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Aviation History
1962
1962 - 1881.PDF
Firm orders for 33 BAC One-Elevens have now been placed with the British Aircraft Corporation, and production is well up to schedules which call for first flight of the first aircraft in April. The first fuselage is being assembled at Hum and the first complete wing centre section with integral fuselage frames (right) was taken out of the jigs at Weybridge lost week. BEA's Aircraft Costs BEA's loss of £1.5m in 1961-62 was, the corporation estimates, made up of a profit of £1.2m on international services and a loss of £2.7m on domestic services. The corporation itself admits (page 19 of its report) that these figures are after charging costs "on bases we believe to be accurate, although some arbitrary assumptions are necessarily involved." At first sight it seems curious that BEA should have made such a heavy loss on their domestic routes when all the major reasons for the overall loss—namely, intensive jet competition from foreign carriers, a recession in traffic growth, and over-capacity—are not applicable to domestic routes. On these services BEA have a virtual monopoly of the air; traffic growth was 21 per cent, and load factor was more than 68 per cent. Last year only £700,000 was lost on domestic services (compared with a profit of £2.2m on international services) and BEA stated in their last year's report that all domestic traffic services, except those to the Channel Islands, operated at a profit. What then can be the explanation of this year's heavy £2.7m domestic loss? In the latest report there is no cost-revenue breakdown of inter national or domestic services and without audited figures it is virtually impossible to see whether BEA are allocating a fair share of their costs to the domestic routes. But there is a key passage in the report which reads: "These figures [i.e., a profit of £1.2m on international services and a loss of £2.7m on domestic routes] are after capitalizing part of the additional costs of introducing new aircraft." A gla*-~~ at Appendix 7 shows that Vanguards made a loss of more t'.an £2m during the year, compared with a profit of nearly £350,000 made by Comets and a profit of more than £lm made by Viscount 800s. Vanguards cost £9m and earned not quite £7m; Comets cost £12m and earned more than £12.3m. In other words, in the year under review, the aircraft designed specifically for BEA's routes (and in the specification of which BEA has a big say) lost money, while the aircraft they had to buy to meet jet competition (and which has never been represented— particularly by comparison with the Caravelle—as the ideally eco nomic jet for BEA's routes) made money. According to BEA's report aircraft introduction costs in 1961-62 amounted to approximately £3.2m and it appears that the major part of these costs was incurred by the Vanguard. The engineering cost of this aircraft is given in Appendix 10 as £122 per hour, compared with £67 for the Comet 4B, £34 for the Viscount 800 and £60 for the Viscount 701. The introduction of the Vanguard, says the report, "created various new maintenance problems with electrical equipment, particularly with heated windows, heated aerofoil leading edges and cyclic timers." The Vanguard is now giving good trouble-free service, as Mr Anthony Milward, BEA's chief executive, said at last week's news conference, and it appears that its develop ment troubles (which BEA say are no more than were incurred by the Viscount in its early days) are now a thing of the past. Nevertheless, it is no fault of the Vanguard, and no inherent fault of BEA's UK domestic routes, that international competitive pressures caused the aircraft for which BEA wrote the specification to be replaced by jets and relegated to domestic routes. While there is no getting away from the fact that the Vanguard's develop ment costs have been heavy, and would have been heavy on what ever routes these aircraft were operated, there seems to be a case for suggesting that the allocation of these costs to domestic services gives a rather distorted picture of domestic route economics. These two graphs, published by BEA with their annual report (see pages 386-387), showl(left) the steady climb of interest on capital and the sharp decline in the last three years of return on capital employed. The "chimneys" on the right show how many empty seats were flown on the corporation's international routes in Inn? /9A2 X2i \0% 2\ J / k 1 ' i A Return on / /j\capita! employed/ / \ ' / \ / ^^H \ i ! \ 'interest paid on capitof \ \2X 10" 4 '; Junt 1962 EMPTY I AVERAGE WMQt OF ' Um SUIS P£R Kit, Italy 1954/55 1955/56 1956/57 1957/58 1958/59 1959/60 1960/61 1961/62
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