N.A.C.’s Worries About Increase In Dues

Press, Volume CI, Issue 29907, 22 August 1962, Page 14

N.A.C.’s Worries About Increase In Dues

(N.Z. Press Association) WELLINGTON, August 21. “The board of directors must register its concern” at the Government’s announced intention to increase the rate of dues substantially, says the annual report of the National Airways Corporation tabled in the House of Representatives today. The report gives as reasons for the concern the “uncertain traffic position and the need to expand the volume of traffic to employ fully the new aircraft.”

Government receipts from National Airways Corporation revenue in the year ended March 31, 1962, were £1,038,000. This included £207,624 interest on capital, £437,943 in airways and airport dues, “over £300,000” in customs duty on new aircraft flown into New Zealland, and £92.680 from N.A.C.’s insurance reserve support funds, being the balance of profit earned in the year ended March 31, 1962. In addition N.A.C. last year increased its reserves for insurance and replacement of assets by £57,684 and provided £480,309 in the accounts fo» depreciation of aircraft, spare parts, buildings and equipment. The £437,943 levied for airport and airways dues, an increase of 8.4 per cent, on the previous year, represented 8 per cent, of the operating revenue, €5,512,821, says the report. Traffic Growth “Last year’s annual report stressed that further recoveries of the cost of airways and airport facilities should come from growth of traffic rather than any increase in the rate of dues,” it says “In spite of this carefully considered opinion, the Government has announced its .intention to increase the rate jof dues substantially “The corporation has found, to its cost, that in the development of new airfields and terminal facilities it faces greatly increased rents and charges for services in addition to the increasing burden of dues

“It must also express concern at the implications of the high costs which may have to be faced at Mangere as compared with the present basis of operations at Whenuapai,” says the report

Depreciation and interest charges in N.A.C. accounts for the year ended on March 31 last amounted to £687.933 an increase in fixed charges of 45 per cent over 1960-61 as a result of the fleet modernisation programme Advances by the Government to N.A.C. during the year were £1.700,000, increasing capital and advances to £5.850.000 at March 31, 1962 Capital expenditure was £2.401.047, including £1.510.652 for new aircraft. £331.357 for spare engines, propellers, parts and stores. £459.984 for buildings, property improvements, plant, equipment and furniture. £14.000 investment in Bay of Plenty Airways and £85.054 for capitalised Friendship crew training costs. Against the cost price of

£7,113.667 for its fleet of 4 Viscount, 8 Friendship, 24 DC3 and 2 Dominie aircraft and their spares, the corporation has made provision so far for depreciation amounting to £1.997,054. DC3’s At £342

The 24 DC3 aircraft, which cost £693,995, are now valued for accounts purposes at £8205, or approximately £342 each. The two Dominies have been written off completely. Capital commitments associated with the purchase of the Friendship fleet and the fourth Viscount were unexpectedly increased, but a change in legislation rendering aircraft flown into the country subject to customs duty. In particular, this rendered the Friendship aircraft liable for foreign rates of duty. “This unexpected commitment of more than £300,000 made the corporation’s cash position extremely critical, and has increased the standing charges on Friendship aircraft by more than £2 a flying hour. “This imposition seems particularly inequitable with the tariff amended again on July 1, 1962.

“In the meantime, the corporation has imported the whole of the Friendship fleet during the period of imposition.” says the report. For the first time since 1950-51 the corporation showed a net loss on a year’s operations in the 12 months ended March 31.

Operating profit, after provi. n for depreciation and obsolescence of aircraft and spares and depreciation of ground equipment, was £111,442 and interest on capital and other loan advances from the Government was £207.624, resulting in a net loss of £96,182. Traffic statistics for the year were: Passengers on scheduled services, 787,840 (in 1960-61, 720.582, increase 9.33 per cent.), passengers on charter flights 6968 ( 4481, 55.5 per cent.), freight-excess baggage-mails. 17,044 tons (16.282 tons, 4.68 per cent.).

Passenger miles increased from 255.170,581 to 296,733,340. and the revenue passenger load factor decreased from 73.22 to 68.15. Year of Change The period was undoubtedly the biggest year of change since the inception of the corporation, says the report. During 1961 the fleet was increased oy one Viscount and eight Friendship aircraft, and the training programme for aircrew, engi-

neers, and traffic staff was a major exercise. At the same time the problems of readjusting timetables were aggravated by the limited number of airfields available and the serious delay in the completion of Momona, Dunedin.

“The coriipletion of this re-equipment programme is now brought to a halt, however, by the number of airfields still requiring to be developed before uneconomic DC3 aircraft operations can be reduced to a minimum,” says the report. With the full fleet of four Viscounts and eight Friendships in service for peak summer operations, instead of the expected considerable increase in traffic there was a ■“fall-off in traffic growth no doubt associated with the general economic conditions throughout the country.” This decline in traffic growth still continues, and the corporation found it necessary to reduce its schedules in February. A contributory factor in the decline in traffic growth was the considerably expanded scale of operations by South Pacific Airlines of New Zealand, which also found it necessary in March to curtail drastically its scope of operations.

This slackening in growth was experienced not only with passenger traffic but to some extent with mail and quite sharply in the case of freight, says the report.