HL Deb 13 October 1994 vol 557 cc998-1001

3.12 p.m.

Lord Orr-Ewing asked Her Majesty's Government:

What progress is being made in upholding competitive principles in the pricing of inter-European flights.

The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen)

My Lords, the European single market, which promotes competition in air transport, allows airlines to set their own prices. This freedom is balanced by competition rules designed to combat anti-competitive pricing.

Lord Orr-Ewing

My Lords, if 10 to 20 years have been spent trying to promote competition, that seems to have been singularly ineffective, because 49 million people flew in and out of Europe from this country last year and all of them paid two to three times as much as they would have paid for similar flights in the United States of America, where competition is keen. Does it make sense for the European Union to grant a subsidy of more than £2 billion to Air France when we are charged enormous prices? It would benefit all travellers if the Government could tackle this problem with real zest and enthusiasm.

Viscount Goschen

My Lords, the liberalisation measures established a single market in air transport in the Community. My noble friend is right. The Government's firm commitment to fair competition was demonstrated amply by our recent decision to challenge in the European Court of Justice the Commission's decision in the Air France subsidy case.

Lord Bruce of Donington

My Lords, is not the European Commission quite incapable of applying or enforcing competition rules fairly and reasonably?

Viscount Goschen

My Lords, there has been a decision which has promoted an enormous subsidy into the air transport industry in Europe. The Government have taken a firm line on that, and we have challenged that decision.

Lord Brabazon of Tara

My Lords, while I wish to congratulate my right honourable friend upon challenging the subsidy to Air France in the strongest possible terms in the European Court of Justice, is my noble friend aware that subsidy to airlines such as Air France is the enemy of cheaper fares, because airlines like British Airways and British Midland which can offer competitive fares to the customer cannot compete if an unfair subsidy is given by a national government like France to its national airline? While I appreciate that this case may take some time in the European Court, is there any chance of an interim order in the European Court to prevent any further subsidy being given to European airlines during the time that it takes for a judgment to be reached in this case?

Viscount Goschen

My Lords, my noble friend is right about the detrimental effect that this enormous subsidy will have on the European air transport market. That is why we are pursuing the case. We continue to apply pressure on the Commission through every avenue available to us.

Lord Peston

I hope that the Minister listens to his noble friends on this matter. Is he aware that this is not really an EC matter? This conspiracy against the travelling public in Europe goes back a great deal further than the foundation of the Community. It is a cartel, explicit or implicit, which has been extorting money from travellers for donkeys' years just to keep national airlines in existence. Is he aware that his noble friend Lord Orr-Ewing is right that, if one believes that competition is a good thing, then one should look at what happens in the United States where they have competition? Is it not cheaper at present to cross the Atlantic, where there is competition, than it is for an ordinary household to make a standard return flight to Paris? Is not that a disgraceful state of affairs?

Viscount Goschen

My Lords, this Government are committed to competition. That is why we have supported the free market in air transport within Europe. If the noble Lord wants to compare the costs of flight across the Atlantic with the cost of flights to Europe he must compare like with like. There are obvious savings in terms of the length of the journey.

Lord Boyd-Carpenter

My Lords, have not the competitive position and the cost position been made very much worse by the imposition of the silly tax on airline passengers from this country?

Viscount Goschen

My Lords, I do not believe that the tax which has been imposed will make a great deal of difference to the overall cost of the fares in terms of the cost of the basic flight.

Lord Clark of Kempston

My Lords, does my noble friend agree with the unanimous opinion against the uncompetitive subsidy being paid to Air France? If the European Court says that the subsidy can continue what further action can Her Majesty's Government take?

Viscount Goschen

My Lords, my noble friend is right about the unanimity of opinion on this side of the House. Various other opinions have also been expressed. It is not for me to pre-empt a decision of the European Court.

Lord Stoddart of Swindon

My Lords, does not this show that the single market is what the French say it is, and not what it should be and what we believe that it should be? Is it not against the interests of British airlines that the Commission should side openly with the French Government in subsidising the latter's flag carrier to the tune of £2 billion every year simply and solely to buy off its staff, who have been on strike and will strike again if the subsidy is removed?

Viscount Goschen

My Lords, yes, I find myself in agreement with the noble Lord, in that the decision represents an enormous amount of aid. It is the largest amount of aid that has ever been allowed in the air transport sector. It is extremely detrimental to competition, especially when one takes into account the great progress that British airlines have made in cutting their costs.

Baroness Hooper

My Lords, does my noble friend agree that this is not just a question of subsidy to Air France but of monopolistic practices? I quote as an example the air journey from London to Strasbourg. I go regularly as a member of the parliamentary assembly of the Council of Europe. The taxpayer pays £348 return for a very inferior service at inconvenient times. What is my noble friend's department doing about that?

Viscount Goschen

My Lords, the simple fact is that, under the new liberalisation measures which I detailed earlier, any licensed airline which wishes to operate a service within the EEA can do so and charge what fare it likes provided that it is not anti-competitive or exploitative. The Government have participated in setting a framework for air fares. It is not for the Government to specify those fares.

Lord Mountevans

My Lords, will my noble friend remind me which costs the Government control? They control, for example, ATC costs. Will he also remind me what the Government are doing to keep these costs down?

Viscount Goschen

My Lords, it is in the interests of the country that air traffic control charges are kept within reasonable limits. The Government do not seek to control fares; they are left to market conditions.

Baroness O'Cathain

My Lords, is it not true that the air traffic control costs in this country are 38 per cent. higher than they are in, say, the United States, which is a large element in keeping these fares high?

Viscount Goschen

My Lords, I cannot confirm or deny the exact figure which the noble Baroness mentioned. It is not quite fair to compare the ATC costs in the United States with those in the United Kingdom because of the different conditions that apply in our two countries.

Baroness O'Cathain

My Lords, that is right, but does the Minister agree that people are comparing the fares?

Viscount Goschen

My Lords, we are comparing the fares in Europe. The noble Baroness's question is bordering on being wide of this Question.