BOAC Flies Low

Embarrassed by having to report to British taxpayers on the profitless sputterings of British Overseas Airways Corp. its chairman, Sir Matthew Slattery a retired admiral, exploded like the old salt he is: "I have taken the opportunity of my first full year as chairman of the corporation to point out that I think its financial structure and the way it's expected to operate is just bloody crazy."

Among the bloody crazy things that rile Sir Matthew is that nationalized BOAC, which lost $40 million last year, has to pay $11 million a year interest to the government on an accumulated debt of $181 million. Sir Matthew tartly challenges British government policy that Crown corporations such as BOAC should be run like private companies and held accountable as to capital and interest. He argues that BOAC, the third largest of the transatlantic carriers,* should be free to write off its entire debt.

Last week Sir Matthew's anguished plea was coldly rejected. Aviation Minister Julian Amery rose in Commons to introduce a bill increasing BOAC's borrowing power by another $90 million and providing additional capital of $28 million for the other government-owned line, British European Airways, which after seven profitable years is dipping into the red.

Amery not only knuckle-rapped Slattery for his remarks, but said that the government has ordered an independent investigation of BOAC's management policies and prospects, with the possible idea of merging BOAC and BEA. Though BOAC has paid some $98 million in interest since 1952, Amery pointed out that the company would still have a $90 million debt even if the government had advanced its capital interest-free.

BOAC's losses stem largely from its decision to buy British aircraft. In 1955, it ordered a fleet of sleek, new Comet4 long-range pure jets and, after delivery in 1958, saw them made obsolete within a year by more economical, longer-range U.S. Boeing 707s. Now BOAC has 16 Boeing 707s; but it is stuck with 60 prop planes, propjets and Comets, whose value, according to the last BOAC annual report, is "-L-30 million less than book value."

Says Sir Matthew: "The extent to which the corporation can be strictly economic without regard to national, social and other considerations is a matter that will have to be discussed with Her Majesty's government." But Her Majesty's government does not seem to be listening.

* After Pan Am and TWA.

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