FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1960
1960 - 1141.PDF
FLIGHT, 22 July 1960 -^h-:-;^ ..,?•:: s, ^--^ :;- •• - DEAR OCTOPUS 135 BY M. J. HARDY LIKE the family in private life, monopoly in public undertakings is awell-loved British institution. This controversial article on the BOAC/Air India/Qantas pool takes its title from Dodie Smith's famouscomedy about a family reunion. THE words of R. H. Tawney in his book The AcquisitiveSociety are worth quoting as having a special, albeit un-intended, relevance to British air transport today: "The course of wisdom in the affairs of industry ... is to consider the end for which economic activity is carried on and then to adapt economic organization to it ... Above all it is to insist that all industries shall be conducted in complete publicity as to costs and profits, because publicity ought to be the antiseptic both of economic and political abuses, and no man can have confidence in his neighbour unless both work in the light." This sentiment might all too readily be dismissed in an age of much blatant disregard of public interest as merely another in the "don't make me laugh" category. But it was brought to mind by Lord Casey's revelation in the House of Lords on May 26 con- cerning BOAC's pool agreement with Air India and Qantas. According to Lord Casey a section of the BOAC/Air India/ Qantas tripartite pool agreement "contains a stipulation by Air India and by Qantas to the effect that they will regard the agree- ment between them as valid only so long as BOAC remains the only United Kingdom airline authorized by the United Kingdom Government to operate in or out of the United Kingdom by the main routes covered by the agreement." What this seems to amount to is that BOAC has worked out an arrangement with Air India and Qantas whereby the independents are excluded from operating scheduled services over the routes concerned, i.e., from London eastwards to India, Australia, Hong Kong and Japan, and westwards from London to New York. The new Air Transport Licensing Board's authority in this matter is to be circumvented because it is not BOAC but Air India and Qantas that have made this fateful stipulation; the matter has thus been spirited away outside the Board's jurisdiction, and the latter is to be presented with a fait accompli in that a virtual monopoly has been created for BOAC over the routes in question. This might be considered as an economic and political abuse, and, as such, deserving of wide publicity; for here is a publicly-owned corporation apparently behaving with a marked lack of public accountability. The word "apparently" must be emphasized strongly, for the exact degree of responsibility can only be a matter for conjecture, since so little is known of the corporations' pool agreements. Was the corporation reluctant to play the chosen instrument, and would it not have welcomed a little competition, even if only of a token nature, from the independents? Did the pool partners want a monopoly among themselves, but did their better judgment argue that independent competition would in the end stimulate them to provide a better service to the public? Or were the three pool partners overruled by the Ministry of Aviation or the governments of Australia and India—who have approved this agreement—that British independent competition would be inconvenient politically and undesirable commercially? The only clue seems to lie in Mr Keith Granville's interview with Flight (issue of April 29), in which BOAC's deputy managing director revealed that the Minister had not called for, and was unlikely to call for, details of pool agreements between corporations and independents; details of pool agreements were not necessarily known to the Minister. This may not apply, however, to the BOAC/Air India/Qantas pool, which is between three national carriers and stipulates the exclusion of independent competition. Even if the Minister did not know of this stipulation beforehand, he may well have approved of it. He may need all his powers of persuasion to convince the House and the public that the stipula- tion contained in this pool agreement was not calculated to restore an effective monopoly to BOAC—or that the recent repeal of the corporations' monopoly powers in the Civil Aviation Licensing Bill was intended as little more than a gesture to private enterprise. Monopolies are a Dear Octopus from which governments can never quite escape, nor in their inmost hearts ever quite wish to. Rationalization Undermined. Whether or not Mr Sandys knew of the monopoly stipulation before this pool agreement was signed, it will be an embarrassment to him politically—not merely in the narrow sense of giving a convincing explanation to Parliament, but because it will place him in the position of giving with one hand perhaps hundreds of millions of pounds to the aircraft industry for new airliner development, and with the other taking away a large slice of the potential home market without which new British airliners are unlikely to sell in sufficient numbers to recover these costs. The monopoly stipulation may, in fact, undermine the whole concept of rationalization by making the aircraft industry weaker. If the Minister really wants to recover money invested in the industry, he should face the fact that independent airlines cannot re-equip themselves without some direct or indirect com- petition with the corporations. It is a remarkable fact that competition on the US trans- continental routes between American Airlines, United and TWA was largely responsible for the Douglas DC-2, DC-3, DC-4, DC-6 and DC-7 series and the Lockheed Constellation and Super Constellation. Pool agreements are contrary to US laws against cartels, and if in the early nineteen-thirties such an agreement QANTAS between American, United and TWA had largely removed the competitive stimulus from the transcontinental routes, air trans- port might still be in the DC-3 or DC-4 stage. It would certainly have lost the priceless asset of a quarter of a century's continual refinement and development in piston-engined airliner design. It may be objected that traffic on the routes covered by the BOAC/ Qantas/Air India pool is so much less than that on US coast-to- coast routes and is shared between so many more carriers that there is no real basis of comparison. But the principle that com- petition can be a stimulus is every bit as valid. Mr Peter Masefield has made the point that no carrier has ever asked a manufacturer to design an airliner to operate as cheaply as possible. In the fullness of time, with new traffic generated by the big jets, might there not be an opening for a new generation of British airliners designed for price competition first and foremost, and able to pay their way on the really cheap fares of the future? And in denying the independents opportunities that may lead to their ordering or sponsoring such aircraft, we may be making a mistake as big as the decision taken in 1946 to abandon manned supersonic flight because it was too dangerous. It is worth remembering the inter-war years when transport aircraft like the D.H. Dragon and Dragon Rapide, designed to pay their way on a limited flow of traffic without the benefit of subsidy, and inspired by operators like Edward Hillman (who believed in price com- petition), found a far wider market than types designed for the "chosen instruments." There is also the prospect of large-scale competition—perhaps undercutting IATA rates—from Aeroflot and other Communist airlines, and it seems strange that the Government, which has sometimes tended to regard BOAC as merely an instrument of foreign policy, has not apparently realized that low-cost air transport,because of its appeal to under-developed countries, could be a very potent instrument of Communist policy. AIRINDIA It has been well said that the British neither possess nor wish to possess any imagination at all. Certainly our post-war aviation policies have sometimes seemed to bear out this truth. Successive Ministers have constantly bemoaned the very small home market for new British transport aircraft without realizing—or refusing to realize—that their restrictive policies towards the independents' expansion have been a major factor in reducing the size of the home market. To increase the size of individual units of the industry is merely an expedient; to increase the size of the home market is a policy. No reasonable person would expect the independents to be allowed unlimited competition with the cor- porations. But is it not equally unreasonable to carry the attitude of "We must not undermine the corporations' competitive position" to a point of refusal even to consider independent com- petition over such important routes as are covered by the BOAC/ Air India/Qantas pool? To the point where to protect a corpora- tion from the possible loss of a million or two from independent competition, we are in danger of depriving the aircraft industry of perhaps hundreds of millions of pounds of home and export orders for its transport aircraft? [Continued overleaf
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
