HC Deb 16 November 1959 vol 613 cc81-7W
Sir T. Low

asked the Minister of Transport and Civil Aviation if, when he has received the answers and comments of the Boards of the British Overseas Airways Corporation and the British European Airways Corporation to the recommendations, conclusions and other points made in the Report from the Select Committee on Nationalised Industries (Reports and Accounts) on the Air Corporations, he will circulate them in the OFFICIAL REPORT.

8. Mr. Sandys,

pursuant to the reply [OFFICIAL REPORT, 18th September, 1959; Vol. 610, c. 183], presented the following statements which he had received from British Overseas Airways Corporation and British European Airways Corporation setting out the comments of the two corporations upon the Report from the Select Committee on Nationalised Industries:

REPORT FROM THE SELECT COMMITTEE ON NATIONALISED INDUSTRIES

A. COMMENTS BY BRITISH OVERSEAS AIRWAYS CORPORATION

Transport Aircraft Requirements Committee —paras. 60 and

The functioning of the Transport Aircraft Requirements Committee and the achievement of the maximum desirable degree of standardisation of civil and military aircraft are matters which the Corporation will keep under review through its representative on the Committee.

2. Development Costs—paras. 64 and

It is understood from the statement by the then Minister of Transport and Civil Aviation in Parliament on 29th July, 1959, that the problem of development costs is under examination by the Government Departments concerned. The Corporation has not yet been informed of the result of this examination. Meantime, the Corporation in its Accounts for the year 1958–59 has written-off as a capital loss the £5m. excess of pre-operational development expenditure which the Corporation has borne on the introduction into service of new British aircraft types.

Fares Policy—paras. 78 and

The Corporation believes that it is an essential condition of any policy of expansion of the travel market (on which the future of the industry depends) that cheaper fares should be introduced as economic considerations allow. The Corporation has committed itself to the purchase of 15 Boeing 707 and 35 Vickers VC. 10 turbo-jet aircraft at a cost of £90m. in the knowledge that these aircraft will show a lower cost per seat mile than the types they supersede and in the expectation that the improved economics of the new aircraft can be passed on to the public in the form of cheaper fares. At this year's I.A.T.A. Traffic Conference the Corporation advocated once again the extension of economy class fares (which are at present confined to the North Atlantic routes) to Eastern and Southern Routes and to the Caribbean. B.O.A.C.'s proposals were not accepted and no agreement has so far been achieved.

Public Relations Policy—para. 85

The Corporation will consider how best to give effect to the views expressed by the Committee.

Utilisation—para. 150

Figures showing the average rate of aircraft utilisation (both revenue and total) are included in the Corporation's 1958–59 Report. Comparative figures for the four previous financial years are also given. The figures for 1958–59 show improvements over 1957–58 from 6.49 to 6.71 revenue hours per day and from 6.82 to 7.03 total hours per day aircraft utilisation. For the period from 1st April, 1959, to 17th October, 1959, the comparative figures for aircraft utilisation are 7.75 and 8.00.

Flight Operations—paras. 154 and

Costs are kept under constant examination with a view to their reduction. For example, as a result of changes in the principles of rostering flying staff, utilisation will be significantly increased, the effects becoming apparent progressively.

Aircraft Maintenance—paras. 159–170

During the year 1958–59, and subsequently, substantial progress has been made with the necessary re-organisation of the engineering department. To date, in face of an increase in output of capacity the number of staff employed in the department has been reduced by more than 1,200 persons through normal and accelerated wastage and the early retirement of some of the more senior staff. The revised pattern of organisation in the department and the new working methods that are being progressively introduced have already enabled the turn round times for aircraft overhaul and maintenance to be substantially reduced with the result that costs have been reduced and greater productivity obtained from the fleet. Engineering costs, which were 10½d. a ton mile in 1957–58, had fallen to 9d. a ton mile during 1958–59 and in the current year have already fallen to 7d. a ton mile. In 1960–61 there is every prospect of a further reduction to 5½d. a ton mile. Delay to the proposed re-organisational measures has resulted from a difference with the Trade Unions and every effort is being made by the management of B.O.A.C. to resolve this situation.

Investment—para. 181

The Corporation holds a similar view.

Subsidiaries—paras. 184 and

  1. (a) Detailed information regarding the subsidiaries is included in the 1958–59 Report and Accounts and will also appear in future reports.
  2. (b) The Corporation is keeping under continuous review the justification for its investment in its subsidiaries. In addition a special re-appraisal of each company is being made 84 with a view to judging whether its current and future value to the Corporation is commensurate with its likely future prospects as far as they can be predicted. When continued support of a company is justified the Corporation will continue to pursue a policy of encouraging greater participation by local Interests with a view to stimulating the interest of local communities in the development of the airline which serves them.

Co-operation between B.O.A.C. and B.E.A. —paras. 229, 230 and

Under the guidance of the Managing Director of B.O.A.C. and the Chief Executive of B.E.A., the appropriate heads of departments in the two Corporations are exploring the possibilities of increased co-operation with the view to achieving economies without unacceptable loss of efficiency or revenue to either Corporation. A further report will be submitted in due course.

Supersonic Aircraft—para. 260

The Corporation has carefully considered this matter and feels that it might have no alternative but to acquire supersonic aircraft in due course if and when they are used by competitors.

B. COMMENTS BY BRITISH EUROPEAN AIRWAYS

Operating Cost—paras. 140–143.

The c. t. m. of a purely short-haul airline must tend to cost more than that of a long-haul airline (Q.1063). BE.A.'s operating cost per c.t.m. for the past few years shows a slowly rising trend as follows:—

1956–57 1957–58 1958–59 Year to 31st May, 1959
39.7d. 39.6d. 40.2d. 40.5d.

There is no easy way and no one action which would bring about a marked reduction in these costs; reduction can come only by constant economies over the whole field of activity although as the Report says "if B.E.A. are to improve their cost/c.t.m. ratio, it must be by improving either aircrew utilisation or aircraft utilisation or both". The problems inherent in improving either of these are not easily or quickly to be solved, but the struggle to reduce our costs never ceases.

Aircraft Utilisation—paras. 132–136.

The utilisation rate for the year to 31st May, 1959, rose to 4.80 hours per day, an improvement on the previous year. The reduction in 1957–58 was mainly the result of phasing-out of the Elizabethan, phasing-in of V.800s, reduction in Pionair utilisation and the cancellation of services necessary because traffic fell so far below expectations. The fall in Pionair utilisation resulted particularly from the introduction of Viscounts on some of B.E.A.'s longer Pionair routes, leaving Pionairs to operate on the shorter routes, such as those within Scotland. The winter's exceptionally bad fogs also resulted in a small drop in aircraft utilisation.

Individual aircraft type utilisations were:—

REVENUE FLYING HOURS PER ANNUM
— 1956–57 1957–58 1958–59 Year to 31st May, 1959
V.806 … … — — 2,080 2,076
V.802 … … — 1,943 2,071 2,066
V.701 … … 2,409 2,383 2,468 2,482
Elizabethan … … 2,221 1,696 1,681 1,053*
Pionair … … 1,561 1,448 1,267 1,264
Freighter … … 1,928 1,630 1,528 1,504
*This aircraft was withdrawn from service on 30th July, 1958.

Whether the overall utilisation of a short-haul fleet such as B.E.A.'s can be materially improved is doubtful (Q.2429, 2430).

— London Airport Station* Apron and Hangars Workshops (excluding Plant maintenance) Total
Inspectors … … — 216 104 320
Hourly-rated:
Skilled and semi-skilled … … 174 444 404 1,022
All grades … … 465 580 435 1,480

Ratios:
Inspectors to skilled and semi skilled 1:2.1 1:3.9 1:3.2
Inspectors to all grades hourly-rated 1:2.7 1:4.2 1:4.6
* London Airport Station undertakes pre-departure inspections, defect rectification and Check A work without inspectors.

A prime reason for the high ratio of inspectors to hourly-rated staff is the incentive bonus scheme which operates in the London Airport Engineering Base. This scheme requires inspectors to be immediately available so as to avoid any waiting-time by hourly-rated staff. Another factor influencing this ratio is B.E.A.'s system under which all work in the Engineering Base is checked both before and after it is done by inspectors, and not by licensed engineers as happens at outstations (Q. 2104 and 2105). Furthermore, B.E.A.'s inspectors undertake a number of directly productive functions such as engine running, aircraft taxi-ing and compass swinging, in addition to their normal inspection duties.

We expect that the inspector/hourly-rated staff ratio will improve when work at present still being sub-contracted is brought into the Base and done by B.E.A. itself.

In any event, the ratio can always be improved by increasing the number of hourly-rated staff!

Co-operation between the Corporations—paras. 219–233

The question of co-operation between B.E.A. and B.O.A.C. was dealt with in a joint paper submitted by the Corporations to the Select Committee (page 351 et seq.) Para. (m) on page 354 deals with a co-ordinated coach service.

Engineering Inspectors—paras, 171–177.

The present ratio of B.E.A. inspectors to hourly-rated staff is:—

So far as the question of merger is concerned, B.E.A. agrees with the Committee's conclusion against merger, and believes that merger would not be beneficial to either Corporation or to British civil air transport as a whole. As stated by the Chairman B.E.A. in evidence (Q. 2516), the "main reason is that the tasks of B.E.A. and B.O.A.C are so entirely different." B.E.A. believes that the financial savings, if any, would be more than swallowed up by the inherent inefficiency of a very large organisation trying to undertake two distinctly different tasks.

Following the Select Committee's report, however, B.E.A. and B.O.A.C. are again making a joint survey of the possible fields for co-operation The issues must turn on what is, or is not, more economic; this in turn calls for extensive costings which inevitably take time. The survey is, however, being undertaken as a matter of urgency.

Fuel Tax—paras. 212 and

B.E.A. does not think it necessary to make any observations on the Select Committee's remarks.

Domestic Services' Accounts—para. 115

The detailed figures which make up the Domestic Services Account are inevitably dependent upon what must necessarily be a somewhat arbitrary apportionment of overhead cost, and might therefore be misleading. B.E.A. does, however, publish the broad results of the "social services", and these are again contained in the Annual Report for 1958–59

Subsidy for Social Services—paras. 104–117

B.E.A. has from time to time given its view that subsidy should be paid in respect of "social services" on which there is little or no hope of ever doing other than make a loss. Our Annual Report for 1956–57 on pages 16 and 17 discussed domestic services and indicated that the Highlands and Islands and Isle of Man groups of routes ought to be regarded as "social services".

The recommendation made in the Report was no doubt intended to help B.E.A. and, indeed, it is something we have ourselves advocated. B.E.A. does not, however, press strongly for such a subsidy at the present time.

General

B.E.A. welcomed the inquiries by the Select Committee, and found them useful in directing attention to important aspects of its business in a way which provides an admirable solution to the problem of public accountability. Throughout their deliberations the Committee rightly emphasised the need for the Corporation to stand on its own feet commercially; B.E.A. has now been in a profitable state for the past 5½ years, intends to remain profitable and believes it will do so. But as the Select Committee realises, there are serious inherent problems in the operation of short-haul air transport which make it no easy task, and the margins within which B.E.A. works are necessarily narrow. B.E.A. believes, however, that given an opportunity to continue its development, continuing success can be achieved.