§ 6.37 p.m.
§ Baroness Burton of Coventry rose to ask Her Majesty's Government whether they have any statement to make on the necessity of regulating the distribution and availability of discounted air tickets.
§ The noble Baroness said: My Lords, I am hoping that at the end of tonight's debate we shall have a statement from the Government based on what is said in the debate. Furthermore, I hope that it will be a positive one and that the Minister will feel able to add to his brief anything which he thinks necessary after the remarks that we have been able to make.
§ Tonight I am dividing my remarks into three sections, of which sections one and three will be brief. Section one—perhaps strangely—deals with conclusions and section three with recommendations. Section two, more lengthy and detailed, I am afraid, deals with actual evidence.
Last year an estimated five million tickets were sold through bucket shops in Britain at prices up to 60 per cent. lower than the Government-approved fares, as airlines tried to fill seats which would otherwise have remained empty. I thought that these discounted tickets should have been available to everybody and sold through all retail outlets. Since then, with the help and the patience of this House, I have pursued this simple aim through Question Time and one debate. As the House knows, we have had a variety of answers from the Government varying from the dismissive to the ridiculous, culminating, I think, with that given on 4th June when the Minister suggested that evidence showing that a ticket was sold at a discount might not be correct because—and I quote—
for example, the airline might owe something to the potential traveller".
Obviously, after that level of reply, it was useless to hope for serious consideration. But I did try on 11th and 18th June. On the former date we heard of the team of legal advisers within the department who had been unable to find any case worthy of attention—not even one out of five million. On the 18th we actually received an admission that a better legal framework might make it easier to mount a successful prosecution, but that that, of course, would not deal with the problem of discounted air tickets. So we were back where we started, except that I think the House believed that I had made my case and that it was one deserving consideration—in public. I say "in public" because obviously such evidence is considered behind the scenes—it has to be. Any department must seek to holster credibility.
§ My quarrel is with bureaucracy. It is with the machine that is determined to block any progress or alteration on a matter which has already been determined by the bureaucrats. That is sacrosanct. I met it over the West London Air Terminal; I met it over over-booking; I met it over Gatwick and the manner in which attempts were made to direct airlines to that airport; I met it over Stansted so long ago as 1968 when I was chairman of the Council on Tribunals. 62 On that occasion we made a Special Report to the noble and learned Lord the Lord Chancellor under the Tribunals and Inquiries Acts 1958 and 1966. Stansted has now reared its head again, and I would warn the House that we are by no means through that battle. Now I meet it over discounted air tickets.
§ That is a long indictment and it comes from only one person. Following it I should like to say at this early stage that my quarrel is not with the noble Lord, Lord Trefgarne. It is with the bureaucrats who prevent progress, who believe that if they obstruct long enough, the opposition will become tired or, if they wait long enough, they can press their point of view once more, when they hope that everything else will have been forgotten, and who finally provide the luckless Minister with the type of answer from which I have suffered all these years. I do not think that these answers should be tolerated. I think that they are a contempt of the House. I would not mind anybody getting up and saying, "I do not agree with the woman, she is quite wrong", and giving the reasons, but I object to real evidence being just swept away like that as though it counted for absolutely nothing, and I think that the House is with me. What I think is particularly serious is that this system applies whatever the Government in power.
§ My conclusions are three in number. First, the department has no intention of asking the Government to uphold their own legislation. Secondly, the law is to continue being held in contempt while common justice and fair play are not to be enacted between airlines, agents and the travelling public. Action is out. Thirdly, there is only one way of breaking this down—by pressure of public opinion and, I hope, of Parliament.
§ Therefore, I come to section two. During past weeks and months evidence submitted to the noble Lord, Lord Trefgarne, and his department has been mentioned in this House. With permission, of course, I now propose giving to the House actual details of that evidence, together with the name of the organisation concerned. Some three months ago, Thomas Cook got in touch with me through their chief executive, who said that he had followed, with a great deal of interest, the Questions asked in this House regarding the sale of discounted airline tickets and, like me, found the replies highly unsatisfactory. On 19th February, the noble Lord, Lord Trefgarne, was given evidence of so-called bucket shop tickets which Thomas Cook and others had purchased from these bucket shops.
§ Perhaps in passing—because I shall return to the point later—I might mention that Thomas Cook said that they were considering the mounting of private prosecutions, although they feared that this would be very expensive, adding—and I hope that the House will agree—that it was quite invidious that a company had even to contemplate action of this sort to protect its legitimate interests.
§ Seven weeks later, on 7th April, the company again wrote to the noble Lord, Lord Trefgarne, asking for a reply to their letter of 19th February, saying that they would like to know whether it was the intention of the department, having been given evidence regarding the discounting of air tickets, to take action. The company were not prepared to let this matter lie fallow, but 63 naturally would not wish to take any action until the attitude of the Department of Trade had been ascertained. This time the delay was one of only three weeks.
On 29th April Thomas Cook was informed by the noble Lord, Lord Trefgarne:
Regarding the evidence you have produced of discounted tickets having been sold, I doubt whether in any of the cases the evidence would stand up in Court. In the first place I am advised that satisfactory evidence would have to be provided as follows:—
If there is a case where satisfactory evidence is available on all the relevant points, I will certainly put it to the Department's legal advisers".
We need not go over again the questions and types of answer already mentioned, but I suggest that the House is entitled to know—and, indeed, should know—what Thomas Cook said in reply to the four points made by the noble Lord, Lord Trefgarne.
Their chief executive wrote as follows on 29th May:
You state that, with regard to the evidence I have produced of discounted tickets having been sold, you doubt whether in any of the cases the evidence would stand up in court and that you have been advised that satisfactory evidence would have to be provided as follows:—
In the supporting sheet that I gave to you on the 18th February we quoted the price that was paid and in most cases we hold photostat receipts for these amounts. I have no doubt that any of the persons making those purchases would be prepared to give evidence in a court of law that this was the price paid for the ticket".
I hope that the noble Lord is paying attention, because it is rather important.
(3) In the case of foreign airlines, proof of direct airline connivance in the transaction.
The photostat copies of the tickets show that some of the tickets were validated by airlines, for example, Aerolineas Argentinas, Thai International, Syrian Arab Airlines, Air France, Austrian Air Transport, etc. Since these airlines issued these tickets, they must in normal accounting terms have expected to receive the amount shown in the fare tariff box on the ticket, less commission, and unless the middleman who handled the tickets was prepared to do so at a loss—and I am sure you will agree this is a very unlikely situation—I think the airlines would not be able to prove that they had received the proper amount".
Faced with such evidence, I find it difficult to understand how your department can seriously contend that such evidence would not stand up in court, and think it likely that Government is backing away from enforcement of the law purely because of the political difficulties vis-à-vis the consumer and other governments.
I have carefully noted your comments regarding the need for IATA to agree changes in its rules in order to resolve the present
unsatisfactory situation. I suggest Government is morally abdicating to IATA by suggesting they change their rules, the requirement to enforce the existing law and I do not think this brings any credit on the present Government".
§ As I told the House on 4th June at Question Time, I myself have copies of these photostats and validation certificate. If we go back to a debate we had in this House on 18th February, I did venture to remind the Minister at col. 710 that in 1967 BARUK—which is the Board of Airline Representatives in the United Kingdom—initiated a clean-up campaign concerning the practice of discounted air tickets. It soon faded out. Why? The situation really was quite ridiculous. Here you had a collection of national carriers, the majority of whom were discounting to their own bucket shop operators, sitting round a table laying down the law, or presumably discussing the possibility of laying down the law, to stamp out these very practices.
§ I have quoted that because the noble Lord, Lord Trefgarne, and his department are obviously back on this tack once more. How many times within the recollection of this House have I told the Minister that IATA say they can do nothing in this matter unless, and until, the Government enforce their own legislation? On the other hand, I do find it all rather difficult to understand, because it is precisely these members of IATA who are breaking the laws of this country.
§ My wish is to be helpful, and one has to be a nuisance to get anywhere in this jungle. As the noble Lord, Lord Trefgarne, and his officials know, I am fortunate enough to be kept in touch by IATA. Therefore, I have known about the Fare Deal Monitoring Group being set up to inquire into the fares situation, including discount tickets, and additionally that it is hoped that its first report will be made available by mid-September. When we return after the Recess doubtless we shall be able to look at this report, and I hope facilities will be available for discussion in this House. At the moment I do not want to go into further detail for two reasons: one, confidentiality; I have not cleared what is confidential and what is not; and, secondly, I have no desire to hand Lord Trefgarne what he might regard as a lifeline and a means of evading an adequate answer to this debate.
§ However, we must accept the realistic comment of IATA that the problem of how to stop the dumping in bucket shops given the present over-capacity, fierce competition and wretched finance of the carriers is not easy to solve. The term "wretched finance" is only too evident. In this country of course the problem is compounded by industrial action. But IATA airlines estimate a loss in 1981 of 2.6 billion US dollars. Faced with a prospect like that, obviously Governments and IATA must do something. Our own Government have allowed discounted tickets to flood the market—to the advantage of some, but not of all—and, I repeat, IATA declares it is unable to take any action while the United Kingdom Government refuse to uphold the law. But any report, from IATA or anywhere else, will have to deal with the obvious fact that if airlines did not supply these tickets to the bucket shops we should not be in the present situation.
§ Lord Northfield
My Lords, may I ask my noble friend a question? I have been carefully following her argument, but the point that puzzles me is this. She has proof that bucket shops are selling tickets at 65 a discounted price. That is not breaking the law. What is breaking the law, I presume, is the airline selling to a bucket shop at a reduced price. Has my noble friend any proof, or visible evidence, that the airline is actually selling to the bucket shop at a reduced price?
§ Baroness Burton of Coventry
My Lords, I know that my noble friend wishes to help, but either I was not clear or he did not understand, so let us put the blame between both of us. I said earlier in this debate that the tickets of which I have been speaking have got the airline stamp on them, that the receipts were held by Thomas Cook of the amounts paid for them, and that the tickets were purchased in the bucket shops by Thomas Cook and, I do not say fellow conspirators but anyway, fellow purchasers, and that these details were given to the Minister.
§ Lord Northfield
My Lords, that, with respect, does not answer the question. The discounted tickets normally have the full price on them, so there is no prima facie evidence that the airline has validated a discounted ticket.
§ Baroness Burton of Coventry
My Lords, I am sorry, I thought it was very clear. If my noble friend will let me get on, of course the tickets have the correct price on them, but they were sold at a reduced rate and the receipts for those reduced rates are held. So he will have to read it later and see whether he is any clearer after that.
§ Baroness Burton of Coventry
Anyway, if I can get back to what I was saying. Any report, whether it is produced by IATA or any other body, would have to take into account the fact that if the airlines did not supply the tickets to the bucket shops we should not be in the present situation. And the most reputable of airlines do this.
On the question of breaking the law and the refusal of the department to initiate a prosecution, I have just one more point to lay before the House. On 11th June Thomas Cook did try once more. They wrote to the Minister referring to the incredible reply on 4th June, which I mentioned earlier, stating that the evidence given to him on 18th February was obtained by individuals purchasing tickets through agents or airlines. There could be no question that these tickets were sold at a price below that shown on the ticket voucher and, equally, there was no question that either the agent who sold the ticket or the airline were supplying some notional credit to the purchaser. So far as the seller was aware, the purchasers were normal, "off-the-street" customers.
Thomas Cook's chief executive said he would be pleased to learn what additional evidence the noble Lord, Lord Trefgarne, would require to mount a prosecution, and that he would like it specifically defined so he could arrange for the necessary evidence to be produced. I repeat that that request was made on 11th June. Today—I am being very serious about this and I assure the noble Lord, Lord Trefgarne, that I am not smiling—29th June, two weeks later no reply has been received, merely a formal acknowledgement. Two weeks, my Lords; I believe the department is totally discredited and I have nothing but contempt for 66 their evasion and pretence. Those are strong words and justified words. No wonder they have forfeited all credibility. They do not want evidence; they just want to do nothing. I feel so strongly that perhaps I had better leave the matter there and hope that public opinion will pick it up.
I come to Section 3 and my recommendations. I suggest, first, that legislation preventing the general sale and availability of discounted air tickets be withdrawn and that the Government, in any necessary co-operation with other countries, with IATA and with the Civil Aviation Authority, take the initiative and do so now.
Or my second suggestion is that, if this legislation be retained, it be acted upon and the law no longer brought into contempt. As a corollary to that, it seems to me that we must add the fact that carrying it out would mean, first, that discounted air tickets would no longer be available to anyone and that, secondly, airlines would find themselves with empty seats and, quite likely, financial disaster. After all, IATA member airlines lost more than £1 billion last year. Does anyone believe they can stay in business on that basis or that the airlines themselves would agree to such legislaton?
My third recommendation is that the Government and other affected parties in the legislative field should decide whether or not they accept the presence of bucket shops. I ask the legal fraternity to realise that the travelling public has learned, and is learning increasingly whenever they buy a ticket—and here I quote from the Travel Trade Gazette—thatif ABTA/IATA shops can't give them tickets at the price they want, then there are others to be found on the back pages of the national newspapers who can".This is a non-party debate, so I can say I know that my noble friend Lady Elliot of Harwood will be developing this aspect, so I gladly leave it in her safe hands.
I want the removal of legislation. I do not want prosecutions. Reputable bucket shops fulfil a real and present need and I am afraid there are enough empty seats to go round. Let the best people sell them and let the public decide where to purchase. Quite simply, I want the cheapest air fares available to everyone and through all outlets. Most of all—and here I am sure the House will sympathise with me—I want a considered and responsible reply to the case I have tried to make.
§ 7.4 p.m.
§ Lord Airedale
My Lords, the noble Baroness, Lady Burton of Coventry, has drawn attention to a widespread abuse which is to be deplored in any civilised society and particularly, I should have thought, when it involves breaching the terms of international agreements entered into between Governments. Anything which interferes ever so slightly with the comity of nations is to be deeply deplored.
I believe one must proceed on the basis that an airline, having put forward a suggested fares structure to the Government, and the Government having entered into international agreements for such fares structure, the airline will make some effort to stick to the fares structure it has put forward and which has been agreed. If it were otherwise, I imagine the Government would feel thoroughly affronted and would take very much 67 stronger action than they appear to have taken up to now. Therefore I have to proceed on that basis.
If an airline wishes to remedy the abuse to which our attention has been drawn, the remedy must be the stricter control of the issue and use of tickets. British Rail has cheap tickets, but so far as I know one does not find bucket shops selling cheap BR tickets to people who are not entitled to use them. Presumably that is because BR takes the trouble to make sure that people using cheap tickets are qualified to use them. If an airline is in difficulty in devising a watertight system to see that its tickets are properly used by the people entitled to pay those particular fares, they might do worse than go and sit at the feet of Sir Peter Parker, from whom they might learn something.
It may well be that the airlines are not as concerned about this abuse as they should be and that they take the view that a seat for which somebody has paid something is better than an empty seat. All I can say to that is that it is not very dignified for a public corporation to connive at breaches of the terms and conditions which it itself has imposed. I suppose the gravity of the situation from the Government's point of view depends on how widespread is this abuse in other countries whose governments are parties to the agreements. If it is happening on any great scale only here, then from the Government's point of view it must be a very serious matter. But if the same thing is happening in the other countries who are parties to the agreements, then at least I suppose it can be said that no contracting party is in a position to complain about any of the others. But, from an overall point of view, that of course is thoroughly unsatisfactory.
I am sure the Government's ultimate remedy is the right one—that which we have been given from time to time by the noble Lord, Lord Trefgarne—namely, that this abuse is symptomatic of the fact that the agreed fares are too high. The ultimate remedy must be to renegotiate realistic fares which will not tempt people to undercut. That must be the final solution, but that will probably take some time and, in the meantime, the noble Baroness is entitled to have something done to remedy the situation as it now exists.
§ 7.9 p.m.
§ Lord Wilson of Langside
My Lords, at this hour of the evening I shall content myself with concurring with everything that the noble Lord, Lord Airedale, has said. The House is in debt to the noble Baroness, Lady Burton of Coventry, for the pertinacity with which she has pursued this by no means unimportant issue. I would content myself with making only three short points. I have listened to most of the questions that the noble Baroness has asked the Government on this matter over the last year or so. Having listened to the questions and to the answers, as I understand it, thanks to the pertinacity of the noble Baroness, Lady Burton, the merits of the issue raised in her Question are not in dispute; they are conceded. I have heard the noble Lord, Lord Trefgarne, himself say that he shared to the full the concern which the noble Baroness, Lady Burton, had expressed on this subject. So the only question now is, what can, and should, the 68 Government do to remedy the situation? Clearly, they must do something.
I come now to my second point. The noble Baroness, Lady Burton, said that this was a non-party question, and so indeed it is. But have you not noticed how very much in the true spirit of social democracy has been the approach of the noble Baroness, Lady Burton, to this matter? I say that because, as all your Lordships know, the best working definition of social democracy is that of Leszek Kolakowski—if I do no injustice to the pronunciation of his name. It is a favourite, I believe, of Mr. Denis Healey and of Dr. David Owen. It is too long to quote in full, but the essence of it is that while social democracy is no ultimate solution for all human misery and misfortune, inherent in it is an obstinate will to erode by inches the conditions which produce the wrongs which beset us. I do not pretend, for that would be arrogance indeed, that we have a monopoly of this spirit, but certainly the noble Baroness, Lady Burton, has such spirit, and I find it difficult to believe that even the skill and ingenuity of the noble Lord, Lord Trefgarne, which we all so much admire in this House, will enable the Government to resist that will.
The last of my brief points relates to the question of prosecution. The noble Baroness, Lady Burton, has said that she has no desire to urge prosecution as a course to be adopted. I am only a Scots lawyer, and I know little about the laws of England so far as the sufficiency of evidence is concerned, but I was always brought up to believe that the Scottish laws of sufficiency of evidence were more stringent than those which had application in the English courts.
If that is so, and even if it is not so, I find most puzzling the suggestion that the evidence which was before the department was insufficient in law. I can think of many reasons, perfectly valid and good reasons, why a prosecution would not be desired, and why it would not be in the public interest to take a prosecution. But I find it extremely difficult to accept that no prosecution was possible because the evidence was not sufficient, bearing in mind all the evidence which there appears to be, from what the noble Baroness, Lady Burton, has told us today and on previous occasions. It would be foolish and presumptious of me to suggest that the statement that the evidence was insufficient is inaccurate. I could not say that, because I do not know what all the evidence is. All I am saying is that if it is anything approaching that described to us by the noble Baroness, Lady Burton, I find it very difficult to accept that it was insufficient for the purpose of prosecution.
§ 7.15 p.m.
§ Baroness Elliot of Harwood
My Lords, I, too, should like to pay my tribute from these Benches to the persistence, the accuracy and the care with which the noble Baroness, Lady Burton, has pursued this matter. It is really wonderful, and it shows that there are still people who believe that one must fight for things which one believes to be right and not allow them to pass under the counter, as it were, so that no one pays any attention to them. We are all deeply indebted to the noble Baroness and, like other noble Lords who have spoken in the debate, I pay my tribute to her.
69 I can add very little to what the noble Baroness, Lady Burton, has said, because she has accurately outlined and detailed the information which she has accumulated from various agencies, and in particular from one of the biggest agencies, Thomas Cook, which sells the tickets. Like the noble Baroness, Lady Burton, I should like to see air fares as low as possible, provided that the low fares cover the necessary costs and are available to everyone. That people should be selling air tickets below price, while other travellers are paying the honest price, seems to me to be quite wrong; in fact, I think that it is very dishonest, and I feel very strongly that the Government should take the same view.
I know a little about travel agents. They provide a very valuable service to the public in relation to travelling overseas, or indeed travelling anywhere. I know that those travel agents who are members of IATA, and who obey its rules and abide by its decisions, are being heavily undersold, heavily sacrificed as it were, by bucket shops—those who do not abide by the rules and decisions. Every day more and more tickets are bought through bucket shops and so more and more of the honest and reputable travel agents, who provide a service to the public, are being undermined. I think that that is wrong. I have here a letter from a travel agent whom I know very well. I asked for an instance of a test case, and I received this letter from a travel agent who obeys the rules of IATA. The letter states:As a test case, I made a booking this morning through a 'bucket shop' for the journey of the son of a friend of mine to Rome …The Apex fare to Rome, which must be booked one month in advance, is £183.00. The one way economy fare is £152.00. The fare charged to me for a scat on a scheduled aircraft (member of IATA) was £108.00. This must mean that the 'bucket shop' is buying the seats from the airline [an IATA airline] for as little as £100 or less".This kind of thing is happening all the time. I am quite sure that if I pursued the matter further, I would find many bucket shop agencies selling at the wrong prices. Although all this is known to be wrong, and the Government and IATA know it to be wrong, no one in authority is taking any action. In fact, all the airlines unable to sell the tickets at the proper price are selling them through bucket shops.
As the noble Baroness, Lady Burton, has reminded us, we had a debate on 18th February this year, and at col. 709 the noble Baroness, Lady Burton, quoted from an article in the Sunday Times Business News, stating the way and methods of the bucket shop sales, including such sales as the Apex tickets. We all know about Apex tickets; I have travelled on Apex tickets myself. One properly books an Apex ticket 30 days before one flies. One must stick to the day that one is scheduled to fly and one must come back on the day that one is scheduled to return. These tickets are being sold the day before the passenger is leaving, by back-dating the ticket voucher. Surely this is something which is quite wrong.
It is estimated—and I think Lady Burton referred to this—that the bucket shops sell 5 million tickets at prices estimated to be up to 60 per cent. lower than the proper price. If, as the noble Lord, Lord Airedale, has mentioned, this were being done, or was trying to be done, in the case of British Railways, there would 70 be the most frightful row and you could not possibly do it. On British Railways you get issued (as I have been, I am glad to say) with an old-age pensioner pass, and you therefore get tickets cheaper; but you only get tickets cheaper because it is an honest-to-God pass which they have issued to you; you produce it and you get a half price ticket or whatever it may be. But nobody could possibly cheat, which is what is happening in the sale of air tickets.
My Lords, I think it is extremely wrong that we should be a party to all this, and that airlines should be a party to it as well. It is quite obvious that the law must be changed. The law is quite unfair on the honest travel agents, who abide by the law and stick to the prices which IATA have laid down. It is quite unfair that they should suffer by being honest and that the bucket shop agents should benefit by selling at half price, or at whatever price they may get. 1, like Lady Burton, beg the Government—and they are the Government that I support; I am not in any sense opposed to the Government—to look at this from the moral point of view and from the point of view of honesty, in which we pride ourselves, and not to allow this situation to go on, riding off, as they appear to be doing, by saying: "We cannot prosecute, we cannot do this and we cannot do that". There is no other sphere that I have ever heard of in my life in which you can do this and get away with it. I think it is all wrong, and I beg Lord Trefgarne to stand up for honesty here and to do something which will really stop what is at present a very bad habit.
§ 7.22 p.m.
§ Lord Ponsonby of Shulbrede
My Lords, may I first of all join with other noble Lords in thanking the noble Baroness, Lady Burton, for asking this Question, and yet again express admiration, as many noble Lords have already done, about her persistence in raising this issue. Her case was so persuasive when she spoke that it is difficult to know what can be said in addition to what she has already said. I am sure that your Lordships' primary concern must be that the consumer interest of air travellers is catered for in that they all have the ability of being carried as cheaply and as safely as possible.
Of course, air tickets can be obtained from IATA approved agents, from non-IATA-approved agents and from bucket shops. The best quality agents (if that is the right description) are, of course, the IATA-approved agents, of whom there are some 1,600 and who sell the tickets of the 250 air carriers in the IATA network. To have IATA accreditation means that the agent must have professionally qualified staff, he must be financially viable and his premises must be secure because he is likely to hold large quantities of airline tickets, which can in effect be seen as blank cheques. To guard against price wars, airlines agree common commission levels for IATA agents, based on discussion with those agents, and these are approved by the CAA under the appropriate United Kingdom law.
There are then the other non-IATA ticket agents who sell airline tickets at approved rates. These are mostly members of ABTA; and, of course, many members of ABTA are, in any case, IATA-approved agents. But these particular agents are those who are 71 unwilling or unable to meet the public protection standards or who do not wish to sell the full range of normal and discount promotional air transport products, such as Apex, Super Apex, Minipris and so on.
Then, of course, there is what this debate has primarily focused on this evening—the "bucket shops". These shops do not meet the public protection standards, and are used by airlines and general sales agents to dump in the market a limited number of surplus seats at prices below those approved by the CAA. These shops originally catered for the ethnic or student markets, but have grown in recent years due to the deteriorating airline economics—over-capacity, fierce competition and the absence of enforcement of CAA-approved fares. The very nature of their operation means that only a certain sector of the public has access to these illegal discounts, and that must surely be, as the noble Baroness, Lady Burton, has said, undesirable in itself.
The worsening of airline economics inevitably means that this problem has continued to grow and these shops and their business have sprung up and flourished because of a classic market situation of too few passengers chasing too many seats. As we have heard, the Government are, and have been up to now, unwilling to enforce the law, presumably partially on the grounds that it would be contrary to their own market force policy and also, apparently, because they seem to believe that a successful prosecution would be difficult to achieve.
We have had persuasive evidence from Lady Burton this evening that in fact such evidence could be obtainable, although she was slightly handicapped in that she had not received, or Thomas Cook had not received, a reply to the latest inquiry into the exact nature of the evidence which would make a successful prosecution possible.
Against this, one sees a situation where the Government have permitted otherwise unsaleable seats to flood the marketplace. It is difficult for IATA to take action against its members when the attitude of the present Government does not appear to support such action. Indeed, if such action was taken non-IATA airlines would be left free to involve themselves more freely in the illegal discount market, to the further disadvantage of IATA airlines.
As the noble Baroness, Lady Burton, has said, airlines are increasingly concerned about the financial implications of this situation, facing, as she told us, an estimated loss of 2.6 billion dollars in 1981. In order to encourage a return to sanity in the United Kingdom market, the IATA airlines, as Lady Burton has said, have taken action to establish a special study group on agency distribution to look at ways and means to make normal and low discount fares available through a far wider group of ABTA agents. They have also, as the noble Baroness, Lady Burton, said, established a special fare deal monitoring group to examine and analyse conditions in the United Kingdom market. The objective is to propose ways to eliminate illegal rebates and to make discounted fares legally and widely available to the public while maintaining the essential consumer and airline protection standards of the IATA agency distribution scheme.
72 Clearly, we are involved in a very difficult and, one would almost fear, intractable problem here; but I have the feeling that the noble Baroness, Lady Burton, is right that the Government are rather procrastinating and that they could take action if they were prepared to take action either along the lines indicated by the noble Baroness or if they were prepared to find parliamentary time to introduce tougher legislation with heavier fines for non-compliance. As the noble Baroness has rightly stated, if cheap air tickets are to be made available they should be made available to everyone. This thesis is a thesis which has our wholehearted support. I hope that the noble Lord, Lord Trefgarne, will have an encouraging reply for us this evening.
§ 7.31 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne)
My Lords, one thing which has come through from the debate this evening and from representations which have been made to me in the past is that the discounting of air fares is widely disliked. The airlines do not like it—although most if not all of them are involved in it—because it erodes their profits, and this at a time when most of them are losing money. The authorised travel agents do not like it because they are losing customers to agents who in some cases are less scrupulous and perhaps not so mindful of their customers' interest. We all regret a practice which erodes respect for the law. Even the customer who is glad enough to buy a cheap ticket has some qualms about doing business with a bucket shop, suspecting that the transaction in which he is involved may not be completely above board. There is no doubt that he, the customer, would much prefer a range of low fares to be made available on a wholly legitimate basis.
When the practice is so widely and so roundly condemned on all sides, your Lordships may well ask why it persists and why all those concerned, including the Government, do not do more to stamp it out. I shall have something to say in a moment about the limits on what the Government can do, but first I would like to stress that the problem is not new, nor is it unique to this country. It is the product of powerful market forces. At a time of world economic recession, most scheduled air services are operating with too many empty seats which the airlines naturally prefer to sell cheaply rather than not at all.
Far from reducing the number of empty seats in a period of falling demand, the conversion to wide-bodied aircraft is actually tending to increase supply and exacerbate the problem. Like King Canute, I am not persuaded by those who seek to advise me that the tide will not rise if I command it not to do so, waving the Civil Aviation Act in my hand. My Lords, I am in no doubt at all that so long as the supply of seats is greatly in excess of the demand for those seats at approved fares, discounting will take place on a substantial scale openly, covertly or both.
There seem to be two schools of thought among those who look to the Government to solve the problem which we are discussing this evening. On the one hand, there are those who say that the Government should put a stop to discounting by prosecuting offenders, while others say that the only thing wrong 73 with the present situation is that "respectable" agents, for example those who are members of ABTA or who are approved by IATA, should be allowed to get in on the act. I confess that I am not entirely certain to which school the noble Baroness, Lady Burton, belongs. I shall try and deal as succinctly as I can with both.
Let us take the prosecutors first. First, we need to look at the law and the offence that may be being committed. In my Answer to the Question from the noble Baroness on 11th June, I told the House where the legal provisions are found. What I am sure noble Lords will have observed is that the position of agents is different according to whether they are acting on behalf of a British or a foreign airline, but that in all cases the offence relates to the carriage of passengers or cargo in contravention of the operator's operating licence or permit. For a prosecution to succeed against either an airline or an agent, the court would have to be satisfied that the passenger actually travelled at a fare other than an approved fare and had not simply bought a ticket; and, secondly, that the airline carrying that passenger had a condition in its operating licence or permit to charge only approved fares.
It is the second condition which presents a particular difficulty. All British airlines have such a condition in the licences they obtain from the CAA, but not all foreign airlines have such a condition in the permits they obtain from the Department of Trade. Moreover, approved fares may well not specify clearly a particular sum for a particular class of travel. Fares filings with the CAA for purposes of approval often refer only to a tangled web of IATA resolutions. It would be all too easy to convince the court in such cases that reasonable doubt existed as to what the approved fare actually was. Sometimes an approved fare might indeed have been paid, but one or other of the laid-down conditions—for example, advance purchase—is not insisted upon. Such an arrangement is no less contrary to the terms of the licence than is charging the wrong fare. My noble friend Lady Elliot referred to that during the course of her remarks.
So far as a prosecution against the airline is concerned, one would need to establish to the court's satisfaction that, before the flight began, the operator knew or ought to have known that the passenger concerned was travelling at a fare that would put the operator in contravention of his licence or permit. Where the ticket shows an approved fare, though the purchaser obtained it at a discount from an agent or sub-agent, it could prove extremely difficult to establish that the airline knew or ought to have known that it was committing an offence in the manner described.
So far as a prosecution against the agent is concerned, the court would have to be satisfied that, before the flight began, the agent in selling the ticket knew or ought to have known that the accommodation was likely to be provided on an aircraft in contravention of the operator's licence or permit. But this condition, difficult as it is to satisfy, appears in the Civil Aviation Act only and not in the Air Navigation Order, so that it could only be used to prosecute an agent selling tickets on British airlines and not on foreign airlines. As your Lordships may know, I have spent some of my life in the air transport industry. I can assure the noble Baroness that of all the examples that she and 74 those of her acquaintance have brought to my attention, none was one that would stand up in court—not only, I think, in the eyes of my advisers but in my own eyes, placing myself in the position of an airline that might be called upon to defend an action based on that evidence.
In this situation, it is natural to ask whether it might not be right to amend the law so as to make successful prosecutions more likely. Certainly that is an option which can be considered, but I am bound to say that I would have some doubts as to whether such a measure should be accorded legislative priority. It would certainly be controversial, since it could be presented as tending to increase the price of air travel to the customer, and effective implementation might well call for significant numbers of additional staff to enforce it. But quite apart from these objections, serious enough in themselves, it is very doubtful whether legislation and prosecution of offenders would actually solve a problem which has its roots in the powerful dictates of the market place.
I turn now to those who believe the Government should wave their magic wand and throw discounting open to all. I have explained on numerous occasions the Government's obligations under its bilateral air services agreements which prevent us from doing this even if we wanted to. The noble Lord, Lord Airedale, referred to this matter during his remarks. I have also explained in the House and to representatives of the travel trade and the airlines that it is not for Government to lay down which sections of the travel trade airlines should deal with, nor to compel trade associations to relax their terms of membership. I have told the agents that they should discuss their problems with the airlines and get the airlines to take it up in the IATA forum.
I understand that IATA has now set up a working party to consider the subject of discounted air fares. Indeed, the chairman of the new working party came to see me only recently. I am told that it is proposing to pay particular attention in the first instance to discounting on the London market. It will be open to representations from travel agents and other interested parties as well as from its own network of IATA enforcement agents. The working party is due to report to the director general and executive committee in September and I think everyone who is concerned with this problem will await the report with keen interest.
Obviously I cannot forecast what the outcome will be. I remain convinced that it is primarily for the economic interests involved—the airlines and the agents and their trade associations—to find a workable answer to the present situation of disorderly marketing. But I think it must be apparent to all of us that uncontrolled discounting will only recede when airlines have more freedom than they do now to compete openly and legitimately on fares.
Where the Government do have a role to play is in the encouragement of an international framework which will favour the sort of competition which will give the customer a fair choice of legitimate low fares, while enabling the airlines and the agents to make a reasonable living. The mini-prix fare to Amsterdam is a good example of the sort of fare which we should like to see more widely introduced. On a broader 75 front we are expecting the EEC Commission to present a report to the Council of Ministers very shortly on the liberalisation of the regulation of air fares. We have encouraged the Commission to include a draft directive with this report, and we shall be using our tenure of the presidency to ensure that their proposals are fully discussed. Progress in these matters is not as fast as we should like, but we cannot move faster than our partners are willing to go. I am in fact meeting Commissioner Kontogeorgis, who is responsible for transport matters, tomorrow and we shall be discussing these matters.
I think that the House has heard enough tonight to appreciate that the problem of dicounting is not one which is easily solved. The present situation is unsatisfactory in many ways. On that, we are all agreed. The policy which we are following together with the efforts which the industry are making on their own account will not bring instant results, but I am satisfied that there are no reasonable alternatives.
§ Baroness Burton of Coventry
My Lords, before the noble Lord sits down (which is my only way of asking him a question) may I ask whether it is the intention of his department to reply to the letter of 11th June from Thomas Cook's chief executive asking what further evidence the department's legal advisers would require in order that they themselves may initiate a prosecution?
§ Lord Trefgarne
My Lords, I shall certainly ensure that all the correspondence that I receive is replied to as quickly as possible.