BRITISH CALEDONIAN: HOUSTON SERVICE (Hansard, 20 March 1978)

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

Lord ORAM
My Lords, under the agreement with the United States of America on fares and charters, announced on 17th March, British Caledonian is able to offer a new range of low fares on its service to Houston.

§ The Earl of KINNOULL
My Lords, I am sure that the House, indeed air travellers, will be grateful to hear that settlement has been reached on the outstanding points that were being discussed in Washington. Can the noble Lord say for what period of time the settlement will last? Will it affect all the North Atlantic routes as well? Finally, is there any danger of a second American carrier being nominated on the Houston service?

Lord ORAM
My Lords, the discussions which took place in Washington in recent days covered more routes—indeed all the transatlantic routes. Would the noble Earl remind me of the first point in his supplementary question?

§ The Earl of KINNOULL
It was about the period of time.

Lord ORAM
My Lords, it was agreed that the arrangements reached in Washington would be reviewed in the autumn. So there is the summer during which experience will be gained. On the last point, I am afraid that I must ask the noble Earl to give me notice of that.

§ Lord AVEBURY
My Lords, was not the original idea that, when Laker started operating with very low fares on the North Atlantic, we and the Americans would wait for about 12 months to see the result of this initiative before extending the concept to many other cities and airlines? Have we not now reached the situation where the proliferation of low fares to multitudes of American destinations is likely to result in profitless growth, as the chairman of British Caledonian has called it, with perhaps some of the weaker airlines going out of business altogether?

Lord ORAM
My Lords, the noble Lord is quite right; the original expectation was that we would look at the Sky-train experiment for a year before embarking upon further low-fare experiments. That would be, I think, the approach we would have wished to make; but, as I understand it, there has been considerable pressure on the other side of the Atlantic—on American airlines—and this has led to the need for the recent negotiations. We are satisfied with the results of those negotiations, although possibly we would have wished to proceed rather more slowly than was, in fact, the case. On this matter, although the consumer will obviously have some direct benefit, we have to maintain a balance between the desire of the consumer to have low fares, and the viability and profitability of our airlines. That is an important point which the noble Lord has made, and it will of course be taken into account in the review in the autumn.

§ Lord WIGG
My Lords, is it not a fact that in Washington British interests got a very rough handling indeed? Will Her Majesty's Government give the House an assurance that on future occasions—unless we have lost all our spine through contact with Europe—British interests will be very much in the forefront, even to the point of disagreeing and saying, "No, no"?

Lord ORAM
No, my Lords, it is not the case that British interests had a rough deal. If one compares the agreement which was reached with the original position put forward by the Americans, one sees that it is the case that we can, as I said in reply to the noble Lord, take satisfaction from the outcome of these discussions. We had these full consultations with the United States of America, 1561 as provided under the Bermuda 2 agreement, and we have secured limits on most routes to the number of seats to be sold at the low fares. Most importantly, we have secured terms under which British airlines will be able to compete more fairly throughout the United States of America. The original United States position put British airlines in a most disadvantageous position. So our negotiators really had a success, rather than the reverse which my noble friend suggests.

§ Lord TREFGARNE
My Lords, what is the position on the Braniff service which precipitated this recent difficulty? Is it now operating, and what are the fare scales applying?

Lord ORAM
Yes, my Lords, that service is operating, and Braniff will be allowed to offer low standby fares without any restriction as to number. I understand that Braniff has filed much higher fares than British Caledonian; namely, £132 and 250 US dollars. The agreement, however, will allow Braniff to match British Caledonian's lower fares, if it wishes.

§ Lord MACKIE of BENSHIE
My Lords, would the Minister care to tell us what is the total take by airlines crossing the Atlantic since the Laker initiative? I know that the Laker initiative has raised the number of people who wish to cross the Atlantic. Can the noble Lord tell me whether it has lowered the amount of money taken by the airlines, or put it up?

Lord ORAM
No, my Lords, I am afraid that I could not give that information without notice. The noble Lord's supplementary question goes considerably wider than the Question on the Order Paper, and I should appreciate notice of it.