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Aviation History
1976
1976 - 0091.PDF
CONCORDE NOW ARRIVING 7 hour. There is no doubt that the economics of the SST are sensitive to fuel prices and the 147,2001b of London-New York block fuel will cost $2,512 per hour at 40c per US gallon. Total direct costs will therefore be $6,089 per hour. Indirect operating costs include passenger service, aircraft servic ing, landing fees, traffic services, reservations and sales, commis sions, advertising and publicity, ground facilities and general and administrative costs. Using an up dated version of the US Federal Aviation Administration indirect operating cost method devised by Boeing and Lockheed, realistic landing fees and 1975 levels of first-class cabin and ground-hand ling costs at a 50 per cent load factor, total indirects amount to $1,943 per flying hour. TOTAL COST Using the above results, the total cost of operating the 108-seat Concorde on London-New York is $8,032 per honr or $28,112 per flight. This gives costs of $7-94 per aircraft mile or 7-35 cents per available seat-mile (based on a flight time of 3-5hr, a distance of 3,540 miles, and a seat capacity of 108). The London-New York first-class fare is $578. Allowing a five per cent dilution to allow for non- fare-paying passengers, the aver age yield per passenger is $549 per trip or 15-51 cents per mile. On this route, therefore, Concorde could break even at a load factor of 47 per cent—51 passengers— without a surcharge. All the experience of the route- proving flights and the result of independently conducted pas senger surveys indicate that there will be a big "slide over" of high- yield passengers from subsonic to supersonic services. Load factors of more than 60 per cent seem likely. These will give an annual profit per aircraft of some $7-7 million (at the same, existing first- class fares). One of the initial prob lems could in fact be how to pro vide sufficient capacity. Concorde will have an important secondary effect on the Air France and British Airways route net works. Paris and London will be reconfirmed as the most important European gateways, particularly for high-yield passengers. As noted above, other airlines are likely, through lata, to insist on SST fare levels higher than first-class to protect their own sub sonic first-class premium traffic. Air France and British Airways have agreed to settle for a 20 per cent surcharge above first-class on their initial Concorde routes. Assuming the same demand, this can only improve the supersonic economy. Studies of other prime super sonic routes such as London-Rio, London-Sydney and Los Angeles- Tokyo show Concorde breaking even at load factors of 50 per cent or better at first-class fare levels. There is no doubt that Concorde can make money for the airlines. RETURN ON INVESTMENT If it is accepted that Concorde by itself is fundamentally profit able, two questions remain in the fleet-planner's mind. Will the air craft provide a reasonable return on investment? What will be the effect on existing equipment? More detailed calculations show that an individual Concorde is capable of providing an equal or better return on investment than a single 747. A mixed fleet of one- class Concordes plus economy/ tourist/ABC 747s provides a better return on investment than a fleet of mixed-class 747s. The introduc tion of Concorde will release 747s for the carriage of payloads such as low-fare passengers and con tainerised freight, for which they are most suited. The costs for London-New York give some guide to the likely rate for a Concorde lease, although the exact charge will depend on the length of the contract and the way in which the aircraft is supported by the lessee. s ummary * Concorde will cost about twice as much per available seat-mile to operate as a wide-body. * Existing first-class fares will more than compensate for this, providing twice the yield of the average subsonic fare. * Concorde will make a substantial profit on most business routes with a break-even load of about 50 passengers at first-class fare levels. * A mixed fleet of Concordes and wide-bodies can make more profit and a better return on investment than an all-subsonic fleet. " * The efficient airline will take care to allocate its Concorde costs to allow for its higher yield and shorter flight times. * Airlines will not be able to argue that Concorde has created surplus capacity; there has been adequate notice that air transport will not be the same after January 21, 1976. A.H. Emergency equipment $> Emergency exits 1 8888888888
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