Travel trouble
Unwanted holidays
David W. Wragg
During the late 1950s and e,..rly 1960s, shortly after the trend towards cheap holidays abroad first reached boom proportions, a spate of bankruptcies hit the mass travel industry as airlines and tour operators failed to cover their costs adequately and maintain a reasonable cash flow. Since then, while the Civil Aviation Authority has consistently warned against the low profit margins of tour
-operators and large losses have been piled up, the mass travel industry has settled down, aided by the assistance of a Tour Operators' Study Group guarantee against the failure of an organiser or an airline.
Now, with the prospect of a standstill, if not an actual decline, in the growth of living standards -the old uncertainties have reappeared. The industry, unable to make profits in fat years and in some cases paying foreign hotel owners as little as 45p a day for catering, has suddenly found itself committed to taking previously booked accommodation abroad, while the customers seem to have disappeared. Tour operators are frantically trying to find ways of either getting out of their commitments or finding enough customers.
This was behind the dispute between Clarksons and British Caledonian Airways, over who carries Horizon holiday passengers following that company's acquisition by Clarksons. Clarksons, of course, wanted the Horizon customers to use Court Line, the shipping and airline group which owns Clarksons. Since Court Line bought Clarksons, a persistent loss-maker, in order to protect its investment in two Lockheed TriStar airbuses ordered to carry Clarksons' holidaymakers, it naturally sees the acquisition of Horizon in much the same light.
British Caledonian, on the other hand, doesn't really want to carry inclusive holiday passengers on charter flights, preferring instead to project its image as an allscheduled service airline. But it is also determined to carry the Horizon passengers until the contract expires in 1975.
The problem has been compounded by the entry of British Airways into the mass holiday market, pushing Enterprise holidays, which use charter flights and twoor three-star hotels, unlike British Airways' well-established up-market Sovereign holidays, with scheduled flights and fouror five-star hotels. The independent airlines feel that they are still restricted from competing on fair terms with British Airways, which is nevertheless using its ability to pass any losses on to the taxpayer in order to pursue the independents into every market.
To be fair, of course, British Airways is using elderly Boeing 707s, some fourteen to sixteen years old and fully depreciated, against costly modern BAC OneEleven and airbuses in the independent fleets. It is also able to supplement the Boeings with the older Tridents, normally used on domestic routes Which happily do tend to be little used at weekends, when most charter flights operate. Yet, it is true that a loss in this sector could be absorbed elsewhere, leaving the taxpayer to suffer any overall British Airways loss.
British Caledonian's Golden Lion holidays, the equivalent of British Airways' Sovereign holidays, have made relatively little impact on the holiday market because they have not been pro
moted as well as the Sovereign holidays, and as a result few people know of the availability of Golden Lion. Given the choice and full knowledge, British Caledonian's reputation for service would probably win the battle.
Yet, Golden Lion and Sovereign are in truth out of the line of fire, since up-market holidays have been little affected by the present crisis, which is really striking at the lower end of the market. If Enterprise has also escaped, it is because of the reliability offered in the public mind by a state corporation at a time of crisis for private industry. But generally up-market cruise operators, such as P & 0, for example, have also found bookings relatively steady.
The problems lie, of course, in excessive competition at the lower end of the holiday market, coupled with the uncertainties in the economy at home. It would help if the accounts of the nationalised British Airways were to be more exact, so that any 'loss leaders' could be spotted and prevented, but this can be said of all nationalised industry. It is really a case in the final analysis of excessive competition being selfdefeating in the end, and if the present crisis leads to fewer, but better based, holiday operators, it will be a positive gain for the consumer and all concerned with the industry. The would-be holidaymaker abroad has, in the meantime, to be cautious about where he places his booking if he is hoping for a holiday abroad cheaper than that at an English resort — the oft-heard boast of the cut price operator!
David W. Wragg, as well as writing on financial affairs, is also the author of several books on aviation. subtle. He believes that for various historical reasons the apparent improvement on our balance of payments following Mr Healey's budget has been due to the continued receipt of Arab gulf state.? funds though at a somewhat higher level due to increased oil prices. If we want to continue to receive these funds and in fact also to take other funds at present going to New York the reform of City practice should be given a certain priority. The importation of the Securities and Exchange Act would cause a harsh fall in the value of equities in this country as the separation of investment banking from fiduciary responsibility took place but there would be a lift to a higher level as Arabs and other foreign investors saw London as a political market recovering from its laughable laxity in anything other than self regulation.
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