Concorde Sst: High Prestige, But A Low Payoff For Airlines -- Successor Jetliner May Be Tough Sell

NEW YORK - Nibbling caviar and sipping vodka as the supersonic Concorde hurtles over the Atlantic Ocean, British business magnate Lord Hanson mused on the luxury of this elite form of travel.

Speed aside, said the 72-year-old chairman of Hanson PLC as an attentive steward tops off his glass, "It's rather like the old-fashioned days of traveling in ocean liners."

Soaring 11 miles over the earth at twice the speed of sound - and hundreds of dollars more than the first-class fare on any other jetliner - traveling on Concorde is a rarefied experience for the elite of the world's jet set.

For British Airways and Air France, the only airlines that fly the world's only supersonic jetliner, the payoff after 18 years of service is considerably less apparent.

That will make it tough to convince lenders and governments to back a new project to build a successor.

Aircraft builders on both sides of the Atlantic are trying to drum up interest in a new SST, to carry the next generation's Lord Hansons after the aging Concorde is grounded early in the new millennium.

The new airplane, if one is ever built, would carry more people and be able to fly fully loaded across the Pacific Ocean nonstop - something the 100-seat, fuel-gulping Concorde cannot do.

Another superjet

Developing such a jet would pose a formidable challenge to designers and could cost a stratospheric $15 billion to develop. It would require European and American cooperation, since neither side could afford to build it alone.

But a next-generation supersonic transport also must compete for limited development funds with a prospective superjumbo jet. Louis Gallois, chairman of French aerospace concern Aerospatiale, the French partner in the Concorde project and a principal partner in European consortium Airbus Industrie, has said there are resources enough for only one or the other.

British Airways has had a somewhat happier experience with Concorde than the French. It maintains it has made a profit with its supersonic service since 1982, though analysts are skeptical. Air France concedes its Concorde service has never made money.

However, Air France officials said the prestige afforded by this "ambassador" of airplanes more than makes up for the needle-nosed jetliner's losses.

"It's the best advertising we have," said Jean-Claude Baumgarten, executive vice president for marketing and sales at the airline. "It makes us different from other airlines."

Even though the SST has been in service for nearly decades, he said, "the magic is still there."

Sky-high fares

BA's Concorde service has a built-in advantage over Air France: a bigger home market. Americans, the leading customers for both airlines, lean toward London as a gateway toward Europe, so overall air traffic between the U.S. and Britain is triple the level of U.S.-France traffic.

Bigger demand lets BA charge $4,147 for a one-way supersonic Atlantic crossing. The same seat on Air France from Paris can be bought for $3,494. A first-class ticket across the Atlantic on a Boeing 747 or other conventional subsonic airliner with BA costs $3,099.

BA has two Concorde flights a day between London and New York plus three a week between London and Washington, D.C. Air France's only scheduled Concorde service is a single daily Paris-New York round trip.

Both airlines have the same number of airplanes - seven - but since Air France doesn't fly its Concordes as often, the cost of each flight is higher.

High overhead

Since speed is what they're selling, the carriers must go to extreme lengths to prevent delays that would anger impatient travelers paying hefty fares. Air France, for example, keeps one Concorde on standby in New York and another in Paris, as backups in case of problems.

Maintenance is also extremely expensive on these exotic airplanes. Until recently, the French government paid Air France a subsidy to offset these extra costs.

Analysts who doubt BA's claim to make a profit on Concorde service, including Nick Cunningham, an airline analyst in London, said the carrier isn't including the capital costs of acquiring its fleet.

Jock Lowe, BA's director of flight operations and its chief Concorde pilot, said BA did pay full cost for the first five airplanes, then made "complex financial arrangements" under which the British government wrote off BA's debt for the craft in exchange for the airline's support for British Aerospace and engine-maker Rolls-Royce.

Even if Concorde really does help British Airways' bottom line, it hasn't fulfilled carriers' hopes for routes other than over the Atlantic.

Filling seats

BA dropped service to Bahrain a few years ago. Air France has eliminated flights to Washington, Mexico City and Rio de Janeiro. Both airlines draw extra income from occasional charter deals, and BA now flies to Barbados in the winter.

Concorde load factors - the percentage of seats filled - weakened for both carriers for years, although they have picked up recently because of price-cutting promotions.

That may be partly attributable to the airplanes' overhaul: BA Chairman Sir Colin Marshall in May said that passenger traffic had boosted passenger traffic for the recent fiscal year by 6 percent on premium travel, especially on Concorde.

But fare promotions have played a role too. Air France cut fares 15 percent a year ago and offers special promotions. It lets a companion travel for half price, for example. BA has responded by offering cheaper fares from continental cities that in does from London.

And BA has separate promotions to draw passengers from Air France. This summer, for example, BA is advertising round trips on the Concorde for the same price as that of a first-class ticket on traditional airplanes - for anyone traveling from Paris or a half-dozen regional French cities including Marseilles and Nice.

Who flies it?

To keep their elite customers coming aboard, both carriers have invested heavily to refurbish their aging fleets last year. BA spent $10 million for leather-covered seats, new toilets and carpeting, bigger luggage bins and compact disc players at each seat. Air France's redesign included new designer interiors and Limoges china.

Concorde passengers are a mix of business travelers, rock stars, the ultrarich and couriers, but business executives and lawyers are the main market for both airlines.

According to BA's statistics on its Concorde passengers, 80 percent are male, the average age is 43, and 43 percent of them boast the title of managing director, chairman or senior manager. The figures are similar at Air France.

Concorde's ticket price may seem an outrageous luxury. But to highly paid executives whose salaries can be equal to $1,000 an hour, the westbound Concorde enables them to fly to the U.S. and still get in an entire day's work. Concorde departs London's Heathrow Airport at 10:30 a.m. and arrives at New York's Kennedy Airport at 9:30 a.m. the same day - local time, of course.

It's also considerably cheaper than maintaining a private corporate jet, as many companies do.

Why fly it?

The general counsel for American Express Bank, Chris Seymour, said he doesn't exploit the privilege. He said he flies the Concorde from London to New York only when he has important negotiations to conclude and can't afford to lose a day.

"And," he said, "it's the only way to avoid jet lag."

But coming back from New York isn't worth the stiff price, he said, since the eastbound Concorde doesn't save any working time. Besides, he said, if he wants to sleep, traveling first-class in a 747 costs 25 percent less and is more comfortable.

Flying on the Concorde isn't an experience about which many executives brag, since however well they can justify the cost to themselves, executives know it looks like a perk to observers.

A Reuters Holdings PLC executive aboard BA001 recently was delighted to talk about the movie stars he had met on previous Concorde flights, but declined to reveal his name to a reporter.

"I'd rather not advertise the fact," he said.

Business executives aren't the only passengers. On that same BA 001 flight were 12 members of the Thai royal family, flying to a vacation at Niagara Falls.

My friend Mick

Lord Hanson said he has come to know rock star Mick Jagger from crossing paths on the airplane - and respects his business judgment, although, he said, "I'm not a genuine admirer of his music."

There are even some passengers who are willing to pay for the sheer pleasure of flying faster than sound - an experience some serious aviation buffs said they feel they must do at least once in their lives.

Jack Hersch, an analyst at Donaldson Lufkin & Jenrette in New York is one. Hersch, who is certified to fly single-engine airplanes, said he had always wanted to fly on Concorde.

"I wanted to be on it before it goes out of service," he said.