HL Deb 14 October 1999 vol 605 cc507-9
Baroness Thomas of Walliswood

asked Her Majesty's Government:

How United Kingdom airlines will benefit from the unilateral granting of fifth freedom rights to the United States cargo airlines in and out of Prestwick airport.

The Minister of State, Department of the Environment, Transport and the Regions (Lord Macdonald of Tradeston)

My Lords, although United Kingdom airlines will not benefit directly from the granting of fifth freedom rights to US cargo carriers from Prestwick, there will be significant economic benefits to the region and to the UK as a whole: and UK airlines stand to gain from the ensuing liberalisation of the overall market.

Baroness Thomas of Walliswood

My Lords, in his Answer, for which I thank him, the noble Lord has made the point that I was making in my Question. We are engaged in long drawn-out negotiations, which I believe are currently stalled, on the exchange of open skies access. Does the Minister agree that when one is negotiating with a very powerful party, it is not wise to grant one of that party's most powerful airlines rights to which we cannot gain access in our negotiating partner's country?

Lord Macdonald of Tradeston

My Lords, we believe that the Prestwick decision represents a good deal for the UK as a whole. As the noble Baroness says, the talks have stuttered along for many years now. The modest offer that we have made is useful in a number of ways. It begins to open up our proposals on talks with the United States. It also represents a good deal for the United Kingdom as a whole. We were working under a threat that FedEx would withdraw its services from Prestwick if it were not granted fifth freedom rights to work out of Stansted. We held the line firmly on Stansted and the regional airports for the large markets in England, which form the major bargaining chip in the negotiations.

Lord Brabazon of Tara

My Lords, as the Minister is aware, it is most unusual to negotiate without any reciprocity in these kinds of talks. Did the UK Government ask for any concessions from the United States Government in return for those rights? Did they, for example, raise the issue of wet leasing, which is of concern to the British cargo airline industry? We welcome the commitment to liberalisation, but we really should be getting something for our airlines in exchange. Is there any prospect of obtaining concessions from the United States—for example, in regard to a third carrier from Heathrow to America?

Lord Macdonald of Tradeston

My Lords, based on our negotiating position, talks with the Americans are scheduled for next week. We have the support of companies such as FedEx, which, far from withdrawing from Prestwick, are now using that airport. They are also using their best endeavours to bring pressure to bear upon the American Government. As we enter the discussions next week, in what has been a lengthy and complex negotiation, obviously we do not want to talk too publicly about any bargaining positions. By engaging the Americans in discussion regarding cargo and fifth freedoms, we hope to be able open up the larger issues of liberalisation that the British Government have pursued for some time.

Lord Berkeley

My Lords, is my noble friend the Minister aware of briefings from FedEx stating that, The British cargo airlines cannot offer, nor do they propose to offer, the aircraft types, products or services", that they can, and that they have only 1 per cent of the total market? Does my noble friend agree that, unless British cargo airlines have fifth freedom rights in reciprocal arrangements, their share of the market will never rise above 1 per cent?

Lord Macdonald of Tradeston

My Lords, the British companies involved in the British Cargo Airline Alliance are indeed small. There are four of them, and they have less than 10 per cent of the UK market. In an increasingly global business, dominated by the Americans, it is our hope that we shall be able to achieve a deal with the United States that would allow our cargo companies to fly into the United States, and also have the right to wet lease airports in what is a very restrictive US market in terms of inward investment, wet leasing and cabotage. We want to crack the market, but we have no illusions as regards the difficulties that have been experienced to date. We shall attempt to ensure a strong negotiating position based on the line that we have taken in regard to Stansted and other airports.

Lord Gladwin

My Lords, can the Minister assure the House that, in the resumed bilateral negotiations with the United States, the interests of the all-cargo operators, so often the Cinderella in these matters, will not, in the final deal, take second place to the interests of the passenger airlines who, in this context, may adopt the role of the ugly sisters?

Lord Macdonald of Tradeston

My Lords, the negotiations which we begin next week will be concentrated on cargo. We will of course have the interests of British carriers at the centre of it.

Lord Clinton-Davis

My Lords, does my noble friend agree that it is a highly sensitive issue, particularly at this juncture? It would not be possible for the Government to reveal their negotiating hand fully at this moment. Does my noble friend further agree that it is extremely important to use every endeavour, without creating any prejudice of consequence to British airlines, that the logjam that has persisted for a long time in these negotiations for fifth freedom rights should be broken?

Lord Macdonald of Tradeston

My Lords, I thank my noble friend for the realistic perspective that he puts on these matters. I agree that it is important that the logjam be broken and to challenge what we believe are unhelpful attitudes in some aspects of the reciprocity that should exist between two countries that believe in liberalised markets. We will press hard and will look to FedEx and other companies involved to help us in our efforts to persuade the American administration of the need for change.

Lord Montague of Oxford

My Lords, does the Minister feel we should be worried by his use of the words "concentrated on cargo" when it comes to negotiations which will take place next week? Uppermost in the consumer's mind will be the cost of air fares, which could come down. Will that be given due consideration during the negotiations?

Lord Macdonald of Tradeston

My Lords, we have agreed that we would like to get the talks back on track on passenger and cargo issues. We look forward to the initial exploratory discussions next week, but have in train other possibilities for negotiation with the United States, including an international conference which has been called in Chicago for December.

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