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Aviation History
1959
1959 - 1816.PDF
FLIGHT, 14 August 1959 AIR COMMERCE . . . 27 CORPORATION REVELATIONS Parliamentary Committee's Fact-Finding Document PART ONE of the report discusses the general position of theCorporations. Among the significant points made are • "How-ever rigid the negotiating procedure [with the trade unions] may have become, it is the responsibility of the management ofB.O.A.C. to achieve at a very early date a drastic improvement in the productivity of their aircraft maintenance departments" It appears that the word "rigid," as used earlier in a similarcontext, was chosen only after careful consideration (page IXXIII), some members of the committee having preferred the word "com-plex." This little exercise in semantics illuminates the delicate relationship between the Corporations' managements and thetrade unions. The committee took no evidence from the unions; to do so, they felt, would have been "outside their proper sphereof action." This may be judged surprising in view of the evidence of B.E.A.'s chief engineer that improvements in Corporationefficiency (one of the committee's main concerns) are, "in a nut- shell, far less a technical problem than a trade union problem." The heavy loss in 1957-58 on B.O.A.C.'s associated and sub-sidiary companies is noted. The evidence of Sir George Cribbett (deputy chairman of B.O.A.C.) on this point (para. 2394 et seq)is disquieting. He lists the main losses (approximate) as follows : M.E.A., £900,000; B.W.I.A., £700,000; Kuwait Airways, £150,000;Bahamas Airways, £100,000. This represents a total loss, for the first full year of B.O.A.C. Associated Companies Ltd. (September1957-September 1958) of nearly £2m. The big loss on M.E.A. (in which B.O.A.C. have invested £6m)caused the Minister to say in the Commons debate on the report: "I regard the situation as extremely grave"; and in evidence tothe committee Sir George said that if heavy losses continued "we should certainly have to reconsider our policy as to whetherwe should go on with participating in this company." The report considers it unwise to try to view the results of subsidiary andassociated companies purely in terms of profit and loss, because indirect benefits (feeder traffic, commercial rights, etc.) areadvantages. In the case of M.E.A., Sir George says in evidence : "These Arab countries are tending more and more to make itdifficult for us ... to acquire traffic rights, and if we can act through the medium of ... a local airline we can preserve theserights." It is the report's opinion that B.E.A.'s annual accounts "are notat present a true indication of the Corporation's efficiency." This is because the losses being sustained on domestic social services,for which a subsidy has been asked but refused, are not published. Notes the report: "The subsidy is being paid not openly throughthe Civil Estimates, but quietly through the accounts of a nationalized industry. . . . B.E.A. would be wise to insist onplacing the responsibility for these losses firmly where they belong." The economic and social ethics of the losses made onHighlands and Islands routes are examined in detail. The com- mittee's above recommendation is strong in view of the goodcase against subsidy put forward by Mr. M. M. V. Custance of the M.T.C.A. (para. 1978; and appendix 19). B.O.A.C.'s "Inadequate" Depreciation The report notes that B.O.A.C.'s financial results achieved inpast years "are not as good as they seemed," because the Corpora- tion have not put aside adequate sums for depreciation. B.O.A.C.themselves, in evidence, recognize this. B.E.A., on the other hand, consider that their rate of depreciation, based on the same formulaas that of B.O.A.C. (seven years pius 25 per cent residual value), has been adequate. On depreciation policy in general, the report states unequi-vocally: "If the airlines of the world embark too early on a race to equip themselves with supersonic aircraft, the current rates ofdepreciation will be quite inadequate for both Corporauons. Typical of the remarks made in evidence by the two chairmenis this from B.O.A.C.'s Sir Gerard d'Erlanger: — "Technically it does not look as though there is any end to the story,and the only thing that will bring sense to it is an economic appreciation by all the countries of the world that this just cannot go on indefinitely.But whether it is possible to get all the countries of the world to come to their senses, particularly those that have got perhaps a surplus of produc-tive capacity which they want to employ, I just do not know. Fr°m. *"£ airline operators' point of view it is a nightmare, there is no stability. Both chairmen independently testify that supersonic transports will undoubtedly increase the level of operating costs. The report believes that some economies could result from "'Report from the Select Committee on Nationalizid Industries (Report and Accounts): The Air Corporations" (Together with the Proceedings of the Committee, Minutes of Evidence and Appendices). H.M. Stationery Office, London. Price 20s. HERE is a review of the Select Committee's report on B.O.A.C andB.E.A., issued in July.* It is without doubt the most revealing inquiry into the Air Corporations yet published. Chairman of the committeewas Sir Toby Low, M.P. for Blackpool North. A leading article appears on the first page of this issue. closer co-operation between the two Corporations. The com-mittee would like to think that "this whole question of co-opera- tion is being considered anew." A great deal of evidence is takenon this point. The committee could have emphasized the need for more co-operation very much more strongly. Appendix 40,jointly prepared by B.O.A.C. and B.E.A., listing the extent of co-operation, is a revelation: two British airlines with main baseswithin a few minutes' walk of each other at London Airport operate no joint technical or operational services whatsoever.Another revelation in this context (not mentioned in the report) is contained in Sir Gerard's annex 3 to appendix 40. So muchdo B.O.A.C. and B.E.A. overlap in Europe that B.O.A.C. pay a commission to B.E.A. on traffic between European points. On the score of operations, appendices A and B (pages LX-LXIII), prepared by the M.T.C.A., compare the Corporations' results with those of Swissair, S.A.S., K.L.M., Air France, PanAm,T.W.A., and Sabena (a comparison which, though heavily quali- fied by the M.T.C.A., was the object of a "spirited attack" byLord Douglas). From these data, and from extensive evidence by the Corporations, the report concludes that, though B.EA'sutilization and costs per c.t.m. are higher than most of their foreign competitors, the Corporation's position as "the only purely short-haul airline of comparable size in the world" make B.E.A.'s results quite creditable, though "if B.E.A. are to improve their cost perc.t.m., it must be met by improving either aircrew utilization or aircraft utilization or both." Utilization Or Load Factor? B.O.A.C.'s utilization "has not been good in recent years"though steps now being taken should improve results. The report considers that B.O.A.C. should publish figures for utilization inthe annual report, "so that the improvement can be watched." Sir Gerard says in evidence: "We may find it best to increaseutilization at the risk of a lower load-factor," and the report suggests that B.O.A.C. have "laid too much emphasis on loadfactors and not enough on utilization." It surprises the committee that the major investigation byB.O.A.C. into their excessive engineering costs should not have begun until mid-1957, although the situation was believed bythem to have been unhealthy as long ago as 1952. As a result of all measures taken, including the re-organization of the structureof the engineering department, considerably better results had been achieved. But the extent of B.O.A.C.'s inefficiency is apparentfrom the evidence—frankly stated—of the two main B.O.A.C. witnesses, Sir Gerard d'Erlanger and Mr. Basil Smallpeice. Thereport notes: — "B.O.A.C.'s aircraft maintenance costs were [in December 1957]nearly twice those of PanAm. In their engineering workshops B.O.A.C. were employing 3,000 more staff than they needed. They employedmore than twice as many staff per aircraft or per flying-hour as did the other airlines investigated, and between four and six times as manyinspectors. In all these assessments, there were no compensating factors —such as better workshop equipment—which could account in anysignificant way for the disparity that had been revealed." There is some discrepancy between B.O.A.C. and A.R.B. evi-dence (Mr. R. E. Hardingham of the A.R.B. withstands a search- ing examination most impressively) as to the responsibility ofthe A.R.B. for B.O.A.C.'s excessive inspectorate. Mr. Smallpeice thinks that the A.R.B.'s requirements account for a "substantial"part of the additional inspectorate; Mr. Hardingham says "Defi- nitely not." The committee goes into the whole problem ofdelegating responsibility to the licensed engineer, and sums up: — "B.O.A.C. have been using a method of quality control which is nowout of date; an indication of the scope of the changes they must make is given by their target of reducing their inspectorate to a third of itspresent size. This will be done by giving the mechanic more respon- sibiliry; he will himself see that the job is completed satisfactorily, andthere will not be the need for the amount of inspection and control that is at present customary. As a result of this change, there is bound to bea considerable reduction in the responsibilities of the present inspectors and supervisors; this will not in any way run counter to the requirementsof the Air Registration Board, but it will rightly engage the interest of the trade unions involved." Relations between Ministry and Corporations are examined atlength. The Committee asks "if the extent of the Minister's non- statutory powers do not add up to a degree of control far in excessof that envisaged by the statutes under which B.E.A. and B.O.A.C.
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