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Aviation History
1961
1961 - 1492.PDF
596 FLIGHT, 12 October 1961 One of Swissair's Convair 880 Model 22Ms, HB-ICM, at Zurich on arrival from Tokyo. Shown here are the company's new covered passenger step: which are in use at Zurich and Geneva and which will be introduced at other airports. An account of a flight to Bangkok on these aircraft, by Johi Stroud, appears on pages 578-579 AIR COMMERCE... THE BIG APPEAL (Continued) CONTINUED here in condensed form is the hearing before Sir FredPritchard of BOAC's appeal against the award of Cunard Eagle's North Atlantic licence. The first two days of the hearing were covered in lastweek's issue; the proceedings of September 28 and part of September 29 are summarized below. CONTINUING his evidence for BOAC, Sir Basil Smallpeice statedthat the failure of traffic on the North Atlantic services to comeup to expectations had resulted in a loss of £650,000 in thefirst 16 weeks of 1961-62 compared with a profit of £350.000 in the corresponding period in 1960-61; this was apart from the effects of thestrikes in June and July. Sir Basil ascribed this disappointment to a reduction in travel to Europe by US citizens, with an increasing ten-dency for those who did fly ths Atlantic to use American carriers (by direction if they were travelling at Government expense); to the effectof the 17-day excursion fare, available only up to March 31. which had resulted in many people travelling earlier than they would otherwisehave done; to a reduction in the number of passengers to or from European centres travelling by BOAC between America and Londonbecause more European cities were now served by direct jet flights: and to the discouraging effect on tourism of political unrest in Franceand the mounting tension over Berlin. All these factors made it necessary to revise forward traffic estimates.Some people felt that North Atlantic air travel had reached saturation point: BOAC took the less pessimistic view that, with favourable condi-tions, a reduced rate of growth might be resumed next year, but from a smaller figure than had been expected. Whatever view was taken it wascertain that there was now less justification than in May for Cunard Eagle's "facile assumption" of a steady 20 per cent increase. BOAChoped that traffic for the year 1961-62 would show an increase of 5 per cent over 1960-61 compared with the 14 per cent estimated beforethe Board. Even this might be rashly optimistic as five months of the year were already gone and the four month summer peak normallyaccounted for two-thirds of the annual traffic. Sir Basil quoted revised estimates of traffic at the now expected re-duced growth rates, and pointed out that the lower figures, compared with those quoted at the original hearing, meant that BOAC's marginof capacity would be more than originally expected. Other operators had greatly increased their capacity and, with load factors of 50 percent, compared with 70 per cent a year ago, it was a case of "too many seats chasing too few passengers." With new jet equipment still beingdelivered to other operators the capacity surplus was likely to continue. It was unlikely that sufficient new traffic could be attracted by ageneral reduction of fares to redress the position and there had been no agreement on fare cuts at the meeting of IATA in July. The marginaleconomics of the route did not justify general fare reductions but group fares and "tour-basing" fares were being considered although there wasa danger of attracting passengers away from normal fare categories. European fares were to be raised by 5 per cent on November 1 becauseof disappointing traffic. It was thus possible that the fare reductions of 10 per cent in 1963-64 and a further reduction of 5 per cent in 1965-66which BOAC had expected to stimulate traffic would not materialize. The greater fare reductions which the Board—on no evidence—had fore-seen were most unlikely. Sir Basil said that BOAC were therefore proposing to reduce theircosts by reducing capacity on the east coast route by 7 per cent in 1962-63, since their current capacity was more than enough to deal withthe total expected British share of the traffic in 1962-63. This would be the first occasion in the history of the route of a capacity cut but loadfactors were currently 20 per cent below normal so that a 40 per cent traffic increase would be necessary to restore a 70 per cent load factor onthe existing capacity. Concluding his evidence, Sir Basil said that the Board seemed to haveconsidered irrelevant the difference in traffic growth rates estimated by BOAC (17 per Cent) and Cunard Eagle (20 per cent). He submitted atable based on these two rates of growth showing that the difference alone represented three aircraft in 1965-66, four and a half in 1966-67and six in 1967-68, or capital at risk of £9m, £121m and £18m in the same three years. The revenue equivalent of the difference wouldbe £6im in 1965-66 and £13m in 1967-68. This year's figure, Sir Basil stated, indicated an average increase rate of not more than 15per cent. Mr Gardiner began his cross-examination by questioning Sir Basilon the traffic estimates submitted to the Board in comparison with the revised figures for future traffic submitted at this hearing. He ques-tioned the "cleaning" which had been applied and suggested that BOAC's estimates for 1959-60 and 1960-61 traffic on the route had beenmaterially exceeded. Mr Fisher submitted that this was improper cross- examination and quoted Regulation 14 as his authority for submittingthat questions should be confined to new matters introduced in evidence at the appeal. Mr Gardiner then quoted 1ATA figures for traffic between the USAand Europe, which showed increases of 4.5 per cent and 4.6 per cent for the April-June and April-July periods of 1961. compared with 1960.and Ministry of Aviation figures showing 12£ per cent increase for the period January-June 1961 compared with 1960. Finally, quoting figuresfor BOAC. UK - USA traffic for the months January-March 1960 and 1961 inclusive, he asked Sir Basil to confirm the indicated increase ofmore than 30 per cent during these three months for which, he pointed out, BOAC had not quoted statistics. Mr Gardiner suggested that thefigures showed that the 17-day excursion fare had achieved the object of levelling out traffic. Sir Basil did not agree that this had been theobject of the fare which had been, he said, intended to produce an overall increase of traffic. Sir Basil agreed, however, that the 30 percent increase in the months January-March 1961 had been more than BOAC had expected. Westbound Traffic Increasing Mr Gardiner also suggested that figures for traffic carried by BOACsince May would be misleading because of the effects of strikes and asked how much these had cost the corporation. Sir Basil quoted lossesof £ljm directly connected with the services not operated, plus a further £lm to £l£m in consequential losses in forward bookings.He confirmed that 27 J per cent of the Boeing 707 payload was available for mail and cargo, did not dispute IATA figures for North Atlanticincreases of 30 per cent in mail and 34 per cent in cargo during the months January-July 1961 compared with 1960, but could not immedi-ately quote figures for BOAC mail and cargo to the east coast. (These were quoted the following day; freight January-June, up 31.4 per centand mail February-June, up 3.4 per cent.) Referring to paragraphs "you didn't read" from extracts from articlesin Airlift which had been submitted as evidence by BOAC, Mr Gardiner quoted a passage implying that Atlantic fares were too high, and sug-gested that nationalized airlines were less inclined than the indepen- dents to reduce fares. A further passage from the same article indicatedthat westbound traffic was increasing—which Sir Basil conceded was so —by about 4.5 per cent. Asked about an article in Travel Trade Gazettein which BOAC were quoted as saying that westbound Atlantic book- ings for Autumn were running about 10 per cent above last year, SirBasil said that he did not read Travel Trade Gazette but did not dis- agree with the statement. Mr Gardiner then turned his attention to load factors and, havingestablished that load factors achieved in the years 1955-59 were 62-6" per cent and that the break-even load factor over the same period wasapproximately 65 per cent, suggested that Boeing claimed a break-even load factor of 30 per cent for the 707 while Cunard Eagle, more con-servatively, assessed it at 40 per cent. Sir Basil said that BOAC put the figure at 50 per cent and Mr Gardiner suggested that this meant thatBOAC could operate their Boeing 707s at 50 per cent load factor with- out losing money, while any sudden spurt of traffic would give ar.enormous profit. Finally, Mr Gardiner asked whether Sir Basil still felt that, as he hacsaid at the hearing by the Board, long term trends were more important than short term movements in considering traffic prospects. Sir Basi!agreed and Mr Gardiner then asked whether he did not feel that Apri! and May figures covered too short a period on which to base a fore-cast of a 5 per cent increase for the whole year. When Sir Basil said that IATA statistics had also been taken into account Mr Gardiner
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