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Aviation History
1986
1986 - 0608.PDF
AIR TRANSPORT BA sale: is US anti trust the holdup? LONDON UK Transport Minister Nich olas Ridley says that the reason why British Airways' privatisation plans have been shelved yet again—this time indefinitely—is continuing disagreement with the USA over laws affecting air services between the two countries. The North Atlantic market, says Ridley, brings BA about 23 per cent of its total reve nue, so anything which affects that market is of considerable significance to BA's commer cial success. BA chairman Lord King, however, has said that if the airline's sale is delayed again he "would not like to contem plate the consequences" for the carrier. A study of the US/UK problems which Ridley says are the reason for delaying the BA sale does not indicate that a prospectus would look more appealing as a result of a delay. Ridley did not indicate how long the flotation would be put back, only that "the Government's aim remains to privatise BA as soon as possible". The US/UK problems affecting BA hinge around three closely-related subjects: the application of US domes tic anti-trust laws outside the USA; the control of airline capacity between the two nations using the Bermuda 2 bilateral aviation agreement; and the remaining private legal actions against BA which have been taken under US domestic anti-trust legis lation following Laker Airways' collapse in 1982. The UK Trade Department has always maintained that US anti-trust laws do not apply outside the USA, and though it would not say so officially, it believes that Laker's collapse was caused by overtrading—not by a trade conspiracy involving BA. Obviously BA pleads the latter also. This argument, as well as diplomatic pressure, caused President Reagan to declare that the Laker anti-trust case was no matter for US criminal law; but the case continued, and still continues, in the US civil courts in various forms. About nine months ago BA, still denying charges, settled out of court with Laker's cred itors and with Laker himself. Almost all anti-trust cases are settled out of court because the defendant, whether guilty or not guilty, always pays his own legal costs. B A's came to nearly £30 million. The point is that, if the transatlantic negotiations are unsuccessful, BA and other British airlines can still be hit by the US anti-trust laws in the US civil courts, and it is not necessary for them to be guilty for them to be severely penalised. So if the USA will not move on this point, the matter will look just as bad on a BA prospectus in a year's time as it does now. If, on the other hand, the USA follows one of the UK recommendations and elevates the Bermuda 2 agree ment to the status of a full treaty, then that treaty will ensure that domestic laws apply domestically, and only the rules of the treaty apply to the competing airlines. Alter natively, the British say, international airlines could be given anti-trust immunity, which may sound unlikely, but the USA already accords anti-trust immunity to inter national fare agreements made through the Inter national Air Transport Asso ciation. The upshot is that, vis a vis the transatlantic agreement, the worst that can happen for BA is that things will remain the same. But there is a possi bility that things could get considerably better with an agreement, and this potential would look good on a prospec tus, whether it was issued now or at some time in the future. On the home front and in the rest of the world delay could have a harmful effect on a prospectus for a number of reasons. Just as Britain is pushing for greater airline liberalisation within Europe, where airlines have similar or higher cost bases than BA, so Far Eastern carriers with low costs continue to push for additional services into and through Britain. And behind the push by the Far Eastern ers, which can initially be resisted by the UK's Trade Department, is the weighty threat of economic sanctions if licences are continually refused. While delay continues, BA's management is con strained to operate on short- term considerations, whether it is in terms of dealing with the unions, or planning for fleet replacement which it cannot arrange without the money which the flotation would raise; "We do not want to be constrained by the PSBR [public sector borrow ing requirement]," says Lord King. Some JAL 747s may be retired TOKYO ~ Japan Air Lines (JAL), the world's largest Boeing 747 operator, is considering retir ing some of its high-cycle 747s following the worldwide alert on cracked frames in the aircraft's nose section. The airline says that it is re assessing the operational life of its 747 fleet, particularly the 747SRs which are used on domestic services. JAL flies at least seven 747s which have recorded more than 18,000 cycles. Although a decision is not likely for several months, the carrier may decide there is no economic justification for the intensive maintenance necessary to keep the aircraft airworthy Flight, March 1, page 4). The move follows disclos ure from Japanese sources that the nose frames on newer 747s are likely to be less fatigue resistant than those on older aircraft. In a structural modification introduced by the manu facturer on 747s after ship number 87, the configuration of the frames in the nose section was changed. Accord ing to structures specialists, 747s with the new config uration are more prone to structural fatigue in that area than those with the older, "heavier" frames. The air worthiness authorities and, airlines are expecting Boeing to redesign this section of the aircraft. The concern with the newer aircraft was emphasised in Boeing's service bulletin of February 14. That SB requires more extensive inspections of the modified- frame aircraft from ship number 88 (Group number 2) than for aircraft line nos 1-87 (Group number 1). As a result of the greater vulnerability of the modified 747s these aircraft are being more strictly treated by the airworthiness authorities, since Boeing's original fatigue tests for these 747s were based on aircraft with the original frame configuration. Boeing's target fatigue life for the 747SR and 747-200 was 20 years with, say, 52,000 cycles and 24,600 cycles respectively. The airworthiness ap proach is that Group 2 inspection thresholds and procedures are the fleet stan dard and are alleviated for Group 1 frames. The standard is based not so much on the original fatigue tests as on the 747 Supplementary Inspection Audit—the monitoring of high time 747s which Boeing and airlines have been doing for several years. The inspection standard is also based on the lessons of the Section 41 nose-frame cracks discovered in Febru ary. These cracks were found in both Group 1 and Group 2 aircraft. JAL's interest in the hard- lifeing and retiring of high cycle 747s comes as a surprise to structures experts who consider that there is no safety problem given the extensive inspection pro grammes. Reframing the crit ical Section 41 areas would be expensive, they admit, but no less economic than, for example, the routine 747 reflooring. Will Boeing redesign the frames for future production 747s? A Boeing spokesman tells Flight: "It's too early to say. The original redesign was to lessen the multiplicity of structure. It was not a weight- saving for marketing purposes. We are reviewing the design in the light of high- cycle aircraft inspections and meetings with operators". FLIGHT INTERNATIONAL, 22 March 1986
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