Air Service Agreement (Hansard, 25 March 1991)

§ The Minister of State, Department of Transport (Lord Brabazon of Tara)
My Lords, estimates were made of the value of the package from the point of view of UK carriers as a whole. The bulk of these benefits would be available to British Airways. Experts from the Civil Aviation Authority and representatives from British Airways were involved throughout the negotiation in assessing those benefits.

§ Lord Stallard
My Lords, I thank the noble Lord for that ingenious reply. While the Government have been asserting that the agreement negotiated with the United States would enable British airlines and others to mount operations into the United States via points 844 in continental Europe, is it correct that that will not apply until we have similar agreements with the remainder of the European countries? Consequently, does that not mean that the Americans achieved everything they wanted, whereas there is nothing immediately on the table for British Airways?

§ Lord Brabazon of Tara
My Lords, certainly not. As far as the value to UK carriers is concerned, the package was worth in excess of £200 million a year. It is true that not all the opportunities can be used immediately. However, the benefits are among those to which British Airways attached particular importance, looking forward to the completion of the internal market in Europe.

§ Lord Clinton-Davis
My Lords, would the Minister agree that three of the main strands of the negotiations in regard to the United Kingdom have not been met immediately? Two of them require congressional approval—namely, the right to operate cabotage routes in the United States and the right to control United States airlines in the United States—and that approval is a long way off. With regard to the right to be able to operate hub airports in Europe, that, as my noble friend Lord Stallard asserted, depends on the agreement of other European countries. What immediate benefits have arisen for British airlines in relation to these negotiations?

§ Lord Brabazon of Tara
My Lords, as regards the noble Lord's first two points—that is to say, cabotage and inward investment—we knew perfectly well that, because of the need for congressional approval, the Americans could not deliver agreement on either of these matters in the short term and therefore that was not asked for in the negotiations recently concluded. British Airways was involved throughout in deciding our strategy and shopping list, virtually, all of which was obtained. There are a considerable number of benefits to UK airlines which are immediately available. In particular, there is the designation of a second British carrier to operate from Heathrow; a new facility for second or third UK airlines to ply on certain existing routes; fifth freedom opportunities, European fifth freedoms, code sharing, more permissive rules on joint ventures and a three-year restriction on US carriers' capacity at Heathrow.

§ Lord Clinton-Davis
My Lords, does the Minister agree that most of the benefits which he has just outlined are not immediate? Does he agree that the main planks of the negotiations which British Airways certainly wanted to assert have not been met and that they are unlikely to be met until a long time in the future? Does the Minister agree that it is a fact that Pan Am and TWA have been permitted to transfer their landing slots at Heathrow immediately to United States Airlines and American Airlines, which is of tremendous benefit to those two companies?

§ Lord Brabazon of Tara
My Lords, the noble Lord misunderstands the situation. I have just listed a number of benefits which are immediately available. Perhaps I may quote from the New York Times for 18th March. It described these negotiations as, 845 a British coup in accord on Heathrow. Many industry executives and analysts say that Britain got the best of the deal. We really did not get anything in return".

§ Lord Stallard
My Lords, will the noble Lord accept that there is great anxiety in the industry at what seems to have been a fairly rushed and cobbled-up agreement in order to rescue the American airlines? We all understand the difficulties of Pan Am and the need to rescue it from its economic problems. We also understand the need to give Virgin airlines a slice of the cake. However this has been done at the expense of British Airways, which at the moment is discussing further staff redundancies. Is the Minister not worried that there is some concern in the industry about that?

§ Lord Brabazon of Tara
My Lords, I certainly disagree with the noble Lord's assertion that these negotiations were rushed. There were detailed negotiations which took place over quite a few months. There was a series of meetings with the Americans. The choice was between a settlement which would benefit both the airlines, including British Airways, and the consumers, and a stand-off which would have given consumers less choice and British Airways no new competitive opportunities. We seized the opportunity.

§ Lord Ezra
My Lords, is the Minister prepared to hazard a guess as to the extent to which consumers will benefit from these new arrangements through reduced airfares?

§ Lord Brabazon of Tara
My Lords, history shows us that consumers benefit from greater choice, particularly on air routes. For example, the liberalisation of domestic routes to Scotland has proved itself.