Air Europe: Fare Application (Hansard, 3 March 1988)

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, the recent European Council directive on air fares requires governments to approve proposed fares if they are reasonably related to the long-term fully-allocated costs of the applicant, while taking into account other relevant factors which include the needs of consumers. Provided Air Europe can meet those criteria and follows the proper procedures, the fares it proposes will be approved.

§ Baroness Burton of Coventry
My Lords, I thank the Minister for that amount of detail which will be appreciated as there are several issues at stake. Does the Minister agree that the chief issue is that Air Europe is endeavouring to make its fares cost-related rather than cartel-related which can only benefit air travellers? Secondly, can the Minister tell the House the present position: has Air Europe filed an application for the £59 fare?

§ Lord Brabazon of Tara
My Lords, we very much hope that UK airlines will be able to respond to the EC directive by introducing lower and more flexible cost-related fares.
In answer to the second point made by the noble Baroness, Air Europe has not yet applied but I understand that proposals for new fares will be filed shortly with the United Kingdom and the French authorities.

§ Baroness Burton of Coventry
My Lords, it is so nice to make some progress. Perhaps I may ask the Minister this question. If the British and French Governments disagree on this matter will it be referred to arbitration? If that is the case, perhaps I may ask if the Minister recalls that on 12th January in a Written Answer to me at col. 1224 of the Official Report he said that the EC air transport package provides: a speedy and binding arbitration procedure on fares;". Can the Minister tell the House what interpretation we might put on the word "speedy"?

§ Lord Brabazon of Tara
My Lords, as regards whether it might be referred to arbitration, I cannot say anything definite until the proposals have been filed. Naturally, I hope that there will not be any disagreement because both governments must observe the rules for approval in the fares directive. If arbitration is necessary, the longest it could take to reach a decision is normally three months from the date when the fares were first filed.

§ Lord Northfield
My Lords, if we are making some progress on the cost of flights to Paris, would the noble Lord be prepared to consider the cost of flying on beyond Paris to Strasbourg? The return fare to Strasbourg is about £256 which is ridiculous by the standards of today. It is almost as much as the cost of flying to New York and back. Cannot something be done to break that part of the cartel?

§ Lord Brabazon of Tara
My Lords, as Strasbourg is within the EC, exactly the same criteria would apply if an airline applied for cheaper flights to Strasbourg; it would be covered by the same directive as the one which is in question today.

§ Lord Taylor of Gryfe
My Lords, will the Minister take note of the fact that a fare of £59 is now available and on offer between London and Paris? In contrast, the fare between London and Glasgow or London and Edinburgh is £74. Can the Minister exercise some authority to induce a measure of competition in this area so that prices may be reduced?

§ Lord Brabazon of Tara
My Lords, first, I should like to correct the noble Lord. The £59 fare is not yet available on the Paris route. As regards domestic fares, there is competition on the London to Edinburgh, London to Glasgow routes. There are two airlines competing from Heathrow and there is also competition from Gatwick. There is the possibility of low air fares upon those routes.

§ Lord Merrivale
My Lords, can the Minister confirm an article which appeared in the press on 10th February to the effect that Air Europe is refunding £25 in the aircraft, which is the difference between £84 and £59? If that is the case is it not rather a gimmick which should be discouraged by Her Majesty's Government?

§ Lord Brabazon of Tara
My Lords, I understand that practice is not actually happening at the moment.

§ Lord Underhill
My Lords, in expressing appreciation of the progress which is being made with regard to the Air Europe application, can the Minister give some assurance—if it is within the power of the Government—that the cheap fares will not be at the expense of the conditions of the persons who work for the particular airlines?

§ Lord Brabazon of Tara
My Lords, the conditions for people employed within the airlines must be for the management of the airlines concerned. The criteria for deciding on the new fares are set down in Article 3 of the directive. I touched upon two of them 275 in my original Answer. They take into account, for example, a satisfactory return on capital; the competitive market situation, including the fares of the other carriers operating on the route; and the need to prevent dumping.
The critical fact is that if the proposed air fare is lower than that offered by another air carrier operating on the route that shall not be a sufficient reason for withholding approval.

§ Lord Orr-Ewing
My Lords, would it be in order to congratulate my noble friend on having at last made some progress? After nine years with a Government committed to competition, if we achieve progress in this one field where the cartel has defeated all previous efforts would it not be appropriate either to put up a plaque or even a statue to the noble Baroness, Lady Burton of Coventry, and perhaps to my noble friend Lord Bethell, as well? I should be very willing to open the subscriptions should this be necessary.

§ Lord Brabazon of Tara
My Lords, I am sure that your Lordships will agree with my noble friend. The Government have been working very hard indeed over the past few years in order to achieve the first stage of this EC package. I emphasise that it is only the first stage. We hope to make further progress by 1990 and even more progress by 1992. The package we have achieved in Europe is not as liberal as we should have liked and it is not as liberal as we have achieved after bilateral negotiations elsewhere. However it is a first step.

§ Baroness Strange
My Lords, is the Minister aware that yesterday was the birthday of the noble Baroness? Would he like to share with us all in wishing her many happy returns of the day?

§ Lord Brabazon of Tara
My Lords, I shall indeed be happy to follow my noble friend's suggestion and congratulate the noble Baroness on her birthday of yesterday. I know that she has been very interested in the subject of aviation for many years. Perhaps it would not be rude of me to say that her birthday more or less coincides with the anniversary of powered flight.