Orders of the Day — Air Corporations Bill

– in the House of Commons at 12:00 am on 2nd December 1970.

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Order for Second Reading read.

3.53 p.m.

Photo of Mr Michael Noble Mr Michael Noble , Argyll

I beg to move, That the Bill be now read a Second time.

Before I explain the details of the Bill, I would like to refer to the Chairmen of B.O.A.C. and B.E.A. I am sure that the House will want to join me in thanking the outgoing Chairmen, Sir Charles Hardie and Sir Anthony Milward, for their services and in welcoming the new Chairmen, Mr. Keith Granville and Mr. Henry Marking. The remaining appointments will be announced very shortly and I know that we can rely on both Boards, and, indeed, all the staff of both Corporations, to continue to serve the country well during the period while the legislation setting up an Airways Board is being introduced and is taking effect.

The object of the Bill is to raise the limits on the loans which B.O.A.C. may raise to finance capital investment. The limits also apply to any temporary borrowings by B.O.A.C. and to any Government investment of public dividend capital in the Corporation, but B.O.A.C. does not expect to need temporary loans in the foreseeable future and I have no plans at present for investing further public dividend capital in the Corporation. The reason, then, for increasing the limits is to enable B.O.A.C. to take up additional borrowings for capital purposes.

The existing limits were set in the Air Corporations Act, 1966, which imposed a limit on the aggregate of B.O.A.C.'s outstanding borrowings and public dividend capital of £90 million, which could be increased to £120 million by Order subject to affirmative Resolution of this House. An Order specifying a limit of £120 million was made last December by the right hon. Member for Caernarvon (Mr. Goronwy Roberts), then Minister of State, Board of Trade, who explained that B.O.A.C. expected to reach the new limit by the summer of of 1970. In the event, it has taken a little longer, for reasons which I will explain later, and I now estimate that B.O.A.C.'s borrowings and reckonable public dividend capital will reach the £120 million mark by the end of March, 1971.

The House will expect me to say how this money has been spent before I explain why the additional sums provided for in the Bill are needed. As the then Minister of State explained when speaking to the Order last December, B.O.A.C.'s capital liabilities at 1st April, 1965, consisted of £31 million of loan capital and £35 million of public dividend capital, all deemed to have been taken up at that date under the Air Corporations Act, 1966, which provided for B.O.A.C.'s financial reconstruction. The total of £66 million reckoned against the limit of £90 million.

Since 1965, all B.O.A.C.'s borrowings have consisted of foreign currency loans negotiated with United States finance institutions, with Swiss banks and a Canadian bank, to finance progress and delivery payments on Boeing 747 and 707/336 aircraft and some other expenditure on capital projects overseas. B.O.A.C. has been required to raise finance in this way to meet dollar investment in order to conserve official dollars.

B.O.A.C. has financed all sterling investment since 1965 from its own cash resources. This includes about £30 million on Super VCIO aircraft and spares, a further £30 million on buildings and roughly the same amount on plant, machinery and equipment. Furthermore, the Corporation has repaid the whole of the Government loan of £31 million deemed to have been advanced in April 1965. This loan was being redeemed in instalments and a sum of £16·9 million was shown in B.O.A.C.'s 1969–70 accounts as still outstanding at 31st March, 1970. In June this year, the Corporation prematurely redeemed the whole outstanding sum out of its own resources. This explains why the limit of £120 million is lasting rather longer than predicted last December.

By March, 1971, the £120 million will consist of the original £35 million of public dividend capital deemed to have been invested in 1965 plus about £85 million of outstanding foreign currency loans which reckon against the statutory limit. By then, B.O.A.C. expects to have taken delivery of three Boeing 747s in addition to the three delivered last May, a total of six in all, which, together with its fleet of eight Boeing 707–336Cs, will have been financed very largely by dollar loans. B.O.A.C. also expects to have taken delivery by March 1971 of one of the two Boeing 707–336Bs which the previous Government agreed that B.O.A.C. could buy, primarily for use on the trans-Siberian route to Japan. The House was told of this order on 18th December last year by the then President of the Board of Trade.

I come to the new limits of £250 million and £380 million provided for in this Bill. These are very considerable sums, representing at the maximum an increase of £260 million over B.O.A.C.'s present limit. I should explain that the higher figure has been calculated as the amount the Corporation seems likely to need to borrow to finance capital investment over the next five years; that is, until early 1976. The intermediate limit, which can be exceeded only after a draft Order has been approved by this House, should last until early 1974.

Legislation to create an Airways Board, to which I referred during the debate on 24th November, will provide for borrowing limits which will include the borrowings of and any investment of public dividend capital in the Airways Board as well as the external borrowings of B.O.A.C. and B.E.A. It will, therefore, overtake the limits provided for in this Bill. I should have preferred to dispense with the present Bill and to wait for this new legislation; but B.O.A.C.'s borrowing powers are nearing exhaustion and, since the Bill is necessary, I thought it right to follow the normal practice in dealing with borrowing powers for nationalised industries by providing for B.O.A.C.'s requirements for about five years ahead.

The new limits allow, first, for dollar loans B.O.A.C. will need to call on after March 1971, amounting to some £44 million, to complete payments on six more Boeing 747s due for delivery between September 1971 and April 1972, and to some £3 million for the second Boeing 707–336B. These loans have already been negotiated in the United States. In addition, the Government have recently agreed that B.O.A.C. may purchase a new Boeing 707–336C at a cost of £4 million, to replace the Super VC10 destroyed in Jordan, of which about 40 per cent. of the cost will be raised by a loan from the Export Import Bank of New York.

We then had to make an assessment of the capacity B.O.A.C. is likely to need from the end of 1972 onwards to replace some of its existing aircraft and to provide for further expansion. B.O.A.C. has forecast that, on the asumption that 20 per cent. of the cost will be met from B.O.A.C.'s internal resources, it will need to raise foreign currency loans for this purpose of some £154 million over the period to early 1976 to finance 80 per cent. of the cost of further United States aircraft, and that about £53 million of this total will be needed by early 1974.

I should emphasise that B.O.A.C. will need to make a case to me for approval for this further investment, and that it will be subject to scrutiny by me, but I think its torward projections seem reasonable so far as the state of the industry can be foreseen for a period so far ahead.

We have also had to make an assessment of the expenditure B.O.A.C. is likely to be incurring during this period by way of progress and delivery payments on Concorde. This and other sterling investment, for example in plant, machinery, equipment and buildings, B.O.A.C. expects to be able to finance from its own internally generated cash flow until about the end of 1971. Thereafter, B.O.A.C. will need additional capital which I am assuming will be met by advances from the National Loans Fund. This may account for a sum approaching £200 million of which rather less than half will be needed by early in 1974.

It would be appropriate for me to comment on B.O.A.C.'s financial performance and prospects. Hon. Members will need no reminder of B.O.A.C.'s excellent record of profits over the last five years. It is true that the 1965–66 financial reconstruction gave the Corporation a fresh start by writing off an accumulated deficit and setting up a reconstruction reserve. But B.O.A.C. has, by its own efforts, taken full advantage of the opportunity this presented to operate as a fully commercial undertaking and it was able to record in its 1969–70 Report that profits from 1965–66 and 1969–70 were high enough to have eliminated the deficit accumulated by March, 1965, and to pay interest on all capital, without a financial reconstruction.

As it is, the Corporation has paid to the Government more by way of dividends and interest than it would have paid without a reconstruction. I take this opportunity to say that it is the policy of this Government to continue to give B.O.A.C. encouragement to maintain its successful record of profitability.

Nevertheless, it would not be right for me to raise expectations that B.O.A.C.'s profits over the next five years will continue to reach the high levels of the last five. International airlines throughout the world are in a phase of declining profits, due in part to too much capacity being offered because of the introduction of wide-bodied aircraft and, in part, to inflation pushing up costs faster than revenues.

4.6 p.m.

Photo of Mr Roy Mason Mr Roy Mason , Barnsley

As usual, the right hon. Gentleman was brief and non-controversial. His speech was also very thin.

I wish at the outset to join him in expressing thanks to Sir Charles Hardie for his service to B.O.A.C. and for the success he achieved while in office. Under his chairmanship, B.O.A.C. has done well.

While the right hon. Gentleman welcomed the chairman-designate, Mr. Keith Granville, he hinted that his tenure of office may not be as successful because B.O.A.C., with other civil airlines, may be in a period of cyclical decline. There may, as a consequence, be much more difficulty ahead for the occupant of Sir Charles Hardie's seat.

My hon. Friends and I welcome the Bill. We recognised when we brought forward a borrowing powers Measure in 1969, which was for quite a small amount, that B.O.A.C. would be in need of further finance. Indeed, had we been in government now we would have been introducing a Bill such as the one before the House today.

This is likely to be the last borrowing powers Measure before we have major civil aviation legislation profoundly affecting B.O.A.C. Within the time scale of the initial borrowing requirements under this Measure, legislation may be enacted to establish the Civil Aviation Authority and the Airways Board. It is difficult to foresee clearly how the Civil Aviation Authority will affect B.O.A.C., particularly its finances, but B.O.A.C. will undoubtedly visualise the Airways Board being to its advantage.

When we prepared our White Paper flowing from Edwards, we visualised—I am certain that the right hon. Gentleman appreciates this—that there would be bound initially under the Airways Board to be a marrying of common services such as freight handling, hotels and computer development. On this latter point, if B.O.A.C., with its Boadicea computer system, and B.E.A., with its Beacon computer system, had developed each system uniformly from the outset, I doubt if we would have spent as much as £72 million on these two separate computer systems.

Then there is the question of marketing, and here there is a good possibility of a merger, along with the development of inclusive tours. These could sensibly be merged to the advantage of both Corporations, with many subsequent savings.

I therefore wonder, since this legislation will be introduced during the time of this borrowing period, if all these points have been taken into consideration, particularly since the right hon. Gentleman mentioned the initial sum in the Bill and the other sum which will follow by way of an Order to be laid later. It seems that this could very much affect B.O.A.C.'s finances.

Allied with this is the possibility that in the next Session the Board will be established and, as a result, B.E.A. and B.O.A.C. could be merged, thereby bringing into being for the first time a national and international airline under one flag and one Board. This is quite feasible within the borrowing timetable envisaged under the Bill.

The Minister has so far not revealed his thoughts on the possible merger or on its timing. This is bound to affect the borrowing requirements of B.O.A.C., so I invite him to tell us what he has in mind. A merger of services could mean less borrowing, aircraft and maintenance, an effect on employment, route nationalisation, more efficient use of aircraft and services, and so on, if the Corporations get together fairly quickly.

As the right hon. Gentleman rightly pointed out, and it was gratifying to the House to hear him, B.O.A.C. has done very well. He said that it had made excellent progress in recent times. Over the last six years it has been showing good operating surpluses and an accumulated figure of £133·7 million, culminating, in the Corporation's last full financial year, in an operating surplus of £31·1 million.

From March, 1966, to March, 1977, we as a Government set a target of return on net assets of 12½ per cent., but over this period B.O.A.C. has managed an overall return of 17·4 per cent. Last year, also, the amount of revenue earned in foreign currency was a record at £136·7 million. Those hon. Members, especially on the other side of the House, who had doubts about the benefits of public dividend capital must agree that it has been a worthy innovation for B.O.A.C. and, indeed, has been to the benefit of the Government.

The right hon. Gentleman made some reference to the success that B.O.A.C. has achieved, and that success is spelled out in the Corporation's annual report. It states: Some may be tempted to give all the credit for this profit record to the fact that B.O.A.C.'s financial structure was re-shaped by the Air Corporations Act, 1966 which wrote off £79·9 million of losses and created a reconstruction reserve of £30·1 million as of 1st April, 1965. This reconstruction was necessary and has played an important part in setting B.O.A.C.'s feet on the road to success.Having said that, however, it can now be recorded that had no capital reconstruction taken place B.O.A.C.'s profits during the subsequent five years would have been sufficient both to pay appropriate interest on all capital provided by H.M.G. and to eliminate by 31st March, 1970 the loss of £79·9 million that had accumulated at 31st March, 1965. Let me therefore say to B.O.A.C. that this also gives enormous pleasure to those in this House who are keen to see the successful development of our civil aviation Corporations.

B.O.A.C., like most of its international competitors, has been riding high on top of the aviation industry's cycle, but the decline may now have begun. The first sign was clearly given yesterday with the publication of B.O.A.C.'s half-yearly report showing a net profit of £8½ million, which is down from £11·7 million in the same period last year. There were many factors in this. Hijacking security precautions have cost something. There has been a loss of revenue from the idle 747s. Competitors operating 747s are creaming off some of the North Atlantic market. There has been a fall in Middle East traffic. But apart from these special factors I think that everyone realises that the civil aviation industry is entering a period of cyclical decline and, indeed, international competitors are on the slide faster than is B.O.A.C.

The short-term concern for B.O.A.C. is very evident. Unit costs are rising and revenue yields are falling. Smaller surpluses are expected next year. Wages and fuel costs are on the increase. And, apart from a slowing down of growth in the United Kingdom market, operators are concerned about over-capacity generally in civil aviation allied with the progressive fall in average fares. And all this at a time when the Government are hell-bent on a course of taking away £6 million of annual route revenue, mainly from B.O.A.C. This will severly injure the Corporation at a time of down-turn in its operations and it shows an almost callous indifference to public Corporation's difficulties.

With reference to the Corporation's down-turn in profits, does the right hon. Gentleman still think that the forecast he gave in the statement which he issued from the Board of Trade on 3rd August dealing with a second force independent airline is right? In paragraph 6 of that statement he said: Forecasts of inter-continental traffic point to an expansion of about 14 per cent. a year up to 1975. He gave that expansion as one of the major reasons for hiving off profitable routes from B.O.A.C. We would like to know whether that forecast of a 14 per cent. per annum increase in intercontinental traffic to 1975 is still true, especially having in mind United States aviation companies' difficulties—as well as those, apparently, of our major Corporation—because if those forecasts are wrong the right hon. Gentleman should think afresh about this hiving off of so many profitable routes from B.O.A.C.

We might have had more information from the right hon. Gentleman about the Boeing 747s. We have ordered 12 of them at a cost of £120 million. The right hon. Gentleman said that three have already arrived and that three will come early next year. The trouble is that the three that have arrived are standing idle. There are mounting losses because of the B.O.A.C.-B.A.L.P.A. dispute on manning and rates of pay. There are various reports of the losses, but it would appear that B.O.A.C. is losing about £25,000 a day, which means that it may already have lost between £4 million and £5 million. The right hon. Gentleman ought to tell the House now, especially when we are dealing with a B.O.A.C. borrowing powers Bill, to what extent the Corporation has suffered because of this dispute, and how much it has lost because of these invaluable assets standing idle at Heathrow. He should also tell us when the dispute is likely to be resolved. Apart from the obvious waste of assets, the loss of North Atlantic traffic has still to be recaptured. I hope that we may be told more about that.

The Minister referred to possible payments for Concorde in 1971. Within this future borrowing, investment in Concorde by B.O.A.C. must play a part, even with the initial payment under the Bill and not necessarily waiting for payment under the Order. B.O.A.C. has made it clear that it would like to go supersonic, and it is a potential customer for eight Concordes. However, there are doubts about the future of the aircraft, and surely this is the time, before moneys are earmarked by B.O.A.C. for the purchase, to have those doubts removed.

I do not want to damn this project. It is a fine technical achievement and a classic example of Anglo-French co-operation, and it is a pace setter in supersonic aviation. Neither do I want to feed the anti-Concorde American lobby. Unfortunately, the United States can determine Concorde's life or death: the 16 airlines which have the first 74 options on Concorde will certainly be awaiting the final American reaction.

But one must question the commercial investment and its return to B.O.A.C. The Government cannot get a commercial return on their investment—that is recognised without doubt. The estimated cost of the research and development on the Anglo-French Concordes has now risen to £825 million. Actual costs so far are £240 million by the United Kingdom and £220 million by France, and from this month to the end of the project another £165 million will be required by the United Kingdom and another £200 million from France, a total investment—although I hesitate to say that because no doubt it will go higher, but at this stage—of £825 million.

The most recent estimate of the cost of the Concorde aircraft is more than £12 million. Therefore, B.O.A.C. will be expected to purchase its initial option of eight at a cost of at least £100 million. Do the Government really believe that B.O.A.C. can operate this costly aircraft and obtain a satisfactory financial return?

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

I do not wish to be controversial, but I should be obliged if the right hon. Gentleman would say on what he bases the cost figure he has given.

Photo of Mr Roy Mason Mr Roy Mason , Barnsley

I have had to glean the cost from the reliable aviation journals, which estimated in 1968 that the cost of a Concorde aircraft would be about £10 million. Since then, because of inflation in wages, and so on, the cost has risen to about £12 million. A lot will depend upon to what extent the Government are prepared to write down investment in research and development. The cost could be much more than that, but I have been conservative and I wish to be helpful in the hope that we can extract from the Minister some general views about how Concorde will be able to go into service with B.O.A.C. with B.O.A.C. extracting a satisfactory financial return.

I should like to know from the Minister what will be B.O.A.C.'s position. Concorde looks like being an extremely costly aircraft. Will B.O.A.C. have to take it? Will the Government decree that it is in the national interest and foist this aircraft on B.O.A.C. irrespective of their commercial judgment? If so, will they consider compensating B.O.A.C. for its losses? That may seem a little hypothetical and a matter of questioning a little ahead of time, but the Bill asks for sums of money, some of which will be used for the purchase and operating of Concorde aircraft. Therefore, some indication of the Government's thinking about this aircraft being introduced into service by B.O.A.C. should be given at a time when the Government are asking for moneys with which Concorde might be purchased.

This Bill and the subsequent order cover a period of heavy investment by B.O.A.C., not just in supersonic aircraft, but in wide-bodied aircraft. B.O.A.C. has been quite frank about the aircraft. It has said that its studies have not yet shown that its operation of Concorde would have a beneficial effect on its overall financial results. So at this stage it sees Concorde as a loss-maker and yet all the research and development costs—£825 million so far and no doubt more to come—have not yet come to light. B.O.A.C. is among the most successful airlines in the world. I wonder how the others are reacting.

I know that next year the two Governments involved will be considering afresh the future of this project, but it so happens that the moneys for B.O.A.C.'s investment programme are being considered now. Therefore, this is the time for the Minister to give an explanation before this proposed extra borrowing is agreed.

The Opposition do not oppose the Bill, but I hope that when the Minister replies he will give us an indication about when the aviation Bill covering the Civil Aviation Authority and the Airways Board is likely to be introduced. Will he tell us to what extent B.O.A.C. has lost money on the three idle Boeing 747s? What does he feel about the possibility of B.O.A.C. having to take Concorde irrespective of cost? These questions are relevant to this Bill, and I hope that the Minister will be able to give satisfactory and substantial replies.

4.24 p.m.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

I have no intention of detaining the House long because there is later important business to occupy the minds of hon. Members, but there are one or two points which I should like to make, and, if not provoked, I shall try to be non-controversial.

First—and it seems that an increasing number of my contributions in the Chamber begin with this comment—I wish that we had a more explanatory Explanatory and Financial Memorandum. Not for the first time I am led to suggest that much of the valuable background information in the speech of my right hon. Friend the Minister for Trade could have been made available to the House earlier and without difficulty by its being incorporated in the Explanatory Memorandum.

I do not believe the final sentence of the Explanatory Memorandum, which reads: The Bill will cause no changes in the number of industrial or non-industrial civil servants or in the numbers of staff employed by B.O.A.C.". If B.O.A.C. is to make use of the powers in the Bill which enable it to borrow three times the amount of money which it is at present authorised to borrow, it is very likely that it will end up employing more people. Why it was thought appropriate to put this normally welcome phrase in the Explanatory Memorandum I do not know. I do not want to be told the answer to that, but I do not believe what it says.

On both sides of the House—and let there be no party wrangling about this matter—there is a genuine desire that B.O.A.C. should flourish and should go from success to success. We may differ about the precise reasons for the success it has been able to claim in its latest accounts. There are people who see its success as stemming at least in part from decisions on aircraft purchases, which represented a conscious desire to limit the capacity which the Corporation was prepared to try to sell and to maximise its profit in that way. Some people have bitter memories about cancellations of VC10s and matters of that kind, but it will do us no good to dwell on them now. Neither side of the House should be doubted when it says that it wishes B.O.A.C. to succeed, even though it may not wish it success for precisely the same reasons.

We see a reflection in the latest published figures of business which has been lost to B.O.A.C., as it has been lost to other airlines, as a result of the hijackings last summer. B.O.A.C. deserves a degree of credit from the people of this country for the high standard of security which it has since maintained and for the fact which is comparatively rare among international airlines, that it can claim to have detected more than one would-be hijacker before he succeeded in boarding the aero-plane.

The more serious and avoidable shortfalls in profit in the latest figures stem from the continuing deadlock over the Boeing 747s. The right hon. Member for Barnsley (Mr. Mason) was right to draw attention to this matter. I do not believe that it can be any consolation to B.O.A.C. to have the most modified and no doubt the safest Boeing 747s in airline service. The engines have been brought up to date. The wings cannot be in danger of falling off because they have scarcely been flexed. The fact that these very expensive devices are safe is no compensation for the fact that these aircraft are lying in a corner of the tarmac.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

I trust that they are not rusting.

We know the reasons for this and we must wish that the deadlock could be broken. For a long time there has been a complete communications block between the B.O.A.C. management and its pilots. I will not try to attribute reasons for it; I merely state it as a fact which we all know. It was recognised on page 24 of the Corporation's Annual Report for 1968–69, which states: It is a matter for great regret that relations with B.A.L.P.A. proved unsatisfactory and very careful consideration is being given to ways and means of improving the atmosphere in which important outstanding negotiations in respect of pilots' salary and working conditions will have to be conducted. I am at a loss to see from the way in which events have developed what new ways and means of improving the atmosphere have been found. They do not appear to have yielded any significant results, even though there have been changes in the negotiating team on the B.A.L.P.A. side and even though the pilots do not wish to be obstructive but are prepared to be conciliatory. I hope that Mr. Keith Granville's advent in office as Chairman of the Corporation will be marked by real progress being made to solve this intractable problem. If nothing else, there might be an agreement on an interim basis to get 747 crew training going and to leave the final negotiation of a formula to a later date. Something along those lines might commend itself to both sides.

I repeat a proposal which I am conscious of having made before and in which I have had the unlooked-for backing of the hon. Member for Poplar (Mr. Mikardo), that the Nationalised Industries Committee eventually might have to interest itself in this apparently insoluble problem. It must be of concern to us, not just in the context of current industrial disputes but as a general matter, that there is this continuing deadlock in a vital area of industrial relations and that the reasons for it should be so difficult to detect.

If I might interpolate a point here, I suggest to my right hon. Friend that if we could get B.O.A.C.'s 747s, present and prospective into the air, it might be possible for the corporation to dispose of the 707s which would become surplus to requirements by selling them to B.E.A. for use by B.E.A. Airtours, instead of Airtours having to import at considerable dollar cost other secondhand 707s from the other side of the Atlantic, as it proposes at present. Given that one of the consequences of the statement that we heard earlier today must be a higher commitment to dollar purchases of aircraft, I hope that this point will receive serious consideration.

The next matter is the Concorde. I am not as pessimistic about it as the right hon. Member for Barnsley appears to be. I believe that it is a project which will succeed on its merits and that its merits are becoming steadily more obvious. When the right hon. Gentleman read a statement of the latest B.O.A.C. attitude to the Concorde, he might have recognised that it represents a considerable step forward from the sort of impression that we tended to get from B.O.A.C. some six months ago. In other words, there has been a detectable increase in the corporation's enthusiasm for the Concorde as a vehicle. It still sees problems, of course, but it is no longer true that the Hastings and Thanet Building Society has given Concorde more publicity than B.O.A.C. However, there is room for Air France to put itself behind the success of the Concorde, for this is a project in which the French nation is just as interested as we are. Although there must be doubts until the final details are known, and although that cannot be yet because the manufacturers have not done all their calculations, the fact that there are doubts does not mean that they will not be resolved. It certainly does not mean that the Concorde will not prove a success in airline service.

At present, we hear it said that the distinctive noise of the 747 is made by the people inside it screaming for drinks.

When the Concorde is in service, we shall get back to real first-class air travel. The conditions in terms of time on the journey which are critical to those who might be called professional air travellers and in terms of the kind of service that they can expect in the air and on the ground at each end will be so superior to the kind of flying omnibus that the 747 really is, that there will be no question about their willingness to pay a premium fare. As soon as B.O.A.C. and Air France put the Concorde into general airline service, I believe that we shall find the first class lounges of the 747s empty, and that the passengers will move to the faster, more comfortable and more efficient vehicle.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

Before the hon. Gentleman leaves that interesting point, a genuine doubt which arises in the minds of the critics of the Concorde's further development and the vast expenditure of capital required to make it a viable aircraft is what will be the number of special travellers who can or will be willing to pay a premium fare for this kind of travel. No one can make any estimate of the number of people likely to be available to ride in this very expensive aircraft. That is the real economic sticking point.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

The hon. Gentleman is quite right. Neither he nor I can prove that we are right in what we say on this point. It would be absurd to suggest otherwise. If he were to press me to produce an additional reason, I would say that I believe that those who look into the medical aspects of air travel have also established another advantage which the Concorde will have over slower vehicles in that it will cut the amount of time that a passenger has to spend in an air-conditioned and pressurised atmosphere to below the level at which he begins to suffer seriously from the effects of dehydration. On similar flights in a 747, he spends two, three or four hours beyond that critical point and the effects on him and his efficiency when he gets to his destination are measurable and established. What is more, they are known to the people who cover 200,000 miles a year by air. I do not say that I am one of them, or that the hon. Gentleman is. But there are a growing number of people who come into that category and who, understandably, as they are pre- pared to pay for a more efficient means of giving dictation or transmitting their ideas, will be willing to pay for a more efficient means of carrying themselves round the world. I think that I will be proved right in this because I regard myself as being on the side of progress. But when it comes to it, the hon. Gentleman and I can go into a corner and talk it over again.

I conclude on this point. B.O.A.C. has a new Chairman. In his initial remarks on taking up his new appointment he has done much to carry the kind of conviction that he should. I am sure that the right hon. Member for Barnsley must have been pleased to hear Mr. Granville say, among other things, that he sees no difficulty in offsetting the business loss of the transfer of routes to the second force in which B.O.A.C. would be involved. By that, he meant that vigorous management and a competitive attitude would very soon recover the ground which would be lost in the process of transfer. That is all to the good, and I believe that it is the optimists who will be proved right rather than the pessimists. I hope that the right hon. Member for Barnsley will not mind if I say that I trust that in due time we shall be able to welcome him amongst the optimists.

4.37 p.m.

Photo of Mr John Wilkinson Mr John Wilkinson , Bradford West

Time is very much on our minds, and I do not want to strain the indulgence of the House. I intend to make a few observations and ask one or two probing questions of my right hon. Friend.

It is obvious that the borrowing powers are necessary in view of the long-term re-equipment programme of B.O.A.C. However, one factor that is extremely disturbing is the dollar element involved. I would like further and more detailed elucidation from my right hon. Friend. Earlier today the House received news from the Minister for Aviation Supply, which concerned another corporation, admittedly, but which will incur the country in a vast addition of dollar expenditure for the purchase of foreign aircraft that we should be building ourselves.

B.O.A.C.'s record of profit has not only been achieved by the Guthrie reforms and by the limitation of the amount of capacity offered to the market: it was achieved also by having the most admirable aircraft in its class, the indigenously-built VC10. The British airframe and manufacturing industry should take credit for the achievement that led to the profit made by B.O.A.C. which we have been praising for the last few years.

If my right hon. Friend succeeds in catching your eye again, Mr. Deputy Speaker, I hope that he will give us a few assurances about long-term plans in terms of dollar expenditure by B.O.A.C. on the purchase of foreign aircraft.

The Government envisage the establishment of an Air Holdings Board and they intend to superimpose it on the two corporations. When that occurs, it is not entirely hypothetical to say that it could rationally lead to the establishment of a British Airways Corporation. When this examination of route structures takes place under the Air Holdings Board, it could well come out of its deliberations that an extended version, let us say of the Lockheed Tristar, would fulfil British Overseas Airways Corporation's requirements exceedingly well. In that case, it will involve an even higher dollar cost.

I do not know how we are to pay for this sort of dollar expenditure. Take, for example, the balance of payments in May. The right hon. Member for Huyton (Mr. Harold Wilson), then Prime Minister, was saying that it would lead to a balance of payments crisis just to import three Jumbo jets. Yet we are to have a fleet of no fewer than 12. These matters really should exercise our minds in the long term.

Then there is the question of Concorde. I was delighted at the bold statement of my hon. Friend the Member for Woking (Mr. Onslow). He has always had faith in the British industry, and rightly so. I should still like a further positive statement of affirmation from my right hon. Friend on Concorde because B.O.A.C.s future is staked on that aircraft. I believe it is the right aircraft for the job in the late 1970s. There will be a requirement for premium travel, with a premium fare. The market has always gone to the fastest airliner with the shortest journey time.

We can be certain that if we lose faith the French will not, and the blue-riband on the Atlantic will be sported by Air France if B.O.A.C. shows any pusillanimity or faint-heartedness over Concorde. That is another matter for which we are legislating.

These extra funds will pay for the investment on Concorde, and I believe they are well spent. They are well spent today when B.A.C. has already received one hard knock. If it were to receive another hard knock over Concorde, indigenous British airliner construction would come to a halt overnight.

Route transfers, to which the right hon. Member for Barnsley (Mr. Mason) alluded, are a once-for-all transaction. The transfer of the West African routes is a comparatively small matter when taken into account with the rest of the route structure of B.O.A.C. It is a permanent structure. More important than that is this. When the Air Holdings Board gets to work, and perhaps when we get the greater degree of co-operation and rationalisation leading to my hypothetical merger, I would hope that the second force will be free, where I.A.T.A. allows it, to compete much more freely with the State corporation because it is from competition with the independent sector, with the second force, that the spur to still greater efficiency will come for B.O.A.C.

I shall be looking to a dual designation on the North Atlantic. This will be to the benefit of B.O.A.C. If there is a marginal decrease in profit for B.O.A.C. on that route, the overall British share will be increased, and there again we have by this Bill financed borrowing powers which in the short term might be necessary.

On the question of pilot relations, I agree wholeheartedly with my hon. Friend the Member for Woking. There has been far too little understanding by management of the problems faced by air crew, and, obviously, vice-versa. We must take into account the fact that in these days air crew in the State corporations are exceedingly highly-trained personnel. They look for their occupation not only in the British market but also in the worldwide market, and we are competing in the world market for their services. Thanks to the cripplingly high marginal rate of taxation in this country, they are particularly badly served for being loyal to the British corporations and to British aviation. We really must open up these avenues of communication if valuable investments in dollar terms and in financial terms generally are not to be left idle.

I hope my right hon. Friend will be encouraging a much greater participation by air crew in management in the corporation, because this will be helpful in the longer term.

I shall say no more now, as we are to discuss God's time very shortly, except that I heartily support and endorse this Measure.

4.45 p.m.

Photo of Mr Russell Kerr Mr Russell Kerr , Feltham

I shall be even briefer than the two preceding speakers.

Several matters have arisen from the debate to which I should like to refer. First of all, very unusually, and, I am sure, to his acute embarrassment, I find myself in agreement on two points with the hon. Member for Woking (Mr. Onslow). First, I completely agree that it would have been more useful if we could have had a somewhat fuller introduction in the Bill itself rather than in the opening remarks of the Minister. It would have been to the general convenience of hon. Members interested in the subject if we could have seen it in print earlier, and it would have helped us in forming our thoughts about these matters.

Secondly—and this may surprise the hon. Gentleman even more—I agree with the substance of his remarks on the Concorde aircraft. Therefore, to some extent I part company with my right hon. Friend the Member for Barnsley (Mr. Mason) on this vexed question.

Of course, there are doubts. It can only be a pretty evenly balanced argument because many of the factors that we are trying to weigh or measure are not as yet known. But I believe there are two things that should bring us, on balance, still down on the side of continuing with the Concorde project. The first is what has now become a very decisive time-lead in terms of entry into the supersonic field in commercial flying. What a short while ago appeared to be a two or three year lead at the most looks, if one judges from reports emanating from Washington recently, as though it may now be doubled or even trebled in time. Although there are certain disadvantages in that we may be doing the testing run, so to speak, for the American aviation industry, none the less there are also great commercial advantages in having this sort of lead into the supersonic commercial flying era.

The other thing which ought to be said is on the question of the spin-off effects of this great enterprise. This is not a very easy matter to weigh up and decide upon, but I was confirmed in my suspicion that they could in the long run be of the greatest possible importance to our future prosperity and economic health by reference to a conversation that I had some months ago with a friend—he is not a close friend—who happens to be an eminent scientist and technologist and who has a profound knowledge of the technology as well as the economics of aircraft manufacture and related subjects. I deliberately played devil's advocate, putting to him the anti-Concorde lobby's point of view, more or less. I will not go into the details of the answer that he gave, but he summed up his feelings very well by saying—and he has no axe to grind—"Look, old man, if it were a question of towing them up to the top of a cliff and pushing them over, I would still be in favour of this project going ahead".

That is, perhaps, a very dramatic way of putting it, but it left its impact on me. He was alluding to the spin-off effects, and here he was eminently qualified to speak because his disciplines range from physics to technology, chemistry, engineering and various other matters. Although I have deliberately refrained from mentioning his name, he is also a very well-known figure in broadcasting and television on these subjects. He persuaded me that there was this tremendous follow-through benefit for us if we would go ahead.

My next point relates to the question of these enormous sums of money to which reference has been made from time to time, and to which the Minister alluded in his speech. There are vast amounts of public money which over the years have been put into Concorde and various other aerospace projects of that sort. I will not weary the House by the classical statement of the case for the socialisation of the aircraft industry, but I still profoundly believe that justice demands no less than that. I have always been against the Conservative policy of "socialising" the losses and "privatising" the profits of the aircraft industry.

In passing, may I say to the House and to hon. Members opposite, in particular, that when I listen to them expressing their good wishes for the continued prosperity of B.O.A.C.—and at this point in the drama the tears start to roll—all I can say is that, if they want to show an earnest of their good wishes, they might even at this late hour reverse their decision about the "second force" private airline and by such an act of redemption and cancellation, pay a real tribute to B.O.A.C. and its future.

4.50 p.m.

Photo of Mr Norman Tebbit Mr Norman Tebbit , Epping

I trust that when the hon. Gentleman used the words "pay tribute" he meant them in a purely verbal sense. We become accustomed sometimes to paying tribute in other senses.

In supporting this Bill, which is not a very novel position to adopt today, I should like to say how pleased I am—and I am sure that all my former colleagues in B.O.A.C. are also pleased—that Keith Granville has been appointed Chairman of that Corporation. We all regard him as a professional in the airline business, who has devoted his life to his airline, and whose whole motivation, even at times when he and I did not quite see eye to eye—and that does not relate only to the second force—has always been what he thought was the good of his airline, as he has always regarded it.

Photo of Mr Norman Tebbit Mr Norman Tebbit , Epping

I particularly welcome his utterly tough and professional approach, which has already been mentioned by my hon. Friend the Member for Woking (Mr. Onslow), towards this second force, which is "O.K., now I will go out and get the business to make up for this." This is absolutely creditable. It is the right attitude, and clearly already that spur of competition is moving even a man as fast off the mark as Keith Granville to greater efforts for his airline.

Photo of Mr Russell Kerr Mr Russell Kerr , Feltham

It still does not excuse what hon. Members opposite have done.

Photo of Mr Norman Tebbit Mr Norman Tebbit , Epping

It does not excuse it. It does not need an excuse. It explains it more fully to those who could not see the point the other night.

While talking about B.O.A.C.'s position as a borrower, and particularly as a borrower of foreign currency, we should also remember its position as an earner of foreign currency. It has been an outstanding earner of foreign currency for many years. Much of this money is not going only on foreign aircraft. Much of it will be devoted to the capital equipment necessary to operate these aircraft. Very substantial sums are involved, and almost all of it will be devoted to British equipment and will undoubtedly help to sell similar British equipment overseas. Spin-off goes a long way.

This is possibly the best moment for us all to wish Keith Granville well with his Corporation, and to recognise the difficulties which he is facing. One difficulty which has not been mentioned is the question of the third London Airport, which we could discuss for many hours. Sufficient to say that when the report arrives eventually, all the airlines of this country and foreign operators will need it to be acted upon quickly.

As one who was involved in the past in the unhappy disputes between the pilots and B.O.A.C., I wish to take up the point made by my hon. Friend the Member for Woking and by other hon. Members. It is a tragic dispute. It has been investigated in one form or another by a considerable number of outside bodies. I shall, no doubt, refer to it again if I have the good fortune to catch the eye of the Chair on another matter. For the moment, I say only that one does not have to picket in order to run a strike if one really knows how to do it, and perhaps right hon. and hon. Members opposite may be surprised to know that we have some knowledge of these matters nowadays on our side of the House.

Above all, in view of the history of outside intervention, it would be prudent of us all to try to settle these disputes, bearing in mind that a dispute still rankles, and that, perhaps, secret diplomacy is best in these matters. In the end, the two parties must come together and understand each other. For my part, I believe that there is a severe weakness of middle management in the Corporation, and this is much of the trouble. But, if anyone is to intervene from outside, I suggest that he does it by taking the two leading participants away quietly, not telling anyone, to a hotel room, setting in a suitable supply of victuals, and making sure that they sit down and come to an agreement which is not imposed on them from outside. That, of course, could have relevance to other disputes as well.

I do not see the future for the industry as being so dark as the right hon. Member for Barnsley (Mr. Mason) painted it. Ten years ago, everyone saw a dark future for the airline industry, but it came out into a period of almost unparalleled prosperity. The provisions which we are making today will enable B.O.A.C. to take part in another wave of outstanding prosperity, and I am happy to support the Bill.

4.57 p.m.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

In following my hon. Friend the Member for Epping (Mr. Tebbit), who has a detailed practical knowledge of the problems of the air Corporations, I wish to say how much I, too, should like to see an early solution to the 747 dispute. It is a great pity to see these large aircraft—three of them now—sitting on the tarmac at London Airport. We have seen them there for six months or more, and the waste of public money involved is really a disgrace. I am sure that what my hon. Friend said is correct. The only way to settle the dispute is for the parties to come together, face up to it, and come to a working solution.

I thought that the hon. Member for Feltham (Mr. Russell Kerr) showed a rather cavalier attitude to the expenditure of public money on the development of Concorde. I agree with most of what he said about the benefits of spin-off, but one cannot put out of one's mind that the cost to date, as the right hon. Member for Barnsley (Mr. Mason) said, is about £825 million, and who doubts that the final bill may come nearer to £1,000 million, split between France and Britain? This is a very large sum of money to go on two development aircraft in pre-production and another which will be destroyed in testing. At a figure nearing £1,000 million, even the most optimistic forecast of sales at about 80 or 90 aircraft makes it more than £10 million per aircraft, before we really start building any Concordes at all.

Photo of Mr Russell Kerr Mr Russell Kerr , Feltham

But will not the hon. Gentleman agree that, using our imagination and projecting into the wider industrial field, we must accept that even these seemingly astronomical sums may well be only a small down payment on a very prosperous economic future?

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

I think that the hon. Gentleman is looking rather further into the future than a reasonably prudent man would. I was forecasting sales of 80 or 90 aircraft, and that goes for 10, 15 or 20 years ahead. Who can see as far ahead as that in aviation?

I come now to one or two questions to my right hon. Friend, and I take, first, the forecast merger of B.E.A. and B.O.A.C. under the Air Holdings Board. How would this affect the borrowing powers, and, in particular, would it enable B.O.A.C. to plan through routes to America and the Continent? Does the hon. Gentleman foresee that it will assist our traffic? One knows from flying to America, for example, that an airline which can offer through travel to the West Coast is in a better position than one which can fly only to the East Coast of America. The same can work in reverse, flying through London to Continental destinations, principally Paris, but also to places in Italy and Germany and elsewhere.

I cannot agree with all the pessimism which has been expressed earlier in the debate. The whole country today seems to be indulging in a bout of self-examination and pessimism. Inflation is a problem, but I feel that we are a little over-obsessed at the moment with ideas of recession. Let us remember that what we are talking about is a fall in the rate of increase in the gross national product. It is a small matter of 1 or 2 per cent. at the most, and it is in the rate of increase. The growth of the gross national product goes on from year to year; the country grows wealthier at an astonishing rate, and the world does, too. This reflects itself on the amount of air travel.

It is common knowledge—I recently saw it myself on the other side of the Atlantic—that there has been an oversupply of capacity, particularly in the large air buses and the 747, and, as a result, the main airlines in the United States are suffering from surplus capacity. But I believe that this is a temporary phenomenon, and that looking into the future, as we must in considering the affairs of our two great Corporations, B.O.A.C. and B.E.A., we can look forward to a gradual increase in the gross domestic product and the traffic which that is bound to generate in the longer term.

I welcome the Bill, and I welcome the creation of the second force. On my recent trip I saw the effect of competition in the United States and how it sharpens the edge of the service given. I am sure that a second force, which takes only 2½ or 3 per cent. of traffic—£6 million worth, a very small bite out of the total traffic for which the Corporations cater—can do nothing but good.

I deplore that B.O.A.C.'s share of the North Atlantic traffic has fallen in the past few years. I hope that the entry of a second British force into the field will help to redress the balance, so that Britain can go on increasing her share not only of the profitable Atlantic traffic but of traffic elsewhere in the world, too. The competition offered by a second British operator is bound to have that desirable effect.

I do not wish to conclude without saying a word about Sir Charles Hardie. A word of congratulation is due to him. I congratulate Mr. Keith Granville on his appointment, and I am sure that we are in for a period of continued growth, but I feel, at the same time, that Sir Charles Hardie, who has steered the air corporations into a period of profit after a period of unprofitability, deserves the congratulation of the House.

5.4 p.m.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

I wish to say a few words, with the Bill as my excuse. As we all know, not much can be said about the Bill itself. It is merely a point at which we are pausing in a fairly long chain of development. During that period of development, I have, as it were, grown up in the House, for it dates almost from the time when I became a Member of Parliament. I travelled initially down here, with four of my colleagues, in a DH-Rapide at 95 m.p.h. That was in 1947, and the Rapides which carried us successfully then, without much interrupt- tion, continued to do so for two or three years. But we realised that we could not creep from Glasgow to London; we had to fly—and the days of crawling passed and the days of faster travel came in.

The capital represented by Parliament and the nation was put behind the private enterprise which was operating and promoting aircraft like the Rapide, because that particular enterprise did not have money in sufficient quantity to back the type of development which was becoming an obvious need. So we had the intervention of the Government and the creation of a new type of aircraft which could fly at 150 m.p.h. and speeds a little beyond that. But State aid for that step was essential. I am sure that right hon. and hon. Members on both sides will not dissent from this.

Development has not ceased. Having travelled at speeds less than sound, we now want to travel, and are beginning to travel, at speeds greater than sound. More money is required, and at this stage the State must play a greater rôle.

The type of aircraft presented to us now, for example, the 747, creates problems for the men who will be employed on it, problems of remuneration, problems of more fascinating travel, so to speak, and problems of far greater scope than are presented by aircraft like the 707. But the development goes on, and will continue to go on. It has led to a branching off. While B.E.A. and B.O.A.C. are beginning to come together to form a unit, we are creating at the same time another force which, allegedly, will be a constant prod to keep the new combination which is shaping itself continually in action But I venture to suggest that this set-up will not last too long. In a little while, the new group will come in. For my part, I welcome Caledonian because I have known them since they started. I think that I can call Adam Thomson a friend, not because he is a Scotsman but because I have known him since he started on his pioneering career. He will be an adornment to this service, and I am certain that in due course the group working with him will be part and parcel of the State combine represented by B.O.A.C. and B.E.A. This has been happening under our noses all through the period during which some of us have been flying to and from Glasgow.

I regret the disastrous deadlock over the 747. It is a pity that so much capital should be lying idle with seemingly no feasible solution. I hope that perhaps some of us who will be at a certain function tonight may be able to say a word or two about what we have been discussing this evening.

The other development which I also particularly welcome is Concorde. I had the privilege of making the first speech in the House in support of Concorde in 1964. Looking back, and re-reading the debate, I agree that our knowledge of Concorde then was rudimentary, but the ideas of those who supported the continuing investment in Concorde and pursuing its development were correct. They have been proved so by the success which has already followed the supersonic flight. We hear a great deal about noise, as if noise were unusual in the age in which we live; but I am certain that Concorde, the summit of aviation progress in the world, will go on to be a tremendous success.

If this little debate in any way, by a kindly thought in support of the continued development of Concorde, plays a part in helping on that progress which I believe is inherent in the idea of Concorde, it will have been worth while.

5.12 p.m.

Photo of Mr James Dempsey Mr James Dempsey , Coatbridge and Airdrie

I find many paradoxes in this short debate, having listened to the speech of the Minister and other hon. Members. The Bill seeks to increase B.O.A.C.'s borrowing powers with a view to strengthening its fleet, making it much more viable, improving its service to its customers, and becoming an outstanding success as a national airline.

Several theories have been advanced, and I could not help but reflect on that put forward by the hon. Member for Belfast, East (Mr. McMaster), who said that B.O.A.C.'s trade on the North Atlantic route had dropped, but that the introduction of the second force would help to improve the situation. I do not know how he reaches his conclusion, because, if the trade has dropped and B.O.A.C. and the new second force may now fight over it, we could well lose more trade as a result of such wasteful competition or duplication of services in that part of the world.

I am trying to discover just what we are discussing, what theories are being put forward. My hon. Friend the Member for Glasgow, Govan (Mr. Rankin) talks about the Concorde. Nobody wants to stand in the way of technical revolutions or flying revolutions, but we are duty-bound to have regard to the effect of such machines on the lives of the people below. Instruments have been installed in buildings on the West Coast of Scotland to assess the physical effect of sonic booms from such an aeroplane flying at 1,000 m.p.h. and the effect on human life of its terrifying noise and the frightening implications for the human system. We must study this and have regard to it when spending public money to purchase such machines.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

When flying over land neither Concorde nor any other supersonic plane will fly at such supersonic speeds.

Photo of Mr James Dempsey Mr James Dempsey , Coatbridge and Airdrie

I appreciate that, but it has been widely reported that Concorde is flying along the West Coast of Scotland, and certain buildings from Oban to the South-West have been monitored because the flight path is very close to the mainland there. By all means, let us encourage improvements in our flying techniques, but we must never forget our responsibility to protect people and property below.

The hon. Member for Epping (Mr. Tebbit) knows something about flying, I understand. I am sure that he will agree that the faster a plane flies the less chance the pilot has of seeing something in front of him, and so the danger is greater, even in flight lanes. In a radio discussion between a pilot and an official of a British air Corporation I heard the pilot make that very point, which seems to be completely overlooked, that in spite of all our flight paths and lanes and our traffic facilities there is always that danger. It is not my argument. I know nothing about flying planes; I just sit in them. But I certainly listen to a pilot when he says something like that. The hon. Gentleman might laugh, but the pilot made it clear that flying at 500 or 600 m.p.h. he has a better chance of seeing something than at 1,000 m.p.h. That is logic. It is a fair comment.

There is a great danger that we are spending public money in going for aircraft that are too big and too fast. In the case of the 747, for instance, it is well known, especially to those responsible for managing our air Corporations, that there must be a minimum passenger load to ensure that a flight is economically viable, no matter where it is going. The larger the plane, the larger the minimum passenger load to ensure that its operation is economic and that greater burdens are not imposed on the taxpayers.

I should like the Minister to assure us that all these aspects have been examined, and that he is satisfied, as are his Corporation chiefs, that such large planes represent economically sound investment for the British taxpayer's money.

I condemn wasteful competition between B.O.A.C. and the new second force, Caledonian-B.U.A. But I also condemn wasteful competition between B.O.A.C. and B.E.A. Every step should be taken to see that we do not have two national Corporations serving the same airport, as happens in Rome, for example. Steps should be taken to avoid any wasteful competition which might arise where, for example, flights are duplicated. If we are to give a Second Reading to a Bill which provides capital for a British national air Corporation to operate, we are within our rights in asking those responsible to ensure that such wasteful competition does not exist.

That does not mean to imply that I am convinced by or wedded to an amalgamation between B.O.A.C. and B.E.A. I believe that they serve two different functions, one short haul and the other long haul. The nature of the travelling and of the flight is different in each. If I join a flight from Glasgow to London, I can get my ticket in a couple of minutes but if I want to go to another part of the world it takes a lot longer to get my ticket and more staff and accommodation are needed. The whole nature of the operation, even administratively, is different in long-haul operations from short-haul operations.

There is a growing belief that, if amalgamation takes place, nothing is more certain than that the short haul will be sacrificed for the long haul, since the long-haul routes will obviously be more profitable. If the right hon. Gentleman is contemplating amalgamation, he should give serious consideration to the implica- tions of such a step. I am sure that, at the end of the day, we will all decide on what we feel is in the best interests of our national corporations and of the nation as a whole.

5.22 p.m.

Photo of Mr Michael Noble Mr Michael Noble , Argyll

With permission, Mr. Deputy Speaker, I will answer the debate. The right hon. Member for Barnsley (Mr. Mason) accused me, for the second time in a week, of having made a short speech. This is the first time in my recollection in this House that anyone has criticised a Front Bencher for making a short speech. If it is a criticism, then I can only reply that I intend to go on earning it wherever possible. He asked me to reply to several points and I will do my best to do so, but I have discovered that if one writes notes on a piece of paper and sits on it, it disappears behind one on this Bench and one cannot get it out.

First, I deal with the question of the proposed Airways Board. In my speech last week proposing the setting up of the Board—the legislation will come before the House this Session—I tried to make it clear that we would leave it to the Board to decide whether or not a merger of B.O.A.C. and B.E.A. was right and sensible, because I do not feel that this is something which the Government should decide from the outside. I believe that the new Board should look at the matter from the inside. If it comes to the conclusion that there should be a merger, as I have said, any decision of that kind will have to come to Parliament before it takes place, and that is the right course.

Photo of Mr James Dempsey Mr James Dempsey , Coatbridge and Airdrie

Does the right hon. Gentleman mean that it will come to Parliament before it is implemented so that Parliament itself decides? Or does he mean that, when both Corporations have arrived at a decision, no matter what we say they will have the right to implement it?

Photo of Mr Michael Noble Mr Michael Noble , Argyll

I meant exactly what I said—that if the Airways Board decides that it would make sense for B.O.A.C. and B.E.A. to merge, it will be for Parliament to decide whether that is to be done.

The figures in the Bill will be affected, as my hon. Friend the Member for Belfast, East (Mr. McMaster) said, by the setting up of the Airways Board, but I thought it right to produce the Bill in this form because the Board is not yet in existence and these are the best estimates we can make of what B.O.A.C. is likely to need over the next five years. Once the Airways Board becomes operational and looks at the whole problem, there may be considerable changes. The Bill is based simply on what we think B.O.A.C. is likely to need over the next five years.

The right hon. Gentleman asked me to explain or justify a statement I made in August about the growth of B.O.A.C. traffic at 14 or 15 per cent. He asked whether I still think that to be about the right figure. It is very difficult to give an absolutely clear answer on this but B.O.A.C.'s estimates see an annual revenue growth in money terms of 18 per cent. over the next five years compared with 12 per cent. over the last five years. Of course, this being a cyclical industry, one gets the odd year where growth may drop, but the current estimates are of an 18 per cent. growth, so the 2½ to 3 per cent. transfer of revenue is only a very small part of what B.O.A.C. itself is estimating as its growth rate.

A number of problems about the Boeing 747 were raised by the right hon. Gentleman, my hon. Friend the Member for Woking (Mr. Onslow), who takes so much interest in these debates, my hon. Friend the Member for Bradford, West (Mr. Wilkinson) and others. Two problems in particular were mentioned. First, what is the cost to B.O.A.C. of having these three large expensive modern aircraft sitting on the tarmac? The original estimate was about £25,000 a day. Now, B.O.A.C. says that up to 31st October it estimates that it has lost about £18,000 a day, and during the ensuing winter months the estimated loss will be less.

The reason for this change in estimates, if one can call it that, is simply that B.O.A.C. thought this situation might last only for a short time and therefore put in the whole cost of what might have happened. But as traffic has ceased to grow as fast as it was growing over the North Atlantic, B.O.A.C. has been able over the months to make special arrangements, and during the winter the traffic is not so great in any case.

I do not want in any way to be provocative. I want the best and quickest solution we can get to this problem of flying the Boeing 747. Everyone in this House hopes very much that B.O.A.C. and the pilots will get together and find a satisfactory solution. One knows the difficulties and the problems. These are highly skilled and highly responsible people and we hope very much that the 747 training will start soon and we shall be able to get them into the air and cut out this daily loss, at whatever figure it may then be.

I say to the hon. Member for Coat-bridge and Airdrie (Mr. Dempsey) that he was being a little unrealistic, and I do not think he or the hon. Member for Glasgow, Govan (Mr. Rankin) really want to go back to the Rapides.

Photo of Mr Michael Noble Mr Michael Noble , Argyll

I said I would be brief.

The hon. Member for Coatbridge and Airdrie asked me to say why it was that B.O.A.C. wanted these new modern aircraft. The answer is quite simply that it is one of the largest and most successful airlines in the world, and if it is to maintain that position, as we want it to, its fleets must include the same sort of top-class modern aircraft as the fleets of its rivals.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

On a point of order, then. The right hon. Gentleman has attributed to me words which I never used. He said that he hoped I did not want to go back to the DH-Rapide. He was linking me with my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey), whom I love but not in aviation matters. That was the right hon. Gentleman's excuse.

Photo of Mr Michael Noble Mr Michael Noble , Argyll

I knew that the hon. Gentleman had not heard what I said. That is why I was trying to stop him interrupting. What I said was that I was sure the hon. Member for Govan would not want to go back to Rapides.

Photo of Mr James Dempsey Mr James Dempsey , Coatbridge and Airdrie

Would the right hon. Gentleman answer the other aspects of the question? Is he satisfied that the minimum economic load required for the 747 will be justified in making it an economic proposition?

Photo of Mr Michael Noble Mr Michael Noble , Argyll

Clearly it is impossible to make money out of 50 people in a Jumbo jet. I know that, B.O.A.C. knows it, Mr. Keith Granville knows it, and everybody knows it. I hope we can now leave that particular bird.

May I move quickly on to the problem of the Concorde, about which the right hon. Member for Barnsley asked me to say a word. At this stage obviously I cannot make a clear estimate of what B.O.A.C.'s thinking will be in the next few months about the possible viability of the Concorde, because B.O.A.C. does not yet know. Mr. Keith Granville spoke on the radio on the night of his appointment and I heard him say that B.O.A.C. is keen to go supersonic. We can only hope that the Concorde will meet the commitments required of it by B.O.A.C. so that the operation will be on a viable basis. A great many contributors to this debate mentioned this point. Everybody interested in the remarkable technical achievement of the Concorde hopes at this stage that the remainder of its tests will come out satisfactorily so that it can be shown to be an economic aircraft in use by airlines all over the world. Only in this way can we hope to get back some of the money that has been invested in the aircraft.

My hon. Friend the Member for Woking mentioned the question of no more staff. The Bill to give B.O.A.C. more borrowing powers does not itself suggest that there are likely to be any greater manpower needs. It is the exercise of the powers, not the Bill itself, that may call for more manpower.

I hope that I have covered all the points which were raised, points which were of interest and of importance. I should like to thank my hon. Friend the Member for Epping (Mr. Tebbit) for his very kind and knowledgeable tribute to Mr. Granville, because the hon. Member worked with him for a very long time and his good wishes for his success will be appreciated. He has been a very professional manager of B.O.A.C.

I hope the House will give the Bill a Second Reading, and I wish B.O.A.C. in particular a very successful period of operation. I trust that its borrowing powers, if needed, may be well spent.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Hawkins.]

Committee tomorrow.