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Aviation History
1963
1963 - 1611.PDF
GHT International, 5 September 1963 R COMMERCE . . . 423 EA 1962-63: A POSTSCRIPT S usual, BEA's annual news conference, held last week, was an i occasion notable for its candour. Lord Douglas, the chair- n and his lieutenants reported to the press on their 1962-63 r and they received two compliments which seemed to be mimously agreed. One related to the quality of BEA's annual ort—"the best in the business"—and the other took the form a tribute to Lord Douglas, who was presenting BEA's results the fifteenth and last time (he retires on March 31 next). BEA's loss in 1962-63, as recorded last week, was about £265,000 er payment of all capital charges for depreciation and interest. scounting the £&m loss on Scottish social services (which this ir is accounted for in unprecedented detail to enable the Minister Aviation better to assess BEA's request for subsidy), there would ve been a net profit of about £68,000. Account must be taken, wever, of the charging of £1.35m aircraft development costs— : same sum as in the previous year—to prudently garnered erves set aside for this purpose from previous years' profits. The report is published at a time when BEA are nearly at the d of their seven money-making 1963-64 summer months, and ird Douglas says that a £lm net profit will probably have been ide in each of these seven months. To be offset against this is t £lm or so a month which, as the chief executive, Mr A. H. ilward, remarked, is almost certain to be lost during the five nter months. It thus appears that BEA may end the current 63-64 year with a net profit approaching £2m. It is, of course, isonable to expect that an efficiently run airline ought to be ofitable with a load factor in excess of 60 per cent. The load ctor budgeted for the current year is 61 per cent, and the figure year under review was 59.9 (exactly the same as in 1961-62), sde up of 58.7 per cent on international services—a fractional crease—and 63.1 per cent on domestic services—just over one tint down. Mr A. H. Milward referred to comments that have sn made that BEA are "an expensive airline." The fact was, 1 said, that BEA and Finnair were the only operators who made a ofit last year on European operations. He did not think BEA's ad factor would ever get back to the 68 per cent peak of 1959-60— fit did," he said, "we would be accused of gross profiteering!" e also commented on what is without doubt the brightest news the report, i.e., that BEA have reduced their break-even load *>r from 61.7 to 60.2 per cent. This is despite a reduction of *ly 6 per cent in the average revenue rate (62.6d per load ton- *) and is hence entirely due to a most encouraging cut in st level. This was slashed 10 per cent to 37.7d (or a penny more account is taken of the £1.35m capitalized). In the current year W-W the budgeted unit cost is expected to come down further around 37d per c.t.m., and the budgeted break-even load factor i according to Mr Milward, 58.5 per cent—the first year ever in bch BEA will have broken the 60 per cent break-even load factor irrier. BEA's load factor continues to be higher than that of almost 'ery major world airline, and because of the high peak-trough ™re of the corporation's business high load factors may be ™*d at the expense of would-be passengers at the busier times jthepeak months. Suggestions that BEA have restricted capacity order to force up load factors are sometimes made, though their '<% is difficult to substantiate. It is true that aircraft utilization 76 Per cent during the year from l,861hr to l,719hr, and the m summer utilization was 13.8 per cent; and though this fo »\fPPea to support arguments that BEA's aircraft resources . m§ u^der-utilized, it is necessary to examine where the falls tozati, n occurred. Certainly not in the Vanguard fleet, which— rkably_flew neariy ^jre as many hours as in the previous ear > nor m the Comet 4B, Argosy or Herald fleets, all of which t ^bstantially more hours. The reduced utilization, as might ^pecfci is attributable entirely to the Viscount 701, 802 and TbgtT- w!^c^> ^ter a wonderful record (to which a special ta , Is r"a'd in the report) are now being sold or relegated to B D<Hme services. *d fat- ^e service-adequacy aspect of the corporation's r will continue to be a matter for debate, Darticularly 65* 60% 60X 1954-55 55-56 5657 57-58 5859 5M0 6MI 61-62 62-63 65*4 64-65 BEA's break-even load factor has been coming steadily down in the past few years, and a target of 58.5 per cent is being aimed for in the current year at licensing battles; and it is obviously a matter about which BEA are not complacent. Mr Milward, speaking in the context of the decline in first-class travel, said that poorly filled first-class compartments increased the problem of "people clamouring to get on tourist-class and being turned off because there isn't room for them." On the morning of BEA's conference, August 27, the Ministry of Aviation published the profitability targets set for BEA for the next five years (see page 417). Publication of this agreed target does not exactly verify rumours that the Minister is contemplating a BEA-BOAC merger. If he were it is doubtful whether he would have set out and published BEA's "financial and economic obli gations" for the next five years. Lord Douglas repeated his complete hostility to any idea of a merger with BOAC and indeed to "any arrangement which would affect exclusive control of BEA's board over its own affairs." Asked to say whether he could suggest what grounds there were for supposing that a merger was being proposed, Lord Douglas said, in effect, that he did not know what the Minister had in mind. But it may be significant that when the subject of the Corbett report on BOAC was raised neither Lord Douglas nor Mr Milward—as might have been expected—dis missed this as a matter concerning BOAC only. Points from the Conference BEA's first Tridents will be "on several routes" before the current financial year ends on March 31, 1964. It had been hoped to introduce ad hoc services before Christmas but this does not now seem likely. The manufacturer will meet the contract date, but will not be able, as had been previously intimated, to better it. BEA are not necessarily planning on an all-Trident fleet; asked whether the BAC One-Eleven might be required, Lord Douglas said: "We have not considered the One-Eleven and I don't think we ever shall." BEA definitely plan to purchase ten more Tridents, 110-seat lFs, though contractual details still remain to be settled. Complimented by a member of the press on the quality of BEA's annual report, Mr Milward commented that "sometimes We think we give away too much," and he wished that it were possible to see British independent airline annual reports. BEA have proposed to the Minister that the corporation should run the small Scottish airports north and west of Aberdeen (about ten in number), and it is thought that the proposal may be favourably received. Mr J. Gilbert, in answer to a question, said he did not favour the idea of one-class service in Europe. The existence of a second class enabled airlines to control the quality of service provided, by measuring it against the higher class service; and when there was only a one-class service it would be difficult to say that no more could be done for people who were prepared to pay. Thus, with one-class only, standards would rise and with them costs, and for this reason he did not favour the idea of one-class service. Lord Douglas agreed that walk-on services could develop from the present stand-by scheme, "but we are not looking at it at the moment." The cost of keeping stand-by aircraft and crews would, he thought, be "rather prohibitive." Mr Milward added that BEA were not sure in any case that walk-on was wanted or indeed that it was a success in America, where reference was never made to its economics. Neverthe less, BEA had a special committee devoted to examining walk-on services. Lord Douglas said that there had been discussions recently on the aims of the corporation, and whether the object was to operate as a commercial concern or as an instrument of policy. He himself had always given priority to the first objective, but BEA could claim to have achieved both. The corporation had to date sponsored five new types of aircraft, achieved a rate of growth double the world average, and with 5m passengers a year was by far the largest airline in Europe.
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