HL Deb 07 August 1980 vol 412 cc1641-711

5.21 p.m.


My Lords, I beg to move that the Bill be now read a second time. This Bill is in two Parts. Part I gives effect to the policy outlined in another place on 20th July last year regarding the introduction of a private sector shareholding in British Airways Part II gives effect to a number of other aviation policies, the most important of which reflects the change in the basis of the future relationship between Government and the Civil Aviation Authority. I shall start by looking at the Government's proposal to sell shares in British Airways. In doing so, I will seek to define both our long-term objectives and the part which the Bill plays in helping us to meet those objectives.

Some people talk about the Government selling off state assets as though this were going to be some sort of unsavoury auction or bazaar, with items going to the highest bidder without regard for the future of the industries concerned or their contribution to the economy. Nothing could be further from the truth. Our proposals in respect of British Airways recognise the fact that our national airline has to operate on a fully commercial basis if it is to succeed in an increasingly competitive international aviation market. We therefore plan to put BA on a proper commercial footing so that it can shape its own future, and to substitute the disciplines of the commercial and financial markets for the existing regime of Government control which is applied to nationalised industries. We shall do this by changing the status of BA from a public sector nationalised industry to a private sector company incorporated under the Companies Acts in which a proportion of the shares will be offered to the public. I should make it quite clear that there will be no separate disposal of any part of BA's operations and it will remain our premier national airline.

It is our firm belief that British Airways will benefit from being given independence from the Government in this way. There may in the past have been good reasons for Governments of the day involving themselves very closely in the affairs of our major airlines; when Imperial Airways was developing an Empire-wide network of air routes, when BOAC was helping the war effort by transporting troops and supplies, when BEA and BOAC were pioneering the use of jet passenger aircraft. In those days it may have been right for the Government to stand in loco parentis. However, British Airways has grown up; indeed, it is now the world's largest international scheduled operator, and I believe it will be well able to stand on its own feet.

The international airline industry faces perhaps the most difficult and challenging time in its history and I do not pretend for one moment that life for a private sector British Airways Limited is going to be easy. However, I am quite convinced that its success is best assured by being free to respond to the pressures of the market, rather than to the diktats of Whitehall standing in judgement over how the business is run—the amounts it may invest, what aircraft it should buy and the amounts it may borrow.

I turn to the provisions of the Bill designed to enable us to pursue the policy I have described, and in doing so will outline the Government's views on certain related questions not specifically covered in the Bill. Your Lordships will have noted that there is one provision in Part I of the Bill that is not related to the sale of shares. This is Clause 1, which reduces the public dividend capital of the British Airways Board by £160 million, thereby implementing the undertaking given by the previous Administration in February 1979. The provision completes the new financing arrangements for Concorde which have been agreed with British Airways and which have already been reflected in the airline's accounts.

Your Lordships will recall that a joint review group was set up in 1978 to consider British Airways' financial structure and concluded that the results of the airline's Concorde operations are not sufficient to cover amortisation of the supersonic fleet or pay a dividend to the Government on the capital used to acquire the aircraft. I do not think it necessary to dwell on this provision at length, since copies of the Review Group's report which explains more fully the need for this reduction in public dividend capital are in the Library. However, I should just make the point that this provision relates solely to the affairs of the British Airways Board and is in no way related to our intention to sell shares in the airline.

However, the remaining clauses in Part I of the Bill are directly related to that intention. In this respect, our aim is to create a company in which the Government will initially retain a majority shareholding, but with other investors such as individuals, pension funds and other institutional investors, and employees of the airline, holding the remainder of the shares. The Bill contains the framework for the achievement of that aim by providing in Clause 2 that on an appointed day, all property, rights, liabilities and obligations of the British Airways Board shall become those of the successor company, which will be incorporated under the Companies Acts in the ordinary way.

Clause 3 provides for the share capital of that company to be issued to persons who will hold the shares on behalf of the Crown. Clause 4 provides that the total amount of share capital to be issued on vesting day shall be equal to the amount of public dividend capital held by the British Airways Board immediately before that day, but apart from this the financial structure of the airline will he unchanged.

At this stage British Airways will have been transformed from a statutory corporation, governed in all its actions by an Act of Parliament, to a limited liability company. The next stage will be for the Government to offer shares in the company for sale. Clause 3 provides that those who hold shares on behalf of the Crown may deal with them—which means dispose of them—on such terms and in such manner as the Secretary of State, acting with the consent of the Treasury, may direct. Our intention is to offer a substantial minority of the shares for sale, but there is no undertaking that the Government will continue to maintain a majority holding. Such a commitment would oblige the Government to take up a certain proportion of any future rights issues, and it would be unwise to bind ourselves or our successors in this respect or to a restriction on the number of shares which might ultimately be sold.

Clause 5 enables the Secretary of State subsequently to acquire ordinary voting shares in the successor company or rights or securities which carry entitlement to or may be converted into such shares. This power would facilitate the taking up of rights issues or the acquisition of voting shares in the market. It is subject to the target investment limit described in Clause 6 which is to be set at the level of voting rights exercisable immediately after the initial flotation. But because, as I have said, the Government intend initially to sell a substantial minority of the shares, it follows that the target investment limit will be set at a majority level. Thus, if the Government's shareholding should ever be reduced for whatever reason, they will be able, should they wish to do so, to restore a majority shareholding in British Airways.

The reason for this power is to provide a longstop provision. During debates in the other place fears were expressed that the successor company could fall into foreign hands, or be taken over by another company with malign intent. The Government consider those possibilities unlikely, but in the event of any such danger the Government could use their powers to restore a majority holding. I might add that there will also be provitions in the articles of the successor company limiting the voting rights of foreign-held shares. Incidentally, copies of the draft articles are available in the Library. So we shall have belt and braces to guard against a foreign takeover.

The remaining Clauses in Part I are purely technical. Clause 7 deals with transitional provisions and the eventual dissolution of the British Airways Board. Clause 8 provides that British Airways shall be deemed to comply with the requirements of part of the Trustee Investments Act 1961 for the purposes of the initial flotation. Clause 9 gives interpretations of certain terms used in Part I.

I turn now to consider the wider questions which are not specifically addressed in Part I of the Bill, but which will I hope amplify the general policy and the considerations which lie behind it. First, let me say a word about timing. Part I of the Bill itself incorporates no timetable for the flotation, but merely the legislative framework for the change of status on an appointed day and a subsequent sale of shares. That omission is quite deliberate because we wish to have complete flexibility in choosing our time. The sale of shares will take place when we consider the time is right, taking into account the need for a successful flotation and the interests of all concerned.

The Government are fully aware that the international civil aviation industry is at present going through a difficult time, due largely to the rapid increase in fuel prices over the last year or so, together with some falling off in demand for air travel. British Airways have shared these problems, as their results for 1979–80, which were announced last week, demonstrated. Your Lordships will also have seen reports that British Airways continues to face problems in the current year, and the board has initiated a plan of action to maximise profits and maintain its competitive position.

These are problems which face the airline industry worldwide, and we welcome the action which BA management are taking to ensure that they get back on to the right track as soon as possible. Its results can certainly stand comparison with those of many foreign carriers. The industry has faced similar problems before in the mid-1970s, and British Airways showed its ability to recover then. It can, I believe, do so again. Meanwhile I emphasise that, bearing in mind that this Bill has yet to complete its full parliamentary passage, it is too early to take any decisions on a date for a sale of shares. We have no commitment to any particular date, and we shall continue to preserve flexibility, so that we can choose the right date in due course.

With regard to the shareholding that the Government are to maintain, your Lordships will wish to hear something about the relationship between the Government and the successor company. Our intention in establishing British Airways as a limited company is to ensure the maintenance of a strong and competitive business that will stand entirely on its own feet. Although the Government for the present will retain at least a substantial shareholding, the company will not be the creature of the Government; we do not intend to control the company. It will stand or fall by its own efforts, and this must be recognised by all concerned.

Our objective will be to appoint initially an experienced and independent board of directors, who will in future determine business policy and assure the continuity of management at both board and lower levels. The Government will. not thereafter wish to intervene in the commercial decisions of the company, and circumstances are not readily foreseen in which the Government would seek to mobilise their shareholding in opposition to the board of directors.

We wish British Airways to be a perfectly ordinary private sector company. We do not want the existing paraphernalia of controls over the airline's capital expenditure; we do not want their borrowings to be governed by cash limits; we do not want power to guarantee those borrowings or to make loans to the company; we do not wish to take any action that might lay the Government open to allegations of influencing the commercial decisions of the company. We intend that British Airways should be quite independent of the Government, and we believe that is where its best interests lie. We do not propose that there should be specifically appointed Government directors on the board of the new company.

There is one further matter which is not covered in Part 1 of the Bill, but which is an important element in the policy. It concerns the undertaking given by my right honourable friend the Secretary of State in another place on 20th July last year that special arrangements will be made to enable employees of British Airways to take up shares in the enterprise should they wish to participate in its future and share in its growth."—[Official Report, Commons, 20/7/79; col. 2183.] We believe that the employees of British Airways should also be given the opportunity to acquire a tangible stake in the company and that they should be able to do so on favourable terms.

We do not subscribe to the view that there must necessarily be opposition between the interests of shareholders and employees, and we certainly do not wish to preserve such an adversary relationship where it may be considered to exist. As a general principle, a greater degree of share ownership by employees in the company for which they work is an important step towards breaking the dangerous and damaging "them and us" syndrome in British industry.

The Government intend to set a good example in this respect by offering shares to British Airways employees on favourable terms at the time of the flotation. A number of possible arrangements are under consideration, including an offer of two shares for the price of one, with exemption from income tax on the free share, as provided for in Clause 46 of the recent Finance Act; a share option scheme; a straightforward, if modest, give away of shares; and priority allotment of shares for employees at the full price. Full details of the arrangements which are eventually decided will be announced in good time for the share sale.

I turn now to Part II of the Bill. This Part contains a number of provisions amending the law relating to civil aviation, and I shall comment on all the more important of these during the course of this speech. However, there is no doubt that the most significant clauses in Part II are Clauses 11 and 12, and therefore I propose to deal with these in some detail before proceeding to comment upon the remainder.

Clause 11 effects four major changes in the Civil Aviation Act 1971. First, it amends Section 3 of the 1971 Act, which sets out the general objectives of the Civil Aviation Authority, by removing the current objectives of the authority to secure that at least one major British airline not controlled by the British Airways Board has the opportunity to provide air transport services and to encourage the contribution of the civil aviation industry to the United Kingdom's balance of payments and national prosperity. The former objective is being removed because it is no longer necessary or desirable to distinguish between British Airways and other airlines following the change in status of British Airways proposed by Part I of this Bill. Moreover, there is an outstanding need to change this objective in Section 3(1) (b) following the decision of the Court of Appeal in the case of Laker Airways Limited v. The Department of Trade, when the Appeal Court decided that this subsection and paragraph had a rather different meaning from that which had been widely understood by both the industry and the then Government.

The effect of the removal of this objective will be simply that in future all British airlines will be able to offer to provide any service. It will then be for the Civil Aviation Authority to decide which airline or airlines should provide those services in the light of the objectives which it is the authority's duty to pursue under the Act of 1971, as amended by this Bill.

The objective of encouraging the aviation industry to contribute to the balance of payments and to national prosperity is being deleted because it is an automatic consequence of the other objectives of the authority. If the Civil Aviation Authority properly addresses itself to its duty under Section 3(1)(a) of the 1971 Act, to secure that British airlines provide services at the lowest charges consistent with a high standard of safety and an economic return to the efficient operator, and to secure the sound development of the United Kingdom civil air transport industry, then the authority can hardly fail to encourage the industry to contribute to the balance of payments and to national prosperity. Since Clause 11 is concerned with the setting out of the CAA's objectives in a proper manner, it is therefore appropriate that we now dispense with this unnecessary provision.

Subsection (1) also has the important effect of putting the CAA's duty to further the reasonable interests of users of air transport services on an equal footing with the authority's other objectives, instead of being a subordinate duty as it is at present. This reflects the Government's intention in this Bill to ensure that the consumers' interests will in future carry at least as much weight as the airline industry's interests when the CAA is exercising its air transport licensing and other functions. I am sure your Lordships will agree that this amendment establishes the proper balance between the general objectives which it is the CAA's duty to pursue.

The second major change effected by Clause 11 is the abolition of the Secretary of State's power to give guidance to the Civil Aviation Authority. The 1971 Civil Aviation Act, which established the CAA, adopted the unusual method of regulating a statutory undertaking by means of the issue of written guidance. At the time this was an understandable decision: the CAA was an entirely new body, and the extent of the areas in which it would become involved was not and could not be known. Unfortunately, experience of the guidance has shown that it is a flawed mechanism. The most cursory examination of the guidance issued in 1972 and 1976 reveals that much of the guidance serves to do no more than encourage the CAA to behave itself and to use its common sense when carrying out various detailed aspects of its functions; and where the guidance attempted to do more than this by going beyond the terms of the 1971 Act, it has run the risk of being overturned by the courts. This was the fate of paragraphs 7 and 8 of the 1976 guidance, which set out the objectives for the licensing of long-haul routes and established a sphere of interest for British Caledonian Airways, since the Court of Appeal held, in the case of Laker Airways Limited v. Department of Trade, that these paragraphs were ultra vires and consequently invalid.

The essential problem with the power to give guidance is that either it says nothing useful or it is in danger of being judged to be ultra vires by the courts. It follows that the proper manner of regulating the activities of the CAA is for Parliament to set out the authority's objectives fully in primary legislation. This is what the remainder of Clause 11 achieves. The abolition of the power to give guidance does not mean that undue power is being handed to the authority. It means, rather, that the objectives and duties of the authority will in future be contained in the appropriate Act of Parliament. I hope your Lordships will agree, therefore, that this Bill represents an improvement in the constitutional propriety of the legislation.

The third major change in existing legislation made by Clause 11 is the introduction into the Civil Aviation Act of 1971 of a new Section 3A, which imposes on the CAA a duty, subordinate to its other duties in Section 3, to have regard to environmental factors in exercising its aerodrome licensing functions in respect of aerodromes specified by the Secretary of State. Subsection (4) of the clause imposes a similar environmental duty on the CAA in respect of the authority's exercise of its air transport licensing functions. These provisions therefore impose upon the authority specific statutory duties when exercising its relevant functions which replace the general environmental duties which are imposed on the authority by the policy guidance. In the case of the CAA's aerodrome licensing functions, the duty will apply only where the Secretary of State specifies a particular aerodrome, as it is hoped that local consultation and action will be sufficient in most cases to ensure that proper care is taken of environmental considerations. Where this is not the case, however, then the Secretary of State will be able to specify the aerodrome concerned for the purposes of Section 3A.

The fourth major change to existing legislation is made by subsection (4) of Clause 11, which inserts into the Act of 1971 a new Section 23A. This new section sets out those considerations to which the CAA shall have regard when exercising its air transport licensing functions. The section takes up several of the CAA's existing duties, which are currently contained in the policy guidance. I will not therefore dwell on these restated duties, but will draw the attention of noble Lords to subsection (2) of the new Section 23A. It lays down that the CAA, when considering whether to grant an air transport licence, and when weighing up the effects of granting a licence on existing services, shall have regard in particular to the benefits which may arise from licensing two or more operators to provide the services in question.

The Government took the opportunity of introducing this new provision into the Bill in another place because of an uncertainty expressed in certain quarters as to the ability of the CAA to take proper account of the advantages to consumers which may arise from a due measure of competition. The purpose of this provision is to establish that the authority can and indeed should take account of these benefits, and to ensure that the interests of the airline passenger have a prominent place among the CAA's objectives. I am sure that I need not remind your Lordships how significantly the consumer may benefit from competition. The revolution in the level of fares on the North Atlantic route and in the variety of services on offer to passengers followed directly from the introduction of a proper measure of competition. It is the Government's hope that a similar change will come about on the London to Hong Kong route, and, indeed, I believe that the variety of fares and services which are already available on that route suggest that such a change is already in train. In the future it is the Government's intention that the CAA will take the initiative in identifying opportunities where the opening of a route to competition would enable a much wider public to have access to air travel.

I turn now to Clause 12 of the Bill. When consultations took place last year on the proposed legislation, several respondents were of the view that it would be helpful for the CAA, in the absence of the policy guidance, to publish an account of the manner in which it proposed to apply the duties and objectives set out in the 1971 Act as amended. This was a sensible suggestion, and Clause 12 therefore requires the CAA to publish a statement of its air transport licensing policies within six months of this Bill receiving Royal Assent. It also provides for the CAA to carry out appropriate consultations with representatives of the air transport industry and with users of the industry's services before publishing its statement. Finally, subsection (3) of the clause empowers the Secretary of State to require the CAA to publish a statement of the policy it intends to adopt in respect of any particular matter relating to its air transport licensing functions. This establishes a mechanism whereby expressions of concern as to the CAA's exercise of its functions may, if the Secretary of State agrees, be resolved.

Part II of this Bill contains a number of other clauses relating to civil aviation law. I will not weary your Lordships by detailing the purpose of each of the less important clauses, which I think are adequately described by the Explanatory Memorandum. However, I would draw your Lordships' attention to the following clauses as making changes of import in the law. Clause 10 confers on the Secretary of State powers to require British air transport businesses to place at his disposal the whole or the relevant parts of their undertakings in time of war, actual or imminent, or in the event of a great national emergency. In the past, the Secretary of State has exercised such powers only in respect of British Airways, but, of course, the change in status of British Airways proposed in Part I of this Bill would make it inappropriate for BA to continue to be singled out in this way. Equally important is the increased need for access to back-up for the country's military forces in the light of recent world developments, and Clause 10 therefore extends the Secretary of State's emergency powers to cover all United Kingdom air transport businesses.

Clause 13 sets out in a more straightforward manner the borrowing powers of the Civil Aviation Authority, and provides for an increase in the CAA's borrowing limit from £125 million to £200 million in order to cover the major investment programmes planned by the authority over the next few years. The CAA's current outstanding debt is £102 million, of which £81 million was borrowed, through the Secretary of State, from the National Loan Fund, with the rest being raised from the European Investment Bank and on the international money markets. It is likely that the CAA's future borrowing needs will continue to be met from a variety of sources, with an increasing proportion of those needs being provided for by loans in US dollars from international money market sources. This will permit the CAA to match its dollar income against an appropriate dollar debt, so mitigating the effect of exchange rate movements on the authority's trading results.

Clause 17 abolishes certain Government controls over the CAA which were appropriate when the authority was dependent on grant in aid but are no longer relevant now that grant in aid covers less than 20 per cent. of the authority's expenditure. Clause 17 will enable the CAA to employ such staff and pay them such salaries as the authority considers proper and it will also terminate Government control over the CAA's pension scheme.

Finally, I would draw attention to Clause 24 which enables the British Airports Authority to acquire land by agreement. This provision will apply generally to all the authority's airports but its immediate effect will be to enable the BAA to purchase property in the wider area of 2,500 acres sround Stansted airport which will not be the subject of a formal planning application or a compulsory purchase order until such time as a need is established for its future development. It will allow the BAA to alleviate the hardship of those with property within this area who, because of the uncertainty of the situation, would have difficulty selling on the open market and who would be unable to benefit from the statutory blight provisions which apply when land is the subject of a compulsory purchase order. This Clause fulfils the commitment made by my right honourable friend the Secretary of State in his Statement in another place on 17th December last year and which I repeated to your Lordships.

This Bill is designed to secure the sound development of British Airways as a normally-constituted private sector limited company and to establish on a firm legislative basis the objectives and duties which it is the Civil Aviation Authority's duty to pursue. I now commend the Bill to your Lordships.

Moved, That the Bill be now read 2ª.—(Lord Trefgarne.)

5.52 p.m.


My Lords, I think the whole House will be indebted and grateful to the noble Lord for his detailed and clear exposition of this Bill. I should like to start by saying that we on these Benches welcome the proposals to provide participation of the workforce of British Airways in the new shareholding and to give them certain preferential treatment in the buying of shares and, I believe, also in the disposal of shares to a certain limit. We shall look forward to be told the precise details of these when the parties concerned have agreed.

For some time now the airline business has been in recession, and is likely to go on being in recession. It is not surprising that the latest financial report of British Airways shows a less happy picture than it did a year ago. Despite the amalgamation of BEA and BOAC which took place eight years ago, the reverberations of the staff difficulties that resulted have still not finally settled. The airline is in process of slimming down its fleet of aircraft and subsequently the disposal of the resulting surplus. Taken together, it does not seem to be a propitious moment to contemplate drawing up a prospectus for launching a new company. I understand that the complications involved are not likely to be ironed out before the summer of next year, that is, in 1981. It is possible that by that time the financial horizon may have become more encouraging. That time may be right; but is there ever a right time?

The Bill says that one of its objectives is to free this new company from Government interference and to get the Treasury off its back. It will no longer have to seek ministerial approval for the purchase of new equipment and it will be free to go to the market for new finance. So far so good. But does this not also mean that the Government now get off the financial hook to provide new funding? I am not clear from the Bill what the resulting Government holding will be when the Secretary of State has disposed of its shares to public ownership. We on these Benches hope that it will not be allowed to be lower than 51 per cent.—if only to preserve the company from being taken over by interests which may not be British as well as seriously prejudicing the ownership and control attaching to the designation of an airline to a particular international route.

I understand from what the noble Lord has said that if there was a danger of interference in the company's control, the Government would step in; but he did not tell us how this will be done. If I remember correctly, a somewhat similar argument arose when we debated the denationalisation of Aerospace. I think the point was brushed aside by its being said that the articles of association could be relied upon to take care of all that. As I said at the time, but to no avail, it is unwise to rely on articles of association as these can be changed at any time by a board resolution. I hope that if and when it is necessary for the Government to take action in the matter they will not rely on articles of association. I hope that the noble Lord when he comes to reply will be able to tell me of this.

This brings me to the question of board membership. The Bill says that the Secretary of State will not appoint Government directors but will select members from outside the Government orbit. But, whether the Government's final shareholding will be more or less than a majority holding, the shares still will be Government shares and will be the property of the general public. Should there not be at least one Government board member to represent this interest? Presumably there will be a considerable gap in time between this Bill becoming law and the issue of shares to the general public. In the meantime, all the shares will be owned by the Secretary of State. Presumably there will be an interim board to be selected by the Minister. What then will be the status of this board vis-à-vis these shares and the pressures of Government policy?

I turn now to the Civil Aviation Authority, or that part of it which deals with the functions relative to the granting of licenses to airline operators. I imagine that it is well realised that these licenses are a big asset, if not the most important asset, of any airline. All the skills, sophisticated equipment and hard work are of no avail if the operator does not have a licence to operate and use them; so that if an airline company has any cancellation, modification or other alteration of its licence, this can cause great damage to the value of its main asset and to its equity value. I suggest that the Bill as it now stands requires quite a lot of clarification and definition of the functions and obligations of the CAA in this connection and provision for them should be made clear by inclusion in the Bill.

When an operator is granted a licence, it is required to make suitable provision for finance, equipment and staff to meet the obligations of that licence. It seems proper that the operator should have some protection against any sudden withdrawal or modification of its licence. There should be established therefore a minimum period of validity for these licences. It should be made incumbent upon the CAA if and when it decides upon a cancellation or a modification of a licence to make a full public statement of its reasons for doing so; and there should be proper time provided for prior discussions, the preparation of adequate defence, the right of appeal and, if appropriate, opportunities for arbitration. Such provisions should be incorporated in the Bill.

Recently we were confronted with somewhat startling action by the Secretary of State who, apparently without new evidence, save possibly the expression of opinion by an interested party, within a few weeks of the granting of a licence by the Civil Aviation Authority overruled the CAA and seriously modified the licence. If this is to be the order of the day, these CAA operating licences will be rendered valueless. Surely, there should be some provision for protection against such ministerial U-turns. Meantime, on these Benches we shall be happy to support the Second Reading of this Bill.

6 p.m.


My Lords, I hope that my remarks today will be able to stand up to the scrutiny of the most knowledgeable and distinguished speakers who follow me. A long time ago, in July 1971, we had the Second Reading of the then Civil Aviation Bill. In that debate I remember raising three main points: the structure of international air fares; charter flights; the proposed Civil Aviation Authority and consumer affairs. Obviously much has happened since then, but at that time I asked for a major reappraisal by all Governments of the whole balance of air transport effort. I think that most speakers in that debate felt the same. Today Governments are doing just this. They have had to, my Lords. Charter flights; cheaper scheduled flights, particularly in Europe; the position of IATA; the attitude of IATA and membership of IATA have all made reappraisal necessary.

But I suggest that we have a major new problem to take into account, it may be throughout the world but certainly in this country, and that is the problem of airports. While considering whether we have new airports or new terminals, whether we manage with expansion of existing facilities, to my mind one question comes more and more to the fore, and that is: Are passengers made for airports or airports for passengers? On short distance flights today from London to Paris or London to Brussels, we spend more time getting to airports and from airports, and we spend more time on the ground than we do in the air.

Since 1971—reverting to my three main points—we have made considerable progress on the fares front and on charters. But where are we on consumer affairs? Today, as in 1971, I deliberately avoid using the words "consumer complaints". There are many consumer matters affecting travellers which are not complaints and the sooner everyone leaves behind that old fashioned concept, the better.

Today I want to speak on one aspect only, one better discussed on Second Reading than in Committee. What I really want is to find out the general attitude of the Government in the area concerned. I have so informed the Minister. In 1971 I was by no means the only speaker in the debate who criticised the Bill and the apparent attitude towards the consumer. Indeed, my noble friend Lord Beswick asked, if we were to be given so much detail, why could reference not be made to the function of the authority as custodian of the consumer interest? Lord Beaumont of Whitley, speaking from the Liberal Benches, felt that the failure of the Bill we were then discussing was that there was virtually no mention of the duties of the consumer. So the House will not be surprised that what I want to talk about today is the position of the air traveller.

When this new Bill first appeared, I felt encouraged and I trust that I will feel the same when we hear what the Minister has to say when he comes to reply. The encouragement was derived from the fact that in 1979 the Secretary of State for Trade obviously felt the same as many of us had felt in 1971. As the House will have noted, the draft new Bill which appeared in October last suggested the repeal of sub-paragraphs (b) and (c) in the old Section 3 so that "the furtherance of the reasonable interests of users of air transport services" now ranks equally with sub-paragraph (a). That has already been mentioned by the noble Lord, Lord Trefgarne, in his speech today.

Mr. Nott reinforced this attitude during the Second Reading of the present Bill when he said, at col. 49 of Hansard of the other place on 19th November, 1979: The whole emphasis of the task to which the CAA was charged in 1971 was to put the airlines first and to promote the British civil aviation industry. The airline users' interest was not the first consideration". This change is to be found in the new Clause 11(1), and airline users thank the Secretary of State.

Airline users need such official encouragement. The House will remember that it took us two years until July 1973 before the Airline Users' Committee was established, and if it had not been for this House we should not have had that body. Neither the industry nor Government wanted it. During those past six years I believe that the Airline Users' Committee has been useful both to the travelling public and to the airlines, but it has been severely handicapped. As a statutory body we could have accomplished much more, and I should like to explain why. At the moment there are far too many committees with the resultant demarcation arguments. Any air traveller, if he has problems, wants the matter dealt with. He does not want passing from committee to committee. Neither does he want to hear the various committees arguing as to which part of the whole they are responsible.

Among other things, I spent my six years on the Airline Users' Committee asking for it to be made statutory or, if not the AUC, one other body. At Second Reading in another place many references were made to the additional powers being given to the Civil Aviation Authority. Does this mean that the Government intend to continue the practice by which the industry consumer body is appointed and financed by the authority responsible for the civil aviation industry? However fair the Civil Aviation Authority may be, and whatever its intentions, that seems to me to be the wrong approach.

The House will remember the many occasions on which independent statutory powers have been sought for the Airline Users' Committee. I am sure that Members will remember the last Government admitting that they recognised the Airline Users' Committee as the consumer body, specifically promoting the interests of all air travellers". Furthermore, of all the committees so recognised by the Government, only the Airline Users' Committee was not to be given statutory status in the then pending legislation. In other words, only the air traveller was not to have his affairs dealt with by a statutory body which, most importantly, would have given it the corollary right of advance information and consultation on the relevant consumer aspects affecting air travellers by the industry concerned". That is a quote of course from statutory committees. I should be glad to have the thinking of the Government on this aspect irrespective of the date on which it is intended to change British Airways from a public corporation into a Companies Act company. The noble Lord mentioned that, and I gather that it is not before the autumn of next year at the earliest.

In the past the Airline Users' Committee had the misfortune of being a hybrid creature under the disposition of the Department of Trade and the Department of Consumer Protection. This provided endless opportunities for those responsible to say that nothing could be done. Dating back to 1973, there has been deep and entrenched opposition to the Airline Users' Committee being made statutory. Most of this came through the Department of Trade. I regret that for so long a period the department gave precedence, approval and backing to this entrenched opposition rather than to the users of air transport. We now have new faces at the department, and I am hoping that the Ministers concerned will feel able to look at this matter again.

If there were to be this new willingness, how could the matter be approached? During Second Reading in another place, references were made to the environment and the necessary environmental considerations to be taken into account in all these matters; and, indeed, the noble Lord, Lord Trefgarne, referred to these matters in his opening remarks today. I did try to pursue further both the environmental point and the problem of too many committees, as far back as 1975. Indeed, the report of the Select Committee on Nationalised Industries for the Session 1975–76 did print, at Appendix 11, a paper of mine, at page 117. This was titled, Airline Users' Committee: Terms of Reference. The paper had been prepared for the Airline Users' Committee and was reproduced by permission. I need not weary the House with much detail on this, but I should like to comment on the environmental aspect.

Difficulties have frequently arisen from the overlapping of the Airline Users' Committee and the British Airports Authority. There is little real identity between the airport committees and the airline user. As an example, whereas an airline traveller is the concern of the airline with which he has booked, in fact, for a time he is the responsibility of an airport authority. He has no ticket from the airport authority and indeed he probably knows nothing of this divided responsibility; but it exists.

As the passenger is concerned with handling at various airports, to get into the air, and numerous authorities are therefore involved, I maintain that some form of organisation is needed so that passengers may know where they stand. To me, it is quite clear that air travellers will not be looked after adequately until there is one statutory committee charged with this work. The airport consultative committees have a dual function, representing the interests of users and people living in the vicinity. But these are quite divided interests. It would appear that the arrangements would be much more effective if there were airport committees representing the interests of only the people in the vicinity of each airport, and one statutory committee representing the interests of air travellers generally. Obviously such a change would greatly hearten the environmentalists, who have many problems today when new airports, new terminals and even new runways are being discussed.

It is not only the user who is affected—indeed, I would say it is not mainly the user who is affected—environmentally on these matters, but rather the people who live round the suggested airports, terminals and runways. What an opportunity, it seems to me, is thus offered to airport committees; that surely should be their function. After all—I think I should quote this—the terms of reference of the airport consultative committees set up by the British Airports Authority are: In the management and administration of any aerodrome, the Authority shall provide for the users of the aerodrome, for the local authorities in whose area the aerodrome or any part thereof is situated, or other local authorities whose areas are in the neighbourhood of the aerodrome, and for other organistions representing the interests of the persons concerned with the locality in which the aerodrome is situated, adequate facilities for consultation with respect to matters affecting their interests, and shall in doing so give effect to any direction given to it by the Minister". If Ministers are willing to consider this matter, I am convinced that progress could be made. In the past this willingness has not been apparent.

Now I come back to the Civil Aviation Authority. However fair such a body may be, I think it is indisputable that the consumer function of an organisation such as the Civil Aviation Authority is different from that of an independent Airline Users' Committee. I think it is wrong fundamentally—and always have—that the Airline Users' Committee should be financed by and appointed by the Civil Aviation Authority. If I am told that the Airline Users' Committee is independent, I would merely state that its members and its chairman are appointed by the Civil Aviation Authority. I feel that I am entitled to add here how glad I am that Mr. Clinton Davis, now in Opposition, agrees with me. It would not be in order to quote his exact words, but during the 20th sitting of the Committee in another place, at column 1031, Mr. Davis made clear that he now regarded the close association of the Airline Users' Committee with the Civil Aviation Authority as a drawback to the Airline Users' Committee.

My suggestions were reproduced in a report made four years ago—to be exact, on 5th February 1976—and referred to previously. But I am glad to be able to call in aid a more recent one, again from the Select Committee on Nationalised Industries, for the session 1978–79, and made on 2nd April 1979. In this later report, at paragraph 56, and following a recommendation of the National Consumar Council, the Select Committee recommended: That the Government should examine whether consumer representation in the field of air transport might be improved, perhaps through extending the remit of the Airline Users' Committee to include airports, through giving the Airline Users' Committee statutory status, or through setting up a consumer body to consider air safety. So I ask the Government to consider giving the Airline Users' Committee statutory status and giving the airport consultative committees more scope by asking them to take on all environmental issues.

I was encouraged by the fact that Mr. Norman Tebbit, the Minister responsible in Committee, stressed during the 15th sitting, at column 744, his concern for the interests of the residents near airfields, who might or might not be consumers of air transport services, adding that the provisions put into the Bill were to increase rather than to decrease the importance given to environmental considerations. Subsequently, a member of the Committee asked who should have a look at and be responsible for environmental problems. I have just made a suggestion—namely, that the airport consultative committees should do the job. I should think that this suggestion would have added force because of the remarks made by the chairman of the Civil Aviation Authority, Sir Nigel Foulkes, and reported in The Times on 30th July. Sir Nigel was criticising a section of this new Civil Aviation Bill which proposed environmental responsibilities for the authority in air transport licensing, which was also mentioned by the noble Lord, Lord Trefgarne. Sir Nigel went on to say: The Authority is a specialised organisation, trained and equipped to serve civil aviation. It is hard to see how a non-governmental body like ours could resolve the often incompatible claims of the aeroplane and the environmental objector". Recalling how this House, from all sides, has reacted over past years, I have no doubt that agreement exists that airline travellers must have some organisation to speak for them. Arising from this, I have for the Minister four questions of which I have given notice.

It was stated in Committee that at present the right of access to information is only discretionary so far as the organisations representing users are concerned, whereas the airline industry in all its aspects has statutory rights. Is that correct? The previous Secretary of State expressed fears that, after the Bill became an Act, all that MPs would be able to do —and I include this House—would be to write polite letters to the Civil Aviation Authority asking it to change its views on certain aspects. Is this correct? Or may we take as correct the statement made by Mr. Tebbit, when he said during the 14th sitting, at column 738: There are still enormous numbers of opportunities for the posing of parliamentary Questions". I hope that is so. Such opportunities will certainly not be overlooked in this House, on both sides of this House.

My last question concerns the obvious necessity of having an organisation to speak for air travellers. if we cite problems well known to this House such as the West London Air Terminal, the bus services to Heathrow, taxis from the Victoria terminal and indeed their cost from anywhere, and a realisation that passengers actually have luggage, I think it must be accepted that we cannot leave such matters to people who control the organisations producing these problems. Can the Minister comment on this?

Finally—and I am sorry to have taken up so much time but it is essential that the background is on record in this battle which we have not yet won—whether or not the Government feel able to accept any legislative amendment in this spill-over period, they must, I think, agree that the present situation is not satisfactory. If making the Airline Users' Committee a statutory body requires legislation, would it not be possible as an interim action to consider changing the terms of reference of the relevant committees—something I put forward as long ago as 1975? That would help, otherwise I assure the Minister that demarcation problems will remain to the detriment of air travellers.

That is for the short term. For the long term—I do not know whether the Minister can say how long that will be—I realise that the whole position of consumers and the nationalised industries is under review by the Minister of State for Consumer Affairs and that we shall eventually have a Green Paper on this. May we have an assurance from the Minister that consumers of air travel will be included in this review, as both the Civil Aviation Authority and the British Airports Authority come into the category of nationalised industries? So I ask for the interim measure of amending the terms of reference and the longer-term one of including the air traveller in the review of the future position. These are two modest requests. The Secretary of State wishes to enhance consideration of consumer interests. The Under-Secretary of State, Mr. Tebbit, said in another place during the Second Reading, at col. 164: We shall put the passengers further up in the pecking order. We believe that airlines exist for passengers. I have maintained, always, that without passengers there would be no airlines. Apparently, the Government agree. What do they intend to do?

6.23 p.m.


My Lords, a major Civil Aviation Bill comes before Parliament generally only about once in a decade. When it does, it is a matter of very great public importance for it involves the regulation and control of a major and a highly successful British industry. It is not always fully appreciated that we in this country have the second largest civil aviation industry in the free world. I have to use that qualification "the free world" since the cloud of military security hangs over the civil aviation activities as it often hangs over the accident records, of the communist world. But after the United States, though a long way after, of course, British civil aviation is the second in the free world. It is a major industry. In connection and in partnership with our tourist industry, the two are the biggest earners of foreign exchange. It is also an industry in which we are highly efficient. Indeed, it is an industry that includes the only British nationalised industry which is at the same time fully exposed to world competition and makes a profit.




I know what my noble friend has in mind. He has in mind the industry over which he presided with such great distinction, but he will also recall the limitations of the competition to which it was exposed with its built-in purchaser in the shape of the British Government. I am sure the last thing my noble friend wants to do is to diminish in any way the remarkable achievement of British Airways in one of the most competitive businesses in the world, making a profit year after year. Now I will certainly give way. No? I am very glad if I appear to have satisfied. I was only going to say "my noble friend," because in many ways he is.

Therefore, the theme of what I am beginning to say is that a Bill of this sort is a matter of major importance which I hope the House will examine carefully not only tonight, when perhaps, somewhat unhappily, it comes on at the tail end of exhausting parliamentary sittings, but also very carefully in Committee when we come back to it during the spill-over, because it really is important to get it right. This is an industry in which, as I say, we as a country are successful. Our airlines, public and private, have the highest reputation. They are highly competitive. Both the public and private sectors are leaders in the move for international cheap fares, and technically safety-wise the skill of their pilots and the admirable service given by their cabin crews are the highest in the world. It is therefore owing to this industry that we should get it right.

I feel that the form—I am not talking about the substance at the moment—of Part II of this Bill is somewhat unfortunate. As noble Lords will see, it proceeds by seeking to amend large parts of the Act of 1971 and, indeed, to write into it certain entirely new provisions. That is a very confusing way of legislating from the point of view of those who have to carry out the legislation. I should have thought that a more workmanlike way of doing it would have been to repeal the 1971 Act in toto and to have re-enacted it with these amendments. We would then have had the whole of the relevant legislation in one statute.

If that be at this stage impossible, I must ask my noble friend why we cannot have what used to be called in another place Keeling schedules; that is to say, a schedule to the Bill setting out how the 1971 Act sections would look if the provisions in this Bill were put into them. As it is, if one is to judge what the effect of a good deal of Part II of this Bill will be, one has to do some sort of paper and scissors work with the 1971 Act. That really is an extremely inconvenient way to legislate. I would ask my noble friend to consider whether Parliament is being treated very fairly and very well by legislation being in this form.

Coming now to the substance, I begin that with a reference to Part I. I personally welcome the transformation of British Airways from a state corporation into a company under the Companies Act. I welcome it particularly because of the opportunity which it gives to introduce employee shareholding. For some reason which I do not understand this provision seems to have caused a certain irritation to the Opposition in another place. It seems to me a wholly admirable provision, particularly in an organisation like British Airways, which in the past has suffered from industrial trouble and in which employee shareholding may very well help to weld together all who work in it with a sense not only of common purpose but of common interest. I very much hope the employee shareholding provisions will be a success.

As some of your Lordships know, I speak on this aspect of things with a little knowledge inasmuch as the company of which I happen to be chairman today was one of the leaders in this country in introducing employee shareholding and in which today over 90 per cent. of our United Kingdom workforce hold shares. I therefore see the benefits of employee shareholding very close up, and I am absolutely delighted that British Airways is to have a similar advantage.

On the other hand, I am a little puzzled by what my noble friend said about arrangements for the board. If the British Government, on behalf of the British taxpayer, are to remain a majority shareholder in the new company they cannot, as I see it, divorce themselves from responsibility for at any rate a large number of board appointments. To do so surely would be really to fail to discharge the duty which falls on shareholders, who have a responsibility in the ultimate for seeing that their board is properly composed. If the British Government, whether as a majority shareholder or merely the largest shareholder—I understand they may he either—simply wash their hands of board appointments, that would be an abdication which would seem to go against the whole spirit of today and against the way in which the Companies Act is operated. I hope that my noble friend will be able to clarify this and be able to tell us that the Government—not as Government but as shareholders—are intending to exercise proper influence in board appointments.

My noble friend said something to the effect, before the changeover takes place, of equipping British Airways with a new but adequate board. I should like to hear a little more from him as to how he proposes to do that, and I should like also to take up a related point. My understanding is that the present very able chairman of British Airways, Mr. Ross Stainton, is due to retire in November. We have had no intimation as to who his successor might be and we are already in the month of August. British Airways are facing another major transition as well as the constant competitive struggle in which they are involved, and I am not sure that it is treating them terribly well to leave the question of the succession to the chairmanship over so long. I should like my noble friend to give some indication that an early announcement will be made.

I pass now to Part 11. I welcome the abolition of the guidance. As your Lordships know, I lived under two successive guidances for five years and I never thought they were a satisfactory instrument. They were neither legislation nor straight administration, and they sought to influence the decisions of the authority without actually clearly instructing it to do something or clearly leaving it to the authority; and, as the event proved, they were subject to abuse.

I was very surprised to hear my noble friend's reference to the Court of Appeal decision in Laker against the Department of Trade when he said that it gave what was "to the industry" a surprising interpretation of Clause 3(1)(b) of the 1971 Act. I can only tell him, having at that time access to legal advice which appears to have been of somewhat higher quality than that which was then available to the Department of Trade, that it came as no surprise to me. And it seems to me now, re-reading the decision, that the Court of Appeal came to the perfectly obvious conclusion that the second guidance was plain contrary to the terms of the 1971 statute and, as the guidance plainly could not override the statute, was invalid. My noble friend's indication (almost a suggestion) that he was among those in his then capacity who was surprised by the Court of Appeal's decision, surprises me. If it does not sound too Irish, my Lords, I am surprised that he was surprised!

The object of removing the guidance, as I understand was said in another place, was to strengthen the independence and authority of the Civil Aviation Authority. I welcome that. Your Lordships may feel, and perhaps it is true, that I have to admit to a certain bias in view of my past connection with that body; but I think it is commonsense that if you hive off a great deal of responsibility for civil aviation from Government to an outside body, the sensible thing is to leave the fullest responsibility with that body. There is an old saying: There is no point in keeping a dog and barking yourself. It seems to me the greatest mistake for Government to duplicate the administration of civil aviation and maintain both a statutory independent authority and at the same time retain a good deal of power with Government themselves.

I welcome very much this decision to strengthen the independence of the authority; but here again there is a "puzzlement", reference to which has already been made. While this Bill with, inter alia, this purpose was going through Parliament, the Secretary of State, for the first time since the authority was set up, allowed, and allowed somewhat dramatically—I think the noble Earl, Lord Amherst, referred to it as a "startling" decision—the appeal on the Hong Kong route.

I shall not comment on the merits of the Secretary of State's decision, but I think the procedure followed merits examination, and it may well be that noble Lords may point to some amendment to this Bill which should come at Committee stage. The authority, at a public hearing and acting quasi-judicially, heard all the evidence and heard it cross-examined; and it came to the conclusion, right or wrong, that there was only sufficient traffic on the route for two airlines. The Secretary of State did not hear any evidence. He had, of course, the shorthand note of the evidence which was given before the authority, but one does not know what other information or advice he had. One does not know, though one may suspect, whether he had representations from the Government of Hong Kong, possibly through the Foreign and Commonwealth Office.


My Lords, I am greatly obliged to my noble friend for giving way. I am sure my noble friend will recall, when I remind him, that the appeal procedure to the 1971 Act provides specifically that the Secretary of State, in considering an appeal, may only take into account those matters which were taken into account at the original licence hearing.


My Lords, I do recall those provisions. I do not, of course, know how the Secretary of State acted or what information he had. It was certainly indicated in Hong Kong that strong representations were being made to Her Majesty's Government, and I cannot believe that the Secretary of State was wholly unaware of those. But I am obliged to my noble friend for touching on a point I was going to make. Were a Secretary of State, in considering an appeal, to take into account anything other than what was on the shorthand note of evidence, it would mean that he was hearing views, sound or unsound, which had not been given, as the evidence at the hearing had, before the other parties and was liable to be cross-examined, but which had come to him direct.

If, as could be the case, other considerations were taken into account, I think this is a matter against which at the Committee stage of this Bill we might consider taking legislative precautions. If my noble friend assures us when he has had a chance to make inquiries, because I realise he does not serve in the particular department concerned, that no such matters were taken into account, I, for one, would find it most reassuring; but that would not necessarily mean that one ought not, when legislating, to take precautions against possible actions in the future of a Secretary of State who was less conscientious.

For the Secretary of State to allow an appeal, which he is legally entitled to do, has very unfortunate consequences. When the authority has granted a licence, the airline in question knows, or thinks it knows, that it has the right to operate and the ambience, the competition in which it is going to operate. If, months later, the decision of the authority is altered on appeal, then the value of the licence and the incentive to get on and operate it are both very much diminished. I should like to hear from my noble friend—I cannot expect him just to say that this was an aberration of the Secretary of State, because if he did say that he might find himself translated to some other appointment—whether this was a very exceptional action of the Secretary of State and that that dignitary, hopefully, does not intend to do it very often again.

This was, after all—I hope that I am not making heavy weather of this—the first time it had happened in the eight years of the authority's operation, and there is some heavy onus on a Minister who, from his desk, overrides the result, not of a decision of the authority itself, but of a decision quasi-judicially arrived at, subject to rules which could be enforced by the High Court and carried out in a way inspected by the Council on Tribunals, but with none of those safeguards operating against himself. I very much hope that we may hear a good deal more of this, either tonight or during the later stages of the Bill.

I welcome very much the addition which was put in in another place at the Report stage—my noble friend, with his usual tact, slightly brushed over the fact that it appeared only at the Report stage—which puts into the new Section 23A, which is being put into the 1971 Act, an instruction to the authority to bear in mind the benefits which competition may bring. As the Bill was introduced with what one might call the British Caledonian clause of the 1971 Act taken out, the Bill looked as if it was beamed at being rather restrictive of competition. But I think that the balance has been very much restored by this amendment which has been put in in another place, and I should like to say how much I welcome it.

I come now to the duty in the new Sections 3A and 23A, which is imposed on the Civil Aviation Authority to take account of environmental considerations. It is my impression—and the quotation which the noble Baroness opposite gave from the speech of Sir Nigel Foulkes the other day confirms this—that the authority is not over-enthusiastic about taking on this new responsibility. I can understand this, but, on the whole, it is probably right that responsibility for taking into account environmental considerations should lie where the main decisions are made. On the whole, I am more on the side of the Government than of my successor on that point.

But having taken this step to transfer this environmental responsibility to the authority, logically the Government might well go further. They might transfer, in particular, one of the most important of the environmental restrictions on aviation, the night curfews at certain major airports —my noble friend in his previous capacity suffered from these at Gatwick—which are imposed at the moment by the Department of Trade. They are rather unusual restrictions in some sense, in as much as they fall only on aviation.

No one interferes with or restricts the night operation of railways, though railways operate, as the House knows, through the centres of big cities, through residential areas and through the otherwise quiet countryside. There is no night limitation on heavy trucks, bumping and vibrating their way through small country villages. Only aircraft are restricted in this way, and this can have very serious consequences for the viability of airline operations. As the former chairman of Air New Zealand once pointed out to me, aircraft earn money only when they are in the air, and Air New Zealand was at one time the most profitable airline in the world, because its aircraft averaged 14 hours of the 24 in the air.

British airlines, and all airlines operating into our major airports, are very restricted by these night schedule restrictions and they have grown with the years. They have moved forward in the morning and backward in the evening, until they constitute quite a considerable handicap for aviation. It seems to me that there is everything to be said for handing over their operation to the body which is responsible for the wellbeing of the airline industry; that is, the Civil Aviation Authority.

In case noble Lords think I have exaggerated their impact, I should like to give the House one positive example of the way, as at present framed and as at present administered, they operate. On the night of 28th July 1979, just over a year ago, four fully loaded British Airways 747s failed, for a variety of reasons, to get off before the night curfew came down. The British Airports Authority informed them that no flexibility could be allowed. They simply were not allowed to depart, though they were ready to depart; each of them, as it so happened, with 400 passengers. Your Lordships can well understand the difficulties and unpleasantness that this caused.

British Airways, by Herculean efforts, got three of the batches of 400 passengers into hotels that night, though they had in one case to go as far as the Tower Hotel in the City of London, which is a long way from Heathrow, to get accommodation. They simply could not find accommodation for the passengers in the fourth aircraft, who simply spent the night in the departure lounge at Heathrow. There was nothing, except those curfews and the inflexibility of their administration, which prevented all these passengers from being safely and comfortably on their way. The unfairness is that most of those passengers will hold that as a grievance against British Airways, who not only had no responsibility for what happened, but were, of course, in financial terms—having to pay for the hotel accommodation—major sufferers from the happening itself.

Passing quickly from that, I welcome very much Clause 17 to which my noble friend referred. Clause 17 abolishes the control by the Government over the pay, remuneration and pensions of the Civil Aviation Authority staff. There is a history of this, of which my noble friend is aware, but the House probably is not. These provisions were put in the 1971 Act, in order to protect the interests of a large number of civil servants, who at that time were being transferred from the Civil Service to the Civil Aviation Authority. My noble friend Lord Glenkinglas—with whom I have discussed the matter in the last 24 hours, and who authorises me to say that he agrees with me—then in the House of Commons, gave assurances that this condition of Government approval of CAA salaries was inserted simply to protect those transferred civil servants from being paid less by the Civil Aviation Authority than they were getting as civil servants: a natural and proper protection for civil servants compulsorily transferred.

But my own experience was that the Government of the day, and in particular the Civil Service Department, used these powers for the exactly opposite purpose, to restrict and restrain increases in the pay of the authority's staff. It is not that when we started as an authority we were anxious to be lavish or extravagant. It simply was, as many of your Lordships will know, that when you are moving from a Civil Service-based system to a commercial system, as we were indeed ordered by Parliament to do, you very often want to pay a number of people quite a lot to do the job which several people have been doing before. This is the way to get a streamlined and efficient organisation. But for years the Civil Service Department blocked our efforts to improve the pay of certain of our staff, using the powers which Clause 17, I am delighted to see, now abolishes.

I was told, among other reasons, when I argued this—noble Lords who know me will appreciate that I did argue this—that one of the things which the Civil Service was frightened of was that if we paid more than Civil Service rates we might have an advantage in recruiting high-grade staff, as compared with the Civil Service itself. It was a real abuse of power. To give credit where it is due, I failed to get any substantial alleviation of this during the Government of Mr. Heath, but the administration of Sir Harold Wilson—though I did not trouble Sir Harold personally with this—proved more helpful and a breakthrough was established after a year or two. But, again, this is a power which can be abused and which I am really delighted to see being eliminated.

Finally, I welcome, as did the noble Baroness who preceded me, the elevation of the interests of consumers, the airline passengers, to the same level of importance in the authority's consideration as the interests of the airlines. If I may say so, if any single individual has been responsible for that change it is the noble Baroness, who by her utter determination—she will not mind my saying her ruthless determination—succeeded eventually in persuading the Government of the day to take this very important and very justifiable step.

I do not wholly go along with her—she will not expect me to—about the Airline Users' Committee. Whether it would have benefited from statutory powers I do not know. I do not think that any statutory powers that it had had would have been anything like as big a contribution to its efficacy as was the appointment to it, for which I can claim responsibility, of both the noble Baroness on that side and my noble friend Lady Trumpington on this side. If noble Lords were to ask me whether statutory powers or two noble Baronesses are the more effective, I would come down on the side of the noble Baronesses.

I agree very much with what the noble Baroness, Lady Burton of Coventry, said about the extension of the powers of the Airline Users' Committee, whether statutory or not, to cover the treatment and handling of passengers at airports. It is indeed, as I think she will agree with me, at airports that most of the problems of passengers arise. On the whole, once safely in the air their troubles are over.

The Airline Users' Committee found, as the Civil Aviation Authority found, that the British Airports Authority's attitude—that this was their matter and the concern only of their airport consultative committees—very much diminished the value of the work which the Airline Users' Committee did for the airline passenger. The British Airports Authority's story has always been that they have their own airport consultative committees, but, as the noble Baroness has said, they are not orientated to the passenger. They are very largely recruited from the adjoining local authorities. Their concern is the very proper and important one of noise, nuisance and pollution, and the interests of the passengers are of no particular concern.

The noble Baroness indicated that she might consider putting down an amendment in Committee, and I think it might be a good idea if an amendment could be drafted to secure that in respect of passengers and their handling the jurisdiction of the Airline Users' Committee should be extended from the airlines, which it already covers, to whichever is the airport authority concerned. I think that this is a very important Committee point.

There are innumerable other points which someone with my past experience would feel tempted to inflict on the House. However, I am very conscious of the fact that we are near the end of an exhaustive and exhausting Session, so all I will do at this stage is to say that on the whole I welcome the Bill. I think that in general it marks a considerable march forward. It merits quite close examination in Committee to make it even better so that when it emerges it will help forward the progress of one of our greatest industries, an industry upon which this country and its economic progress is becoming increasingly dependent.

6.54 p.m.


My Lords, I am delighted to follow the noble Lord, Lord Boyd-Carpenter, for three reasons. First, I see that he is sporting a tie which matches mine. Secondly, it gives me an opportunity to fill a gap in his knowledge with regard to the competitive character of British Aerospace. If the noble Lord remembers the circumstances under which British Airways insisted on buying all-American aircraft, and if he will refresh his memory of our last report, which showed that over 60 per cent. of what we sold earned foreign currency overseas, I am sure he will not wish in any way to denigrate the efforts which were made. Thirdly, I am delighted to follow the noble Lord because in other respects I am going to agree with much of what he said.


My Lords, if the noble Lord will allow me to say so at this early stage, I agree with very much of what he has said. Indeed, I can claim the credential that I was a member of the British Cabinet which in the early 1960s over-ruled the determination of British Airways to cancel their order for the VC.10 and made them take the VC.10, and therefore was entitled to great credit not only for the good that did the British aircraft industry, but for the good that did British Airways to have what was then the most comfortable aeroplane in the world.


My Lords, I am bound to tell the noble Lord that the situation has changed a good deal since those palmy days.


I fear so, my Lords.


It is not my purpose to contest the principle behind the proposal to establish British Airways Limited. However, as the noble Earl, Lord Amherst, and the noble Lord, Lord Boyd-Carpenter, have said, I am concerned with the procedure and the mechanism which is involved in this change.

I make this general point: what British industry needs at present, in my view, is a sense of continuity. That goes for British Airways. With the amortisation of aircraft spreading over anything from five to 15 years, it manifestly damages the British effort if the structure and ownership of an organisation is to be changed with each new Parliament. British Airways seems to me today to be under a board and a management team as good as and probably better than in any recent period. The board members together now constitute a formidable body of airline experience, and for my part I think that it is a pity that changes are proposed. I should have liked to see the present team left to prove themselves.

The questions that I want to put relate to the uncertain character of certain aspects of the proposed changes. First, the Bill refers to a target investment limit. I should like the noble Lord to tell me a little more about this. How is that target to be expressed? Is it to be expressed in a number of shares, or in a percentage of shares? Or is it to be expressed as a percentage of whatever is the share capital at any one time?

Will the noble Lord the Minister say something more about the proposed relationship between the company and the Government? My personal view—again, like that of the noble Lord, it is based on a certain amount of experience—is that those working for British Airways are as important, in their way, as the customer. I am sure that my noble friend Lady Burton of Coventry will agree with me. Together they make up the business. For them the company structure could—and I emphasise the word "could"—be as satisfactory, or satisfying, a corporate form as a statutory corporation. Certainly if the company remained wholly Government-owned, or partly employee-owned, if you like, then I would venture the opinion that it would be more satisfactory than the existing formula of a statutory corporation, with all that that implies in terms of Treasury intervention. But it is precisely this issue of relationship which is so clouded.

I understand that various ministerial spokesmen have said that the company will operate like a normal company. I believe that is what the noble Lord himself said. That is fine, or it could be fine. But then the noble Lord goes on to say that board members will be independent. As far as I understand him, he is implying that the Government will not be nominating board members. Now what exactly is this independence? Although the noble Lord emphasises that it will be a normal company, how does one reconcile the operations of a normal limited liability company with a body in which the board members are independent of the largest shareholder? I am bound to say that I do not know of any other normal company in which the majority shareholder deliberately, as a matter of policy, says that they will leave the appointment of directors to a minority interest. I feel that we shall have to look at this much more carefully, and I am reinforced in that view by what the noble Lord, Lord Boyd-Carpenter, has had to say. I should also like the noble Lord to say something about the position of the present board members of British Airways in two situations—the initial situation in which the company is wholly Government-owned and the situation which will arise after the sale, if any, of a proportion of the shares.

I understand that the appointments of present board members were all extended until November, but what is going to happen in December and onwards? I have already paid my tribute to the dedication of the executives now responsible for British Airways, but it would seem to me that the Government are imposing upon that dedication in the present situation. Of course, there will be uncertainties about the future but could not the noble Lord be a little more helpful so far as timing is concerned? The appointed day will be one for Government decision. Can the noble Lord not tell us when it is intended that the statutory corporation will hand over, as the Bill provides, to the new company? What day will that be? More difficult, I appreciate, but still I should have thought the Government would have some idea—what sort of time have they in mind so far as the sale of shares is concerned? The noble Lord used the magic word "flexible", but managers have to manage; they have to take decisions; they want to know something about the future, and I should have thought he could have been a little more helpful than that.

Then may I ask the noble Lord what procedure will be followed for this sale? Will the issue be underwritten? If so, will the underwriters decide when, or is the variable factor going to be the price, the date being fixed by the Government and the underwriters saying at what price they think they can dispose of the shares?

I have only one other and more detailed question on the first part of the Bill and that relates to the proposed powers to be taken in Clause 10. In a time of great national emergency and with the onetime great resources of RAF Transport Command now a matter of history, I should have thought that the powers proposed to be taken are reasonable; but can the noble Lord say whether they apply to personnel? Reference is made in the Bill to "persons managing that business" but what about the other individuals—pilots, for example? Are they to be subject to the same powers and to the same penalties? Probably the noble Lord can inform us on that point.

Turning to Part II of the Bill, I accept the basic doctrine which I understood lay behind Clause 11. The memory of the noble Lord, Lord Boyd-Carpenter, goes back some distance, but I think probably mine goes back the same length of time. It is almost exactly 36 years since I put forward the proposal that there should be an authoritative body outside a Government department responsible for air transport licensing functions as well as other aviation responsibilities. I recall discussing the problems enjoyably and I hope constructively, with the late Ronald Edwards, whose Committee made such a valuable contribution to later developments.

I have seen, sometimes from afar and sometimes from quite near, the growth in the responsibility and the effectiveness of the licensing body from the original Air Transport Advisory Council to the Air Transport Licensing Board, through the successful formative period under the distinguished chairmanship, if I may say so, of the noble Lord, Lord Boyd-Carpenter, to the present authority, which has come to deserve a well-merited reputation for careful work and sound judgment.

Given that reputation, built up over the years, it was, as others have said, all the more surprising that the Secretary of State should overturn the CAA decision on the Hong Kong route. It is difficult—and most informed observers would say impossible—to see how the Secretary of State was in a better position than the CAA to assess the traffic potential. If he has better analysts or researchers at his disposal, or if he has superior advisers, then I suggest they be given the job of licensing—they should take it over—but, if the Civil Aviation Authority is to be responsible, I should have thought action of that kind was unwise. Despite what the noble Lord himself said in an intervention, most people would say that it was an exercise in appeasement; appeasing the surprisingly influential interests in Hong Kong. If that is so, it will not be the first time, within my certain knowledge, that the Hong Kong tail has wagged the United Kingdom dog.

Be that as it may, the important thing now is to re-establish the authority of the authority. We need to restore the confidence of industry in that when they have a decision in their favour an operator can plan accordingly, invest accordingly and not see—40 days before a service is due to start—that the decision has been changed by the Secretary of State. Conceivably we might find an appropriate amendment which would give a clearer understanding of the circumstances—exceptional circumstances, one would expect—under which the Secretary of State would see fit to override the CAA. At present the Secretary of State—and this was emphasised by the noble Lord—cannot consider evidence not available at the hearing. But, of course, that rule makes it all the more difficult to understand his action in regard to the Hong Kong decision. But it is known in our legal processes for new evidence to come to light and for exceptional procedures to be provided.

I suggest that there could be such occasions when, properly, the Secretary of State should look again at a given decision, or he might be in a better position to assess the national interest outside the purview of the authority. Or, of course, we have provision in other fields where an appeal will lie on a point of law. I accept that in a democratic country there should be a possibility of appeal in certain circumstances, but I am inviting the Minister to consider defining the limits within which an appeal would be heard.

Perhaps I might add this. We might all have confidence in the discretion of the present ministerial team at the Department of Trade, but ministerial reshuffles are not unknown and indeed sometimes there are things called elections and it is not entirely impossible to conceive a less reliable incumbent in the ministerial office in that department. I hope the noble Lord will be able to say that he will consider an amendment; or at least would it be possible to have a carefully considered statement at Committee stage, after consultation with industry, which would do a little more to restore the structure undermined by the Hong Kong decision?

On the question of fare structures, I would pay a tribute to the efforts made by the Secretary of State to get more imagination and enterprise in the European fares structure. So far, however, the success seems to be limited. In these matters I would suggest that a more indirect approach and a wider dialogue can very often assist in the development of a policy. At some point I hope the noble Lord will tell us what is being done, or what can be done, to stimulate discussion in European circles.

I believe there has been too much protectionism over fares in the past. On occasions the cartels have certainly appeared over-strong. However, I hope that we are not now going to lurch over to the other extreme. A complete free-for-all or a dramatic price cutting will not necessarily help the air traveller of the future. In my view, one cannot properly apply the economics of the street market to air transport. The recent spectacle of operators bidding against each other for the North Atlantic standby passenger resembled nothing more than the barkers at a fairground, and that is not, in my view, consistent with the dignity or indeed the efficiency of this industry.

I add this. The economy and the comfort of air travel since the war has importantly, and probably most importantly, been advanced by improvements in equipment both on the ground and in the air. The wide-bodied aircraft and the high bypass ratio engine have probably been more significant as contributions towards the wellbeing of the passenger than any fare cutting. But if that kind of equipment is to be developed, then there must be sound customers able to invest hundreds of millions of pounds. The ability of an operator to raise capital for modern equipment is in the real interest of the traveller, and when we hear arguments about fares in the future I hope that point can be borne a little more in mind.

At Committee stage I hope we can look more closely at the provisions relating to the environment. I, for my part, would take for granted that if there was an application to operate a shuttle service from Heathrow in the early hours of the morning using 707s, or dare I say VC.10s, the authority would have some questions to ask about noise factors. I followed as carefully as I could what the noble Lord, Lord Trefgarne, had to say on this point, but are these provisions intended to make the CAA the authority on environmental matters? Are they really the body for that? Have they the staff? If it is going to cost them more money, are the Government going to provide that finance or will it have to go in airport charges? I would ask the noble Lord, are the questions involved really for technical consideration or are they not more a matter for political judgment? I am sure the ideas which my noble friend Lady Burton put forward deserve study, and I hope we can consider them at Committee stage. But my view at the moment is that the sort of problem that will have to be faced is one in which the Minister responsible should be seen to be taking responsibility.

Like other noble Lords, I have a certain number of other questions, but I have my eye on the clock. I look forward with confidence to the noble Lord, when he comes to reply, giving me just a little more information and satisfying me on some of the points I have ventured to raise. I hope that that may well help us to have an even more constructive Committee stage.

7.14 p.m.


My Lords, I should like to say at the outset that in general I welcome this Bill wholeheartedly. However, I wish to restrict my observations to that part of the Bill that deals with the new set of objectives set for the Civil Aviation Authority and in particular those objectives in respect of the environment. By virtue of Section 3(2) of the Civil Aviation Act 1971, the authority has the duty to perform its functions in such a manner as it considers is in accordance with guidance given by the Secretary of State after approval by each House of Parliament. The current guidance provides that: in exercising its functions the authority should take full account of the need to minimise disturbance caused to the public from noise, vibration and pollution arising from aircraft operations and should advise the Government on operational and economic aspects of achieving this objective. It should co-operate in Government policies designed to protect the environment, encourage airline and airport operators to adopt such policies, and generally assist the Government in implementing those policies". Read as a whole the guidance appears clearly to envisage that with regard to the environment the Civil Aviation Authority's main duty is to advise and co-operate with the Government. Together with the powers exercised by the Secretary of State under Section 29 of the Act of 1971, the provisions of the guidance on environmental matters—as interpreted and acted upon by the Civil Aviation Authority—have to date worked very well. In particular, the Civil Aviation Authority has been able to avoid any significant conflict between its duty to secure the provision of air services of a satisfactory standard and its obligations (as distinct from specific statutory duties) under the guidance.

My Lords, as your Lordships are aware, it is now proposed in this Bill to amend Section 3 of the Act so as, inter alin, to revoke the Secretary of State's power to give guidance to the authority. On environmental matters, that which is little more than earnest exhortation is to be replaced by a specific statutory duty placed upon the Civil Aviation Authority to have regard to the need to minimise as far as reasonably practicable the whole series of items affecting the environment which are within the body of the Bill, and I will not weary your Lordships with them.

I believe it is objectionable to impose on the Civil Aviation Authority by order a statutory duty to take account of additional and more far-reaching factors than those pertaining to the Secretary of State's own statutory powers in respect of these matters. Furthermore, I believe it would be quite wrong to impose upon the Civil Aviation Authority a duty to secure that British airlines provide air transport services which satisfy all substantial categories of public demand… together with the conflicting duty to minimise adverse effects on the environment and disturbance to the public.

The judgments that would be required in respect of"specified"aerodromes are essentially political judgments. The Civil Aviation Authority is not constituted to make judgments of that nature. It is motivated and professionally dedicated to the support, encouragement and development of civil aviation and would certainly be seen in that light by the environmentalists, or indeed any other kind of protestational neurotic. The judgments required concern the delicate balance between conflicting legitimate interests. Such judgments are for governments and not for a body corporate that is not the servant or agent of the Crown, not directly accountable to Parliament.

With regard to the provision of services by British airlines, and the reasonable interests of users of air transport services, the Civil Aviation Authority has, and would retain, specific statutory duties to which its environmental duties would be subordinate. In effect this would afford to airlines a measure of protection that would not be available to, say, air taxi operators and private aviation. I believe it to be questionable that the Secretary of State should have virtually unfettered power arbitrarily to "specify" aerodromes without prior consultation of any sort. Mind you, I cannot envisage any Secretary of State so doing. However, he has no obligation to consult. Furthermore, the Bill makes no provision as to the particular matters that may or may not be taken into account by the Civil Aviation Authority in relation to the licensing of "specified" aerodromes; nor does the Bill deal in any way with the conditions that could be attached to an aerodrome licence for environmental reasons. Section 29 of the Act of 1971, dealing with the Secretary of State's powers and duties, does set bounds and imposes requirements.

In order that it could be seen to have discharged its statutory duty fully, the Civil Aviation Authority would be obliged, in considering the licence of a"specified"aerodrome, to establish machinery for obtaining and considering the views and claims of the licensee, the users of the aerodrome and those who claim to be adversely affected by its operation. It might well be necessary to have public hearings on the lines of those for some air transport licences.

Again, no provision is made for appeal against Civil Aviation Authority decisions reached after taking into account, as would be required by the Bill, environmental matters. Nor is there any provision for procedures to be followed by the Civil Aviation Authority in considering, for example, a request to revoke or substantially restrict the licence of a "specified" aerodrome.

It would no doubt be necessary to amend the Civil Aviation Authority Regulations so as to provide for appeal against Civil Aviation Authority decisions, and it is difficult to contemplate any arrangement other than an appeal to the Secretary of State. It seems to follow that any Civil Aviation Authority decision with regard to a "specified" aerodrome, would be the subject of appeal either by aircraft operators who felt that they were unduly restricted, or—more likely—by those aggrieved by continued disturbance. As the Secretary of State would have to take the decision in the second instance he might just as well take it in the first. It would save a lot of unnecessary complication and work.

I would suggest, with respect, that it seems absurd to give the Secretary of State power to impose on the Civil Aviation Authority, by order, a duty to do things which he himself is already specifically empowered to do by virtue of Section 29 of the Act of 1971, and will presumably continue to do in respect of the four aerodromes already designated; namely, Heathrow, Gatwick, Stansted and Prestwick.

As your Lordships are aware, there are 130 aerodromes currently licensed by the Civil Aviation Authority, a large number of which could generate environmental complaints, with the consequent temptation for officials in the Department of Trade to offload the problem of dealing with the complainants by urging that the aerodromes be "specified", thus passing the buck to the Civil Aviation Authority. News travels fast and it would soon become known to the environmentalists that, instead of a situation whereby the Department of Trade had managed to contain environmental action to four major aerodromes, there was machinery by which pressure on the department would result in "specification" and access to an appeal machinery which had not existed previously, and which had not been needed previously, so far as I am aware.

Make no mistake about it; in this respect Her Majesty's Government are abrogating their duty to govern. They are passing on to the Civil Aviation Authority—a body corporate, not the servant nor the agent of the Crown—nor answerable to Parliament—a duty to take political decisions. In so doing I believe that they are making a rod for their own back, for any person aggrieved at Civil Aviation Authority decisions will, by whatever means are at his disposal, be they foul or fair, inevitably appeal to Government for satisfaction, and meanwhile place a spanner in the smooth working of the Civil Aviation Authority.

7.26 p.m.


My Lords, first, I should like to pay a tribute and extend my thanks to the noble Lord, Lord Trefgarne, for the clarity of his presentation of the Bill in your Lordships' House. Equally, or rather superiorly, I should like to extend my thanks to the noble Lord, Lord Boyd-Carpenter, for giving us the benefit of his incomparable knowledge of this interesting aspect of British life.

So far, we have heard speeches dominated by our fear for the future of passenger air traffic. But I should like to fulfil a duty, and that is, to help to emphasise the point made by the noble Lord, Lord Boyd-Carpenter, that this is an extremely important Bill and it is vital for the future of this country. Therefore, I should like to turn from air passenger traffic to air cargo.

Since the war we have been accustomed to thinking of commerce without paying due regard to the units of energy involved in the production of various commodities —that is because we have had cheap oil and we have had cheap coal. But now the reality of life has been enforced upon the trading countries of the world that certain countries can hold them to ransom because they—and they only—contain these supplies of fossil fuels. So, the units of energy come very much into the cost evaluation of our international trade routes. We now find that technologists are concerned with the criticism of the fuel efficiency of engines. I forecast that we shall see technologists producing new types of engines—engines which will reduce the usage of fuels of a conventional type. However, I do not want to develop a kind of Jules Verne pattern of talk; I should like to stay with the facts as I understand them.

The pessimists, of course, will say that they see the future of the internal combustion engine coming to an end because of the exhaustion of our liquid hydrocarbon fuels; in other words, the combustion engine is a wasting asset. We find, on the other hand, that supplementary or remedial measures are being taken by countries like Japan, by adding sails to ships to increase their speed and to reduce fuel costs. The traditional propeller of a ship will soon be completely changed and we shall see the use of plastics in driving ships through the seas —something that we have never thought of before. We shall see the hulls of ships lined with silicones that will reduce the friction and the buoyancy of the ships and so reduce the amount of fuel used for sea transport. And so, too, it will be in the air.

I was fortunate, after the war, to be in contact with Professor Andre Houberechts, a Belgian professor, who, to keep sane in a prisoner-of-war camp, worked out the mathematics of the thermo-dynamics of jet propulsion. That brought me into contact, naturally, with Whittle. As an interesting aside, if your Lordships wish to see the first Whittle engine you must go to the University of Louvain, and Professor Houberechts' department, where Whittle gave him an engine as a memento of the vast amount of mathematics he carried out as a prisoner of war.

So, in those early days I was educated by these masterminds into looking at jet propulsion. They were, in their brilliant way, instructing me on the value of bubbles and gases and how one day we would be not just driving an engine through the sky with hydrocarbons, but driving it through the sky with mixtures of hydrocarbons and water. We are already beginning to see that happen. We know that we can get the same energy out of mixtures of hydrocarbons and water as we can out of straight hydrocarbons. But the driving force of water is far superior to hydrocarbons. One has only to think of gazing at the fantastic performance of Old Faithful in Yellowstone Park to appreciate the enormous power of a steam jet. One has only to go into a power station to see a steam turbine at work to appreciate what happens if we could convert, effectively, water into a stream of gas. So we shall see all these things happen.

But I do not want to bore your Lordships with these anecdotes; rather, I want to draw to your attention, or to place on record, the growth in this country and in other countries of air cargo. Again, the orthodox mind will say:"Ali, yes, it is quite all right to fly expensive commodities like flowers from Nairobi to Frankfurt, perfumes or whatever, but only the specialist commodities can be economically transferred from A to B by air". But when one looks at the scene as it is at the moment, when one looks at every sophisticated and industrialised country in the world, what does one see? The basic industries are becoming more and more indigenous and less and less viable as exporters of the old gross products of industry, for example, iron and steel and motorcars. On the trade routes of the world of tomorrow or even today we shall see the sophisticated products that the world wants—for example, chemicals, which will not stand up to the rigours of sea and road travel but which must get from A to B fast and safely.

Therefore, in this debate I should like to underline the importance in the growth of our air freight industry. It has some exciting potentials for Britain. Let me give your Lordships one example of how this could not only work to the benefit of the world trade routes, but also how it has a significant effect upon the politics and social behaviours of countries in which at one time we had a parental interest.

Let us take, for example, Zambia, Uganda or Zimbabwe. They are all land-locked countries, throttled, by one disturbance or another, and so unable to export their products and, therefore, their economies are stifled. If we could import into these countries the ability, for example, to process their metals and fly the metals out—not the gross minerals—we would then create trade routes which would make air transport viable. I have had the privilege of discussing this with President Kaunda, and so to illustrate my point let us take the case of the Copper Belt. There there are waste tips of enormous size containing considerable percentages of copper, and particularly cobalt and selenium. The new revolution in the extraction of metals will be away from the use of heat for smelting metals. We now have compounds which, if you want a new word in your list of chemical jargon, are called "chelates". These compounds suck metals onto one end and throw the wasted part out at the other end; they are scavengers. They can isolate metals and purify them without the use of heat. I have explained to the people in Zambia that we make those chemicals; that we could fly them in and fly the cobalt out.

What I am talking about? Cobalt is fetching about £20,000 a tonne. I am talking about an annual trade between Zambia and Britain of £80 million per annum. If somebody tries to tell me that this is not a viable prospect for air transport, then I shall wonder what has happened to my mental reasoning. Therefore, I give that example simply to emphasise the point that at the moment probably only about 20 per cent.—and I defer to correction here—of our air traffic is devoted to cargo.

Just as the cargo ships of old produced the passenger ships, so the improvement of cargo airships will increase the available money for improving the conditions for the passengers for whom the noble Baronesses are pleading. I am also excited by this prospect of reverting to airships. I know that many people are allergic to airships after the R101, but to me they make sense because an airship is like a helicopter—it can land anywhere and can lift greater tonnages than an aircraft. I was immensely cheered to read in the press and to see on television that a company in the Isle of Man is building airships. This was triggered off by a company called—and noble Lords will see that I do not have to declare an interest because I am not sure of its name—Redcoat Cargo Limited. This company has been in business flying freight from here to Africa. It is interested in these airships that have been built which are capable of carrying 60 or 70 tonnes of freight at about 80 miles per hour. That is a viable possibility. In an article published in the Daily Mail on 4th August the managing director, Mr. Owen, of Redcoat Cargo said: If we were able to introduce the airship into service today, we would be able to reduce all our freight prices by 25 per cent. Therefore, I thought that it was my duty to place on record in this Second Reading debate these remarks which may be helpful when it comes to the Committee stage in ensuring—as the noble Lord, Lord Boyd-Carpenter, said—that we must get the Bill right; therefore, we must not have in the Bill any obstacle to the development of the distribution of merchandise around the world by means of airships or aircraft.

7.37 p.m.

The Earl of KINNOULL

My Lords, I think that one could truthfully describe some of the noble Lords who have so far taken part in this debate as godfathers of aviation. The standard may now drop a little in experience, but not in enthusiasm. My noble friend Lord Boyd-Carpenter described our civil aviation industry as the second largest of the free world. I would venture to add that it comes first when one looks at the influence of aviation in the free world; when one looks at the innovations, the development of markets and the fact that we have been able to bring air travel to many people; when one looks at the standards of service of our airlines and, above all, at the standard of our safety record. It is a 20th century industry at which I think we excel. Therefore, any civil aviation Bill which comes before Parliament, as other noble Lords have said, is of great importance. It must foster and maintain our market share and, indeed, make our industry continue to thrive.

I hope that this Bill will achieve that, although I do not quite share the obvious enthusiasm of my noble friend Lord Boyd-Carpenter for the considerably increased independence of the Civil Aviation Authority on licensing in the future. However annoying policy guidelines have been to the Civil Aviation Authority in the past, they were a direct line between the Minister and the authority and, indeed, between Parliament and the authority. I now wonder, although I am sure that my noble friend will reassure us later, whether there is some severance of that link.

The decision to transform British Airways from a nationalised body into a mixed economy body is something I certainly support. Its twin objectives of employee participation in the equity and a mixed economy vehicle are, I am sure, good ones. It is of course a testing time for the private sector's nerves to take a share in British Airways when the market is in somewhat of a recession, costs are rising, profits are falling, and the capital needs are simply vast. But I have little doubt that the challenge will be taken up.

As other noble Lords have said, and indeed as the noble Baroness said, one would like to add one's tribute to the past management and staff of British Airways and wish them well in the future. Anyone who has seen the dedication of service of Mr. Ross Stainton or Mr. Roy Watts and their team will know of their enormous achievements in steering British Airways to the size and influence it enjoys today. It is truly a giant among international airlines, with a great and much envied reputation.

Turning to Part II of the Bill, civil aviation's increased independence is certainly a matter to which I hope we shall return in Committee. It is certainly a matter which most British airlines watch with, I would almost say, considerable apprehension: how the appeals structure will operate; what grounds of appeal will be allowed to the appellants. These, as the noble Lord, Lord Beswick, said, are points which I hope we shall clarify later.

There is one particular issue on the existing appeals structure of which I have given notice to my noble friend and which I should like to raise briefly tonight. It concerns the helicopters for North Sea oil. It concerns particularly Class 7 licences, which my noble friend Lord Boyd-Carpenter was instrumental in introducing in, I think, 1973. The House will know that Class 7 licences were designed to combine maintaining opportunities for competition among British operators with a degree of protection for our industry against unfair foreign competition. It is a policy followed avidly throughout the world by no less than Canada, the United States of America and even Norway.

The North Sea helicopters service is a vast, vital connection to our rigs. It carries something over 100,000 passengers a month going to and from the rigs. As the House will know, they often operate in appalling conditions. The spin-off benefit of this industry for the helicopter industry itself is that with the support and enthusiasm of British Airways one is now seeing the development of what is known as the WG31, the new Westland helicopter, which is likely to be due to come into service in 1982.

There was a recent case of a Class 7 application by the Helicopter Hire Company. I do not wish to discuss the merits of this case, but it went to appeal. It was contested by two of the main British operators in the North Sea. The opposers' case was principally that the applicant was a small British company which in all commercial reality was owned by a large American company with large interests in Mexican Gulf operations. In other words, this was foreign competition coming in through the back door.

At the application stage the financial information regarding that company was quite rightly not available to the opposers, on the grounds of commercial confidentiality. But when it came to appeal the financial aspects of this company were obviously an important matter, and indeed it was necessary to know whether its financial strength could meet its commit ments. The publication of the Minister's decision came in this form. The Minister said: The authority"— that is, the Civil Aviation Authority— is empowered to decide not to disclose certain information supplied to it in confidence about the finances of applicants for air transport licences. It was mainly on the basis of undisclosed information that the authority satisfied itself on the fitness and financial control of Helicopter Hire Limited. The Minister then went on to say: The confidential information on which the authority relied was not before the Secretary of State in his consideration of the appeal. That is a seemingly unsatisfactory situation because it seems that the Minister, in judging the merits of the appeal, was not privy to certain salient facts. That may be incorrect, but I would ask my noble friend why the financial information was not before the Minister. Does he indeed have the power to call for that financial information, or is there a gap in his powers? Is the original purpose of the Class 7 licence being undermined by this case? I hope that my noble friend will have time to reply to those points tonight, but if not we can of course come to them at Committee stage.

My last point is that the popularity of the Civil Aviation Authority among British airlines at the present time is, when it comes to the level of charges, an acute matter. My noble friend knows this well. This relates to charges for the use of airports, security checks, navigation services, and so on. But my noble friend may not know that a recent survey throughout the world showed that if an airline was carrying a passenger from New York to Washington, the charges were £1.47p per passenger; New York to Montreal cost £2.73; London to Glasgow cost £17.87; and London to Paris cost £13.19. These are staggering figures, and I would ask my noble friend whether he endorses the view that the charging policies of the Civil Aviation Authority should encompass much more public accountability. Finally, I should like to wish this Bill success, wish its objectives success, wish the Civil Aviation Authority success in their new and undoubted responsibilities and indeed wish the industry success.

7.47 p.m.


My Lords, you have already heard that I was brought into this particular world by my noble friend Lord Boyd-Carpenter and nurtured by the noble Baroness, Lady Burton of Coventry. With parents like these, plus the fact that I am at present chairman of the Air Transport Users' Committee, it would be unusual if I did not have a special interest in today's debate. The noble Baroness, Lady Burton, will recognise that, while I agree with many of her views, I shall disagree with others. Unfortunately there has been no collusion between us, so I trust your Lordships will forgive a certain amount of brief but necessary repetition.

As the noble Baroness said, the Air Transport Users' Committee was formed in 1973 by the Civil Aviation Authority. Its membership consists of regular air travellers drawn from all over the United Kingdom, among whom are several with long and specialist experience of civil aviation from every point of view. The last time we needed new members we advertised. Well over 400 replies were received, and the present excellent, in my view, committee is largely based on the pick of that bunch.

The terms of reference of the Air Transport Users' Committee are: To make reports and recommendations to the CAA for furthering the interests of air transport users, including the investigation of complaints against the suppliers of air transport services; to co-operate with any airport consultative committees which are charged by airport proprietors with furthering the interests of air transport users inside their airports. It is in discharging the latter part of our terms of reference that we undergo considerable difficulties.

It is the view of the Air Transport Users' Committee that a person becomes an airline user the moment they buy their ticket. From then on their welfare becomes our concern. But during the time a passenger is inside an airport until he boards his aeroplane his interests lie in the hands of the airport consultative committee. The moment he leaves the airport to board his plane he reverts to the care of the AUC. Your Lordships will appreciate that I am, in the main, referring to the airport consultative committees of Heathrow and Gatwick.

Let me turn for a moment to the terms of reference set out for the airport consultative committees. As the noble Baroness, Lady Burton, and my noble friend Lord Boyd-Carpenter said, their terms of reference deal mainly with noise abatement and problems concerning the communities adjacent to the relevant airports. However, what neither of them mentioned was their terms of reference under the headings,"Passengers' Services Sub-committee". The airport consultative committees are required: (a) to consider, on their own initiative or by direction of the Consultative Committee, any question in connection with the airports affecting passenger-user interests; (b) to act as an advisory body to the Consultative Committee on such matters; and (c) to report to the Consultative Committee on their consideration with, where appropriate, recommendations. Thus, to give the simplest kind of example, when a passenger writes to the Air Transport Users' Committee complaining first, that there were no trolleys at Heathrow and, secondly, that somebody smoked incessantly in the non-smoker part of the aeroplane, the Air Transport Users' Committee can deal only with the latter part of the complaint and is compelled to refer the complainant to the consultative committee for action with regard to the complaint about trolleys.

This is not only difficult for the public to understand but is time-wasting and inefficient. It is also difficult for the AUC to understand. I have had conversations with the two relevant Ministers in another place concerning the present ridiculous situation. So far, neither of those conversations has borne fruit, but I am always hopeful.

I am therefore asking my noble friend whether he would consider adding a short paragraph to the Bill amending the terms of reference of both the Air Transport Users' Committee and the airports consultative committees in such a way as to make the Air Transport Users' Committee responsible for the care of the passenger from the moment he buys his ticket right through to the end of his journey. I realise there are difficulties involved in what I am asking, but I can see no other way to resolve the anomaly which exists at present. The Air Transport Users' Committee has neither sufficient funds nor members to take up places which might be offered them to sit as members of the various consultative committees.

The noble Baroness, Lady Burton, recommends that we should become a statutory body. She will not mind my saying that she has always held a one-woman minority view on this point, even from the days when she was a member of the Airline Users Committee. But the Air Transport Users Committee members do not wish to become a statutory body. They fear that, by so doing, first their powers of action might be curtailed and, secondly, that membership by category might be forced upon them. Further, the committee gains immense advantage through its close but independent association with the CAA. The closeness of that association has never muzzled the views of the committee; they have felt entirely free to bite the hand that feeds them, and have done so.

The other side of the coin is that through our close association with the CAA we have ready access to information, research and advice when we call for such things. All these advantages save money, apart from being really positive advantages which we might lose if we lost that close contact. We members of the AUC, unlike members of statutory bodies, are unpaid. A further point made by my committee is that we would cost the taxpayer a great deal more money should we become a statutory body. I agree that the appointment of members and the chairman by the CAA could be seen as a weakness, but no appointment nowadays is made without full consultation with, and agreement by, the entire committee, and I do not think the board of the CAA would act against the committee's wishes. I have no idea how members of statutory bodies are appointed, so I must leave that question in the air.

With deference, having discarded the statutory body angle, the only remaining possibility seems to be—and I am supported in my view both by the British Tourist Board and the Scottish Consumer Council —to take the action I have already suggested, which is to re-write the various terms of reference of the AUC and the consultative committees, and I would most emphatically seek the aid of my noble friend to include such a paragraph in the final version of the Bill.

Regarding Clause 15 of the Bill, in the view of the Air Transport Users Committee this is virtually a repetition of Section 36 of the Act, with the single exception that the authority replaces the Secretary of State as the person empowered to disclose information. We have strongly represented for a very long time our view that the user of air transport suffers, principally but by no means exclusively, in the matter of air fares because operators in Europe, which include the United Kingdom, are not required to publish regularly and promptly meaningful operational data such as is legally imposed on United States airlines in America, and indeed on British airlines when they land in the United States.

My committee believes that the transference of the responsibility from the Secretary of State to the authority for determining what, if any, operations information shall be capable of being disclosed is altogether too feeble an amendment. The conditions which have to be satisfied can be laborious and time-consuming. We therefore strongly urge that Clause 15 of the Bill should adopt a bolder and more positive approach to this real problem. We should like to see a revised amendment to Section (36)(1) of the Act as set out in Clause 15 of the Bill, but deleting subsections (1)(b) to (d) inclusive and substituting the following subsection (1)(b): (b) the Authority determines to disclose the information". That would give the authority the power to disclose without the ramifications of receiving representations from the persons affected. I wish the Minister all good fortune with the Bill and I look forward to hearing his comments on the many points that have been raised this evening.

7.57 p.m.


My Lords, I wish at the outset to welcome the noble Lord, Lord Trefgarne, back from his extended tour of South America. We note how quickly he has been put back into harness in having to move the Second Reading of a major Bill so soon after his return. We have had a number of fascinating and erudite speeches this evening, but I am afraid I must bring your Lordships back to the hard reality of the major purpose of the Bill, which in Part I is designed to make British Airways into a normally constituted company. I do not think the proposals in the Bill will actually make British Airways a normally constituted company.

It is ironic that the Bill should be brought to this House for Second Reading so soon after British Airways announced a sharp fall in their profitability, with the announcement that their retained profit for the year ending March 1979 was down from £62 million to £4 million. It is ironic because the Government's open-skies policy, which is of immediate benefit to the consumer, has undermined and will continue to undermine the profitability of British Airways, though I agree there are many other factors which have caused this undermining of the profitability of British Airways.

The ability of the Government to ensure the success of any public issue of shares will depend very much on timing. That will be crucial to the marketing of shares, and the noble Lord, Lord Trefgarne, pointed out that the Government were retaining flexibility as to when in fact they will market shares in British Airways Limited. It is clear that for an issue to be successful, British Airways should be able to show itself to be in a strong business situation in a favourable international climate. I think that that is unlikely to be the case for some time. Indeed, it could well be that a Government of a different political hue will be in power by the time that it is expedient to proceed with the sale of these public assets. Furthermore, it could well be that the sale will never take place; and I should regard that as a very satisfactory result to this Bill.

One wonders what is the reason behind the proposals in the Bill. In moving the Second Reading of the Bill the noble Lord stressed the need to give British Airways more freedom of management control; freedom from the diktats of Whitehall, he said. Yet it is of course always within the power of Government, of any particular Government, to give British Airways as it now stands that freedom. It is not necessary to have a Bill of this nature in order to give British Airways the particular freedoms that the noble Lord talks about. It may be that the noble Lord wishes to ease the pressure on the public sector borrowing requirement by taking British Airways outside it. That could possibly be a reason for the Bill. However, I believe that the truth is, as we all recognise, that we have the Bill before us today because it is a part of the dogma of the Government that public assets should be sold off. I believe that this is misguided and that it will do nothing for the industry.

I fear that with this Bill we shall be in the same difficulties as we were in with the British Aerospace Bill, which we debated earlier this Session. We do not know how much of the shareholding the Government intend to keep. The Government's current policy apparently is to retain a 51 per cent. shareholding, but that policy may change, and Parliament as a whole does not have the faintest idea whether eventually the Government will sell 10 per cent. or 90 per cent. of the shareholding, if indeed they ever sell any shares at all. Certainly I agree with the view expressed by the noble Earl, Lord Amherst, that it should not drop below 51 per cent.; and of course this is the Government's current policy.

However, if this is the Government's current policy, one is amazed that, as the major shareholder of British Airways Limited, they do not wish even to appoint a single director to the board to look after their majority shareholding. Surely there should be watchdogs to look after the public interest at British Airways. I cannot end my comments on Part I of the Bill without joining other noble Lords in paying tribute to the high quality of service provided by British Airways as well as the dedication of British Airways staff, all of which I hope to enjoy tomorrow.

I now wish to turn to Part II of the Bill. We have heard very authoritatively —particularly from the noble Lord, Lord Boyd-Carpenter—about the work of the Civil Aviation Authority. Certainly our view would be that the Civil Aviation Authority should operate within parameters laid down by the Secretary of State and should be accountable to Parliament. Until recently the Government's view appeared to be that the Civil Aviation Authority should be a totally autonomous non-governmental organisation, but with the Hong Kong decision that appears no longer to be so. Thus, if this situation is to be repeated, the Civil Aviation Authority could find itself becoming a show body, with arbitrary decisions being made elsewhere by the Secretary of State.

The noble Lord, Lord Boyd-Carpenter, very forcefully underlined the difficulty for airlines caused by the kind of action that has been taken in the past by the Secretary of State. My noble friend Lord Beswick, with whom I would agree, also underlined that point. It is important that the authority of the Civil Aviation Authority should be re-established so that airlines will know that once they have a decision from the CAA, they can go ahead and plan on that basis.

While speaking about Part II of the Bill, I should also like to raise the question of the charging policies of the British Airports Authority. As noble Lords will be aware, I have always been concerned about the vitality of the British tourist industry. In my view, to some extent this depends on the maintenance of the predominant position of London's airports in the European travel market. It is not beyond the bounds of possibility that if airport costs are too high, this could persuade airlines to switch to other, less expensive European airports. The current charging policies of the British Airports Authority, which are based on the need to finance future developments, are I believe open to question. I think that one should question whether it is right to ask present users to pay for services which will be used by future users. I believe that this is a point that your Lordships should question when we come to the Committee stage of the Bill.

The debate is taking place a little later than I had expected and I do not wish to detain the House further, other than to say that I am sure that your Lordships will give the Bill a Second Reading. I think that I have underlined the fact that we are against the major purpose of the Bill, and we shall scrutinise it in great detail in Committee.

8.7 p.m.


My Lords, I have been posed with a considerable task this evening: to answer the very many points that have been raised. Therefore, perhaps your Lordships will forgive me if I reduce to the very minimum the opening general remarks of my reply and then deal with as many points as possible in the time remaining. If there are any points which inadvertently I fail to touch upon, perhaps your Lordships will forgive me and allow me subsequently to pick them up from Hansard and deal with them in correspondence with those of your Lordships concerned.

We have had a wide-ranging and constructive debate upon this important Bill. Dealing first with Part I, I should like to take this opportunity once again to stress two important points in connection with the change in the status of British Airways. First, it is the whole of the undertaking of the British Airways Board that is being vested. There is no question—as I think the noble Lord, Lord Ponsonby of Shulbrede, suggested—of any part being sold separately, hived off, flogged off, asset stripped, or whatever one may call it, under the provisions of the Bill. Secondly, the undertaking will be vested in a Companies Act company, but that company must be one in which all the shares on vesting day are owned by the Crown. Thus, there is no question of the undertaking being vested in a company that has connections with any other existing company or organisation. We are convinced that British Airways Limited should be a normal private sector Companies Act company not some kind of hybrid, quasi-nationalised industry.

Turning now to Part II, I must make it clear that in no sense is the Bill intended to bring about what has become known as an "open skies" regime. Regulation by Governments is currently a pervasive feature of the civil air transport scene. This country cannot, acting alone, force other countries to dispense at one fell swoop with the regulatory mechanisms that have been created over a long period. Therefore, the Bill seeks to ensure that where competition will be beneficial, and where the United Kingdom has the power to bring it about, it will be the duty of the Civil Aviation Authority to see that that competition is introduced.

Let me now turn to the large number of points that have been raised, which I shall try to deal with as succinctly as I can. First, the noble Earl, Lord Amherst, speaking from the Liberal Benches, mentioned Government provision of funds for British Airways. In fact, the Government do not provide loan finance for British Airways. British Airways borrow in the market, mainly from banks in the United States—and they do so in dollars—to finance their capital programme. It is true that this is currently with Treasury guarantees, which will not be available to the successor company, but this will be the only change.

The noble Earl also asked what would be the status of the successor company and its relationship with the Government when 100 per cent. of the shares were owned by the Government prior to the flotation. Our thinking on this is that the change of status should take place fairly near the time of the flotation, when the date is known. This would restrict to a relatively short period the existence of the successor company with 100 per cent. Government ownership. Meanwhile, British Airways would of course continue as a nationalised industry.

The noble Earl also asked me about foreign shareholders. He again raised the fears, which have indeed been expressed in debates in the other place, that the successor company could fall into foreign hands or be taken over by another company, perhaps with malign intent. Although as I indicated in my opening speech the Government consider these possibilities remote, there are belt and braces, to which I briefly referred, which act as a safeguard against such a possibility. First, the belt. There will be provisions in the articles of the successor company, a draft copy of which is in the Library, to provide that foreign-held shares carry only one-tenth of the voting rights; and linked to these will be transparency provisions to ensure that the company will be able to determine the nationality of the beneficial ownership of all shares. Any shareholder not being able to satisfy the company of his nationality will be treated as foreign, and the voting power of his shares reduced accordingly. However, we recognise that certain rights of investment may be available to nationals of other Community states. Such rights as exist are protected by the proposed articles of the company.

However, there are other provisions, which I might call the braces, under Clauses 5 and 6 of the Bill, whereby the Government have the power to acquire British Airways Limited shares in the market if it should ever be considered desirable or necessary to restore the level of the Government's holding at the level which they held immediately after the initial sale of shares; in other words, a majority shareholding. Thus there will be a long-stop which could be used in the event of any takeover or control from an unwelcome source.

My Lords, may I turn now to the questions put to me by the noble Baroness, Lady Burton? She queried whether this Bill would affect the ability of Members of Parliament to ask Questions about civil aviation policy and about the CAA's exercise of its functions. The simple answer is that it will have no such effect. This Bill is removing the Secretary of State's power to give guidance, which I have already explained is a flawed power, and is instead setting out the authority's objectives and duties in primary legislation. It does not alter the Secretary of State's overriding responsibility for civil aviation matters. Therefore, the ability to question the Secretary of State on civil aviation matters remains unimpaired. Of course, in future it will not be possible to frame Questions which refer to the power to give guidance, but it will, for example, be possible to query whether the CAA's policies are sound in relation to the objectives laid on the authority by the 1971 Civil Aviation Act as amended by this Bill. So I hope your Lordships will agree that there is no question of this Bill changing the ability of Members of the other place or of your Lordships' House to ask Questions relating to civil aviation policy.

My Lords, the noble Baroness also asked whether it was true that the right of access to information was only discretionary as regards the consumer organisations, whereas of course the airline industry has statutory rights. The statement which was made in Committee in another place was made strictly in the context of air transport licensing, and the reference related to certain rights which are conferred by the Civil Aviation Authority Regulations 1972 upon such persons as the holder of an air transport licence, the holder of an aerodrome licence and the holder of a road service licence. The Government accepted that there is a need for greater disclosure of economic information, and to this end accepted a proposal for the insertion of a new clause, now Clause 16 of the Bill. This clause confers upon the Civil Aviation Authority greater ability to publish economic and statistical information relating to air transport licensing, and it is thought that this will meet the needs of those consumer organisations which seek more information about air transport licensing matters.

The noble Baroness also asked, as I think did my noble friend Lady Trumping-ton, at least by implication, whether there was not an obvious necessity for a single organisation to speak for air travellers. Primary responsibility for looking after the needs of air travellers rests, of course, with the Civil Aviation Authority. The authority, in order to cope more successfully with this task, has set up the Air Transport Users' Committee, which the noble Baroness knows well since she was herself a distinguished member until September last year. This body is completely independent minded, and is by no means under the control of the organisations which she has in mind. If the noble Baroness has any positive suggestions as to ways in which the committee's service to the public could be improved, I am certain that the present chairman, my noble friend Lady Trumpington, would be more than happy to consider them.

My Lords, my noble friend Lord Boyd-Carpenter criticised the form of Part II of the Bill. He was concerned about the fact that this Bill will of course have to be read in conjunction with the 1971 Act, and I confirm that that, for the moment, is the case. However, I am hoping at a later stage in these proceedings to bring forward certain technical pre-consolidation amendments in the hope that it will be possible in the near future to bring forward general civil aviation consolidating legislation, which I agree with my noble friend is much needed.

My noble friend Lord Boyd-Carpenter also asked about the possibility of a new chairman for British Airways. The Government are urgently considering the chairmanship of British Airways in the light of the fact that, as my noble friend said, Mr. Stainton's term of appointment expires towards the end of this year. Your Lordships will not expect me to speculate on the question, but I can give an assurance that it is a matter to which the Government attach great importance and that an announcement will be made as soon as a decision is taken.

My noble friend Lord Boyd-Carpenter, and also, I think, the noble Lord, Lord Beswick, asked me about the general position of Government directors in the future company. As I said in my opening speech, it is not our intention to appoint special Government directors to the board of British Airways Limited on a continuing basis. Of course, the initial board of British Airways, as it will appear in the prospectus for the sale of the shares, will be one to which all the members have been specifically appointed by the Government as promoters of the scheme. Since at that time the Government will own 100 per cent. of the shares, it is natural that they will appoint all the directors as promoters of the company. However, these directors will not be chosen as the agents of Government but as individuals who are considered best able to run the airline successfully as a fully commercial enterprise.

It will be the duty of those directors, as of any other director of a company, to act in the best interests of the company itself, and not to promote any extraneous interest, be it that of the Government or of anybody else. Therefore, the initiative as regards changes in board membership will lie primarily with the board itself, as in the case of any normal company. However, the appointment by the board of any new directors during the year—for example, to fill a vacancy arising—and the reappointment of directors retiring by rotation will be subject to the approval of the shareholders at the following annual general meeting. Like any other shareholder, the Government will be empowered to vote in respect of resolutions proposed by the board relating to membership of the board. I do not readily foresee circumstances in which the Government would use their majority vote to veto the proposals of the board in this respect, but should this occur the Government's prime consideration in deciding how to exercise their rights will be what is in the best interest of the company.

The essential point is that the company will be run by directors in whom the shareholders, including the Government, have confidence. The Government will not interfere in the day-to-day management of the airline by its directors. There is no place in the successor company to British Airways for directors appointed by the Government to do the Government's bidding or ensure that Government policy is followed in cases where the real interests of the company as a company dictate otherwise.


My Lords, I am most grateful to the noble Lord for giving way. The noble Lord said that there would be no question of the majority Government shareholder veto-ing any appointment to the board. Can he not be a little more positive than this? In the first place, there will presumably be a short-term appointment in the wholly-owned Government company. Is there to be no security offered to the executives who accept appointment to that board—an assurance from the majority Government shareholder that they will be appointed to the successor company?


My Lords, it is certainly the intention that the successor company will at the outset enjoy the services of the directors of all the corporation at the time of vesting; but thereafter the directors will enjoy the same employment protection arrangements as do the directors of any other company of this nature.

The noble Lord, Lord Beswick, also asked me about the target investment limit. I can do no better than draw to the noble Lord's attention Clause 6(2)—page 6, line 22—where the target investment limit is defined. It

  1. "(a) shall be expressed as a proportion of the voting rights exercisable at general meetings of the successor company; and
  2. (b) shall he equal to the proportion of those voting rights which is carried by the Government shareholding at the time when the order fixing the limit is made."
I hope that is what the noble Lord had in mind.


My Lords, this is not a Committee stage, of course, but I would direct the noble Lord's attention to Clause 5, which refers to the need for purchase of securities. Is the cost of those securities within the target limit or not?


My Lords, I shall have to take advice on that. Perhaps I may write to the noble Lord. The noble Lords, Lord Ponsonby and Lord Beswick, raised the question of the timing of the vesting and the sale of shares. I can only reiterate what I said in my opening speech. Part I of the Bill incorporates no timetable but is only the legislative framework. The Government have made it clear that no decisions have been reached on timing. We wish to maintain complete flexibility to choose the best time. Sale of shares will take place when we consider the time is right, taking into account the need for a successful flotation and the interests of all concerned. The earliest possible time for a flotation would be, I suppose, the summer of 1981; but I must emphasise that it is too early to take any decision at this time.

The noble Lord, Lord Beswick, asked about the Government's relationship with the successor company. As I said in my opening remarks, we wish British Airways to be a perfectly ordinary private sector company. We intend that it should be independent of the Government. Although, after the initial sale of shares, the Government will have a majority holding in the successor company, we shall stand right back from the running of the company and not interfere with any aspect of its commercial and financial operations. These matters will be entirely in the hands of the board of directors.

The noble Lord, Lord Beswick, also asked whether the powers in Clause 10 could be used in relation to the staff of an airline other than the managers. The answer is, yes, indirectly. The power to give direction to the management presupposes that the management in the company have the necessary internal control to be able to run the airline in question, including, for example, to require a pilot to fly aircraft from point "A" to point "B". I hope that that satisfies the query in the noble Lord's mind.

The noble Lord, Lord Beswick, and my noble friend Lord Morris asked about the environment duties which will be conferred upon the CAA in certain circumstances. As an all-embracing duty, it may, on the face of it, sound attractive; but it could have serious disadvantages. With such a broad statutory obligation, the authority could not be confident of taking any steps without laying itself open to litigation on the charge of failure to carry out its environmental duties. A more satisfactory solution is to attach this duty to the specific functions of the authority where environmental questions may arise. Two such areas which will be left uncovered by the abolition of the power to give guidance are aerodrome licensing and air transport licensing, both of which are therefore covered by the environmental duty imposed on the CAA by Clause 11 of the Bill.

I turn now to the question raised by several noble Lords, by the noble Lord, Lord Beswick, and, I think, by my noble friend Lord Boyd-Carpenter, relating to the recent appeal decision in connection with the Hong Kong service. It has been claimed that the decision was at variance with the purpose of this Bill—that is, to give greater scope and responsibility to the Civil Aviation Authority. I submit that that is not so. It is desirable to have a licensing procedure so that an independent body can examine all the relevant facts and take a decision accordingly; but an appeal mechanism is also desirable since, in the end, aviation policy must be subject to judgment by the Government of the day on the basis of the criteria laid down in the Act. My noble friend Lord Boyd-Carpenter asked specifically whether this recent decision heralded some new departure in appeals procedure. I can assure him that it does not. The circumstances on the Hong Kong route were very exceptional. As my noble friend pointed out, this is the first time since the CAA became responsible for these matters that the Secretary of State, any Secretary of State, has overturned a decision of the authority and I fancy that it will be a good while before he does so again.


My Lords, before leaving the point, can my noble friend tell the House what was so exceptional about this case?


My Lords, I would refer my noble friend to the remarks of my right honourable friend and his right honourable friend, the Secretary of State, when he made the announcement on this matter in another place on 17th June. He indicated very clearly the criteria which he had taken into account in this matter. The reference is column 1359 of the Hansard of the other place on 17th June. I would refer my noble friend to that.


My Lords, that reference was to the assessment of the traffic potential on this route. If the Secretary of State is going to take a judgment on traffic potential, he can take that judgment on almost any application that is made.


My Lords, think that there were four applicants before the Civil Aviation Authority and that it was very exceptional indeed for there to be such wide disparity in the traffic forecasts which came before the authority on that occasion. My right honourable friend, as he said at the time, preferred the estimate of Laker when he arrived at his decision.


My Lords, my noble friend has said—and I have read the Statement of my right honourable friend and his right honourable friend—that what was exceptional was the difference in the traffic forecasts. Surely, there has hardly ever been a licensing case before the authority where there has not been a dispute over traffic forecasts. That is what all these cases are about. What his right honourable friend did not explain was what, in this case, in relation to the traffic forecasts, was so unusual that it could not be said to arise in any other case whatever. The problem is that his right honourable friend was putting his judgment, which in the nature of things is less instructed against that of the professional authority who are weighing traffic forecasts every day of their working life.


My Lords, my right honourable friend, as the Secretary of State, is charged with considering these matters; and he did so. I am prepared to back his judgment in this case against that of the authority.

The noble Lord, Lord Beswick, and the noble Lord, Lord Boyd-Carpenter, referred to the general position regarding the duty of the Secretary of State when considering appeals. I should explain that Section 24(6) of the Civil Aviation Act 1971 (which provides that the Secretary of State shall make regulations conferring the right of appeal to him from decisions of the Civil Aviation Authority with respect to air transport licences) also lays down that the Secretary of State, in considering appeals shall have regard to the duties laid upon the Civil Aviation Authority by Section 3 of the 1971 Act. It is the Secretary of State's duty when deciding appeal cases to have regard to exactly the same criteria as the Civil Aviation Authority must employ when deciding licensing applications. This will continue to be the case in future. The only change to Section 24/6) of the 1971 Act which this Bill makes is to add a reference to the new Section 23(a) inserted in the 1971 Act by Clause 11. This new section sets out the duties of the authority in respect of air transport licensing and it is therefore appropriate that the Secretary of State should, when considering appeals, have regard to the general objectives of the Civil Aviation Authority as laid down in Section 3 of the 1971 Act, as amended by this Bill, and to particular decisions of the Civil Aviation Authority when exercising their air transport licensing functions as laid down in the new Section 23(a).

My noble friend Lord Kinnoull raised the question about the information available to the Secretary of State in connection with an appeal, particularly where there was some confidential information which had been made available to the Civil Aviation Authority in confidence and which was not subsequently made available to that Minister when the appeal came to him. My right honourable friend regards this situation as unsatisfactory, and consideration is being given to amending the regulations relating to the appeal procedure to overcome the difficulty. I hope that clears up the point.

My noble friend and also the noble Lord, Lord Ponsonby, raised the question of the British Airports Authority and Civil Aviation Authority charges. BAA charges fall outside the scope of the Bill, but I think the principle is the same as I will enunciate now for Civil Aviation Authority charges, which is that the CAA has been charged with making its finances work out correctly. Progressively over the years, with one or two hiccups, it has improved the situation. If my memory serves me rightly, it is now virtually breaking even.

My noble friend drew comparison between charges levied in this country and elsewhere. The principal explanation—no doubt there are some differences in costs—is that in other countries they do not seek to recover all the costs in the same way as we do.

My noble friend Lady Trumpington seemed to be somewhat at variance with the noble Baronesss, Lady Burton of Coventry, about the status of the Air Transport Users' Committee. I would not wish to put myself between the two noble Baronesses in their discussion on this matter. I will take note of both their views. The point raised by the noble Baroness, Lady Burton, is one that we shall wish to consider, and we shall consider. I would not wish to make any commitment on the outcome of that at the present time.

My noble friend Lady Trumpington drew attention to the different terms of reference of the Air Transport Users' Committee, on the one hand, and the airport consultative committees, on the other. Again, it is a matter that I am prepared to look at. There is some benefit in having the separate bodies. They perform separate functions. The AUC, for example, is a centralised body, while the consultative committees of course relate to specific airports. I will consider what the noble Baroness says and see if there are any suggestions that I can put to her.


My Lords, I have had a good innings, and I will not take up the time of the House, but I asked the Minister about the terms of reference of the relevant committees. I said I had put this forward in 1975. I wonder whether it could be considered as a short-term measure, and a letter would not suffice for that. I asked the Minister something which I think is important: Whether the position of the air traveller could be considered in the review being conducted by his right honourable friend the Minister of State for Consumer Affairs on which we are to have a Green Paper. Is it possible for him to give an answer on that?


My Lords, I cannot give an answer to that without consideration. I should have been better informed about that than I am. I apologise to the noble Baroness for that omission. I will certainly consider the question of the terms of reference of the two committees to which she referred, although without commitment at this point. Time is short and we have another debate to follow. I do not think there is any particular point that I will try to deal with now. I hope that your Lordships will give this Bill a Second Reading.

On Question, Bill read 2a, and committed to a Committee of the Whole House.