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Aviation History
1954
1954 - 1508.PDF
The Heron's external neatness is matched by a bright, comfortable passenger cabin. by political conditions which are outside the managerial sphere of air transport, it must be accepted until a better arrangement comes along. In passing, it may be observed that exchange of traffic rights by means of bilateral agreements is sometimes one-sided. Holland, for example, enjoys a large share of international traffic but can offer very few reciprocal rights. The Dutch population is about one-fifth of Great Britain's, but in 1953 the ton-mile output of K.L.M. was nearly 60 per cent of that for B.O.A.C. and B.E.A. combined. This fact may reflect Dutch political perseverance, K.L.M.'s commercial acumen and enterprise, relative backwardness on the part of the British airlines—or a combination of all three. To our mind, however, it does suggest that the Five Freedom concept is not quite as restrictive as some small nations profess it to be. There is a Sixth Freedom of which comparatively little mention is made—cabotage, or the right to carry traffic within national boundaries. The major example of cabotage today is the familiar one of West Germany, which lacks sovereignty and must permit foreign airlines to operate all local services. Under this heading the most important single question is "Are the airlines self-supporting?" To this we must reply definitely not. It has recently been estimated13 that the 62 major international airlines last year earned £800m revenue after incurring £790m expenses, but that if allowances were made for elevated mail-pay and subsidies this profit of £10m would be turned into a £40m loss. Furthermore, all airline calculations ignore the colossal discrepancy between the cost of building and maintaining airports and the actual contribution made by the airlines towards this cost in the form of landing fees and similar charges. An I.C.A.O. document14 on this subject provides some interesting figures. It is stated that during 1951 about £26m "could be regarded as that part of the cost of providing inter national airports properly allocable to use by international scheduled air services." Against this sum the international airlines paid nearly £7m in landing charges, while revenues from concessions, rents for office space and other services added a further £7m. The net result, from the airports' viewpoint, was a deficit of over £12m. During the same year, it is noted, total operating costs of London Airport (including depreciation and interest), were more than £lim. Revenues over the same period amounted 21 May 1954 669 to 22 per cent of this figure, and 44 per cent of the airport's maintenance and operating costs. There is no doubt that airport deficits in many parts of the world can be cut by maximum exploitation of oppor tunities for letting concessions to shopkeepers, caterers and the like. But, however efficient the management, a deficit will remain with most airports for many years to come. Only small increases in charges to operators can be made without adversely affecting traffic—and the airports exist to attract and encourage traffic. A point which deserves special emphasis is that both airports and airlines render a service to the community which is literally invaluable. Their status as part of national defence is equally intangible. Deficits at airports cannot be fairly reflected in airline operators' accounts, but they are men tioned in this study to underline the need for objective assess ment of air transport. There is a tendency for profit or loss figures to be taken out of context and treated as an infallible measure of operating efficiency. There are too many hidden subsidies, too many variations in operating conditions, for airlines to be evaluated solely on a profit-and-loss basis. The acid test is the quality and relative cost of service which the airline customer receives. In general, he gets good value for money. Operating Costs A break-down of the major cost items incurred by airlines will serve to indicate the direction in which future improve ment can be expected. Flight operations account for an average of about 30 per cent of most operators' expenses. This includes crews' salaries, which average about 10 per cent in America and 7-8 per cent elsewhere, crews' expenses, fuel and oil (about 15 per cent), insurance (ly-2 per cent) and remaining minor costs. Depreciation charges vary greatly from operator to opera tor, depending on the period of depreciation (usually around six years) allowed and the average age of the fleet. Percen tages vary from 3 to 17; but 8 per cent is probably a fair average. Maintenance and overhaul costs normally work out at around 20 per cent. The remainder, 40-50 per cent, is paid for station expenses, passenger services, sales and publicity and administrative costs. This proportion includes all salaries except those of flight crews. The actual level of salaries paid is almost outside the air line's control, but the size and quality of staff (particularly administrative personnel) can be the most critical factor affecting the economic result. The employee of American Airlines, for example, is paid air transport's highest average salary (about £1,500) but he is also among the most produc tive in terms of ton-miles per annum. Efficient management also presupposes the existence of an aggressive sales branch capable of filling the largest number of seats possible and the last inch of cargo space. Choice of aircraft is often described as the airline execu tive's biggest problem. It may be true that the wrong aircraft will put an airline "in the red" inside a very short space of time, but the majority of operators by-pass this problem by avoiding unknown quantities and choosing one of the very small number of aircraft known beyond doubt to be capable of the task in hand. In practice, the majority of traffic is carried by a handful of major aircraft-types, and the selection of equipment has caused sleepless nights only where new and revolutionary aircraft—notably the British turbine- powered airliners—are under consideration. In the case of American operators buying such aircraft as the Super Con stellation, DC-6B and DC-7 the critical decision has prob ably centred on the number of machines to be bought rather than the type. So far as the next generation of transport types is concerned, the operator's major contribution to efficiency is the estab lishment of effective liaison with designers and manufacturers. The post-war years have already seen too much expenditure on transports foredoomed to failure through lack of atten tion to airline requirements—or want of direction on the part of operators.
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