JUMBOS AND AIR FARES GIANT PLANES WILL REDUCE ATLANTIC RATES SHARPLY

Press, Volume CIX, Issue 31922, 25 February 1969, Page 16

JUMBOS AND AIR FARES GIANT PLANES WILL REDUCE ATLANTIC RATES SHARPLY

(Reprinted from the “Economist” by arrangement) Boeing’s “Jumbo” 747 had been scheduled to fly before last Christmas; a combination of what was briefly described as “system troubles” and bad weather held it up until early this month. Even so, it looks as if misgivings about those same systems, the nerve-and-muscle network of wires, pumps, servos, hydraulics, computers, gears, levers and rachets that move the aircraft’s huge control surfaces, brought the trials to a premature end when the pilot suspected that flaps on the leading edges of the wings were out of alignment. Given the time lost, it may be difficult for Boeing to deliver the first 747 s in time to start carrying passengers this year, although the company is still talking as if it will. But saving unforeseen difficulties during the flight trials, 747 s will be carrying passengers on the North Atlantic in large numbers by the time the summer tourist season opens next year. And the effect on fares will be considerable.

Something drastic has to be done to generate enough extra passenger traffic to buy the huge number of extra seats the 747 s are going to produce. Taking the 167 Boeing jumbos now on order, they could notionally carry between them five or six times the number of passengers who flew the North Atlantic last year. And with Boeing talking of building 747 s at the rate of two a week, there is no question of cushioning the shock by introducing this extra capacity gradually. At 350 seats, these jumbos are expected to be 20 per cent cheaper to fly than today’s jets; at 500 seats, which they are likely to have as soon as engine performance has been sufficiently improved, the saving will be nearer one-third. Management Reticent Airline managements, particularly among domestic airlines in the United States that go in dread of the Civil Aeronautics Board, try not to draw attention to this, for fear of pressure to cut fares by more than they want. The new jets may be cheaper to fly, but other costs (including that of special 747 ground equipment) have been rising so fast that where fares are; already low, as they are inside the United States, the savings are likely to go merely to hold fares down to their present levels. That, at least, is how some managements argue. But they have, nonetheless, made arrangements to cut fares quite substantially on the North Atlantic, starting next winter. Like most air tariffs, the new fares are hedged with an infinity of restrictions planned to cut rates to the tourist while squeezing the last shilling out of the business travellers who are now out-numbered by holidaymakers by something like three to one. For businessmen, flying is going to be more expensive. Nothing so provocative had been done as to put rates up, but the 5 per cent discount has ended on an ordinary return ticket which most of them buy across the counter, and the net result is another £8 or £lO on a North Atlantic economy flight, depending on whether one flies on, or offseason.

I The holidaymaker, on the ! other hand, gets a 75 per cent fare cut. Assuming the basic, economy-class return ticket will in future be £212 at the height of summer (£175 offseason), then travel agents [ready to book small blocks

of seats can get them for as little as £55 return, or onequarter the basic fare. They do not have to book all that many seats: a minimum of 40 to Europe, only 20 to the United States and Canada. No nonsense either about seeing that people who then travel in them go out as one jolly party. The seats will be sold by travel agents as a normal package holiday now.

This is rate-cutting with a vengeance, and it is also cutting in on the charter companies who have been carrying at least three-quarters of a million passengers on the North Atlantic; the total is not known but it may be of the order of 13 per cent of the traffic scheduled flights. If this cut-rate market could be diverted to 7475, it would go some way to fill their gaping maws. The inconvenience of having to belong to a charter group is avoided, but the trick will only work if the hotels and all the other middlemen restrain their greed and allow the full saving to be passed on to the customer. The airlines are far from confluent that they will. A Packaged Deal The catch in these £55 return tickets is that they can only be obtained as part of a packaged holiday deal. Tourists who dislike packaged holidays are still going to be offered a discount, but a much less substantial one of only about 25 per cent. The way this is being done is, as usual, tortuous. A two to three week excursion ticket costing £125 return exists now, but is not usable at week-ends nor at the peak of l the summer season. For a surcharge, which brings thej ticket at peak times to round the £l5O mark, it may in future be used all the year) round.

Stripped of the essentials, what the airlines have agreed js to operate three types of economy fare on the North Atlantic costing round trip: £175-£212 for the businessman; £125-£l5O for the holidaymaker on an excursion ticket; and £55 for the tourist on a packaged holiday.

How long this huge discrimination can be maintained depends on the rapidity with which travel agents begin to offer packaged holidays to Pittsburgh, Detroit, Houston, and other big commercial centres. The idea that no company ever worries about the size of its travel bill is one of the myths with which airline managers console themselves, and the lengths to which they have gone to see that cut-rate fares work in a way that stops business travellers from using them is one reason why the business market is the only sector of air travel that has ceased to grow. Confidence And Fear It must be the first time that airlines have made fare cuts in anticipation of a new aircraft, and not waited until it has been in service for some years. It is a sign both of the confidence the airlines have in the 747 and how deeply afraid they are of the surplus capacity they are creating by buying it and a host of other jets that will more than double capacity in the next three years. Until the 747 actually flew, there were still sceptics who wondered whether something physically as vast as the over 300-ton 747 could get into and stay up in the air. Now it seems increasingly logical to expect that the 747 will be stretched to take 650 passengers—which is the maximum that it could carry without major rebuilding—and after that be replaced by a 900 to 1000-seater.

Where the supersonics fit i is anyone’s guess. The most [optimistic estimate used to Ibe that their costs would be a fifth higher than today’s [jets (or 40 to 50 per cent [higher than the 7475). Now ;the Americans have admitted j by virtually suspending design work on their supersonic project, that they cannot get anywhere near this target. The British Government’s admission this month of redesign work on the wings, fuselage, fuel tanks, flying controls and engines of the Concorde is an indication that the outlook scarcely looks better from this end either.