HL Deb 16 October 1985 vol 467 cc567-70

2.44 p.m.

Lord Bethell

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether, in view of the agreement liberalising air transport recently concluded with the Belgian Government and in view of their recent assertion that the competition articles of the Treaty of Rome apply to air transport within the European Community, they will now advise British airlines not to conclude any agreement with any Belgian airline on tariff fixing or revenue pooling.

The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness)

My Lords, the Government believe that there should be a more open, competitive regime for air services in the EC and are actively pressing for the proper application of the competition rules of the Treaty of Rome to civil aviation with a minimum of exemptions. To this end, we are seeking early agreement in the Council of Ministers. It is not for the Government to interfere in the commercial decisions of airlines. They must themselves decide which commercial agreements they should enter into and whether they are compatible with the Treaty of Rome.

Lord Bethell

My Lords, I am grateful to the noble Earl and I congratulate him and his colleagues on this agreement. I wonder, though, whether he recalls that his noble friend Lord Trefgarne told the House on 25th July that member states have the power to enforce the competition articles of the treaty and should do so, but there is a duty to enforce them. Does he not therefore feel that it is the Government's duty to prevent any agreement between, say, British Airways and Sabena on this route which the Government have declared to be illegal and that it would be wrong to allow this to happen, as happened between British Airways and KLM on the Amsterdam route?

The Earl of Caithness

My Lords, I do indeed recall the words of my noble friend Lord Trefgarne. He, I know, is very disappointed not to be handling aviation now. With regard to any pooling agreement, as I said in my original Answer, this surely is a commercial decision for the airlines.

Baroness Burton of Coventry

My Lords, may I ask the Minister, following the answers he has just given the noble Lord, Lord Bethell, whether we are to understand that in this agreement concluded between the two governments revenue pooling will be permitted? Arising from that, may I ask him whether it is not the case that in Europe, where there is a considerable amount of revenue pooling, the advocates of such a course say that it enables airlines to operate which would not otherwise be able to take part? Arising from that, is the Minister telling the House that British Airways or the Belgian airlines are in need of such help; and does he not feel that revenue pooling certainly should not be allowed in agreements of this nature?

The Earl of Caithness

My Lords, we agree that fare fixing is undesirable and can be against the consumer interest in most cases. But the noble Baroness is absolutely right in saying that, on a few routes, airline co-operation may be necessary to maintain the viability of the route.

Lord Underbill

My Lords while there is general agreement on the desirability of having lower fares and a general improvement in the competitive basis of British airlines, would the noble Lord not agree that if one followed the line as suggested in the original Question this could be harming British airlines, that we should not take a unilateral line, and that the importance of bilateral agreements still remains?

The Earl of Caithness

My Lords, I think that it is a matter of more than bilateral agreements. We are seeking through the Council of Ministers to get a much more comprehensive attitude of the EC to a more competitive airlines market.

Lord Harvey of Prestbury

My Lords, is my noble friend aware that if the air fares could be deregulated as in the United States this would go a great way to improving the whole economy of Western Europe?

The Earl of Caithness

My Lords, my noble friend is absolutely right but I must point out to him a fact that he knows better than I: that in America it is a purely internal market but that Europe is an international market as well.

Lord Bruce of Donington

My Lords, is not part of the trouble that under the treaties the Commission is entrusted with the task of interpreting the treaties and that, according to the Commission, air transport is specifically excluded from the competition articles within the treaties? Would it not therefore be far better if Her Majesty's Government, when considering bringing forward amendments to the treaty, put forward amendments to these particular clauses of the treaty which have given rise to the Commission's ruling upon them?

The Earl of Caithness

My Lords, the Government agree that the competition rules apply in principle to air transport. I hope that the noble Lord will support us in our endeavours with the Council of Ministers.

Baroness Burton of Coventry

My Lords, the Minister was selective in what he replied to in my supplementary questions; and I was not surprised at that. May I ask him whether it is the case that pooling arrangements do not lead to lower fares? That is the first thing. Secondly, is he saying that the airlines involved in this agreement are really those which would not be able to take part unless there were pooling arrangements?

The Earl of Caithness

My Lords, with regard to the second part of the noble Baroness's supplementary questions, no, that is not what I said. So far as the first part is concerned, would the noble Baroness remind me of the point?

Baroness Burton of Coventry

My Lords, it was quite brief. It was whether pooling arrangements did not in fact lead to lower fares.

The Earl of Caithness

My Lords, I think the answer is that in some cases they can lead to higher fares, but in those cases it is probably the air route itself that is being saved.

Lord Bethell

My Lords, on 25th July my noble friend undertook to enforce the competition articles of the Treaty of Rome. Is the Minister now saying that the Minister will not enforce these articles?

The Earl of Caithness

My Lords, I am not exactly sure what my noble friend Lord Trefgarne said, and perhaps it would be advisable if I did not comment specifically on that at the moment but wrote to my noble friend.