Airline Traffic Rights: United States (Hansard, 28 April 1999)

§ The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty)
My Lords, the Government always seek to get the best terms for UK interests as a whole. We shall push very hard for true reciprocity of traffic rights.

§ Lord Montague of Oxford
My Lords, I thank my noble friend for that Answer. I was prompted to ask the Question because of the request by American Airlines Federal Express for permission to fly from Prestwick and; Stansted. The consultation period expires at the end of this week. Is it still the position that we stand firm by our policy of granting rights only on a reciprocal basis? That is of the greatest importance to this young industry with 75 aircraft and 4,000 employees. It needs reciprocal rights for continued growth.

§ Lord Whitty
My Lords, the Government have always taken the view that, wherever possible, we should achieve reciprocal rights in our dealings with the United States. As noble Lords will be aware, that has been a difficult task in many of our negotiations with the United States. In relation to the FedEx application, we are pressing hard for reciprocity. There are a number of other issues involved, including employment issues. We are aware of the UK cargo carriers' concerns in particular. Those will be taken fully into account. As my noble friend indicated, we are undertaking wide consultation, the full results of which will be known at the end of this month. We shall make a decision shortly thereafter.

§ Lord Geddes
My Lords, is the Minister aware—I am sure that he is—of the report of the European Select Committee of your Lordships' House of November last year on airline competition policy in which strong recommendations were made for reciprocity, particularly 302 with regard to the United States? In that context, will he comment on the present restrictions whereby no more than 49 per cent ownership of a US airline is allowed by non-US citizens relative to 25 per cent in Europe?

§ Lord Whitty
My Lords, I fear that in this context the attitude of the United States Administration does not indicate clearly their commitment to free trade and liberalisation. Not only is there a more or less blanket restriction on cabotage, there are also greater restrictions than pertain in Europe on ownership, wet leasing and various other aspects. We are attempting to get the US Administration to change their view on this. It will require some heavy negotiations to get some movement, but it is our intention to do so. We believe that in the long run that will be in the interests of the United States and aviation as a whole.

§ Lord Northfield
My Lords, this disagreement has been going on for years, even longer than the disagreement over bananas—and that is saying something. Can my noble friend say what point has now been reached and whether some breakthrough is in prospect? It has gone on long enough on both sides of the Atlantic.

§ Lord Whitty
My Lords, my noble friend is absolutely correct. The last time I was employed in the aviation industry was nearly 30 years ago and these issues were more or less present then. We are continuing to negotiate. We are attempting to do so at the highest level. My right honourable friend the Deputy Prime Minister met the US Transportation Secretary last week. Both sides agreed that we should get the talks back on track. The UK now intends to have a round of informal talks with the Americans in May and the formal talks will resume in June. I cannot pretend that this is an easy negotiation, but we believe that we can make some progress on liberalisation within the US. It is very important to the future of British aviation that we reach an understanding on UK-US services. We are the market leaders, but we also recognise the importance of the US market.

Lord Campbell of Croy
My Lords, do these rights include the rights to popular slots at Heathrow which are very much sought after? If so, and if more become available to the United Kingdom as a result of these negotiations, will the Government ensure that domestic flights within the United Kingdom are not frozen out but are given some priority?

§ Lord Whitty
My Lords, the question of slots is extremely complex and there is no clear consensus of the way in which we should proceed. The Government are clear that the slots are not the property of individual airlines, but the current system gives the airlines a fair amount of scope over how they use them and the swops in which they are prepared, for 303 one reason or another, to engage. It is not the intention of the Government that any alteration of the slot situation should disadvantage domestic airlines.

§ Lord Gladwyn
My Lords, in seeking the views of interested parties on the matter of the Federal Express application, the DETR seems to be opening the possibility of conceding rights unilaterally. Is that wise at a time when we are marshalling all our arguments for the forthcoming bilateral negotiations?

§ Lord Whitty
My Lords, every case has to be taken on its merits and full agreement on the broad issue is unlikely in the same time-scale as a decision on FedEx. Nevertheless, I repeat that we are negotiating hard to ensure reciprocity in the FedEx case.

§ Lord Brabazon of Tara
My Lords, the Minister said that every case has to be taken on its own merits. However, at the same time, he said that negotiations on the existing Bermuda 2 agreement might take place as soon as June. But why should this application be taken separately from a full negotiation on Bermuda?

§ Lord Whitty
My Lords, I said that the further round of formal talks would take place in June. No doubt the prospects for that will become apparent before a final decision is taken on FedEx. However, I would be misleading the House if I were to give the impression that June would be a likely date for a final conclusion of all outstanding issues between the United States and the UK. It is a much more complex and long-term process than that.

§ Baroness Thomas of Walliswood
My Lords, is it not true that in negotiations between the UK and the United States the main card in the hands of the latter is cabotage for our airlines within the states and that our main card is the availability of slots at Heathrow? Can the Minister tell the House what effect the delay in negotiations for putting forward the association between British Airways and American Airlines, caused by the direction from the EU that BA should give up some of its important slots, will have on any other negotiations between the UK and the US?

§ Lord Whitty
My Lords, I think it would be wrong to suggest, as the noble Baroness does, that there is a direct trade-off between cabotage rights within the US and developments on slots at Heathrow. Obviously cabotage rights in the US represent, in total, a massive access to a new market, which we believe we should be pursuing. As I have indicated, the issue of slots at Heathrow is a more constrained area of flexibility, given the pressure that is put on those slots in any case.
As far as concerns the BA/American Airlines position, the House will recognise that, although that may have implications for future UK/US relations in such areas, the whole situation is under review by the competition authorities in at least three places. In those circumstances, I could not possibly comment further.