HC Deb 21 November 2000 vol 357 cc122-3W
Barbara Follett

To ask the Secretary of State for the Environment, Transport and the Regions what conclusions he has reached on the application of the sum of sectors pricing policy on UK/US air services. [139832]

Mr. Mullin

The 'sum of sectors' policy, which was agreed by the UK and the US in 1978, covers transatlantic air fares for journeys which include one or more additional domestic sectors. It provides that the total fare must be no lower than the sum of the published fares for all the sectors flown on that journey. The policy was adopted to reduce the advantage that US airlines enjoy as a result of the exclusion of UK carriers from the US domestic market. Such an advantage, if it had been allowed to persist, could have resulted in even more passengers connecting at US gateways being channelled onto US carriers for the transatlantic sector.

In October, British Midland sought to offer promotional fares from UK regional points to the US via Manchester which breached the sum of sectors policy. These fares were automatically disallowed by the CAA. However, following advice from the CAA, we decided that the operation of this 22-year-old policy needed to be reassessed. In particular, he wished to be satisfied that the right balance existed between the need to protect UK carriers from unfair competition and the need to promote healthy competition which would bring benefits to consumers and to the regions.

We have concluded that the policy should no longer be applied to transatlantic journeys serving UK regional points. Such a change of policy would mean that journeys from a range of 'behind' points to points in the US via regional UK gateways would no longer need to cost the sum of the fares of the two individual sectors. The effect will be to encourage keener competition on transatlantic routes to and from UK regional points, with the prospect of lower transatlantic fares and commensurate benefits for the regions.

In arriving at this conclusion, we have had regard to the advice of the CAA, the industry and those hon. Members who have written to us on the subject. Whereas we recognise that there is no consensus, we are satisfied that the consumer benefits are sufficient to warrant this change in policy.

My right hon. and noble Friend the Minister for Transport has therefore written today to Rodney Slater, the US Secretary for Transportation, commending this policy change to him.

Given the potential consumer benefits and the even-handed application of the policy as between UK and US carriers, and while the US is considering our proposal, we have asked the CAA not to intervene on tariff filings by carriers of either side for services to UK regional points if they contravene the `sum of sectors' policy.