FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1968
1968 - 0218.PDF
1 212 AIR TRANSPORT . .. anticipated a reducing rate of growth for this market because of probable fare reduction on North Atlantic scheduled ser- vices, influenced by such factors as the jumbo jets and in- creased group travel on scheduled services. The future expan- sion of Caledonian, he considered, would need something more substantial than just charter work. Mr Thomson made much of the values of Caledonian's Scottish nationality. If the applications were granted, he fore- cast two further moves to strengthen these ties. A change of name to Air Scotland was contemplated, and ultimately an engineering base would be established at Prestwick. At last Mr Thomson got on to 'finance, the heart of the matter. He named the company's ten shareholders and said that they not only supported the plans for scheduled opera- tions but have firmly committed themselves to provide an additional £3 million if the licences were granted. This is in addition to the claimed "more than adequate" finance with which they already back the company. Ten letters indicating this commitment were made available to the ATLB. Mr Thom- son also revealed that during the last year additional equity from two other concerns had been turned down as unneces- sary. Of the £3 million available, half would be called on initially to introduce the scheduled services. A reserve of ap- proximately £1 million would be maintained and the injection of the remaining capital would be according to a timetable of a budget which was available to the ATLB in confidence. He mentioned the imminent acquisition of short-haul jets with- out revealing details, but said that the £500,000 required for their introduction was available. There was some difficulty over Mr Thomson's offer to reveal Caledonian's draft accounts for 1967 to the ATLB but not to the other two parties to the hearing. However, he did give an outline of the company's position at September 30, 1967. Capital was given as £604,959, the share premium account stood at £200,372 and £140,483 was in reserve. Estimated profits were £124,658. Since that date the Lyle Shipping Com- pany had invested £125,000 and the total capital now stood at £1,070,814. Questioned on the financial arrangements for the acquisition of the three 7O7-32OCs necessary to start transatlantic sched- ules, Mr Thomson revealed that they were being paid for over a period of six years with an average interest rate on the loans of 7 per cent. Caledonian expected these aircraft to be with them for 12 years. Many questions failed to reveal really just how much effort Caledonian would devote to a transatlantic charter work if scheduled services were allowed, although Mr Thomson admit- ted that in the early years charter flights would be financially supporting the scheduled operations. He had earlier firmly indicated Caledonian's willingness to accept a "use it or lose it" condition with any scheduled route that was licensed. Among the features of the first part of the fourth week of the hearings were the exchanges between members of the board and Mr M. A. Guinane, economics director of Caledonian Airways, about the effects of real-life events on the results of statistically based estimations. In these exchanges, a kind of friendly deadlock was reached in the thought processes behind the two points of view. FLIGHT International, IS Februa Put in simplified terms, the questions from the board members concerned the effect on revenue if, say, an estimated percentage of excursion-fare passengers failed to materialise These sources of revenue would not, in practice, be replaced by other classes of traveller—yet the logical statistical estima- tions showed that this would be so. The estimates are based on an assessment of annual traffic growth and average expected load factors. Then, as a separate exercise, the total revenue is calculated according to experience-backed estimates of the percentages of passengers paying the different fare levels, if one of these percentages is wrong, the total revenue will not (statistically) be seriously affected because the estimated traffic growth-rate and load factor will have produced a fixed total of passengers. But a wrongly estimated "mix" of passenger categories, as postulated, would, in any case, have falsified the traffic-growth estimates on which the sums had been based —though this was not directly pointed out at the hearing. Falling Revenue Rates To the onlooker, the simple lesson to be learned from the comments and questions from, in particular, Sir Friston How and Mr E. Baldry is that traffic-growth forecasts must neces- sarily assume a continuing promotional-fare pressure. Without an increasing use of incentive devices, the traffic-growth rate, even on the North Atlantic, may not be maintained. So it can be assumed that the revenue-rates will continue to fall. This part of the examination of Mr Guinane consisted mainly of questions about the traffic and other estimates put up by Caledonian and the staff strengths proposed for the operation of transatlantic services. Counsel for Eagle, Mr Webster, pointed to the big differences between the numbers of staff proposed by the two airlines in the USA. Those proposed by Eagle greatly outnumbered those for Caledonian in all categories. Mr Guinane's answer to a final question was that he "would not comment on what Eagle consider necessary to sell their services." A breakdown of the differences in, and reasons for, the direct London-New York operating costs for the two airlines with the 320C was one of the exhibits. The biggest variation was that for maintenance—on which Caledonian's estimate was £511 higher than Eagle's. This was explained in the breakdown as being the result of Caledonian's "higher costs and longer flight time." Earlier, the general manager, marketing services, Air Canada, had told the ATLB that, if a second carrier were to be licensed on the UK-Canada route, the present pool arrangement with BOAC would be ended. If so, he said, "we would not be content with less than 50 per cent of the market; we would set out to obtain this and more." Mr John de la Haye, marketing director of Caledonian, explained to the board the total marketing concept which the airline was adopting, and produced examples of past and future publicity campaigns. The pre-operation promotional costs, he said, would amount to £175,000 in respect of New York- London services, and £350,000 for all services. He believed that marketing activities could have an important effect on the fares-mix; the main factor was the yield, and if this was not reaching the desired level it was vital to correct it by a re-orientation of sales activity. Mr T. E. Boud, financial director of Caledonian, gave details BACjSud Concorde 001 emerged from the pre-flight fitting-out han- gar at Toulouse last week to bepn engine runs. For these a special exhaust-jet silencer has been bu'« (right) but, even so, extra protective shielding has been placed over W fin and rear fuselage to protect tw skin against possible damage f small stones which may be whipp up by the jets. The twp droop nose is here seen pictures in the fully position. The first flight of aircraft is expected in May or in
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
