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Aviation History
1960
1960 - 0060.PDF
60 FLIGHT, 8 January i960 THE KEY TO "VLF". . . (6) A downgrading to the extent of VLF is unprecedented; but thegreater the downgrading the greater the chances that the traffic attracted will be new, rather than diverted, traffic.(7) VLF is considered economic by at any rate two of its proponents. These two are low cost operators, and it is important that such operatorsshould be allowed to pass on to the public the benefits of their low costs, and to maintain low fare pressures on the established carriers.(8) It it worth remembering that the US system of regulation permits "supplemental carrier" scheduled air services at cut rates and lowfrequencies on domestic routes. Regulation is such that there is no disruption of the regular services.(9) Britain has every right to take advantage of considerable Colonial cabotage privileges to develop her own "supplemental" cut-rate servicesas an integral part of her air transport system. (10) VLF, by creating business for prematurely obsolescent but stilleconomic aircraft, will provide a healthy corrective—small but influential —to air transport's obsession with quality competition.(11) If it is right for the Government to approve State corporation investment in the most advanced and competitive equipment, it is rightfor it to encourage the use (by corporations as well as by independents) of second-line but still economic equipment.(12) VLF, to repeat (1), will satisfy an undisputed public demand. It will create new business for British air transport, and it will keep theattention of a whole industry—corporations, independents, aircraft manufacturers and government departments—focussed on the massmarket on which the future prosperity of all depends. But how can VLF be introduced? No one wants the estab-lished services to be operated with rows and rows of empty seats, causing the corporations heavy losses which will eventually meaneither a withdrawal or a public subsidy. There is little sense in risking the disruption of air services carefully built up over aquarter century, like those of BOAQ—an airline with more experi- ence of international airline operations than all three VLF pro-ponents put together. Mr Sandys has said: "It is not my intention to do anything which will undermine BOAC or BEA, in which somuch public money has been invested. They must continue to be Britain's principal flag carriers on the main air routes of theworld. But there is scope also for the independents to expand." The solution, as presupposed in the dozen points above, liesin regulation. And regulation requires some definition of the meaniningless cant "material diversion." If it is fear of this whichis at the bottom of every controversy over independent low-fare bids, ought we not to seek some formula whereby it can bescientifically assessed? Such a formula can be derived from experiment and inquiry.For seven years there has been the Colonial coach experiment, yet the Ministry has prompted no systematic inquiry into thekind of traffic it has attracted. The knowledge about diversion that such research* might have yielded could have been put togood use in the VLF controversy. A Basis for Regulation Meanwhile the basis upon which VLF should be regulatedcan be determined from what experience is available. For example, we can find the relationship between the traffic carriedon Colonial coach services and the traffic carried on parallel corporation tourist services. In 1958, taking the UK-Nairobiroutes as typical, the picture was as follows (passengers south- bound) :— Airwork 1,661 Hca 1,763 Beac/Saa/Eeaf 6,895 The relationship works out as 33 per cent Colonial coach and67 per cent BOAC/SAA/EAA. The relationship in terms of capacity, since the corporations' load factors are lower than thoseof the independents (71 per cent for HCA in 1958), would be of the same order. It is interesting to see how closely this accordswith the 30/70 division recommended by the Government in 1957 as the independents'/corporations' share of the futureeconomy class market. Now in its 1957-58 report BOAC said that, as a result ofViscounts being introduced on Colonial coach services in 1957, these services "have caused increasing inroads into the trafficcarried on the tourist services of the corporation and its partners." No measure of these inroads was offered; but it seems that a33 per cent independent share of the low fare market is the highest that BOAC and its partners could reasonably be expected to bearon any route initially—particularly in view of the fact that VLF will be operated not by Viscounts, but by more competitive (fromthe long-haul viewpoint) Britannias or DC-6As. No figures are available, except within BOAC, to show the *For three ten-day periods each year since 1949 Aer Lingus has invitedpassengers to answer questions devised to determine the commercial characteristics of its market. From personal interviews there has beena 90 per cent response, from questionnaires on the aircraft 70 per cent. f/n the last weeks of 1958 EAA introduced a weekly Canadair Coach service. This has been ignored in the accompanying rough comparison. point-to-point tourist traffic carried by the corporations on theroutes affected by the VLF applications. Reference to timetables gives only a rough idea of the extent of the corporations' touristtraffic. One can estimate how many tourist seats are offered from London to, say, Singapore weekly. But we do not know theorigin or destination of the passengers occupying these seats. Nevertheless, a very rough assessment does suggest that oncertain routes anyway the VLF applications (either Eagle's or HCA/Airwork's) represent a higher percentage of the low faremarket than has generally been supposed—perhaps as high as 5f /50 on the routes to Aden and the Caribbean. Will the proposed African frequencies, operated by 100-seatDC-6As or 127-seat Britannias, command more than a 33 per cent share of the low fare market? Since we do not know howmuch economy class and tourist class capacity the corporations are proposing to provide on the African route, we can only guess.Will 10,400 seats a year to Nairobi (for example) represent more than 33 per cent of the total low fare market? Such questions,which can only be answered by an authority with all the facts and figures made available to it, are fundamental in any con-sideration of the extent to which VLF should be regulated. Something else that is fundamental in any attempt to solvethe VLF problem emerged clearly from the first article: the African corporations EAA and CAA insist on their rights to ashare in VLF. It is conceivable that the two UK corporations (in particular, BOAC) are now—having understandably opposedthe independents' VLF applications—likewise saying: "If anyone is to get VLF, we insist on our share." BOAC might be pre-pared to operate their impending very big surplus stock of DC-7Cs and Britannias on a marginal cost basis at VLF (or, bya compromise with the independents, not-quite-so-VLF) rates. By chartering capacity to their partners, BOAC could then enterthe VLF (or not-quite-so-VLF) field alongside the independents —either in addition to their proposed economy class or (moresensibly perhaps) instead of it. This is perhaps a revolutionary idea: but the potential VLF market would sustain both VLFproducers, and regulation would be straightforward. It might all depend upon whether the independents would be preparedto compromise on a slightly higher VLF rate, and whether BOAC would be prepared to have a go at operating their surplus propellerequipment on a marginal cost basis. Certainly BOAC's surplus stock has to be put to good account somehow. Which independents should be licensed for which VLF routes?Suffice it to suggest that, though Eagle are the inventors of VLF, their "prior claim" to the key African routes should not be atthe expense of the established independents—operators which can, incidentally, claim to be the pioneers of Colonial coachscheduled air services. Certainly there will have to be give-and- take (or mergers?) among the independents, as well as betweenthem and the corporations. It is likely that, if the Civil Aviation Act is amended to allowVLF to be introduced by any independent (the corporations are unlikely to sign the necessary associate agreement required bylaw at present), responsibility for its regulation will be invested in the proposed new Air Transport Board. The constitution ofthis Board will be a subject of a later article. It is undoubtedly VLF which more than anything else has shown how great is theneed for such a board—for an executive referee to take Britain's air transport field. When the whistle has blown for VLF to beintroduced, there must be created a body capable of resolving the next fares challenge when it arises. SUMMARY AND CONCLUSIONS • The VLF principle should be accepted, for the dozen reasonssuggested. • The main objection to VLF—diversion from corporationswhose business must not be undermined—could be met by skilful regulation. A Colonial coach experience suggests, as a basis for such regula-tion, that the independents' share of the low fare market might be about one-third, at least initially. • This may, on some routes, require the independents' VLFdemands to be curtailed—unless the corporations also introduce VLF (perhaps instead of economy class, and perhaps at a com-promise fare rather higher than VLF) by operating their big surplus of DC-7Cs and Britannias at marginal cost. • Corporation participation would, paradoxically, increase theindependents' VLF scope, because regulation need consequently be less protective towards the corporations. • Responsibility for regulation should be invested in the pro-posed new Air Transport Board, which should sponsor field research aimed at establishing a much needed formula forestimating the diversionary effect of low fares. • Whether the corporations insist on "we too" VLF or not,selected independents should be granted a VLF franchise.
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