|Concorde : An Untimely and Unnecessary Demise|
Undoubtedly, Concorde is the most beautiful and best known passenger plane in the world.
Carrying only 100 passengers per flight, but higher, faster, and more luxuriously than any other plane before or since, Concorde is without a doubt the embodiment of all that is best about flying.
The simultaneous announcements by British Airways and Air France that they are retiring their Concordes would seem to mark the sad end of an era.
But BA and AF are willfully preventing the public from continuing to enjoy the Concorde experience.
Virgin Atlantic Airways has offered to buy their planes, but both airlines have refused to sell them. Why?
The sleek superfast Concorde offers its
passengers the ultimate in deluxe travel experiences. During the 27
years it has been flying, over 2.5 million people have enjoyed the unique
experience of traveling faster than many fighter jets, and at an altitude
so high that if you look up, you see the darkness of space, and if you
look down, you can see the curvature of the earth.
Although the planes are no longer new, they have been lovingly maintained and upgraded. They have comparatively low flight hours and are certified as airworthy until 2009 (with further extensions possible).
But now, British Airways and Air France announce a double blow : The final Concorde flight will be on 24 October, and they are refusing to sell them to any other airline to operate. Why?
What Conventional Wisdom Tells Us
'Everyone knows' that although the Concorde is a lovely plane to fly in, it is an outmoded outdated and ridiculously fuel inefficient plane that is way too costly for normal airline operations.
'Everyone knows' that BA and AF lose money on their Concorde services and it is only because they are unique and the 'flagship' planes of the two airlines that they continue to operate them, reluctantly, as loss-leaders, in the hope that the positive image of these planes will flow through to their normal operations.
'Everyone knows' that with the depressed economic climate, and worries about the Iraqi War, almost no-one is flying first class any more and so there is no longer a role for a plane like the all-first class Concorde.
But are these three statements true? Do they hold up to scrutiny? Let's have a careful look at the issues.
The Unimportance of Fuel Efficiency
Conventional wisdom has always maintained that the big problem with Concorde is its lack of fuel efficiency. But how truly important is fuel economy?
A Concorde uses, during the course of a typical trans-Atlantic flight, about 5650 gallons of kerosene every hour. This translates to about 6 gallons of fuel per mile flown. A Boeing 747 consumes about 5 gallons of jet fuel per mile flown.
While this difference seems very small, remember that the Concorde can only carry a maximum of 100 passengers, whereas the 747 is typically configured to carry about 400 passengers. In terms of fuel use per passenger carried, one gallon of fuel on Concorde will take one passenger 16.7 miles, but on a 747 one passenger can travel 80 miles. The 747 is 4.8 times more fuel efficient than a Concorde (and more fuel efficient than two people sharing a private car, too!).
Let's see what this operationally means in terms of a roundtrip flight across the Atlantic between London Heathrow and New York JFK, a distance of 3447 miles each way. If we use a cost per gallon of fuel as $1.15 (jet fuel is much cheaper than pump prices for petrol), it costs $474 per passenger for fuel on Concorde but only $99 on the 747.
The extra fuel cost on Concorde is less than $400. This is a trivial extra cost for a plane that sells only first class seats, and at up to $12,000 each. At a price like that, it really makes no difference at all whether the fuel costs $99 or $474. There is still over $11,500 gross profit on each of those tickets!
Let's cost this another way. If Concorde flies roundtrip between London and New York, with all seats sold at full price, it can earn close on $1.2 million dollars. Subtract fuel costs of $47,400 and it still generates $1.15 million in positive earnings. A 747 flying full will earn about $800,000, with fuel costs of $40,000, leaving $760,000 in positive earnings per flight.
A Concorde is more costly to maintain than a 747. One rule of thumb is that Concorde's total operating cost is three times its fuel cost. I don't know what the comparable rule of thumb is for a 747, but let's assume that a 747's total operating cost is twice its fuel cost. This means that the total cost per passenger on a roundtrip across the Atlantic is now $1422 for Concorde and $198 for a 747. It is costing the airline an extra $1224 to fly a person on Concorde instead of on a 747.
This difference is still trivial when compared to the $12,000 fare on Concorde, and a Concorde can still generate $1 million per roundtrip in profit, compared to 'only' $720,000 for the 747.
Even after allowing for the extra fuel and maintenance costs, Concorde can earn 40% more money per flight than a 747.
(Note that in both cases, a lot of other fixed and semi-fixed costs need to be added to this marginal costing analysis to get the 'true cost' of operating the plane.)
While the preceding analysis is very approximate, the results fit with what I've heard 'on the grapevine'. It has always been my understanding that Concorde has been a profitable operation for BA, and their CEO, Rod Eddington, said on Thursday 'Before the Concorde tragedy in Paris, BA operated very profitably a double daily Concorde service across the North Atlantic'. The BBC suggests that BA might have been making as much as £20 million (US$32 million) net profit from its Concorde operations each year and this estimate might be low.
For an airline that has had some spectacular net losses over the past few years, a 'very profitable' service, whether netting $32 million a year or more, is surely a welcome addition to the bottom line and something that is worth doing all possible to protect and preserve.
The Lack of Full Fare Passengers
The preceding analysis was done on the basis of comparing a full Concorde with 100 first class passengers with a full 747 (with only 14 first class passengers, plus a mix of business and coach class passengers).
Sadly, Concorde has not been flying full recently, and BA's first and business class traffic dropped disastrously on all its planes in March.
Some Concorde flights are rumored to be operating with less than one third of the seats sold, and many of the few seats that are sold are heavily discounted package deals, selling for less than half the full published fare. In such a situation, a Concorde flight is unlikely to make money.
But. This is presumably not a permanent situation. All airlines are hoping and planning for a recovery in business travel. When that happens, opportunities to re-grow the loads on Concorde and to restore fares to full price will return. In the meantime, there are plenty of promotional activities that BA and AF could be doing to fill their Concorde seats with discounted fares. For example, a Concorde would still make money if operated with a full load of passengers paying business class rather than first class fares.
The ability to fly between New York and either Paris or London in little more than three hours - the ability to do a return day trip between Europe and the US - truly does have a value for many people, and the simple novelty of Concorde is another positive factor that also encourages people to choose Concorde if at all financially feasible. Even in today's depressed business climate, many people will pay some amount of premium to fly Concorde.
Instead, both airlines have done very little Concorde promotion, and have instead reduced service - an action that so often leads to a vicious spiral of cutbacks and losses to the point where service is discontinued entirely - exactly as we're seeing here.
A far-sighted airline would simply put their Concorde planes into storage - along with all the other many thousands of planes currently sitting idle in the desert - and then return them to service when economic conditions improve.
Alternatively, if they felt certain that there was no way that they could ever expect to profit from their planes again in the future, surely they'd then seek to sell them for as much money as possible to whoever else was as 'foolish' as to attempt to operate them. But they're not doing that, either. Both airlines have refused earlier approaches from Virgin Atlantic to buy some or all of their planes. BA is talking about giving away its seven planes to museums, and says that it will cost £84 million (US$135 million) to permanently discontinue its Concorde services.
UPDATE - OCT 03 : BA did indeed do exactly what I recommended - promoted Concorde discount flights for the remaining six months of service. These discounted tickets (but still very expensive) resulted in most Concorde flights operating at close to full capacity, and at huge profits, too.
In an article on p7 of The Sunday Times, 26 Oct 03, it is estimated that Concorde made a £50 million profit ($80 million) in its last six months of operation. The article also says that Concorde could make a profit if flown full but with fares only one third of regular full fares (this is generally in line with my own estimates). You can be certain that if Concorde's fare was even simply halved (ie making it less than a regular business class fare) every seat on every possible flight would always be full. BA is just not trying to make Concorde the success it could be.
Furthermore, with the Iraqi war now behind us, and a general slow improvement in business travel, BA's chances of ongoing profitable 'normal' operations with Concorde would seem greater today than any time in the last several years. The last six months have not vindicated BA's decision to discontinue Concorde flights, but instead have further contradicted this decision.
Something just doesn't seem right.
So Why are BA and AF Discontinuing Service?
On the face of it, the decision to discontinue Concorde service seems to make no sense. One has to guess that there are other reasons that aren't being disclosed in public. What follows is nothing more than mere speculation - you decide what may or may not be true.
First of all, there is the challenge of corporate image. Until the Air France Concorde crash in Paris on 25 July 2000, the Concorde was statistically the safest passenger plane ever built - zero crashes, zero fatalities. Both airlines boasted extravagantly about their high levels of maintenance and safety on the Concordes, and the thirteen planes were the total embodiment of all that was supposed to be best about British and French aviation. Operating Concorde truly was a huge boost to the corporate image - as well as the corporate profitability - of both countries and their national airlines.
With the crash, Concorde immediately changed from the safest plane to the most dangerous plane. Due to its very small number of flying hours, one single crash was enough to make its safety average transition from best to worst.
Alarmingly, since the return of Concorde to service in 2001, there have been a series of embarrassing incidents with pieces falling off the Concordes, engine problems, and other mishaps. The 'perfect safety record' of the plane has become increasingly tarnished. Some people might suggest that the Concorde has transitioned from being an image booster to an image detractor, and that in the very unlikely event of a second fatal crash, the plane and its operating airline could have their reputation permanently wrecked.
Perhaps BA and AF have decided that the planes are no longer sufficiently safe and reliable, and don't want to risk the massive negative publicity that would follow a second airplane crash? And so, while not wanting to make such an embarrassing admission in public, they are instead blaming the decision to withdraw the planes from service on the planes being 'uneconomic' rather than unsafe.
There is a second possibility. Consider again the financial analysis of flying the Concorde. While it seems plain that the Concorde can be profitable, there is another perspective than an airline cost accountant would almost certainly adopt in tight financial times. This perspective fixates on the issue that a first class passenger costs the airline an extra $1224 if flown on Concorde rather than on a regular 747.
Is it possible that the two airlines have simply decided to cancel their Concorde services, not because they don't make money, but instead because they could make more money if their Concorde clients were forced to fly on regular 747s instead?
There are some reasons to support this suggestion.
When both airlines suspended their Concorde flights for a year after the Paris crash, they discovered, to their relief, that their Concorde passengers chose to stay with them, but fly in regular first class instead. This answered one of their big unknown marketing questions and reassured them that Concorde passengers would stay loyal, even without Concorde.
With the depressed market for business travel in general in late 2002 and early 2003, their normal plane services are also flying with lots of unsold first and business class seats. Both airlines could easily absorb their Concorde passengers into their regular flights, at no extra cost; indeed, instead of incurring extra costs, they would be saving greatly by canceling their Concorde flights with no loss of passenger income.
Many people might think this is the real reason that the Concorde service is being discontinued. Not because Concorde service is unprofitable, but because regular service is more profitable.
Why Won't They Sell Their Planes?
In early March, a BA spokesman said : 'We will never sell this aircraft. The plane is synonymous with British Airways. It is almost a symbol of the airline. In any case, no one but BA and Air France are capable of maintaining this fleet. It would be like asking the corner garage to service a Formula 1 car.'
British Airways is currently proposing to give away its fleet of seven planes to museums. BA CEO Rod Eddington said on Thursday that Concorde is 'part of aviation history and I'm absolutely clear they'll end up on display so future generations will be able to see them'.
There are already Concordes on display in flight museums, so his prediction is partially true already.
Surely, if CEO Eddington feels so strongly about preserving the Concorde legacy, he would be even more pleased to see them continue in daily service for as long as possible, so that current and future generations can not only see the planes as lifeless museum exhibits, but actually experience the full reality of a supersonic trans-Atlantic flight?
Sir Richard Branson, the charismatic founder of Virgin Atlantic Airways, and a long term thorn in the side of BA, points out that BA was given their entire fleet of Concorde planes for only £1 by the British Government. Branson explains 'When the government gave British Airways Concorde for £1 they said that if another British company ever wanted to operate it they could.'
Immediately after BA's announcement that it would withdraw Concorde from service, Virgin was flooded with calls from the public - and even from some BA staff (!) - asking if they would step in and take up the responsibility for keeping this icon of British aviation excellence flying. But the chances of this happening are very slim, because there is one essential part of the cost equation in ceasing Concorde service that BA and AF will be desperate to preserve.
Although the two airlines are confident that discontinuing their Concorde service will not cause them any loss of passengers, if a third airline was to start offering Concorde service, this situation would almost certainly change, and both airlines would then be confronted with the likely defection of large numbers of their highest-fare paying passengers. This would change a financially sound decision into a financially disastrous decision.
And so, some people might think that Air France's earlier refusal to sell two Concordes to Virgin, and BA's current refusal to do anything except give the planes away to museums is the unkindest part of their entire dubious decision to end Concorde service.
BA in particular was entrusted by the British Government to protect and preserve the Concorde legacy for as long as feasible. If BA now deems it infeasible to continue Concorde operations, surely it is obliged to pass the legacy on to any other airline that is willing to preserve and operate these beautiful planes?
An Unsolved Mystery
I've discussed this article and the circumstances of the withdrawal of Concorde with several other industry participants. None of us really understand what caused such a sudden cancellation of service - as recently as October last year, Aviation Today was talking about Concorde having a service life through to 2014 and said that 'it was understandable that British Airways and Air France see no reason why the prestige jet cannot be kept operational and in good shape'.
It is also surprising that both airlines made the identical decision, at the identical time. This is almost surely no coincidence.
The real reasons for Concorde's withdrawal might be as simple as those publicly stated by BA and AF, or might be so convoluted that no-one will ever know. The only thing that we do know, for certain, is that the loss of Concorde marks the end of the greatest aviation achievement ever. I grieve its passing.
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Originally published 11 April 2003, revised Oct 24 03, last update
26 Jun 2019