FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1961
1961 - 0594.PDF
~smAp^ 604 AIR COMMERCE FLIGHT, A May The Board's Moment of Truth BY THE AIR TRANSPORT EDIIOR MAY 16 is the date tentatively fixed by the Air TransportLicensing Board for the opening round of its hearings into Cunard Eagle's bid for the North Atlantic route. How long these will last remains to be seen; speculators suggest two or three days. Then, as officially announced by the Board, the equally portentous hearings into the same independent's bid for a network of European routes, together with a similar bid by British United Airways, will open at Therese House on June 20. These hearings, because they involve also a clash between independents, will be more compli- cated and hence long drawn out. Indeed, they look like being truly heroic in duration, because other "related" applications are scheduled to be dealt with at the same time—from Overseas, Tradair, Silver City, Stanvays, East Anglian, and even some from BEA and BOAC. The arguments for and against nearly 100 appli- cations from ten operators are down to be heard—including BUA's contentious applications for services to the Far East. The Board has set aside five days for this hearing; if each takes as long as the recent relatively uncontroversial case about BEA domestic freight rates, the Board will be lucky if the hearing is finished in five months—especially as appeals seem inevitable. At any rate, within three months of opening shop, the Board is to be confronted with test-conflicts which raise the most fundamental of all questions: Should Britain's independent airlines be given a share of BOAC's and BEA's international scheduled services? It was to primarily resolve this very question that the Air Trans- port Licensing Board was set up, and its moment of truth ap- proaches. It is timely to attempt to define the problems involved, and to try to anticipate how they can be handled with the minimum waste of time. The questions to be resolved fall under three main headings: (1) Is it desirable, from the point of view of British politics, for the State corporations to share their business with private companies ? (2) Is the designation of a second carrier on a given route economic- ally desirable ? (3) Is the designation of a second British carrier on a given route likely to cause international political repercussions ? There is no need for the Board's time to be wasted with any discussion of the first question. Parliament has changed the law to give private airlines the right to apply for any route. The indepen- dents will not, it is to be hoped, waste time or bore people with arguments about the benefits of private enterprise; these arguments are accepted and the independents have been given a prima facie right to a share of BOAC and BEA business. And history is tin their side; in 17 years the independents have gained in stature and responsibility and have won political acceptance of their right to participate in the big-league air transport. As for BOAC and BEA, there is no point in their arguing with the inevitable: when the east wind blows, the only thing to do is to put on your overcoat. The Economics of Dual Designation To come to the second basic question; is the designation of a second carrier on a given route economically desirable? Having ruled that political diatribe is a matter for the history books, the Board must direct its mind very attentively to this second question, which is simple and straight—is there sufficient traffic on the routes being applied for to justify a second carrier—or, in the jargon, to justify dual designation ? If British United Airways or Cunard Eagle, or any applicants, wish to be granted a licence for a particular route, they must con- vince the Board that there is sufficient traffic available to two British carriers without unduly affecting the cost level of the route. The BOAC and BEA counter-arguments must be aimed at con- vincing the Board that there is not sufficient traffic to justify dual designation without increasing the cost level. Any other economic arguments, such as the rate at which traffic has been growing, or material diversion, are of secondary importance. The basic question, it cannot be too often repeated, is: What is the traffic on the route and is it sufficient to justify a second carrier ? This question does not, as many might think, fall into the same class as "How long is a piece of string ?" A number of attempts have been made, by authorities in this country as well as in the USA, to provide a scientific method of answering it. One such authority is Mr Stephen Wheatcroft, who, in a Royal Aeronautical Society lecture last December, dealt with the question of how much traffic is necessary to justify dual designation. "It will be essential," he said, "for the new Air Transport Licensing Board to form a judg- ment on this question." He presented a graph, published on page 1029 of Flight for December 30, suggesting the traffic volume re- quired to sustain competitive air services. Another authority is United Research Inc, which prepared an analysis Competition Among United States International Air Carriers on behalf of the White House in October I960. One of the conclusions of this study, which all the parties to the coming hearings should have read, was that "the minimum standard for the dual designation of US international carriers is the development of the route to the point where US carriers can be expected to have available to them a minimum of 116,000 passengers a year in both directions, i.e., 58,000 each way." If the route is a highly seasonal one, this minimum would be higher. This conclusion, assuming stage lengths of over 2,000 miles and aircraft of 130-seat capacity*. tallies remarkably closely with an extrapolation of Mr Wheatcrofts graph, which covered various aircraft capacities and stage lengths. There is room for many differences of opinion on this subject; but these opinions, if they are presented to the Board, must be based on sound research. Indeed, the whole subject calls for very much more research, and this is one of the reasons why so many people want the Board to have a strong scientific staff to analyse independently important technical questions such as this. The Essential Question The parties to the case should first and foremost offer the Board statistical evidence and argument based on thorough-going research into the essential, simple question: Will the route under discussion bear two carriers without ruining its economics ? The fact that British United Airways and, it is believed, BOAC are retaining legal counsel to sway the Board does not raise hopes that arguments will be confined to the essential economic issues. It will be a pity if the Board has to suffer legalistic huffing and puffing; the professional skill of hired advocates in argument and cross- examination must be devoted to convincing the Board of the economic case for or against an application. Having dealt with the economic arguments for and against an application, the Board can then allow discussion of the third essential question (which must not be allowed to confuse the economic issues just discussed): Is the designation of a second British carrier on a given route likely to cause international political repercussions ? The Board, as we all know, has no powers over the negotiation of foreign traffic rights, and there is no guarantee attached to any of its licences that these traffic rights are available. But it cannot avoid becoming involved in foreign politics, because among the matters which it is statutorily required to consider are the financial and commercial arrangements entered into by British airlines already licensed for the routes under discussion. Both corporations are bound to lay heavy emphasis on their conviction that the licensing of a second British airline for most routes (one exception being the North Atlantic) will jeopardize relations with foreign carriers. For example BEA, who are in pool with all their foreign rivals, will assert that pool agreements are in the public interest, that they have enabled foreign protectionism to be bought off, opening doors that would otherwise have been closed to British traffic growth and the reduction of fares. The corporation will say that pool agreements with foreign carriers will be jeopardized, and in some cases invalidated, by the designation of a second British airline. In reply the independents may argue that BEA have no exclusive j right to commercial relations with foreign airlines, and that, in a ; pool, three is company and not a crowd. The Board cannot of j course bring diplomatic pressure to bear on foreign governments to require their airlines to take British independents into partner- ship. But what it can and must do is to call for full information about existing pool agreements, so that it can make its own judgement about their value. As the corporations have no doubt realized. pools will be useful instruments for obstructing the independents and for confusing the economic issues. There is another reason why the Board must be fully informed about pooling. The licensing of an independent may, it seems, be conditional upon that independent operating in pool with BEA or BOAC; but how independent is an independent if it is in pool with a corporation ? To sum up, the Board's time need not be wasted with domestic politics; and though foreign politics will have a bearing on most applications, they must not be allowed to confuse the essential question: Is there enough traffic for two British carriers to compete for without wrecking the economics of the route concerned ?
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
