§ 6.53 p.m.
§ The Earl of KIMBERLEY rose to ask Her Majesty's Government why the United Kingdom does not take the lead under the auspices of Airbus Industrie in designing and building a series of European airliners in the 130–180 seater category for services starting in the middle 1980s. The noble Earl said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. Since the nationalisation of British Aerospace certainly some progress has been 1551 made, but there are quite a number of employees within the industry who feel that more could have been done. Nobody could disagree that a healthy competitive manufacturing industry—whether publicly or privately-owned—is an essential and vital necessity to the nation's wellbeing, whether it is for employment, domestic and export markets, help for our balance of payments, or lastly taxation revenue. Therefore, I ask: Do we have a national role in world industry?—to which the answer must surely be in the affirmative. I submit that one major role should be in a skilled and highly intensive industry, such as the manufacture of aircraft, computers and avionics.
§ It was gratifying last year to see that British Aerospace declined the American offer of our becoming a mere sub-contractor to their giant industry. One reason given two-and-a-half years ago for nationalising the aircraft industry of this country was that a decision had to be taken on building a family of aircraft in the 130 to 180-seater category. That decision had to be made rapidly as otherwise Britain would once again lose out to the United States.
§ My noble friend Lord Beswick—and like to call him my noble friend—who is chairman of British Aerospace said on 15th March at a lecture at Bristol that the real problem for British Aerospace was not short-term, but a long-term one of building a secure base on which to earn a living. Two-and-a-half years ago at Farnborough I was sitting at lunchtime next to Mr. Harding Lawrence, who is the President of Braniff Airways. He categorically stated to me that there was a world market for 3,000 aircraft in the 130 to 180-seater category in the coming 10 years. As an American he saw that there was no reason why, if Britain and Europe got together, we should not have, at the very least, 30 per cent. of that market.
§ I agree that it is perfectly true that at present all the major airlines are looking at wide-bodied aircraft and, for the time being, are temporarily content to top up their medium and short-haul fleets with present-day technology narrow-bodied aeroplanes. But they cannot continue to do that forever due to the very strict noise regulations which will come into 1552 force in the middle 1980s. Therefore, if there should be any noble Lord who might think that my figure of 3,000 is wrong, may I say that there will have to be 3,000 existing geriatric narrow-bodied short and medium-range jets replaced, as by the mid-1980s the majority of the world's major airports will refuse to let those aircraft operate not only for noise, but probably also for safety, reasons due to structural defects and metal fatigue.
§ I should like to ask the noble Lord, Lord Leonard, when he replies whether, in view of the Dan Air 707 crash in Lusaka when the tail fell off, the Government have any proposals for the next few years for not allowing these ancient aeroplanes to fly into airports which have a very heavy population around them? Also what agreements are there, if any, with other foreign civil aviation authorities?
§ Therefore, a new aeroplane must, if it is to be a winner, be launched now because the United States has the DC.9 Super 80 and the Boeing 757. McDonell-Douglas still has the possible advanced-technology medium-range aircraft sitting on the sidelines. New technology airliners are not just needed for less noise: they are also needed for economy and fuel saving reasons. As regards fuel economy there are three reasons which are particularly pertinent: first the price of it: secondly, there is only so much oil left in the world until we perfect the production of oil from coal—which seems quite a long way away—or we can produce a new power plant which may work on hydrogen; and finally the more economical the aircraft the lower will be the passenger seat mile cost.
§ To quote an example of an old/new aeroplane, British Aerospace tried very hard with the X-11 but the French and the Germans said—no, it was not a new aeroplane. Simultaneously British Airways and Lufthansa ordered the Boeing 737 as a stopgap. Air France tried to do so, but the French pilots refused it as it only needed a two-man crew. Therefore Air France went back to old Boeing 727s. However, Lufthansa is now thinking very seriously of phasing out its 737s because they are not large enough. They want a 140 and a 180 seater. In fact, they say that if this family of aircraft is launched now, it would be a certain winner and would 1553 also be an integral part of the family of Airbus Industrie. Therefore, I hope it is beginning to be obvious that unless we start in the very near future—in other words, now—we shall once again be too late and present the Americans with yet another monopoly of a large piece of the civil market.
§ While I am on this subject, out of interest, perhaps the Minister can tell us how much our balance of payments has been affected by British Airways buying 737s and 757s. Perhaps we shall be told that as the 757 will have Rolls-Royce engines, the bill will not be as large as it might otherwise be. However, even if that is so, I am not certain that it is a good enough answer. Perhaps it is of interest to note here that in his lecture the other day in Bristol the noble Lord, Lord Beswick, again said that he thought it would cost this country £1.5 billion. Perhaps the Government could confirm that figure.
§ What do potential customers of British Aerospace think when our nationalised carrier gives absolutely no encouragement by buying British or, as it is today, Anglo-European? The following European flag carriers have ordered or purchased A300s from Airbus Industrie: Air France, Lufthansa, SAS, Alitalia, Olympic, Iberia, and Swiss Air the A310. Can they possibly all be wrong?
§ I now come to Rolls-Royce and the Airbus Industries. Last year Sir Freddie Laker announced that he would buy A300s, but that he was not prepared to spend the £25 million to develop so that the Rolls-Royce engines could be fitted in his aeroplanes. To me £25 million seems to be a very small sum when compared with the potential market that the A300 and the A310 have. Do the Government realise that Pratt and Witney and General Electric from America are presently at each other's throats fighting to get their engines into these aircraft? Do any of your Lordships think that Pratt and Witney and General Electric are wrong as well? Why does not Rolls-Royce try to compete for the Airbus?
§ In November last year I wrote to the Prime Minister, President Giscard d'Estaing and Chancellor Schmidt, drawing their attention to the large market for an aircraft family of 130 to 180 seats. I 1554 appealed to the three Leaders that, in spite of the co-operation over the A300 and the A310, they should make a big effort to get this new aircraft family launched. I had three replies. The Prime Minister's Secretary said that he would show my letter to the Prime Minister but I have heard nothing; the French said "Thank you", and the Germans answered with a two-page letter stating that the market survey for a 130–180 seater was not sufficiently advanced, and that the A310 must therefore have preference, particularly as there was not the factory space available. That is completely understandable as production capacity at all Airbus plants will need to cope with much greater production rates when output rises from two aircraft a month at present possibly to eight a month by the end of this year.
§ It appears that the second stumbling block might be finance. However, that should not be a problem with the vast quantity of money which we successfully seem to pour down the throats of lame ducks in this country. Possibly a third argument that can be put up against it is that of the power plant. But that is not a problem, because we have the American engine, the CFM56, which already exists; the RB211–535 is under development; and on the sidelines, if some money was advanced to it, there is the RB432. There are two existing American engines, the Pratt and Witney JT1OD and the JT8D-209. Therefore, for the 130-seater there are three engines—two American and one English; for the 150-seater there are two American engines; and for the 180-seater there is one English and one American engine.
§ I should like to return to the problem of the lack of space in the factories, because if we cannot build the aircraft in France, we could certainly build it at Weybridge, Filton and Hurn. I am given to understand that at Weybridge and Filton the current workload is maintenance on United States Air Force F1–11s, certain parts for the British Aerospace 146, parts of the A310 wing, converting five Gulf Airways VC10s and four East African Super VC 10s to tankers and Universal Test Equipment orders. I agree that that work provides employment, but many British Aerospace employees are frustrated and their morale is low. Who can blame them if they leave for more 1555 salubrious climes where they can continue to design and build new aeroplanes as well as probably earn a lot more money? I am also given to understand that within the last 12 months about 165 designers have left British Aerospace.
§ I, for one, do not envy the task of the chairman of British Aerospace, the noble Lord, Lord Beswick. He appears to get far less co-operation from both Ministries and the Treasury. British Aerospace seems the poor relation, coming after British Airways and Rolls-Royce. Maybe one reason is because Rolls-Royce has the NEB behind it. However, we now have quite a long history of Anglo-French-German co-operation and we have the Airbus. So we have European co-operation producing jobs and income, which is co-operation in its most practical sense. Therefore, if we allow that this Airbus family of a 130–180 seater aircraft must be launched, we must establish the foundation and principles immediately. This would also restore morale on the civil side of British Aerospace as well as provide encouragement and incentive, while simultaneously we would be taking, and at the same time sharing, the lead—unlike when we became a partner in Airbus Industrie, which was only after many difficulties.
We now have a chance to help our European partners so that the project is produced in time. We have to agree all the criteria with Airbus Industrie but we, in this country, have the space and the workforce. It would be a great money-earner for this country at the same time as continuing the success of Airbus Industrie. We should very soon find the Americans knocking on our door and wooing us. Let us not forget that in 1966 Boeing raised several hundred million dollars on the New York Stock Exchange because there was confidence in their ability to design, build and sell aeroplanes. I think that we should make this a target for European Aerospace. We must find the money, and I do not accept the Treasury's criticism the other day of our 20 per cent. in the A310, saying that it would have a negative cash flow by 1983. To quote the noble Lord, Lord Beswick:
To criticise profitability on a three or four-year outturn is ridiculous".
Incidentally, I have heard no Treasury criticism of the £1.5 billion—if that is the correct figure—spent on American aircraft.
§ Therefore, when the noble Lord, Lord Leonard, replies to my Question, I ask him: first, does he not agree with my assessment of the market need for a family of aircraft in the 130–180 seater category? Should he by chance say that there is no need, I would ask the noble Lord to go back to British Aerospace, the Department of Industry and the Treasury and ask them to rethink the project. However, should the Minister agree with me, perhaps he would give your Lordships some encouragement and show some determination that we, with the French and the Germans, can win a major part of what will be an incredibly lucrative market. I also wait with great interest to hear from my noble friend Lord Trefgarne the official policy of the Opposition. May I reiterate that time is running out for us. Finally, will Her Majesty's Government make a prodigious effort to try to get our three nationalised aerospace companies to co-operate with each other on a considerably larger scale than they do at the present? If the Government will do this, the sky is the limit.
§ 7.10 p.m.
§ Lord TREFGARNE
My Lords, it is customary on these occasions to extend thanks to the noble Lord who raises the matter, and I readily and gladly do that tonight. Having read the Question on the Order Paper I think at the outset I had better resist the temptation to try and answer it because that will be for the noble Lord, Lord Leonard, to do in a moment. Indeed, I sometimes wonder whether Parliamentary pressure on British Aerospace, or any nationalised concern, to produce this or that aeroplane, or to follow this or that policy in a matter of extreme technical complexity, is the right way to reach the answers we desire. Indeed, I have said in your Lordships' House on several occasions before tonight that the consideration of different aircraft types by British Airways, for example, is a difficult and technical matter, and it is not always wise for politicians, at least for Opposition politicians, to pronounce views too firmly, because for sure they do not have all the facts available to them. 1557 How much more difficult then is it to reach a decision as to which aircraft to develop or build, than it is to decide simply which aircraft to buy.
The difficulties can perhaps fall under three headings. First, the time-scale of an aircraft project is at least 20 years, sometimes 30 years. It follows, therefore, that decisions taken now will have effect at least until the end of the century. As we know, the sums of money involved in launching a new aircraft project are prodigious; so much so that nowadays we cannot afford, by and large, to launch major transport aircraft projects on our own, and we have to secure the co-operation and collaboration of our colleagues in Europe. It follows from these two points that the risks of failure are appalling, for, if we do fail, having committed vast sums of money and enormous resources of manpower and manufacturing facilities to these projects, the consequences really are grave indeed.
Having accepted the difficulty of reaching the correct decisions, perhaps I may indicate some of the considerations which British Aerospace must weigh in deciding upon their future programme. I do not pretend for a moment that the points that I want to talk about are exhaustive or complete, but they may help to indicate to your Lordships the difficulties of the problem. First of all, we have to decide what size of aeroplane the market requires. The noble Earl, in his Question, has suggested that we need a 130 to 180 seater. I fancy that that may be a bit on the small side, but that is simply a personal view. British Aerospace and their colleagues will conduct their researches and I trust arrive at the right conclusion.
We have to decide when replacements for existing aeroplanes will be required. The noble Earl touched on this when he was talking about the retirement of the so-called geriatric jets. Indeed, some people say that the existing generation of transport aircraft will have to be retired sooner rather than later because their structures are, in some cases, now suspect. There is the question of noise certification. I shall have more to say on that next Monday when we consider the Air Navigation Noise Certification Order. But sufficient for the moment to say, as the noble Earl reminded us, that by the mid-1980s most of the existing generation 1558 of so-called noisy aircraft will have to be compulsorily retired.
We need to decide how many of the new type of aircraft will be required. We shall need to consider in that context both the numbers of aircraft to be replaced and the growth of the industry generally so that we know how many additional planes over and above those we have at present will be needed. We have to decide and consider whether the new aircraft will have an adequate improvement over the operating costs of existing machines, with particular reference nowadays, of course, to fuel economy. We have to ensure that the new aircraft will meet all the future environmental considerations; not only the noise, to which I have referred already, but smoke and other emissions which are nowadays becoming less and less acceptable, and quite properly so.
I have referred to this before but I must mention it again. We shall have to decide how many seats the new aircraft has, precisely how many it needs, having regard not only to existing traffic but to the expected density growth in the future. We have to be sure that the new aircraft will be compatible with existing terminal facilities and ground equipment. If not, will it be possible for airlines and airport operators to afford any new facilities or equipment which will be required? We have to decide what sort of configuration we require for the new aircraft; whether we want all tourist seats to meet the boom in low fare traffic, or whether we want a mix of high density seating and first-class seating, and what sort of freight facilities we require. We have to decide—and this is most important—how the development of the aircraft will be financed. I have mentioned already that collaboration is inevitably essential, but how much money will British Aerospace be required to put into this project, and how much money will the British Government be required to put into the project? It will inevitably be a very substantial sum.
We have to decide also not only how to finance the development of the aircraft but how to finance the sales of the aircraft. I believe that this is one of the areas where the Concorde programme has fallen down. It has not proved possible on this side of the Atlantic to devise financing schemes of sufficient attraction, particularly to the smaller airlines, to enable them to acquire, 1559 or lease, or hire, the aircraft. This is in sharp distinction to the American industry, whose aircraft financing arrangements are way ahead of ours, and it is one of the reasons why they have been so successful in selling their aeroplanes to some of the smaller emergent nations.
I have covered just 10 points. I imagine that the noble Lord, Lord Beswick, and his colleagues in British Aerospace will be considering at least a thousand other points in reaching their decision, and quite right too. Are we therefore in a position to suggest, let alone dictate, to British Aerospace the details of their manufacturing problems? I should have thought, from this side of the House at least, that we are not. Of course the Government have to make judgments on these matters, but they are able to do so in possession of all the facts.
So your Lordships should I believe confine yourselves to consideration of the political, social, and strategic implications of these decisions. But the noble Earl has tabled his Question, and is entitled to hear my views at least on the specific points that he has raised, and I shall try to do that whatever the difficulties. I must confess that I am attracted to some extent to the noble Earl's arguments, and would agree that there may well be an important market for the sort of aircraft he describes. But, as I said earlier, I fancy that it ought to be a little bigger. As of this moment, I should think that British Aerospace would be better employed in applying its now considerable resources and energies to promoting its existing projects. One particular project which very nearly meets the requirements of the noble Earl is, of course, the A-310, in which British Aerospace is now a full partner. This is not a 180-seater, it is a 200-seater and thus meets my requirements, if not those of the noble Earl.
In that connection, I am unconvinced that British Airways were right to choose the 757, the American aircraft, instead of the A-310 which was offered to them. I have mentioned this matter before in your Lordships' House and I make no apology for raising it again: it was—indeed, still is—a matter of the greatest importance. British Airways were to be one of the two launch customers for the 757, and indeed they have ordered it. 1560 Unhappily, the other launch customer, Eastern Airlines, have not yet ordered it and there are rumours that they may not do so. Perhaps this is not the time to go into that matter in detail, but I was very concerned by that decision of British Airways and I remain so. The contract is now signed, at least so far as British Airways are concerned, and I hope it works out for British Airways, and we shall be watching carefully to see that it does. I wonder whether in future we should reassess the methods of launching new projects and endeavour somehow. if we can, to determine in advance the likelihood of major European orders before launching new collaborative or national projects.
Not for the first time we are in the noble Earl's debt for raising this subject. I wonder how far we should go in trying to influence what must be a commercial decision. Of course I lay myself open to the charge of inconsistency, in that I would seek to influence British Airways' so-called commercial decisions but not those of British Aerospace. However, I would answer that by saying that British Airways' record, even when left to their own devices in this matter, has not been uniformly successful. On the other hand, the aircraft manufacturers, once as individual companies and now jointly in British Aerospace, deserve at least to be given a chance. The technical skills are undoubted. Let us now watch their commercial skills with the closest attention.
§ 7.22 p.m.
§ Lord THOMAS
My Lords, we are all grateful to the noble Earl, Lord Kimberley, for giving us the opportunity to express our views on the important subject of the future of British civil airliner building. Whether we do so as a whole project or whether we participate as partners with another manufacturer is a matter for very careful thought, but there is no doubt that in the 1980s there will be a consistent and continuing demand for the type of 150 to 200-seater airliner that the noble Earl quotes broadly in his Question.
I recently paid a visit to the West Coast of America and spent some time with one of the leading aeroplane manufacturers in that area. They are planning to produce large quantities of two-engined and three-engined aircraft. Their planned rate of 1561 production is of a very high order indeed, something like 30 a month of one aeroplane model alone that falls into this category. It is the disparity in the rates of production between the American and European manufacturers which raises a peculiarly difficult situation for the United Kingdom aerospace industry.
The American aeroplane producers are perfectly willing to buy parts from Britain, but they want absolutely cast-iron assurances that delivery quantities and dates of delivery will be met for whatever components they order. Already there is a fair business being done by at least a few of Britain's leading aircraft component manufacturers; for instance, every Boeing delivered from Seattle contains British-made parts in the shape of flap actuators, power control system, windscreens, parts of the braking gear and other comparatively minor, though very important and expensive, components.
However, when it comes to getting orders from large American aeroplane manufacturers from this side of the Atlantic for substantial items such as undercarriages, nose wheels and of course, engines, then the financial commitments are fantastic. When I say that the investment in the machine tools for a comparatively simple component like a retractable nose wheel at the rate of production that is needed on one of these quantity produced and internationally popular aeroplanes is of the order of £45 million, it makes one think of a particularly large investment egg in a comparatively medium-sized British basket.
What is more, to achieve the guaranteed rate of production which is required would mean the recruitment of something like 250 skilled machinists in this country; and it is a sad commentary on our present state of industry that although there is very high unemployment, there is not the pool of skilled machinists, men or women, capable of operating tape controlled machines and sophisticated automatic or semi-automatic machine tools of the type necessary to achieve the accuracy and high degree of precision entailed for these components at the going price.
Price is important. Britain is no longer a low cost producer nor, due to the malaise of strikes that affect our industrial corpus, are we a reliable source of supply. That 1562 is because over the past couple or so decades we have not shaped our overall engineering facilities to encourage men or women to do this kind of work. High taxation is one of the disincentives; the industrial climate that encourages or even allows engineering shipbuilders, for instance, to do five hours work on an eight hours shift is completely out of balance, and we all know what has happened to the British motor industry. Once upon a time, more years ago than I care to remember, 40 per cent. of the orders for all cars sold in this country went across my desk at Cowley, Oxford. That lead has been eroded in no uncertain way. Coming back to aircraft, that very lesson makes the question asked by the noble Earl so vitally important.
The success of Concorde in operation shows that our aerodynamicists, designers and technicians have the skill to produce highly sophisticated aircraft. Concorde was achieved by Anglo-French or, if you like, European collaborative effort, and has proved there is no language barrier in high technology. So let us be wholly realistic too and pay tribute to the aircraft produced by Airbus Industrie. Anyone who has seen the lift-off performance of one of their aeroplanes with its British-made main wing cannot fail but to be impressed by its potential and its aerodynamical excellence. What it would do with a couple of new advanced technology Rolls-Royce RB-211 aero engines can readily be extrapolated both in terms of fuel economy, which is becoming more and more important as the years go on, and in the matter of cost and range per seat mile.
I take this opportunity strongly to suggest that the question of over-water flight limitation planning for twin-engined jet aircraft be re-studied and new parameters evolved. The question of long-range over-water flight planning is topically emphasised for aircraft operating to the Spanish, Iberian and Mediterranean areas from Britain by the strange behaviour of the French air traffic controllers. These gentlemen seem determined as a long-term policy to make airspace facilities and monitoring of aircraft flying from Britain over French airspace difficult, forcing them to flight-plan longer routes far out over the Atlantic Ocean before turning east to Europe to reach their destinations. 1563 This deplorable practice last summer cost all British airlines much money and much valuable time, and it created much passenger ill-will because of unpunctuality. It looks like being more of a nuisance this coming summer than it was last summer, and so a future Anglo-European built airliner design would have to have this factor allowed for in its basic parameters, not in terms of near-sonic speed, but in economical long-range cruise, and of course radio facilities.
May I repeat that for all round economy, advanced technology twin jet-engined aircraft produce optimum figures. The fewer engines you have on an airplane, the lower the maintenance cost. There has been sufficient experience already built up with both European and American built jet engines to prove that the ratio of shutdowns in the air for jet engines is only a fraction of what used to be accepted in the case of the piston engine; and so longer twin jet engine over-water allowances should be made.
Therefore there seems to be a logical case for a positive answer to be given to the noble Earl's Question. The United Kingdom should take the lead, under the auspices of Airbus Industrie, in which we already have a strong commercial connection with some components, to develop a limited series of civil airliners, some of which could certainly be fitted with British made engines. American civil airplane makers give a choice of power units. One can buy a 747 Jumbo with a set of two different American made engines, or with British Rolls-Royce engines. I suppose that I should disclose an interest here as the chairman of an airline that uses 25 American built jets; but I can say that if a European built 150–200 seater aircraft, with an enhanced over-water flight planning capability, and two advanced technology RB-211 jet engines was planned to be available in the mid, or even the late, 1980s, it would be studied very carefully indeed by a large number of seriously minded customers.
§ 7.33 p.m.
§ The Earl of KINNOULL
My Lords, I wish very briefly to support the noble Earl, Lord Kimberley, and to thank him for initiating this interesting debate on Airbus Industrie, with particular regard 1564 to the 130–180 seater project. The noble Earl's enthusiasm for aviation and aviation matters never wanes, even if the influence of Government and of our industry on their future share of work in world markets becomes increasingly bound up with the European Airbus Industrie. I am sure that the House looks forward to the reply of the noble Lord, Lord Leonard —I think that it will be his maiden speech in an aviation debate—and I hope that it will be a good reply.
The noble Earl, Lord Kimberley, raises the question of what I am sure we all feel is a very important market. I hope that the noble Lord will confirm the actual figure, but if the figure of 3,000 aircraft replacements within the next five, 10 or 15 years, is correct, it shows that this is a very important market. I hope that, despite the enormous cost of becoming a partner with the Airbus Industrie, despite the difficulties of resources and of finding resources among partner countries, and despite the capacity problem that all those within Airbus Industrie now face (with the hoped for production of the A.300B and the A.310, and the commitments that British Aerospace have on the 146) the noble Lord will be able to say that the Airbus Industrie is at least looking at this market, and is perhaps considering some joint project with an American company. I believe that that would be the answer. I do not believe that the British Government would be very keen at this stage to pour more resources into a new project. I do not even know what such a project would cost, and I hope that the noble Lord, Lord Leonard, will be able to tell us.
Discussing the Airbus Industrie gives a chance to learn, even at this stage, how much work is now flowing into British factories from our having joined the Airbus Industrie, or how much work is expected in the next year, or two or three years. Perhaps we can also learn where the orders stand for the A.300B, and where the project of the A.310 stands. Perhaps at the same time we can learn what is the current position regarding the British 1–11 production. How much longer is the production likely to be in operation? Where do we stand now regarding Concorde? Has that project now finally closed?
Perhaps the greatest value that I see in British Aerospace joining Airbus Industrie 1565 is that it possibly takes us away from a plague which has afflicted the British air industry for 20, 25 or 30 years. It is the plague of the fickleness of politicians and the Treasury for cancelling projects, often at the very last moment before they are due to go into production. We have seen with Concorde where the determination of the French to see the project through was a great example to British politicians and indeed to the British Treasury. Similar remarks could apply to the DC.10, and the 3–11 was another example. I hope that the noble Lord, Lord Leonard, will give us an encouraging reply to the noble Earl's question of whether the Airbus Industrie is examining this very large market.
§ 7.37 p.m.
§ Lord GISBOROUGH
My Lords, a report says that 105 airliners are being considered for replacement by British Airways at the moment at a total cost of about £1,000 million. When one considers that the useful life of an airliner is reckoned to be about 14 years, one realises that the 707s and VC10s will be replaced, requiring at least a further 35 aircraft for British Airways and probably another 50 for Lufthansa and Air France, and more for the other airlines. According to one estimate by 1986 the number of people taking annual package holidays will have doubled, and, whereas at present about one in 18 people go abroad for the annual holiday, the ratio will change to about 1 in 9. In addition, whereas at the moment British Airways is carrying about 12 million passengers on short-haul passages, the figure will rise to about 27 million within 10 years. Furthermore, it is reported—I do not know whether it is correct—that IATA negotiated fares will be phased out. It has been said that the airlines,will be exposed to the icy blast of competitionwhere the fares will be dictated by those airlines which are able to operate with the greatest efficiency—
§ Lord GISBOROUGH
I got the information from one of a number of cuttings 1566 which I have, and I shall be delighted to show these to the noble Lord later.
OPEC has today put up the price of crude oil by 10 per cent; and fuel costs will be a growing proportion of airline costs in the future. It is estimated that the cost of fuel will have gone up by at least 20 per cent. by 1986. There will be an enormous number of replacements—not only replacement of aircraft which are becoming old, but also replacements to meet the very stringent noise regulations, as well as replacements for reasons of economy. The old technology aircraft which are used at the moment are having their engines up-dated and their bodies lengthened. New engines have been put on some types and are available now. The DC.9 has a new engine. I gather that it is very difficult to put a new engine, a quiet engine, on the 727 because of configuration of design; but, as has been mentioned, the 757 is on offer now, and so is the DC.9 with its new engine. But a very important fact is that fiddling about with old designs and putting new engines on them, and lengthening them, certainly achieves a lot, but the real answer, to get the greater effect, is to design a new airframe with the new engine all in one package. Therefore, there is an enormous opportunity for a new technology aircraft to be designed and built, and for there to be a large demand for it.
I was amused to read some interesting snippets about examples of computerised flight controls, whereby the speed could be held to within 1 knot through adjustments of height rather than throttle control. This alone, it was estimated, would save 2 to 3 per cent. of fuel on a flight to Bahrain from London, and return, and would save £200 on the trip. Also, improved technology would improve the maintenance and the speed of maintenance—even to the extent of such things as the galleys, which at the moment are often sited over electrical parts, so that fruit juice spilt from the galleys corrodes the electric wires, which are very difficult to get at. These sorts of things are all small things, but, obviously, there is scope for an enormous amount of new technology to improve the efficiency. There is a very large market, my Lords, and I believe that the United Kingdom should play a very large part in the production of this new generation of airliners.
§ 7.42 p.m.
§ Lord LEONARD
My Lords, I should like to thank the noble Earl, Lord Kimberley, who has this evening provided us with a useful opportunity to look a little into the future. As regards the involvement of the United Kingdom in the civil aircraft industry, once again we are grateful to the noble Earl for drawing our attention to this industry. Other noble Lords who have taken part in this debate have posed some very interesting questions for the future. Only last July Lord Kimberley raised in this House the question of the future policy of the industry. At that time British Aerospace 146 had just been launched and important decisions regarding Airbus Industrie were still awaited. Then, almost as soon as the Airbus decisions had been announced in November, the noble Earl drew our attention to the truly international nature of the airline industry and the problems facing airline operators. Now this evening he has posed an important question on the JET type of aircraft. We have heard from the noble Earl, Lord Kimberley, the noble Lords, Lord Trefgarne and Lord Thomas, and the other speakers, some of the options that are open to us. I am not sure that the market for such an aircraft is altogether as clearly defined as has been suggested. However, the Government are of course well aware of the market slot which appears to await a new European civil airliner. Indeed, the noble Earl reminded us of it in his recent Questions for Written Answer.
Before I turn to the Government's attitude on the JET proposals, I should say that at this stage the two questions raised by the noble Earl ought really to be addressed to British Aerospace because a major decision such as the launch of new aircraft with all the industrial and financial consequences that are entailed must first be evaluated at the industrial level. It would not be very practical for the Government to determine their position without first hearing what the manufacturers have to say.
Looking at the Question before us, as I am sure your Lordships are aware, studies have indeed been under way for a number of years regarding aircraft in the 120 to 190 seater range. A number of tentative proposals—we have even heard a few of them this evening—have been looked at in 1568 some detail by the manufacturers, but in the light of all the work that has been done—I want to make this perfectly clear —no definite conclusions have been reached by British Aerospace or other partners in Airbus Industrie regarding the single-aisle type of aircraft generally referred to as JET. So this is something which must be borne in mind by noble Lords when they are pressing suggestions for this because we have not had them from British Aerospace or any of their partners, and they, we must agree, are the technocrats who should first be consulted on a matter of this nature.
§ The Earl of KIMBERLEY
My Lords, would the noble Lord give way for one moment? I think I said in my speech that if the noble Lord, Lord Leonard, could not give a satisfactory answer would he please go back to British Aerospace, the Department of Industry and the Treasury. So I am not putting the blame on his shoulders.
§ Lord LEONARD
My Lords, I see no reason why we should not go back to them—I would accept that—but I have a foreboding that if they were keen I would not have to go back to them; they would come to me or to the Government. But, as I said before, we have not heard from them as yet. Therefore, we must not rush the situation.
§ The Earl of KINNOULL
My Lords, may I ask the noble Lord a question? Can he say whether the Government would in fact have the funds available if the industry came to the Government? Because this is one of the questions of course that the noble Earl has been addressing to the Government.
§ Lord LEONARD
I would certainly have to have notice of a question like that, my Lords. I could not just stand here and say that the Government have funds to put into a colossal investment of this nature without its first being decided, not only by the financial end of our Government; the technical side and many other things would have to be taken into consideration. I think we should remember that the airliner market is, I accept, a little uncertain in this sector, as has been shown.
1569 Many airlines are still reviewing their forward procurement policy. For example, I have no doubt that they wish to examine more closely the effect of discount fares, which we have heard about tonight; and when you talk about discount fares structures on their operations this, I would agree, will have a significant impact in the 1980s and the aircraft that eventually come forward will have to be designed with this in mind, as well as increases in fuel prices and many other factors. So there is also the obvious and important trend towards these matters, especially the fuel prices, and increasingly there are various forms of de-regulation of the market leading to increased competition between airlines. This in turn will call for alterations in the technical approach to single-aisle aircraft.
However, I believe there is one conclusion that can be reached from the investigations that have already been made. It seems clear that in the single-aisle category for aircraft with around 130 to 180 seats, the airlines would be getting an aircraft with an extremely good operating cost. This will require in turn the manufacturers to offer high standards of technology on which we are all agreed, and standards which are better than those of existing aircraft; and, more important, better than those of any competitor.
British Aerospace and their partners in the Airbus Industrie have therefore retained a great interest in the JET type of aircraft. They are presently engaged in the process of refining the previous project work on this sector in the market. They are, I understand, all the time taking account of the latest market intelligence from around the world.
Of course, the continuing market studies will have to take into account the timing of the airlines' requirements for new aircraft and the competition from other manufacturers. As we are all aware, the giants of this industry are on the other side of the Atlantic and, certainly, they will not be slow to enter the market place if the prospects seem right. Indeed, McDonnell-Douglas has already launched the DC.9-80 aircraft which, no doubt, will corner a useful slice of the market for itself from 1980 onwards, particularly among American operators. Boeing, too, have a competitor underway with their Rolls-Royce-engined 757. While this aircraft 1570 has a seating capacity slightly above the JET range, we must expect it to eat into some of the potential market for JET type aeroplanes. These points are integral features of the market studies which have been referred to and are well appreciated by the manufacturers. I can assure your Lordships that British Aerospace are well aware of the potential that may exist in the smaller civil airline sector of the market from the consultations with other manufacturers and airline operators that have already taken place.
But there are other factors to be taken into account before British Aerospace launch another aircraft project. The aerospace manufacturers around Europe are already heavily committed on existing aircraft and other programmes. This applies equally to British Aerospace. The work on the British Aerospace 146 feeder liner launched last July is now well under way. Now that British Aerospace has entered the Airbus Industrie consortium as a full and equal partner, they have additional work on the new smaller A310 Airbus. The existing A300 Airbus is now selling well with over 20 airline customers involved and orders and options are now approaching the 200 mark.
As your Lordships will no doubt be aware, the work on the existing A300 Airbus is now building up and further increases in production rates have been suggested. With the A310 programme getting under way and other projects—such as Tornado, the new Jetstream 31 and HS125—there will be a considerable load on British Aerospace's resources to deal with the matters already in hand. Obviously, any new proposals to draw further on these resources will and must need very close scrutiny. While many would like to be able to look forward to new smaller additions to the Airbus family, I think we must recognise that some careful family planning is called for in this matter.
For their part, the Government have been keeping in touch with developments as regards the JET project and we accept that, at the present time, the manufacturers must be allowed to continue their outline work on the JET concept, liaising with the airline operators as necessary. The aircraft partners in Airbus Industrie, and British Aerospace in particular, will want 1571 to establish for themselves that JET is a commercially viable project and that the market wants it at prices it can afford. These are the necessary steps for the manufacturers to take before proposals can be put to Governments. I said, "Governments". I am sure that all those concerned for the future of the aircraft industry in Europe would wish any new project to be subject to such procedures, and it is the intention of the Government that this should be so.
My Lords, with regard to some of the questions I have listened to tonight, in so far as the question about how the balance of payments has been affected by British Airways' purchase of the American aircraft, I have not got the exact figures; but if the noble Earl would like me to write to him I shall give him those figures and we shall be able to see; but I could not produce them at a minute's notice. There are many questions to be answered and there are many technical problems to be solved. All in all, we have had a useful opportunity for airing some of the considerations which surround a possible new aircraft project. Some of the points that have been made are applicable to any aircraft project and not just to JET itself. Some interesting and relevant points have been made and your Lordships may be assured that these matters will be taken into account during the further appraisals by British Aerospace, in association with its partners in Airbus Industrie.
I am not going into specific details on the reference by the noble Lord, Lord Thomas, to productivity. I think it is only fair to say this.
§ Lord LEONARD
The engines that fly the Jumbos across the Atlantic, the Rolls-Royce engines—they were very pleased to get them and they were delivered on time—are very acceptable to the British and the American public. On that note, if I have not answered all the questions, I shall endeavour to do so either by meeting noble Lords and talking to them or by writing to them.