BERMUDA AGREEMENT: RENEGOTIATION (Hansard, 27 July 1976)

§ The Earl of LAUDERDALE
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

Lord ORAM
My Lords, the decision to seek renegotiation was taken in the national interest to improve our balance of payments. The Government keep in close touch with the British air transport industry and, although it was not directly consulted, the airlines most concerned were informed prior to the announcement. Now that the need for confidentiality is passed, consultations have been held at senior level with both British Airways and British Caledonian.

§ The Earl of LAUDERDALE
My Lords, in thanking the noble Lord for that reply, may I ask whether he does not consider that very serious interests were at risk in the airlines being informed instead of being consulted before these negotiations were entered upon?

Lord ORAM
My Lords, the Government were in touch with the airlines concerned and the Government were fully informed of the problems and needs of the airlines in the North Atlantic market. It was the decisions on timing and tactics in 1178 relation to the renegotiation of the treaty which were essentially for the Government to take.

§ The EARL of LAUDERDALE
My Lords, in thanking the noble Lord for that answer may I ask a further question? Is he not aware that British Caledonian have made it clear that they were simply told 24 hours before the announcement, and that this announcement put at risk the licence they already had received from the Civil Aviation Authority to inaugurate a service to Houston and Atlanta next autumn?

Lord ORAM
My Lords, I know there is some dissatisfaction in the quarter to which the noble Earl refers. I think the principal need for us now is to have an eye on the future. British Caledonian are fully with the Government about the need for the renegotiation, and the Government are well aware of the needs and hopes of British Caledonian, so I hope the noble Earl will agree that we should look forward to the negotiations in a positive spirit.

§ The EARL of LAUDERDALE
My Lords, I appreciate the noble Lord's answer and the style in which it is given. Would he consider asking his right honourable friend to press that the question of the service to Atlanta and Houston might be treated outwith the renegotiation of the Bermuda agreement proper, otherwise that prospect will be at risk by the very fact of having the renegotiation?

Lord ORAM
My Lords, I doubt whether it could be taken as a separate issue. It is one of the main parts of the negotiation. I recognise that the year that lies ahead is a short period. Nevertheless, as I told the noble Earl last week, the preliminary meetings have been satisfactory and we feel that in the coming six months a good deal of isolating or identifying the issues will take place and we hope that the two routes can be negotiated in time for British Caledonian's plans to take effect.

§ Lord ORR-EWING
My Lords, is the noble Lord aware that there has been a recent Government statement that they believed in the mixed economy, and a mixed economy entails equal and fair 1179 treatment for those in the public sector as well as those in the private sector? Is he further aware that it is not fair and equal treatment if they consult British Airways and merely inform British Caledonian? This is not fair treatment as advocated in the recent statement; and there was the recent example in the case of Laker Airlines as well. The Government are very vulnerable on this point. I hope he will put it right at the earliest opportunity.

Lord ORAM
My Lords, in a mixed economy I accept the need for fair treatment of all sectors of it, But a point which I think the noble Lord misses in this connection is that the Bermuda agreement deals with scheduled flights and British Airways were the only airline operating scheduled flights. So there was a distinction in relation to the two airlines in that respect. But reverting to my point about looking to the future, the needs of both airlines are very much in the minds of the negotiators, and I hope that we can all use our efforts in the interests of both sectors of the airline industry.

§ Lord MERRIVALE
My Lords, will the Minister agree that the negotiations are likely to turn on the imbalance between the British and United States shares of traffic, the designation of more than one United States airline on a route and "beyond homeland" traffic rights? Also, in view of the contentious issues involved, will the noble Lord agree (I assure the noble Lord, Lord Shepherd, that I am not reading at the moment) that these negotiations are likely to be very protracted and it therefore seems highly unlikely that, as was laid down in the White Paper of February, British Caledonian will get these rights as from next autumn, so it would be better if the issues were taken separately?

Lord ORAM
My Lords, I accept that there are tough negotiations ahead, and I merely repeat that we fully intend to negotiate on behalf of British Caledonian in respect of the Houston and Atlanta routes. The agreement has been working to Britain's disadvantage, which is the reason why we believe it should be renegotiated. When I say "Britain's disadvantage", I mean the whole of our 1180 airline industry, and I do not see a possibility of separating out one interest in what the noble Lord himself agrees to be a complicated series of negotiations ahead.