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Aviation History
1963
1963 - 2221.PDF
1020 FLIGHT International, 26 December 196 AIR COMMERCE... TASMAN EMPIRE V QANTAS EMPIRE SUPERFICIALLY, TEAL shows up badly in its annual report. Not only did its traffic fall in the year 1962-63, dragging down revenues from f 3Jm to £3£m, but profits slumped to a precariously narrow margin. But these adversities do not reflect in any way on the management of the airline but on the changed political environ ment in which it now operates. As the price for becoming the chosen instrument of New Zealand aviation policy, TEAL has had to give up its monopoly of services across the Tasman. During 1961-62 Qantas was building up its share and this halted TEAL's growth. In 1962-63, however, QEA took up its full entitlement of 40 per cent of trans-Tasman capacity, and this unavoidably meant that TEAL carryings fell back. As these routes account for some two-thirds of TEAL's total traffic, it is possible to understand why TEAL's chairman describes the period covered by the latest report as "a critical year." Despite the arrival of Qantas, the average load factor achieved by TEAL rose from 55 to 60 per cent. Although no reference is made in the report to the workings of the pooling agreement, it could well be that Qantas was at the receiving end of this particular revenue pool. The reason why this high load factor was not translated into handsome profits was because TEAL is a relatively high cost airline (unit costs averaged 32 pence per c.t.m.). Again, however, this is hardly the fault of the airline but an unavoidable feature of small scale. TEAL's entire fleet comprises three Electra aircraft, and although these are utilized intensively (they each average well over 3,000hr a year) it is obviously impossible to match the cost levels of an airline the size of Qantas. The inflexible nature of costs in such a small undertaking as TEAL is, of course, the reason why profits react so sharply to any change in the volume of operation. Now that Qantas has taken up its full share, TEAL expects that traffic, revenues and profits will show a rapid recovery this year. Total traffic across the Tasman continues to grow, and the other routes to Fiji, Samoa and Tahiti are sharing in the current Pacific boom. Nevertheless, if TEAL is to acquire the status befit ting the national flag line of New Zealand, and also some much needed economies of larger scale, then there is no alternative but to expand on to longer haul routes across the North and South Pacific. Not surprisingly, as he views his approaching retirement, Si$ Leonard Isitt regrets that he will have left the helm when his airline moves into the big jet league with the DC-8s ordered last summer for operation from the new Auckland airport in 1965. THE CEDAR BEARS MORE FRUIT PROMPTED by a somewhat guarded note in these pages on their report for 1962 (issue of September 12, page 452), Middle East Airlines have written to clarify a number of points which previously were obscure. Most important, the adjustment to previous years' figures for revenue and expenditure was caused by adoption of the more conventional practice of showing non-traffic receipts as a separate item on the revenue side of the operating account. Pre viously these receipts were treated as an unidentified deduction from expenses. Another apparent discrepancy was the suggestion that a loss was incurred in 1960. In fact, the airline claims a profit was made in that year but this did not show up as accumulated profit because it was transferred to capital reserve. Regarding the unfavourabl ratio between revenue and net assets, the airline point out that thi is an unavoidable feature of the early stages of the re-equipmen cycle. This explains why amortization reserves at the end of 1%', stood at only £L14m on a fleet which was valued at cost at £L54m However, an interesting new fact to emerge is that 1962 saw thi adoption of less stringent depreciation policies. In the case of thi Comet fleet, the depreciation period was extended from eight t< ten years and the residual values were raised from 15 to 20 per cent The effect of these changes was to reduce the 1962 depreciation charge by £L1.8m. Had the latest annual report shown 1962 and 1961 profit figures based upon comparable depreciation arrange ments, then it would seem that the substantial improvemen declared for 1962 would have been converted into a slight deterior ation. This should, of course, not obscure the more importani fact that MEA succeeded in maintaining profitability at a time when rivals were invariably incurring heavy losses. BOAC COMMONS DEBATE POSTSCRIPT THERE seems no obvious reason why the Minister of Aviatioi should have steered an apparently unnecessary Bill through Parlia ment when there is always a grave shortage of Parliamentary tirai for vital legislation. Parliament and the public could be excused i they thought that the real reason for the Air Corporations Bill wai that BOAC had insufficient borrowing powers. Nothing could bi further from the truth. Only last year the Air Corporations Act 1962 extended theii borrowing powers up to a record high of £300m, subject to M affirmative resolution of the House of Commons for amounts it excess of £260m. BOAC is nowhere in sight of using these facilitisi to the full. The balance outstanding of long and medium tern borrowings stood at £168.5m at the end of the last account an< even if the full amount of outstanding capital commitments i added (£86.6m), this is still under £260m and a long way short o £300m. The Bill read for the first time on November 21, and for thi second time on December 2, seeks to do two things: (a) To increas< the amount which the Minister can advance to finance BOAC'! accumulated deficit from £100m (as provided for the first time ii 1962) to £125m; and (b) to extend the date by which accrue) deficits must have arisen (if they are to be financed in this way from March 1964 to March 1966 for both BEA and BOAC, BOAC has made a substantial improvement in its overall positioi and no one has suggested that by March 1964 its accumulated defici will have risen from £85m to £100m. It is quite conceivable tha this rise may take place by March 1965, but if this is to happen thei the new chairman will have to do a whole lot worse than his predeces sor. Is the Minister really so confident that Sir Giles will be mor. than £15m worse than Sir Matthew? Hence the most probable reason for the new Bill is to extend th accrued deficit date from 1964 to 1966 and someone in the Ministr; or the Treasury (more cynical than most) has evidently decided i would be a good idea to prepare for even worse disasters to befal BOAC. Even if BOAC were temporarily to sink further under: new skipper, there is no need to seek a new Bill because there ar ample unused borrowing powers to tide things over until the nei team can make their presence felt. It even seems unnecessary to extend the accrued deficit date. because the Minister could approach Parliament at any time Something new in airline advertising, "Tri-Vision," has been adopted by Frontier Airlines. Incorporated in this hoarding in Denver is a 16ft N unit comprising 16 vertical louvres with three faces (two shown here) which rotate at predetermined intervals permitting different messages appear\within a matter of seconds . • FLY FRONTIER AIRLINES
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