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Aviation History
1957
1957 - 0581.PDF
FLIGHT, 3 May 1957 What Price Air The Real Foundation of Air Commerce: Present Trends and Future Possibilities THERE was once a Rugby player who, having kicked the ballinto a tree, fervently cried: "Never mind the ball—let's geton with the game!" Air transport resembles football inas- much as the main object of the pursuit, the airline passenger, issometimes overlooked by those who live close to the technical frenzies and political complexities of the pursuit itself. Admittedly the passenger is seldom deposited in the top of atree; but he is not yet the object of a chase as single-minded as it could be, even though he is the industry's main consumer. Thisis not to say that the airlines do not try to attract and keep cus- tomers. They do—-but within limitations which are, in any finalanalysis of the industry's rate-making machinery, imposed by the national politics which have influenced air transport since the dayit began in 1919. So long as countries regard air transport as an essential instrument of national power, which they will protectand if necessary subsidize, so will the industry's most important consumer, the occupant of the airline seat, fly less far for his moneythan he might in a perfect non-political world. If that perfect world of free air commerce did exist, the actionsof every airline might be wholly directed to cutting fares, on the theory that air transport cannot reap the greatest riches by sellingspeed and convenience alone: it must eventually sell these com- modities at surface-transport prices. Even with its present higherfares, air transport—so great is the attraction of its speed and convenience—will continue to expand faster than its surfacecompetitors. But the rate of expansion will slacken—and is indeed showingsigns of doing so—unless a new passenger-market can be found. Why, it might be asked, does it matter all that much if the rate ofexpansion does slacken? Cannot the airlines, like the older forms of transport, make money out of traffic which just increases at arate proportional to the rise of world incomes and populations? Why must they find a mass market? The airlines' net profit is less than one per cent of their totalrevenues—and if public subsidies and "hidden" subsidies (e.g. re-equipment loans at interests lower than market rates) were tobe removed from these-revenues the margin would be less—prob- ably it would be a deficit of several per cent. This is a fact whichthe public, as LA.T.A.'s director-general, Sir William Hildred, has said, might find difficult to reconcile with gleaming airliners, prettystewardesses, and luxurious cabin service. It is apparent that the air transport industry is some way from achieving the economicstability which will enable it to stand rising world prices and to throw off its subsidies. Obviously governments are keen to seetheir protegees operating free of subsidy, and in fact most flag carriers are moving steadily in this direction. The key to better economics, as in any industry, lies in the application of more efficient tools to mass production. To put itin air transport language, the airlines must use larger and more efficient vehicles with which to manufacture their capacity ton-miles at the lowest possible cost. They will only procure big revenues by using large low-cost-per-seat-mile transports filledright up and operated hard and at high traffic-generating frequencies. Therein lies the explanation of the airlines' massive turbinere-equipment programme, and of the trend in LA.T.A.'s fares- policy towards a "thrift"-class level of prices: new tools—and thecreation of a demand which will enable them to be applied to mass production. It is not within the province of this article to consider whetherthe new aircraft ordered by the airlines are the most efficient on the market. The fact is that nearly all the new types of turbinetransport now on order—£800 millions-worth, from the local- service Friendships to the long-haul 707s and DC-8s—will becheaper per seat-mile to operate than the piston-engined trans- ports they will replace. They therefore meet the "more efficienttool" requirement. What steps have the airlines taken towards the application ofthese tools to mass production? Six years ago they took the momentous decision—despite (or because of?) small profits—tointroduce tourist-class air-coach travel at fares 30 per cent below existing levels. Like most fare-innovations, tourist travel wassponsored by American carriers, and it was first introduced on U.S. coast-to-coast services. Soon it was adopted on the NorthAtlantic and it eventually spread throughout the world, until today it accounts for about 40 per cent of total world air-passenger traffic.(In the country of its origin, the U.S.A., the figure is about 35 per cent.)The effect of tourist fares was an almost immediate increase in traffic, especially on the long-haul sectors; but it did not increaserevenues. This was disappointing, and for two years past the air- lines have been pondering how much further they dared go inreducing fares to lure the mass market. They knew from tourist experience that fare-reductions would expand the market, but theywere not convinced that there would be a corresponding increase in revenues. This was the background to the historic I.A.T.A. traffic con-ference which met at Cannes last year, and which agreed—after initial tough opposition from certain European carriers—to a newlevel of North Atlantic fares 16 per cent below existing tourist fares. The move was sponsored by the Americans, notably byPan American and T.W.A., with the moral backing of the U.S. Government's Civil Aeronautics Board. Like every I.A.T.A. deci-sion, it had to be agreed with 100 per cent unanimity. Failure to Turbojet and turboprop: will there come a demand for these two forms of transport propulsion to be differentially priced? ill
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