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Aviation History
1963
1963 - 0699.PDF
FLIGHT International, 9 May 1963 671 AIR COMMERCE . . Cargo, More Cargo, Supercargo . . . onward connections. Considerable revenue can be garnered by an alert individual in these fields whilst offering a service to satisfy a passenger demand, and there is no reason wny ticket sales should not be made and space reserved over company communications enabling close connections to be achieved. The possibilities of selling waitlist space need exploration, and advance information on transfer passengers speeds the interlining process. The purser also offers an opportunity (should the airlines ever tackle the problem) of collecting excess baggage charges on duty-free purchases made after the passengers' baggage has been weighed and charged. Another field is aid in the completion of forms required by passengers for entry at destination airports, and those for the aircraft itself. The demands for these are still proline and assistance in the air eases the task of staff on the ground who normally correct errors and soothe the authorities. General advice, from the selection and provenance of wines to facts about places of interest at the destination foster the favourable impression the airline aims to leave; by service, manner and conversation the purser can create an image of a helpful, courteous, efficient yet friendly organization. The carriage of a purser eliminates the need of signalling load details ahead, as weight and balance are prepared on board. Brief details of disembarking and known embarking load can be exchanged on company frequency, and meal requirements advised to enable accurate victualling. The safe custody of valuable cargo, of diplo matic mail, the welfare of livestock—in short, responsibility to the captain for the commercial operation of the aircraft in the air and for loading on the ground would be the purser's. TWA'S COMEBACK ALTHOUGH the efforts of Trans World Airline's new and dynamic management have inspired the company with new heart and set it well on the way to financial stability, the 1962 annual report is unable to conceal the immense built-in headwind resulting from the decisions of an earlier era. Last year, TWA's international operations yielded a 13.4 per cent excess of revenue over total expenses compared with an 8 per cent loss in 1961. But inter national business was only about a quarter of the airline's operations and domestic revenues fell short of expenses by 6.6 per cent, about the same as 1961. The result was that TWA's 1962 total system revenue of $403m failed to meet expenses by 2.3 per cent compared with a 6.8 per cent deficiency in 1961. Great credit is due to the new TWA management for progressively bringing down the overall cost per capacity ton-mile from over 32 cents three years ago to 25 cents in 1962. This was more than offset, however, by a fall in the overall revenue load factor to the very low figure of 44.8 per cent compared with 58-60 per cent in the pre-jet years. Nevertheless, in his remarks to shareholders, Mr Charles C. Tillinghast, president of TWA, expresses confidence that the airline will again make a profit in 1963 if only because unusual circumstances prevented one this year. The circumstances he referred to were $1.8m strike benefit paid to Eastern under the airline industry mutual aid agreement, over $7m estimated loss of revenue due to the pilot/flight engineer strike, and ?2.7m net of tax adjustments to give more realistic values to old piston- engined aircraft. The root of TWA's troubles seems to be in the unhealthy situation of the domestic services, which will probably not improve until more competitive equipment is introduced on to the shorter routes with delivery of Boeing 727s in 1964. Although TWA have fleets of 707-131Bs and Convair 880s on many trunk routes and coast-to- coast services, these aircraft—apart from their inadequate airfield performance—are too big for competitive frequencies on the important feeder stopping services which at the moment are being operated with uneconomic and uncompetitive Constellations. It is characteristic of the aggressive way the new TWA management is tackling its problems that it is reported to be showing renewed interest in the Caravelles—for which TWA placed an order for 20 in September 1961—no doubt along with the BAC One-Eleven and DC-9, for very short and less dense traffic routes. The Economics Would the purser be additional to, or a develop ment of, an existing crew member ? An addition increases costs for hotels, meals, flying pay, and means a marginal theoretical loss of payload for baggage and personal weight. As no airline plans its revenue on 100 per cent load factors, this can be disregarded and direct comparison made with the extra pay proportionate to the additional duties falling upon one of the present complement. Fifteen daily departures from home base with an average trip time of ten days followed by the days off requires 150 staff, dis counting training leave and sickness. A saving of staff at points served by the- airline could number upwards of 50 so that the net increase is approximately 100. Taking £2,000 per annum per purser as an annual cost, the total expenditure is £200,000 or £18 per flight, inwards and outwards, end to end. If use is made of a crew member already of the complement, the cost would be as little as £2. The return of £20 per flight to make the purser economically justifiable is small and must outweigh the cost of returning mail and freight to its proper destination or placating passengers deprived of baggage. How much must be charged against late departures caused by searching the holds ? What is the revenue derived from use of cubic inches saved by good loading or the economy achieved by fuel uplifts, to the last 50kg, at favourable prices ? A revenue of $1 per head on 200 passengers met on a round trip shows a profit to the airline, and the field of duty free parcel weights has already been mentioned. Each airline must study the costs of back-hauling freight and baggage; of meeting claims and of sterilized or lost capacity and set them against the cost of pursers. Their employment must be on economic grounds, but negative expenditure (i.e., costs avoided by the elimination of the cause) is difficult to estimate. This apart, there is evidence that the cost per passenger is small enough to ensure recovery, whilst the additional benefits are the airline's reward for services rendered. R. H. G. C. R. SMITH ON WASTEFUL DUPLICATION IF a translation is sought for the immortal phrases "wasteful duplication" and "material diveruo.i" then no publication provides a better interpretation than the annual report and accounts of American Airlines. In particular, Mr C. R. Smith's hard hitting presidential report tells the story of an airline that has been sadly affected by the CAB's policy of multiple competition. As a result, American gets less profitable as it gets bigger; not because of higher costs—its level of unit costs per c.t.m. has fallen steadily by a cent a year since 1959, to the present low level of 28 cents—but because of sagging load factors. This has caused American's net profit to fall to $7m in 1962 compared with |8£m in 1961, $21m in 1959, and about $12m a decade ago when revenues were less than half the 1962 level of $463m. The excessive capacity that appears to have been brought about by the CAB's policy—or, to be fair to the CAB, by the airlines' failure to adapt their aircraft procurement plans to accord with the Board's policies—is shown not only by declining load factors but also by the changing shape of the balance sheet. Ten years ago, total AA revenues were running comfortably ahead of total assets; by 1962 revenues represented only two-thirds the value of total assets. Had it been possible to finance this increasing burden of capital out of retained profits and proceeds of share issue, then American's position would not be so difficult. As it was, however, this burden had to be financed primarily by fixed interest-bearing loans. Thus the ratio of long-term debt to total assets, which in 1953 stood as low as one-sixth, rose by 1962 to as much as a half. This meant that interest charges had risen last year to the crippling level of some f 14m. Expensive under-utilization of capital is, of course, a problem shared acutely by both American and Eastern and is the main reason behind the proposed merger. Mr Smith puts the annual savings of such a merger at $50m and the reduction in combined capital requirements at $100m. With characteristic bluntness Mr Smith gives a one-word answer to the alternative: subsidy. Footnote American Airlines' continues to make no secret of the fact that it is seriously interested in the One-Eleven, a figure of 25 having been mentioned as a possible number of "small jets" initially required by the airline. No decision has yet been made, though both the DC-9 as well as the One-Eleven are being considered.
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