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Aviation History
1964
1964 - 1743.PDF
962 FLIGHT International, II June 1964 AIRLINE EFFICIENCY... efficient airlines in the world; their very low load factor is the reason for their run of heavy losses. Fig 2. Capacity sold per employee The most commonly quoted measure of airline operating efficiency is staff productivity expressed in terms of capacity ton-miles per employee produced. Its main weakness as a basis of comparison is that a capacity ton-mile is not a homogeneous product; a BEA ton-mile is a very different product from a BOAC ton-mile. Although these two airlines fly roughly the same number of hours per year, BOAC produce a third as many more ton-miles. A short-haul airline like BEA would inevitably require more staff to put one ton-mile into the air compared with a long-haul operator like BOAC. Plotting capacity ton-miles against stage length helps to compen- sate for this; and better still is a plot of capacity ton-miles sold, i.e., load ton-miles, versus stage length. Selling is a highly basic activity, and it is more important to compare an airline employee's load performance than it is his capacity performance. This is perhaps the best way of bringing in load factor as a measure of efficiency, even though it tends to weight the comparison in favour of airlines like BEA with high load factors. The most striking feature of Fig 2 is the very much higher sales performance of US airlines compared with European airlines. This could be due to the sheer size of US airlines, who tend more to enjoy the economies of large scale; but it could also be due to the fact that, as somebody, once said, Americans tlon't buy air transport, they are sold it. Even Eastern, with the lowest load factor of all, are still above average. BEA, despite the highest load factor of all, are well below average. Fig 3. Flying hours per employee Staff productivity when meas- ured on a ton-mile basis tends to favour an airline with a higher proportion of big jets, with their greater hourly ton-mile productivity than the aircraft operated by the shorter-haul operators like BEA. So one way of filtering out the effect of high-productivity aircraft and weighting the scales more in favour of airlines like BEA is to make a comparison of staff productivity in terms of flying hours produced per employee. Fig 3 shows the result. It is remarkable that Eastern, so high up in terms of ton-miles per employee, should still show up well in terms of flying hours per employee. Of course, wages are so high in America that it pays to provide more horsepower per employee in the form of automatic aids to production than it yet does in Europe. This is an important factor to be taken into account when comparing the staff produc- tivity of US airlines with that of European operators. Nevertheless, the superiority of Americans over Europeans in both measures of staff productivity seems too marked to be accounted for solely by a higher degree of automation. Fig 4. Flights per employee Since 1960 ICAO have been calling for a return of the number of flights operated. This is a welcome and important addition to the statistical air transport literature, particularly as it is probably the best raw material available for measuring and comparing safety performance. For the present purpose it offers another measure of staff productivity, namely flights per employee. As expected, the plot versus stage length follows the pattern of flying hours per employee, a steeper curve through the lower stage lengths reflecting the shorter flying times of the shorter-haul airlines. Fig 5. Total cost level Common sense suggests that the high- productivity airlines are the low-cost airlines, and another measure of efficiency is cost level, or expenditure per unit of air transport production. This is usually expressed as cost per capacity per ton- mile, and here it is shown in cents per capacity tonne-kilometre, the ICAO units. It will be seen that one of the highest cost levels is recorded by BEA, with BOAC close to the average and certainly the best of the Europeans. The reduction of BOAC's cost level in the past five years has been one of the most encouraging trends in British air transport (one cannot help wondering about the worth of the £22,000 Corbett report on BOAC which found, according to Mr Julian Amery's November 1963 white paper, that "financial control has not been accorded sufficient importance"). Once again, Eastern come out top, or bottom, whichever way one looks at it. Air France's cost level is very high indeed, and perhaps explains why this airline is still the most heavily subsidized in the world (£8m in 1962). There are two main reasons for BEA's very high cost level. The first is that they have had to perform with Comets the work that, but for their support of the British aircraft industry, they would have done with Caravelles. Secondly, and accentuated by a pricing policy aimed largely at the tourist, the seasonal nature of BEA's business is one of the most pronounced in the world, with a peak- trough ratio of the order of 2J to 1. The accompanying table compares BEA's peak-trough ratio with that of other airlines examined in this study. To "factor" BEA's operating efficiency to compensate for the seasonal nature of their business is probably impossible, but it is a peculiarly BEA problem and it must be borne in mind when comparing this airline's operating efficiency with that of others less seasonally afflicted. Rank 1 2 3 5 6 7. 9- 14 1f 17J1 i21 "• Airline BEA SASAlicalia Sabena National Swissair BOAC Air France KLM TCA TWFinnair PAA UAL EAL Delta NW Bran iff Qancas AA LTK x 1 million, 1940 and IMI Peak month 28* 3020 17 m16* S3 53 39 37*95 2 III 101 71 31 30 19 16 103 Trough month Hi14 10 IOJ 30* 32 26 25 65 1* 77 70 51 24 23 15 12 85 Peak- trough ratio 2.5 2.1 2.0 1.8 1.7 .1 £ * 1 .D 1.5 • 1.4 ji In \ ^ 1.2 Fig 6. Engineering cost level Among all the items that go to make up total cost level, engineering cost may be singled out as one of the most important measures of efficiency. By far the highest-cost engineers up to six years ago were BOAC, but there has been a truly spectacular fall since then of nearly 40 per cent, taking the corpora- tion actually to within a decimal point of the cost levels achieved by the most economical airline engineers, namely KLM and Pan American. This must have been known when the 1963 white paper declared BOAC's engineering costs £4m (20 per cent) a year too high. The reason for BOAC's high engineering cost a few years ago was over-staffing, to the extent of some 3,000 engineers in 1957-58 and to a top-heavy inspectorate which tended, perhaps because human nature is what it is, to relieve the man on the job of the responsibility for which his skills and training qualify him. BOAC, it may be recalled, said six years ago that they proposed to reduce their engineering costs by half during the period 1958-1961, largely by reaching an agreement with the trade unions on the delicate matter of job descriptions. BOAC have been as good as their word—even better in fact, and further engineering economies are in hand. BEA's engineering cost level is above average, a result partly of the more or less sudden appearance in their engineering base since early 1960 of four new types of aircraft, Comet 4B, Vanguard, Argosy and Herald, one of which in particular—the Vanguard and its Tyne engines—had more than a reasonable share of troubles. The surprise in this curve is that SAS and Swissair, despite all their joint Convair/Caravelle maintenance, have above-average engineering cost levels. Points to be borne in mind in evaluating this graph are that some airlines do a lot of engineering work for others, perhaps showing their earnings therefrom as a deduction from cost; and others may allocate some engineering staff costs to, say, the administration account. Such differences in accounting practice could make differences to the engineering cost level, though these would pro- bably not be substantial. In general, most of the airlines examined pursue a do-it-yourself engineering policy. Fig 7. Annual average hourly costs An airline can of course reduce cost per unit of production (Fig 5) simply by operating higher- productivity aircraft and doing nothing about staff productivity. This illustration of cost per hour filters out the big jet aeroplanes' contribution to reduced cost level and has a look at the other side of the coin, namely hourly costs. These have been going up year by
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