1990
In January Dan-Air announced it was withdrawing from the Dublin-London route, saying over capacity from several carriers was the reason. Dan-Air were also under pressure to increase services on other, less populated routes where they could maximise revenue. Five staff at the Dublin office which would also close in March would be offered other jobs within the company. The expansion of other services was no more evident than in Scotland. A company BAC 1-11 was named 'Scottish Connection' in February at a special ceremony.
In February, British Island Airways (BIA) collapsed. The airline had operated just three scheduled services, to Malta and Sicily. However, 4000 charter passengers had been booked to fly with BIA in the forthcoming months. BIA had debts of £10 Million. Two of the airline's eight BAC 1-11 jets had been sold off, in an attempt to raise capital. BIA had been profitable until 1988, and was even the chosen carrier for two of Mrs. Thatcher's Election tours. British Island Airways had been a stand alone carrier until they joined with other airlines to form Air UK. A few years later BIA broke away and had formed a second tier airline, based at Gatwick. The 89-seat One-Eleven 400s and 119-seat One-Eleven 500s operated by the second BIA filled a niche in the UK charter market, which at the time was dominated by 130-seat Boeing 737-200s operated by BIA's much bigger, vertically integrated competitors. These smaller, second-hand aircraft's lower acquisition costs (compared with the competition's bigger and newer 737-200s) enabled BIA to offer tour operators lower capacity aircraft at keener rates, giving it a competitive advantage on less dense routes. The One-Eleven 400's ability to match the 737-200's range, as well as both One-Eleven variants' ability to match the 737's fuel consumption and to comply with stricter, post-1985 noise abatement rules (as a result of having hush kits fitted to their engines), further enhanced BIA's competitiveness vis-à-vis its rivals. This helped attract business from the big tour operators that owned its rivals, especially to secondary European ski destinations served in winter where the lower trip costs of BIA's older planes outweighed the seat-mile cost advantage of the in-house airlines' technologically more advanced equipment. This in turn helped minimise the tour operators' risk, thereby representing a 'win-win' situation for both parties.
The One - Eleven, in a nut-shell was cheap to purchase and worked well on lower density routes. This could not be the long term aim of Dan-Air, who had eighteen of them in service. Newer, much more efficient regional aircraft were available. As ever, the problem would be how to get hold of them without financially draining the airline. To put this in context: Below is a list of how much fuel (in kilograms) is consumed per hour and the seating capacity on each type.
BAC 1-11 500 - Fuel Consumption 2,800 kg/h (119 passengers)
Boeing 737 200 - Fuel Consumption 2,800 kg/h (130 passengers)
Boeing 737 300 - Fuel Consumption 2,400 kg/h (149 passengers) (Dan-Air 30 Class Elite -40 Economy - Charter config 161)
Boeing 737 400 - Fuel Consumption 2,600 kg/h (156 Passengers) (Dan-Air 30 Class Elite - 66 Economy - Charter config 169)
BAe 146 100 - Fuel Consumption 1,700 kg/h (88 Passengers) (Dan-Air 12-40 Class Elite - 20-62 Economy)
BAe146 300 - Fuel Consumption 1,920 kg/h (96 Passengers) (Dan-Air 16-40 Class Elite - 46-82 Economy)
Boeing 727 100 - Fuel Consumption 4,140 kg/h (141 Passengers)
Boeing 727 200 - Fuel Consumption 4,500 kg/h (189 Passengers)
Boeing 757 200 - Fuel Consumption 3,320 kg/h (231 Passengers)
Boeing 767 200 - Fuel Consumption 4,500 kg/h (276 Passengers)
Airbus A300 - Fuel Consumption 5,000 kg/h (350 Passengers)
Tristar - Fuel Consumption 5,000 kg/h (350 Passengers)
TU 134 - Fuel Consumption 2,500 kg/h (85 Passengers)
TU154B - Fuel Consumption 6,200 kg/h (135 Passengers)
TU154M - Fuel Consumption 5,100 kg/h (152 Passengers)
As you can see, the BAC 1-11 compares quite badly. Dan-Air were also being hit hard by using the Boeing 727 on European charter flights. There seems little logic in using a Boeing 727 200 carrying 189 people, when a Boeing 767 could carry 276 people for the same amount of fuel. The Airbus A300 that Dan-Air used only slightly more fuel, but carried 74 more passengers than the Boeing 767. Yet still, Dan-Air chose to reduce the Airbus fleet, in an effort to raise cash. Dan-Air's 727 in both 100 and 200 series, used much more fuel than rival carrier's aircraft. Britannia, Air Europe and all the other charter carriers leased their aircraft; resulting in substantial monthly lease payments to the lessor or manufacturer. Whether the balance sheet tipped in favour of the fully owned aircraft was up for debate. One thing is for sure, if a would be Tour Operator came to Dan-Air requiring an aircraft, to match the competitor's price, Dan-Air would be operating on a vastly reduced profit margin. If there was a profit at all.
Being an air stewardesses was always considered to be a young person's game. That was not the case for Joan Garnett who in February retired from Dan-Air after thirty years service as a hostess. Joan would hit sixty later in the month and was to take her well earned retirement.
The British Airports Authority introduced major changes this year which saw wide ranging price increases, some as high as 45%. This led to Dan-Air announcing fare increases of up to 7% on scheduled services. A spokesman said: 'It's a sad fact of life that we have had to make these increases, but we reckon seven per cent isn't that bad when you consider some of the charges we have to pay. Fuel charges at over 35% and the interest rate increases haven't helped either. '
In 1990, the worldwide recession started to bite in the UK. One of the first things that people forgo, when times are hard, is their overseas holiday. UK bookings were down 40% on the previous year, at the time of the BIA collapse. Press reports said that 'Even industry giant ILG who own Air Europe were feeling the pinch.'
Following the collapse of BIA, Air Europe had jumped on the available Malta services and were soon operating Boeing 757 aircraft out of Manchester and Gatwick to the sunshine island. In April, Dan-Air announced that for only the second time in its history that it had made a loss. 1989's pre tax profits of £9.9 million dropped to a loss of £3.3 million. Share prices tumbled 50p to 355p (An all time high was last year's 570p) Fred Newman stated that high interest rates were partly to blame, as well as an exceptionally hot UK Summer. Newman also claimed the merger of BCal and BA had hurt the airline. Over-capacity on some services had not helped either, as this meant they were unable to increase fares. Their charter division was down 7%. Despite this, overall, Dan-Air had maintained their share of the charter market of between 15 and 20%. Turnover was up 11% at £376m. The sale of two Airbus aircraft had raised £5.1m and the company sold more than £1 million in surplus spare parts. Despite carrying 4.5 million passengers on the charter division, which was only 1% lower than last year. The airline was not able to increase revenue from those charter flights . the reason for this was because they were operating on the same margin as the previous year. This operation was carried out amidst much higher fuel costs. The cost of launching Class Elite had been costly, but almost two million passengers flew on Dan-Air's scheduled network, an increase of 40%.
Stories about a merger between Air Europe and Dan-Air resurfaced on 26th February this year, according to 'sources close to the company'. Dan-air was Davies and Newman's main profit generator, but 1989's drop in package-holiday bookings led to it reducing its 4,000 seat capacity in the UK charter market by 4%. Analysts valued Dan-air at about £50 million. Most of the company's revenue came from operating charter flights. The slots at Gatwick were valuable and the scheduled network was profitable. It was believed that Harry Goodman wanted to turn away from package holidays and concentrate on inter European travel, which he believed to be the main growth area for the 1990s. acquiring Dan-Air would set him on the right path alongside his Air Europe. The source said that there appeared to be no sign that 1989's down-turn had been reversed and that Dan-air was 'losing money hand over fist'. Goodman's ILG was taken private following a £150 million management buy-out in 1987. The company was thought to have assets of £225 million by way of Intasun, Air Europe, Global and Lancaster Holidays. A few days later on March 6th, Dan-Air described the rumours as 'Codswallop' George Yeoman of Dan-Air said 'There is no truth in these rumours whatsoever. All airlines have been hit by the recent down-turn on holiday bookings. There is no reason why we should be taken over.'
A new Gatwick-Berlin daily service was launched in March, the same month that Pop Princess Kylie Minogue flew on Dan-Air in March this year. The airline offered to whisk the star through a quieter part of the airport, but Miss Minogue insisted on meeting fans saying 'They have been waiting all day to see me.' A company BAC 1-11 was named 'Scottish Connection' at a special naming ceremony in Aberdeen in April.
Air Europe signed a contract 'of substantial value' on April 30th. The contract was for Dan-Air to carry out the maintenance of Air Europe's Boeing 757 fleet. The contract was to last three and a half years. This followed the contract signed last year for Dan-Air to maintain Air Europe's Boeing 737 400 series fleet. The bulk of the work on the twelve string fleet would be carried out at Dan-air Engineering's new hanger at Gatwick. It would also apply for Air Europe's associate airlines. The engineering base at Lasham would also be involved. Mike Ellis associate Director of Dan-Air Engineering said; 'This is the first major contract where the majority of the work will be predominantly performed out of the new Dan-Air hanger complex at Gatwick Airport.' The engineering division was already involved in the maintenance of more than 100 aircraft of other carrier's fleet as well as the 51 aircraft in their own fleet.
May 1st would see the opening of the new daily (except Saturday) Gatwick -Vienna service.
Secret talks that had taken place in May were leaked to the press. The talks had been between Dan-Air and several interested parties, resulted in a dramatic increase in the Davies and Newman share price, rising from 150p to settle at 575p. This increased the value of the stock market company from £10m to £40.3m. Exactly who was involved in the takeover talks was initially unclear. It was rumoured that both British Midland Airways and British Airways were not involved as they knew any such merger would be referred to the monopolies and mergers commission. Aviation insiders believed that a European or American airline would be most likely to buy Dan-Air, as it was the easiest way to get into the already congested airports of Gatwick and Heathrow. These carriers would also be aware that Dan-Air had massive hanger space at both Gatwick and Manchester. Dan Air went to great lengths to reassure passengers that any passengers booking with Dan-Air would in no way be at risk with contractual obligations. Dan-Air announced that they would be withdrawing from the Inverness-Manchester-Gatwick service, that had been in operation for only fourteen months. Instead, they would be concentrating on the Gatwick-Manchester route which had far better yields. The successful Inverness-Heathrow and the Aberdeen-Gatwick services would increase frequencies. Dan-Air revealed that only 7% of passengers at Inverness had opted for the Gatwick service over Heathrow. The Inverness-Heathrow route had been so successful, that not only had frequencies increased they were now increasing capacity on all flights. The flights would all now be carried out using the larger, 104 seat BAC 1-11 500, adding a further 20 seats to each flight.
The announcement that saw the company make a loss of £3.3 million was explained by Chairman Fred Newman as 'a combination of high fuel prices, high interest rates causing people to choose UK holidays, combined with an exceptionally hot summer.' He said that stiff competition from other airlines had also played a part. Over-capacity in the airline market had made it difficult for Dan-Air to raise prices. The total charter market had decreased by 7%, but Dan-air had maintained their share of between 15-20%.
A HS 748 prop-liner was involved in a near miss over Germany on 2nd May. The Captain was forced to take a violent nose-dive to avoid a collision with an American military jet. Captain Bob Dearling landed the aircraft safely with passengers lining up to shake his hand. Captain Dearling took violent evasive action to avoid the crash after the jet came within 50 feet of the 748. One of the 16 passengers on board, a German business man was concussed as he was thrown forward. The incident occurred over Saarbrucken which was the destination of the airliner which had departed Berlin. An investigation was launched by the West German authorities. A Dan-air spokesman said Captain Dearling was under radar control of the US Air Force at the Ramstein Air Base. Two F-15 jets were in the same airspace as the Dan-Air aircraft.
A raft of new route licences were sought in May, with applications for Manchester, Tees-Side and Newcastle to Berlin. Tegal Airport in West Berlin had long been established as a charter base for Dan-Air who supplied flights for the majority of West German Tour Operators and the The GTF (German Tourist Facility.) Dan-Air executives thought it was a good idea to expand scheduled services out of West Berlin beyond the Saarbrucken, Amsterdam and London services. Applications were therefore submitted for licences from Berlin to Moscow, Budapest, Prague, Warsaw and Bucharest. The former Communist states had opened up to the west and Dan-Air was ideally placed to become a major player in the region. With George Yeomans of Dan-Air saying: 'It is our intention to capitalise on our Berlin Tegal base.'
Britannia Airways announced that there would be redundancies this year after a difficult twelve months trading for the entire industry. Dan-Air, keen to shake off rumours that they were about to go bankrupt, issued a statement saying; 'Consideration is being given to the possibility of greater co-operation between Dan-Air and other airlines. As part of this process the company is in discussion with a number of interested parties and those discussions may or may not lead to an offer being made for the company. It is emphasised that such an offer is only one of several possible outcomes from such discussions.
There had been leaks to the press suggesting that the airline was about to be taken over, which Dan-air had initially denied. The airline had intentionally not disclosed which companies they were in talks with. Just days after the statement was released, another leak revealed that British Midland had been in talks with Davies And Newman. British Midland admitted they had been in talks, but stressed that they were 'inconclusive at the present time'. The press were unclear about why British Midland were in talks with Dan-Air, which, it said, was foundering because of the collapse in the package holiday market. Captain Alan Selby told us:
'Well they would say that wouldn't they? Dan-Air was a much larger airline that BMA. While the press were going on about them not being able to expand at Heathrow, they neglected to say that we had some very good routes out of Manchester, Newcastle and Gatwick. Our fleet was considerably bigger than theirs and our network dwarfed theirs. We carried six million passengers that year, two million of them on largely profitable routes. That was double those on BMA,. So, from my point of view it was obvious why they wanted us. If we had been making any mistakes in the late 1980s I believe that it was because we were diversifying into too many areas, we were also in the habit of keeping unprofitable routes going for far too long. Instead of just axing them. We did have profitable parts of the business, the engineering was profitable for most of its existence and so was Gatwick Handling. I also believe that a lot of the charter stuff should have been thrown out. It's perfectly acceptable to have a modern, efficient airliner flying good business, but I, and many others knew that operating the 727 came at a heavy price. I don't think they were making any money at all, and if they were not - then get rid of the jets and either replace them or operate the profitable ones only - using the most modern aircraft. I can't say for sure, but I believe that there might have been a bit of egomania in play. I think Dan-Air enjoyed being known as the second largest airline in the UK. But the bottom line was that anyone can have a shop selling ten pence apples at nine pence each. You can't do it for very long though. The charter scene had so much over capacity with new airlines all over the place. It was hard to get the contracts, you have to match all the new carriers' rates, and if you are doing that with a 727 and your competitor is using a 757, and you are using so much more resources on the same route - you will lose money.'
Within days the press was full of stories about how Dan-Air was about to be taken over by Air Europe, American Airlines or Lufthansa. Dan-Air were anxious to re-assure holiday-makers and the travelling public that it was 'business as usual'. Telling journalists that any talks they were involved in 'would in no-way jeopardise any contractual arrangements we have with any of our customers. We are a controlled company, in other words we have various family trusts and directors, who together, hold a majority shareholding in excess of 60%, so we are in control of our destiny.' It was rumoured that the airline was up for sale at £45 million. One of the senior management team told us, on condition of anonymity:
'Obviously, I was not involved in the actual discussions, but I was involved from the sidelines. The whole industry was in a pretty desperate state. The International Leisure Group and their airline, Air Europe, in public at least, did a good job of appearing to be able to withstand the economic forces that was exceptionally hostile to our business. During the year there had been war in the Gulf, involving two oil producing nations. This was bound to have an effect on fuel prices. It would also mean that travellers were anxious about flying in general. It didn't matter that the Gulf was a long way away, it did unsettle the travelling public. It is never good with a backdrop like that to have constant speculation that your company is about to be swallowed up. I can assure you that we were not, as it were, on the phone calling every airline in town and saying 'Will you buy us please?' Airlines do work together more than you would imagine and believe it or not, contacts are maintained. In this sort of scenario, there are discussions with banks, that are ongoing through the year. Several airlines may use the same banks. There are all sorts of formal and semi formal dialogues between these institutions. It was not as if we couldn't pay the electricity bills. Things at this time went on as usual. You cannot be perceived as cutting corners with standards as that leaves you open to other sets of accusations. The board were not sat there with their heads in their hands night and day. There was the business of running an airline and that is what we did. You never knew - maybe a huge contract was just around the corner and if it was, then you had to be seen to be professional and ready to meet the challenges. Some of the changes that were about to come, I was enthusiastic about - some not so much. Some of the things that new people did, I thought were the right call - and some were, frankly terrible decisions.'
On May 24th a packed Boeing 727 was racing down the runway at Manchester about to take off when an indicator in the flight deck alerted him that there was a fire in the jet's engines. Highly experienced pilot Captain Charles Nash brought the aircraft with 187 passengers on board to a halt on the runway, whilst at the same time issuing a 'Mayday' call to the tower. the aircraft stopped on the runway and Captain Nash was heard on radio saying 'I thought you had learned the lessons from the 1985 disaster.' In the incident Captain Nash did not know if there was a fire because the engines are at the back of the aircraft and he couldn't see them. Manchester Airport Operations said that the CAA had been asked to launch an investigation and that to comment would prejudice the inquiry. The tower stated that they could not see flames,only smoke and that fire services were on their way. The Captain was given a radio frequency to speak to the fire teams. Communications were lost and the Captain forced to re-tune to the tower.
Just one day later a company BAe146 suffered a burst tyre on take off at Gatwick on a flight to Newcastle. The aircraft flew over the tower at Newcastle to see the extent of the damage, revealing that the starboard inner tyre had burst. Emergency services stood by as the airliner with a near full load of 72 passengers approached. The Captain landed the aircraft safely.
The nest day a BAC 1-11 charter flight from Palma to East Midlands landed and was informed by the tower that smoke was 'bellowing' from one of the rear mounted engines. The crew opened the rear air stair, smoke began to fill the aircraft and crew then decided to close the door, instructing passengers to exit by the front door. Several passengers chose to ignore the crew and opened over-wing emergency doors before clamouring onto the wing and jumping off. One of those passengers was a seventy year old woman who jumped off, breaking her ankle. The Dan-Air spokesman said:
'We checked the engine and there was no fault. We believe it was just a case of some oil dropping onto the hot engine and smoking. The wind must have been blowing in the wrong direction and took the smoke into the rear of the aircraft. So our crew very properly made the right decision in closing the door and instructing passengers to use the front door. There was no intention for it to be an emergency evacuation.'
Inspirations East - a small Tour Operator chose to charter Dan-Air Boeing 737 400 series jets for a series of holiday flights from Gatwick to Goa in India. The flights would operate in 170 seat configuration and would be the first charter flights to India that Dan-Air had undertaken. there would be a refuelling stop at Sharjah in the United Arab Emirates. There would be a free bar and in flight catering. For an additional £95 passengers would enjoy extra leg-room seats and upgraded catering. The Sunday evening flights would operate from October through to March 1991.
Harry Goodman gave an interview to TV which was displayed a lot of his ambition.
'When we started as a small Tour Operator we soon realised we needed an airline, all the airline charter companies were owned by our rivals. So that was a necessity, after that, it became a fun business, it's very fun, very profitable. We like to win. We don't take great risks with the company, we take calculated risks, we like to be winners. You know it's fun to take on your rivals, and Governments and bureaucracies, and it's even more fun when you're winning.'
But winning hadn't come easy, Air Europe had started out as a charter company, carrying passengers for it's sister company Intasun. It was only five years prior that Air Europe had gone into scheduled services, challenging the larger airlines head to head. Goodman continued;
'What you have got is a series of not likeable, fat cat European scheduled airlines. They have never had to face competition, their costs are sky high, and in a competitive environment they are finding it difficult. Now the only way that they can compete is by blocking facilities. Refusing to accept our tickets, refusing to inter-line, refusing enable us to use facilities at airports, but we're cracking all of those.'
They claimed that the strategy was simple, that Air Europe were using brand new aeroplanes and offering excellent on board service for a much lower price. They said that established airlines fought tooth and nail to block the new upstart and Air Europe found themselves handicapped at every turn. Including denying them access to the European computer reservation system. Charles Powell, Air Europe's Scheduled Services Director said:
'We still have an outstanding issue with Alitalia who have been editing data that we want to put into those reservations systems. They refuse to show our fares for example. They pretend that we charged the same fares as Alitalia, all that kind of nonsense. All of that can be very damaging and it has the effect of reducing the consumer's choice in what is, otherwise, a developing market.'
Most airlines airlines had traditionally expanded cautiously, moving onwards step by step, but Air Europe had a different approach. In 1989 they began to form partnerships with smaller airlines all over the continent. they established a pan European network of scheduled routes, calling the concept 'Airlines of Europe' I was a bold step and the rest of the airline industry was watching their every move, but Air Europe were absolutely convinced that the next decade would be theirs for the taking, with Rod Lynch, Air Europe's Managing Director going on to say;
'The biggest barriers are the barriers in people's minds, about those people who see France as a totally foreign country, as opposed to somewhere that is around one hours flying time away. I think this country, which is very insular, is going to go through something of a revolution. The sheer access into Europe, and vice versa, is going to generate masses of traffic, and I fully intend that we are going to take advantage of those.
But as the market changes, so do the airlines. The next few years would see partnerships from some of the largest airlines in the world, with huge resources. Was Air Europe not worried that they might simply squeeze them to death Goodman said;
'Well they will try, but one thing is for sure, you don gain anything by putting a series of inefficient companies together. You know, if you look at our costs compared to Air France, Lufthansa, Iberia even British Airways, our costs are 40% less. To get low fares, you have to have low costs, and all cosmetics of putting all the monolithic giants together without addressing the basic problem of getting the cost base down will do them absolutely no good whatsoever. We compete every day of the week. If you look at how scheduled airlines have grown up, they have grown for instance, between British Airways and Air France with an agreed affair between London and Paris. There was no competition, the fare was agreed at which was the least efficient of those two carriers, so you didn't have to worry about costs, you know, if Air France had a strike and the unions wanted 30%, it was like 'no problem give them 30%' because who pays? You and I, the poor old passenger. But now that's gone out of the window, so they've gotta look at costs. But they've got a cost structure that's built up over twenty years as a monopoly. Very difficult to get rid of.'
Air Europe had made their mark at Gatwick. They were the second largest airline at the airport, behind Dan-Air but in front of British Airways. In 1989 they had carried more than three and a half million passengers. Their business class and executive lounge, 'Premier Class' had been a hit with business commuters. Rod Lynch said;
'The airline business is absolutely infectious, once you've been bitten, it's completely incurable, I couldn't consider working anywhere else personally. I don't know any of my co-directors who would give tuppence to work in any other industry. Once you are in aviation it tends to stick permanently.'
Harry Goodman closed by saying;
'If you're asking me do I like flying? No, I hate flying, but that's a personal thing, I just hate getting on aeroplanes, on saying that, I do 200,000 miles a year, so I have to. But it's certainly not in my blood, you know, I don't fall in love with an aeroplane sitting there on the tarmac. I like to be successful, I like to take on challenges, I like to win, and here you see an opportunity, which is very rare a man gets. I was told at first, you will never get a scheduled service licence, and if I did I would't get the landing slots and if you did, you would never get lower fares - we got all three. We run at satisfactory load slots, and if I look at our major competitors, they are more frightened of us than I am of them.
Sir Colin Marshall Chief Executive of British Airways said in response to Goodman;
'Well I think he will have another thought in due course. I saw him on the video, and there was, of course, a sprinkling of disinformation and half truths. It's had to conceive that Harry's costs would be 40% lower than those of British Airways, after all, we buy our aircraft at the best possible prices on a high volume basis, we borrow money at a fine interest rate. We pay our pilots and engineers at a proper rate and I very much doubt that Harry is paying his pilots and engineers at 40% less than British Airways. I doubt that his insurance is less, and I know that his air traffic control and landing charges certainly won't be less than ours, so I think that Harry and we are going to be very strong competitors for the future, and that's a good thing..'
Marshall denied that there was any attempt by British Airways to squeeze smaller airports out of business by pointing out that Air Europe had more slots at Gatwick than British Airways and their charter carrier Caledonian combined. He neglected to say that Air Europe had no slots at Heathrow.
Dan-Air were the recipient of the Tea Council's 'Best Airline Tea' in the world. They were chosen with a combination of presentation and leaf blend. The council flew 300,000 miles over 504 hours sampling the tea of airlines all around the world. Eventually a short list of thirty airlines were chosen, this was narrowed down to Austrian Airlines, British Airways, American Airlines and Dan-Air. Two professional tea tasters then selected the winner. Dan-air said 'Of course we are delighted to have won this award and that our passengers can enjoy the brew, from the judges point of view, Dan-Air is obviously their cup of tea. Dan-Air were keeping the blend a secret, but it was believed to be a blend of Indian Tea. the judges also felt that Dan-Air crew serving the tea with milk from a jug was also a factor int he taste, with the Dan-air spokesman saying: 'I think they were impressed that we serve milk that way, not from a carton or a plastic jug and certainly not the little packs of UHT milk. One of the tasters, Jenny Wright who had travelled 80,000 miles tasting tea was also impressed with the enthusiasm of the Dan-air cabin crews. She said 'Tea is undoubtedly my favourite drink, and whilst I am no expert, I know what I like.'
On August 24th Davies And Newman share price fell from 175p to 150p a fall of 12% knocking £12 million off the value of the company. But a company spokesman said: 'Things are proceeding as normal. Absolutely nothing is happening at all - we are baffled by the speculation. The setting up of Airtours International, whose parent company were the fourth largest Tour Operator in the UK would certainly have an effect on Dan-Air. The top four Tour Operators in the UK now all had an in-house airline. The spokesman denied that recent talks with the CAA had been a 'crisis meeting' saying: 'It was a perfectly normal meeting that the CAA have with all airlines every year to keep them informed of their future plans. The share price compared with a price of 934p the same time a year before. The share price eventually recovered to 225p.
Newspapers continued predict that Dan-Air was in a desperate state, similar to British Island Airways and Novair who had both gone bust this year. Fred Newman said he believed that the fall in price was a result of press speculation and a result of minimal trading volume. He confirmed that the company was involved in talks with a number of airlines and was in the process of conduction a review of company operations. The process had begun with the news that the main company office was moving to Gatwick and that five aircraft would be sold. The review would not see any changes to the airline's scheduled operations in Scotland. For the first time, media reports claimed that Richard Branson's Virgin Atlantic was interested in Dan-Air. Captain Alan Selby told us:
'The review of company operations was vital I felt for all the reasons i mentioned earlier. What was as clear as a bell was that five aircraft would be joining Airtours fleet very soon with roughly the same capacity as the 727. In the end, a lot more aircraft went than I expected, and more joined the fleet than I thought would. My own notes read that the last of the A300s went, and three of the 727 200, we got rid of one each of the BAC 1-11 200/300 and 400, whilst keeping all the 500 series. We disposed of two HS 748. On the plus side we bought four Boeing 737s. So we were five down. Lots of activity was going on, which gave the impression that 'something' was afoot. I didn't like that atmosphere. But there was never a feeling that we would become part of an airline much smaller than us. My colleagues and myself always had an unshakeable belief that we would somehow get through it. We always had before, no matter how big the problems we face were. I certainly agreed with Fred Newman that press speculation was impossible. Mainly because so many of them didn't understand the airline business and were just looking to write something that had an attention grabbing, gloomy headline.'
The review did indeed see many changes. Up to 150 staff would move from London to the Newman House complex in Horley to be nearer Gatwick. The recent fuel price hike would effectively add £1 per passenger, per hour on a Dan-Air flight. The poor efficiency of the BAC 1-11 2/3/400 series and the Boeing 727 had further hampered the airline. The base at Stansted looked certain to close as Airtours had made it known that their own airline would operate 60% of Airtours' summer programme and 90% of their winter one. The sale of the aircraft would bring in new revenue and the replacement aircraft would all be leased in and not purchased outright. The UK economy continued to struggle and by September two more airlines had folded, Capital Airlines and Air Dundee both went bankrupt.
In October, a new company Chairman was installed. Dan-Air had a record turnover in 1990 of £380 million but by August fuel prices had rocketed again. His appointment was not without criticism. The innovatory refinancing package received Stock Exchange was approved with just hours to spare before the company was said to be placed in administration by its bankers led by LLoyds. Instead the company managed to negotiate a rollover of their existing credit facilities of £40 million whilst securing new lines worth a further £30 million. The new £70 million deal would not need to be renegotiated until January 1992. David James said:
'The fuse was getting fairly close to the powder keg.'
In return for this further funding, the banks would get a 'success fee' equivalent to a percentage of the company's net asset value on a given date, certified by accountants. This was believed to be the first time that banks had been offered this kind of incentive to participate in a rescue deal.
David James said that the situation at Davies and Newman was 'unprecedented' and required an 'innovative solution'. The alternative, he said, was administration,a form of insolvency usually involving the break up of the company. In stepping down, Fred Newman, who's family owns 60% of Davies and Newman gave undertakings not to use his stakes not to block crucial changes to the board, except in the case of a bid for the contested company. The details between the company and its creditors were complex. Davies and Newman agreed to pay interest at 2% above LIBOR and the success fee would be based on the valuation of the company in December 1991. the payment would be one third above the net asset value - between £26.25 million and £45 million and 10% of anything above that. But the minimum was set at 8.75 million. Which would mean Davies and Newman having an NAV of £70 million. The fee was unsecured and subordinated to all other creditors. James said that he hoped that this deal would be a 'frontier breaker' Encouraging other companies to go for a similar deal rather than just go for a insolvency.
James' appointment came with the reassurance that Dan-Air were no longer looking at selling the airline or joining up with another carrier. They were looking at returning the airline to profitability.
One of James' first moves as Chairman, was to replace most of the Board of Directors at Dan-Air with people he had personally chosen. Many had no experience in aviation. He then told the press and the industry that he saw no reason why Dan Air could not be turned around. He was "Pleased at Dan-Air's present performance which has seen it sell 85% of its charter capacity for 1991."
The next move saw James put Dan-Air Engineering (DAE) up for sale. The price tag of £25 million would give a massive injection of cash to Dan-Air. The board of Directors had instructed Barings Bank to find a suitable buyer. The engineering division employed 1,600 people at Lasham, Manchester and Gatwick and had staff at 11 UK Airports.
Davies and Newman announced that DAE had MADE PROFIT LAST YEAR. Davies and Newman hoped to retain 20% of the company and use the facilities to maintain their own aircraft. Air Europe then announced they would not be renewing their maintenance contract with Dan-Air and would not be chartering ANY of Dan-Air's aircraft this year.
James' idea revolved around Dan-Air securing a re finance package and concentrating on becomming a stand alone scheduled airline. He said he wanted to commence a fleet renewal programme. The General Manager - Europe - Vic Sheppard announced that in 1990; 'Dan-Air would be phasing out our smaller aircraft and thinner routes'
Those aircraft would be replaced by newer, quieter and more economical jets on high density routes such as Gatwick - Paris, which would soon be offered up to nine times a day.
Sheppard said;
'I am well aware that people only see Dan-Air as a cheap and cheerful charter airline, and all that goes with that, but when people have tried our scheduled services, in particular the 'Class Elite' they are often pleasantly surprised at the level of service we offer. Our market research shows this, and it shows that they are highly likely to come back for more.'
In 1990, 24% of Dan-Air's scheduled passengers were travelling on business class, 40% of flights were on the scheduled network and the plan was to take that to 60% in 1991. The six domestic services into Gatwick offered other airlines 'Interlining' with their own flights. In particular, American carriers were impressed with Dan-Air's ability to bring passengers into Gatwick to join one of their flights Stateside. Dan-Air had no ambitions to enter the long haul market and the agreements worked well. As Europe prepared for the 'de-regulation of the airways' in 1992, Dan-Air found itself having BA as a direct threat on its Gatwick-Toulouse route. British Airways wanted to get back onto the service, but was hitherto restricted by only being permitted to fly into Paris Orly.
Announcing pre tax losses of £18.7m in October for the last six months trading, the figures made grim reading. A further 15p fell off the share price of Davies and Newman. Having increased by 20p at the announcement of David James' appointment. They now stood at 140p. James was quoted that day saying;
"Whatever happens, in any circumstances the core business Dan-Air is certain to survive in one form or another."
Further going on to say 'The board’s first task, is to give priority to addressing the corporate strategy for the future and deciding precisely which parts of the organisation should be developed and which may present potential for realisation'
It was not all bad news - Seventeen Dan-Air flights to Lapland were chartered to enable children to fly and see how Santa prepares for the special day. Many of the flights would be from Manchester and Gatwick.
Aer Lingus, the Irish national carrier expressed an interest in buying Dan-air Engineering. The engineering division did not produce trade figures of its own, but was widely believed to be one of the most profitable divisions within the group. David James then said that Cathay Pacific were interested. In the end neither purchased DAE.
A company Boeing 737 was sandwiched between two RAF Tornado's over Tyneside in September Dan-Air complained to the CAA. It came days after another 737 had been involved in an near miss with a Scandinavian Airline DC9 over Aviemore. Both pilots had to take drastic action after being placed on the same flight level by air traffic controllers.
A BAC 1-11 pilot was suspending in October after damaging the wing-tip of the jet as it made a 'blind landing' at Inverness. The airport was surrounded by low cloud as the 'very experienced pilot' who Dan-Air would not name made the decision to land.
The BAC 1-11 was beginning to be a problem, some of the older 1-11s would not meet the noise reduction targets set by the EU. They were also lacking CAT III technology. Some had been fitted to CAT I. This had been considered not to be a problem on charter routes, because they generally had good weather. When the 1-11s were placed on Northern European Scheduled Services some of them became problematic when weather was bad. The airline's strategy was to ditch BAC 1-11, HS 748, Boeing 727, and Airbus aircraft and consolidate the fleet on just two types. The Boeing 737 and the BAe146.
A Dan-Air Boeing 737 flew to Moscow on a charity flight in December. Charities had managed to get a plane load of baby food and Dan-Air agreed to fly the food destined for hungry Soviet babies free of charge. The flight brought much needed good news to the company. As did the award 'Airline of the Year' awarded to Dan-Air by ILG. This was ironic as Air Europe were ongoing in their campaign to smear Dan-Air;
In what seen as an attempt to finally finish Dan-Air, ILG said that it would not be chartering any Dan-Air aircraft beyond this year. Just two years prior, ILG had time chartered six aircraft. The following year only three.
ILG went on to say that they had no plans to use any Dan-Air aircraft in future. Dan-Air Engineering had lost the contract to service Air Europe's aircraft last year.
Dan-Air, unlike Air Europe, was asset rich, with real estate that they actually owned, several aircraft that were often owned outright and spare parts valued at millions. The landing slots owned by Dan-Air were colossal. The sale of DAE was said to be 'progressing' by David James. The decision to sell off Dan Air Engineering is explained in great detail in the company history section of this site.
1990 had been a record year for the amount of passengers Dan-Air carried 6,276,000 passengers. 4,472,000 on charter flights and 1,804,000 on Scheduled Services. Their aircraft had flown 68,903 flights. Of those 35,560 were charter flights and 34,343 were scheduled flights. In terms of its network, all flights covered 72,666,000 aircraft km. Forty scheduled Service destinations had now been added to the network and in total 220 airports had been visited.
The HS 748 aircraft was seen to have reached the end of its use, they did not have the capacity nor efficiency of most of the jets in the fleet. The oil supply charter flights had dwindled to a mere trickle, and several HS 748s were sold, leaving the fleet total at just eight.
NEW ROUTES AND ROUTE CHANGES
- Gatwick - Amsterdam feeder route - March (Taken over from British Airways)
- 2 April - Gatwick-Berlin service commenced - April 2nd
- Gatwick-Dublin service discontinued - April 4th
- Gatwick-Vienna service started - May 2nd
- Gatwick - Ibiza - ‘Class Elite' introduced. May
- Connecting flights introduced between Manchester, Newcastle, Tees-side and West Berlin. October 29th
NETWORK & PRESS 1990
1991
New Year brought much needed good cheer when Dan-Air was given the licence to fly Gatwick-Amsterdam after British Airways dropped the service. Dan-Air would commence operations in March. This was a premium route that was almost guaranteed to succeed. However, Dan-Air announced it was scrapping routes from Newcastle and Tees Side to Norway in March. This was in response to a challenge from Norwegian airline Braathens Safe who announced they would be going head to head with Dan-Air. It was felt by many that they were not in the mood for a price war with another airline after being stung so heavily on the London-Dublin service.
The Inverness-Heathrow service continued to grow and for the second year in succession Dan-Air announced they would be replacing the 104 seat BAC 1-11 with a 124 seat Boeing 737 200 series. The aircraft used the same amount of fuel but could carry 20 more passengers.
Dan-Air announced on 13th February that they were withdrawing eight flights a week from the Aberdeen-Manchester-London service citing the Gulf War and recession as the main reasons. The airline said it was holding up well compared to some of the larger airlines, but that they had lost 15% of business passengers. The 10am DA133 daily flight from Aberdeen was cut both ways with the exception of Fridays. Other services between Manchester and London would still operate, as would direct flight between Aberdeen and Gatwick. Dan-Air said the flights would definitely be back for Summer and possibly before, stating that they were constantly monitoring the situation.
Dan-air Engineering was sold to the Danish company FLS for £2.5 million, the employment of the 1,500 or so people looked to be secure. The company would now be the largest non airline owned engineering company in the UK. Its largest customer would be Dan-Air. The engineering division had spare parts worth millions of pounds and real estate at Manchester and Gatwick. Dan-Air Engineering was always a profitable division within Davies and Newman. Incoming Chairman of the group David James said;
'The sale of DAE will bring immediate financial benefits, it will generate a significant cash sum which will be used to reduce our present bank borrowings and strengthen the group balance sheet. Additionally Dan-Air will have the benefit of improvement in its trading performance in 1991 arising from the saving in bank interest and the elimination of the loss previously resulting from the under-utilisation of the engineering facility. Dan-Air will now be able to devote all its energies to the operation of its airline activities involving a current fleet of 40 aircraft.'
In other words - selling off a profit making division to pay for a loss making one...... That sentiment may not be easy to take, but as one engineer told us;
'We were not happy, we had been loyal, we had been profitable. We never had people coming to us saying that we had to make savings. We were praised for what we did. The vast majority of people loved what they did. We had some pretty impressive clients. There was a war on in the Gulf - yes things needed to change within the airline, things might well have been cut. But we should have been one of the things they left alone. Air Europe had signed a big contract for us to look after their 757 fleet. Then they said they weren't going to renew it. That wasn't that down to our work or the prices we were charging - that was down to ILG wanting the airline out of the way. All those new airlines that came out that took Dan-Air business - that had nothing to do with us either. Maybe the airline should have been looking to buy a Tour Operator years before....David James.....saying they would be able to concentrate on running an airline now we were out of the way. That is a laugh, the airline had been doing that for forty years nearly. I think they knew how to do that. They needed to just weather the storm of the war and the recession. We had done all of that before. It's so sad, I can't tell you how much of an inventory of spares we had. I have no-idea who worked out the sale price. I did later find that we had spares that were worth double figures in millions. Jesus, the hangers at Gatwick - you could just go on and on....'
The announcement to axe Belfast flights to Gatwick, Newcastle, Cardiff and Bristol came in January. The flights would cease in April. Dan-Air said the services would have to go as a result of 'cost cutting' citing interest rates and rising fuel costs. The 23 staff members based at Belfast would be offered other positions within the company. Vic Sheppard, Dan-Air's head of Scheduled Services told the staff;
'We regret the decision to withdraw from Belfast has been necessary - but a time of very tough conditions in the airline industry, we have to invest our resources where they will produce the best returns. Those people who do not wish to apply for positions elsewhere on our network will be offered severance pay and as much assistance as we can in finding alternative employment. Those who are wish to re-locate will be given re-location assistance.'
Air Europe immediately applied to the Civil Aviation Authority for a licence to fly between Gatwick and Belfast, four times a day with Fokker 100 aircraft, saying they were confident that they could make the route profitable. The HS 748 used by Dan-Air on the Newcastle flights would be phased out of service. Air Europe used effective promotion to give the impression that they were withstanding any pressure from the struggling economy. It escaped press scrutiny when Intasun had cancelled half a million holidays the year before. Harry Goodman's own interview in 1990 had seen him say how much he liked to win His claim that Air Europe's operating costs were 40% lower than BA's was never placed under the microscope. He had said that Air Europe's scheduled services were flying with 'satisfactory load factors', with a strategy of low fares and economical aircraft.
What was unknown to most people, was the seriousness of Air Europe's financial position. Both Air Europe and Dan-Air used the same bank; Lloyds. It had gone unreported that the International Leisure Group (ILG) had received a rescue package earlier in the year. Lloyds Bank, and major creditor had agreed to swap the £50 million ILG owed into shareholdings. But implementation of that deal depended on ILG putting together other elements of a package which involved Swiss financier Werner Rey. Mr. Rey's Omni Holdings owned a 49% share in ILG, and planned to inject £40 million into ILG. But serious doubts had been cast on the move since Omni had sought receivership from the Swiss courts while its own financial position was clarified. Air Europe carried on business as usual in the short term, with the introduction of scheduled flights to Vienna from Gatwick, in direct competition with Dan-Air.
David James had stated that whilst his relationship with the Civil Aviation Authority had improved, when he was at Dan-Air he felt them to be 'sticky'. He knew that both Dan-Air and Air Europe were having considerable difficulties, but felt that the CAA did not perceive the problems Air Europe had, when at the same time, they were very aware of the ones Dan-Air had. He felt that he was getting a raw deal from the CAA, feeling that the pressure that was being applied to him was not being applied to Air Europe. James felt that the CAA were very hard to deal with during the early part of 1991, feeling that not only were the CAA considering withdrawing licences that Dan-Air held, but that the CAA did not expect Dan-Air to be able to succeed with re-financing. James said;
'I was not in the least bit surprised when their problems surfaced, and it became clear that they had a far greater terminal risk of collapse than we did.'
For six weeks of the Gulf War Dan-Air suffered an outflow of funds amounting to £28 million. By Friday 8th March 1991 the amount of money that James had available to draw on was just £920,000.
The Gatwick-Manchester service had seen a drop in figures as the recession bit deeper. The war in the Gulf had made American travellers, including those on business, reluctant to travel. One of the reasons the Gatwick-Manchester service had been popular was because of the connectivity it offered to worldwide destinations only served from the capital. With numbers so badly affected, Dan-Air attempted to boost sales by offering off peak, return tickets on flights in April for £50. The take up was instant with flights heavily booked. So successful was it, that the airline decided to carry on the offer for the whole year.
At an extraordinary general meeting new chairman David James announced that the airline was going to need a substantial injection of cash. He hinted at a share offer. The shares fell and then increased by 5p to 125p. James announced that they had sold Dan Air Engineering (DAE) for £27.5 million to the Danish Engineering company FLS Aerospace. This massive injection of cash and the sudden upturn of business following the end of the war helped.
What was not known to the general public was that the banks had to decide which airline they were going to offer the rescue package to. Dan-Air's strategic advantages included its 11 domestic routes and 36 European routes. James said flights on some of these routes had 'Been curtailed to save fuel and maximise payloads. Partly to offset the five fold increase in fuel costs since the Gulf War.'
Air Europe, and ILG had also been seeking assistance from banks and backers. In terms of product, the carrier was strong. It had a good brand image and their standards of service were highly regarded. In terms of assets, the company, as it happened, had very little. Office space had been rented, and the smart, shiny aircraft were, with the exception of three, all leased. Air Europe had made great headlines with their new aircraft orders. Whilst, at the same time, calling Dan-Air aircraft, old and gas guzzling. Effectively, Dan-Air was asset rich.
Whilst all of Dan-Air's troubles were being heard in public via the press, with newspapers using tawdry headlines such as 'Ailing or Struggling Dan-Air' Air Europe's very real troubles were not mentioned. In the major research I have carried out, the first indication of anything awry came on February 7th, when a regional newspaper in Surrey covered a story about Gatwick airport being praised for performance. At the foot of the piece, with any headline, it read 'Air Europe has axed 150 administration jobs. Next to TWA's business at Gatwick drops 60%. The second week in February Air Europe announced that they would operate a new service from Gatwick to Nice. Again in direct competition with Dan-Air.
On Friday 8th March Air Europe collapsed. There hadn't been a single story in the press that Air Europe was in trouble. I have been researching this website for more than ten years and there is no website online more comprehensive about an airline than this one. This is a proud boast. I could find plenty of stories about the impending collapse and financial mess that British Eagle, British United, Court Line, Donaldson, Lloyd International, Laker, British Caledonian were all in at various stages of their history, and much of it is located on this website, as all of their problems were relevant to Dan-Air in some way or another. I was able to find masses of stories about Air Europe of course, for they never stopped saying how wonderful they were. Their aggressive style of operation was in direct contrast to that of Dan-Air who, if anything, were operating in quite passive and gentlemanly manner. You can find stories, some subtle, some not where Air Europe say - 'We should be able to operate out of Gatwick at night because our aircraft are modern and quiet. Others are not......' Of Intasun not using any more of 'Dan-Air's old gas guzzling jets' whilst at the same time awarding Dan-Air 'Airline of the year'. You cannot find a story where Dan-Air decided to challenge Air Europe on a scheduled service, only the reverse. The fact that Air Europe had, for almost all its existence used Dan-Air Engineering and then publicly dropped them at a time of economic gloom pointed out that the company wished to do Dan-Air harm.
With the collapse of ILG, the future holiday plans of 400,000 people were thrown into doubt. On the day of collapse 25,000 people were stranded abroad, and a further 12,000 were due to travel over the weekend. ILG went to the High Court to appoint a receiver, and announced that unless a buyer was found within week, the company would fail. At the hearing, it was disclosed that ILG had lost £30 million in the three months to the end of January of 1991. It was also told that ILG had liabilities of £15.4 million. This was astonishing - nothing was reported until the day of the collapse. With one claiming that Air Europe had failed because of the problems now hitting Intasun. Goodman was described as 'flamboyant'. The Daily Mirror had carried out a major investigation into Goodman's personal life, mentioning his three failed marriages, and concentrating on his alleged three day binge of cocaine fuelled orgies with prostitutes. He was alleged to have paid sex workers in three addresses. None of that is of any importance to the ILG business. None of that need have been reported. How was it that so much of Dan-Air's business from the very beginning was reported? It was obvious that someone was leaking the information. But at what level was that happening? One can understand a secretary photo-copying sensitive documents for a fee, but what if the leaks were at a much higher level? Was there an active campaign for Dan-Air to be highlighted as failing? It is worth pointing out that a World In Action programme had reported that Richard Branson's Virgin Atlantic had been victim to a campaign by British Airways to undercut the fares of Virgin, Air Europe and Dan-Air, the latter of which had a system that BA could not access. Both Virgin and AE shared the same system giving them vital information. High ranking staff had even had private detectives go through rubbish and conduct smears in the press. None of that seemed to involve Dan-Air or Air Europe. The negative press that came Virgin's way had resulted in a high profile court case.
On the day of the collapse one newspaper announced that a rescue package had been agreed a few weeks before (See previous paragraphs) with Omni, but the recession had meant they had also experience financial difficulties. Not one newspaper carried the story about the rescue package.
The Association of British Travel agents reassured those booked on package deals that they would get their money back, saying: 'If a company does have to cease trading, the ABTA will protect those who are on, or have booked a holiday. But those booked on scheduled services with Air Europe might not be so successful as there is no automatic money back guarantee for them.'
There was a ray of hope for some. Tour Operator organisation - the Tour Operator Study Group - said they would arrange for passengers stranded abroad to get home. They also pledged that ILG customers who were due to fly on other airlines and due to depart before midnight on Sunday 10th March would go ahead as planned, and that anyone who had booked and paid for a package holiday with an ILG brand could either have a full refund or an alternative holiday with another operator. Over the weekend, Dan-Air operated 41 rescue flights to meet that promise or to repatriate those abroad.
The administrators KPMG Peat Marwick McLintock said: 'There is a small margin of window, through which the airline could be sold as a going concern'. They went on to say that they were in talks with several people, including airlines, and that they hoped the suspension of flights would be lifted soon. The company continued to trade, with holidaymakers and passengers told to contact their travel agent for information. Holidaymakers would not lose money as ILG was a member of the bonded scheme, ATOL and ABTA. Those on scheduled services were told to contact their travel agent. Twelve of Air Europe's 36 aircraft fleet were impounded by an administrative receiver, appointed specifically for those aircraft. Other secured lendors tried to take possession of their aircraft.
Tim Heyward from KPMG said:
'What is hoped for ....is that we will be able to sell the business as a going concern, and that the airline will be flying again in a very short order.' Within days this had been updated to;
'The airline's only assets, as far as we could see were the routes, take off and landing slots and the actual organisation, which consisted of a strong Tour Operation with Intasun, Global, Lancaster and 18-30. Sadly, even in that instance, the offices were rented. Overseas transfers were carried out on hired coaches and resort reps either used shared, rented office space or worked from hotels. It became clear very quickly that the company had very little of its own.'
Air Europe advised holidaymakers abroad to carry on as usual with their holidays, and that they were working with other carriers to arrange to get them back home with other carriers. Mr. Heyward was tasked in finding a buyer for ILG
He said:
'Obviously I was very disappointed, but I certainly gave it a good try. The Tour Business as one combined operation was over. There were still some small assets that could be sold, but the companies were all placed in liquidation over the next few weeks. There was some interest in Air Europe, and the Civil Aviation Authority (CAA) extended their operating license a further 24 hours. I believed that any would be buyer could arrange for more favourable leasing terms on the 34 aircraft that Air Europe leased. If a buyer bought the carrier, they could sell the three aircraft that Air Europe owned or keep them. Once the Tour Operators were placed in liquidation they could be snapped up quite quickly. The value would drop significantly. There was a specialist school holiday company ILG owned called Quest Leisure Group, and there was a lot of interest in that, within a day of its liquidation talks were at an advance stage. Talks ultimately failed and Quest was closed down. We almost had a buyer for Air Europe and the press picked it up. I became less confident of an eleventh hour rescue. There was a lot of interest in Club 18-30 as well. I was shocked at how ruthless and swift the travel industry can be. ILG stopped flying on the Friday and Dan-Air had a special licence from the CAA to operate the Gatwick-Brussels service the next day. They were after eight of Air Europe's Gatwick flights.'
Quest Leisure had three Tour Operators, Hourmont Tours, Schools Abroad and School Plan. They had a market share of approximately 33% and carried 75,000 school children and teachers on holidays. Days after the collapse talks to buy it failed and administrators closed the operation. It was revealed that Intasun had debts overseas of £5.5 million in Spain alone, for coaches, hotels and other firms.
One air steward, called Danny told us:
'Oh the irony. Loads of us were on days off and standby, and then the phones rang saying to report for duty. Air Europe had gone bust and their staff were calling us to charter us to bring them home! I have to say, I had a spring in my step. Not at them losing their jobs - but at me keeping mine! There had been a heavy cloud over us for months, we knew what ILG were doing, they were out to destroy our company. One thing I had always felt at Dan-Air was a sense of family. We were a nice company, and I don't think ILG were the same. We never set about destroying another company to get what we wanted. A company isn't just a workplace. It is people who had rents and bills. Business shouldn't be so hard, and in a way, that lot at the top of their organisation got what they deserved. The saddest part was that their staff probably felt the same about ILG as we did about Dan. They were people too.'
Another stewardess called Helen said;
'I had been successful getting taken on at Dan-Air in 1990, and I was certain that we were going under. I knew a girl called Zena (Not her real name) at Air Europe and, although she usually said 'I'm only joking' afterwards, she would say 'You should come over to Air Europe, because Dan-Air won't be around next year. She said things 'in jest' about our aircraft being clapped out old bangers. She even said to a group of friends once that 'after the safety demo Helen goes and sits next to the rear gunner on her aircraft'. I hadn't heard the Dan Dare tag until I started with them. I had been on lots of holidays, but actually never with Dan-Air. When I started working on them, I swear, I didn't see anything different about our aircraft than anyone else's that I had been on. I don't recall a single thing that made me think we were dodgy. On the day that it happened I had a phone call from Zena and she was in tears. She actually asked me if there were any jobs at Dan-Air! I joked and said 'Are you sure we would be good enough for you?' - I was a great feeling knowing that we were, for the time being at least, safe in our jobs. Zena, by the way, applied for Dan-Air and was rejected. I don't know if it was because she failed at something, or because she was from Air Europe!'
Dan-Air offered passengers standby tickets for passengers booked on Air Europe flights to Jersey and Paris. Air Europe had gone head to head with Dan-Air on these services. On the back of this news Davies & Newman shares rose to 140p. With analysts saying that Dan-Air hoped to make capital of the crash of Air Europe.
As well as ILG holidays, other Tour Operators had seats booked on Air Europe planes. Owners Abroad said they had about 1000 passengers abroad who had travelled on Falcon, Sunmed and Sovereign holidays. They would be flown home with other carriers. Travel Agent Thomas Cook said any passengers booked on Intasun or Air Europe would be offered an alternative or a full refund. The crash of ILG sent shudders throughout the industry. Optimism after the Gulf War had ended so quickly evaporated at the thought that it was not just the small Tour Operators who were at risk of closure.
The Association of British Travel Agents (ABTA) said that they had £63 million in insurance bonds from ILG and that none of the package holidaymakers would be out of pocket. However those booked on scheduled flights would need to contact their travel agent. The sell off began immediately, with the sale of the 49% ILG had in German airline NFD being sold for an undisclosed sum.
Charles Newbould, the Managing Director of Thomson, the UK's largest Tour Operator said: 'As far as I am concerned Intasun and its companies are a dead duck. There is no salvation' - with another saying; 'Intasun is dead, as soon as customers get a whiff of trouble, the credibility goes.'
Meanwhile it was claimed that the Government had stopped the CAA from shutting the company down the day before because it would cause embarrassing questions being asked in the Transport debate in the House of Commons. The CAA had been ready to remove licences it was claimed. A rival Tour Operator stated that 'Harry Goodman flew too close to the Intasun'.
Goodman's deals looked good on paper, but accumulating his relatively modern fleet over a short period from 1978 saw him incur large debts. Accountants would now have to pore over the books to find out what assets the company really did have, against liabilities of £480 million. The industry as a whole agreed that the ILG's loss, which accounted for 16% of the UK package tour business, would mean that demand may well outstrip supply in the coming summer. As prices were fixed in advance, it was unlikely that there would be increases to prices, but also highly unlikely that there would be any wide spread discounting either. Tory MP Kenneth Warren of the all party Trade and Industry select committee carpeted the CAA, saying:
'The CAA is duty bound by law to have full information as to the financial viability of an airline. I think passengers who have lost their money have cause to find out if they can sue the CAA for neglecting their duty.' It was announced on Monday 11th March that ABTA had cancelled Air Europe's membership to the organisation. The Department of Transport revealed that the Secretary of State for Transport did have meetings with Air Europe, the most recent being days before the crash. 'He was told by the company of the difficulties it was facing, and we were kept informed.'
Webmaster Note* With accusations that the CAA and Government acted improperly being flung around, and responses about the silence about Air Europe being explained as protecting the company from collapse while rescue negotiations were underway, it seems incredible that Dan-Air were not given this same level of discretion. For well over a year, almost every detail of their own on-going financial struggle had been reported extensively in the press. Dan-Air's troubles were far less than those of ILG. It surely put pressure on the company to perform well in public. Confidence would have been very low with the travelling public, who would be fearful of Dan-Air going under. The whole organisation deserves credit for carrying on under this extreme scrutiny.
Within hours of the collapse becomming public knowledge, Dan-Air had applied for several of the routes that Air Europe had hitherto operated. David Lammy MP, chairman of the Labour Party's aviation sub committee said 'I blame organisations like the CAA for not putting restrictions on companies like Air Europe getting a license.' The Transport Secretary, Malcolm Rifkind was blasted in the media for not revealing he knew of Air Europe's troubles for two weeks. It is difficult to say whether he had made the right call. Had he revealed all he knew, he could have made the situation worse, with passengers and holidaymakers all rushing to cancel their holidays and flights.
Days before the collapse Harry Goodman, ILG's boss,checked himself into a £300 a night private hospital,saying he was suffering from delayed shock after a car crash a month previously. Then, after ILG went under Goodman said:
'It's not a good day, it's a shame we can't take people on their holidays, but their money will be safe. The recession hit us harder than some. It all cost us more than £70 million.'
Dan-Air could also take a breath. Those 'old, gas guzzling, jets that ILG did not want to charter anymore, from an airline they wanted to consign to the history books, had helped save the day. They were owned outright by Dan-Air and whilst they did not have the value or efficiency of Air Europe's aircraft, in aviation, there is no value in a rented anything! Dan-Air had spare parts worth millions, offices and real estate, a small tour operation, a 50% share in Gatwick handling, cash from the sale of Dan-Air Engineering and a rescue package from the bank. But all was not good.
The decision to replace Dan-Air board members with people from none aviation sources was a great risk. People watched with interest and worry as new board members took their places. Board members who lost their seats included Danny Bernstein, who left Dan-Air to become Managing Director of Monarch Airlines. His great skill in the industry saw Monarch go from strength to strength and become one of the most successful UK airlines in the 90s. Also, Graham Hutchinson who was acknowledged as a supreme airline manager, respected the all over the World.
How could anyone take such a risk in removing these two people? Only three people on the new board had a background in aviation. Michael Newman, John Mayes and Peter Sommers. The new Davies and Newman Chairman himself, David James, was an accountant by profession and had been trained by Lloyds. James had saved companies from going under in the past, none of them were airlines. How could he be expected to know about this kind of industry? Others to come with James were Peter Ryan, a chartered engineer and Charles White, an engineer.
The new strategy, moving Dan-Air forward was to be a five featured plan; To concentrate on Dan-Air's operation and development as an independent airline - To develop the airline as a specialist, short haul, scheduled service provider within Europe and the UK, based at the Gatwick hub - To maintain subsidiary scheduled services, spoke centre based at Newcastle Manchester and Berlin - Progressively modernise the fleet of aircraft - and to continue a strong presence within the charter market, albeit with a reduced, but more flexible capacity than before.
David James said;
"Dan-Air needs a substantial injection of new funds." and "This might entail a 'rights' offer to shareholders" James continued, Significant new equity investors, would benefit in the enhancement of the overall corporate entity!" The other option was for Dan-Air to be sold as a going concern,' adding that "No talks were taking place, but past expressions of interest might recur once market conditions began to improve.' The final option was to merge with a similar airline, stating "Again this might requite the approval of shareholders or new investors with additional funding."
James announced that "Dan Air's strategic advantages were its 11 domestic and 36 European routes - but flights to some of these would have to be curtailed to save fuel and maximise payloads. Partly to offset the five fold increase in fuel costs and the Gulf War." Group losses were £30.4 million from £18.7 million in the first half of last year. This figure included £5 million in 'exceptional costs' to pay for 'special fees' to the banks for their lending lifeline, relocation of head office and 'professional fees' in forming the group's future strategy. In other words - bank charges and fees for management.
Just five days after the collapse of ILG it was announced that administrators had failed to find a buyer for the Tour Operator section of ILG, as they had not been able to sell it as one business. In total 800 UK and 750 overseas jobs would be lost. Resort representatives were flown home and dismissed. Talk would continue to find a rescuer for Air Europe with a deadline placed of seven days. Citibank had made many loans to Air Europe's parent company ILG on the security of their aircraft, and on March 7th 1991 they demanded that ILG had 24 hours to find new financing. Or they would call in all their loans. Lloyds Bank meanwhile, who had been surprisingly negative to Dan-Air, and had made the restrictions the placed on Dan-Air so wide ranging, were now trying to keep ILG afloat! This policy was understandable from Lloyds point of view. They were the Bank who ILG's owed the majority of their debts to, estimated at £100 million. So misguided were Lloyds by ILG that they had attempted to persuade ILG to take over Davies and Newman as part of the D & N rescue package. In actual fact, no financing came, and ILG along with Air Europe collapsed. Over the previous three months alone, ILG had suffered losses approaching £50 million.
Tim Hayward from KPMG again:
'ILG's liabilities looked at being about £400 million, the whole organisation had assets that were likely to raise no more than £10 million. It was clear that the company was insolvent and had to be liquidated. The situation was quite bleak. It would be a long time before any dividend could be paid to any creditors. Sorting out the creditors was a lengthy and expensive task. The best that creditors were looking at was 2p in the pound.'
All was not lost. The brand Club 18-30 was taken over as a management buy-out backed by venture capitalists County NatWest Ventures, Grosvenor Capital and Causeway Capital, in a transaction valued at £167,000. After being briefly re-branded as 'The Club' due to regulatory rules precluding the use of the name for 3 years, it reverted to the original name in 1994. In 1995, the company was sold for around £9.75 million.
Time was running out for ILG. The extended licence the CAA had given them was about to expire. Tim Hayward from KPMG said;
'Selling the whole firm is looking less likely. We are now looking at splitting it up into a number of smaller companies, several other airlines and tour companies had expressed an interest. Time is not on our side and we only have a matter of days left.'
Captain Alan Selby told us:
'What a sorry mess. What was there to buy? There wasn't really an airline - as it stood it was a carrier with a number of leased aircraft, they didn't own hangar space or office space that wasn't rented. We had already applied for their scheduled services - for free! We could obtain aircraft ourselves on our terms. The only value of the airline was landing and take-off slots and their reputation, which was good, I admit. But that had taken a knock in the last week or so.
So, you would be buying a Tour Operator who's name was now firmly in the mud. Let's face it Intasun and Global had a pretty rotten reputation in the first place. ILG boasted about Air Europe all the time. Then when they chartered our aircraft they were providing minimal catering for Intasun passengers. It was a step up from Airtours - but not much! It is no wonder no-one wanted to buy it.
Air Europe and ILG's collapse in March left significant gaps in the travel market. Companies that had booked seats or whole aircraft from Air Europe would be looking for a replacement carrier. Dan-Air was ideally placed to swallow up not only this available business, but also many of the bankrupt airline's Air Europe's scheduled routes. It would mean that Gatwick-Paris would now not face competition from Air Europe. It could have been the saving of Dan-Air. It is widely regarded now that had they done this, the airline would have gone into profit again that year. The board chose not to do this. They had already announced that they wanted to be a scheduled services airline. In fact - instead of taking on this available work the new board actually reduced the charter and IT work that year. Despite claiming that now they had refinanced the airline and that they were in a position to 'take advantage of market opportunities.'
Thomson Holidays alone added 300,000 extra holiday seats in the same month that ILG went bust. Britannia Airways had planned to sell off aircraft and now said:
'we have gone from a situation where we faced a slump to one where we are having to increase dramatically.' ABTA announced that 95% of people who had booked a holiday with an ILG firm had now re-booked with other firms. Dan-Air had applied for ten of Air Europe's routes, with Brussels already operating under a special licence.
On 19th March, a new UK charter airline, Airtours International made its first departure from Manchester to Rhodes. The start up carrier baulked at being called the son of Air Europe. The parent company, Airtours said that they had increased capacity to try to plug the gap left by Intasun. Airtours was the third largest Tour Operator in the UK and were set to take 750,000 people on holiday. The increase in bookings might take them over the one million mark, they said at a press conference.
'Airtours has ordered five MD 83 aircraft and would base them at head office Manchester and Birmingham.' Airtours had been a regular client of Dan-Air's for many years. The company wanted to stress that they were not 'the son of Intasun' and that they believed that Thomsons believed they didn't have any competition. Airtours said 'We will give them a run for their money.'
One of our contributors says:
'It was a familiar story over the last few years. We would just about get over a Tour Operator who did big business with us setting up an airline, and then another came and the pattern repeated itself. Right back to the days of Air Europe starting. They would always start with just two aircraft....Then the Tour Operator would get bigger and for a while things would be good at Dan-Air because their two aircraft couldn't fly all their business. Within a year or two the new airline would have half a dozen aircraft and they wouldn't want to charter Dan-Air aircraft anymore. That was the case until they went bust!'
Later in the year a new Tour Operator sprung up. Sunworld. It had been born out of the ashes of ILG. Iberotours in Spain were its founders. By late Summer they had launched and carried a few thousand passengers. They said they would be launching a full package for the Summer of 1992. They would sell 360,000 holidays and would be using Dan-Air as their main charter airline. The irony of this is that Sunworld's managing director was the former Manager of Intasun, Peter Long.
Another of our contributors said
'All the discrediting ILG had done to Dan-Air, all the attempts to finish us - came from a company grew too fast and were in debt up to their necks. Now, this new company was being formed. chartering Dan-Air aircraft!! You could not make the story up! Loads of people lost their holiday, or at least had it inconvenienced. Scheduled passengers who had paid by debit card lost money. All those people stuck in resort having to be repatriated. It stank! Then there were thousands of staff. Talented people, who had faith in their company, all out of a job. Some of the people working for Sunworld were previous contacts of ours. Sunworld were saying they were going to use us!
Sunworld advertised in the national press, and it is worth repeating the words on the adverts.
'YOU CAN BOOK A SUNWORLD HOLIDAY WITH COMPLETE CONFIDENCE. WE ARE PART OF AN EXPERIENCED TRAVEL GROUP WITH OVER SIXTY YEARS OF EXPERIENCE, A £200 MILLION TURNOVER AND TEN YEARS SUCCESSFUL TRADING IN THE UK. OUR AIM IS TO PROVIDE THE BEST HOLIDAYS AT THE BEST PRICES.... Just when you thought you might not get away to your favourite sun spot at this popular holiday time - Look again at SUNWORLD. '
Incidentally - the advert said 'We WON'T be beaten on price.'
Industry Observers noticed the lifeline thrown to Dan-Air from Sunworld. They suggested that the main reason Dan-Air had lost out on charter work was the lack of vertical integration with a Tour Operator. They urged Dan-Air to join forces with one or to start one of its own. Their advice was ignored. In a further twist, the new Dan-Air board had decided to concentrate on scheduled services AFTER the Air Europe/ILG collapse. Thomson holidays said that the crash had resulted in a 25% surge in bookings. Horizon's sales was up 30% and Airtours, who aimed at the cheaper end of the market had soared by 40%, which in real terms meant a million people would book an Airtours holiday. Airtours had decided to add three more aircraft to its fleet, it did so because it couldn't find any capacity with existing UK airlines. The Airtours fleet now stood at eight aircraft. Could Dan-Air not have leased a similar aircraft? If Sunworld was able to produced a full holiday programme immediately after ILG had gone bust - could Dan-Air have not done the same?
Airtours share price had rocketed to 795p. This enormous gap in the market was largely ignored by Dan-Air's management. They were hopeful that in 1992 they would break even. The following year have a profit of £20 million rising to £42 million by 1995.
The press could still not resist putting the boot into Dan-Air - The Engineering division had been sold to FLS Aerospace. The new company announced 400 redundancies in late March. The press reported that Dan-Air was in 'crisis again' and would be making the redundancies.
A further special licence to operate Air Europe's Gatwick-Amsterdam service was given to Dan-Air. Daily scheduled flights from Gatwick to Gibraltar commenced in June using Boeing 737 aircraft. The flights would operate two classes with Class Elite and economy cabins
In April BBC TV's 'Money Programme' devoted an entire episode to the struggles facing Dan-Air. Captain Mike Ralph was interviewed on the programme and said: '
'Our aircraft are old....they were dirty...and the paint would be flaking off them. The ground equipment would be in a similar state....And....the image the projected wasn't a good one. We pressed the management to do something about this and we hope now that something will be done.''
This was not particularly helpful, nor particularly true. The sixteen Boeing 737 aircraft in the fleet were pretty new, in particular the 300 and 400 series models. Certainly of a comparable age to those in the Britannia Airways fleet. The BAe 146 fleet were new aircraft when introduced to the fleet, they had been upgraded since their introduction. The fifteen strong BAC 1-11 fleet of varying models, were, it is true, older models. The type was the exact model to those in the British Airways fleet, as were the HS 748s. Only the seven Boeing 727s could be described as old, and they had already started to be phased out, to be replaced by Boeing 737 and BAe146 aircraft. Even the older types were airworthy and maintained to an excellent standard. The 1-11s were profitable on both scheduled and charter services. In the UK, British Airways were also flying the same type.
The Boeing 727, despite its excellent pedigree was a terrible burden for the airline and their replacement was vital. Although it is worth noting that the 1-11s and the 727s went on to fly for several years in the UK, after the takeover, with European Aviation, British Air Ferries, British World Airways, Sabre Airways, Ryanair and Cougar Airlines.
The Gatwick-Brussels licence had been hastily granted as there was no British airline operating the service. Within a few weeks bookings had increased by 14%. The Gatwick-Paris service had seen an increase of 12% since Dan-Air became the sole airline on the route. Frequencies increased between Gatwick and Manchester, with a new service from Gatwick to Gibraltar launched in May. Dan-Air were granted licences to fly to Malta, Athens, Gothenburg, Palma, Stockholm, Istanbul, Cairo, Rome and Oslo. Should these services be profitable, then there could be a way forward for Dan-Air. Some of these services would commence in 1992.
Ian Peddar and Captain John Mayes were the only two pre David James board members to remain on the board. One of James' appointees, James Ryan left the board to take up the post of chairman with another company.
On June 29th Company Chairman, David James summed up the previous year as: 'We survived'. James unveiled Davies and Newman losses of £38.7 million, largely due to poor performance of Dan-Air he said; 'Despite appalling difficulties including a deep recession and a war in the Gulf. Future profitability now depends on funding to support and develop the airline. We will be switching the bulk of our operations from charter to schedules to improve earnings. This combined with additional funding should put the airline back into profit in 1992.'
James ruled out job cuts saying that he was concentrating on funding in the city to fund re-organisation of the company and provide more scheduled services. Despite press rumours saying the airline had axed 2,000 jobs. A company spokesman said: 'This is quite untrue, we had sold our engineering division, and the reduction in workforce is simply because those employees are now working for another company. In fact we may be recruiting new staff for the eight extra routes we have applied for. We have started two already.
Shetland oil related charters had now been reduced to a trickle and Shetland Council wished to mothball the airport at Scatsa. Dan-Air were the only airline using the airport on a contract with BP. The council said they would maintain the airport in such a way that it could open immediately if there was an exceptional incident such as an oil spill. The council said that Dan-Air could continue to operate from Sumburgh.
A holiday jet stowaway caused a high security row on June 15th when he boarded a Dan-Air Boeing 737 at Corfu and landed at Manchester. The man conned his way through security and boarded the aircraft without a boarding pass. The Foreign Secretary Douglas Hurd was notified and there would be an investigation into the matter with Greek authorities. The unemployed man from Cumbria was met at Manchester Airport and detained by police. Bury South MP David Sumberg said 'Manchester Airport spends vast amounts of money on security, but this money is down the drain if airports abroad such as Corfu do not match Ringway's level of care. I want a complete review of security at Corfu.'
The stowaway told police he arrived in Greece from Australia and met a group of ten youths while there on holiday. They helped him trick his way through security at Corfu by pretending to have the tickets and boarding cards. Cabin crew carried out a head count and discovered one more passenger than there should have been, but airport handling agents said they could not have made the mistake - then the plane took off. The Captain then made a personal check and the stowaway was revealed. The pilot radioed ahead and the police then detained the man who had been drinking heavily before he boarded the aircraft. Dan-Air said; 'We are taking the matter very seriously. There will be a full investigation to discover exactly what happened.'
Just a few days later on June 29th Captain John Wolff, who was in charge of the aircraft was found dead in his car. The engine was running and a pipe was fixed from the exhaust into the car's cabin. Only hours before Dan-Air had moved a step closer to bringing Captain Wolff's troubled 20 year career to an end. An airline spokesman said: 'Captain Wolff had received a series of several verbal and written warnings for a range of offences before the stowaway incident. Captain Wolff had received his final written warning not long before he was found dead in his car. He was aware that any further trouble would have led to his dismissal.' Captain Wolff had failed to remove 21 year old Colin Fox from the Corfu flight. Wolff had disregarded airline rules which had been strengthened in the wake of the Lockerbie bombing. Eager not to delay the flight, the 50 year old ex-RAF fighter pilot then took off and failed to report the extra passenger.
Dan-Air did not wish to prosecute the stowaway, saying nothing would be achieved from doing so. Fox, in a bid to avoid being seen by the press climbed over a six foot police wall to avoid being seen after he was cautioned. At the inquest into his death in November, his wife said that she didn't know that her ex-husband whom she had left five year previously had been in trouble with bosses. She knew, she said, that he didn't particularly like or get on with management at Dan-Air. A verdict of suicide was recorded after it was revealed that Wolff had died of carbon monoxide poisoning. He had also drunk one and a half times the legal limit. He had received a letter, dismissing him from his £45,000 a year job just 24 hours before he killed himself. He left three children.
In October, A pressure group who campaigned about Manchester Airport noise levels awarded Air 2000 an award for being the quietest airline at the airport. Airtours the second place. This group went on to say that they hoped it would encourage the withdrawal of older jets such as Dan-Air's Boeing 727 and BAC 1-11. Why did this group feel the need to say the airline's name at its presentation? The same BAC 1-11 were operated by British Airways and other carriers. The same Boeing 727 were used by Lufthansa, Air France, and a host of other airlines. Dan-Air's comment? 'We have been investing in new, quieter aircraft since before those airlines even appeared. The BAe146 remains the quietest airliner in the world in its class. We use the same equipment as most airlines at Manchester. Our older BAC 1-11 have been fitted with hush kits in an attempt to comply with noise regulations.'
In late October Dan-Air agreed to pay fifteen of its most senior cabin crew 50% of their wages to stay at home for the winter months, giving them permission to fly with other airlines to earn extra cash. The airline had already laid off 50 temporary cabin crew for the winter, as was standard practice. For the winter months Dan-Air would only operate one of the four strong Manchester charter fleet. The airline blamed a fall in the number of passengers, but at the same time several other airlines were reporting a much busier winter period than in previous years. Dan-Air's spokesman said: 'Our winter charter programme at Manchester is being reduced because we don't have the demand, but it does come at a time when we are increasing the number of scheduled flights from Manchester to Gatwick increasing from six flights a day to eight.' Manchester Airport's publicity department refused to comment on Dan-air's flights but said that winter flights from Manchester were set to increase by 25% with the number of passengers travelling to Cyprus almost doubling. One former senior manager told us:
'It was all good saying that we wanted to be this scheduled airline with all the best routes that earn money. The reality was that we had always relied on charter flights as our bread and butter. I know that many people, myself including were exasperated at the board's insistence that we try to avoid charter contracts. With what had happened with ILG I thought it made perfect sense to reap those rewards of grabbing all the available work. If other airlines had increased their capacity by as much as 300,000 it made no sense at all not to do so. Those Intasun passengers got their money back and they still wanted a holiday. Air Europe were not around to take them and we had the effing aircraft to do the job. I told several board members that I agreed with the long-term aim of where we were hoping to be, but in the meantime, in the middle of a recession, we take whatever comes our way. What did seem strange was that on a day to day basis we didn't seem to be any different. Not a lot seemed to be happening. All these years after, I still have the nagging suspicion in my mind that if their plan didn't happen that they were making us an attractive proposition for a take-over. Nothing was said, but I just felt it.'
The former managing director of Dan-Air, Graham Hutchinson was appointed as chairman of a drug rehabilitation centre in Berkshire.
High flying Santa proved to be a big hit from Manchester this December when Cosmos Holidays chartered Dan-Air Boeing 737s for a series of flights that would see 900 passengers travel to Finland. The flights were so popular that the 737 was replaced with a bigger Boeing 727 enabling a further 250 people to travel. Other flights would take-off from Gatwick. Scheduled flights from Gatwick to Oslo took to the skies in November. The CAA granted Dan-Air the licences for several other major routes. Captain Alan Selby takes up the story:
'This was not as simple as it first appears. We were not carrying out as many charter flights this winter and I am sure the powers that be had already decided on the same status the following year. It was relatively straightforward with Amsterdam and Paris, those flights could operate with BAC 1-11 which could easily reach the destination and would work admirably on them with an altered cabin configuration. It starts to get problematic when one want to fly to Cairo or Istanbul, and to some extent Malta, which is more or less at the far end of range capability of the 1-11. Even with a reduced load of passengers. It may not have been economical to fly that distance. Some of the newer Boeing 737s would be ideal for those services. The problem was that we didn't have enough of them. There's all sorts of paperwork way beyond my pay-grade that goes into obtaining a 737 on lease. There is also the issue of training pilots who may not have ever flown a 737, the same goes, but to a lesser extent, with cabin crew. We would also need in most cases, to establish a base, with either a handling agent or to have our own handling, which was certainly needed in Paris because we would be flying there so frequently. Not so much in Istanbul, but I believe many of those destinations would have been successful. Gibraltar was working out well, and I knew that business travellers and tourists would benefit from what we had to offer. The CAA had a very slow approach to not only approving things, but to actually hearing applications. You might apply for something in January and be told that you would have the hearing in April. You might, if you were lucky, get to start flights in June. If Air Europe had already operated the services and were now no longer doing them, and not because they were unprofitable, but simply because Air Europe was around any more. Then it made sense to allow an airline that wanted to carry them out, to get on with it. I saw a documentary on TV where non aviation executives were arguing the toss about why they should get a business model together before getting an aircraft. They often assumed that if you had an aircraft it was just good to go. That was not the case. The 727 could have easily flown those longer routes, but they, and I know because I was a Captain on them, that they would make a loss on every flight. They just about broke even on a charter flight because we could cram people in them, and we sold drinks and duty-free. If we were to operate them on scheduled services they were certain to fail on fuel costs alone. What I don't think they were aware of is that the charter fleet was a separate entity to the scheduled fleet. It wasn't about how comfortable you could make a cabin, it was about how much it cost to fly it - land it and how much you were selling tickets for. I think they learned a lot, very quickly.'
All but six of the HS 748 aircraft had been sold by the end of the year. Of the forty nine aircraft in the fleet, nineteen were in the charter division and 30 aircraft were now carrying scheduled service passengers. The plan David James envisaged was to carry two million charter passengers in 1991 and two million scheduled passengers. There were plenty of airlines that were successfully operating as scheduled carriers that carried two million passengers. James had managed to refinance Dan-Air, the sale of Dan Air Engineering had raised £27m. In addition, the sale of 105 million Davies and Newman shares had raised just over £50m. Total losses for the year were £35m of which £5m was accounted for with the relocation of the head office!
James said the cash would be used to balance the bank accounts and to go towards financing new aircraft. Dan-Air replaced BAC One-Eleven 500s with Boeing 737s on many new routes. From this period on, Dan-Air carried more scheduled passengers than British Caledonian had ever carried in any single year throughout its existence. Total losses for the year were £35m.
NEW ROUTES & ROUTE CHANGES
- Gatwick - Brussels - Route commenced - April
- Gatwick - Oslo - Route commenced - Twice daily except Saturday - November
- Gatwick - Paris Charles De Gaulle - Increased to nine flights daily - May
- Gatwick - Manchester - Increased frequency to eight flights daily. - May
- Gatwick - Gibraltar - June
- Gatwick - Rome - (Proposed Route - CAA Granted Licences)
- Manchester - Gothenburg (Proposed Route - CAA Granted Licences)
- Gatwick - Athens (Proposed Route - CAA Granted Licences)
- Gatwick - Cairo (Proposed Route - CAA Granted Licences)
- Gatwick - Malta (Proposed Route - CAA Granted Licences)
- Gatwick - Palma (Proposed Route - CAA Granted Licences)
- Gtwick - Istanbul (Proposed Route - CAA Granted Licences)
- Gatwick - Stockholm (Proposed Route - CAA Granted Licences)
NETWORK & PRESS 1991
1992
The previous year had been a terrible year for the whole airline industry. Two major carriers had gone bankrupt and the country's second largest Tour Operator had failed. Dan-Air had been saved by the banks, but there would be no room for complacency, 1992 looked set to be tough.
Dan-Air relaxed several rules that had applied to cabin crew. Cabin crew could now be married, the maximum age of cabin crew was scrapped, and from January the wearing of some jewellery was permitted. One uniform change was welcomed by many of the stewardesses. The famous Dan-Air hat would now be optional. There had been many changes in uniforms over the years, the most recent hat had never been popular. Management said that the wearing of the company hat 'is up to the individual' - A spokesman said 'The type of hat the girls are wearing is a bit outdated, we couldn't just change the hat, but when we eventually change the uniform, probably next year, we will look at the question of hats again.'
One Ringway based stewardess said:
'It's wonderful news, the hats made us look stupid. If they were pulled tight over your eyes to stop them blowing off, it messed up you hair, and passengers would always be making derogatory remarks. Passengers used to say they looked like potties when stored upside down.'
Dan-Air were fined £1,000 on January 29th for not transporting a live animal in the correct manner. The dog was being transported from Nice to Gatwick. Agents acting on behalf of the airline had placed the dog inside the hold. Upon unloading an RSPCA inspector discovered that all but one side of the crate was surrounded by luggage and therefore ventilation was restricted. The crate was also seven inches too short and one inch too low for the breed. Trading standards had also found that the crate had ventilation holes that were seven times larger that the International Air Transport Association (IATA) permitted, which would allow the dog to put a paw or even its nose through. This broke IATA rules. Trading Standards had brought the prosecution fo which Dan-Air pleaded guilty. Company Secretary for Dan-Air David Quinn said: 'We consider this matter extremely seriously and have issued instructions to all our agents with fresh information.' and he pledged that Dan-Air would no longer transport animals from Nice. As well as the fine, Dan-Air were ordered to pay £80 costs.
John Olsen, the Company Manager of Cathay Pacific Europe was appointed as Director of the Dan-Air Group Of Companies. He took over from David James who became Chairman of Dan-Air and the Group Chairman. The company had been looking for a new chief executive since October 1991. Olsen, aged 49 when shareholders agreed to a new rescue plan which involved a virtual re-flotation of the company with the issue of 107.5 million new shares. The share issue enabled Dan-Air to raise £49.4 million to pay off debts and fund operations. The firm expected to announce a loss of about £35 million 1991 but expected to be back in the black this year. Peter Ryan Group Deputy Chairman would stay with the company and Charles Whyte, Group Managing Director would remain in place until Olsen starts work in April.
The press carried a story about Dan-Air 'amazing turnaround' in February. The article said ''Once troubled' Dan-Air would be recruiting 100 new staff in preparation for the six new routes the company would be flying to from Gatwick this year. From April Stockholm, Athens, Rome and Barcelona would be added to the network with Istanbul, Cairo and Malta added later in the year. The re-financing of the airline enabled them to apply for new routes. A company spokesman said: 'Despite the recession, it is the right time for the airline to start new routes. Recruitment for ground staff and cabin crew are already underway.'
In a refreshing piece, one Crawley newspaper said of Dan-Air's new routes: 'Established in 1953 Dan-Air has gone from strength to strength in superb style. The same newspaper had called the airline 'Ailing' only months previously.
The new Gatwick-Athens service was launched on Monday 2nd March. The flights would be operated using Boeing 737 aircraft with 'Class Elite' offered as well as economy class.
David James would move to his next 'rescue' the revival of the international transport group LEP. James said that his appointment would not affect his determination to go through with the litigation he had begun for Eagle Trust. Previously James had always refused to take on more than two 'rescues' at any time, saying; 'Normally, I take on one new one a year. That last one was Dan-Air which I took on in October 1990. That has now been re-financed and is very orderly. A new chief executive is taking over in five weeks. I will stay on as conventional chairman. Eagle Trust still takes two days a week. We are now getting to the interesting part of the litigation.'
Meanwhile, Dan-Air's Chairman, Peter Ryan was to rush in to help out at the Newcastle based engineering and signs company; Torday and Carlisle. The firm had experienced a torrid time in 1991. Peter Ryan would be the non executive chairman of the group, leaving Paul Torday free to concentrate on his duties as chief executive.
Dan-Air ended a three year contract with Trusthouse Forte in March. Forte said the move would lead to job losses, but that they hoped Dan-Air's new catering company, SAS would be taking on new recruits, including some of their highly skilled and experienced workers!
A General Election was called for April 9th this year. The Liberal Democrats chartered a Dan-Air Hawker Siddeley 748 (G-BUIV) for the use of their leader, Paddy Ashdown. The aircraft would be in use for the whole campaign, which at six weeks was the longest election campaign in generations. The aircraft was given a slight change of livery, with the 'Dan Air London' titles replaced with 'Liberal Democrats'. The compass and flag logo on the tail was pasted over with a giant yellow circle with the legend 'My Vote'. The aircraft made several appearances on the TV news. On 27th March the aircraft had a bumpy landing at Newcastle after landing in cross-winds. The aircraft then experienced some technical issues. Rather than delay the politician, Dan-Air supplied him with the luxury of a BAC 1-11 jet for the rest of the day. The two larger parties had chartered jets for their campaigns with Neil Kinnock's Labour Party using a British Air Ferries BAe146 jet, whilst the John Major's Conservatives chartered a British Midland Airways Boeing 737.
Errol Cossey one of the leading executives of Dan-Air in the 1970s was interviewed this year. He, along with Martin O'Regan and Alan Snudden had left Dan-Air after disagreements with Fred Newman's refusal to re-equip Dan-Air's fleet with the Boeing 737 200 ADV in 1978. Cossey had gone to Harry Goodman and became a leading figure in the launch of Air Europe. A few years later he was the founder of Air 2000. His interview shed light on some of the thoughts about his time with other airlines, without naming them! After training to be a chemist he realised he wasn't cut out for it, but also that he had to eat. He thought he had a chance of work at Southend Airport, where he was taken on as part of the operations staff: 'Until that time, I'd never even had the remotest interest in aircraft - or airlines, I had a foot on the ladder and I applied for a job with Dan-Air in the sales department. I was there for seventeen years. I had gone as far as commercial director, and I really knew the aviation business by then.'
In 1979 his big break came when he was a founding director of Air Europe. 'It was owned by Harry Goodman's International Leisure Group, and was soon the darling of the holiday charter business. I had parted company long before the ILG collapse in 1991. I wanted to put into practice my view of the future of Tour Operators. I believe that they should be vertically integrated with their own charter airline. So I approached Owners Abroad, the second largest Tour Operator, which has brands such as Falcon and Enterprise. I suggested that they should think about their own airline, and in 1987 Air 200 was launched with two Boeing 757 jets. It was almost like watching a video of my own life, using the same basic concepts - using very modern equipment, a dedication to the leisure market, without any aspirations without any aspirations to go into scheduled services, and coming up with high quality passenger services. I've modelled this on the Marks and Spencer and Sainsbury's business approach. Having a good product, being the best in your market and giving good value for money. And I'm glad to say it really works. I ensured we had a good product, marketed it well and that's it. What we don't do is make the mistake of offering too many variations on a successful theme. In a big business, that's where overheads and complications creep in, and costs increase. Aviation is an exciting business, but paradoxically, you have to keep both feet on the ground if you are going to succeed. The business is littered with the tombstones of flamboyant characters who got carried away. They smelled the kerosene, heard the roar of the jet engines and believed their own PR. I couldn't be further from that mode. I've got no interest in seeing my name on the side of an aeroplane. I'm not an aircraft buff, I see myself as a commercial chap. A good salesman, who has got to know the cost of the business he is selling. We can all go out and sell dollar notes for 90 cents, that's not very clever. There's no magic to this business, you've just got to work to get the product right, and getting the right team to operate it.'
If one examines the interview a little, you can see that Cossey was hinting that he left Dan-Air because of the management's refusal to upgrade the fleet. That he left Air Europe, because of their expansion into schedules, something he had said in 1979 that the company had no plans to do. However, Air 2000 also commenced scheduled services just two years later. The interview suggests that Goodman, who was flamboyant had started to diversify, as had Dan-Air, into too many markets, and that Goodman had believed in his own publicity. The name on the side of the aircraft suggests Freddie Laker. Finally, Errol Cossey left Air 2000 for his third foray into the charter airline scene when he launched Flying Colours in 1996.
Another set of charter flights that Dan-Air would lose this year would be the Aberdeen-Scatsa ones on behalf of BP. Dan-Air had been the sole user of the airport for the last few years. Loganair were chosen as the new airline by BP using Jetstream aircraft.
In April, Davies and Newman posted full year results that indicated the company was on the right track. Turnover was £317 million which was an improvement on the forecast £312 million - with losses of £18.9 million against an expected £19.1 million. David James said: 'The board believes that it has made excellent progress overall in implementing the key elements of the strategy.' On the charter side, James said he shared the concern of other airlines that certain Tour Operators had applied to the Civil Aviation Authority (CAA) for permission to use an eastern European airline saying 'As the CAA have the same control over such airlines the company has made representations to the relevant Government departments, urging them not to grant an operating licence.' Davies and Newman expected to make a loss last year because of the Gulf war and the impact of the recession, but it did cut its losses from £38.7 million to £35.4 million. James said the continuing recession, General Election uncertainty and terrorism had combined to depress the market this year, adding: 'With the election out of the way and expectations of more general economic optimism, there may be indications that market growth is beginning to be re-established. Dan-Air is continuing to increase it market share, giving it considerable encouragement that the company's strategy would prove to be well-founded in the longer term.' James did not see shareholders receiving any dividend until 1994.
The airline announced in April that four of the older BAe146 aircraft (100 series) were being sent back to British Aerospace along with two BAC 1-11 jets. They would be replaced with four of the latest variant of the 146 - The 300 series. The jets were eight years old and the newer models would bring down the average age of the fleet. The cost was explained as negligible. In addition to these changes, there would be a further two BAe146 300 series brought into the fleet at a cost of £20 million. The twelve strong BAC 1-11 fleet now had ten aircraft operating scheduled flights in a 99 seat layout and just two were flying charter flights with a 119 seat layout.
The new Group Managing Director, John Olsen officially started working for Dan-Air in April. His salary was a reported £150,000. The recruitment of Olsen was seen as a positive appointment. No one had thought for a single second that Olsen would have left such a successful airline to work for one that was predicted to fold.
In May, Dan-Air rolled out what was announced as its largest ever expansion at Gatwick with flights to Rome now operating daily
May 7th saw drama when a company Boeing 737 took off from Newcastle on a flight to Lanzarote and flew into a flock of seagulls. The aircraft was forced to return to the airport where shaken passengers were taken to a lounge and given refreshments. No-one was injured, but the aircraft nose was badly damaged. A spokesman said: 'The aircraft was on its climb at 8:15 am this morning when it struck the birds. The aircraft was handling normally, but the Captain returned the aircraft as a precautionary measure. The passengers were perfectly safe and would not have been aware of the impact. The real danger is when a bird is sucked into an engine - that can cause real damage, but this didn't happen. The passengers were understandably shook up and we apologise for that. They boarded a second aircraft and took off at 10 a.m'. The CAA were informed. Newcastle Airport said that they took measures to prevent birds being in the area, but that they did occasionally get struck by aircraft.
At the end of May, David James stated that the sustained increase in passengers that was needed to lift the airline back into profit had failed to materialise. He said bookings from April to May had shown no recovery, but that bookings over the last two weeks had shown a marked improvement. This was despite him saying earlier in the year that the airline had been performing better than had been forecast. The airline had posted slightly higher turnover and slightly less losses than forecast. Now James was saying:
'This erratic and unpredictable pattern does underline the difficulty of accurate forecasting in the present conditions." He had told the Annual General Meeting that "by adding just two business class passengers on every Dan-Air flight they would add £20 million to annual profits."
Only the month before, the airline had posted pre tax losses of £35.5 million compared with losses of £38.7 million the previous year. James had said that the airline's survival plan was 'on course'. A runway extension at Sumburgh was given the go ahead, and it was revealed that Dan-Air, who were under charter from BP to fly out of the airport, were looking to get out of the arrangement. Dan-Air had refused to sign a renewal contract and were instead carrying passengers on a month by month basis. The airport could not handle jet aircraft and Dan-Air were in the process of selling all prop-liners and replacing them with jets.
Bags checked in at Gatwick from May 14th would be speeded up by new technology installed at the airport in a new £25 million upgrade of passenger facilities. Baggage tag printing would now be automated and integrated into the computerised check-in system. This resulted in tags now storing more details than before. In addition to the passenger name, flight number and routing details, the tags would now carry codes that could be read two ways; both infra red scanners and the newly installed optical character reading system. As the passenger checks-in the tags are added by check-in staff and read by computer controlled scanners as they travelled along the conveyor belt. The scanners used technology similar to those in supermarkets could then direct the luggage automatically to the correct aircraft. The scanners could handle 60 bags a minute which would give staff ample time even at peak periods.
The war in Yugoslavia saw thousands of British Holiday-makers having holidays cancelled. The Yugoslavian airline JAT had been chartered to fly British travellers to many other locations and UK carriers had suffered as a result. The British Government placed sanctions on the former Yugoslav country, Serbia which meant that JAT could no longer operate in the UK. This would benefit Dan-Air as the JAT flight to Gerona would now be with a Dan-Air Boeing 727. The 187 seat aircraft could accommodate all the passengers booked on the JAT example where the Airtours MD 80 had only seats for 165.
Dan-Air joined the Air Miles scheme in June. This was seen as a positive move as it would complement their frequent flier programme, run jointly with Virgin Atlantic. Leaked information disclosed that Dan-Air were looking for a partner company to formally merge with. This further unsettled staff and passengers. At this time Dan-Air dropped its sponsorship of a football league.
Passenger numbers on the Newcastle & Tees Side-Amsterdam flights went into free fall, forcing Dan-Air to suspend the service from July 31st. Dan-Air blamed the drop in figures on falling demand and the recession. Flights from Newcastle-Gatwick would continue to operate on weekdays but the weekend flights would also be dropped, as the airline put the squeeze on unprofitable routes. The move would mean that thirteen temporary cabin staff would have their contracts terminated two months early. Chief Executive John Olsen said: 'The continued effects of the recession have led to a drop in demand, and this has forced us to take this action. Like all airlines in the current economic climate we consistently review our routes to remain competitive. Despite all our earlier efforts to safeguard the route the continued effects of the recession has meant a lack of demand to support the service profitably.'
The final restriction on air travel in the European Community were lifted on Monday 22nd June this year. Transport secretary John McGregor described the signing of the agreement in Luxembourg as the 'final chapter' in a ten year battle for open skies in Europe. The deal, which would come into force on January 1st next year was aimed to 'do away' with controversial airline cartels in Europe. Subject to meeting only safety and financial regulations any member state airline could operate any route anywhere within the community. There would be no power from ministers of member states to regulate air fares or conditions either. John McGregor said: 'Our agreement has put in place all the mechanisms, the market will do the rest.' Airlines and passengers generally reacted well to the news, but the Airline Transport Users Committee said that they felt that passengers would have to wait a long time before they saw any big fare reductions. The agreement meant that smaller airlines like Dan-Air would be protected from predatory behaviour from the big airlines and will have more of a chance to compete with them on any route. Richard Branson said: 'This is good news for the airlines, it should have happened 50 years ago.'
The Shetland oil charter situation deteriorated in June when the local council refused an application for the runway at Scatsa to be lengthened. This would stop Loganair's proposed scheduled service into Scatsa with Jetstream pop-liners. Loganair had planned to take not only oil workers, but paying passengers on the service. They would no longer seek approval for the service. Dan-Air said they would now no longer provide a month by month rolling contract with BP, instead they would terminate the charter contract when it ran out in September. In the end, Gill Air won the five year contract to operate the flights. They would use a Shorts 360 aircraft with 22 seats fewer than the Dan-Air HS 748. Gill Air would therefore carry out nine flights a week instead of five. *(Webmaster note - Could a replacement aircraft suitable for this service not be leased by Dan-Air?)
For a second time Dan-Air were found guilty in court over the poor carriage of animals. The airline was charged with cruelty to four dogs. Two of the dogs were flown into the South Terminal in boxes that were too small, and all four were not tied down correctly. Mr.Brian Stone, prosecuting said: 'Dan-Air had broken its own code of practice to end injury and distress to animals in aeroplanes. the dogs which included a Collie, a mongrel and two cross-bred Collies were being flown all the way from Africa. A customs official told Crawley Magistrates Court that the dogs were in danger of being tossed about and after the flight had landed one of the dog boxes was found on its side. Ms, Marilyn Scantlebury, Dan-Air's assistant company secretary said the airline had carried more than 1,000 animals in the last 18 months. She said that the company had now placed a total ban on animals flying into the United Kingdom. Dan-Air were found guilty of seven charges and were fined £4,800 and ordered to pay £80 costs.
Vic Sheppard who had been a manager with British Caledonian before joining Dan-Air had recently left the company and went public with his ambitions to start a new airline -First European Airways - Sheppard had been responsible for Dan-Air's operation to Paris and Nice from Gatwick. He claimed to have raised £6.5 million of the £8 million he needed to start the airline. They would be operating to Nice and Paris from Gatwick he told press. His company comprised of an experienced ex- British Caledonian and Dan-Air staff. David James, Dan-Air's Chairman was furious when Sheppard's plans were revealed. He argued that First European would make a loss forcing Dan-Air into making losses too. Sheppard argued that the lights will merely restore the competition that had been missing since the demise of Air Europe. The CAA awarded First European Airways a licence, but our research indicates that the airline never got off the ground and Vic Sheppard moved to Emirates airline.
Dan-Air's much anticipated Gatwick-Cairo service was given the green light for January 1993 following lengthy negotiations between the two national Governments. The initial flights would be three flights a week using Boeing 737 400 aircraft in a two class configuration. Dan-Air claimed the demand for Egypt had bounced back following the Gulf War.
The proposed Gatwick-Cairo service was licensed in September, with flights set to start in January. The service would be flown three times a week using a Boeing 737 400 series offering a two class cabin. Dan-Air said that leisure and business travel had bounced back in Egypt following the end of the Gulf War.
On the 28th September it was revealed that Dan-Air had been in talks with Richard Branson with a view to a possible merger. Davis and Newman's share trading was to be suspended from that day until the emergency talks had been completed. The share price at the time of suspension was just 21p down from 550p two years previously. Concern that British Airways share prices might suffer as a result of a Dan-Air / Virgin merger proved to be unfounded. Branson was looking at keeping Dan-Air as a holding company. David James denied that the Civil Aviation Authority (CAA) were on the verge of closing down Dan-Air. Saying that the company needed funds for future expenditure. Virgin's shareholders would be given the option to invest and the aircraft in Dan-Air's fleet would be used primarily as feeder flights for Virgin Atlantic flights worldwide. In return Virgin would re-brand Dan-Air as Virgin European Airways and provide operational and marketing support. The Dan-Air name would disappear. Meanwhile it was revealed that Peter Ryan, Dan-Air's Deputy Chairman was found to have seven other jobs as a none executive director. Dan Air said of the merger talks that there were no plans for Dan-Air and Virgin to merge or for Dan-Air to be taken over. They were, they explained, 'talks aimed at getting financial backing. Flying operations would continue as normal.'
Virgin issued a statement saying: 'There have no no talks with Davies and Newman, Dan-Air's owner, with regard to a merger. Nor has Virgin received any proposal regarding such a merger or other equity participation. Following an approach by Davies and Newman, a preliminary discussion has taken place between the two airline groups about further possible opportunities for marketing and operational links at Dan-Air's Gatwick base.'
The very next day David James issued a message to shareholders to say that "Talks of a merger between the two airlines was untrue - they were to result in co-operation between the marketing and operational activities of the airline." He strongly denied reports that Dan-Air had been threatened with the loss of its licences. He also described talk of the loss of hundreds of jobs as "pure speculation". Losses for this year were now forecast at £60 million.
On 28th September shares in Davies and Newman were suspended at 23p while merger talks were taking place.
James denied that the airline was about to close that same day, claiming that the airline needed financing to 'meet anticipated expenditure'. The proposed deal would see the Virgin name on Dan-Air's fleet of aircraft, but would stop short of a merger. Rumours had suggested that the new Dan-Air would be called Virgin Elite.
Davies and Newman had requested the suspension of share trading so that the news of negotiations between the two airlines would not spark speculative trading on their shares.
The last Scatsa flight departed on 30th September. A BP spokesman said: 'It's a sad day, we have worked with Dan-Air for nine years. We had no intention of ending our working relationship. It was a fact that Dan-air said they were selling the aircraft and wouldn't be able to carry out the flights any more.'
On 10th October it was rumoured that Branson was only willing to invest £10 million in Dan Air and even then he would like to see Dan-Air stripped back to a core network of highly profitable routes and feeder routes for Virgin Atlantic. Dan-Air were looking for heavier investment of up to £40 million. James said "One way or another, some sort of proposal will come out to try and save Dan-Air." Industry analysts speculated on TV that Dan-Air would need up to £60 million investment.
This was in total contrast to the statements James had made last year that spoke of the 'certainly Dan-Air would be saved'.
The talks between Branson and Dan-Air broke down on 13th October with Dan-Air saying they were 'Greatly appreciative of Virgin's interest, but an agreement could not be reached.' Virgin said that if Dan-Air remained an independent airline then they would be happy to work with it as a feeder carrier and they would not enter the short haul market to compete against it. But that if Dan-Air tied up with a mega carrier then Virgin European would be borne.
It was reported that the Government was keen to see Dan-Air taken over by British Airways as it would avoid a repeat of the Air Europe collapse the year before. It was highly unlikely that BA would be interested in Dan-Air's charter operations.
New talks were going ahead with other carriers, with the speculation that the talks were with British Airways. This turned out to be true. A second round of talks were soon completed. The announcement that BA had saved Dan-Air was made on 23rd October 1992. In total 1600 jobs would go at Dan-Air. The entire charter division would close. The only aircraft to be taken over by BA would be the Boeing 737 fleet. It was discovered that almost all the scheduled service routes were in profit.
After the British Airways take over, James claimed to have got the best deal for Dan-Air, saying that he had been in talks with twenty other carriers, none of which had been able to match the one BA offered.
Dan-Air's final year of airline service saw just four HS 748 in the fleet. The BAC 1-11 fleet was reduced to 12 models. The Boeing 727 which had dominated the charter market for so long stood at seven. Nineteen Boeing 737 aircraft of 200/300/400 type flew, primarily on scheduled services and four BAe 146. Several of the BAe 146s were on order but never arrived. In the aftermath of the Air Europe collapse several things had happened. The beginning of the deregulation of the airways had begun with airlines now free to fly on any route of their choice. Malta for instance, a small island in the Mediterranean was suddenly served by Air Malta, Air Europe, British Island Airways and British Airways. Both Air Europe and British Island Airways had gone bankrupt. This left the stage clear for Dan-Air to apply for - and obtain several routes in 1991. By 1992 some of the services were not fully up and running. Dan-Air had sold its share of the profitable Manchester Handling in January. David James, the Chairman of the company said: "From now on Dan Air will be an airline - just an airline."
The new board intended every route Dan-Air flew to be a high density, business or leisure route. Their plans included greater frequency on the most popular routes, a much more scheduled service approach and a fleet that was to be consolidated to two types; the Boeing 737 and the BAe146. The Gatwick - Stockholm / Rome / Athens / Barcelona routes had all started. Dan-Air was facing massive competition. The Barcelona route closed after just six months. The expansion of Dan-Air's scheduled operation at Gatwick continued throughout 1992, resulting in the resumption of the former Air Europe route to Stockholm Arlanda in February and Rome Fiumicino in April. In addition, Dan-Air launched Gatwick - Athens in March and re-launched Gatwick - Barcelona in May. During that period, Dan-Air became Gatwick's largest resident, short-haul scheduled operator controlling 18% of all slots, and 21% of all morning peak time slots between 8 am and 9 am.
Anyone who knew the aviation industry should have known that these routes, with landing and take off slots, were worth a small fortune. As were the spare parts in Dan-Air Engineering's three bases that had been sold at a price many people said was 'under value'. Davies and Newman had further huge assets remaining with the real estate in Horley and London City. Gatwick Handling was a major company with large profits. When Air Europe collapsed not only were its scheduled routes up for grab, but a substantial charter programme. The board at Dan-Air had rejected the chance to try and take this work. Instead concentrating mainly on the scheduled services. in many cases charter contracts were rejected. Including the lucrative Shetlands oil charters, that had, admittedly been reduced, but Dan-Air's reason that they 'were selling the aircraft and didn't have one that could do the job' When it was possible to retain the aircraft or replace it with a leased aircraft.
The funds raised through new shares had been massively insufficient to standardise Dan-Air's fleet on the Boeing 737 300/400 series and the Avro RJ115 (marketed but never built). The funds were also insufficient to finance transformation from a cheap-and-cheerful charter carrier with a collection of poorly performing, "low visibility" regional scheduled routes into a top quality, "high visibility" mainline short-haul scheduled operator plying trunk routes.
Dan-Air's Chairman, David James, said: 'weak marketing and its charter mentality, even after the decision to make high-profile scheduled services the focus of commercial activities, was the reason it failed to achieve results.'
That meant that instead of making Dan-Air the airline of choice for high-yield business travellers on prime scheduled routes where it had become a major force in the wake of the demise of British Caledonian and Air Europe — such as Gatwick to Paris Charles de Gaulle — through carefully targeted marketing and publicity, Dan-Air continued selling the bulk of its scheduled inventory to consolidators and discount travel agencies, in the way it had sold its charter inventory to package tour operators.
The airline saw this as risk minimisation to fill seats on scheduled services. However, Dan-Air surrendered control over its scheduled seats to third parties whose sales were volume-driven. This deprived Dan-Air of the opportunity to boost the profitability of its scheduled operation by concentrating on maximising revenues from high-yield travellers. British Airways paid a nominal £1 for Dan-Air - in return taking on financial commitments of £50 million which included debts of £37 million. For its part, British Airways got 12 of Dan-Air's most modern Boeing 737s, a similar number of short-haul scheduled routes from Gatwick, the Heathrow—Inverness feeder service and about one-fifth of its 2,500 workers. Dan-Air was absorbed into British Airways' Gatwick operation. On 27 November 1992, the company's name was changed from Dan Air Services Ltd to British Airways (European Operations at Gatwick) Ltd. This rump of the former Dan-Air formed the nucleus of what British Airways intended to be a low-cost short-haul feeder for its Gatwick long-haul scheduled services, with the aim of helping to return British Airways' loss-making Gatwick operation to sustained profitability. The spares at DAE had a value of £20 million alone - With the slots at Gatwick being worth millions and their office space and headquarters also. It is staggering that the airline failed. Or was allowed to fail.
NEW ROUTES AND ROUTE CHANGES
- Gatwick - Stockholm - Twice daily, except Saturday. February 24th
- Gatwick - Rome - Daily service commences February 24th
- Gatwick - Athens Daily service commences - March 26th
- Gatwick - Barcelona - Daily service commences - May 18th
- Gatwick - Barcelona service closed. October 2nd
- Gatwick - Oslo
- Gatwick - Istanbul
- Gatwick - Malta
- Gatwick - Cairo
NETWORK & PRESS 1992
SPECIAL ARTICLE
Causes of decline
Among the reasons for Dan-Air's decline was the lack of vertical integration with a UK tour operator. the company had contracts with 130 Tour Operators many of whom did not charter a full aircraft. The company claimed that this suited them, as they could offer the spare capacity to other, smaller Tour Operators, who also could not justify chartering a full aircraft. Dan-Air was the last major independent provider of charter airline seats to numerous large, medium-sized and small tour companies in the UK and overseas. This was at a time when most UK Tour Operators had set up their own airlines. From the late 1970s Tour Operators had been aware that by having a dedicated in house airline, they could save costs with that vertical integration. Each time one of these carriers started up. It was with a small fleet of new aircraft. With a dedicated Tour Operator using those aircraft there would be no negotiating lower rates with various airlines. They could give the best flights to thier own carriers. As their own airlines grew - the need to charter other airlines' aircraft would diminish. Fortunately, the number of British people taking overseas holidays continued to increase. Nevertheless, Dan-Air's own growth in the charter market was stunted. These airlines included Court Line (Clarkson's) Britannia (Thomson) Air Europe (Intasun, ILG) Monarch (Cosmos) Orion Airways (Horizon) Air UK Leisure (Unijet) Air 2000 (Owners Abroad) Airtours International (Airtours) Inter European Airways (Aspro) and British Airtours/Caledonian (Inspirations). Those carriers subsequently merged with others or simply went out of business. It is not without credit that Dan-Air managed to retain any market share at all. In the early 1970s Dan-Air accounted for almost 40% of the charter market. By 1992 this figure had dropped to 16%. Having said that 16% of the many more millions who travelled in the 1990s compared to the seventies is impressive.
The competition had resulted in a decline in Dan-Air's importance as a business partner for these tour operators, reducing its status from main to marginal provider. Air Europe even dropped Dan-Air Engineering as it's preferred engineering company. It appeared that Dan-Air was being attacked on all fronts. The privatisation of the hitherto state owned British Airways was a tremendous blow to all airlines. Especially in a pre-deregulated environment. British Airways had not only a huge network and fleet, but, when privatised, got it all for free. A share option to the public then gave BA an even bigger cash injection.
Another reason for failure was that the fleet contained too many different, incompatible aircraft types. Some of these aircraft were older and less efficient than those operated by competitors such as Air Europe. Consequently, the Dan-Air fleet was costlier to operate and maintain. The Boeing 727s, which Dan-Air continued to acquire throughout the 1980s, including some on unfavourable leases, proved a financial millstone. Air Europe had made disparaging comments to the press that they would not be using Dan-Air's aircraft in future as they were 'old, gas guzzling jets.' To some extent this was true. However, newer types had been introduced at the beginning of the 1980s. The Boeing 737 and BAe146 aircraft performed well and were comparable to any similar aircraft operated by rival airlines. Britannia and Air Europe had purchased newer, larger Boeing 757 and 767 by 1984. at time when the long-haul charter market really took off. This left Dan-Air without a compatible type, and unable to enter that arena. the introduction of the A300 whilst important saw them match their rivals only with capacity, not range. Fred Newman had expressed an interest in the Boeing 757, but went public saying the aircraft was as large as they would ever contemplate using. The interest did not go further than that.
It was said by Dan-Air's last chairman David James 'The Boeing 727s were a terrible burden. They were so expensive to fly. we were flying them just to pay to keep them flying.' - Why then were seven of them kept for the entire time James was in charge? Several Boeing 737 300/400 had become available as soon as Air Europe was grounded. They were leased and Dan-Air could have taken the leases on, or leased others. The aircraft may have a lower book price, but if they were bringing zero into the company purse - why keep them?
The huge variety of different aircraft had, in the 1970s and 80s been a major selling point. No other airline could offer clients such varied capacity from 44 seats (HS 748), 70 (Viscount) 89-119 (BAC 1-11) 88-102 (BAe 146) 99-119 (Comet) 130 (Boeing 737) 142-189 Boeing 727) Charter airlines had grown in sophistication by 1980, realising that a 130 seat Boeing 737 would pretty much cover all the popular Mediterranean resorts in terms of range and its size was ideal. Especially after Government regulations allowed more than one Tour Operator to charter the same aircraft. Dan-Air reliance on the Comet for the whole of the 1970s was a poor choice. Not only was it grossly inefficient, it was also lacking in passenger appeal as the decade wore on. Tour Operators have told me several times that their own managers would charter them only when nothing else was available.
Dan-Air's decision to embark on a major expansion into scheduled services from Gatwick at a time when the UK economy was still mired in the early 1990s recession made their own financial position worse. The economic conditions in the UK meant that actual revenues fell short of budget in the 1991–1995 business plan, which aimed at sustained profitability by 1995 with a £42 million profit. This meant an injection of £49 million of additional working capital into Dan-Air's parent company from a successful share issue in 1990 was insufficient to fund the airline's needs. The funds raised through new shares were insufficient to standardise Dan-Air's fleet on the Boeing 737 300/400 series and the Avro RJ115 (marketed but never built). The funds were also insufficient to finance transformation from a perceived cheap-and-cheerful charter carrier (with a motley collection of poorly performing, 'low visibility' regional scheduled routes) into a top quality, 'high visibility' mainline short-haul scheduled operator plying trunk routes.
Dan-Air's last chairman, David James, said 'weak marketing and its charter mentality, even after the decision to make high-profile scheduled services the focus of commercial activities, was a reason it failed to achieve results.' As Chairman of the company - who might have been to blame for that? If the carrier had that mentality as he saw it. The Chairman would be the one who had the power to stop and change any company practice. The weak marketing could have been improved at the Chairman's behest.
This 'weak marketing and charter mentality' meant that instead of making Dan-Air an airline of choice for high-yield business travellers on prime scheduled routes where it had become a major force in the wake of the demise of British Caledonian and Air Europe – such as Gatwick to Paris Charles de Gaulle – through carefully targeted marketing and publicity, Dan-Air continued selling the bulk of its scheduled inventory to consolidators and discount travel agencies, in the way it had sold its charter inventory to package tour operators. The airline saw this as risk minimisation to fill seats on scheduled services. However, Dan-Air surrendered control over its scheduled seats to third parties whose sales were volume-driven. This deprived Dan-Air of the opportunity to boost the profitability of its scheduled operation by concentrating on maximising revenues from high-yield travellers.
The Failure Of Air Europe - Major Changes And Disaster
The original board members had started to turn the airline into a predominantly scheduled services carrier as early as 1988. Its scheduled services had been increasing steadily, loss making routes were dropped in favour of higher yield trunk routes. Dan-Air had capitalised on routes taken away from British Caledonian and British Airways at the time of their merger. Several Gatwick routes were up for taking and Dan-Air were awarded six of them. Dan-Air's 'Class Elite' was also launched in 1988. A business class cabin that meant aircraft had to be refurbished. Where aircraft had six abreast eating the centre seat would not be sold, but instead a table would be placed. On five abreast the row with three seats would also see the centre seat unsold. Arthur Larkman, a senior board member who had recently retired was not impressed with the business class name. He had reservations about the cost too. Drinks would be free, passengers would have improved in flight catering with glass ware and china crockery as standard. The use of airport lounges would also be included in the fare. Larkman is entitled to his opinion, but Dan-Air had to have a business class cabin with those features, all of the company's main rivals had a similar product and without one - Dan-Air would never be able to compete. The name of the product was largely irrelevant.
The cost of refitting cabins may well have been high, but it was vital - even with the charter fleet. In the 1980s Air Europe, Britannia and Monarch had all installed audio ad video In Flight Entertainment (IFE) in their cabins. Some carriers had chosen to offer this for free, some charged for headsets to rent or take away - a valuable income. The IFE was instantly popular with passengers. Dan-Air chose not to have this, even on the latest additions to the fleet. I cannot say if Dan-Air had lost some of their aviation antennae, but as the world embraced modernity, were the board guilty of complacency?
Many experienced board members had retired or passed away in 1990. Newer members came in their place. Dan-Air invested heavily into a computer reservation system that was way ahead of anything that its competitors had. The 1989 results were published in 1990 and did not make good reading. Out of a turnover of £376,000,000 a loss of £3,340,000 was recorded. In a damage limitation exercise the airline sold two Airbus A300 aircraft. This off set the loss to £1,856,000. Selling the aircraft at approximately £700,000 each. By 1990 the figure was even more alarming; a record turnover of £380,745,000 was recorded. The airline had carried more passengers than ever. Had a wider network and had met challenges that the Gulf War had presented. Fuel prices had increased however to alarming prices at $90 a barrel from a pre war price of $40. The Summer months of 1990 were looking positive. However, the war began in August - the busiest month of the year. Several people cancelled their holidays and many decided against flying altogether. August was also the month that airlines made requests to banks for funding to cushion them from the Winter downturn in business.
In August 1990 Dan-Air's request was turned down. It was a stunning rejection. Davies and Newman had banked with Lloyds since 1922. Dan-Air had been in profit in all but two years of its existence. At the time of the request, Dan-Air was in debt to the tune of £26,000,000 which was normal for the time of year. These debts were widely known to be secured against the group's assets, of which there were many.
In a twist of fate, Air Europe's bankers were also Lloyds, As were British Island Airways - Air Europe's debt at this time was £90,000,000. Although, somehow, the industry were not aware of this. Dan-Air had to endure a year of constant press speculation about their fate. Columns were full of stories about their impending failure, or that they were about to be taken over. This cannot have helped with confidence in the company. Air Europe had escaped any such chatter. Was this because Dan-Air was the victim of leaks to the press? Air Europe's massive debt was of course known to the banks. They had financed their impressive fleet through lease arrangements and had little in the way of assets. Furthermore, all of their office space was rented. In an attempt to save their business, their first action was to waste no time trying to destroy the reputation of Dan-Air.
1990 was the year Air Europe announced that they would not be chartering ANY Dan-Air aircraft or using their maintenance services. Air Europe announced an operating profit of £35 million. This was all because of an increase in the value of their aircraft, because of this they were able to refinance the aircraft several times. Air Europe had actually placed orders for their planes before the American operators had. This made their aircraft more valuable. However The 1990 Gulf War brought about a spectacular collapse.
In the negotiations that followed a further loan of £30,000,000 was indeed secured to Dan-Air, bringing the debt to a total of £56,000,000. However this loan came with a wide range of heavy conditions. Firstly the company would have to have a new Chairman. This meant that Fred Newman would have to step down. The New Chairman, David James would have the freedom to choose who he wanted on the board. He quickly recruited his own team. Several Dan-Air directors would be leaving, they had agreed to stay until replacements were found. David James said on BBC's Money Programme:
'I will not have, or accept the responsibility for a rescue, unless I also have the total authority to see the job through. If I'm going to put my reputation, and indeed, in some cases, my own financial substance on the line then I'm darn well going to have the authority to back up that responsibility'.
Fred Newman and his family on the board even gave assurances that they would not use their voting rights. James was seen on camera saying:
'Operationally Dan-Air was heading in broadly the right direction.' However he claimed that they 'didn't have a financial strategy to take it towards the future.' It was, he said: 'Essential that Dan-Air recapitalise'.
As 1991 approached it and it looked like the war was almost at its conclusion. Fuel prices had begun falling and people were once again flying. The directors who had left the board had been astonished to find their services were no longer required. Between them they had years of experience in running a highly successful airline. The industry is known to be particularly specialised and it is not without dangers. Margins are low and competition is fierce. To replace board members with people from non aviation sources was a risk. Some of the outgoing directors were not even given a formal farewell party. There was to be no formal recognition of these people from senior management in the new board room.
Danny Bernstein had left to become Managing Director of Monarch Airlines. His great skill in the industry saw Monarch go from strength to strength and become one of the most successful UK airlines of the 1990s. Graham Hutchinson was acknowledged as a supreme airline manager, respected all over the World. Was it a wise move to let these two, outstanding people leave the company? Only a few people on the new board had a background in aviation. Michael Newman, John Mayes and Peter Sommers. The new Davies and Newman Chairman himself, David James was well known in the business world. He had earned the moniker 'The Company Doctor' Banks the World over had recruited him to save ailing businesses. He was an accountant by profession and had been trained by Lloyds. James had saved companies from going under in the past, none of them however, were airlines. Others to come with James were Peter Ryan, a chartered engineer and Charles Whyte, an engineer.
On the board would be Roger Payton, Sir Ian Pedder and David Herbert. Herbert was a solicitor and had been deputy chairman of Dan-Air for six years. He would lose that role and instead be responsible for legal affairs, pensions and insurance. Sir Ian Peddar who had, prior to the changes, been Chairman and Director of Dan-Air Services. Peddar would be removed from his current position and given the role of overseeing operational and engineering aspects on behalf of the Dan-Air board. A newcomer to the board was Roger Payton, who came from the collapsed Barings Bank. John Mayes was promoted to 'Director - Airline Services'. After a period. Fred Newman, the man who was respected throughout the aviation world bowed out and issued a statement. He was a man known to shun away from courting publicity. He was graceful in handing power over to James and his team. Newman must have been devastated at what was happening around him. He was widely known to have been a major force in shaping the airline. Not a soft touch by any means, but a kind hearted, decent and honourable man. By 1991 nine of the senior directors of the company had been removed.
The next move surprised everyone in the aviation world. On January 11th 1991 it was announced that a Danish engineering company called FLS Aerospace had bought Dan-Air Engineering for £27,500,000. Lasham Airfield had been leased by Dan-Air since 1954. It had several hangers and state-of-the-art testing equipment, ground equipment and spares. There was a second large base at Manchester with similar equipment. The newly built hanger space at Gatwick had cost more than £10 million and was able to handle the very largest of aircraft. Any debts DAE had would be almost all wiped out and all creditors would be paid. The deal had secured, for three years, the maintenance of Dan-Air's fleet. This was with a guaranteed payment of £15 million annually. In November 1990 a valuation of Dan-Air's spares in stock (ALONE) was carried out - The figure - £30,000,000! The business, equipment, spares, stock, hangers, the job lot went for £27 million!! The sale had seemed to happen very quickly. Dan-Air Engineering did not publish its own figures because they were wholly owned by D & N. The company was profitable. It may be an opinion - but if one has two companies, one in profit, one in loss, why sell the profitable one to help keep the loss making one afloat? DAE gave top priority to Dan-Air aircraft but serviced aircraft of some thirty other operators.
James announced that the sale of Dan-Air Engineering was a "Happy Occasion, where both parties achieve something of major benefit." He claimed that the sale would open the way for the new Davies and Newman board to concentrate on the development in future strategy.
Was Dan-Air Engineering a millstone around the company's neck? In short - no! In any case. The 1,600 employees would have to wait to hear their fate when new owners moved in. Within months the new owner FLS announced redundancies of 300 engineering staff.
James was reportedly paid £30,000 a month. He stated at the time that his work at Dan-Air was a short term appointment. The advisers who would put together the new route applications following Air Europe's collapse, cost the airline HALF A MILLION POUNDS. Bank loans secured by James also came with a heavy price tag. After selling Dan-Air Engineering and refinancing the airline, Dan-Air would owe NINE MILLION POUNDS to them alone.
Citibank had made many loans to Air Europe's parent company, ILG, on the security of their aircraft, and on March 7th 1991 they demanded that ILG had 24 hours to find new financing. Or they would call in all their loans. Lloyds Bank meanwhile who had been surprisingly negative to Dan-Air, and had made restrictions so wide ranging, were now trying desperately to keep ILG afloat. This policy was understandable from Lloyds point of view. They were the Bank who ILG's owed the majority of their debts to. So misguided were Lloyds by ILG that they had attempted to persuade ILG to take over Davies and Newman as part of the D & N rescue package. As it happened, no financing came. Air Europe owned just three aircraft in its fleet. (These were usually procured on highly favourable terms from the manufacturers and then sold upon delivery to ILG's in-house leasing subsidiaries, such as AE Finance or AE Norsk, or to third party lessors, such as Guinness Peat Aviation (GPA), from whom the airline subsequently leased them back. If you remember, Air Europe had placed their orders first, and so the aircraft were particularly valuable as they were new on the market. This enabled AE to keep the aircraft off its balance sheet, thereby being relieved of the financial burden resulting from the aircraft's depreciation, while keeping a substantial interest in the aircraft's residual values, which were booked as profits. This sale-and-lease-back activity was a central plank of ILG's corporate strategy. It also constituted a major part of ILG's business and accounted for a large slice of its profits.
Neither did the group hold the titles to the freehold of any of the properties that housed its offices and other facilities that formed an integral part of the business. Consequently the airline went bankrupt with 4,000 jobs lost. What was breathtaking at this point to observers was that a huge gap in charter business had opened up, with Dan-Air was ideally placed to swallow up not only this available business, but also many of the bankrupt airline's scheduled routes. It would mean that Gatwick-Paris would now not face any competition from Air Europe. This could have been the saving of Dan-Air. It is widely regarded now that had they done this the airline would have gone into profit that year. The board spectacularly chose not to do this. They had already announced that they wanted to be a scheduled services airline. In fact - instead of taking on this available work they actually reduced the charter and IT work that year. After ILG had collapsed, Tour Operator, Sunworld was formed by ILG bosses. They wanted to charter Dan-Air aircraft for their entire programme.
The question has to be asked: If our business is losing money and lucrative work comes your way - even it is work you would rather not do - do you reject it? What are the expressions? Two spring to mind - Beggars can't be choosers and If the word throws lemons at you - make lemonade.
To compound all that was going on in the airline, even more changes took place in the board room in 1991. Vic Sheppard was appointed to lead a large team at the Traffic department. This would cover every aspect of in flight service. Meanwhile, David James addressed shareholders who had recently been invited to buy shares in a new share offer, aimed at giving the company a further cash injection. He stated that his prime objective was to bring a 'return to profitability' which he saw as being 'feasible'. He also pointed out that all of the board had come to that same conclusion. Furthermore he reiterated his intention to concentrate on making the airline a scheduled services operator. Just one month later, he announced that the company needed more funds. This time to the tune of £40 million. The vision the board had could only be achieved with this additional funding. He stated that the 'professional team of professional advisers' he had assembled in the board room were going to assist in the process.
The majority of the new routes Dan-Air had applied to operate were ex Air Europe destinations. They had acquired some of British Airways and British Caledonian's routes at the time of their merger (Effectively a takeover) in 1987. Dan-Air had also benefited from this, when the Government had only allowed the merger to go ahead if some of their routes were released. Dan-Air had gained Madrid, Lisbon and Mahon.
Of the ex Air Europe destinations Dan-Air were given rights to operate from Gatwick to Cairo, Athens, Istanbul, Rome, Malta, Stockholm, Gibraltar, Ibiza and Brussels. Some of these had started and some were set to commence in late 1992 - early 1993. Route proving is a costly exercise, airlines would research the route with viability studies. There may be route proving flights to find optimum departure times and frequencies, all of this takes time. In addition, an airline would need to establish a base at the destination airport. With that, a base manager and ground handling staff. Or at least a handling agent. Office space and equipment would be required, signage, and training of locally recruited staff members. There should also be a period of advertising at both airports well in advance to make the public aware of prices, offers, times and contact information.
Profitable routes can, and often do, supplement loss making routes until the correct load factors are achieved. Or dropped altogether should the route fail. In the case of Dan-Air, charter work was usually a safe way of ensuring this could happen. Charter flights carried much less risks. The airline was not responsible for selling seats. Tour Operators carry all the responsibility. If a flight is empty that is the tour operator's fault and the cost is theirs to bear. They have hired an aircraft, which provided catering, level of service and entertainment as the Tour Operator sees fit. The airline in return provide a serviceable aircraft with the correct flight crew. The airport provide assistance to passengers. It is a much easier operation from an airline's point of view. Not that this airline ever took their duties lightly. Dan-Air's standard of service was the same whatever flight you happened to be travelling on. By reducing charter flights that cushion of support was missing. Those new scheduled services would need to be hit profitable load factors from the get go.
By now just two members of Dan-Air's board had an aviation background. Sir Ian Peddar and Captain John Mayes. No-one on the board made any significant noise opposing this policy of rapid, mass expansion. There had been disagreement over whether to obtain aircraft first or secure the route first. It had been Dan-Air's usual policy to make sure that if you were flying a route, that you make sure you had the equipment to operate it. James and his board didn't agree, insisting aircraft were easy to get hold of. Not all aircraft were so easy! This disagreement was aired on TV as part of a documentary.
All airlines know about route proving and implementation and how risky and expensive it is. It was a simple fact that Dan-Air did not, at that time, have the financial muscle or flexibility to expand in this way. Dan-Air had always been far sighted and cautious about expansion. Only ever taking the chance if there was a significant cash reserve and plenty of profitable charter work to support new routes. Only then would they ever add a new route. This had worked over years. Let's not forget that when the airline had carried more than six million passengers in 1991 - almost two million of them had flown on scheduled flights. So it wasn't as if they were new-comers to the scheduled services scene.
Dan-Air had, at times, tried to establish routes that had failed. Either because of poor load factors or aggressive competition from other carriers. All airlines had been through that. It was sometimes a case of 'Some you win, some you lose'.
The decision was taken to consolidate the Dan-Air fleet into just two types. The Boeing 737 300/400 and the BAe146 was a good one. It was not clear how long this would take. The fleet had 19 aircraft that were not of either type. Of the Boeing 737 fleet; a further ten aircraft were the 200 series that the board had decided needed to be replaced. In total then, 29 aircraft out - leaving THIRTEEN that were suitable.
The £30 million loan that had been taken out had almost been paid off. Things should have began to improve on the balance sheets. Sadly, new services and new management structures with many new departments and initiatives had proved to be costly. The debt had now risen again, this time to £11,250,000, although this included the £8,750,000 arrangement fee that Lloyds had arranged! Without the charges, the losses would be £2.5 million - maybe less if the charters had been approved!
Although Fred Newman had been ousted from his role of Chairman of Davies and Newman he could take some comfort from the sale of the ship broking company which David James now sold to Fred and Michael Newman. Through all of this, the company carried on as professional as it always had been. This professionalism irked British Airways who had been losing money on its scheduled services out of Gatwick. Various attempts were made by BA to strengthen is position at London's second airport. Long haul flights were trialled without success. The intention of turning Gatwick into a hub for UK and European feeder flights was not realised. Where it competed with Dan-Air at Gatwick BA was not successful either. Talks between BA's management and some of Dan-Air's board took place in October with a view of using Dan-Air as a franchise airline similar to what had been tried with success with Manx Airlines in the Isle Of Man and Loganair in Scotland. Not only would Dan-Air operate its own schedules, but those of British Airways short haul flights from Gatwick. This was a real lifeline to Dan-Air. Talks seemed to be going well. Dan-Air would have the added advantage of having surplus aircraft that could fly its charter programme simultaneously. At the late stages the Dan-Air team withdrew, to the shock of all involved.
With all this uncertainly, an Extraordinary General Meeting was called in late October 1991. David James formally introduced John Mayes to the board stating that "He came with a wealth of experience in aviation" Once again James insisted that he was working towards bringing the company back to profitability. He went on to point out that the board had been examining all aspects of the company with 'intensive analysis and research.' He also pointed out that 'both Barings Bank and County Natwest had required the company to appoint separate independent external professional advisers, specialising in civil aviation matters' Looking back, this seems an odd decision. A board of extremely qualified, experts in aviation had been released of their positions only the year before. They had been replaced by men who were highly skilled in business, but had little or no knowledge of the airline industry. If these experts were to be recruited, what was the price of their remuneration? The figures were jaw dropping. From £400,000 in 1989, rising to £2,500,000 in 1990 and a slight reduction to £2,300,000 in 1991 - This was made even more disturbing when one sees that that figure was for only SIX MONTHS! Expertise does not come cheap! The fact that Dan-Air's existing board already had all the knowledge that ANY airline could possibly need, and had been relieved of their duties cannot be overlooked. David James announced at that time that he had: 'Never been more certain about the wisdom and validity of any rescue in my life as this one.....I think that that what has happened in the last year has been one of the best demonstrations I have sever seen of a company getting off its butt end'
With substantial charter availability suddenly available, a new airline sprang up. Air World came on the scene from the ashes of ILG and Intasun's successor, Sunworld. Airlines grabbed all the spare capacity, leaving Dan-Air floundering with its new scheduled routes. During the Summer months, the airline reported a loss of £5 million, at a time when it had always made a profit from charter work. The Rights Issue offer in October was for 107,500,000 shares. A paltry 2,500,000 would be available to Dan-Air employees. Priced at 50p per share, David James was convinced of a surge in shareholders and he claimed it 'would immediately return the airline to profit'. The reverse happened. As aviation analysts would point out - The Summer months were the most profitable for airlines. The share offer was made in the Autumn. The employees raised £1,250,000 and the share issue was a success raising £40 million - but the writing was clearly on the wall.
Further expense came when the new board recruited John Olsen as the airline's new Group Chief Executive, David James would now be group chairman. Fred Olsen had an aviation background, working for Cathay Pacific for 23 years. His expertise was hoped to save the company. With him came a raft of new departments and managers. The question was whether an executive used to working with a large, international airline, flying long haul flights on super sized aircraft would be able to produce results with an airline with a mixed fleet of smaller aircraft and a European only operation?
The company was struggling for survival, and by June 1992 James once more claimed that he thought: ''(It)reasonable to expect a return to profit for the 1992 year.' He claimed that there was: 'No diminution of the board's confidence in the future of the company' Just three months later, he announced that Dan-Air would run out of money by 'The third week of October' All the money that the airline had made during the Summer months had been passed to the banks. On top of that, two BAe146 aircraft and six HS 748 prop-liners were sold. Shortly after this sale, all of the company's BAC 1-11 aircraft were sold, thus reducing the debt to £22 million. The bank would not be at any major risk with this debt as the airline still had considerable assets. By comparison Air Europe had crashed with debts reported, by the Guardian to be, £500 million.
Another lifeline appeared to be thrown by Virgin Atlantic. Richard Branson was quoted as saying that 'Dan-Air mustn't go bust'. As the final round of negotiations began with Virgin in October. The two sides indicated that there would be no statement until early the next week. There were growing fears, however, that the deteriorating financial position of Dan-Air might make it impossible to agree terms. Dan-Air was rumoured to be heading for losses of between £30 million and £40 million in 1992, compared with the £20 million profit forecast at the time of its recapitalisation the previous year. 'It certainly isn't a pretty picture,' One source, close to the talks was quoted as saying. However, suddenly Dan-Air withdrew from the talks. British Airways were now more than ever, aware of Dan-Air's weakened position, and for a second time, approached Dan-Air, this time with a revised offer. Now they wished to purchase 14 routes from Dan-Air and their fleet of Boeing 737 400 aircraft. Dan-Air rejected the offer. Despite heavy debts, the airline actually made a profit, as they usually did, during the peak summer months. Assets for the company totalled almost £20 million. Was the company really in such a bad position? One must challenge that assumption.
Government Ministers were invited to help with the European Commissioner for competition declining to get involved as the company was 'too small'' It would be fair to say that despite debts, the company was more or less sound. If emphasis were placed on the charter market once more then perhaps it could have returned to profitability sooner. Even more so if the risky scheduled services had paid off. On the 8th November 1992 Dan-Air was sold to British Airways for the nominal sum of £1. Negotiations had been going on for several days behind closed doors. Often into late into the night. For the purchase price of £1, British Airways would take on Dan-Air's financial commitments of £50 million which included debts of £37 million. For its part, British Airways got 12 of Dan-Air's most modern Boeing 737s, all of the airline's short-haul scheduled routes from Gatwick, the Heathrow–Inverness feeder service and about one-fifth of its 2,500 workers. The rest of the aircraft would be sold. Dan-Air was absorbed into British Airways's Gatwick operation. On 27 November 1992, the company's name was changed from Dan Air Services Ltd to British Airways (European Operations at Gatwick) Ltd.
This rump of the former Dan-Air formed the nucleus of what British Airways intended to be a low-cost short-haul feeder for its Gatwick long-haul scheduled services, with the aim of helping to return British Airways' loss-making Gatwick operation to sustained profitability. But was that all that British Airways would get? The short answer is 'No' - Gatwick Handling was a success story in its own right. From its inception, Dan-Air owned 50% of it. Initially with Laker Airways being the other 50% shareholder. After Laker's demise, Delta and Northwest Orient bought 25% each. They would have one member each on the board. The vast majority of airlines at Gatwick used Gatwick Handling - it was a precious asset. Then the landing slots at UK airports, and for that matter, European airports were of tremendous value. Particularly the daytime slots at Gatwick. People outside the industry would be unlikely to know how valuable they are. Dan-Air owned prime real estate in the shape of their purpose built headquarters in Horley - 'Newman House' as well as Norway House in London, new offices at New City Court in the centre of the capital. Bilbao House was a large property of great value. Dan-Air also had travel companies, an insurance firm, leasing companies, bonded stores, and a catering company. What's more, the pension fund of £20,000,000 was transferred to British Airways. All of that for £1. All of the airline's flight crew had trained on specific aircraft. Only those qualified to fly Boeing 737 aircraft would go on to British Airways. Most of the Dan-Air staff were made redundant. The pilots who found themselves unemployed would have to train on other types to find work. Dan-Air were the only UK airline to use the Boeing 727. Fortunately for them, Sabre Airways set up shortly after Dan-Air's sale to grab some of the available charter work. They used ex Dan-Air 727s and some crews found work. It is interesting to note that Sabre Airways would become XL airways and have many years of profitable flying. Meanwhile, the ex Dan-Air pilots had to pay for their own training to qualify on new types. Redundancy payments were not large for most people. With pilots receiving only two weeks basic pay for each year they had served in the company. In contrast, the severance pay for the former board members who were in charge of the airline for the last two years received a figures totalling £742,233. Having sold aircraft and the airline with it's assets, David James issued a statement.
As the Company now has no assets, the Board is of the opinion that if the resolution of the voluntary winding up is not passed, the Board will have no alternative but to petition the court to wind up the Company - Yours Faithfully David N James." He later went on to say "I think what has happened is an unfortunate outcome, but it is an infinitely better solution than the awful alternative of receivership"
The Company has no assets? if that really was the case, then someone had sold them!
Was that the end of the story?
Some time after the event is was disclosed that British Airways was set to inherit a tax credit of between £50 million and £100 million. Even the worst case scenario would mean that by taking on Dan-Air's debt of £55 million it would benefit to the tune of £15 million for a £1 investment. The rebate was only to apply if and when Dan-Air or the new subsidiary makes a profit. The British Airways plan was to run the Gatwick arm of its company as an independent holding company known as European Operations At Gatwick (EOAG) Dan-Air explained that this was known at the time of the takeover, but Dan-Air had no hope of making a profit so it could not claim the cash. Whilst the company folded and charter flights were grabbed by the likes of Airtours, Air 2000, Inter European and Britannia, staff that had transferred to the BA's new British Airways European Aviation At Gatwick would have different contracts to the ones that they held with Dan-Air. Some would be transferred to Heathrow and many contractual obligations were now disregarded and the unions seemed powerless to intervene. Shortly after the takeover many former flight deck crew got together and with a combined effort and with huge legal fees mounting, the crew took British Airways to a tribunal. BA was accused of corporate arrogance. The Dan-Air crews won their case. This meant that British Airways was looking at a huge bill of up to £8 million. The tribunal heard that:
'The criteria adopted to make the pilots redundant was unreasonable' Michael Ingle, solicitor, representing the Dan-Air Pilots' Action Group said: "British Airways had been disingenuous in portraying itself as Dan-Air's saviour, when in fact, it stood to gain several lucrative routes in the deal.' It was claimed that 'BA made much of the fact that it rescued Dan-Air when it completed the purchase in November 1992. It now appears rather disingenuous when British Airways achieved significant benefits from the way it structured the purchase.' Lawyers claimed that it had acquired some very large tax losses but gained valuable new routes with which to boost its loss making operation at Gatwick. 'There was a complete failure', the tribunal heard. 'To inform the pilots about their redundancies or tell them it was likely. There was also a complete failure to implement redundancies on the basis of seniority, which is traditional throughout the airline industry, including British Airways. There was also a complete failure by BA to consider if it had any alternative jobs for pilots throughout the whole group.' This successful claim was only the first hurdle in the pilots battle for compensation. On February 27th they returned to Croydon to make a claim for the maximum compensation the tribunal could award, £10,000 each. After that, the airline staff planned to take their case to the High Court where they could claim up to £40,000 each which would take the BA bill to £8,000,000. One pilot claimed he was 100% sure that a former pilot, who he refused to name, had taken his life because of the upset. Several families, the pilots claimed, had split up, with pilots being forced to work overseas. It was claimed that most of the pilots who had found alternative jobs were paid far less than when they were at Dan-Air because of the seniority system. Having to work for another airline meant that any seniority accrued would be wiped out on commencement of service with another carrier. The pilots union BALPA was criticised by pilots for advising pilots to accept the redundancies. British Airways said that at the time of the takeover, because of Dan-Air's troubled financial status, it was not obliged to follow normal redundancy procedures, an argument rejected by the tribunal. Lawyers said afterwards that 'The landmark decision would allow workers rights to prevail'. The press had a field day calling British Airways "Brutish Airways" and one claimed that David James had treated Dan-Air like a horse with a broken leg.
On December 8th David James said he was donating £100,000 to a hardship fund set up to help unemployed staff of the defunct Dan-Air. But his act of magnanimity failed to impress Dan-Air shareholders and employees, as they turned out in droves to attack the deal. Shareholder after shareholder stood up to criticise the sale and the performance of Mr. James during a rowdy meeting to approve the voluntary winding up of Davies & Newman, Dan-Air's parent company. Faced with the barrage of dissent, Mr James, chairman of Davies & Newman, disclosed that he was contributing £60,000 severance pay and £40,000 of fees to a trust to support hardship cases.
But this was not enough to placate shareholders, including a former Dan-Air captain with 22 years' service who was receiving just £4,000 in redundancy pay. Shareholders had been treated with contempt, one small investor said to loud cheers, while another accused James of having 'conned' staff about the prospects of saving the airline. Some accused the banks of 'shamefully helping destroy another business' but others laid the blame squarely at the door of Mr James and fellow board members. There were gasps when James disclosed that severance payments to directors of Davies & Newman totalled £742,233. James conceded that the situation for pilots was not satisfactory but said their severance payments had to be seen in terms of the 'overall aggregate cost to make the deal possible at all'.
Maintaining an urbane delivery throughout, James explained that Dan-Air had fallen foul of the vicissitudes of the charter market, its own image, the banks and an ageing, expensive aircraft fleet. The deal with BA was not a pretty one but it had more merits than the 'awful alternative' of receivership. But his critics were not persuaded. 'At the moment there are three losers - Britain, the employees and the shareholders,' pronounced Peter Frankel, one of the latter group. Although the resolution to wind up Davies & Newman was defeated overwhelmingly on a show of hands it went through on a poll with a 97.23 per cent vote in favour after proxy votes from institutions had been counted. Dan-Air was no more.
A PERSONAL VIEW
There is still tremendous affection for the company throughout the World. This website has had more than one and a half million individual visits in the years it has been running. I have worked for perhaps too many hours to make the website current and modern. The research I undertake had become a passion of mine. Digging up old news is fascinating. Talking, as I have with former staff is great fun - hearing some of the sadly unprintable stuff is often hysterical. There is a great deal of mystery in the UK aviation world. At ground level staff are happy to talk about theories as to why things happen - Some theories, may well be true - but cannot be put on the site for obvious reasons. The higher one gets whilst researching - the tighter the lips get to full disclosure. Some people did talk off record and their views are often shocking. Rival airline staff have also been part of my research. Some of them reserve utter contempt for people within their industry. Whatever the politics of the airline world used to be, it is a fascinating industry. I am not always 100% sure when I write what I research, if anyone is interested. Then, when I do an update on the site I get a raft of people e-mailing me to debate the matter. So I hope the 2023 updates will bring you a whole set of topics to discuss.
The fact is - I don't really mind at this stage if I am the only one who is interested in my writing. I just love doing it. My only sadness is that I was not able to continue writing about the airline in what would be its 71st year this year. I wonder if the board would have got in touch to say 'Well done - will you come and run our website for us?' or if I would be getting a call telling me to take t down as they don't approve. Perhaps something half way! Recently I was contacted by the brother of a board member who died in the early 1970s. He was very complimentary thankfully. If you have anything you would like to see on the site - please get in touch and let me know. admin@danairremembered.com
The site was never set up to make money, or to point the finger at David James and his board. It was to tell the story as accurately as it could be told. The aim was to celebrate the wonderful memories and history of this incredible airline. To pay tribute to the staff - of all departments. To show what flying with Dan-Air was like. This is the 71st anniversary of Dan-Air's taking to the air, I wanted to say 'Thank You' - you may be gone - but you are not forgotten.
April 2024
DISCUSS THIS SUBJECT
1
review
Mike Hearn
Saturday 25 Sep 2021
Absolutely brilliant!
.....................love the fleet summaries showing the individual aircraft!!!!
...............................should be done for other 'long gone airlines' including overseas ones like Pan Am!
.....................love the fleet summaries showing the individual aircraft!!!!
...............................should be done for other 'long gone airlines' including overseas ones like Pan Am!