HL Deb 13 December 2001 vol 629 cc1411-3

Lord Berkeley asked Her Majesty's Government:

Whether they consider that the proposed BA/AA alliance holding 70 per cent of the peak hours take-off and landing slots at Heathrow complies with their competition policy.

Lord Filkin

My Lords, data from Airport Co-ordination Limited, which is responsible for slot allocation, show that BA and AA together currently hold no more than 51 per cent of the slots during any one hour. Their average over the peak period is about 40 per cent. However, the competition authorities are considering the proposed BA/AA alliance. They will determine whether the alliance should be approved and, if so, which competition remedies are appropriate.

Lord Berkeley

My Lords, I am grateful to my noble friend for that detailed Answer. If his figures are different from mine, that just shows how easy it is to massage figures one way or another. Either way, how will the Government decide whether the BA/AA alliance is in the national interest? What conditions could they put on that if it goes ahead? Could they require the alliance to give up slots, and could they require, for example, fifth freedom rights for other airlines in the US as a trade-off?

Lord Filkin

My Lords, I should be happy to give a reconciliation of the difference between my figures and those of my noble friend, but it might bore him and the House if I did it now, so I shall write to him with it.

Two separate processes are involved. BA and AA—and British Midland International and, I believe, United Airlines—have proposed airline alliances. Those alliances are being considered by the competition authorities on each side of the Atlantic—in our case, by the Office of Fair Trading. As noble Lords know, that body is completely separate from the Government and it will make its decisions and recommendations about what increased competition would be necessary, were it to support such a proposal. As one would expect, that is almost bound to require the release of slots at Heathrow for other airlines to increase competition. If the competition authorities are prepared to support the alliance on the specified terms and the airlines are prepared to agree to them, the United Kingdom Government would be prepared to move forward to a new agreement that was based on "open skies" and, effectively, on opening up the US domestic market to such of our airlines as were prepared to form alliances. That is the system. I hope it is clear that two separate processes are involved, rather than one conglomerate.

Lord Bradshaw

My Lords, does the success of our national flag-carrying airline mean more to us than some narrow interpretation of competition policy? That seems to be the view in many other countries and it is strange that we take a different approach.

Lord Filkin

My Lords, I do not think that we do. The Government have several perfectly proper objectives. A fundamental objective is to increase competition in relation to the North Atlantic. That will benefit passengers and UK industry, which may he paying higher freight charges than would otherwise be the case. Just to agree to the United States proposal—the open skies approach would give US carriers access to Heathrow without getting access to domestic opportunities in the United States, arid that would be very much against the interests of United Kingdom carriers. We have to crack that nut. The problem, as noble Lords know, is that there are very strong domestic pressures in the United States against liberalising their domestic market. That is why several airlines and competition authorities have realised that the way to break in there is through airline alliances. That has been done by six other countries.

Viscount Astor

My Lords, would the Minister be kind enough to tell me when responsibility will devolve from this country to the European Union for negotiations on transatlantic services?

Lord Filkin

My Lords, the short answer is that we will have to wait and see whether that comes about at all. I am sure that the noble Viscount is aware that we are currently awaiting a judgment from the European Court of Justice on whether other such airline alliances infringe EU competition policy. The Attorney-General's judgment is, I believe, expected towards the end of January and I should not wish to second-guess what it might be. It is possible that it might be held that such alliances infringe competition policy and that therefore negotiations between European countries and the United States would have to be done collectively. There would no doubt be benefits from that but one would hardly expect the process to be quick.

Lord Borrie

My Lords, the Minister rightly pointed out the independence of the competition authorities in this country—and, for that matter. in the United States—from government. Bearing in mind the UK Government's strong views, which the Minister mentioned, does he propose to give evidence on behalf of the Government to those authorities, particularly to the competition authorities in the United States? As he said, it is most important, in relation to competition, for British domestic airlines to have access and to be able to compete with United States airlines in the use of airports in the United States.

Lord Filkin

My Lords, I have no doubt that, if required, the Government will give such evidence. We are certainly making strong representations to the United States Government about the need to move forward and increase effective competition in relation to the North Atlantic route. Indeed, my right honourable friend the Prime Minister made those points in his discussions with the President of the United States in November and asserted the importance of moving forward on this agenda. Having said that, it is right and proper that the OFT deals with these matters impartially and without political interference—that is in the interest of competition and consumers.

Lord Clinton-Davis

My Lords, I should declare an interest as the president of BALPA. Is my noble friend aware that the Americans are behaving with a very anti-competitive attitude by offering huge subsidies to American airlines, which, quite rightly, are not matched in Europe? Are the Government doing anything about that?

Lord Filkin

My Lords, I am not certain that I have put my finger exactly on the subsidy to which my noble friend refers. I suspect that he refers to the situation post-September 11th, when there was indeed strong support from the US Government, in an effort to get the internal domestic flights of US carriers started again. As noble Lords know, our Government also rapidly gave support to try to protect our industry when it could not get insurance cover and would therefore otherwise have been grounded. That arrangement continues until, I believe, 23rd January. I do not want to go into a detailed defence of the US position, but noble Lords will be aware that almost all of the US airline industry was grounded, whereas we were hit just in relation to the North Atlantic route. Nevertheless, that issue will be closely tracked by the UK Government.

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