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Aviation History
1963
1963 - 0414.PDF
394 AIR COMMERCE FLIGHT International, 21 March 1963 important because unit costs generally fall like the side of a house with increasing distance at these sort of stage lengths. Average stage length of all US domestic operations is only 226 miles. (2) BEA's domestic route-network links major multi-million- population industrial business and social centres, whereas the US locals generally link one major centre with outlying one-horse towns—producing a less favourable kind of traffic pattern, station utilization and route-density. (3) For this last reason BEA are able to use larger aircraft with consequently lower seat-mile costs. (4) Since BEA are four times bigger in terms of ton-miles per formed than the largest local-service carrier, the corporation's engineering, administrative and other overhead expenses should be lower per ton-mile. No attempt has been made to assess what additional profit the American operators would have made if, in their particular spheres of operation, they had possessed the monopoly which BEA enjoy. But it is true to say that monopoly, by definition, tends to increase profits; BEA certainly hold strongly to the view, asserted many times during licensing battles, that competition can reduce profits. It might be noted also that any comparison between BEA's load factor and that of US domestic airlines must take account of the difference between the number of seats that BEA squeeze into an aeroplane compared with their US counterparts. Taking the latest (years for which comparable information is available (ICAO Digest of Statistics, No. 91. and Airlift, May 1962 issue) the comparison is as shown in the table in col 2. Thus BEA fares are priced on the basis of, say, 45 Viscount 800 passengers compared with fewer than 35 in a Continental Viscount 800—i.e., 10 more passengers. A load factor of 68 per cent on 71 Viscount seats produces very much less revenue than a 56 per cent load factor on 59 Viscount seats. It is worth noting, too, that some BEA Viscount 800s are actually fitted with more seats than are two US operators' Electras. No allowance for the big resultant differences in earning power—about 5s per mile on a Viscount -has been made in the £350m calculation, Operator Aircraft No of Seats BEA BEA United Continental American Braniff Eastern National Northwest Western Eastern Allegheny Mohawlc North Central Braniff Delta National United Frontier Viscount 700 Viscount 800 Viscount 700 Viscount 800 Electra Electra Electra Electra Electra Electra Convair 440 Convair 440 Convair 440 Convair 440 Convair 340 Convair 340 Convair 340 Convair 340 Convair 340 54-61 66-71 46* 59* 72 69 70 80 77 78 44 50 50 44 44 44 44 44 44 *Current seating Even after making every allowance possible for the acknowledged differences between BEA domestic services and those of the US airlines, a sum of £350m seems big enough to justify the proposition, which Mr Milward describes as "quite remarkably ill founded," that with BEA's monopoly, equivalent revenue rate and load factor, an American operator would be making a fortune. It is big enough, too, to make one wonder at BEA's domestic losses, and at the demand for steep fare increases and the prospect of more to come. And it makes one wonder at the Air Transport Licensing Board's fulsome praise of BEA's efficiency, and at the Board's statement—unaccountable in any circumstances—that it might even have granted higher increases. But let Mr Milward have the last word:— "My purpose... is to dispel the notion that British domestic airline operations are grossly inefficient compared with those in America and to secure a better public understanding of some of the economic problems which underlie the operation of air services within Britain. We intend to solve tnese problems and I have no doubt that we can, in due course, look forward to profitable operations on our main domestic routes." Facts of Airline Life AT lATA'S annual public relations conference in Washington last November a panel discussion, "The Economic Facts of Airline Life," was held. The proceedings, much of them highly critical of I ATA, have now (to the Association's great credit) been published. Among the contributors was Mr Hans Heymann, an economist for the US Rand Corporation, and a consultant to the US Government. Here is a synopsis of his address:— "Let me dispose very briefly [Mr Heymann began] of the ques tion of the direct measurable economic contribution of international air transport to a nation's economy. By the conventional measures used by economists—gross national product and total employ ment—the contribution of international air transport can be dis missed in one word: 'trivial.' In the United States, for example, the share of the GNP originating in international air transport is less than 1 /20th of 1 per cent, and the share of employment 1 /30th of 1 per cent. In the Netherlands, where KLM plays a truly monu mental role as the country's fifth largest single employer of man power, the share is still only l/3rd of 1 per cent. "Another much-touted measure of air transport's economic significance is its impact on the balance of the payments. Here, too, its importance is, for the most part, grossly over-rated. "In the US for example, in 1960, air transport accounted for a little more than 1 per cent of receipts on international account and 2 per cent of expenditures on international account. It was responsible for only 5 per cent of our net balance-of-payments deficit, a deficit which, incidentally, was more than offset by a net surplus on account of US aircraft purchases and sales abroad. "These figures are, of course, completely drowned out by the very large US deficit on travel account, i.e., the excess of US tourist expenditures abroad over foreign tourists expenditures in the US, which was more than four times as large as the impact of die air transport account. There are a few exceptional situations, such as that of the Netherlands and that of India, where the foreign ex change earnings and savings resulting from the operation of their own carrier are significant. But for the most part their contribution is marginal and uncertain. "As part of the world's transport system, you fall into the noble category of what economists like to call 'social overhead capital.' An artist's impression of the new terminal building at Haneda, Tokyo International Airport. The first stage of Haneda's massive rebuilding and expansion pro gramme comes into effect this month. The six-storey terminal building, which will contain an hotel as well as the usual restau rant and office facilities, is due to be completed in August
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