B.O.A.C. Chairman (Directive)

Oral Answers to Questions — Ministry of Aviation – in the House of Commons at 12:00 am on 5th February 1964.

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Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington 12:00 am, 5th February 1964

asked the Minister of Aviation if he will publish the directive he has recently issued to the chairman of the British Overeas Airways Corporation.

Photo of Mr Julian Amery Mr Julian Amery , Preston North

Yes, Sir. The text of my letter to Sir Giles Guthrie on taking up his appointment will be circulated in the OFFICIAL REPORT.

Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington

I welcome that reply. Does the undertaking which he is supposed to have given Sir Giles, that any departure from strict commercial principles would be followed by a letter to that effect, mean that we shall also know the terms of any instruction given under that letter or directive?

Photo of Mr Julian Amery Mr Julian Amery , Preston North

Each case will have to depend on the particular circumstances.

Photo of Mr John Cronin Mr John Cronin , Loughborough

As it will greatly help Sir Giles to understand the right hon. Gentleman's directive, can the right hon. Gentleman assure the House that he will permit Sir Giles Guthrie to see the whole of the Corbett Report?

Photo of Mr Julian Amery Mr Julian Amery , Preston North

I refer the hon. Gentleman to a Question which I answered last week.

Following is the letter:

1st January, 1964.

I have sometimes been told that there is uncertainly on the part of the British Overseas Airways Corporation as to how far its role is commercial and how far it should take account of considerations such as public service and national prestige which might conflict with a purely commercial interest. The Government do not consider that there is any solid justification for such uncertainty. Nevertheless it may help to remove any misunderstanding if I give you more specific guidance on this issue.

It has all along been understood that it was the duty of the Air Corporations to make themselves self supporting as soon as possible. The Chairman of B.O.A.C. in 1952 made this clear in a direction to his staff with which I find myself in complete agreement. He said, in the annual report of the Corporation for 1952, that it should be imprinted on the minds of all staff that the Corporation was essentially a commercial undertaking; that the financial aspect of every single activity mattered; and that the ultimate test of the Corporation's success was not only the standard of public service provided but also the normal business criterion of whether it could be made to pay its way.

The White Paper on "The Financial and Economic Obligations of the Nationalised Industries" (Cmd. 1337) explains what is meant by a nationalised Corporation paying its way. The minimum requirement is that the revenues should be enough to meet all items properly chargeable to revenue, including interest, depreciation and also to provide for reserves. It is accordingly the Government's aim to agree with the nationalised Corporations on financial targets with the object of achieving as soon as possible yields approximating more closely to industrial yields, allowance being made for obligations which are undertaken by nationalised Boards for reasons other than their strict commercial interest. I hope that it will be possible eventually to agree on some such financial target for B.O.A.C. as I have been able to do with B.E.A.

The immediate task, however, is for B.O.A.C. to achieve the break even point after meeting interest and depreciation. How this can be done is a matter for you, but for my part I am also much concerned in view of my responsibility for financing the accumulated and continuing deficit. After consulting you I have informed Parliament in the course of the second reading Debate on the Air Corporations Bill, 1963 that a plan for achieving break even will be produced by the Corporation within a year. This plan may well raise major questions of policy, including questions about the size of the fleet and the route network operated by the Corporation, and you will no doubt wish to discuss its implications with me.

There are many points where national policy and the aims and activities of the Corporation interact. It is highly desirable that a close relationship between the Ministry and the Corporation should continue and, with it, the constant interchange of ideas on matters of common interest.

There is already established machinery under which the Corporations seek the Ministry's approval for the ordering of new aircraft. There is also the Transport Aircraft Requirements Committee where the points of view of all the interests concerned are brought together. But the choice of aircraft is a matter for the Corporation's judgment. It has been the aim of the Corporations to buy their aircraft as far as possible from British sources and I trust that this policy will continue. There may, of course, sometimes be occasions (as when the Boeing 707s were purchased in 1956) when the choice of foreign aircraft is unavoidable.

It is important that the interchange of views between the Government and the Corporations should not blur the fundamental responsibility of the Corporations to act in accordance with their commercial judgment. If the national interest should appear, whether to the Corporations or to the Government, to require some departure from the strict commercial interests of the Corporation, this should be done only with the express agreement or at the express request of the Minister. How losses, if any, resulting from such a political decision should be presented in the accounts will depend on circumstances in each case.

JULIAN AMERY.

Sir Giles Guthrie, O.B.E., D.S.C., J.P.,

British Overseas Airways Corporation,

London Airport,

Hounslow,

Middlesex.