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Aviation History
1963
1963 - 0270.PDF
256 FLIGHT International, 21 February 1963 Al R COM MERCE . . . San Francisco - Chicago and Chicago - Cleveland. A number of the airline's 720s are being converted to a one-class three-and-two seating layout; along with this will go a simplified in-flight service that will include drinks and a meal. Between Chicago and San Francisco the fare will be $111. This is $24.4 less than present first-class and ¥5.55 more than coach. Because of the prospect of Continental's extension of the three-class service, United will not offer one-class services on the Chicago - Los Angeles route as planned because the $111 fare would not be competitive with the cheapest of Continental's three-class fares—$85 economy coach. However, United's fare would be less than Continental's comparable business-class fare costing $ 116. Beyond opposing the scheme, so far neither American Airlines nor TWA have expressed their views on the best alternative to the three-class idea. However, United received moral support for their proposal from Mr L. B. Maytag Jr. president of National Airlines, who has placed himself on record as being an advocate of the single-class fare structure. ATLB Grants Higher UK Fares IN four pages of close typescript the Air Transport Licensing Board gives its reasons for what amounts to a 99 per cent endorsement—briefly reported last week—of the 5-20 per cent UK domestic fare-increases applied for by BEA and seven indepen dents and their subsidiaries. If it were possible to summarize the Board's decision in one sentence it might be: "The airlines know best." This decision, which the Board has taken the trouble to justify in great detail, does not ring with the authority that has characterized previous decisions. Fare increases may well be necessary; but they should not be granted for the sort of reasons adduced by the Board. This decision—the first handed down in a major UK fares case —was admittedly made under great duress. The Board was faced with applications by the major UK domestic airline, BEA, a nationalized corporation, who were in a strong position to say in effect: "Give us these fare increases or you must take responsibility for our losses." This was a tight corner; and the Board was crowded in further by a simultaneous demand from the indepen dents concerned for comparable increases on all routes, with one or two notable (e.g., Starways on Liverpool - London) exceptions. The Board made a show of being tough, by sending out question naires and holding a public hearing (though it may be asked what is public about a hearing involving confidential Board questionnaires, confidential answers supplied to them, and other confidential written evidence). Under heavy pressure, the Board was unable to prevent the applicants from advertising the new fares in their timetables. In the event a foregone conclusion has been reached, but for reasons which are controversial and which, in one or two cases, make one blink. For instance:— "Since any licensing system protects airlines engaging in domestic services to a greater or less degree from competition by their fellow operators, and since . . . there is little evidence to suggest any disposi tion to engage in fare competition, we clearly have a duty to avoid a high level of tariff calculated solely to enable operators to maxi mize profit." Bravo for the Board's recognition of its duty to avoid high fares calculated solely to make high profits. But has the Board never heard of the CAB, which positively encourages competition in US domestic air transport, and which has even been criticized for licensing too much competition ? And is this the same Board which, not much more than a year ago, said: "We are in no doubt that some carefully regulated competition must, sooner or later, become a feature of the routes over which British aviation operates" ? The Board goes on to say:— "This is not because we have a specific statutory duty to protect the general public from excessive fares, but because such fares tend to retard traffic growth and hence the development of British civil aviation." The 201st F-27 was rolled off the Fairchild assembly line early this month. Production continues, with 12 more on the line, and a new repeat order from Bonanza is possible. Fairchild have delivered 95 to date By the Air Transport Editor The public comes nowhere. The Board's statutory motto, as is well known, is to further the development of British civil aviation. By a legislative oversight it was not called upon to consider the public interest. The cart is for ever, in the regulation of British air transport, before the horse. To its credit, the Board does not stick to this principle, however; it exercises its discretion to allow Messrs Lucking and Bishop, private citizens, to object to the pro posed fare increases. And in its decision it speaks, pro bono pub lico, of a need to avoid "confusion and a sense of grievance among passengers" if further differential tariffs were to be introduced —as argued by Citizen Lucking on behalf of the businessmen who. he alleges, find it hard to get seats when they want them on the UK trunk routes. (The Board accepts BEA's assurance that there is no serious 'shortage of seats in the "business bands," though the corporation was not pressed for statistics to support its evidence that variations in load factor are "not so large as some people imagine.") Again pro bono publico, the Board says of the Channel Islands that cheap internal travel is important to the life of the islands. But. if this is so, is it not even more important to the life of England where the major centres of population, industry and commerce are located ? Another passage of the Board's decision reads:— "An additional major factor contributing to BEA's loss appears to be heavy expenditure and initially uneconomic operations resulting from the introduction on domestic routes of new aircraft with much greater capacity." As we said in these pages six months ago (September 6, page 385) "it is no fault of the Vanguard . . . that international competitive pressures caused the aircraft for which BEA wrote the specification to be replaced by jets and relegated to domestic routes . . . The allocation of [heavy Vanguard development] costs to domestic services gives a rather distorted picture of domestic route economics." All that the Board has to say about BEA's dumping of £2m Vanguard overheads on to domestic trunk routes (which, only 12 months ago, BEA were telling the Board were profitable), is: "We are satisfied from the evidence before us that the present and prospective losses on domestic services cannot be eliminated by any accounting adjustment." The extent to which accounting adjustments can distort the finan cial results of a route is, of course, always a matter for debate, even within an airline. The Board implies that BEA's accounting methods must be good because they have been "used consistently for many years." But old age does not necessarily sanctify account ing methods. It is by no means unknown to find in companies larger than BEA that individual cost items have swelled to two or three times their true value as a result of successive decisions taken over the years by accountants and their clerks sitting in offices instead of studying, say, the engineering department's problems. The Airlines Know Best
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