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Aviation History
1961
1961 - 1027.PDF
FLIGHT, 27 July 1961 129 BEA had bought Comets to meet competition from Air France Cara-vel les. Pools, said Mr Collingwood, had benefited the public through (1)joint scheduling with a good distribution of flights through the day; (2) promoting a more rapid growth of business; (3) reduction in oper-ating costs ensured by elimination of excessive frequencies and wasteful competition; (4) low off-peak fares which the reduced operating costsmade possible. Dual participation would adversely affect the con- ditions which facilitated these benefits and would damage BEA'sposition as the leading airline in Europe. Cross-examining on behalf of BUA, Mr Gardiner suggested thatMr Collingwood's opinions were contrary to those which had been expressed by Mr Masefield, who had considered pools to be a gravesocial and economic danger. Mr Gardiner suggested that on the service to Madeira it would be better to carry all the traffic instead of enteringinto a pooling agreement with TAP. Could not the bilateral agreement be terminated at 12 months' notice and re-negotiated on more favourableterms? Mr Collingwood said there was a good deal in favour of doing this, but apparently the Government did not think so. Mr Ashton Hill, cross-examining for Cunard Eagle, referred tothe claim that pools helped by ensuring good arrangement of schedules through the day, and asked whether Mr Collingwood did not agree withthe statement in Mr Wheatcroft's book that scheduling agreements could be negotiated without entering into pooling agreements. MrCollingwood said that as far as he was concerned, Mr Wheatcroft was just another author expressing an opinion. Mr Porter, for Tradair, asked whether Mr Collingwood wouldagree that Tradair's proposals would not affect the bilateral agreements and BEA's pooling agreements. Mr Collingwood replied that hecould not agree with this. The Board questioned Mr Collingwood on the meaning of clausesin the typical pooling agreement put in by BEA controlling the sharing of revenue. Mr J. L. Grumbridge, general manager, commercial, of BEA, nextgave evidence and was asked by Mr Marking to state his commercial and sales objectives, and how he set about achieving them. Mr Grum-bridge said it was BEA's policy to reduce fares. The policy was to make reductions, not "across the board," but in such a way as to attracttraffic to off-peak periods by fare differentials. Low fares introduced were planned to attract new traffic without dilution of existing sourcesof revenue. Additional revenue from new low-fare traffic could also facilitate overall fare reductions. Asked how granting of the appli-cations would make it impossible for BEA to continue their present fare policy, he said that wasteful duplication of services and diversionof traffic would lead to lower load factors and would increase costs. Mr Grumbridge explained that fare revisions had to be unanimouslyagreed by IATA conferences. BEA's bargaining position in these negotiations was strengthened by their commercial agreements withother operators. The Package Tour Business With reference to "misleading statements made about ITX fares," hesaid that the airlines had, by special discounts, and by IT fares, en- couraged agents to sell package tours. By 1957 this business had beenworth more than f 1 million. To meet a fall in business in 1958. mid- week night fares had been introduced, with great success. Mr Grum-bridge said that BEA might lose the pre-eminent position they had established in the negotiation of differential fares with foreign operatorsif they had first to negotiate with a second British operator. Dupli- cation of BEA's service by a second operator would lead to concen-tration on the most profitable hours of operation, with a consequent poor service. Vanguards reduced costs and provided increased capacity,but splitting the traffic with another operator would make it necessary to reduce frequency. This would result in poorer utilization and un-economical operation, making it impossible to pursue the policy of reducing fares. The Board asked Mr Grumbridge to elaborate on the difficultieswhich he thought a second operator might cause in fare negotiations at IATA. He explained that differences in policy between the twooperators might confuse negotiations and prevent presentation of an agreed British case. Cross-examining on behalf of BUA, Mr Gardiner asked the meaningof the phrase "across the board." Mr Grumbridge explained that it meant all fares in a particular group or class. Mr Gardiner contrastedthe rise in European average fares with reductions on the North Atlantic and asked whether there had not been a greater decrease in the lowestfares on the Atlantic than in Europe. Mr Grumbridge said that the lowest fares on the Atlantic applied only to propeller services, aboutsix per cent of the traffic. Asked what were the BEA fares which would be affected by the five per cent "across the board" increase proposedfor Europe this winter, he said that almost all fares would be raised, the only exceptions being a few recently reviewed, and those to certainMiddle East destinations. He agreed that this did not accord with a policy of reducing fares, but said that it was not possible to disregardrising costs. Mr Ashton Hill, cross-examining for Cunard Eagle, asked whetherMr Grumbridge was aware that Cunard Eagle were already members of IATA and represented in Traffic Conference 2. Witness replied that thishad not yet led to complications only because they were not operating parallel routes. Asked whether he agreed with Mr Wheatcroffs viewthat the only objection to the applications for domestic routes was that they had come at the wrong time, Mr Grumbridge said "Maybe." The final stages of Mr Ashton Hill's cross-examination of Mr Grum-bridge concerned the application of IT and ITX fares on BEA services. He suggested that charter flights offered certain advantages overbookings on BEA services at IT rates, such as group bookings in hotels, with which the witness agreed. Mr Ashton Hill then said that whencharter figures rose astronomically in 1957-58 BEA met this develop- ment by the introduction, in 1959, of ITX fares, which were muchlower than those previously charged and were applied to single seats on BEA schedules. He suggested that, in view of the fact that theindependents could not do the same, since they were not allowed to operate scheduled services, this was unfair competition. Mr Grumbridgedid not agree. Mr J. Gilbert, commercial planning manager of BEA, was nextcalled to give evidence in support of the corporation's general objections. Mr Marking asked his witness questions regarding the figures fromBUA tables which had been queried by a member of the Board. Mr Gilbert said that Mr Whybrow of BUA had. as he was entitled to do,elected to use the figures from BUA table M.I8, which better supported his company's case. While Mr Gilbert did not accept thatthe BUA figures were correct they could be used to illustrate his own evidence. He then introduced document BEA 61. This document compared figures, given by BUA in evidence, forthe proportion of total traffic which they would expect to carry in 1965 (based on table BUA 1 M.I8) with figures based on table BUA 1M.19. which BEA considered more appropriate, and with corrected figures prepared by BEA for both 1963 and 1965. Figures for 1963had been given because BUA would not be providing any capacity until that year. BEA must, therefore, provide capacity for all theBritish share of the traffic until 1962—or possibly until 1963. depending on the result of the applications and how soon BUA would be able tostart operations if licences were granted. A load factor of 60 per cent had been assumed by BEA, instead of the 50 per cent taken by BUA,because 60 per cent was the minimum required for economic operation; it was also the minimum typical load factor in Europe. Figures hadbeen based on 56 per cent of the total traffic instead of the whole of the traffic (which had been taken as a base by BUA) because BEA hadcarried 56 per cent of the total traffic in I960 and might expect to carry the same proportion in future, as the sole British operator. Any trafficcarried by BUA would be diverted from BEA. BUA's Estimated Shares BEA's calculations based on these corrections showed that BUA'scapacity expressed as a percentage of the total traffic would be 15.8 per cent in 1963 and 13.2 per cent in 1965. The figure put forward byBUA had been 10 per cent in 1965. The traffic BUA could expect to carry, expressed as a percentage of the total traffic available to Britishcarriers, became 28.2 per cent in 1963 and 23.6 per cent in 1965. com- pared with BUA's figure of 5 per cent in 1965. Asked to explain thestartling difference in the figures. Mr Gilbert said that the percentages calculated by BEA had been based on the growth 1962-63 and1962-65, i.e. growth since the year before BUA would start providing capacity. If BUA achieved a load factor of only 30 per cent in 1963 the diversionfrom BEA would still represent 97.7 per cent of the growth of BEA's share of the traffic. All the calculations were based on the assumptionthat BUA would use 64-seat Viscount or BAC One-Eleven aircraft. If they used larger aircraft, such as the Britannia, the diversion would begreater. The percentages were based on year-round operations, but the diversion would be increased in the trough periods. Mr Gilbert was then cross-examined by Mr Gardiner on behalf ofBUA. Mr Gardiner put questions about various factors included in, or excluded from, BEA's statistics and forward estimates, suggesting,in general, that BEA's figures were no more reliable than those of BUA with which the witness had compared them. The outcome ofthese exchanges was that BEA undertook to produce further figures as soon as possible, although this would not be before the beginning of thefollowing week. Mr Gardiner suggested that BEA figures which had been produced in evidence were misleading because they were basedon aircraft of a capacity which BUA would not use, in a year when BUA would not be operating, and on the assumption that all BUAtraffic would be diverted from BEA. Mr Gilbert disagreed with the sug- gestion that the BEA figures were misleading. Although BUA might notbe using BAC One-Elevens in 1963 they could be using Viscounts and Britannias. The capacity of thege would average approximately the64 seats of the One-Elevens. He confirmed his belief that all BUA traffic would come from BEA and, when counsel for BUA suggested that this BEA's domestic-trunk profit/loss achievement £ 500,000 £ 250.000 BREAK- EVEN £ 250.000 £ 500.000 PROFIT ^— - I \ LONDON - BELFAST ^^^ " ^*\. / LONDON-SCOTLANC LOSS i / ! / DON-MANC;HESTER £ 500.000 £ 250.000 BREAK- EVEN £250.000 £ 500.000 1952 1953 1954 1955 1956 1957 1956 1959 I960 1961 1962 Year ended 31st March
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