§ 10.4 p.m.
§ Lord ORAM rose to move, That the draft British Airways Board (Government Investment) Order 1976, laid before the House on 11th October, be approved. The noble Lord said: My Lords, the purpose of this order is to continue in force permanently certain provisions of the 1971 Civil Aviation Act which would otherwise expire at the end of March next year. Without the order, British Airways' public dividend capital would revert to interest-bearing loans and there would be no power to provide further public dividend capital.
§ Public dividend capital, or rather Exchequer dividend capital, as it was then called, was first given to BDAC 10 years ago. When the British Airways Board was set up under the 1971 Civil Aviation Act, this form of finance was still relatively novel. Provision was therefore made for the position to be reviewed after five years. A similar provision was made in 1969 for the British Steel Corporation's public dividend capital. Noble Lords may recall that, after a review in 1973, the legislation relating to the Steel Corporation's public dividend capital was made permanent in 1974.
§ International civil aviation has been through very hard times over the last two years, as a result of the oil crisis and the general world recession. British Airways have weathered the storm better than many other airlines, but for two years it has not been possible for them to pay a dividend. Before the oil crisis, however, BOAC, and later British Airways, had on average a remarkably good record of dividend payments, exceeding so 7 nearly 10 years the interest payments which would have been paid on equivalent loan finance. The first three months of the current financial year have seen the start of a recovery in British Airways' fortunes: there was a surplus of over£14 million compared with a loss of£2 million in the same period last year. This encouraging trend shows every sign of continuing, and there is reason to hope that within a couple 419 of years the airline will once again be paying good dividends.
§ The Select Committee on Nationalised Industries in another place recently welcomed the increased role of public dividend capital in British Airways' capital structure. The Government also feel that this type of finance has an important part to play in the airline's capital structure, and that it is now appropriate to make the arrangement permanent. The order before your Lordships also perpetuates the duty of the Secretary of State to determine a target rate of return on net assets for the Board to aim at achieving. The Government have set a target of an average of 11 per cent. return over the four-year period up to 1978–79. This figure has been carefully selected so as to present a real challenge for the airline, but not so high that it would be impossible to achieve. Noble Lords will, I am sure, agree that in British 420 Airways we have an airline of which the nation can be proud. I am therefore pleased to commend to the House this order as an expression of confidence in its future. My Lords, I beg to move.
§ Moved. That the draft British Airways Board (Government Investment) Order 1976, laid before the House on 11th October, be approved.—(Lord Oram.)
My Lords, may I first thank the noble Lord, Lord Oram, for his very brief explanation of this order, which is very vital for British Airways. We said that we would not sit late, and the order was made easy for us to under-stand. So I will merely say that British Airways need this money, and we need an efficient airline. I thank the noble Lord again for what he has told us tonight.
§ House adjourned at nine minutes past ten o'clock.