May 04, 2003

Virgin Concorde

Patrick Crozier | Air - Concorde | British Rail Privatisation | Virgin

Richard Branson wants to fly Concordes. There are many reports to this effect, here's the latest from Sky.

The funny thing about this is that British Airways doesn't want to sell. And it's not a question of negotiating the right price. It appears that they do not want to sell at any price.

So, what is going on here? And what should us libertarians think? Is this, as it appears, a market failure - one of capitalism's downsides? Is it in reality, actually a good thing? Could it be related to Concorde's tortured history? Or is it in fact the product of some bone-headed regulation or other?

As it happens, this mirrors something that has been going on in the rail industry. There, having bought a brand spanking new fleet of diesel locomotives, EWS, the UK's main freight operator started scrapping its existing rolling stock. Again, it was most unwilling to sell.

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Comments

Patrick:

In a pure libertarian society I would have no problem with BA refusing to sell their Concordes for any reason whatsoever. In reality, I believe that BA got the planes for virtually nothing - paid for by the taxpayers. Branson has mentioned the sum of £1 per plane. If that is so, Gordon Brown should take them back for £1 each and then sell to the highest bidder, no doubt Virgin Atlantic.

Posted by David Farrer on May 5, 2003

One could ask the same questions about EWS and whether their locomotive fleet inherited from the nationalised BR were sold to them at a fair price.

Admittedly most of those they've actaully scrapped were 30 year old class 37 and 47 locos, which were pretty much life expired. The real controversy is over the newer class 56 and 58s, built between the late 70s and mid 80s. Most of this fleet has not been scrapped but "stored", meaning being left to rust away in sidings.

EWS purchased 270 new locomotives immediately after privatisation, hoping for large scale expansion of services. When this didn't happen, they were left with too many locomotives, hence the retirement of the 58s and most of the 56s.

Posted by Tim Hall on May 5, 2003

I am surprised about the 58s, they surely still have some good working life left in them.

Posted by Matt on May 5, 2003

As David Farrer pointed out, the travesty is that HM gov't gave the Concordes to BA (BOAC?). If BA doesn't want them any more, efficiency and equity demand that another operator get a chance to fly them.

However, there's no mystery about BA's reluctance to sell. BA regards Concorde service as uneconomical, but regards Branson as a more talented operator, who--if he obtained the 'planes--could fly them profitably (indeed, if demand for luxury transatlantic service were ever to come back, a Concorde-equipped Branson would hold a tremendous advantage over BA in attracting high-value customers to direct and connecting services. On the other hand, if BA and Branson were to have equally fast (slow) fleets of subsonic aircraft, Branson couldn't offer anything BA couldn't match). Since Branson is a competitor, of course BA does not wish to sell him the Concordes.

Now, in theory BA could demand a price high enough to extract now all the value they would lose in the future to Branson's competition. I suspect that BA believes (a) Branson knows more than BA (about Branson's costs and benefits from the Concordes) and, more importantly, (b) selling the Concordes to Branson *at any price* would open BA to criticism ("if Branson can make a go of them, why can't you?") which BA executives would prefer not to hear. Note that reason (b) is so strong that reason (a) is quite redundant--even if BA could charge Branson so much for the 'planes that Branson could never realize any competitive advantage or other profit from them, just offering to sell would expose BA execs to carping from the peanut gallery.

Posted by Mark on May 6, 2003

Matt,

To my knowledge none of the class 58s (Built from 1984 onwards) have actually been scrapped. Five have recently been exported to Spain for use in construction work on a new high speed route there. There was a plan (which I think has fallen thought) to least 15 of them to a company in the Netherlands. Sounds like EWS recognises they're still potentially valuable assets, but doesn't want to sell them to a potential rival in the UK.

Posted by Tim Hall on May 6, 2003

Concorde has become uneconomic, so BA needs to reduce its losses by scrapping it. Branson is just doing his usual trick of grabbing some cheap publicity. A good analogy is that if someone needs to close a factory to reduce their overproduction of some good they cannot be compelled to sell that factory to a competitor.

The government may have once upon a time given BOAC the aircraft (though the £1 figure is misleading), however irrespective of the justice or otherwise of that transaction, the planes are BA's property. (In any case the taxpayer owned BA at the time it "gave" them Concorde, therefore the planes would have been a part of the BA fleet at the time of privatisation, and factored into the company books when the flotation documents were drawn up. If the government forces BA to sell Concorde to Branson it will be an abuse of private property rights on a par with the attempted seizure of Railtrack.

Posted by James Griffith on May 7, 2003

BA & Virgin read this >>> Concorde what a contraversial issue !! I have a deep fascination with flight. Since I was a kid I have always looked at the skies. Now I am 26 and have turned myself from a homeless pennyless hopeful into a succesful business man working for the fourth largest company in the world. My dream has always been to fly.

Whilst I appreciate BA's corporate approach regarding their refusal to sell to anyone they need to sit back and look at the bigger picture. Who would benefit from the sale ? Well apparently Branson if he could run a profitable service. Though I beleive whole heartedly that the passion I share with him is his real beleif in giving the people that chance they have not had I.e. ME! I also beleive that BA would benefit from the sale, all this non sense about how the exec board would be slated for suggesting such an idea or implimenting it, complete rubbish ! I am a tax paying citzen who very frequently fly's with BA and would be the most grateful man in the world and give much respect to BA if they held their heads high and passed them on allowing the Uk citizens the opportunity to experience what so many have not. Off course they would benefit they would make a killin from the sales, alot more than if they should scrap them. The crest of that slump they are riding now would be reserected. BA how many planes could you buy with the money you would raise from Concorde.

Heres what I propose:

BA retains one aircraft for charter and special occasions which fly's in the tradional BA colours

BA sell their fleet to highest bidder (Branson no doubt)

BA purchase a couple of the new Large Airbus (Larger than Jumbo's) due soon and run very cost effective transatlantic flights providing an area that is more spacious and Business focused within the Airbus enabling you to be competitive for those business customers by charging slightly less than concorde. (BA you've done it once do it again)

Virgin purchase the remaining fleet and be true to your word.

I am nearly in a position to afford a flight on concorde ! Please dont rob me of my chance it has taken me 10 struggling years.

Yours hopingly

Alexander Bradley
Vodafone Business Account Manager

Posted by Alexander Bradley on September 19, 2003

BA should sell concorde to virgin because richard branson can save concorde and return her to the skies.
If BA don't then concorde will die and nobody wants that to happen.

Posted by Paul Carlin on October 19, 2003

I am doing my dissertation on Concorde (the end of concord) at London Institute. Would you please send me some information on concorde. Thank you

Posted by barbara iga on October 23, 2003

Fellow shareholders,
We must kick out the B.A. Board and install Branson, that way he gets Concord and turns B.A.into the force it once was.

Jack Bowran

Posted by jack bowran on October 26, 2003

Does everything need to make a profit ?
Concorde has been an exelent advert for BA ,
And has kept the UK only 3 hours from the USA , a large customer for Britain .
Can you put a price on that ?

Posted by simon leach on October 26, 2003

Hi every Concorde-loving heart!

We should have kept concorde in the air. At least until Sukhoi gets a continental investor to continue with his plan to create the business supersonic.

Pity!!

Richard could have kept them flying another five years, enough time to create a joint venture between (who knows..) Bombardier-Sukkhoi?.

Companies like Lufthansa wet-lease BBJs and the like for specific business routes to the US from Privat-air.

Richard could do that too. Why not? Are we losing our faith? Call Freddie Laker and Herb Kellegher!!

Iñaki.

Posted by iñaki arregi on January 16, 2004

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