I am grateful to my hon. Friend the Member for Nuneaton (Mr. Huckfield) for this opportunity to enlarge on the thinking behind the statement of the Secretary of State for Trade on 29th July, when he announced his conclusions after reviewing civil aviation policy. I recognise that my hon. Friend has strongly-held and expert views on civil aviation, which he has expressed with his customary clarity, but if I were to follow him into discussing the current negotiations between British, Airways and British Caledonian, I should be in danger of frustrating their whole purpose, the achievement of a consensual and lasting approach to civil aviation problems. I am sure that he will forgive me if I do not go into too much detail. I recognise his concern. The problems he mentioned were well considered by my right hon. Friend and myself before the conclusions were announced to the House.
My hon. Friend has traced, with his considerable knowledge of the air transport industry, the course of events since the Edwards Committee's Report and the subsequent formation of British Caledonian Airways. The policies advocated by Edwards had the general support of both sides of the House, and this was underlined in the Labour Government's White Paper "Civil Aviation Policy" of 1969.
However, as we said then, the Government would not accept that the formation of a second force airline
should be made conditional upon the transfer to it of a significant part of the Air Corporations' route networks.
This was a view we maintained later when the Tory Government transferred certain routes to British Caledonian on its establishment, notably the trunk route to West Africa.
One aim of the review of civil aviation policy we announced last December and completed this summer was therefore to consider whether reversal of these route transfers would be consistent with preserving the stability of the United Kingdom industry and enabling it to acquire the largest possible share of the world market.
I should remind the House that there was another major reason for the Government's decision that a review of civil aviation policy was needed. This lay in the changes which have taken place in the air transport market since the Edwards recommendations were adopted, and to which my hon. Friend alluded in his remarks.
The Edwards recommendations were made against a background of optimistic forecasts that during the 1970s traffic carried by United Kingdom airlines would be doubling roughly every five years. However, the air transport industry, both in the United Kingdom and worldwide, has been hard hit by the oil crisis and general recession of the last two years. Since the autumn of 1973 not only has the previous growth in traffic been halted, but most sectors of the market have experienced a serious decline in demand.
It is only right to say that British air-lines have fared better in this difficult period than most of their international competitors. But British Airways, after making profits in the first two years since the merger of BOAC and BEA, made a loss of £9½ million in 1974–75—rather less than was originally forecast and that says much in tribute to the work of British Airways—and British Caledonian was obliged in November 1974 to make drastic cuts in its operations. In these changed economic circumstances it seemed necessary to consider whether the structure of the industry developed by civil aviation policy since Edwards still remained appropriate.
My right hon. Friend the Secretary of State for Trade announced the conclusions the Government had reached on the review in his statement last July. As he said then, it is difficult to draw final conclusions from the limited experience available of the advantages of maintaining two British scheduled carriers on a single international route, but it is clear that in the current and foreseeable airline operating environment there will be few, if any, routes on which we could hope to introduce a second United Kingdom carrier on terms which would enable both airlines to operate profitably, and which might enable us significantly to increase the British share of revenue on the route. Indeed, the experience of BCAL on the North Atlantic routes shows just how difficult it is for a second United Kingdom airline to challenge successfully the position of established carriers on that kind of route. One might cast some doubt upon the wisdom of British Caledonian in embarking upon that in the first place.
The Government reached the conclusion, therefore, that it no longer remains in the national interest to seek to have more than one British carrier serving any given long-haul scheduled route. For the foreseeable future it will be our policy not to license more than one British carrier on such routes. Nevertheless, after careful consideration of the evidence produced by the review we believe that it remains in the interest of United Kingdom civil aviation as a whole—it is in that respect that we have to consider it—that British Caledonian should continue as a major scheduled carrier and as a second centre of airline expertise.
It is in that respect that I have to differ from the conclusions drawn by my hon. Friend. I know perfectly well that he and some others of my hon. Friends believe that it should have been the Government's policy to absorb British Caledonian into British Airways one way or another. A number of choices were avail- able. However, the choice between two British airlines is valued by many users of services on a number of domestic and European routes, and as British Caledonian is the major scheduled operator from Gatwick, which will in any case need to be developed rapidly as part of the Government's national airport stategy, it is right to point out that the consumer has a choice between two London airports on many routes.
A major factor which weighed extremely heavily in our considerations was the future of the 5,000 or so employees of British Caledonian at Gatwick. This is not a point to which my hon. friend alluded, although I know that he is not oblivious of this factor.
Nationalisation of British Caledonian would inevitably have been followed by its absorption into British Airways. This would have led both to dislocation of scheduled services from Gatwick and unemployment among former British Caledonian employees. Indeed, one cannot additionally fail to consider the consequential unemployment that might have followed a decline in the use of Gatwick as a result of the demise of British Caledonian.
The Government believe that there is still scope for an independent British Caledonian, and indeed the airline's staff were anxious to retain its separate identity. Although it is not within the Government's power to guarantee British Caledonian's future, in the relatively brief period of its existence it has made a worthwhile contribution to British civil aviation and the Government believe that it is right to take such action as is open to them to enable the airline to continue as a successful operator, but we do not intend to bolster British Caledonian at the expense of British Airways. We do not intend to cannibalise British Airways' route network to benefit British Caledonian.
I do not think that the parallel with Air France and UTA is any guide to the Government's intention. The situation there was quite different historically and in respect of a number of matters, and it is not our intention to pursue similar policies to those prevailing in France.
We intend that BCAL should have a sphere of influence for its long-haul scheduled services based largely on its existing West African and South American operations. This sphere of influence, and that of British Airways, will be consolidated by a limited exchange of routes between the two which, it is hoped, will prove of mutual advantage to both, and which will be both reasonably balanced and operationally sensible. I emphasise that the exchange of routes is to be a limited one. It is an exchange of routes, not a give-away, as happened under the Tory Government in a manner which merited the condemnation of the Labour Party and which I believe to this day was utterly wrong.
I have indicated that I cannot say very much about the route rationalisation talks, but what is aimed at is that we should have a relationship with British Airways that will lead to closer co-operation between the two and, therefore, will lead to an increase in the value of the routes as far as the United Kingdom as a whole is concerned. We believe that the policy outlined by my right hon. Friend will provide British civil aviation with the right foundation from which both to meet the current pressures faced by the industry and to employ fully the opportunities which will again arise in the future when we put the present recession behind us.
Our intention has been to make changes in policy only where these are clearly needed. It is our aim to produce a policy framework for the industry which will command general support and, indeed, I hope the support also of my hon. Friends in due course when they see how the route rationalisation talks have worked out. We want the industry to be able to plan ahead for the long term with confidence in the stability of policy, which we believe is a vital ingredient of success.
It will be necessary in the new Session for revised policy guidance for the Civil Aviation Authority to be brought before the House for approval. My right hon. Friend has already undertaken that there will be a White Paper explaining the Government's proposals. There will, therefore, be a further opportunity for debate of this important subject. At that stage the negotiations which are currently going on may well have reached fruition. I hope that will be so.
I bear very well in mind the observations made by my right hon. Friend in the form perhaps of a shot across the bows, but I urge him to believe that what we are seeking to do is to work out a rationalisation policy in the current circumstances which prevail in the aviation industry of this country. He has criticised us for departing from previous policy which was laid down both when we were in Government and in Opposition. Circumstances have changed remarkably since that time. I stress that we have to bear in mind the employment prospects of thousands of people, not only those who are employed by British Caledonian but those who are heavily dependent on British Caledonian. It would not have been right for us to have ignored the strong representations made by working people who were faced by the prospect of a close-down of British Caledonian or its absorption into British Airways. These are crucial factors which I am sure we are right to take fully into account.