DOCUMENT IS THE P R O P E R T Y OF HER BRITANNIC MAJESTY S GOVERNMENT)
l
C[69Jl149
COPY NO.
3rd November, 1969
CABINET
CIVIL AVIATION POLICY
Note by the Pre a idenfr of the Board of Trade
My colleagues will wish to see the attached draft White
Paper setting out my proposals for future civil aviation policy,
which were approved, together with the White Paper, by S E P last
Thursday.
I am discussing the date of publication with those
Ministers most concerned; but I hope that it will be possible to
publish the White Paper on Tuesday, 11th November.
R. M.
Board of T r a d e
9
S. W . I .
3rd November, J.969
63
CIVIL AVIATION POLICY
DRAFT WHITE PAPER
C O N T E N T S
INTRODUCTION
OBJECTIVES
THE STRUCTURE OF THE INDUSTRY
General approach The p u b l i c s e c t o r The independent s e c t o r A "second f o r c e " a i r l i n e
Regional air services ECONOMIC POLICY
Introduction G e n e r a l approach t o p r i c i n g Cross-subsidisation Domestic f a r e s and f r e i g h t r a t e s ' I n c l u s i v e tour p r i c e s
International fares
Transport c o - o r d i n a t i o n
Subsidies
Commercial agreements
Aerodrome planning and p r i c i n g
A i r c r a f t procurement and f i n a n c e
A i r Transport A s s o c i a t i o n
HUMAN RELATIONS
General Approach
Participation
:
THE CIVIL AVIATION AUTHORITY
Economic r e g u l a t i o n S a f e t y and t e c h n i c a l r e g u l a t i o n Constitution The p o l i c y statement and a p p e a l s ' Air service licences The a l l o c a t i o n o f f u n c t i o n s Financial control The A u t h o r i t y as a c o n s t i t u t i o n a l innovation
SUMMARY:
THE SHAPE OF THE FUTURE
1
CONFIDENTIAL
C I V I L
A V I A T I O N
P O L I C Y
DRAFT WHITE PAPER
1.
C i v i l a v i a t i o n i s one o f the w o r l d ' s f a s t e s t growing i n d u s I tries.
The output o f the i n d u s t r y on i n t e r n a t i o n a l scheduled
I services a l o n e grew at an a v e r a g e r a t e o f 17% a y e a r o v e r the l a s t
ten y e a r s , o r more than doubled e v e r y 5 y e a r s .
Part of this
growth was accounted f o r by new a i r l i n e s , w i t h the r e s u l t t h a t the
r e l a t i v e share o f B r i t i s h a i r l i n e s , l i k e those o f t h e U n i t e d S t a t e s ,
declined o v e r t h i s p e r i o d .
N o n e t h e l e s s t h e output o f B r i t i s h
airlines on i n t e r n a t i o n a l scheduled s e r v i c e s has been doubling
every 5 i y e a r s w h i l e t h e i r output on i n c l u s i v e tour c h a r t e r
services has grown so r a p i d l y from small b e g i n n i n g s t h a t i t was
nearly 20 times as g r e a t i n 1968 as i n 1 9 5 8 .
Few i n d u s t r i e s can
match t h i s r e c o r d o f s u s t a i n e d e x p a n s i o n and look f o r w a r d t o c o n ­
tinuing expansion a t h i g h r a t e s f o r as f a r ahead as can be
foreseen.
2.
This remarkable growth has been t h e product o f two main
factors.
The s t e a d y d e c l i n e i n t h e c o s t o f a i r t r a v e l has brought
it within the r e a c h o f e v e r - i n c r e a s i n g numbers o f p e o p l e .
At
the- same time a v e r y r a p i d r a t e o f t e c h n o l o g i c a l change has b o t h
reduced c o s t s and enabled l a r g e r numbers o f p e o p l e t o be c a r r i e d .
The p a s s e n g e r - c a r r y i n g c a p a c i t y o f the Boeing 747, which w i l l be
in t r a n s a t l a n t i c s e r v i c e i n 1 9 7 0 , i s a t l e a s t 5 t i m e s t h a t o f the
Comets which i n a u g u r a t e d t r a n s a t l a n t i c j e t s e r v i c e s o n l y 11 y e a r s
ago, and even l a r g e r and more economical a i r c r a f t a r e i n p r o s p e c t .
3.
Other and c o m p l e t e l y new t e c h n i q u e s o f a i r t r a n s p o r t w i l l
make t h e i r impact o v e r the next decade.
The Concorde s u p e r s o n i c
airliner w i l l be coming i n t o s e r v i c e .
A i r c r a f t capable o f
using very short runways may p l a y an i n c r e a s i n g r o l e .
Looking
further ahead, t h e r e i s the p o s s i b i l i t y o f the s u c c e s s f u l
development of economic a i r c r a f t c a p a b l e o f v e r t i c a l t a k e ­
off and l a n d i n g .
The i n c r e a s e i n t h e s i z e o f a i r c r a f t has
already p e r m i t t e d a r a p i d growth o f a i r f r e i g h t - t r a f f i c and
with the i n c r e a s e d use o f c o n t a i n e r s t h i s w i l l continue t o
be one of the f a s t e s t growing s e c t o r s of the i n d u s t r y ' s
business.
4.
The c o n t r i b u t i o n made by B r i t i s h a i r l i n e s to t h e n a t i o n ' s
economy depends on t h e i r continued growth and p r o s p e r i t y .
The
industry c o n t r i b u t e s d i r e c t l y t o t h e balance o f payments through
its earnings from c a r r y i n g p a s s e n g e r s and f r e i g h t .
I n 196 8 t h e
net f o r e i g n currency earnings o f B r i t i s h a i r l i n e s were £69 m i l l i o n ;
after a l l o w i n g f o r t h e net e a r n i n g s o f f o r e i g n a i r l i n e s from t h e
United Kingdom, t h e g a i n t o the b a l a n c e o f payments was £20 m i l l i o n .
There are o p p o r t u n i t i e s f o r making t h i s c o n t r i b u t i o n c o n s i d e r a b l y
greater i n f u t u r e .
I n a d d i t i o n t h e r e i s the i n d i r e c t c o n t r i b u t i o n
made by the a i r l i n e s i n a t t r a c t i n g f o r e i g n t o u r i s t s to B r i t a i n .
Less measurable but no l e s s important i s t h e f a c t t h a t ^ t h e
ordinary c i t i z e n can now e n j o y o p p o r t u n i t i e s - the M e d i t e r r a n e a n
holiday, t h e v i s i t t o r e l a t i v e s i n o t h e r c o n t i n e n t s - t h a t were
until r e c e n t l y t h e p r i v i l e g e of a m i n o r i t y . .
2
5,
I t was a g a i n s t t h i s background t h a t the Government a p p o i n t e d ,
in July 1967, a Committee o f I n q u i r y i n t o C i v i l A i r Transport w i t h
Sir Ronald Edwards as Chairman and w i t h the f o l l o w i n g terms o f
reference : ­
"To i n q u i r e i n t o the economic and f i n a n c i a l
s i t u a t i o n and p r o s p e c t s o f the B r i t i s h c i v i l
a i r t r a n s p o r t i n d u s t r y and i n t o t h e methods
o f r e g u l a t i n g c o m p e t i t i o n and o f l i c e n s i n g
c u r r e n t l y employed;
and t o propose w i t h due
a t t e n t i o n to o t h e r forms o f t r a n s p o r t i n
t h i s country what changes may "be d e s i r a b l e
t o enable the i n d u s t r y t o make i t s f u l l
c o n t r i b u t i o n to the development o f t h e
economy and t o t h e s e r v i c e and s a f e t y o f the
travelling public."
The Government g r e a t l y a p p r e c i a t e the v a l u a b l e work done by t h e
Edwards Committee i n b r i n g i n g i n t o focus the i s s u e s t h a t now c o n ­
front the i n d u s t r y and i n s u g g e s t i n g a course f o r i t s development
in the coming decade.
The Committee's R e p o r t , which was p u b l i s h e d
on 2nd May 1969, i s o f o u t s t a n d i n g ' q u a l i t y and i n t e r e s t .
6.
This Report confirms t h a t B r i t i s h a i r l i n e s have g r e a t a c h i e v e ­
ments t o t h e i r c r e d i t .
BEA and BOAC a r e both h e l d i n " h i g h
esteem" by the i n t e r n a t i o n a l a i r l i n e community.
In spite of
v i c i s s i t u d e s , the p r o f i t r e c o r d s o f t h e s t a t e - o w n e d a i r l i n e s have
compared f a v o u r a b l y w i t h t h o s e o f most o f t h e i r i n t e r n a t i o n a l
rivals.
B r i t i s h a i r l i n e s have been i n n o v a t o r s , b o t h t e c h n i c a l l y
with the i n t r o d u c t i o n o f j e t a i r c r a f t and b l i n d l a n d i n g t e c h n i q u e s
and commercially, i n p a r t n e r s h i p w i t h the t r a v e l i n d u s t r y , i n t h e
development o f i n c l u s i v e t o u r h o l i d a y s .
The Committee did not
find anything fundamentally wrong i n the past r e c o r d o f the i n d u s t r y
but did i d e n t i f y some weaknesses t h a t should be c o r r e c t e d f o r t h e
future.
I n planning ahead f o r the s e v e n t i e s , the need i s t o make
the industry s t i l l more e f f i c i e n t and t o p r o v i d e f o r g r e a t e r
f l e x i b i l i t y so t h a t i t can meet the c h a l l e n g e s t h a t r a p i d growth
and change w i l l b r i n g .
7.
This means f i r s t d e a l i n g w i t h those shortcomings t h a t do
exist.
P r o d u c t i v i t y , f o r example, has been low compared not o n l y
I with the U n i t e d S t a t e s but a l s o w i t h some l e a d i n g a i r l i n e s i n
i Western Europe.
As the Report shows, t h e l a b o u r p r o d u c t i v i t y o f
BOAC and BEA, taken t o g e t h e r , l i e s i n t h e m i d d l e r a n g e o f Western
European performance, b e i n g surpassed by A l i t a l i a , Lufthansa and
KLM; only t h e r e l a t i v e l y small a i r l i n e s , such as S w i s s a i r , Sabena
and I b e r i a appear to have s i g n i f i c a n t l y l o w e r l a b o u r p r o d u c t i v i t y .
These comparisons s u g g e s t t h a t c o n s i d e r a b l e room remains f o r
improvement.
The i n d u s t r y ' s n e t f o r e i g n currency e a r n i n g s , though
high, have not kept pace w i t h t h e growth o f a c t i v i t y .
I t has a l s o
become i n c r e a s i n g l y apparent t h a t t h e r e a r e weaknesses i n the
i n s t i t u t i o n a l arrangements f o r r e g u l a t i n g t h e i n d u s t r y .
The a i r
service l i c e n s i n g system has not worked as w e l l as was hoped when
it was set up i n 1960.
J u s t i f i e d c r i t i c i s m has been made o f the
system f o r a p p e a l s .
The b a s i c weakness has been a lack o f c l a r i t y
about the o b j e c t i v e s o f c i v i l a v i a t i o n p o l i c y and a l a c k o f
suitable machinery f o r a c t i n g p o s i t i v e l y i n t h e i r p u r s u i t .
3
8.
When the Report was p u b l i s h e d the Board o f Trade i n v i t e d
comments from a l l i n t e r e s t e d p a r t i e s and the Government have
taken account o f the many v i e w s e x p r e s s e d i n the course o f
e x t e n s i v e and thorough c o n s u l t a t i o n s .
This White Paper i s
intended t o p r o v i d e a new c h a r t e r f o r the i n d u s t r y f o r the next
decade, on the b a s i s o f which i t can b u i l d on past s t r e n g t h s ,
correct past weaknesses and grasp the immense o p p o r t u n i t i e s that
l i e ahead.
A f t e r s e t t i n g out the o b j e c t i v e s on which the
Government s p r o p o s a l s are based and some o f the l i m i t a t i o n s on
t h e i r freedom o f a c t i o n , the White Paper d e a l s f i r s t w i t h the
structure o f the i n d u s t r y , t a k i n g i n turn the f u t u r e o r g a n i s a t i o n
of the p u b l i c s e c t o r , the proposed "second f o r c e " a i r l i n e and t h e
structure o f r e g i o n a l a i r s e r v i c e s .
The next s e c t i o n d e a l s
with o t h e r a s p e c t s o f economic r e g u l a t i o n , i n c l u d i n g p r i c i n g
p o l i c y , t r a n s p o r t c o - o r d i n a t i o n , s u b s i d i e s , commercial agreements
and aerodrome p l a n n i n g .
A f u r t h e r s e c t i o n d e a l s w i t h human
relations.
The concluding s e c t i o n s e t s out the Government's
i n t e n t i o n s f o r t h e f u t u r e r e g u l a t o r y system.
1
4
I.
OBJECTIVES
9,
I n any statement o f the o b j e c t i v e s o f B r i t i s h c i v i l a v i a t i o n
policy t h e r e i s a need t o s t r i k e a b a l a n c e which a l l o w s the
industry t o p l a n w i t h r e a s o n a b l e c o n f i d e n c e and c o n t i n u i t y ,
without imposing a c r i p p l i n g r i g i d i t y .
There i s a l s o , as t h e
Committee p o i n t e d o u t , a need t o f i n d a m i d d l e c o u r s e between
policy s t a t e m e n t s of such wide g e n e r a l i t y as t o be open t o
almost any i n t e r p r e t a t i o n and t h o s e of such d e t a i l t h a t t h e y
must i n e v i t a b l y produce a s t r a i t j a c k e t w i t h i n which i t i s
impossible t o adapt t o changing and o f t e n u n p r e d i c t a b l e
circumstances.
The Report s e t s out a number o f p o s s i b l e o b j e c t i v e s
for p o l i c y and the Government welcome the emphasis p l a c e d on the
interests o f - t h e consumer, on the need f o r an economic r e t u r n
on investment and f o r r a t i o n a l p r i c i n g p o l i c i e s , on the s a f e t y ,
of o p e r a t i o n s and on good c o n d i t i o n s f o r t h o s e working i n t h e .
industry.
10. In t h e Government s v i e w the p r i n c i p a l o b j e c t i v e o f
civil a v i a t i o n p o l i c y must be t o encourage t h e p r o v i s i o n
of a i r s e r v i c e s by B r i t i s h c a r r i e r s , i n s a t i s f a c t i o n o f
all s u b s t a n t i a l c a t e g o r i e s o f p u b l i c demand,- at t h e l o w e s t
levels of c h a r g e s c o n s i s t e n t w i t h a h i g h standard o f s a f e t y , .
an economic r e t u r n on investment and the s t a b i l i t y . a n d
development o f the i n d u s t r y . . T h i s " o b j e c t i v e must be s e t i n
the context o f the need t o n e l p s t r e n g t h e n t h e b a l a n c e of
payments and c o n t r i b u t e t o t h e o v e r a l l growth o f the economy.
In s e t t i n g t h e s e o b j e c t i v e s f o r t h e i n d u s t r y , the Government
consider t h a t t h e minimum o f r e s t r i c t i o n should be imposed on
it or on the u s e r s o f i t s s e r v i c e s , and t h a t arrangements which
restrain c o m p e t i t i o n or i n n o v a t i o n should be t o l e r a t e d o n l y t o
the extent t h a t t h e y are n e c e s s a r y t o a c h i e v e the main o b j e c t i v e s
of p o l i c y .
Thus, as w i l l appear l a t e r i n t h i s White Paper, the
Government f a v o u r the l i c e n s i n g o f a second B r i t i s h c a r r i e r on a
scheduled s e r v i c e r o u t e , where i t can be shown t h a t such
competition would be i n t h e p u b l i c i n t e r e s t .
A g a i n , where the
prices of i n c l u s i v e t o u r s have t o be c o n t r o l l e d , t h e y should be
set at l e v e l s no h i g h e r than i s n e c e s s a r y t o g i v e adequate
protection to competing scheduled s e r v i c e s f o r Which t h e r e i s
a genuine n e e d .
. - ­
1
11. The p r i n c i p l e o f the minimum o f r e s t r a i n t on c o m p e t i t i o n o r
innovation can, however, be a p p l i e d only w i t h i n t h e l i m i t s s e t
by a i r l i n e economics and the p r a c t i c a l r e a l i t i e s o f i n t e r n a t i o n a l
civil a v i a t i o n .
B r i t i s h c i v i l a i r t r a n s p o r t i s an i n t e r n a t i o n a l
industry, w i t h w e l l , o v e r 90 per cent o f i t s output on i n t e r n a t i o n a l
services.
Here i t s c o m p e t i t i v e stx-ength i s c r u c i a l , and h e r e i t
fakes i t s g r e a t e s t c o n t r i b u t i o n b o t h t o t h e economy and the
balance of payments,. ­
12. The i n d u s t r y i s , and w i l l c o n t i n u e t o b e , h i g h l y r e g u l a t e d
throughout the w o r l d f o r a number o f r e a s o n s .
F i r s t , there i s
jne need f o r t h e h i g h e s t standards o f s a f e t y and the need t o
control a i r c r a f t n o i s e .
Second, t h e r e i s the need f o r s t a b i l i t y
.
and r e g u l a r i t y o f p u b l i c t r a n s p o r t s e r v i c e s .
L a s t l y , there i s
the inescapable f a c t that i n t e r n a t i o n a l s e r v i c e s depend upon a
tworlc of agreements reached with, o t h e r c o u n t r i e s , d e f i n i n g the
traffic r i g h t s which a i r l i n e s may e n j o y .
The need, t h e r e f o r e ,
is to o p e r a t e w i t h i n t h i s framework i n such a way as t o g i v e the
industry the b i g g e s t p o s s i b l e o p p o r t u n i t i e s i n the expanding
world market.
At the same t i m e , however, t h i s framework o f
regulation can be m o d i f i e d by i n t e r n a t i o n a l b a r g a i n i n g , by both t h e
airlines and the Government.
T h i s a p p l i e s t o f a r e s as w e l l as
to t r a f f i c r i g h t s .
B r i t a i n ' s i n t e r n a t i o n a l b a r g a i n i n g power i s
far £rom n e g l i g i b l e .
ne
13. The Government w i l l i n c o r p o r a t e these broad o b j e c t i v e s i n
a policy statement that w i l l be p u b l i s h e d and made b i n d i n g upon
the future r e g u l a t o r y body, t o g u i d e i t s work o v e r the whole
span of i t s a c t i v i t i e s .
The r e s t of t h i s White Paper s e t s out
the Government' s v i e w s on the o r g a n i s a t i o n a l changes that a r e
needed, and the p o l i c i e s t h a t should be a p p l i e d , i n o r d e r t o
reach these o b j e c t i v e s .
T h i s more d e t a i l e d e x p o s i t i o n of the
ways in which the o b j e c t i v e s should be pursued w i l l form the
foundation of the p o l i c y guidance t o t h e new r e g u l a t o r y body.
The Government a c c e p t that i t may become n e c e s s a r y t o v a r y
parts of t h i s guidance from time t o t i m e , t o . g i v e e f f e c t t o any
changes of emphasis that may be r e q u i r e d .
CONFIDENTIAL II.
THE STRUCTURE OF THE INDUSTRY 14. The Committee were o f t h e v i e w t h a t , i n matters o f i n d u s t r i a l
structure, the w i s e r c o u r s e i s t o c r e a t e c o n d i t i o n s i n which
change can come about n a t u r a l l y o v e r time under the broad
s t r a t e g i c guidance of the r e g u l a t o r y a u t h o r i t y , r a t h e r than t o
lay down a r i g i d and d e t a i l e d p a t t e r n i n advance.
T h e i r Report­
envisages a f u t u r e s t r u c t u r e i n which t h e r e w i l l be f e w e r
a i r l i n e s than t h e r e a r e now.
A s m a l l e r number of a i r l i n e s
operating in an expanding market s h o u l d , through g r e a t e r
economies of s c a l e and of s p e c i a l i s a t i o n , be b e t t e r p l a c e d t o
increase t h e i r e a r n i n g s o f f o r e i g n exchange and t o s e r v e the
country's t r a n s p o r t n e e d s .
The Government a g r e e t h a t s t r u c t u r a l
changes should be encouraged, on the broad l i n e s proposed i n
the R e p o r t .
G r e a t e r s i z e should not be pursued t o the e x c l u s i o n
of d e s i r a b l e c o m p e t i t i o n ;
but both the i n d u s t r y and t h e economy
are l i k e l y t o be harmed by an e x c e s s i v e f r a g m e n t a t i o n o f e f f o r t .
15. The encouragement of - s t r u c t u r a l changes on the l i n e s now
envisaged c a l l s f o r more p u r p o s i v e r e g u l a t i o n of t h e i n d u s t r y ­
than the p r e s e n t l e g i s l a t i o n and l i c e n s i n g system p e r m i t .
The
Government a c c e p t that the task should be c a r r i e d out by a
Civil A v i a t i o n A u t h o r i t y charged by S t a t u t e t o a c t i n accordance
with the o b j e c t i v e s and p o l i c i e s l a i d down i n the Government*s
formal p o l i c y s t a t e m e n t s .
The C i v i l A v i a t i o n A u t h o r i t y w i l l be
concerned w i t h the s t r u c t u r e o f the i n d u s t r y both i n i t s
broader terms and, more n a r r o w l y , i n i t s d e c i s i o n s on
individual r o u t e s .
I t i s the b r o a d e r s t r u c t u r a l i s s u e s t h a t
are the main concern o f Government p o l i c y .
The public
sector
16. The p u b l i c s e c t o r p r o v i d e s n e a r l y 95% of the i n d u s t r y ' s
output on i n t e r n a t i o n a l scheduled s e r v i c e s and 70% o f the t o t a l
output of the i n d u s t r y .
I t has c o n t r i b u t e d the main w e i g h t o f
the United Kingdom s c i v i l a v i a t i o n e f f o r t o v e r t h e y e a r s and
will continue t o do s o .
I t s o r g a n i s a t i o n i s , t h e r e f o r e , of g r e a t
importance.
The two A i r C o r p o r a t i o n s , s e t up in 1 946 t o
s p e c i a l i s e r e s p e c t i v e l y i n l o n g and s h o r t haul o p e r a t i o n s , have
responded s u c c e s s f u l l y in d i f f e r e n t ways t o the c h a r a c t e r i s t i c s
of the d i f f e r e n t markets t h e y were d e s i g n e d t o s e r v e and the
nature of the c o m p e t i t i o n they meet.
I t i s c r u c i a l t o the
future of the i n d u s t r y t h a t the p u b l i c s e c t o r a i r l i n e s should
be enabled t o b u i l d on the p o s i t i o n s of s t r e n g t h t h e y have
achieved i n the f a c e o f growing i n t e r n a t i o n a l c o m p e t i t i o n and
changes i n the s t r u c t u r e o f t h e i r m a r k e t s .
1
17- The Committee c o n s i d e r e d how b e s t t h i s o b j e c t i v e c o u l d be
achieved.
The p r e s e n t arrangements have c r e a t e d a n a t u r a l
rivalry between the two C o r p o r a t i o n s which has a c t e d as a spur
to e n t e r p r i s e and i n n o v a t i o n , but which has a l s o l e d t o an
independent and s e p a r a t e approach on some matters on which i t
would have been an advantage t o have a more c o - o r d i n a t e d
approach.
The Committee l a i d g r e a t s t r e s s on the p r i n c i p l e
that no o r g a n i s a t i o n should be made l a r g e r than n e c e s s a r y t o
secure the major economies of s c a l e and s p e c i a l i s a t i o n and on
the v i r t u e o f having more than one management group.
Nevertheless,
they concluded t h a t more c o - o r d i n a t i o n was needed than c o u l d be
achieved by c o - o p e r a t i o n between the two s e p a r a t e C o r p o r a t i o n s
and they recommended the c r e a t i o n of a H o l d i n g s Board w i t h f u l l
financial r e s p o n s i b i l i t y f o r and e x t e n s i v e powers of c o n t r o l o v e r
the o p e r a t i o n s of the two C o r p o r a t i o n s .
7
18. In c o n s i d e r i n g t h i s recommendation, i t i s e s s e n t i a l f i r s t
to assess the s t r e n g t h of the c a s e f o r c l o s e r i n t e g r a t i o n .
The
Committee d i s c u s s e d a number of areas i n which common a c t i o n
might have brought c o n s i d e r a b l e g a i n s .
They r e f e r r e d t o the
large investment of the C o r p o r a t i o n s i n s e p a r a t e computer
systems u s i n g e n t i r e l y d i f f e r e n t equipment and i n s e p a r a t e
f r e i g h t t e r m i n a l s and they concluded t h a t , under the p r e s e n t
arrangements, t h e r e " w a s a b u i l t - i n b i a s towards investment in
separate p r o j e c t s of these k i n d s .
They thought i t important
to ensure i n f u t u r e t h a t the case f o r common f a c i l i t i e s , even
if they were n o t so c o m p l e t e l y s u i t e d t o the purposes o f one
Corporation, should be f u l l y w e i g h e d .
19. The Committee a c c e p t e d that the i n d i s c r i m i n a t e amalgamation
of e n g i n e e r i n g u n i t s might s e r v e no p u r p o s e , but c o n s i d e r e d t h a t
BOAC and BEA might not be taking i n as much of each o t h e r ' s work
as i s d e s i r a b l e or might become d e s i r a b l e i n f u t u r e .
They,
t h e r e f o r e , recommended continuous and e f f e c t i v e study from an
inside v i e w p o i n t .
The Committee d i d , however, l a y p a r t i c u l a r
stress on the need f o r c l o s e c o - o p e r a t i o n i n the e n g i n e e r i n g
study o f f u t u r e a i r c r a f t and f l i g h t system r e q u i r e m e n t s .
Two
independent p r o j e c t groups w i l l each tend t o think s o l e l y o f
the r o u t e s t r u c t u r e o f i t s own a i r l i n e , i n s t e a d of c o n s i d e r i n g
what balance of f u t u r e a i r c r a f t types would c r e a t e o p t i m a l
conditions f o r the two a i r l i n e s j o i n t l y .
Consequently, the
best s o l u t i o n f o r the p u b l i c s e c t o r ' a s a whole w i l l n e v e r be
sought. The Committee, t h e r e f o r e , recommended that p r o j e c t
engineering should be p r o v i d e d as a common s e r v i c e f o r the
public s e c t o r a i r l i n e s .
Other f i e l d s i n which the Committee
thought t h a t the advantages of g r e a t e r c o - o p e r a t i o n d e s e r v e d
close examination i n c l u d e d i n d u s t r i a l r e l a t i o n s , c a t e r i n g ,
transport, t r a i n i n g , a d v e r t i s i n g , the handling of i n c l u s i v e
tour c h a r t e r s , and h o t e l i n v e s t m e n t .
20. I t was, however, i n t h e c r u c i a l a r e a of marketing that the
Committee b e l i e v e d the g r e a t e s t weakness i n the p r e s e n t
organisation was t o be found.
They c o n s i d e r e d that t h e p u b l i c
sector a i r l i n e s should be o r g a n i s e d s o as t o secure t h e maximum
total net g a i n , and t h a t i n t e r - c o n t i n e n t a l and European t r a f f i c
should be c o n s i d e r e d t o g e t h e r f o r t h i s p u r p o s e .
So l o n g as each
a i r l i n e c u l t i v a t e s i t s s e p a r a t e market, so as t o o p t i m i s e i t s
own i n t e r e s t , the b e s t o v e r a l l r e s u l t may not be a c h i e v e d .
The
Committee r e c o g n i s e d t h a t f u l l c o n s i d e r a t i o n of t h i s i s s u e
involved d i s c u s s i o n about the a l l o c a t i o n o f r o u t e s between BEA
and BOAC, about the use o f the same a i r c r a f t on A t l a n t i c and
European f l i g h t s and about r e l a t i o n s w i t h o t h e r European a i r l i n e s
all matters o f c o n s i d e r a b l e c o m p l e x i t y on which BOAC and BEA
held d i v e r g e n t v i e w s .
21. The Government a c c e p t t h a t t h e s e a r e powerful arguments
calling f o r some change i n the p r e s e n t o r g a n i s a t i o n t o p r o v i d e
for c l o s e r c o - o r d i n a t i o n .
To h e l p them i n d e c i d i n g what form
that change should t a k e , the Board o f Trade undertook f u r t h e r
studies i n t e n d e d p r i m a r i l y t o throw more l i g h t on the e x t e n t o f
the p o s s i b l e advantages from c e n t r a l i s e d decision-making i n the
key areas o f marketing through t r a v e l , and o f f l e e t U t i l i s a t i o n .
The two C o r p o r a t i o n s c o - o p e r a t e d f u l l y i n t h e s e s t u d i e s though
their v i e w s d i f f e r e d on c e r t a i n i s s u e s .
The s t a r t i n g p o i n t f o r
these s t u d i e s was t h e same as t h a t adopted by the Committee - t h a t
the o b j e c t must be t o secure the b e s t a g g r e g a t e r e s u l t .
For
example, the c h o i c e o f a i r c r a f t f o r use on any s i n g l e r o u t e must
­
depend l a r g e l y on the c h o i c e made f o r use on o t h e r r o u t e s w i t h i n
the same system and the p o t e n t i a l market on any p a r t i c u l a r r o u t e
depends p a r t l y on t h e market a v a i l a b l e on o t h e r r o u t e s which
connect w i t h i t .
The fundamental q u e s t i o n t o be answered was
whether t h e b e s t r e s u l t s f o r the p u b l i c s e c t o r a i r l i n e s as a whole
could be a c h i e v e d by t r e a t i n g them as a s i n g l e system, o r as two
separate systems.
22. The s t u d i e s s u g g e s t e d that s i g n i f i c a n t g a i n s i n a i r c r a f t
u t i l i s a t i o n , and thus l o w e r c o s t s , might be e x p e c t e d i n the l o n g e r
term i f t h e s c h e d u l i n g o f a i r c r a f t were planned t o match a s i n g l e
integrated r o u t e network r a t h e r than two s e p a r a t e systems.
The
saving would a r i s e t o the e x t e n t t h a t f e w e r a i r c r a f t were needed
to do the same amount o f work.
The o p p o r t u n i t y i s p r o v i d e d p a r t l y
by the f a c t t h a t , a l t h o u g h the a v e r a g e s t a g e l e n g t h on BOACs
routes i s much g r e a t e r than on BEA' s, each c o r p o r a t i o n o p e r a t e s on
some r o u t e s where t h e s t a g e l e n g t h s a r e s i m i l a r o r a r e more
typical of the o t h e r ' s .
Thus some o f BEA's r o u t e s might be
served as w e l l o r b e t t e r by BOACs l o n g - h a u l a i r c r a f t and some o f
BOACs r o u t e s by BEA's medium-haul a i r c r a f t .
I t can now be economic
to use l o n g - h a u l a i r c r a f t , which a r e u s u a l l y a l s o l a r g e r a i r c r a f t ,
on r e l a t i v e l y short s t a g e l e n g t h s where t r a f f i c d e n s i t i e s a r e
s u f f i c i e n t l y h i g h , f o r a t l e a s t p a r t o f t h e i r working week.
This i s confirmed by o b s e r v a t i o n o f t h e a c t i v i t i e s o f many f o r e i g n
airlines which o p e r a t e o v e r both long and short s t a g e l e n g t h s .
In the short term the g a i n s from the i n t e g r a t e d s c h e d u l i n g o f
BOACs and BEA' s f l e e t s a r e l i k e l y t o be r e l a t i v e l y s m a l l but i n
the longer term, as the Committee s u g g e s t e d , g r e a t e r g a i n s should
accrue w i t h the procurement o f a i r c r a f t t o match the g r e a t e r
scheduling f l e x i b i l i t y t h a t an i n t e g r a t e d r o u t e s t r u c t u r e p e r m i t s .
23. The use o f l o n g - h a u l a i r c r a f t o v e r s h o r t s t a g e s where t r a f f i c
is dense makes i t p o s s i b l e t o seek the marketing g a i n s t h a t can be
expected t o a r i s e from o f f e r i n g through t r a v e l on r o u t e s j o i n i n g
points t h a t a r e at p r e s e n t s e r v e d s e p a r a t e l y by t h e two
Corporations.
T h i s i n v o l v e s not m e r e l y a u n i f i e d s e l l i n g e f f o r t
for connecting s e r v i c e s , but the o f f e r o f through t r a v e l on the
same a i r c r a f t , f o r both passengers and f r e i g h t , e s p e c i a l l y
between North America and c o n t i n e n t a l Europe.
Since the f a r e
for the t r a n s a t l a n t i c l e g o f a through j o u r n e y i s much g r e a t e r
than on the European l e g , a r e l a t i v e l y s m a l l i n c r e a s e i n t h e
number o f through passengers would more than o f f s e t t h e l o s s o f
a larger number o f passengers on the European s e c t o r .
There are
two aspects t o t h i s .
F i r s t , through c o n n e c t i o n s by s i n g l e
British a i r c r a f t c o u l d compete f o r the l a r g e amount o f t r a f f i c
which at present stops en r o u t e between North American and
European c i t i e s .
T h i s i s a market that i s c u r r e n t l y h a r d l y
served at a l l by B r i t i s h c a r r i e r s , because of the r i g i d g e o g r a p h i c a l
division o f f u n c t i o n between the two C o r p o r a t i o n s , which has
deprived the B r i t i s h c i v i l a v i a t i o n i n d u s t r y of many o f t h e
advantages of our l o c a t i o n a s t r i d e t h e . s h o r t g r e a t c i r c l e r o u t e s
between g r e a t c e n t r e s o f p o p u l a t i o n i n North America and Western
Europe. Secondly, although c o n n e c t i n g s e r v i c e s through London
or another point i n the U n i t e d Kingdom e v e n by the same a i r c r a f t
Wuld g e n e r a l l y be l e s s a t t r a c t i v e than d i r e c t f l i g h t s o f f e r e d by
other a i r l i n e s a t c o n v e n i e n t t i m e s , t h e t o t a l market i s so l a r g e
that the small share o f i t which might be captured where the British c a r r i e r ' s t i m i n g was more c o n v e n i e n t - o r a B r i t i s h f l i g h t vas p r e f e r r e d f o r some o t h e r reason - would s t i l l r e p r e s e n t a further s u b s t a n t i a l g a i n . 9
24. The s i z e i n t o t a l of the p o s s i b l e g a i n s can be gauged by t h e
t o t a l v a l u e o f a i r t r a f f i c i n 1968 between the c o n t i n e n t of
Europe and the U n i t e d S t a t e s - £250 m i l l i o n f o r passengers and
some £70 m i l l i o n f o r f r e i g h t - f i g u r e s which should be a t l e a s t
twice as g r e a t by 1973. The winning o f o n l y a modestly i n c r e a s e d
share o f t h i s would be of g r e a t v a l u e p a r t i c u l a r l y at a time when
BOAC, w i t h the i n t r o d u c t i o n o f t h e i r Jumbo j e t s , w i l l have
g r e a t l y i n c r e a s e d c a p a c i t y , and when an i n c r e a s i n g p r o p o r t i o n o f
t r a f f i c from the U n i t e d S t a t e s i s c h o o s i n g t o t r a v e l through
gateways o t h e r than New York, at which t h e U n i t e d Kingdom has
traffic rights.
As t i m e goes on, the t r a f f i c p o t e n t i a l v i a the
United Kingdom on any p a r t i c u l a r r o u t e may grow more s l o w l y than
total t r a f f i c on t h a t r o u t e , or even d e c l i n e , w i t h the p r o g r e s s i v e
introduction of f o r e i g n non-stop s e r v i c e s between more and more
city p a i r s .
N e v e r t h e l e s s , the p o t e n t i a l f o r B r i t i s h p a r t i c i p a t i o n
in the market:as a whole can be e x p e c t e d t o grow w i t h the market,
as t h i s j u s t i f i e s the p r o g r e s s i v e opening up of connections
between more c i t y p a i r s .
25. I t was beyond t h e purpose o f the s t u d i e s i n i t i a t e d by t h e
Board o f Trade t o attempt t o d e c i d e which r o u t e s might be most
appropriate at t h i s s t a g e f o r through o p e r a t o r s .
A full
i n v e s t i g a t i o n and d e t a i l e d planning of p a r t i c u l a r o p e r a t i o n s
could, be done o n l y by the a i r l i n e s o v e r a p e r i o d .
Nevertheless
preliminary e x a m i n a t i o n by the a i r l i n e s o f a sample o f p o s s i b l e
routes confirmed t h a t a s u b s t a n t i a l untapped market e x i s t e d from
which the revenue would be almost e n t i r e l y i n f o r e i g n c u r r e n c y .
It also s u g g e s t e d t h a t , even a l l o w i n g f o r any a d d i t i o n a l o p e r a t i n g
costs on the s h o r t s e c t o r c e r t a i n o f t h e s e r o u t e s could be
operated p r o f i t a b l y .
BEA emphasised c e r t a i n d i s a d v a n t a g e s t h a t
might r e s u l t from any e x t e n s i v e r e - a d j u s t m e n t o f r o u t e s ­
p a r t i c u l a r l y the i n c r e a s e d r i s k o f l a t e d e p a r t u r e s from the U.K.
where the a i r c r a f t began t h e i r j o u r n e y s i n North America and some
possible l o s s o f the advantages a r i s i n g from t h e i r s p e c i a l i s a t i o n
in the t e c h n i q u e s of marketing and p a s s e n g e r handling a p p r o p r i a t e
to the v e r y l a r g e numbers who t r a v e l on s h o r t r o u t e s .
The
Government, however, c o n s i d e r t h a t t h e r e a r e w o r t h w h i l e g a i n s t o
be had from planning and o p e r a t i n g the r o u t e networks o f the two
corporations i n a more i n t e g r a t e d manner.
10 26. A g a i n s t t h i s background, the Government have c a r e f u l l y
considered the- Committee's recommendations f o r the f u t u r e
structure o f the p u b l i c s e c t o r and have c o n s u l t e d the C o r p o r a t i o n s
and o t h e r i n t e r e s t e d o r g a n i s a t i o n s .
The Committee concluded
that t h e y c o u l d not support £in o u t r i g h t merger and t h a t any
form of j o i n t A i r l i n e Committee would not be s u f f i c i e n t l y
strong and e f f e c t i v e .
They recommended the e s t a b l i s h m e n t
of a Holdings Board-which would have o v e r a l l f i n a n c i a l
r e s p o n s i b i l i t y f o r a l l the d e c i s i o n s of the p u b l i c s e c t o r and
would be " i n e x a c t l y the same p o s i t i o n as a major Holdings Board
in the p r i v a t e s e c t o r " .
At the same t i m e , they e x p r e s s e d the
view t h a t the Holdings Board "should hold the r e i n s l i g h t l y "
and recommended v a r i o u s s a f e g u a r d s , i n c l u d i n g a c a r e f u l b a l a n c e
in the membership of the Holdings Board, d e s i g n e d t o p r e s e r v e
the s t a t u s and i d e n t i t i e s o f the C o r p o r a t i o n s (and o f t h e i r
Chairmen) and t o ensure t h a t t h e case f o r any measure o f
c e n t r a l i s a t i o n was " p r o v e d t o a Board, where t h e m a j o r i t y o f
members w e r e ' a s s o c i a t e d w i t h p a r t i c u l a r a i r l i n e s " .
?//. Both C o r p o r a t i o n s have c r i t i c i s e d t h i s p r o p o s a l , i n the
form i n which i t was put f o r w a r d , on the grounds t h a t i t would
be l i k e l y t o i n t r o d u c e a double l a y e r o f d e c i s i o n - m a k i n g and so
greatly t o c o m p l i c a t e and p r e j u d i c e the commercial o p e r a t i o n s of
the a i r l i n e .
S i m i l a r views were e x p r e s s e d by a wide range of
other o r g a n i s a t i o n s and i n d i v i d u a l s .
The Chairmen o f t h e
Corporations might s t i l l appear t o be the
a i r l i n e bosses" ­
as the Committee proposed - but t h e y would be s u b j e c t t o the
authority o f the Holdings Board.
There would be a danger of
internal t e n s i o n s which might be d i f f i c u l t to r e s o l v e .
The
Government a c c e p t the f o r c e o f t h e s e o b j e c t i o n s .
The C o r p o r a t i o n s
have, i n the meantime, g r e a t l y s t r e n g t h e n e d the A i r l i n e Chairmen's
Committee, which was e s t a b l i s h e d i n 1 946, and argue t h a t the
major b e n e f i t s t o be gained, from c l o s e r working c o u l d be a c h i e v e d
through t h i s arrangement.
I n the Government's v i e w , however, i t
would be u n r e a l i s t i c t o e x p e c t the f u l l p o t e n t i a l gains from
closer i n t e g r a t i o n to be a c h i e v e d i f they depended s i m p l y on
co-operation between two s e p a r a t e C o r p o r a t i o n s , each w i t h i t s
own i n t e r e s t s t o p r o t e c t and each charged w i t h t h e duty o f
earning i t s own r e t u r n on c a p i t a l .
28. In the l i g h t of t h e s e c o n s i d e r a t i o n s the Government have
considered, whether i t would be advantageous t o proceed d i r e c t l y
to the merger of BOAC and BEA i n t o a s i n g l e a i r l i n e . The White
Paper p u b l i s h e d by the p r e v i o u s a d m i n i s t r a t i o n i n 1 963 on the
Financial Problems of BOAC s t a t e d t h a t the arguments f o r and
against such a course w e r e , a t t h a t t i m e , f i n e l y b a l a n c e d .
The
evidence a v a i l a b l e , p a r t i c u l a r l y on changes i n the market and i n
aircraft performance, s u g g e s t s t h a t the balance has s h i f t e d
towards i n t e g r a t i o n .
The Government are w e l l aware, however, of
the d i f f i c u l t y t h a t i s i n h e r e n t i n s t u d i e s of t h i s k i n d , of
being c e r t a i n t h a t a l l the f a c t o r s have been c o r r e c t l y a s s e s s e d
and of e s t i m a t i n g w i t h complete c o n f i d e n c e the gains t h a t might
be achieved.
The Government share the v i e w o f the Committee
that the pace and p r e c i s e d e g r e e of i n t e g r a t i o n 'are b e s t judged
by those working w i t h i n the i n d u s t r y and having r e s p o n s i b i l i t y
for i t s performance.
While i t i s c l e a r t h a t the r e a l i s a t i o n of
the f u l l b e n e f i t s must depend on c e n t r a l i s e d d e c i s i o n s w i t h i n
the public s e c t o r on major planning and s t r a t e g i c i s s u e s , the
Government share the Committee's r e l u c t a n c e t o s a c r i f i c e the
operating i d e n t i t i e s o f the two C o r p o r a t i o n s .
11
29. The e f f e c t i v e c h o i c e l i e s between two c o u r s e s .
The f i r s t
is to l e a v e BOAC and BEA t o c o n t i n u e as at p r e s e n t , but to
impose on them the duty t o seek t h e g r e a t e s t a g g r e g a t e b e n e f i t
for the p u b l i c s e c t o r as a whole and t o s e t up j o i n t
i n s t i t u t i o n s f o r t h i s purpose.
I t would have t o be r e c o g n i s e d
that t h i s c o u l d mean one of the two C o r p o r a t i o n s a c h i e v i n g
poorer r e s u l t s than i t might have a c h i e v e d i n i s o l a t i o n , i n
order t h a t the o t h e r might a c h i e v e b e t t e r .
The second course
is to e s t a b l i s h a s i n g l e Airways Board, charged w i t h the task
of maximising the a g g r e g a t e b e n e f i t f o r the p u b l i c s e c t o r , w i t h
s u b s t a n t i a l l y the same powers as were s u g g e s t e d by the Committee,
but without the o r g a n i s a t i o n a l r e s t r a i n t s which have been the
subject o f p a r t i c u l a r c r i t i c i s m .
I t i s t h i s Board t h a t would
take a l l the d e c i s i o n s r e q u i r e d t o s e c u r e t h a t the two a i r l i n e s '
f l e e t s and r o u t e s were planned and marketed, t o the b e s t o v e r a l l
advantage;
i t would be made c l e a r that i t had complete a u t h o r i t y
and r e s p o n s i b i l i t y and would n o t , t h e r e f o r e , be a c t i n g as an
additional l a y e r of d e c i s i o n - m a k i n g .
I t would i n c l u d e the
Chairmen of the two C o r p o r a t i o n s , and would be r e s p o n s i b l e f o r
appointing the members o f t h e boards o f the C o r p o r a t i o n s .
The
Airways Board would d e c i d e , i n the l i g h t of d i r e c t knowledge and
experience, how f a r and how f a s t i t would be j u s t i f i e d i n
i n t e g r a t i n g the a c t i v i t i e s o f the two a i r l i n e s .
I t would be
in a p o s i t i o n to make changes q u i c k l y t o meet changing circurn­
stances.
I t would be r e s p o n s i b l e t o t h e Board, o f Trade f o r
financial c o n t r o l of the two a i r l i n e s and f o r the planning of
their f u t u r e i n v e s t m e n t s .
The Airways Board would a l s o be in
the best p o s i t i o n to undertake the r e o r g a n i s a t i o n of secondary
services i n the p u b l i c s e c t o r (which a r e c o n s i d e r e d l a t e r
in this s e c t i o n ) and o t h e r s u b s i d i a r y a c t i v i t i e s .
30. The Government a c c e p t t h a t t h e f i r s t course m i g h t , w i t h
determination, be made t o y i e l d some w o r t h w h i l e r e s u l t s but are
s a t i s f i e d t h a t the c r e a t i o n o f a s i n g l e Board would o f f e r the
best assurance t h a t n e c e s s a r y changes were made when and as
quickly as they were needed.
L e g i s l a t i o n w i l l t h e r e f o r e be
introduced t o s e t up an Airways Board charged, w i t h a c h i e v i n g the
optimum a g g r e g a t e r e s u l t s oy the C o r p o r a t i o n s .
BOAC and BEA
will r e t a i n t h e i r i n d i v i d u a l i d e n t i t i e s as o p e r a t i n g a i r l i n e s ,
but w i l l be s u b j e c t t o the s t r a t e g i c c o n t r o l o f the Airways
Board. Although the change i n e v i t a b l y i n v o l v e s some l o s s o f
independence and w i l l be unwelcome to some, the Government are
convinced t h a t both a i r l i n e s w i l l emerge s t r o n g e r and b e t t e r a b l e
to compete a g a i n s t t h e i r r i v a l s , most of which run both s h o r t - h a u l
and l o n g - h a u l o p e r a t i o n s .
The new o r g a n i s a t i o n a l s t r u c t u r e
should p r o v i d e g r e a t e r c a r e e r o p p o r t u n i t i e s f o r those whose s k i l l
and work has c o n t r i b u t e d t o the past performance of both
Corporations.
The p u b l i c s e c t o r , and those employed i n i t ,
should b e n e f i t from the g r e a t e r scope f o r the movement of
management and s t a f f between both the two a i r l i n e s and the
central o r g a n i s a t i o n .
Ilhe^independent
sector
31.
The Government a g r e e w i t h the Committee's v i e w that t h e r e
a p l a c e i n the i n d u s t r y f o r both p u b l i c l y - o w n e d and p r i v a t e l y ­
owned a i r l i n e s and t h a t t h e r e may be a r o l e f o r an a i r l i n e group
-f mixed ownership s p e c i a l i s i n g i n the p r o v i s i o n of r e g i o n a l a i r
services.
They a g r e e a l s o t h a t t h e r e should be no attempt to
lay down, i n q u a n t i t a t i v e t e r m s , a hard and f a s t share f o r each
sector.
l s
0
1 2
32. Competition and r i v a l r y among a i r l i n e s can, as the Report
points o u t , make an important c o n t r i b u t i o n to a i r l i n e e f f i c i e n c y ,
e s p e c i a l l y by a l l o w i n g the consumer t o e x e r c i s e freedom o f
choice.
There a r e , of c o u r s e , p r a c t i c a l l i m i t a t i o n s t o the
pursuit of these advantagesThe e x c e s s i v e f r a g m e n t a t i o n o f
effort must be a v o i d e d , and the scope f o r d i r e c t : c o m p e t i t i o n
on p a r t i c u l a r r o u t e s needs to be judged a g a i n s t the volume o f
t r a f f i c to be c a r r i e d .
Moreover, as t h e " R e p o r t r e c o g n i s e s ,
our o p p o r t u n i t i e s t o d e s i g n a t e . a second B r i t i s h c a r r i e r a r e '
l i k e l y t o be limited, by the nature- o f our b i l a t e r a l a r r a n g e ­
liients.
N o n e t h e l e s s , the Government a c c e p t that the b e n e f i t s
of competition should be a c t i v e l y p u r s u e d ' w h e r e v e r the p r a c t i c a l
considerations a l l o w .
33. One o f the more important tasks o f the C i v i l A v i a t i o n
Authority w i l l be t o keep under r e v i e w the p o s s i b i l i t y of
licensing a second, c a r r i e r on a scheduled s e r v i c e r o u t e where
this might be e x p e c t e d t o i n c r e a s e the B r i t i s h share of the
market or b r i n g o t h e r b e n e f i t s .
I n c o n s i d e r i n g any a p p l i c a t i o n s
the A u t h o r i t y w i l l need t o s a t i s f y i t s e l f that t h r e e c o n d i t i o n s ­
are met.
F i r s t , the a p p l i c a n t a i r l i n e should have the s k i l l and
resources needed t o mount an e f f e c t i v e s e r v i c e and. make i t v i a b l e
within a r e a s o n a b l e p e r i o d .
S e c o n d l y , the d e s i g n a t i o n o f an
independent a i r l i n e on a r o u t e a l r e a d y served, by BOAC or BEA
should not unduly i m p a i r the C o r p o r a t i o n s . s e r v i c e s , o r t h e i r
capacity t o meet the f i n a n c i a l o b l i g a t i o n s l a i d upon them by the
Government.
T h i r d l y , the net i n c r e a s e i n t r a f f i c g a i n e d by the
two c a r r i e r s t o g e t h e r and the r e s u l t i n g b e n e f i t s t o consumers
and to the b a l a n c e o f payments should more than o f f s e t any
diseconomies.
These c r i t e r i a seem i n the s h o r t term more l i k e l y
to be s a t i s f i e d on some of the t r a n s - a t l a i n t i c r o u t e s t o the
United S t a t e s than e l s e w h e r e .
The U n i t e d Kingdom's a i r s e r v i c e s
agreement w i t h the U n i t e d S t a t e s a l l o w s e i t h e r p a r t y t o
designate more than one c a r r i e r .
1
34- The Government a l s o agree b r o a d l y w i t h the C o m m i t i e e ' s views
about c o m p e t i t i o n on domestic r o u t e s .
There a r e a l r e a d y two
carriers l i c e n s e d t o s e r v e the trunk r o u t e s between London and Belfast, Edinburgh and Glasgow.
I n t h e l o n g e r term, as the
volume of t r a f f i c i n c r e a s e s , t h e r e may be room t o l i c e n s e a second
carrier on o t h e r primary r o u t e s .
But the main need f o r the
immediate f u t u r e i s t o c o n s o l i d a t e the p o s i t i o n of the second
carrier on those r o u t e s where competing s e r v i c e s a l r e a d y e x i s t ,
vath a view to the e v e n t u a l removal o f l i m i t a t i o n s on the
frequency o f i t s s e r v i c e s .
35. The independent a i r l i n e s . h a v e p r o g r e s s i v e l y i n c r e a s e d
their share of a r a p i d l y growing a i r t r a n s p o r t market, mainly by
developing i n c l u s i v e t o u r and o t h e r c h a r t e r s e r v i c e s .
This
evolution has b e e n encouraged by v a r i o u s forms o f v e r t i c a l
integration between a i r l i n e s and o r g a n i s e r s of group t r a v e l ;
in
this way economies of s c a l e and of s p e c i a l i s a t i o n have been
gained. The Committee f o r e c a s t a c o n t i n u i n g expansion i n these
sectors, e s p e c i a l l y f o r l o n g - h a u l s e r v i c e s .
Freight charter
services w i l l a l s o become i n c r e a s i n g l y i m p o r t a n t .
The Government
foresee a promising f u t u r e f o r a i r l i n e s s p e c i a l i s i n g i n these
sectors, p r o v i d e d t h a t they have the n e c e s s a r y f i n a n c i a l
strength and m a n a g e r i a l competence.
36. The changing n a t u r e o f the market, t o which the Report draws attention, i m p l i e s a c o n t i n u i n g e v o l u t i o n i n the c h a r a c t e r of air s e r v i c e s and a p r o g r e s s i v e change i n the b a l a n c e between scheduled and" c h a r t e r s e r v i c e s on i n t e r n a t i o n a l r o u t e s .
The
main scheduled' c a r r i e r s w i l l engage i n c r e a s i n g l y i n c h a r t e r operations, e i t h e r d i r e c t l y or through s u b s i d i a r i e s .
Conversely,
the scope f o r s p e c i a l i s t non-scheduled c a r r i e r s w i l l i n c r e a s e through changes i n p r i c i n g p o l i c i e s and i n the c h a r a c t e r of services needed on p a r t i c u l a r r o u t e s . 37. One of the ways i n which the s t r u c t u r e o f a l l s e c t o r s o f
the i n d u s t r y may be s t r e n g t h e n e d i s through m e r g e r s .
The C i v i l
Aviation A u t h o r i t y w i l l encourage or f a c i l i t a t e mergers t h a t
seem l i k e l y to s t r e n g t h e n the i n d u s t r y i n p u r s u i t o f the g e n e r a l
objectives w i t h o u t unduly i m p a i r i n g c o m p e t i t i o n .
The f o r m a l
statement o f p o l i c y w i l l p r o v i d e f o r the A u t h o r i t y to a c t
within the terms o f the G o v e r n m e n t s g e n e r a l p o l i c y on mergers and
to consult the Board of Trade on t h o s e proposed mergers which
fall w i t h i n the p r o v i s i o n s of the Monopolies and Mergers A c t , 1 965.
A "second f o r c e "
airline
38. The Report recommends t h a t the p r i v a t e s e c t o r of the i n d u s t r y
should be encouraged t o form, by the amalgamation o f two or more .
existing independent c a r r i e r s , a "second f o r c e " a i r l i n e t h a t
would f i l l the r o l e o f second f l a g c a r r i e r on i n t e r n a t i o n a l
routes.
I t i s t o t h i s new a i r l i n e t h a t the C i v i l A v i a t i o n
Authority would g i v e p r e f e r e n c e i n a l l o c a t i n g such l i c e n c e s f o r
international s c h e d u l e d s e r v i c e s as a r e a s s i g n e d t o the independent
sector of the i n d u s t r y .
39. The Government would welcome the emergence of such a new
airline i f i t r e s u l t e d i n the s t r e n g t h e n i n g o f the i n d u s t r y as
a whole and c o n t r i b u t e d t o the r e a l i s a t i o n of the G o v e r n m e n t s
policy o b j e c t i v e s .
They agree, w i t h the Committee s v i e w t h a t
the establishment o f a "second f o r c e " a i r l i n e w i l l almost
certainly take some t i m e . A new a i r l i n e o f t h i s kind must
evolve p r o g r e s s i v e l y , p r o v i n g i t s e l f a t each s t a g e .
It is
for the a i r l i n e s t o d e c i d e , i n the e x e r c i s e o f t h e i r commercial
judgment and i n the l i g h t o f market f o r c e s , whether and i n what
ways to come t o g e t h e r .
I t w i l l be f o r t h e C i v i l A v i a t i o n
Authority to judge whether any combination of a i r l i n e s w i l l
befitted f o r a p a r t i c u l a r r o l e , and t o s c r u t i n i s e each r o u t e
application on i t s m e r i t s w i t h i n the framework of t h e G o v e r n m e n t s
statement of o b j e c t i v e s and p o l i c y .
1
40. The Committee made an e s t i m a t e o f the s c a l e o f o p e r a t i o n s
that a "second f o r c e " a i r l i n e might need t o a c h i e v e by about
1975 , i f i t was t o have a r e a s o n a b l e p r o s p e c t of l o n g - t e r m
viability i n t h e h i g h l y c o m p e t i t i v e c o n d i t i o n s t h a t i t would
face. This e s t i m a t e was based on assumptions about the t y p e s o f
aircraft t h a t would need t o be employed and the numbers o f each
type that i t would be economic to o p e r a t e .
A v a r i e t y o f such
estimates can be made, depending on d i f f e r e n t assumptions about
the future s i z e and c h a r a c t e r o f the market, the mix o f r o u t e s
and of a c t i v i t i e s i n which the a i r l i n e would e n g a g e , the t y p e s
of a i r c r a f t that would be r e q u i r e d and a host o f o t h e r f a c t o r s .
It does not f o l l o w t h a t the s c a l e of o p e r a t i o n s needed t o
Provide employment f o r a f l e e t of g i v e n s i z e must n e c e s s a r i l y be
contributed w h o l l y , o r i n any s p e c i f i e d p r o p o r t i o n , by scheduled
services. Such e v i d e n c e as t h e r e i s s u g g e s t s that the v i a b i l i t y
of an a i r l i n e depends on a number of f a c t o r s , of which s i z e i s
lot n e c e s s a r i l y t h e most i m p o r t a n t .
C e r t a i n l y t h e r e i s no
uniquely " r i g h t " s i z e or p a t t e r n o f s e r v i c e s t h a t a "second
force" a i r l i n e would need t o a c h i e v e i n o r d e r to be s u c c e s s f u l ,
*
41, The Government cannot accept that t h e f o r m a t i o n of a
"second, f o r c e " a i r l i n e should be made c o n d i t i o n a l upon the
transfer to i t of a s i g n i f i c a n t p a r t of the A i r C o r p o r a t i o n s '
route networks , as d i s t i n c t from double d e s i g n a t i o n i n a p p r o ­
priate c a s e s .
The Committee emphasised that t e r r i t o r i a l
concessions must be l i m i t e d .
Some r e a l l o c a t i o n o r readjustment
of r o u t e s , which.might i n c l u d e some exchange of r o u t e s , would not
be ruled out where, in the judgment, of t h e C i v i l A v i a t i o n A u t h o r i t y ,
this would b e n e f i t the i n t e r n a t i o n a l c o m p e t i t i v e n e s s of the i n d u s t r y
as a whole and the balance of payments.
Such changes i n r o u t e
patterns must be c o n s i d e r e d i n the c o n t e x t of the o v e r a l l c o n t r i ­
bution o f the i n d u s t r y t o t h e o b j e c t i v e s of c i v i l a v i a t i o n p o l i c y .
These are matters t o be determined by t h e A u t h o r i t y i n the l i g h t
of d e t a i l e d study and argument and the Government do not intend
to impose a p r e c o n c e i v e d r e a l l o c a t i o n of r o u t e s on any a i r l i n e ,
which has borne the c o s t o f d e v e l o p i n g t h e r o u t e s and i s s e r v i n g
them w e l l .
42. The Report proposes t h a t the Board c o n t r o l l i n g the p u b l i c
sector should secure i t s own stake i n the "second f o r c e " a i r l i n e
through share p a r t i c i p a t i o n or c o n v e r t i b l e loan s t o c k .
The
Government r e c o g n i s e c e r t a i n a t t r a c t i o n s i n t h i s p r o p o s a l but
consider t h a t on balance i t would make i t more d i f f i c u l t to
achieve the f u l l b e n e f i t s o f c o m p e t i t i o n , and t h a t i t would be
inappropriate t o use p u b l i c funds i n t h i s way.
There a r e ample
precedents f o r c o - o p e r a t i o n between a i r l i n e s , where t h i s would be
in the n a t i o n a l i n t e r e s t , w i t h o u t one having a s t a k e i n the o t h e r ;
nor is such a l i n k n e c e s s a r y i n o r d e r t o secure e f f e c t i v e communi­
cation on p o l i c y matters between the "second f o r c e " a i r l i n e and
the Board o f T r a d e .
Regional a i r
services
43. The Report makes an important d i s t i n c t i o n between the primary and secondary networks o f scheduled a i r s e r v i c e s .
The primary network, which comprises the g r e a t bulk o f i n t e r n a t i o n a l r o u t e s together w i t h the domestic trunk r o u t e s , can be d i s t i n g u i s h e d by ;the l a r g e r volume of t r a f f i c , which i s r e f l e c t e d in the i n c r e a s i n g
use of the l a r g e r j e t a i r c r a f t .
The primary network i n c l u d e s the
routes between London and B e l f a s t , Edinburgh and Glasgow and o t h e r
routes c o n n e c t i n g the main i n t e r n a t i o n a l g a t e w a y s .
The secondary
network comprises mainly domestic s e r v i c e s t o g e t h e r w i t h c e r t a i n
related s e r v i c e s mainly l i n k i n g r e g i o n a l a i r p o r t s w i t h the n e a r e r
parts of C o n t i n e n t a l Europe.
This network i n g e n e r a l r e q u i r e s
the use o f s m a l l e r a i r c r a f t , of types t h a t are d e c r e a s i n g l y u s e f u l
in other s e c t o r s of the market, and t o a growing e x t e n t those a i r ­
lines which engage i n both primary and secondary s e r v i c e s need to
maintain s e p a r a t e a i r c r a f t f l e e t s and o r g a n i s a t i o n s f o r the two
purposes.
In a d d i t i o n t h e r e a r e s e r v i c e s of a more l o c a l c h a r a c t e r ,
^ploying v e r y small a i r c r a f t o f l i m i t e d range and c a p a c i t y , which
I
% conveniently be d e s c r i b e d as t h i r d l e v e l
services,
jy Domestic a i r s e r v i c e s w i t h i n the United Kingdom have a l o n g
hstory of
i n s t a b i l i t y r e s u l t i n g from high c o s t s and inadequate
returns.
This i s a t t r i b u t a b l e
* shortness of
to a number of
average s t a g e l e n g t h s ,
CONFIDENTIAL
factors,
including
the low volume o f
traffic
on'many r o u t e s , d i f f i c u l t i e s o f s e c u r i n g adequate a i r c r a f t
u t i l i s a t i o n and i n c r e a s i n g c o m p e t i t i o n from s u r f a c e t r a n s p o r t .
Many o p e r a t o r s have found i t i m p r a c t i c a l t o run a d o m e s t i c
scheduled s e r v i c e network as a s e l f - s u p p o r t i n g business and
have c r o s s - s u b s i d i s e d t h e i r domestic o p e r a t i o n s from t h e i r
earnings on i n c l u s i v e t o u r c h a r t e r s e r v i c e s .
Since the Report
appeared, the c o n t i n u i n g d i f f i c u l t i e s f a c e d by o p e r a t o r s i n t h i s
sector have been i l l u s t r a t e d by the d e c i s i o n o f A u t a i r I n t e r ­
national Airways t o d i s c o n t i n u e d o m e s t i c o p e r a t i o n s a f t e r the
end of October 1969 and to c o n c e n t r a t e e n t i r e l y on i t s p r o f i t a b l e
and expanding c h a r t e r a c t i v i t i e s , and by the f a c t t h a t B r i t i s h
Air S e r v i c e s L i m i t e d , which c o n t r o l s BK'S and Cambrian, has been
going through a d i f f i c u l t p e r i o d .
45. The R e p o r t r e c o g n i s e s t h a t the f u t u r e v i a b i l i t y o f the
secondary, mainly d o m e s t i c , s e r v i c e s demands a measure o f r o u t e
r a t i o n a l i s a t i o n t o g e t h e r w i t h some c o n c e n t r a t i o n o f the s t r u c t u r e
of the a i r l i n e s concerned, so as to a l l o w economies of s c a l e and
of s p e c i a l i s a t i o n t o be a c h i e v e d .
I t i s p r o b a b l y a l s o important
to work towards more economical standards o f s e r v i c e , so as t o
offset the i n t r i n s i c a l l y h i g h c o s t s t r u c t u r e o f l o w - d e n s i t y
short-haul o p e r a t i o n s .
The need i s f o r c o h e r e n t r o u t e s t r u c ­
tures, a s c a l e o f o p e r a t i o n s t h a t w i l l p e r m i t h i g h l e v e l s o f
a i r c r a f t u t i l i s a t i o n , and the e l i m i n a t i o n : o f f r i l l s w i t h o u t any
s a c r i f i c e o f s a f e t y or e f f i c i e n c y .
46. The R e p o r t recommends t h a t a new r e g i o n a l a i r l i n e group
should be formed round t h e nucleus o f B r i t i s h A i r S e r v i c e s
Limited, a s u b s i d i a r y o f BEA i n which t h e r e i s a m i n o r i t y
private s h a r e h o l d i n g .
BEA's secondary s e r v i c e s would be
transferred to the BAS group, so as t o form a nucleus t h a t
other a i r l i n e s might j o i n .
I t w i l l i n any event be n e c e s s a r y
to undertake an e a r l y r e o r g a n i s a t i o n o f the BAS group.
The
Government a c c e p t the u n d e r l y i n g c o n c e p t o f the Committee's
recommendation t h a t t h e r e should be a r e g i o n a l a i r l i n e o r
a i r l i n e group as a s e p a r a t e s u b s i d i a r y o f the Airways Board,
that would b r i n g t o g e t h e r a l l BEA s d o m e s t i c s e r v i c e s o t h e r
than those which can be r e g a r d e d as f o r m i n g an i n t e g r a l
extension o f i t s primary i n t e r n a t i o n a l n e t w o r k , and r o u t e s
served by BAS.
The p r e c i s e a l l o c a t i o n o f r e s o u r c e s between
the primary and r e g i o n a l networks and t h e r e c o n s t r u c t i o n of BAS
will need t o be s t u d i e d i n d e t a i l b e f o r e f i n a l d e c i s i o n s are made.
This w i l l be an important t a s k f o r the A i r w a y s Board, a t l e a s t
during the i n i t i a l s t a g e s o f the development o f the r e g i o n a l
airline group.
1
47. The R e p o r t recommends, and the Government a c c e p t , t h a t o t h e r
airlines should be. f r e e to j o i n the new r e g i o n a l a i r l i n e group,
provided t h a t any investment i n such a c q u i s i t i o n s by the group
could be e x p e c t e d t o show an a c c e p t a b l e r e t u r n w i t h i n a r e a s o n a b l e
period.
The Government a l s o accept t h a t the new r e g i o n a l a i r l i n e
should not have a complete monopoly o r powers o f compulsory
acquisition.
h e scope f o r f u r t h e r a c q u i s i t i o n s w i l l thus be
limited, s i n c e the nucleus comprising BFJA's secondary s e r v i c e s
and those o f BAS w i l l a l r e a d y p r o v i d e about 70% of t o t a l output
in this s e c t o r .
I t i s c l e a r that some a i r l i n e s now engaged i n
this s e c t o r may wish to r e t a i n , t h e i r independence and t h e Govern­
nt would not wish to p r e v e n t t h i s .
I n d e e d t h e r e might be room
for more than one a i r l i n e group to e v o l v e under the s u p e r v i s i o n
Px the C i v i l A v i a t i o n A u t h o r i t y .
.
T
me
16
48, The Report e n v i s a g e s t h a t the new p u b l i c s e c t o r r e g i o n a l
airline should have the s t r u c t u r e o f a h o l d i n g company c o n t r o l l i n g
a number of s u b s i d i a r i e s w i t h c l o s e r e g i o n a l a f f i n i t i e s , and t h a t
there should be p r i v a t e e q u i t y p a r t i c i p a t i o n at both group and
subsidiary l e v e l s .
The Government are c o n t e n t t h a t an appro­
priate s t r u c t u r e should be allowed -to e v o l v e under the c o n t r o l
of the Airways Board and under the s u p e r v i s i o n of the C i v i l
Aviation A u t h o r i t y .
49, The Government f o r e s e e a s i g n i f i c a n t and growing r o l e f o r
third l e v e l s e r v i c e s , such as a l r e a d y e x i s t , f o r example, i n
Scotland, the South West o f England and the Channel I s l a n d s .
50. The C i v i l A v i a t i o n A u t h o r i t y w i l l have a major r e s p o n s i b i l i t y
in studying and promoting the r a t i o n a l i s a t i o n of r e g i o n a l s e r v i c e s ,
in p a r t i c u l a r through the examination w i t h the a i r l i n e s o f the
scope f o r r o u t e r a t i o n a l i s a t i o n and the encouragement of
co-operation.
The Government accept the need f o r a p p r o p r i a t e
pricing p o l i c i e s to be e v o l v e d .
I t w i l l a l s o be f o r the A u t h o r i t y
to ensure t h a t , w h i l e the needs of the r e g i o n s f o r s e r v i c e s to t h e
Continent are f u l l y r e c o g n i s e d , t h e r e w i l l . b e the minimum o f
diversion o f t r a f f i c from B r i t i s h f l a g c a r r i e r s to the l o n g - h a u l
services o f f o r e i g n a i r l i n e s .
The A u t h o r i t y w i l l c o n s u l t the
authorities of the Channel I s l a n d s and t h e I s l e of Man i n s o f a r
as s t r u c t u r a l changes i n domestic s e r v i c e s may a f f e c t t h e i r
interests;
the Government w i l l d i s c u s s w i t h the I s l a n d
authorities what machinery should be e s t a b l i s h e d f o r t h i s
purpose.
17 48. The Report e n v i s a g e s t h a t the -new p u b l i c s e c t o r r e g i o n a l
airline should have the s t r u c t u r e o f a h o l d i n g company c o n t r o l l i n g
a number of s u b s i d i a r i e s w i t h c l o s e r e g i o n a l a f f i n i t i e s , and that
there should be p r i v a t e e q u i t y p a r t i c i p a t i o n at both group and
subsidiary l e v e l s .
The Government a r e c o n t e n t t h a t an a p p r o ­
priate s t r u c t u r e should be a l l o w e d to e v o l v e under the c o n t r o l
of the Airways Board and under the s u p e r v i s i o n of the C i v i l
Aviation A u t h o r i t y .
4 9 . The Government f o r e s e e a s i g n i f i c a n t and growing r o l e f o r
third l e v e l s e r v i c e s , such as a l r e a d y e x i s t , f o r example, i n
Scotland, the South West of England and the Channel I s l a n d s .
50. The C i v i l A v i a t i o n A u t h o r i t y w i l l have a major r e s p o n s i b i l i t y
in studying and promoting the r a t i o n a l i s a t i o n o f r e g i o n a l s e r v i c e s ,
in p a r t i c u l a r through the examination w i t h the a i r l i n e s o f the
scope f o r r o u t e r a t i o n a l i s a t i o n and the encouragement o f
co-operation.
The Government a c c e p t the need f o r a p p r o p r i a t e
pricing p o l i c i e s t o be e v o l v e d .
I t w i l l a l s o be f o r the A u t h o r i t y
to ensure t h a t , w h i l e the needs o f the r e g i o n s f o r s e r v i c e s to the
Continent are f u l l y r e c o g n i s e d , t h e r e w i l l be the minimum o f
diversion of t r a f f i c from B r i t i s h f l a g c a r r i e r s t o the l o n g - h a u l
services o f f o r e i g n a i r l i n e s .
The A u t h o r i t y w i l l c o n s u l t the
authorities o f the Channel I s l a n d s and the I s l e o f Man i n s o f a r
as s t r u c t u r a l changes i n domestic s e r v i c e s may a f f e c t t h e i r
interests;
the Government w i l l d i s c u s s w i t h the I s l a n d
authorities what machinery should be e s t a b l i s h e d f o r t h i s
purpose.
17 III.
ECONOMIC POLICY 51. The Report draws a t t e n t i o n t o a number of matters that are
less d i r e c t l y r e l a t e d to the s t r u c t u r e o f the i n d u s t r y but are
nonetheless o f prime importance f o r i t s w e l l b e i n g and f o r t h e
realisation o f the g e n e r a l o b j e c t i v e s .
The C i v i l A v i a t i o n
Authority w i l l p l a y a major r o l e in- the study and a p p l i c a t i o n
of p o l i c i e s i n these f i e l d s , i n c l u d i n g the primary r e s p o n s i b i l i t y
for conducting or i n i t i a t i n g b a s i c r e s e a r c h where t h i s has been
lacking in the p a s t .
I n some i n s t a n c e s the A u t h o r i t y w i l l have
sole r e s p o n s i b i l i t y , in o t h e r s i t w i l l c o n t r i b u t e t o more w i d e l y ­
concerted e f f o r t s .
Pricing
52. The Report advocates p r o g r e s s towards a more r a t i o n a l p r i c e
structure f o r the i n d u s t r y as c l o s e l y r e l a t e d t o c o s t s as can be
achieved.
The Committee were w e l l aware o f the p r a c t i c a l c o n ­
straints and o f the f a c t t h a t changes i n p r i c i n g p o l i c y must be
gradual.
In the i n t e r n a t i o n a l f i e l d t h i s c o u n t r y cannot a c t
u n i l a t e r a l l y , although i t can have a p o i n t o f v i e w which, o v e r
time, i t might persuade o t h e r s t o s h a r e .
The Government
accept
these v i e w s and r e c o g n i s e the need t o e v o l v e p r i c i n g and l i c e n s i n g
criteria t h a t w i l l correspond more c l o s e l y t o market c o n d i t i o n s as
they d e v e l o p .
This i s a task f o r the C i v i l A v i a t i o n A u t h o r i t y ,
which w i l l be d i r e c t e d t o e s t a b l i s h a p p r o p r i a t e c o n s u l t a t i v e
arrangements w i t h a l l s e c t i o n s o f the i n d u s t r y and w i t h u s e r s
of air s e r v i c e s .
Cross-subsidisation
53. The Government accept t h a t , as a g u i d i n g p r i n c i p l e f o r the
longer term, a i r f a r e s should so f a r as p o s s i b l e r e f l e c t the long
run marginal c o s t s o f producing the s e r v i c e s i n q u e s t i o n , proper
allowance b e i n g made f o r the c o s t o f c a p i t a l .
i n the long
run ground c o s t s should, so f a r as p r a c t i c a b l e , b e . f u l l y
taken i n t o account.
.
This does not p r e c l u d e the c r o s s ­
subsidisation by e x i s t i n g p r o f i t a b l e s e r v i c e s o f new r o u t e s that
are in the development s t a g e , p r o v i d e d t h a t these new r o u t e s are
likely t o become s e l f - s u p p o r t i n g w i t h i n a r e a s o n a b l y short t i m e .
Where, however, p a r t i c u l a r s e r v i c e s are c r o s s - s u b s i d i s e d on a
continuing b a s i s , t h i s i n d i c a t e s that t h e r e may be a m i s a l l o c a t i o n
of resources t h a t should be r e c t i f i e d .
The same p r i n c i p l e a p p l i e
to the p r i c e s charged f o r d i f f e r e n t c l a s s e s and c a t e g o r i e s o f
travel.
I t argues a l s o f o r a g r e a t e r r e a d i n e s s t o a l l o w f a r e
d i f f e r e n t i a l s according to the type of a i r c r a f t used ( a s f o r
example between j e t and turbo-prop a i r c r a f t or as between s u p e r ­
sonic and subsonic a i r c r a f t ) and f o r the g r e a t e r use of
d i f f e r e n t i a l s r e l a t e d t o the hour o f - t r a v e l and the l e n g t n of
booking p e r i o d r e q u i r e d .
domestic f a r e s
and f r e i g h t
rates
^* The C i v i l A v i a t i o n A u t h o r i t y w i l l i n h e r i t from the A i r
transport L i c e n s i n g Board the r e s p o n s i b i l i t y f o r e s t a b l i s h i n g
the United Kingdom domestic a i r t a r i f f .
The A u t h o r i t y w i l l be
required t o o b s e r v e the Government's p o l i c i e s f o r the c o n t r o l of
Prices.
The Government w i l l r e t a i n the power t o r e f e r i n c r e a s e s
^ d o m e s t i c a i r f a r e s and f r e i g h t r a t e s t o the N a t i o n a l Board f o r
"rices and Incomes i n a p p r o p r i a t e c a s e s .
18
CONFIDENTIAL
Triglusive t o u r p r i c e s
,
55. I t w i l l a l s o be the r e s p o n s i b i l i t y o f the A u t h o r i t y t o c o n t r o l
the minimum p r i c e s o f i n c l u s i v e t o u r h o l i d a y s t o the e x t e n t t h a t
this continues t o be n e c e s s a r y .
The Government a g r e e w i t h the
Committee t h a t the d i s t i n c t i o n between scheduled and non-scheduled
services i s changing".
They a c c e p t t h a t i n c l u s i v e tour p r i c e s must
in general be r e l a t e d t o p u b l i c f a r e s on scheduled s e r v i c e s , but
agree t h a t t h e y do not need to be i d e n t i c a l , o r indeed t h a t t h e r e
must be a r e l a t i o n s h i p , i n e v e r y c a s e ,
The two main c r i t e r i a are
that the s t r u c t u r e o f p r i c e s f o r i n c l u s i v e t o u r s , where t h e s e are
controlled, should be i n t e r n a l l y c o h e r e n t and. t h a t t h e i r l e v e l s
should be no h i g h e r than is' n e c e s s a r y t o g i v e adequate p r o t e c t i o n
to competing scheduled s e r v i c e s f o r which t h e r e i s a genuine need.
5 6 . The Report argues t h a t a scheduled c a r r i e r has an i m p l i e d
obligation to s e r v e h i s r o u t e s w i t h a f r e q u e n c y and c a p a c i t y
sufficient t o ensure t h a t , on a v e r a g e , the demand f o r s e a t s i s
adequately met at r e a s o n a b l y s h o r t n o t i c e and w i t h a r e a s o n a b l e
choice of t i m i n g s .
The non-scheduled, c a r r i e r h a s , i n t h i s sense,
a lesser o b l i g a t i o n .
I t f o l l o w s t h a t a scheduled s e r v i c e , o p e r a ­
ting as i t must a t a r e l a t i v e l y l o w e r a v e r a g e load f a c t o r than a
charter s e r v i c e w i l l be c o s t l i e r t o run. The r e p o r t goes on t o
argue t h a t , where the demand f o r scheduled s e r v i c e s w a r r a n t s ,
it is r i g h t t o p r o t e c t the scheduled c a r r i e r from the e f f e c t s of
lover p r i c e d c h a r t e r c o m p e t i t i o n , f o r example by s e t t i n g minimum
prices f o r c h a r t e r i n c l u s i v e t o u r s and imposing r e s t r i c t i o n s on
the types o f t r a f f i c t h a t can be c a r r i e d at u n c o n t r o l l e d p r i c e s .
But there may be r o u t e s where the p a t t e r n of demand does not
justify the p r o t e c t i o n o f scheduled s e r v i c e s i n t h e s e ways and
where i t would be s e n s i b l e to remove e x i s t i n g r e s t r i c t i o n s .
In
the words of the R e p o r t :
scheduled s e r v i c e s should o n l y be
given a p r o t e c t e d s t a t u s where t h e r e i s a c l e a r need f o r t h i s
type of p u b l i c f a c i l i t y , , "
57. Progress i n t h i s d i r e c t i o n cannot be f a s t .
First, a detailed
route-by-route examination i s needed to f i n d out where the p a t t e r n
of demand i s such as t o a l l o w the p r e s e n t degree o f p r o t e c t i o n to
be reduced or perhaps removed.
T h i s w i l l be a task f o r the C i v i l
Aviation A u t h o r i t y .
S e c o n d l y , the U n i t e d Kingdom can o n l y move
in concert w i t h o t h e r c o u n t r i e s .
58- In the i n t e r v e n i n g p e r i o d p r o g r e s s can be made on the l i n e s
of the t a r i f f f o r the 1970 summer season of i n c l u s i v e t o u r h o l i d a y s
in Europe, which was announced l a s t J u l y a f t e r c o n s u l t a t i o n w i t h
the Air Transport L i c e n s i n g Board and the i n d u s t r y .
This t a r i f f
is designed, t o encourage o f f - p e a k t r a v e l , to d e v e l o p t r a f f i c on
the longer European r o u t e s and to reduce the adverse d i f f e r e n t i a l
n i n c l u s i v e t o u r s d e p a r t i n g from the p r o v i n c e s .
T h i s i s the
Kst recent o f a s e r i e s o f changes i n the s t r u c t u r e o f i n c l u s i v e
.tour c o n t r o l p r i c e s , which have a l r e a d y borne f r u i t i n terms of
increased t r a f f i c f o r both scheduled and non-scheduled c a r r i e r s ,
with corresponding b e n e f i t s t o consumers.
Q
53. I t should now be p o s s i b l e t o b e g i n t o extend these p o l i c i e s to the p r i c e s of i n c l u s i v e tours t o d e s t i n a t i o n s o u t s i d e Europe. The p r o v i s i o n s g o v e r n i n g a f f i n i t y group t r a v e l w i l l a l s o come under r e v i e w . 19
CONFIDENTIAL
international
fares
60. I n t e r n a t i o n a l scheduled s e r v i c e f a r e s and f r e i g h t r a t e s are
regulated i n the c o n t e x t o f agreements w i t h o t h e r c o u n t r i e s f o r
the exchange of t r a f f i c r i g h t s .
The c l o s e l y - m e s h e d nature of
the world network o f a i r r o u t e s had led. t o arrangements f o r the
s e t t l i n g o f the t a r i f f s through the mechanism of the I n t e r n a t i o n a l
Air Transport A s s o c i a t i o n r a t h e r than by a m u l t i p l i c i t y of
bilateral n e g o t i a t i o n s .
I t i s i m p r a c t i c a b l e f o r one c o u n t r y t o
act in i s o l a t i o n .
The Report a c c e p t s t h a t , d e s p i t e i t s l i m i i a ­
tions and s h o r t c o m i n g s , t h e r e i s no r e a d y a l t e r n a t i v e t o t h i s
system but recommends t h a t the U n i t e d Kingdom should p l a y a more
forceful
r o l e in these matters.
61. The Government a c c e p t that the p u r s u i t o f more p o s i t i v e
pricing p o l i c i e s g e n e r a l l y must imply a more v i g o r o u s approach,
through argument and p e r s u a s i o n , i n IATA and i n i n t e r - g o v e r n m e n t a l
discussions.
U n i t e d Kingdom a i r l i n e s p l a y an i n f l u e n t i a l p a r t
in IATA's d e l i b e r a t i o n s and i t i s r i g h t t h a t they should use
their i n f l u e n c e t o f u r t h e r the o b j e c t i v e s and p o l i c i e s l a i d down
for the i n d u s t r y as a w h o l e .
To t h i s end the A u t h o r i t y w i l l
play i t s p a r t , i n c o n c e r t w i t h the Board of T r a d e , i n g u i d i n g
the a i r l i n e s concerned as t o the o b j e c t i v e s they should pursue,
in ample time t o i n f l u e n c e the p r o p o s a l s they t a b l e in IATA.
62. The Board o f T r a d e , i n d i s c h a r g i n g i t s continuing r e s p o n ­
s i b i l i t y f o r i n t e r n a t i o n a l r e l a t i o n s i n the C i v i l A v i a t i o n f i e l d ,
will r e t a i n i t s p r e s e n t r e s p o n s i b i l i t y f o r g i v i n g or w i t h h o l d i n g '
approval o f IATA t a r i f f r e s o l u t i o n s and f o r n e g o t i a t i o n s w i t h
other governments on t a r i f f m a t t e r s .
I n c a r r y i n g out t h e s e
functions t h e Board o f Trade w i l l a c t in c l o s e c o n s u l t a t i o n w i t h
the, A u t h o r i t y a t a l l s t a g e s and each w i l l have the b e n e f i t o f the
other's a d v i c e .
Transport-co-ordination
63. Transport s e r v i c e s w i t h i n the U n i t e d Kingdom have t o be
viewed as a whole i f the best use i s t o be made of a v a i l a b l e
resources i n c o m p e t i t i o n w i t h r i v a l i n v e s t m e n t needs.
In the
long run, t h e key t o the optimum a l l o c a t i o n o f r e s o u r c e s w i l l be
the adoption of a p p r o p r i a t e p r i c i n g p o l i c i e s throughout the
transport s e c t o r and the p o l i c i e s s e t out i n paragraph 54 above
represent a u s e f u l c o n t r i b u t i o n towards t h i s o b j e c t i v e .
64- So f a r as i n v e s t m e n t in domestic t r a n s p o r t i n v o l v e s p u b l i c
funds, the t o t a l , amount t o be a l l o c a t e d t o the t r a n s p o r t s e c t o r
and i t s a l l o c a t i o n w i t h i n t h a t s e c t o r must ,remain the Government's
r e s p o n s i b i l i t y , a c t i n g w i t h the a d v i c e , among o t h e r s , o f the C i v i l
Aviation A u t h o r i t y , the Airways Board, the F r e i g h t I n t e g r a t i o n
Council and the R e g i o n a l Economic P l a n n i n g C o u n c i l s .
The adop­
tion and p u r s u i t o f a p p r o p r i a t e p r i c i n g p o l i c i e s w i l l p r o v i d e a
uniform measure o f the scope and need for p r i v a t e investment i n
domestic a i r s e r v i c e s and, i n c o n j u n c t i o n w i t h standard investment
criteria, a b a s i c t o o l f o r the c o - o r d i n a t i o n o f p u b l i c investment
o as to a v o i d w a s t e f u l d u p l i c a t i o n .
s
^5- In c a r r y i n g out i t s r e s p o n s i b i l i t i e s r e g a r d i n g r o u t e
licensing, f a r e s and aerodrome p l a n n i n g , the A u t h o r i t y w i l l have
Regard to the p a t t e r n o f planned i n v e s t m e n t i n a l l forms o f
internal t r a n s p o r t and i n p a r t i c u l a r t o the i m p l i c a t i o n s of
technological i n n o v a t i o n .
To t h i s end the e x i s t i n g Government
Machinery for c o n s u l t a t i o n on these m a t t e r s will be extended to
include the A u t h o r i t y and machinery w i l l be f u r t h e r d e v e l o p e d
for c o n s u l t a t i o n b e t w e e n the A u t h o r i t y and o t h e r manor
ransport i n t e r e s t s .
"
L
9 n
J
Subsidies
6 6 . The s t r u c t u r a l changes proposed f o r secondary s e r v i c e s ,
s e r v i c e s , t o g e t h e r w i t h changes i n p r i c i n g p o l i c i e s , should
enhance the v i a b i l i t y o f a i r s e r v i c e s t o the r e g i o n s .
The
Government r e c o g n i s e , however, t h a t d e s p i t e t h e s e changes
there may s t i l l be c e r t a i n r o u t e s or r o u t e networks t h a t
could not a t t r a c t s u f f i c i e n t t r a f f i c t o permit v i a b l e
operation f o r a number of y e a r s o r f o r the f o r e s e e a b l e
future.
A i r s e r v i c e s can o f t e n p l a y an important p a r t
in the t o t a l t r a n s p o r t and communications p a t t e r n o f the
regions and may indeed be e s s e n t i a l where a l t e r n a t i v e means
of t r a n s p o r t a r e i n a d e q u a t e .
The Government t h e r e f o r e accept
the Committee s c o n c l u s i o n t h a t the development o f c e r t a i n a i r
services may need t o be s u b s i d i s e d , where t h i s would c o n t r i b u t e
to the economic and s o c i a l development of the r e g i o n s .
1
67- The Report p o i n t s o u t , however, t h a t no c o n c l u s i v e l i n k
has y e t been demonstrated between the p r o v i s i o n o f a i r s e r v i c e s
and the pace o f r e g i o n a l economic development.
Such e v i d e n c e
as there i s s u g g e s t s t h a t the e x i s t e n c e or lack of a i r s e r v i c e s
may not be a major c o n s i d e r a t i o n i n most i n d u s t r i a l l o c a t i o n
d e c i s i o n s , which must n e c e s s a r i l y take account o f a h o s t of
other f a c t o r s . A c c o r d i n g l y the Government c o n s i d e r t h a t the
f i r s t task must be to d e v e l o p methods of' a s s e s s i n g the economic
and s o c i a l b e n e f i t s t h a t might accrue from the p r o v i s i o n of
particular a i r s e r v i c e s .
B e f o r e d e t e r m i n i n g the amount of
any subsidy that might be j u s t i f i e d on these grounds, i t w i l l
be n e c e s s a r y t o a n a l y s e the o p e r a t i n g economics of the a i r l i n e s
concerned, the c u r r e n t and p o t e n t i a l t r a f f i c f l o w s , the i n f l u e n c e
of p r i c i n g p o l i c i e s and the impact o f the s t r u c t u r a l changes
foreshadowed i n the p r e v i o u s s e c t i o n o f t h i s White P a p e r ,
Only
then w i l l the Government be a b l e t o judge the s t r e n g t h o f the
case f o r subsidising any p a r t i c u l a r s e r v i c e i n the l i g h t o f t h e i r
general p o l i c i e s f o r t r a n s p o r t c o - o r d i n a t i o n and r e g i o n a l
development..
68.
These economic s t u d i e s w i l l be an important task f o r the
C i v i l A v i a t i o n A u t h o r i t y t o u n d e r t a k e , i n an a d v i s o r y c a p a c i t y ,
in conjunction w i t h the Government departments concerned and i n
consultation w i t h r e g i o n a l and l o c a l a u t h o r i t i e s .
I n v i e w of
the importance o f t h i s t a s k , p r e l i m i n a r y s t u d i e s , b u i l d i n g on
work that has a l r e a d y been done i n r e l a t e d f i e l d s , w i l l be put
in hand w i t h o u t w a i t i n g f o r the i n t r o d u c t i o n of the l e g i s l a t i o n
e s t a b l i s h i n g the new A u t h o r i t y .
69.
I f , i n the l i g h t o f t h e s e s t u d i e s , i t i s d e c i d e d t h a t an
air s e r v i c e should be s u b s i d i s e d from p u b l i c funds, then i t i s
accepted that the subsidy should be d i r e c t i n r e l a t i o n t o
that s e r v i c e .
T h i s i s p r e f e r a b l e t o the p r e s e n t s i t u a t i o n ,
in which a i r s e r v i c e s are o f t e n c r o s s - s u b s i d i s e d on a c o n ­
tinuing b a s i s by o t h e r more p r o f i t a b l e s e r v i c e s or a r e
i n d i r e c t l y and i n d i s c r i m i n a t e l y s u b s i d i s e d i n the sense t h a t
aerodrome and ground s e r v i c e c o s t s are not f u l l y r e c o v e r e d .
Nor i s i t the G o v e r n m e n t s i n t e n t i o n t h a t support should be
given by t a k i n g a i r s e r v i c e s i n t o the p u b l i c s e c t o r and running
them on a c o n t i n u i n g b a s i s a t l e s s than an a c c e p t a b l e r a t e of
return.
Primary d o m e s t i c r o u t e s and i n t e r n a t i o n a l s e r v i c e s
from the United Kingdom w i l l not be e l i g i b l e f o r s u b s i d i e s and
the United Kingdom cannot be e x p e c t e d t o s u b s i d i s e h o l i d a y
routes to the Channel I s l a n d s and the I s l e o f Man.
21
CONFIDENTIAL
70.
The R e p o r t suggests t h a t s u b s i d i e s should be f i n a n c e d by
the r e a l l o c a t i o n t o a i r s e r v i c e s o f funds a l r e a d y a l l o c a t e d t o
regional development, on the b a s i s of recommendations Dy r e g i o n a l
authorities.
F i n a n c i a l a s s i s t a n c e t o r e g i o n a l development i s
given f o r p a r t i c u l a r purposes and i s not a l l o c a t e d among the
regions i n predetermined amounts.
There are a l s o o t h e r r e s p e c t s
in which the l e g i s l a t i v e p r o v i s i o n s and machinery f o r r e g i o n a l
development a s s i s t a n c e do not e a s i l y lend themselves t o a scheme
such as the Report p r o p o s e s .
The Government accept the p r i n c i p l e
that r e g i o n a l a u t h o r i t i e s should a d v i s e on the r e l a t i v e p r i o r i ­
ties to be accorded t o the support o f a i r s e r v i c e s and o t h e r
forms of transport: i n and between t h e i r r e g i o n s but i t must
remain the Government s r e s p o n s i b i l i t y t o d e c i d e on the amount
and source of p u b l i c funds t h a t should be made a v a i l a b l e both i n
total and i n i n d i v i d u a l c a s e s .
I n so doing the Government w i l l
take account o f the p r o g r e s s being made towards t h e f u l l r e c o v e r y
of the c o s t s . o f aerodrome and t e c h n i c a l s e r v i c e s , as w e l l as the
impact t h a t a p a r t i c u l a r subsidy might have on o t h e r forms o f
transport.
The Government a l s o a g r e e t h a t a p r o p o r t i o n of the
cost of any .subsidy should i n p r i n c i p l e be borne by t h e communi­
ties and l o c a l i n t e r e s t s t h a t b e n e f i t from the s e r v i c e and that
the a i r l i n e concerned should have e v e r y i n c e n t i v e to e l i m i n a t e
losses w i t h i n a r e a s o n a b l y s h o r t p e r i o d .
I n p a r t i c u l a r , account
must be taken o f any b e n e f i t to t h e a i r l i n e from i n t e r l i n i n g
t r a f f i c and o f - t h e l i k e l y g r o w t h o f t o t a l t r a f f i c on t h e r o u t e .
1
71. The Government w i l l seek powers t o grant s u b s i d i e s , where
these are shown t o be j u s t i f i e d , i n l e g i s l a t i o n t o be i n t r o d u c e d
as soon as p o s s i b l e .
I t i s c l e a r , however, t h a t the payment o f
subsidies, which must depend on the c o n c l u s i o n of the n e c e s s a r y
studies, cannot b e g i n i m m e d i a t e l y .
S u b s i d i s a t i o n and r a t i o n ­
a l i s a t i o n must go hand i n hand and, as the Report makes c l e a r ,
some time w i l l be needed.
The maintenance o f s e r v i c e s during
the i n t e r i m p e r i o d must i n g e n e r a l remain, as h i t h e r t o , a m a t t e r
for the commercial judgment o f the a i r l i n e s concerned, w i t h such
assistance as may be g i v e n by the communities and l o c a l i n t e r e s t s
that b e n e f i t .
I n the p u b l i c s e c t o r , domestic s e r v i c e s that are
running a t a l o s s w i l l n o r m a l l y be kept going o n l y where t h e r e
is a prospect o f t h e i r b e i n g made p r o f i t a b l e w i t h i n a r e a s o n a b l e
period.
There may, however, be i n s t a n c e s i n which i n t e r i m
arrangements t o keep s e r v i c e s g o i n g w i l l need t o be c o n s i d e r e d
on t h e i r m e r i t s .
72. The Government r e c o g n i s e t h a t the geography o f the S c o t t i s h
Highlands and I s l a n d s s e t s l i m i t s t o p o s s i b l e improvements i n
a l t e r n a t i v e means o f t r a n s p o r t , so t h a t t h e r e a r e s p e c i a l grounds
for ensuring the c o n t i n u a t i o n o f e s s e n t i a l a i r s e r v i c e s i n t h i s
area.
These s e r v i c e s w i l l c o n t i n u e t o be s u p p o r t e d by c r o s s ­
subsidisation, t h e i n c o m p l e t e r e c o v e r y o f aerodrome c o s t s and non­
recovery o f ground s e r v i c e c o s t s u n t i l a l t e r n a t i v e arrangements
are made.
73. The C i v i l A v i a t i o n A d v i s o r y Committees have been making an
important c o n t r i b u t i o n to t h e f o r m a t i o n o f c i v i l a v i a t i o n p o l i c y .
The Government a c c e p t , however, t h a t i n the new environment t h e i r
non-statutory f u n c t i o n s should be t r a n s f e r r e d t o the R e g i o n a l
Economic Planning Councils and t h a t the A d v i s o r y Committees should
then be d i s c o n t i n u e d .
22
Commercial agreements
74. The Government a g r e e w i t h t h e Committee's v i e w t h a t p o o l i n g
and o t h e r commercial agreements may o f t e n be i n the p u b l i c
interest.
In some c a s e s , such agreements a r e mandatory under
the United Kingdom's A i r S e r v i c e s Agreements with o t h e r c o u n t r i e s
or are n e c e s s a r y to p e r m i t the f u l l e s t development o f B r i t i s h
airlines' services.
C o - o p e r a t i o n between p o o l p a r t n e r s i n such
matters as t h e ' s c h e d u l i n g o f f l i g h t s may w e l l r e s u l t i n the
greatest a g g r e g a t e b e n e f i t to the a i r l i n e s concerned, to the
economy and to the consumer.
I n some c a s e s , however, commercial
agreements may have the e f f e c t o f muting c o m p e t i t i o n , i m p a i r i n g
e f f i c i e n c y , l o w e r i n g the standards o f s e r v i c e t o the p u b l i c o r
d e t r a c t i n g from the c o u n t r y ' s o v e r a l l economic i n t e r e s t .
75. The Government a g r e e , t h e r e f o r e , w i t h the Committee's v i e w
that t h i s i s an area where constant v i g i l a n c e i s needed.
They
consider t h a t a l l commercial agreements should be f i l e d w i t h the
C i v i l A v i a t i o n A u t h o r i t y and be s u b j e c t t o r e v i e w . I n examining
such agreements, the A u t h o r i t y w i l l be guided by the Board of
Trade as t o the i n t e r n a t i o n a l and g e n e r a l p o l i c y i m p l i c a t i o n s
of any a c t i o n t h a t i t might take o r recommend.
Aerodrome planning and p r i c i n g
76.. The Government a c c e p t the v i e w o f t h e Committee t h a t
research i n t o aerodrome p l a n n i n g should be a c c e l e r a t e d .
As
the Report r e c o g n i s e s , the e f f e c t i v e power t o implement p l a n s
rests w i t h aerodrome owners and the Government accept the
Committee's v i e w that t h e r e i s i n s u f f i c i e n t case f o r r e v e r s i n g
the p o l i c y o f s u c c e s s i v e Governments on aerodrome o w n e r s h i p .
Nevertheless t h e y a g r e e t h a t the p r e p a r a t i o n and p u b l i c a t i o n
of s t u d i e s on aerodrome p l a n n i n g w i l l be o f g r e a t b e n e f i t t o
owners and o t h e r a u t h o r i t i e s concerned w i t h aerodrome d e v e l o p ­
ment.
I t w i l l be a r e s p o n s i b i l i t y o f t h e C i v i l A v i a t i o n
Authority t o study the r e q u i r e m e n t s f o r aerodromes t o match
the development of a i r s e r v i c e s .
The Government w i l l , however,"
remain r e s p o n s i b l e f o r the a l l o c a t i o n o f p u b l i c funds by way o f
direct or i n d i r e c t s u b s i d i e s , i n t h i s f i e l d as i n the f i e l d o f
domestic a i r s e r v i c e s .
Nor do the Government i n t e n d i n t h i s
context t o change the l e g i s l a t i o n g o v e r n i n g land use p l a n n i n g ,
since aerodrome development a f f e c t s much w i d e r i n t e r e s t s than
those o f c i v i l a v i a t i o n a l o n e .
.77. The R e p o r t recommends t h a t aerodrome charges should be
subject t o a p p r o v a l by the same body t h a t i s r e s p o n s i b l e f o r
the r e g u l a t i o n o f a i r f a r e s .
Aerodrome owners a r e t o some
extent i n a monopoly p o s i t i o n and aerodrome charges are r e l e v a n t
to the f i x i n g o f a i r f a r e s , the development o f r e g i o n a l a i r
services and the examination o f the need f o r s u b s i d i e s t o be
given i n c e r t a i n c a s e s .
The Government t h e r e f o r e a g r e e t h a t
the C i v i l A v i a t i o n A u t h o r i t y should be g i v e n the task o f a d v i s i n g
the Board o f Trade on the s t r u c t u r e and l e v e l s o f aerodrome
charges.
To t h i s end the Government w i l l s e t out t h e i r p r i c i n g
policy f o r aerodromes, r e f l e c t i n g the g u i d i n g p r i n c i p l e i n p a r a ­
graph 54 a b o v e , i n t h e i r formal p o l i c y s t a t e m e n t ;
the A u t h o r i t y
will be i n s t r u c t e d to have due r e g a r d , i n framing t h e i r recommend­
ations, t o the f i n a n c i a l o b j e c t i v e s s e t by the Government f o r the
Brit ish A i r p o r t s A u t h o r i t y and t o the i n t e r n a t i o n a l i m p l i c a t i o n s
of changes i n a i r p o r t c h a r g e s .
Aerodrome owners w i l l have the
same o p p o r t u n i t i e s as a i r l i n e s t o c h a l l e n g e the A u t h o r i t y s
recommendations, where t h e s e appear t o c o n f l i c t w i t h the
declared p o l i c y .
1
2
3
Aircraft procurement and f i n a n c e
7 8 . The a i r c r a f t manufacturing i n d u s t r y has i t s own important
place i n the B r i t i s h economy.
The Government i s c l o s e l y concerned
with i t s success i n s e l l i n g i t s p r o d u c t s i n the w i d e s t p o s s i b l e
markets and w i t h i t s e a r n i n g s o f f o r e i g n exchange.
Where the c o s t
and r i s k s o f launching a promising new a i r c r a f t d e s i g n a r e beyond
the i n d u s t r y ' s c a p a c i t y , Government a s s i s t a n c e i s at p r e s e n t g i v e n
through launching a i d schemes, p r o v i d e d i t can be demonstrated
that the p r o j e c t s a t i s f i e s c e r t a i n s t r i c t economic c r i t e r i a so t h a t
there i s a good p r o s p e c t o f r e c o v e r i n g the investment through a
levy on s a l e s .
Such a s s i s t a n c e must, i n o b j e c t i v e and i n
administration, be d i s t i n g u i s h e d from p o l i c i e s d e s i g n e d t o f o s t e r
the development o f c i v i l a v i a t i o n .
I t i s already inherent in
Government p o l i c y t h a t any support f o r the development o f B r i t i s h
aircraft should be g i v e n d i r e c t l y to t h e manufacturing i n d u s t r y .
The Government welcome the CommitteeVs r e a f f i r m a t i o n o f t h i s
principle.
7 9 . The Government have c a r e f u l l y c o n s i d e r e d t h e recommendations
in the Report on f i n a n c e f o r a i r c r a f t purchase and the e l i g i b i l i t y
of a i r c r a f t ;?:)c investment g r a n t s .
The G o v e r n m e n t s p o l i c i e s f o r
civil a i r t r a n s p o r t a r e i n t e n d e d to s t r e n g t h e n t h e i n d u s t r y and
improve i t s f i n a n c i a l s t a b i l i t y and r e t u r n .
There i s no r e a s o n
to expect t h a t e f f i c i e n t a i r l i n e s earning a commercial, r a t e o f
return w i l l be unable t o c a l l on the f i n a n c i a l f a c i l i t i e s they
need i n o r d e r t o renew and expand t h e i r f l e e t s , w i t h o u t a d d i t i o n a l
Government a s s i s t a n c e b e i n g r e q u i r e d .
The Government t h e r e f o r e
see no r e a s o n t o change t h e d e c i s i o n , which t h e y took i n 1966,
in general t o e x c l u d e investment i n t h e s e r v i c e s s e c t o r ( i n c l u d i n g
investment i n a i r c r a f t ) from the scope o f t h e i n v e s t m e n t g r a n t s
scheme.
Nor do t h e y s e e any r e a s o n t o seek to extend to U n i t e d
Kingdom a i r l i n e s the arrangements f o r f i x e d - r a t e Government­
guaranteed bank c r e d i t t h a t apply to B r i t i s h s h i p o w n e r s ' purchases
of B r i t i s h s h i p s .
Air Transport
Association
80. The Government welcome the recommendation t h a t t h e i n d u s t r y should e s t a b l i s h an A i r Transport A s s o c i a t i o n t o f a c i l i t a t e c o n ­
sultation between t h e i n d u s t r y and t h e Government, t h e C i v i l Aviation A u t h o r i t y and u s e r s o f a i r t r a n s p o r t s e r v i c e s . 24
CONFIDENTIAL
CONFIDENTIAL
IV.
HUMAN RELATIONS
81. The Government welcome the Committee's c o n s t r u c t i v e approach
to human r e l a t i o n s q u e s t i o n s and i n p a r t i c u l a r the emphasis p l a c e d
on the v a l u e of c o n s u l t a t i o n and the need f o r proper n e g o t i a t i n g
machinery.
They accept the recommendation t h a t a l l a i r l i n e s should
be placed under the same o b l i g a t i o n as a r e the A i r C o r p o r a t i o n s ,
by v i r t u e o f S e c t i o n 23 o f t h e A i r C o r p o r a t i o n s Act 1967, r e g a r d i n g
negotiating and c o n s u l t a t i v e machinery.,
Provision for this w i l l
be made i n the B i l l t o e s t a b l i s h the C i v i l A v i a t i o n A u t h o r i t y .
This w i l l p r o v i d e f o r the A u t h o r i t y , when c o n s i d e r i n g an a i r l i n e ' s
entitlement t o o p e r a t e , t o s a t i s f y i t s e l f t h a t the a i r l i n e has
complied w i t h t h i s o b l i g a t i o n .
T h i s w i l l be analogous t o the
provisions r e q u i r i n g the A u t h o r i t y t o s a t i s f y i t s e l f t h a t an
airline has adequate f i n a n c i a l r e s o u r c e s , competent management
and the a b i l i t y t o o p e r a t e s a f e l y .
82. The Government share the C o m m i t t e e ' s hope t h a t t h e i n d u s t r y
of the f u t u r e w i l l o f f e r s t a b i l i t y o f employment and a t t r a c t i v e
career o p p o r t u n i t i e s , and welcome the Committee's v i e w t h a t high
levels o f labour p r o d u c t i v i t y a r e e s s e n t i a l not o n l y f o r t h e
industry's w e l l b e i n g i n an i n c r e a s i n g l y c o m p e t i t i v e environment
but a l s o as a b a s i s t o a f f o r d h i g h l e v e l s ' of pay t o s k i l l e d and
efficient s t a f f .
I n the Government's v i e w , l e v e l s o f pay should
reflect the employees' c o n t r i b u t i o n s t o p r o d u c t i v i t y as w e l l as
differences between a i r l i n e s as t o t h e c h a r a c t e r and r e s p o n s i b i l i t y
of employees' t a s k s , and t h i s w i l l p r e c l u d e a b s o l u t e u n i f o r m i t y
of pay r a t e s .
A c c o r d i n g l y t h e Government i n t e n d t o amend S e c t i o n
15 of the C i v i l A v i a t i o n A c t 1949 t o make i t c l e a r t h a t , i n
interpreting the o b l i g a t i o n under S e c t i o n 1 5 ( 1 ) , r e g a r d
should be had to the terms and c o n d i t i o n s of employment .
as a whole observed by t h e C o r p o r a t i o n s and those o b s e r v e d
by the independent u n d e r t a k i n g s .
83. The Government a t t a c h importance t o the r o l e o f the
National J o i n t Council f o r C i v i l A i r T r a n s p o r t , not o n l y as a
forum f o r the n e g o t i a t i o n of terms and c o n d i t i o n s o f employment
but a l s o f o r i t s : c o n t r i b u t i o n t o the promotion of i n c r e a s e d
productivity.
They r e a f f i r m t h e i r d e s i r e t h a t the a i r l i n e s i n
membership o f the Council should be more f u l l y r e p r e s e n t a t i v e
of the i n d u s t r y .
Participation
84. The Government share the C o m m i t t e e s v i e w t h a t a sense of employee p a r t i c i p a t i o n i s i m p o r t a n t .
The Government r e c o g n i s e that the most e f f e c t i v e method of p a r t i c i p a t i o n i s through membership of a t r a d e union which n e g o t i a t e s on a l l q u e s t i o n s affecting c o n d i t i o n s of employment;
t h e y are a l s o i n f a v o u r of experiments i n the appointment o f w o r k e r s ' r e p r e s e n t a t i v e s to the boards of u n d e r t a k i n g s .
The Government hope t h a t the airlines, some of which have been l e a d e r s in the development of p r o d u c t i v i t y b a r g a i n i n g , w i l l show s i m i l a r e n t e r p r i s e i n ^vising new forms of s t a f f p a r t i c i p a t i o n and i n v o l v e m e n t . 25
V
Rconomic
THE CIVIL
AVIATION AUTHORITY
regulation
35. The Report i d e n t i f i e s some shortcomings i n t h e p r e s e n t
machinery f o r the economic r e g u l a t i o n o f c i v i l a i r t r a n s p o r t .
There i s no doubt t h a t , i f t h i s machinery were t o continue, i n
its present form, a number o f changes would be needed.
The
Government share t h e C o m m i t t e e ' s v i e w t h a t the A i r T r a n s p o r t
Licensing Board has a b l y a c q u i t t e d i t s e l f w i t h i n t h e l i m i t s
set by the l e g i s l a t i v e framework, although t h e s e l i m i t s and
the way i n which they have been i n t e r p r e t e d p r e v e n t e d the
emergence o f a broad s t r a t e g y f o r the i n d u s t r y on the l i n e s
o r i g i n a l l y hoped.
86. The C i v i l A v i a t i o n ( L i c e n s i n g ) Act 1960 l i m i t e d not o n l y
the range o f t h e A i r T r a n s p o r t L i c e n s i n g B o a r d ' s r e s p o n s i b i l i t i e s
but a l s o the p r a c t i c a l scope f o r i t t o p l a y a f o r m a t i v e r o l e .
It was a weakness, as t h e Report p o i n t s o u t , t h a t t h e o b j e c t i v e s
of B r i t i s h c i v i l a v i a t i o n p o l i c y were not s e t clown more f u l l y as
a guide t o a c t i o n .
The tendency has been f o r the L i c e n s i n g Board
to await a p p l i c a t i o n s and t o grant t h o s e which s a t i s f i e d a
limited number o f v e r y g e n e r a l c r i t e r i a . ­
87. In the p r e s e n t White Paper, the Government a r e s e t t i n g out
a broad s t r a t e g i c framework as a guide both t o the f u t u r e
regulatory a u t h o r i t y , and t o t h e i n d u s t r y .
The a d o p t i o n of the
objectives and p o l i c i e s s e t out i n t h i s White Paper w i l l
require the new r e g u l a t o r y body t o act p o s i t i v e l y i n p u r s u i t o f
the Government s d e c l a r e d o b j e c t i v e s and p o l i c i e s .
I t w i l l need
sometimes t o t a k e the i n i t i a t i v e r a t h e r than j u s t t o respond t o
the i n i t i a t i v e s o f a p p l i c a n t a i r l i n e s .
C l e a r l y t h e need t o
choose between competing c l a i m s t o s e r v e p a r t i c u l a r r o u t e s w i l l
remain but i n f u t u r e the b a s i s f o r s e l e c t i o n w i l l be d i f f e r e n t .
The future r e g u l a t o r y body w i l l be r e s p o n s i b l e , w i t h i n the terms
of the Government's d e c l a r e d p o l i c y , f o r shaping r o u t e networks
and f o r measures t o s t r e n g t h e n the i n d u s t r y ' s s t r u c t u r e .
It will
have to c o n s i d e r what r o l e s a r e needed and a r e a v a i l a b l e f o r
airlines to perform and the a b i l i t y of p a r t i c u l a r a i r l i n e s t o
perform them.
T h i s w i l l i n v o l v e a more d i s c r i m i n a t i n g approach
than has h i t h e r t o o b t a i n e d .
I t w i l l sometimes be n e c e s s a r y , f o r
example, e x p l i c i t l y to c l o s e a s e c t o r o f a c t i v i t y t o new e n t r a n t s ,
or to encourage o r d i s c o u r a g e c e r t a i n k i n d s o f d i v e r s i f i c a t i o n by
airlines.
1
88. in t h i s and i n o t h e r r e s p e c t s t h e r e w i l l need t o be a
continuing d i a l o g u e between the r e g u l a t o r y body and t h e i n d u s t r y
as a b a s i s f o r forward p l a n n i n g .
The r e l a t i o n s h i p w i l l need t o
be c o n s u l t a t i v e and not c o n f i n e d t o the formal h e a r i n g o f e v i d e n c e
and argument.
The working out o f the d e t a i l s o f Government p o l i c y ,
over the v e r y broad range o f m a t t e r s c o v e r e d i n the Report and i n
this White P a p e r , w i l l i n v o l v e guidance and a d v i c e as w e l l as
direction.
The programme o f b a s i c r e s e a r c h t o be undertaken by
the new body w i l l l e a d t o a b e t t e r understanding o f the environment
i which the i n d u s t r y o p e r a t e s , f o r the i n d u s t r y * s b e n e f i t as w e l l
the Government.'s.
lf
as
26 89. The Government b e l i e v e t h a t the economic r e g u l a t i o n of the
industry should c o n t i n u e t o be c a r r i e d out by an e x p e r t body t h a t
is not s u b j e c t t o d e t a i l e d s u p e r v i s i o n by M i n i s t e r s i n i t s day t o
day d e c i s i o n s and which, t h e r e f o r e , should l i e o u t s i d e the normal
framework of a Government department.
As the Report p o i n t s o u t ,
a separate body can speak a u t h o r i t a t i v e l y both to and f o r the
industry.
Within the d i s c r e t i o n a l l o w e d i t by the Government's
formal p o l i c y s t a t e m e n t and d i r e c t i v e s , d e t a i l e d d e c i s i o n s can be
taken w i t h f u l l knowledge and understanding and w i t h t h e , u n d i v i d e d
attention that the M i n i s t e r i n charge of a busy department cannot
hope to g i v e .
Safety and T e c h n i c a l
Regulation
9 0 . The Report s t r e s s e s the i n t e r - r e l a t i o n s h i p between the
economic, o p e r a t i o n a l and t e c h n i c a l r e g u l a t i o n of the i n d u s t r y .
All aspects of a i r l i n e a c t i v i t y have a b e a r i n g on the s a f e t y o f
the s e r v i c e s p r o v i d e d t o the p u b l i c .
C o n v e r s e l y , the achievement
of high standards o f s a f e t y imposes an economic c o s t which needs
to be taken f u l l y i n t o account both i n c r e a t i n g the c o n d i t i o n s i n
which a i r l i n e s can o p e r a t e p r o f i t a b l y and i n a s s e s s i n g the
a b i l i t y of an a i r l i n e t o f i l l a p a r t i c u l a r r o l e .
The more
purposive d i r e c t i o n of economic r e g u l a t i o n which the Government
now intend t o adopt w i l l make i t more important t o take account
of these r e l a t i o n s h i p s .
The q u a l i t y o f d e c i s i o n s , both about an
a i r l i n e ' s c a p a c i t y and performance and about t h e course o f f u t u r e
developments, w i l l be improved i f the r e g u l a t o r y a u t h o r i t y has t h e
fullest p o s s i b l e knowledge and understanding o f a l l a s p e c t s of
airline a c t i v i t y .
91. There are c l o s e l i n k s between the work on o p e r a t i o n a l safety, which i s at p r e s e n t the r e s p o n s i b i l i t y of the D i r e c t o r General o f S a f e t y and O p e r a t i o n s , and the work of the N a t i o n a l Air T r a f f i c C o n t r o l S e r v i c e s , which both at p r e s e n t come w i t h i n the Board of Trade ( t h e l a t t e r j o i n t l y w i t h the M i n i s t r y of Defence).
With t e c h n i c a l advance, t h e r e a r e a l s o i n c r e a s i n g l y close l i n k s between the o p e r a t i o n a l s a f e t y work at present conducted by the Board o f Trade and the work on a i r w o r t h i n e s s conducted by the A i r R e g i s t r a t i o n Board;
i n d e e d , the A i r Registration Board has r e c e n t l y s u g g e s t e d that t h e r e might be a case f o r combining some o f t h e s e f u n c t i o n s .
The s e v e r a l a s p e c t s of o p e r a t i o n a l r e g u l a t i o n - the c e r t i f i c a t i o n o f a i r w o r t h i n e s s , the r u l e s governing the f l y i n g o f a i r c r a f t , the t e s t i n g of professional competence, the assessment of an a i r l i n e ' s a b i l i t y to operate s a f e l y and the c o n t r o l o f a i r c r a f t movements - a r e interlocking a s p e c t s o f a s i n g l e o p e r a t i n g environment. 92. For these r e a s o n s , the Government accept t h a t t h e enhanced
economic f u n c t i o n s should be c a r r i e d oirt, i n accordance w i t h a published p o l i c y d i r e c t i v e , by a r e g u l a t o r y a u t h o r i t y o u t s i d e the normal departmental machinery;
t h a t t h i s a u t h o r i t y should combine w i t h t h e s e f u n c t i o n s r e s p o n s i b i l i t y f o r the o p e r a t i o n a l
regulation o f the i n d u s t r y ;
and t h a t a l l the o p e r a t i o n a l and technical f u n c t i o n s should be brought t o g e t h e r w i t h i n the same body. They a c c e p t , t h e r e f o r e , t h a t t h e r e should be a s i n g l e Civil A v i a t i o n A u t h o r i t y having r e s p o n s i b i l i t y f o r the whole spectrum of economic, o p e r a t i o n a l and t e c h n i c a l r e g u l a t i o n , including r e s p o n s i b i l i t y f o r a i r w o r t h i n e s s and f o r the non-
Nilitary aspect o f t h e a i r t r a f f i c c o n t r o l s e r v i c e s .
A single body with r e s p o n s i b i l i t y o v e r t h i s whole f i e l d would be i n the est p o s i t i o n t o form coherent judgments both on the a c t i v i t i e s
of i n d i v i d u a l a i r l i n e s and on t h e developments which w i l l b e s t serve the n a t i o n a l i n t e r e s t i n t h i s r a p i d l y expanding i n d u s t r y .
D
27
CONFIDENTIAL
9 3 . The C i v i l A v i a t i o n A u t h o r i t y w i l l be a b l e t o d e v e l o p a
comprehensive e x p e r t i s e i n a l l a s p e c t s o f the i n d u s t r y ' s a f f a i r s .
As such, i t would be w e l l p l a c e d t o a t t r a c t s t a f f o f the many
professional s k i l l s r e q u i r e d .
A l a r g e r o r g a n i s a t i o n such as t h i s
would be a b l e to o f f e r b e t t e r c a r e e r p r o s p e c t s t o many o f i t s
highly s k i l l e d and s p e c i a l i s e d p e r s o n n e l , who would g a i n the
opportunity t o broaden t h e i r f i e l d s of s p e c i a l i s a t i o n by moving
between areas of work t h a t a r e a t p r e s e n t i n s e p a r a t e compartments.fc
At the same t i m e , as the Report p o i n t s o u t , t h e r e would be a'
continuity of e x p e r i e n c e t h a t the C i v i l S e r v i c e i s l e s s a b l e t o
guarantee.
P r o v i s i o n w i l l be made f o r some movement of s t a f f
between the A u t h o r i t y and Government Departments;.
94. In r e a c h i n g t h i s d e c i s i o n , the Government r e c o g n i s e that
certain problems w i l l r e q u i r e s o l u t i o n and t h a t adjustments w i l l '
have to be made.
I n p a r t i c u l a r the s e p a r a t i o n o f p o l i c y - m a k i n g
from i t s e x e c u t i o n w i l l r e q u i r e the maintenance of the c l o s e s t
contacts between the Board o f Trade and the A u t h o r i t y a t a l l
times, and. both w i l l be i n v o l v e d t o g e t h e r i n a number o f important
activities.
­
95. In a c c e p t i n g the recommendation t h a t the r e s p o n s i b i l i t y
for a i r w o r t h i n e s s should be brought w i t h i n t h e A u t h o r i t y , the
Government i n t e n d no r e f l e c t i o n on the A i r R e g i s t r a t i o n B o a r d ' s
past performance.
The Board j u s t l y e n j o y s a h i g h r e g a r d through­
out the w o r l d and the Government a r e anxious t h a t the scope and
character o f the B o a r d ' s r e l a t i o n s w i t h the manufacturing and
operating i n d u s t r i e s should not be i m p a i r e d .
The Government w i l l
be concerned t h e r e f o r e , t o ensure a minimum o f d i s t u r b a n c e e i t h e r
to the p r e s e n t i n t e r n a l o r g a n i s a t i o n of the A i r R e g i s t r a t i o n
Board or t o the p r e s e n t arrangements f o r c o n s u l t a t i o n s w i t h o u t ­
side i n t e r e s t s .
The A u t h o r i t y w i l l draw o n . t h e . s a m e sources o f
advice as a r e a t p r e s e n t a v a i l a b l e t o t h e A . R . B .
96. ' The N a t i o n a l A i r T r a f f i c C o n t r o l S e r v i c e has the duty b o t h
of c o n t r o l l i n g a i r c r a f t movements and a l s o o f accommodating
different c a t e g o r i e s of u s e r s w i t h i n the United Kingdom's l i m i t e d
airspace.
A p p r o x i m a t e l y h a l f the a i r c r a f t based i n t h i s country
are c i v i l , and h a l f a r e engaged on d e f e n c e d u t i e s , w i t h a i r c r a f t
movements i n about the same p r o p o r t i o n .
The needs of t h e v a r i o u s
categories of c i v i l users and o f d e f e n c e are d i f f e r e n t and o f t e n
conflicting.
The r e s o l u t i o n o f t h e s e c o n f l i c t i n g requirements
fe
demands a combined approach to the use o f the U n i t e d Kingdom's a i r - "
space as a w h o l e , and i t was f o r t h i s r e a s o n t h a t the N a t i o n a l A i r
Traffic C o n t r o l S e r v i c e was s e t up i n 1 962 as a j o i n t d e f e n c e and
civil body.
The c o n f i d e n c e of a l l u s e r s of the a i r i n i t s i m p a r t ­
iality and a b i l i t y t o take the n a t i o n a l v i e w i s important to i t s
success. The S e r v i c e w i l l c o n t i n u e t o o p e r a t e on an i n t e g r a t e d andl
national b a s i s and w i l l be r e s p o n s i b l e j o i n t l y t o the M i n i s t r y of F
Defence and t o the C i v i l A v i a t i o n A u t h o r i t y .
The appointment of
I
the C o n t r o l l e r , who may be e i t h e r a c i v i l i a n or a s e r v i n g o f f i c e r ,
and other s e n i o r o f f i c e r s w i l l as now be made j o i n t l y w i t h t h e
1
Ministry o f D e f e n c e .
The A u t h o r i t y , i n t a k i n g o v e r from the Board 1
of Trade the r e s p o n s i b i l i t y f o r p r o v i d i n g the c i v i l component of
1
the j o i n t S e r v i c e w i l l be s u b j e c t t o t h e G o v e r n m e n t s d i r e c t i o n on I
natters a f f e c t i n g the b a l a n c e between c i v i l needs and those o f
1
defence.
I
97. In t a k i n g o v e r the s a f e t y of a i r c r a f t o p e r a t i o n s and r e s p o n s i ­
bility f o r the c i v i l s i d e o f a i r t r a f f i c c o n t r o l , the A u t h o r i t y wil"
acquire c e r t a i n r e s p o n s i b i l i t i e s i n r e l a t i o n to g e n e r a l a v i a t i o n an
"ill not be s o l e l y concerned w i t h commercial a i r l i n e o p e r a t i o n s .
he Governments formal s t a t e m e n t o f p o l i c y w i l l i n c l u d e guidance tc
the A u t h o r i t y i n matters a f f e c t i n g a e r i a l work and p r i v a t e f l y i n g .
28
T
The C o n s t i t u t i o n o f
the C i v i l A v i a t i o n
Authority
98.
The C i v i l A v i a t i o n A u t h o r i t y w i l l be e s t a b l i s h e d as a body
c o r p o r a t e governed by a Board a p p o i n t e d by the Board of T r a d e .
This Board w i l l comprise members w i t h e x e c u t i v e r e s p o n s i b i l i t i e s
t o g e t h e r w i t h independent members. The i n t e n t i o n i s that one
independent member should have s p e c i a l r e s p o n s i b i l i t y f o r the
i n t e r e s t s o f consumers.
99. The d e c i s i o n s o f the A u t h o r i t y w i l l be d e c i s i o n s o f i t s
Board, s u b j e c t to any measure of d e l e g a t i o n t h a t may be
provided, f o r .
The A u t h o r i t y w i l l conduct formal h e a r i n g s of
applications f o r a i r service licences in appropriate cases;
the procedures g o v e r n i n g such h e a r i n g s w i l l come under the
g e n e r a l s u p e r v i s i o n of the Council on. T r i b u n a l s .
Because of
the e x e c u t i v e r e s p o n s i b i l i t i e s of most Board members, i t i s
e n v i s a g e d that h e a r i n g s w i l l take p l a c e b e f o r e the f u l l Board
only i n cases of major s i g n i f i c a n c e .
100. The Government a c c e p t the recommendation t h a t a system
of p r e - h e a r i n g s should be i n t r o d u c e d , p r o v i d e d t h a t t h i s does
not r e s u l t i n two l e v e l s o f d e c i s i o n .
The p r e - h e a r i n g
procedures w i l l be concerned w i t h t h e c l a r i f i c a t i o n of t h e
i s s u e s and the e v i d e n c e t o be heard, so as t o e x p e d i t e formal
hearings.
The P o l i c y statement and a p p e a l s
101. As s t a t e d i n paragraph 13 above, t h e Government accept
that t h e i r o b j e c t i v e s and p o l i c i e s f o r the i n d u s t r y should
from time t o time be s e t out i n a p u b l i s h e d s t a t e m e n t .
They
a l s o . a c c e p t the recommendation that such statements should be
made b i n d i n g upon the A u t h o r i t y by g i v i n g them a s u i t a b l y
formal s t a t u s and s u b m i t t i n g them t o P a r l i a m e n t f o r a p p r o v a l .
They propose t h e r e f o r e t o make p r o v i s i o n , i n the Act e s t a b l i s h i n g
the A u t h o r i t y , f o r s t a t e m e n t s o f p o l i c y t o be made by means o f
appropriate instruments.
102. The Government r e c o g n i s e that s t a b i l i t y and c o n t i n u i t y o f
p o l i c y a r e important f o r the o r d e r e d development o f the i n d u s t r y
and a c c e p t , t h e r e f o r e , t h a t changes should be r e l a t i v e l y
infrequent.
Subject t o c e r t a i n p r o v i s i o n s f o r s p e c i f i c d i r e c t ­
i v e s t o the A u t h o r i t y d i s c u s s e d below, t h e y a c c e p t that t h e
d e c l a r e d o b j e c t i v e s and p o l i c i e s should be amended o n l y by way
of s i m i l a r formal p r o c e d u r e s .
103. The Government share the view t h a t the S3/-stem of a p p e a l s
e s t a b l i s h e d by the C i v i l A v i a t i o n ( L i c e n s i n g ) Act 1960 has
undermined the a u t h o r i t a t i v e c h a r a c t e r o f the l i c e n s i n g body.
They a c c e p t the recommendation that the grounds on which an
appeal may be made a g a i n s t a d e c i s i o n o f the A u t h o r i t y i n
matters o f a i r s e r v i c e l i c e n c e s should be l i m i t e d to the i s s u e
of the c o n s i s t e n c y o f such a d e c i s i o n w i t h t h e d e c l a r e d p o l i c y .
104. The Government a c c e p t t h a t an a g g r i e v e d p a r t y should be
a b l e , as at p r e s e n t , t o o b j e c t to a d e c i s i o n of the A u t h o r i t y
on grounds of v i r e s and t o seek a p r e r o g a t i v e w r i t so as to
29 bring p r o c e d u r a l d e f e c t s b e f o r e the C o u r t s ;
but they s e e
d i f f i c u l t y i n the f u r t h e r recommendations that the Courts
a j u d i c i a l t r i b u n a l should, hear an appeal on the i s s u e o f
the c o n s i s t e n c y of a d e c i s i o n w i t h -the d e c l a r e d p o l i c y .
The
formal p o l i c y s t a t e m e n t , b e i n g concerned w i t h e s s e n t i a l l y
economic c r i t e r i a , i s u n l i k e l y t o be e x p r e s s e d i n terms l e n d i n g
themselves t o j u d i c i a l i n t e r p r e t a t i o n .
The c o n s i s t e n c y o f t h e
Authority's d e c i s i o n s w i t h t h e p o l i c y can b e s t be judged by the
Board o f T r a d e , which w i l l have drawn up the p o l i c y statement
in the f i r s t p l a c e .
o r
105. A c c o r d i n g l y the Government propose t h a t a p a r t y t o a c a s e
decided by the A u t h o r i t y , i n a m a t t e r o f a i r s e r v i c e l i c e n s i n g ,
should have the r i g h t t o r e f e r the m a t t e r t o the Board o f Trade
on the grounds t h a t the d e c i s i o n cannot r e a s o n a b l y be brought
within the terms of the Governments' s t a t e m e n t of p o l i c y .
In order t o l i m i t abuse of t h i s p r o c e d u r e , the Board o f
Trade would take the power t o v a r y the d e c i s i o n , at t h e i r
discretion, o n l y i f i n t h e i r o p i n i o n t h e d e c i s i o n was not
consistent w i t h the p o l i c y then i n f o r c e .
106. The Government a l s o accept that t h e Board o f Trade
should
be empowered t o suspend, a c t i o n on a c a s e , i n a m a t t e r o f a i r
service l i c e n s i n g , on g i v i n g n o t i c e t h a t i t p r e s e n t e d i s s u e s o f
policy which they wished t o c o n s i d e r .
T h i s power would be
exercisable e i t h e r b e f o r e or a f t e r t h e A u t h o r i t y had reached i t s
decision and even though the A u t h o r i t y ' s d e c i s i o n , i f r e a c h e d , was
within the terms o f the p o l i c y then i n f o r c e .
T h i s power i s
necessary to ensure that the p o l i c y can be adapted from time t o
time in o r d e r t o meet changed s i t u a t i o n s , as w e l l as t o ensure
the long-term c o n s i s t e n c y of the A u t h o r i t y ' s d e c i s i o n s w i t h t h e
Government's and P a r l i a m e n t ' s i n t e n t i o n s .
T h i s i s , however, a
reserve power t o be used s p a r i n g l y and o n l y when a major change
of p o l i c y i s c a l l e d f o r .
Air S e r v i c e
licences
107. The a d o p t i o n of more p u r p o s i v e r e g u l a t o r y p o l i c i e s on the
lines d e s c r i b e d i n paragraph 8 8 and the b r i n g i n g t o g e t h e r of
economic and o p e r a t i o n a l r e g u l a t i o n under a s i n g l e Board w i l l
demand an e a r l y r e a p p r a i s a l o f the forms and c a t e g o r i e s o f a i r
service l i c e n c e s .
Among the p o i n t s t o be c o n s i d e r e d a r e the
kinds of a i r s e r v i c e s t h a t need to be l i c e n s e d , the e x t e n t ' t o
which they should each be l i c e n s e d s e p a r a t e l y and the way i n
which requirements b e a r i n g on tour o p e r a t o r s should be g i v e n
effect.
In p a r t i c u l a r i t w i l l be n e c e s s a r y t o d e f i n e the way
in which the l i c e n s i n g system should r e f l e c t the duty of the
Civil A v i a t i o n A u t h o r i t y t o s a t i s f y i t s e l f as t o an a i r l i n e ' s
general competence, . i t s a b i l i t y to o p e r a t e s a f e l y , the adequacy
of its f i n a n c i a l r e s o u r c e s and i t s compliance w i t h the r e q u i r e m e n t
regarding the e s t a b l i s h m e n t o f o r p a r t i c i p a t i o n i n a p p r o p r i a t e
industrial n e g o t i a t i n g machinery, b e f o r e a l l o w i n g i t t o engage
m commercial a i r l i n e o p e r a t i o n s .
One a s p e c t o f t h i s q u e s t i o n
is the need t o modity the. p r e s e n t arrangements, under which an
airline that has not passed some of these t e s t s may n o n e t h e l e s s
engage in exempt s e r v i c e s of a commercial
character.
The
30 Government w i l l d i r e c t t h e A u t h o r i t y to keep these matters under
continuing r e v i e w , b e a r i n g i n mind the need f o r the s i m p l i c i t y
and r e a s o n a b l e s t a b i l i t y of the l i c e n s i n g arrangements.
The a l l o c a t i o n of
functions
108. I n a c c e p t i n g the concept o f a C i v i l A v i a t i o n A u t h o r i t y on
the l i n e s proposed i n the R e p o r t , the Government are a c c e p t i n g
also the broad complex o f f u n c t i o n s t h a t t h e Report proposes the
Authority should d i s c h a r g e .
There a r e , however, c e r t a i n
exceptions and q u a l i f i c a t i o n s .
109. The Report recommends t h a t the A u t h o r i t y should be i n a
position t o c a r r y the main w e i g h t o f i n t e r n a t i o n a l t r a f f i c
rights n e g o t i a t i o n s i n most c a s e s , i n a s s o c i a t i o n w i t h the
Foreign and Commonwealth O f f i c e , but r e c o g n i s e s that the Board
of Trade, which w i l l remain r e s p o n s i b l e f o r g e n e r a l c i v i l
aviation p o l i c y , must r e s e r v e the r i g h t t o concern i t s e l f w i t h
these. There i s f o r c e and m e r i t i n t h i s p r o p o s a l s i n c e the
i n t e r r e l a t i o n between r o u t e l i c e n s i n g and o t h e r d e c i s i o n s o f
economic r e g u l a t i o n on the one hand and the n e g o t i a t i o n o f
international t r a f f i c r i g h t s on the o t h e r i s so c l o s e that the
same body should be i n t i m a t e l y i n v o l v e d i n b o t h .
110. The Government c o n s i d e r , however, t h a t i n t e r n a t i o n a l
negotiations on c i v i l a v i a t i o n , as on o t h e r s u b j e c t s , must remain
the r e s p o n s i b i l i t y o f M i n i s t e r s and t h a t i t would be n e i t h e r
appropriate nor p r a c t i c a b l e t o charge the A u t h o r i t y w i t h the duty
of conducting i n t e r n a t i o n a l d i s c u s s i o n s whether on t r a f f i c r i g h t s
or on such o t h e r c i v i l a v i a t i o n m a t t e r s as the acceptance and
discharge o f o b l i g a t i o n s under the Chicago Convention.
Since
these are s p e c i a l i s e d a r e a s c l o s e l y r e l a t e d t o a v i a t i o n p o l i c y
the Government propose t h a t they should, as i n t h e p a s t , be
primarily the r e s p o n s i b i l i t y o f the Board o f Trade a d v i s e d by
the A u t h o r i t y .
The Board o f Trade w i l l have the power t o g i v e
specific d i r e c t i o n s t o t h e A u t h o r i t y where t h i s i s n e c e s s a r y t o
secure the implementation o f i n t e r n a t i o n a l o b l i g a t i o n s .
111. Nonetheless i t i s d e s i r a b l e t h a t t h e A u t h o r i t y should be
intimately a s s o c i a t e d w i t h the Board o f Trade i n t h e s e m a t t e r s .
The Government i n t e n d t h a t the A u t h o r i t y should have an a d v i s o r y
role in the n e g o t i a t i o n o f t r a f f i c r i g h t s and should p r o v i d e
in appropriate cases members o f the U n i t e d Kingdom d e l e g a t i o n
for i n t e r n a t i o n a l n e g o t i a t i o n s and m e e t i n g s .
In o t h e r m a t t e r s
only the A u t h o r i t y w i l l be a b l e t o p r o v i d e the s p e c i a l i s t
representation i n i n t e r n a t i o n a l d i s c u s s i o n s .
Accordingly
arrangements w i l l be made f o r the A u t h o r i t y to p a r t i c i p a t e i n
international n e g o t i a t i o n s and i n the p r o c e e d i n g s of i n t e r n a t i o n a l
organisations, and i n a p p r o p r i a t e c a s e s t o r e p r e s e n t the
United Kingdom i n those m a t t e r s .
112.The Report recommends t h a t the A u t h o r i t y should have the esponsibility f o r the c o n t r o l of a i r c r a f t n o i s e .
Most n o i s e abatement measures impose some degree of p e n a l t y on a v i a t i o n . Considerations of t e c h n i c a l , f e a s i b i l i t y , c o m p a t i b i l i t y w i t h safety, and the economic p e n a l t i e s , must be of d i r e c t concern to the A u t h o r i t y , but t h e Government have a duty t o ensure that balance i s maintained between the i n t e r e s t s o f the i n d u s t r y ^ the amenity o f t h e p u b l i c .
I t would not be s u f f i c i e n t t o r
a
an
' ' '31 ­
: :
l y on the terms o f a g e n e r a l p o l i c y d i r e c t i v e .
The main
r e s p o n s i b i l i t y f o r n o i s e abatement must t h e r e f o r e remain
ith the Board of T r a d e , c o n s u l t i n g t h e A u t h o r i t y where
appropriate, and w i t h the power to i s s u e and p u b l i s h d i r e c t i o n s
to the A u t h o r i t y t o implement p a r t i c u l a r n o i s e abatement measures.
r e
v
113. The A u t h o r i t y w i l l not be empowered t o make s u b o r d i n a t e
l e g i s l a t i o n but w i l l be the p r i n c i p a l source of a d v i c e t o the
Board of Trade in the making of such l e g i s l a t i o n i n the s a f e t y ,
technical and o p e r a t i o n a l f i e l d s .
The A u t h o r i t y w i l l , however,
have powers t o make b y e - l a w s i n c e r t a i n c a s e s , s u b j e c t t o
confirmation by the Board of T r a d e , t o g e t h e r w i t h powers t o
impose c o n d i t i o n s o r requirements i n c o n n e c t i o n w i t h t h e grant
of l i c e n c e s o r o t h e r p e r m i s s i o n s .
The Board o f Trade w i l l r e t a i n
a small s t a f f w i t h understanding o f s a f e t y and o p e r a t i o n a l
matters s u f f i c i e n t t o advi.se on p o l i c y and on l e g i s l a t i o n m a t t e r s .
114. As part o f i t s o v e r a l l r e s p o n s i b i l i t y f o r s a f e t y m a t t e r s ,
the A u t h o r i t y w i l l have r e s p o n s i b i l i t y f o r the l i c e n s i n g of
aerodromes. Management and o p e r a t i o n o f the Highlands and I s l a n d s
aerodromes and of Aberdeen depend t o a s u b s t a n t i a l d e g r e e on
services p r o v i d e d by personnel o f t h e N a t i o n a l A i r T r a f f i c
Control S e r v i c e and o f the C i v i l A v i a t i o n O f f i c e f o r S c o t l a n d .
Since both t h e s e o r g a n i s a t i o n s w i l l be t r a n s f e r r e d t o t h e C i v i l
Aviation A u t h o r i t y i t i s e x p e d i e n t a l s o t o t r a n s f e r the ownership
and management of t h e s e aerodromes.
The; Government w i l l look
to the C i v i l A v i a t i o n A u t h o r i t y in c o n j u n c t i o n v/ith t h e Airways
Board, to study and make recommendations?, on the f u t u r e ownership
and management of t h i s group having r e g a r d t o economies which
might r e s u l t from common c o n t r o l w i t h t h e a s s o c i a t e d a i r s e r v i c e s .
It is p o s s i b l e that a t the time when t h e C i v i l A v i a t i o n A u t h o r i t y
is set up one o r two o t h e r c i v i l aerodromes w i l l remain i n the
ownership o f t h e Board o f T r a d e .
The Board o f Trade w i l l c o n t i n u e ,
in accordance w i t h l o n g - s t a n d i n g Government p o l i c y , t o seek t o
transfer ownership o r management o f t h e s e aerodromes t o o t h e r
responsible b o d i e s on r e a s o n a b l e t e r m s .
115. The Report emphasises the need f o r t h e A u t h o r i t y t o probe
more thoroughly the f i n a n c i a l and m a n a g e r i a l r e s o u r c e s o f
airlines and a l s o t h e need f o r the f u l l e r p u b l i c a t i o n o f f i n a n c i a l
and s t a t i s t i c a l d a t a .
I n p a r t i c u l a r t h e Report recommends that
financial r e s u l t s should be reported, i n a standard form.
The
Government accept t h a t the A u t h o r i t y w i l l need t o o b t a i n f u l l and
up-to-date r e t u r n s and w i l l empower i t b o t h t o o b t a i n and t o
publish such i n f o r m a t i o n in r e s p e c t o f a i r l i n e s and the o r g a n i s e r s
of i n c l u s i v e t o u r s .
Arrangements w i l l b e made f o r c o - o r d i n a t i o n
between the A u t h o r i t y and. the Government S t a t i s t i c a l S e r v i c e .
The
Government r e g a r d the p u b l i c a t i o n of f u l l e r i n f o r m a t i o n as being
of considerable, importance so t h a t the p u b l i c may be a b l e t o judge
the performance o f the i n d u s t r y as w e l l a s that of the Authority^
in exercise o f i t s s t e w a r d s h i p .
116. The s t e a d y e v o l u t i o n , of i n t e r l o c k i n g arrangements between airlines and the o r g a n i s e r s of group t r a v e l , t o g e t h e r w i t h the emphasis p l a c e d i n t h e g e n e r a l o b j e c t i v e on the i n t e r e s t s o f the consumer, r e q u i r e t h a t the A u t h o r i t y should be i n a p o s i t i o n t o s a t i s f y i t s e l f t h a t adequate arrangements have been made t o
safeguard the p u b l i c a g a i n s t bbo r i s k s consequent upon t h e
f i n a n c i a l f a i l u r e o f o r g a n i s e r ^ o f group t r a v e l i n v o l v i n g
a i r t r a n s p o r t and, i f necessarfjf t o r e q u i r e the f u r n i s h i n g
of a p p r o p r i a t e g u a r a n t e e s .
Financial
contro'1
117- The annual e x p e n d i t u r e o f the A u t h o r i t y i s l i k e l y t o be
about £25 m i l l i o n , the g r e a t e r part o f t h i s f i g u r e being
accounted f o r by the p r o v i s i o n of a i r n a v i g a t i o n s e r v i c e s and
other t e c h n i c a l s e r v i c e s .
The A u t h o r i t y w i l l be financed,
p a r t l y by f e e s and c h a r g e s f o r i t s s e r v i c e s , many o f which a r e
a l r e a d y so f i n a n c e d , i n whole or i n part", and p a r t l y by the
p r o v i s i o n of s e r v i c e s on c o n t r a c t to Government departments.
Where and f o r so long as c o s t s cannot bra f u l l y r e c o v e r e d i n
these ways, fincince w i l l be p r o v i d e d by means o f g r a n t s from
public funds, t h e i r s i z e b e i n g determined, i n advance by the
f i n a n c i a l o b j e c t i v e s which the Government w i l l s e t the A u t h o r i t y
f o r each o f i t s main areas o f a c t i v i t y .
118. The long term o b j e c t i v e must b e f o r the A u t h o r i t y t o
r e c o v e r the f u l l c o s t of i t s s e r v i c e s i n a l l cases i n which t h a t
is appropriate.
The pace towards f u l l c o s t r e c o v e r y o f en
route n a v i g a t i o n a l s e r v i c e s w i l l depend on t h e outcome o f
i n t e r n a t i o n a l d i s c u s s i o n s and i n t h i s c a s e i t w i l l be n e c e s s a r y
f o r the Board o f Trade t o approve the proposed c h a r g e s .
Where
p o s s i b l e , however, t h e A u t h o r i t y w i l l be p e r m i t t e d to determine
i t s own f e e s and c h a r g e s , i n the l i g h t o f the f i n a n c i a l
o b j e c t i v e s s e t f o r i t by the Government and b e a r i n g i n mind the
d i s c i p l i n e imposed by l i m i t e d and p r e - d e t e r m i n e d g r a n t s .
Within
these c o n t r o l s and the G o v e r n m e n t s p r i c e s and incomes p o l i c y
the A u t h o r i t y w i l l be a b l e t o enjoy the maximum d e g r e e o f
freedom i n the way i t d i s c h a r g e s i t s r e s p o n s i b i l i t i e s .
119The A u t h o r i t y w i l l be r e q u i r e d t o employ modern management'
techniques and, where a p p r o p r i a t e , to produce accounts on a
commercial b a s i s .
The accounts, a f t e r a u d i t by the C o m p t r o l l e r
and A u d i t o r G e n e r a l , w i l l be p r e s e n t e d t o Parliament w i t h the
A u t h o r i t y ' s Annual R e p o r t .
33.
CONFIDENTIAL
The A u t h o r i t y as a c o n s t i t u t i o n a l
innovation
120. The Government have been moved by the need t o f i n d the b e s t
solution t o the problems o f the c i v i l a v i a t i o n i n d u s t r y .
They
recognise t h a t the e s t a b l i s h m e n t of a C i v i l A v i a t i o n A u t h o r i t y
on the l i n e s proposed i n v o l v e s a number o f c o n s t i t u t i o n a l and
administrative i n n o v a t i o n s .
W i t h i n the- terms of the d e c l a r e d
policy, the A u t h o r i t y w i l l have a s u b s t a n t i a l d i s c r e t i o n and
theee w i l l be e f f e c t i v e l i m i t a t i o n s on the a b i l i t y of the Board
of Trade t o i n t e r v e n e in the A u t h o r i t y ' s d e t a i l e d d e c i s i o n s ,
whether on t h e i r own i n i t i a t i v e or on the i n i t i a t i v e o f
aggrieved p a r t i e s .
121. The A u t h o r i t y w i l l n o t , however, be a c o m p l e t e l y independent
body. The e s s e n t i a l f e a t u r e o f i t s s t a t u s w i l l be the s e p a r a t i o n
between p o l i c y f o r m a t i o n and the d e t a i l e d a p p l i c a t i o n o f
policy.
In the l a t t e r f u n c t i o n s the A u t h o r i t y w i l l have a wide
discretion, but t h e r e w i l l be ample p r o v i s i o n t o ensure that i t
does not exceed that d i s c r e t i o n . . The f o r m a t i o n o f the p o l i c y
will remain the r e s p o n s i b i l i t y o f M i n i s t e r s b e f o r e Parliament
and that p o l i c y , and any changes i n i t , w i l l have to be d e c l a r e d
and approved.
The Board o f Trade w i l l r e t a i n d i r e c t r e s p o n s i b i l i
in matters t h a t i n v o l v e w i d e r c o n s i d e r a t i o n s than the A u t h o r i t y
would be competent t o d e c i d e - i n t e r n a t i o n a l m a t t e r s , the c o n t r o l
of aircraft, n o i s e , the s i t i n g o f aerodromes, the making of
subordinate l e g i s l a t i o n and the c o - o r d i n a t i o n of the m i l i t a r y
and c i v i l i n t e r e s t s i n a i r t r a f f i c c o n t r o l .
But i n each o f t h e s e
reserved f u n c t i o n s t h e A u t h o r i t y w i l l have i t s c o n t r i b u t i o n t o
make i n p a r t n e r s h i p w i t h the Board of Trade and o t h e r departments
of Government.
12-2. The A u t h o r i t y w i l l have t o be i n a p o s i t i o n t o j u s t i f y i t s
performance t o the Board o f T r a d e , P a r l i a m e n t and the p u b l i c .
It w i l l have t o show, i n i t s annual r e p o r t s and p u b l i s h e d
results, t h a t i t i s c a r r y i n g out i t s r e s p o n s i b i l i t i e s i n p u r s u i t
of the o b j e c t i v e s and i n implementation o f the p o l i c i e s l a i d down
It w i l l be a c c o u n t a b l e a g a i n s t p r e s c r i b e d standards of f i n a n c i a l
performance and i t s a c t i o n s w i l l be s u b j e c t t o s u p e r v i s i o n by the
Council on T r i b u n a l s .
The u l t i m a t e c r i t e r i o n w i l l be the e x t e n t
to which the i n d u s t r y t h r i v e s and the p u b l i c are s e r v e d under the
Authority's s t e w a r d s h i p .
34
CONFIDENTIAL
CONFIDENTIAL VI.
SUMMARY:
THE SHAPE OF THE FUTURE 123.
The p r i n c i p a l o b j e c t i v e of c i v i l a v i a t i o n p o l i c y must be
to encourage the p r o v i s i o n of a i r s e r v i c e s by B r i t i s h c a r r i e r s ,
in s a t i s f a c t i o n of a l l s u b s t a n t i a l c a t e g o r i e s o f p u b l i c demand,
at the l o w e s t l e v e l of charges c o n s i s t e n t w i t h a high standard
of s a f e t y , an economic r e t u r n on investment and the s t a b i l i t y
and development of the i n d u s t r y .
This o b j e c t i v e must be s e t
in the c o n t e x t of the need t o h e l p s t r e n g t h e n the balance o f
payments and c o n t r i b u t e t o the o v e r a l l growth of the economy.
124.
The Government w i l l c r e a t e the c o n d i t i o n s n e c e s s a r y t o
strengthen the s t r u c t u r e o f the i n d u s t r y .
They w i l l e s t a b l i s h
an Airways Board c o n t r o l l i n g the p u b l i c s e c t o r a i r l i n e s , and
charged w i t h the task of s e c u r i n g that the f l e e t s and r o u t e s o f
BOAC and BEA are planned and marketed t o the b e s t o v e r a l l advantage
This Board w i l l have complete a u t h o r i t y and r e s p o n s i b i l i t y and
will notj t h e r e f o r e , r e p r e s e n t an a d d i t i o n a l l a y e r of d e c i s i o n ­
making .
125.
There i s a c o n t i n u i n g and promising r o l e f o r independent
airlines having the n e c e s s a r y f i n a n c i a l s t r e n g t h and managerial
competence.
The Government f a v o u r the l i c e n s i n g of a second
British c a r r i e r on scheduled s e r v i c e r o u t e s where c e r t a i n c r i t e r i a
are s a t i s f i e d .
The Government would a l s o welcome the emergence
of a "second f o r c e " a i r l i n e , formed by the amalgamation of two
or more e x i s t i n g independent c a r r i e r s , but cannot accept t h a t the
formation of such an a i r l i n e should be made c o n d i t i o n a l upon the
transfer t o i t o f a s i g n i f i c a n t p a r t o f the A i r C o r p o r a t i o n s
route networks .
1
126.
The Government accept the need t o s t r e n g t h e n the s t r u c t u r e
and improve the v i a b i l i t y of r e g i o n a l a i r s e r v i c e s through
the
formation of a r e g i o n a l a i r l i n e or a i r l i n e group.
127.
The Government a c c e p t the need f o r more r a t i o n a l p r i c i n g
policies and f o r a more a c t i v e r o l e i n r e l a t i o n t o I ATA.
The
Government accept t h a t i t may be n e c e s s a r y t o s u b s i d i s e c e r t a i n
air s e r v i c e s t h a t c o n t r i b u t e t o the economic and s o c i a l d e v e l o p ­
ment of the r e g i o n s .
They w i l l seek powers t o grant s u b s i d i e s
where these are shown to be j u s t i f i e d i n the l i g h t of d e t a i l e d
economic s t u d i e s . .
128.
The Government welcome the c o n s t r u c t i v e approach o f the
Edwards Committee t o human r e l a t i o n s q u e s t i o n s and w i l l p r o v i d e
for the o b l i g a t i o n s now p l a c e d on the A i r C o r p o r a t i o n s t o be
extended t o c o v e r a l l a i r l i n e s .
129.
The Government w i l l e s t a b l i s h a C i v i l A v i a t i o n A u t h o r i t y
to regulate the whole economic, o p e r a t i o n a l and t e c h n i c a l
environment o f the i n d u s t r y w i t h i n the terms o f a published
statement of o b j e c t i v e s and p o l i c i e s .
The A u t h o r i t y w i l l implement
the more p o s i t i v e economic p o l i c i e s t h a t a r e now t o be f o l l o w e d and
will be r e s p o n s i b l e a l s o f o r a l l a s p e c t s of a i r s a f e t y .
On
these m a t t e r s , i t w i l l d e a l on the same b a s i s w i t h a l l p u b l i c and
Private s e c t o r a i r l i n e s .
There w i l l be a l i m i t e d r i g h t of appeal
to the Board of T r a d e , on grounds t h a t a d e c i s i o n cannot r e a s o n a b l y
ebrought w i t h i n the terms o f the p o l i c y then i n f o r c e .
b
35 130.
The Board of Trade w i l l be r e s p o n s i b l e f o r l a y i n g down
the o b j e c t i v e s and p o l i c i e s f o r the i n d u s t r y as a whole and f o r
seeing t h a t the A u t h o r i t y c a r r i e s them o u t .
The Board of Trade
will continue to e x e r c i s e i t s p r e s e n t f u n c t i o n s i n r e l a t i o n t o
the Airways Board and the B r i t i s h A i r p o r t s A u t h o r i t y .
It will
continue t o bear the main r e s p o n s i b i l i t y f o r n e g o t i a t i n g i n t e r ­
national agreements, a f f e c t i n g c i v i l a v i a t i o n , f o r the i n v e s t i g a t i o n
of accidents and f o r the c o n t r o l of a i r c r a f t n o i s e .
131.
The Government a r e c o n f i d e n t that these changes w i l l enable
the industry to meet the c h a l l e n g e of the f u t u r e and to increeise
its c o n t r i b u t i o n to an expanding economy.
36
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CONFIDENTIAL