HC Deb 19 July 1977 vol 935 cc470-1W
Mr. Kerr

asked the Secretary of State for Trade whether he is satisfied that British Caledonian Airways will obtain a fairer opportunity to establish viable services to Houston and Atlanta under the new Air Services Agreement with the United States of America than could have been obtained under the 1946 Bermuda Agreement.

Mr. Dell

Yes. We have won a better deal for British Caledonian Airways than would have been possible under the 1946 agreement.

Under the old agreement the best we could have hoped to negotiate was new routes to Houston, Atlanta and Dallas, and perhaps elsewhere, which would have been available to both sides simultaneously. Under the new agreement we have secured sole rights for BCAL to operate a non-stop passenger/cargo service to Houston for three years, while a United States operator will have corresponding sole rights to a non-stop service to Atlanta. At the end of the three-year period, both routes will be open to both sides. This arrangement accords with BCAL's own wishes. The agreement also provides BCAL with fifth freedom right to South American points already in BCAL's sphere of interest, which we could not have expected to negotiate under the old agreement.

There will be some indirect competition for BCAL's Houston service from the United States service to Dallas; but BCAL can start its service to Houston immediately, whereas the United States carrier has yet to be selected. BCAL should therefore have a head start.

The agreement also provides that not more than one United States airline can be designated on each of these routes, and that they must serve Gatwick. Under the old agreement the Americans would have been entitled to designate more than one of their airlines for each point and they could have gone to Heathrow. A further provision which was not available under the old agreement, and which will be of considerable assistance to BCAL, is that when BCAL comes on to the Atlanta route its United States competitor will be obliged to restrain its capacity in order to give BCAL a fair chance to become established. The capacity regulating mechanism will also provide a continuing means of preventing the "swamping" of BCAL services, which occurred under the old agreement.