Supersonic Concorde Is King of the Air but Its Status on Bottom Line Is Unclear
After about 10 years of trans-Atlantic flights, the supersonic Concorde jet has become a high-profile symbol of advanced technology and luxury travel--but its status as a commercial enterprise is unclear.
The Concorde, with its streamlined, stiletto-thin body tapering into a sharply pointed nose, is widely recognized as a sleek embodiment of the most modern concepts in air travel.
It’s not for the huddled masses of air travelers, though. At just under $6,000 for a round-trip ticket between New York and London--about 30% more than the regular first-class fare--the Concorde caters mainly to people who don’t have to worry about the cost of flying.
About 80% of passengers on scheduled Concorde flights are business travelers, who need to wing across the Atlantic in a hurry. They and their companies are willing to pay a hefty premium for a 3 1/2-hour flight, slicing about four hours from the normal trans-Atlantic run at a cruising speed of 1,350 miles an hour: twice the speed of sound.
The average passenger on Concorde flights between New York and London, operated by British Airways, is a high-ranking executive in a large U.S. or British company, a man 50 to 60 years old, who takes the Concorde at least three or four times a year.
“It’s not a price-critical operation,” Capt. Brian Walpole, the general manager of British Airways’ Concorde division, said in a recent interview. “The real core of our business is taking business people between New York and London.”
British Airways, with seven Concordes ranging in age from 7 to 12 years, operates two daily flights between New York and London, as well as three flights a week between London, Washington and Miami. Government-owned Air France, the other Concorde operator with a fleet of six, has one round-trip flight a day between New York and Paris.
Sunday, Nov. 22, marks the 10th anniversary of the two airlines’ Concorde flights between New York and London, and New York and Paris.
Besides the heavy contingent of business passengers, the Concorde also draws on a pool of politicians, diplomats and jet-setting “rich and famous.” Its frequent fliers include movie stars Paul Newman, Elizabeth Taylor and Joan Collins, athletes John McEnroe, Jimmy Connors and Jack Nicklaus, as well as Britain’s Queen Elizabeth II and Prime Minister Margaret Thatcher.
But does it make money?
At $6,000 a head, with the 100-passenger planes running an average 60% full on the New York-London route, they would seem to be turning a tidy profit.
Concorde economics aren’t so simple, however. The aircraft were designed and built as a bold, highly political enterprise by the British and French governments--started separately in 1956, then as a joint project after 1962. The two governments, in a bid to challenge the dominance of U.S. aircraft makers in world markets, foot the bill with more than $2 billion in joint development costs.
The Concorde began commercial flights in May, 1976, flying from London and Paris to Washington. The aircraft came up against strong environmental opposition in New York and weren’t allowed to fly into that city until 18 months later. The British and French governments continued to subsidize the program until 1983.
The heavy government subsidies, along with high operating costs, meant that it would take a long time for the Concorde to start paying its own way. And the problem is complicated by the fact that the two airlines don’t provide detailed financial data for their Concorde operations.
Can Only Guess
“The general consensus is that on a fully allocated basis (for costs), there’s no way that thing can make money,” said Edward Starkman, an airline analyst for investment firm Paine Webber Inc. “It’s just such an oddball piece of the business.”
Starkman and other analysts concede that, without all the financial figures, they can only guess at how Concorde is faring.
Walpole, who is the senior Concorde pilot as well as manager of the division for British Airways, insists that the plane is now profitable after about five years of losses.
“The airplane really sells itself,” he said. “We have opened the market up to new passengers.”
After operating in the red from the time of its commercial takeoff in 1976, British Airways’ Concorde operations turned around and started making a profit in 1982, Walpole said. He attributes the recovery to a new marketing strategy, the introduction of charter flights and a campaign to reduce costs, which included laying off 10 Concorde pilots out of British Airways’ staff of about 90.
In the fiscal year ended March 31, 1986, BA’s Concorde business posted an operating profit of 20 million pounds, or about $30 million, according to the airline. The operating profit, however, doesn’t reflect Concorde’s bottom line--since it doesn’t account for subsidy costs and other factors.
A Concorde jet needs to carry 45 passengers, or 45% of its capacity, to break even, Walpole said. He noted that the passenger load, at an average 60%, varies according to the season--sometimes reaching as high as 90% in the summer and fall.
In Black Since 1983
BA recently was privatized in a big sale of shares to the public, after more than a half-century as Britain’s flagship carrier and an instrument of government policy. Walpole called the Concorde “the cutting edge” of the privatization.
Air France, still government-owned, makes a similar case for Concorde’s profitability.
“The airplane is self-sustaining in terms of day-to-day operations,” said Bruce Haxthausen, a spokesman in New York for the French airline.
He said Air France’s Concorde business had an operating profit of 31.3 million French francs in 1983, the year it went into the black, rising to 66.2 million francs in 1984 but dropping to 15 million last year.
Some analysts are willing to give Concorde the benefit of the financial doubt.
“I believe they are profitable,” said Robert Joedicke, an analyst for Shearson Lehman Bros. However, he said, the Concorde operations are not “going to swing the profit factor of (BA and Air France) a great deal one way or the other.”
In the final analysis, it may be incongruous to try to apply economic principles to what is surely one of the most political of all airplanes. The Concorde was built as a way for European aircraft makers to flex their muscle, and as a symbol of Anglo-French cooperation at a time when the fledgling Common Market was struggling to take shape.
It was overtaken commercially by Boeing Co.'s much larger, conventional 747 jumbo jet, which became the workhorse of international air travel.
But even financial skeptics concede that the Concorde has a “cachet” and a prestige value that can’t be measured in terms of hard cash.