(c) crown copyright
Catalogue Reference:CAB/24/280
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(THIS DOOUMBWT I S THIS PROPERTY uF HIS BRITANNIC MAJESTY'b GUV3HHHEMT.)
B E G R 3 T.
;.P.
246
Copy No,
(38).
C A B I N E T .
IMPERIAL AIRWAYS AND BRITISH AIRWAYS.
Memorandum by t h e C h a n c e l l o r o f t h e Exchequer
and the S e c r e t a r y o f S t a t e f o r A i r .
1.
Our c o l l e a g u e s w i l l
remember t h a t the C a b i n e t
d e c i d e d ( C a b i n e t 49 ( 3 8 ) C o n c l u s i o n 17)
t h a t the
questions
o f p o l i c y i n v o l v e d by the c o n t e m p l a t e d amalgamation
I m p e r i a l Airways and B r i t i s h Airways
informally
at a meeting of
should be
discussed
Ministers,
T h a t m e e t i n g has b e e n h e l d and t h o s e
2.
of
present agreed i n p r i n c i p l e
to the proposed
Ministers
amalgamation.
They f u r t h e r a g r e e d t h a t as t h e amalgamated c o n c e r n w o u l d ,
i n any e v e n t a t t h e o u t s e t , be l a r g e l y
s u b s i d i e s from His M a j e s t y ' s
dependent on
Government i t was n e c e s s a r y
t h a t the d i v i d e n d s should be r e s t r i c t e d
associated with public u t i l i t y
t o the l i m i t s
companies.
Such
restriction
would b e i n a c c o r d a n c e w i t h t h e v i e w s expressed, i n
Cadman R e p o r t and w i t h the Government o b s e r v a t i o n
t o the e f f e c t
the
thereon
t h a t t h e Government were " i n agreement
the p r i n c i p l e u n d e r l y i n g
the p r o p o s a l , namely t h a t
money should n o t be used f o r
raising
dividends
usually
with
public
t o undue
levels '.
1
^.
After
consideration of alternative
forms o f
o r g a n i s a t i o n t h e m e e t i n g came t o t h e unanimous
t h a t t h e most f e a s i b l e
form o f
conclusion
o r g a n i s a t i o n was t h a t
had i n f a c t b e e n recommended t o t h e Government
­
which
Departments
c o n c e r n e d by Mr. M o r i s o n o f Thomson McLintock and Company
after
a careful
and d e t a i l e d i n v e s t i g a t i o n , ,
q u e s t i o n would i n v o l v e
under s t a t u t e ,
The scheme
the f o r m a t i o n o f a P u b l i c
to acquire
Corporation,
the e x i s t i n g u n d e r t a k i n g s
I m p e r i a l A i r w a y s and B r i t i s h Airways a t a f i g u r e
a g r e e d between the Government and the D i r e c t o r s
Companies and approved by t h e i r
The Board o f
Government,
of
to be
o f t h e two
shareholders.
the C o r p o r a t i o n would be a p p o i n t e d by the
though subsequent v a c a n c i e s might be
b y the Board i t s e l f
Government.
subject
to the approval o f
filled
the
The C o r p o r a t i o n would be a s t a t u t o r y body
with c e r t a i n statutory l i m i t s
on the amount o f
stock.
respective
in
its
The money
on i t s powers - i n
particular
d i v i d e n d s or i n t e r e s t p a y a b l e on i t s
required
(a)
f o r t h e purchase o f I m p e r i a l Airways and
B r i t i s h Airways ( s a y , £ 3 , 0 0 0 , 0 0 0 )
(b)
f o r immediate development
and
(c)
for
future
(say another
development u n t i l
such time as
C o r p o r a t i o n c o u l d s t a n d on i t s
the
own f e e t ,
would be found by the i s s u e o f f i x e d , i n t e r e s t
g u a r a n t e e d as t o p r i n c i p a l
£3,000,000)
stock
and i n t e r e s t by t h e Government.
The annual s u b s i d y would c o n t i n u e t o b e p a i d and would be
f i x e d i n such a way as t o c o v e r the s e r v i c e
o f the
guaranteed
S t o c k and t o a l l o w r e a s o n a b l e p r o v i s i o n o f r e s e r v e s
development w i t h a v i e w t o r e d u c t i o n o f
guaranteed c a p i t a l .
for
the need f o r
dividends
instead of
catering,
o f 7^% t o 10% on o r d i n a r y
s h a r e s would b e r e q u i r e d t o c o v e r the low r a t e o f
(3% t o 5-2%) p a y a b l e
future
C a p i t a l would thus be r a i s e d on t h e
c h e a p e s t p o s s i b l e terms and t h e s u b s i d y ,
as a t p r e s e n t ,
for
interest
on medium o r l o n g term g u a r a n t e e d
stock.
S i r John R e i t h , as chairman o f
4.
and Mr. O l i v e P e a r s o n ,
agreed in p r i n c i p l e
Imperial
Airways,
as Chairman o f B r i t i s h A i r w a y s ,
have
t o amalgamation and t o a P u b l i c
Corporation.
5..
L e g i s l a t i o n would be r e q u i r e d t o s e t up t h e
p r o p o s e d C o r p o r a t i o n and t o g i v e the T r e a s u r y power
guarantee p r i n c i p a l
of
for
and i n t e r e s t on i t s
t h i s memorandum i s
to seek the a u t h o r i t y o f
t h e p r e p a r a t i o n o f the n e c e s s a r y
6.
The d a t e o f
stocks.
to
The
object
the Cabinet
legislation.
the announcement t o the House and t h e
s h a r e h o l d e r s w i l l have t o b e s e t t l e d at the d i s c u s s i o n
with
the r e p r e s e n t a t i v e s
it
of
the companies.
Till
t h a t date
i s most d e s i r a b l e t h a t t h e d e c i s i o n s h o u l d b e k e p t
secret.
(Intl'd.)
"
3rd,November
t
1938.
J.S.
K.W.
completely