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Aviation History
1956
1956 - 0023.PDF
FLIGHT, 6 January 1956 23 THE AIRPORT AND THE STATE An Official Investigation into the Management of British Airports STRONG dissatisfaction with the policy of the Ministry ofTransport and Civil Aviation towards the commercialaspects of airport management is certain to be the reaction of any taxpayer who reads the recently published official report*on British civil aerodromes and ground services. The report, by the Select Committee on Estimates, is a rather forbidding-lookingdocument of nearly 300 closely printed pages, consisting largely of lengthy transcripts of verbal evidence. For this reason, perhaps,its findings have not been widely publicized in the national Press, though "revelation" would not be too strong a word to apply tosome of the facts disclosed in the report. As observed in Flight recently, the majority of the world's air-ports are run at a loss. It is very doubtful, however, if the M.T.C.A. are doing everything possible to reduce airport losses,or if they have any plan for reaching the break-even stage. One reason for the Ministry's passive, unenterprising approachto financial matters is the lack of a costing system resembling even remotely the balance-sheet of a normal trading concern.The report notes that when a Government Department (such as the Mint or the Stationery Office) operates a commercial under-taking it is required to present annual trading accounts to Parlia- ment. So far as airport operations is concerned, this practice wassuspended in 1950, because it was not possible to devise a realistic system of accounting. No attempt to do so had beenmade since that time. According to the Ministry, the net operating cost to theExchequer of M.T.C.A. airports for each of the past two financial years was in the region of £ 1.66m. This figure did not take intoaccount interest on capital, depreciation on runways and buildings, or cost of administration away from the airports. On a truecommercial basis, the cost of operating U.K. airports and ground services in 1954-55 was about £6m. "This information," thereport observes, "is not available to Parliament or the pubic." In 1945, the report recalls, the Government decided that all air-ports from which scheduled services were operated should be State-owned. This policy had subsequently been modified, thefirst departure from it being the agreement that Manchester Corporation should retain ownership of Ringway (which had notbeen requisitioned). The agreement, reached in 1950 but not signed until five years later, was apparently advantageous both tothe Corporation and to the Exchequer, who would save about £650,000 over the next few years. The report recommendedthat other municipalities should be encouraged to own and operate their own airports, and that the M.T.C.A. should accordinglyrestate their policy on municipal ownership of aerodromes and the conditions on which agreements should be based. Discussing the question of capital expenditure on airports, thereport reasons that a more rapid expenditure on capital works would reduce the loss incurred in the day-to-day operation ofairports. It seemed important that the expenditure necessary at Gatwick should be hastened as quickly as possible; the combinedoperating loss at Bovingdon, Croydon and Stansted over the past two years—£158,000—was equal to interest at 4 per cent on £4m,two-thirds of the cost of the first stage of developing Gatwick. The committee found it impossible to judge whether financiallimitations imposed by the Treasury had in fact delayed develop- ment, or whether the slow progress was caused by policy changesor shortage of labour and materials. It was not their duty to recommend more expenditure of public money, but they felt thatat least part of the difficulty arose from the fact that capital expenditure was found by the Treasury out of current taxation,involving the rigid Parliamentary system of Estimate, Vote and Appropriation. The report urged reconsideration of the possi-bility of grants-in-aid or quinquennial grants. The report observes that, when questioned as to M.T.C.A.policy towards creating and increasing traffic at their airports in order to decrease the charge to the taxpayer, the Northern Divi-sional Controller stated that it was no part of his duty to seek new business or traffic for the aerodromes within his responsibility.At the same time, he had many suggestions to offer on how the traffic could be increased—particularly at Liverpool, where anunexplored traffic potential was the justification for keeping the airport open despite a loss of £11,000 in the last financial year.This official considered that it was the Liverpool Corporation's duty to press their demands on operators for increased trafficat Speke Airport, Liverpool, though, as the report drily observes, "this solution would appear to be abdicating the Ministry's *"Civil Aerodromes and Ground Services." Report by the Select Committee on Estimates. H.M. Stationery Office, London. Price 13s 6d. financial responsibility to a body with no immediate interest inthe aerodrome's profitability." The Permanent Secretary of the M.T.C.A. confirmed hisNorthern Divisional Controller's statement by saying: "We do not try to attract traffic ... the object is not to make as muchmoney as we can on the aerodromes or even to make them pay." The report concludes that not only were the M.T.C.A. making noeffort to reduce the cost to the taxpayer by increasing traffic but that, by implication, they were "contentedly acquiescing in sub-sidizing all travellers by air whether British or foreign." The report devotes considerable space to the possibilities ofraising landing fees and passenger service charges in order to reduce running cost of the British airports. Five reasons hadbeen given by the Ministry for not raising landing fees at present: — (1) Charges are already higher than in other European countries;(2) Inter-continental traffic might be diverted to foreign airports; (3) There might be a general raising of fees in other countries;(4) The air transport industry is still faced with rising costs in numerous directions and it is therefore premature to increase charges; (5) The expansion in traffic has led to an average increase in revenueof 10 per cent yearly since 1950 and wiU continue to do so for some years to come. On balance, the Committee did not believe that some increasein fees would in fact put British charges seriously out of line with those of other European countries, and they also felt that the fearof diversion of traffic to foreign airports was much over-rated. The Committee felt that people who enjoyed the attraction offlying should not be indefinitely subsidized at the expense of public funds. Having weighed the various arguments, the Com-mittee recommended that landing fees should not be increased. Despite the objections of airline operators to the passenger ser-vice charge, the report agreed with the opinion of the M.T.C.A. that it was "a very good and a very fair charge." The Com-mittee felt that the charge could be included in the fare paid by the passenger, and had not heard any good reason why this hadnot been done. The report went on to recommend that the charge should be reviewed with the object of "(1) Setting thebasic rate higher and allowing the same rebates and surcharges as apply to landing fees; and (2) considering whether the chargeshould be levied on the operating companies in respect of passengers landing rather than departing." Airport concessions let by the M.T.C.A. had produced£160,000 of revenue in the past financial year. This represented only six per cent of all revenue at airports from fees, rents, chargesand concessions. Manchester Corporation had stated that it was their aim to raise no less than 60 per cent of their revenue fromconcessions and from the non-travelling public. At many U.S. airports, income derived from sources other than those actuallyconnected with the operation of aircraft and the movement of passengers amounted to 40 per cent—and in some cases to asmuch as 85 per cent—of the total revenue. The Ministry figures seemed so out of line with practice elsewhere that the Committeehad asked for opinions of B.OJV.C. and B.E.A., with their world- wide experience, on the subject of amenities and concessions.Their joint conclusions are summarized as follows: — "(1) There should be a more aggressive commercial approach indeveloping amenities and the matter should be treated as one of some urgency so that the revenue-earning aspects of airports may be madefully productive as early as possible; "(2) Airport managements should be given greater autonomy infinancial affairs, with the object of achieving the financial solvency of individual airports and aerodromes." These suggestions were endorsed by the report, which con-cluded that more urgent measures should be taken by the Ministry to develop amenities and concessions. Finally, the report reviews the arrangement whereby construc-tional and maintenance work on M.T.C.A. airports is carried out on an agency basis by the Air Ministry Directorate-General ofWorks. The Treasury would allow the Ministry to use out- side consultants and architects as long as the Air Ministry staffprovided for the purpose were not under-employed; the Ministry had, however, employed private consultants, and had paid them£29,800 for their services, whereas the Air Ministry would have charged £45,400. The clear danger of the Treasury's attitude,the report comments, "is that the Air Ministry's staff may be maintained at an unnecessarily high level." Of the £543,000paid to the Air Ministry by the M.T.C.A. in the last financial year, £100,000 was paid by the Air Ministry to outside consultantsemployed by them. It was not clear why the M.T.C.A. should not employ these consultants direct, thereby saving the AirMinistry's departmental expenses.
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