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Aviation History
1973
1973 - 0898.PDF
538 BCAL: SECOND FORCE ON ATLANTIC on the charter side to drive the weakest participants to the wall will gain any long term benefit. The trouble with that policy, if you are a large-scale operator, is that you are liable to wake up one morning and find that it is your turn." Mr Thomson draws the corollary with examples of this type of strategy amongst European inclusive-tour charter operators. In 1971, he says, the 50 British tour operators lost nearly £9 million on a turnover of about £173 million. "There is good reason to think that the 1972 results will be even worse, and a few of the guys who were saying a couple of years ago if you can't stand the heat get out of the kitchen are now very badly burnt themselves." On November 6, 1969, Flight published an examination of airline financial results for the North Atlantic routes which concluded that profits were hard to earn and that revenue dilution was a significant contributor to the problems. One source of the figures was the detailed Air Transport Licensing Board 1968 decision, rejecting British Eagle and Caledonian applications for Atlantic licences. The Board's brief 1972 decision approving the BCAL appli cation contained none of the airline's figures. Reading it gives an impression that the members may have been influenced by the Government guidance to the ATLB's successor, the Civil Aviation Authority, and in effect approved the political policy decision reflected in the guidance. But since BCAL's August 1972 submission to the CAB in Washington has become available some interesting comparisons can be made. A major difference is the much larger scale of the operations now planned. The first- year revenue totals £10-3 million, of which the London- New York route is expected to yield £6 • 3 million, compared with the £1-6 million of the 1968 proposals. The money required in 1968 for the three proposed routes—to New York, Montreal/Toronto and Chicago/Los Angeles—was estimated by the Board to be at least £1-5 million. Presumably much more money is required now, particu larly as the Board was told that wide-bodied aircraft would be introduced in 1974. In its February 1972 decision, the Board reported that British Caledonian was financially strong enough to acquire these aircraft. The estimated cost of a 707 round trip from London to New York rose between-1968 and 1972 from about £10,600 to about £12,800—a 21 per cent increase, or 27 per cent including allocated general overhead. The corresponding estimated average net fare fell from £65-9 (1968 estimate for 1970) to £55 (1972 estimate for 1973). Caledonian's 1968 estimate of the round-trip cost in 1973 was £9,686, with a one-way net revenue per passenger of £62. The average number of passengers was expected to be 77. In August 1972 it was 103, and the expected average receipt was £55. Now the expected first-year deficit on the route is £313,750, against £344,000 (1968 figures). The London- Los Angeles route is expected to lose £361,000 in 1973-74. BCAL LONDON-NEW YORK COST ESTIMATES RIGHT International, J April 1973 NORTH ATLANTIC REVENUE DROP BCAL Forecasts London- London- New York New York netrevenue round-trip per cost passenger. one way (£) (£) Caledonian system all non- scheduled (pence/ capacity tonne-mile) BOAC (pence/ capacity tonne- mile) Atlantic TWA Pan Am (pence/ (pence/ capacity capacity tonne- tonne- mile) mile) 1968 1969 1970 65-9* 10,601* (7-3p/ctm) 1971 1972 5-9 6-3 5-7 1973 55 12,800 (8-9p/ctm) 8-53 9 04 8 68 9-51 8-95 (8-46)t 6-6 7-9 1973 32 6,596 (6-0p/ctm) Laker Skytrain (158-seat 707-138B) Mean sector length (km) Fare levels (US cents) First class Low class: Economy Excursion Group Fares Public GIT Available seat-km (millions) First class Low class Cost per available seat-km First class Low class Revenue passenger-km (millions) First class Low class Yields per revenue passenger-km First class Low class Passenger load factor First class Low class Required passenger load factor First class Low class 1965/66 7,571 6-3 3-9—4-5 3-1—3-4 3-2 — 4,886 36,839 3-55 1-70 1,775 20,851 5-55 3-20 36% 57% 61% 52% 1969/70 7,571 6-6 4-1—4-7 3-1—3-4 2-7—3-1 2-4—2-8 8,107 62,265 3-35 1-60 2,902 33,701 5-50 2-80 36% 54% 56% 66% 1972/73 7,571 7-2 4-0—5-2 2-2—3-6 1-9—2-6 2-1—2-8 10,376 93,448 3-15 1-75 3,136 50,105 5-70 2-65 30% 54% 59% 70% * ATLB Jan/Feb 1968 t Direct costs of BOAC 747 0 49p below corporation average. Caledo nian system figures from DoTI Business Monitors. BOAC system figures from annual reports. Until 1971/72, the North and Mid-Atlantic was treated as one group, so the figures for the years 1965/66 and 1969/70 include Mid-Atlantic operations. The way North Atlantic revenues have dropped and the required increase in load factor required to maintain a profit are indicated in this table taken from "Agreeing fares and rates," published by lata and available from 1155 Mansfield St, Montreal 113, PQ, Canada. Price $10 Mr Thomson notes that Mr Wiser, president of TWA, suggested in a recent speech that BOAC's motives in sup porting new low fares on scheduled services for 1973 was to put the squeeze on British Caledonian during its first year of scheduled-service operations. "But this does not really hold water because we have been operating in the low-fare end of the North Atlantic market for years and we fully understand the implications connected with low- fare operations. We have consistently supported the part- charter concept for 1973 on the basis of an advance- booking group or advance-booking individual fare because that part of the market has outgrown the affinity rules. Frankly for 1973 part-charter or advance-booking group fares are not an important factor for our scheduled operations because we shall have two flights a day from New York and one flight from Los Angeles, and do not anticipate having a great deal of space available for this new fare, but this concept was the important factor to us for the long term. Beally Pan American and TWA seem to have elected to play the numbers game on affinity charters, numbers referring to passenger statistics as opposed to profit statistics which I believe to be non existent. BCAL would prefer to fill empty scheduled-service seats rather than follow this fruitless pastime, which I Ibelieve to be unviable and therefore detrimental to business interests. "Because we believe these affinity charter flights to be uneconomic for 1973, we have as a policy substantially reduced our participation in this part of the market. It would have been madness to have done otherwise. We have taken this course regardless of the fact that we are moving into the scheduled-service side. Contrary to this, Pan American and TWA have increased their participation in affinity charters very substantially for 1973; BOAC has increased its participation but to a small extent." "Frankly," says Mr Thomson, "I am quite puzzled by the policy Pan Am and TWA have adopted; how they can afford to operate aircraft at the rates available is some thing I find difficult to understand, and, of course, the substantial increase in participation by these scheduled carriers in 1973 will make it very difficult for those who are solely dependent on that market to continue their operations. One might reasonably speculate that they are trying to put the squeeze on the other operators in the charter market."
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