Airline Competition Policy (Hansard, 12 November 1987)

§ Mr. Channon

As the House knows, the Monopolies and Mergers Commission has concluded that the proposals made by British Airways may be expected not to operate against the public interest. It is a matter for BA and the British Caledonian Group whether the merger proceeds. But if it does now go ahead, the chairman of the Civil Aviation Authority has agreed that he will report to me one year later about implementation of the merger on the basis proposed.

The commission considered only the merger proposal before it and made it clear that any investigation of airline or airports policy as such, or of the powers of the CAA, was outside its terms of reference. I believe that the commission made a sensible distinction. Its job is to report on mergers or proposed mergers. My responsibility, as Secretary of State for Transport, is the much wider one of ensuring that the objectives of the Government's airline competition policy and airports policy can be achieved. The CAA, within its statutory duties and statement of policies, is responsible for the day-to-day regulation of the aviation industry and for providing me with expert advice.

The Government's airline competition policy objectives are set out in the 1984 White Paper. The main elements are: promotion of competition in all markets; encouraging a sound and competitive multi-airline industry with a variety of airlines; enabling the United Kingdom industry to compete aggressively against foreign airlines.

The merger—if it proceeds—will clearly strengthen the international competitive position of the United Kingdom industry in a world which is seeing moves towards larger carriers. Removing the present uncertainty about BCal's future and the opportunities for improved efficiency will also contribute to the competitive position of the industry.

However, while securing these benefits, we must also promote competition within the United Kingdom industry, and provide suitable safeguards against anticompetitive behaviour.

The CAA has a duty to publish its air transport licensing policies and to consult the air transport industry and users before doing so. Before the proposed merger was announced, the CAA was engaged in public consultations about its policies on market entry and anti-competitive behaviour. If the proposed merger goes ahead, it will be all the more important that the CAA should press ahead with those consultations and I shall be discussing with the chairman their scope, timing and whether any other aspects of its policies should be covered.