, obviously, if what we have now decided proves to be insufficient or not the best way of solving the various competitive problems which the two British flag-carriers will have to meet, then of course they will have to be reviewed. Because trouble and care have been taken in producing this new policy we hope that it will last, but it is not a diktat.
§ Lord DRUMALBYNMy Lords, may I ask the noble Lord a few questions? First, he said that the whole of the South American continent will now be open to British Caledonian. That means I take it, that British Airways will not be operating at all in South America. Secondly, can the noble Lord say what evidence there is to support the idea that on a high-density route, at a time when traffic is expanding, one airline is likely to get a higher proportion of traffic for this country than two British airlines or even to retain as much traffic for this country? This is an absolutely key point. I should have thought the evidence was all the other way: that two airlines would get more total traffic than one could attain, especially from British people who wanted a choice of British airlines. Thirdly, on the question of the withdrawal of the licence from Skytrain, is compensation payable on the withdrawal of a licence as it is, for example, on the cancellation of planning permission in this country, and, if not, why not?
§ Lord WINTERBOTTOMMy Lords, whereas two British airlines competing out of non-British territories might attract more passengers to travel on them, it is equally conceivable that one airline would be played off against the other. Whereas, at the moment, we are proposing that one profitable airline should work from various regions of the world, as a result of the noble Lord's proposals we might have two unprofitable airlines working from them. The whole basis of the concept is that the competition is provided by the foreign flag carriers and that British flag carriers are free to compete against their foreign competitors without competing against their own countrymen.
As regards compensation, there is the precedent of 1971. The Conservative 114 Government withdrew certain rights from British Airways without, as I understand it, paying compensation. In fact, this decision is paralleled by the one that we reached then. The Government of the day decided to take certain action in the interests of the industry as a whole. For that reason, as I understand it, no compensation was paid.
§ Baroness LLEWELYN-DAVIES of HASTOEMy Lords, of course we are in the hands of the House, but we have been debating this Statement for nearly half an hour. My noble friend has indicated that the usual channels will be discussing the possibility of having a debate. I think, therefore, that probably most noble Lords would prefer that we should now resume the debate on Lord Byers's Motion.