British Caledonian in The 1970s - 1974 Crisis Year

1974 Crisis Year

The creation of British Airways (BA) as a result of the 1974 BEA-BOAC merger came against the background of the first global oil crisis in the wake of the 1973 Arab–Israeli War, which led to the quadrupling of the price of a barrel of oil as a consequence of the decision by the Organization of Petroleum Exporting Countries (OPEC) to boycott the West in retaliation for its support of Israel during that war. This meant that the newly merged corporation's original revenue and profit projections were far too optimistic. During that time, BA began exerting pressure on the Government, at the time its sole owner as well as the regulator for all UK airlines, to curtail the activities of its independent competitors generally and of the "Second Force" in particular.

The difficult operating environment at the time did not affect BA alone. In fact, the major scheduled airlines were all losing enormous amounts of money at the time. The sudden spike in the oil price caused a major recession during the second half of 1974 as well as the first half of 1975, with much reduced demand for air travel. This in turn led to the collapse of a number of prominent travel companies and their associated airlines — most notably the Court Line group and Horizon Holidays, the latter having provided work for three BCal short-haul aircraft prior to its collapse. There was also massive overcapacity on the North Atlantic routes.

These circumstances forced BCal to put in place a major programme of retrenchment, known internally as Plan "S".

Plan "S" began to be implemented from 1 November 1974. It resulted in route cut-backs — including the suspension of the transatlantic "flagship" services, the immediate withdrawal and subsequent disposal of the remaining VC10 long-haul aircraft, the grounding of a number of short-haul aircraft as well as several hundred redundancies among the company's staff. It also resulted in organisational changes that saw Sir Adam become the airline's chief executive in addition to continuing in his role as chairman of a reconstituted board, and the transfer of all aircraft leasing, purchase and sale activities to a new subsidiary. British Caledonian Aircraft Trading was the name of the company that succeeded Caledonian Airways Equipment Holdings, Caledonian Airways (Leasing) and other related interests. It became one of the most profitable parts of the business.

In addition to withdrawing from the prestigious long-haul routes to New York and Los Angeles after only 18 months, other specific measures the airline took at the time to ensure its survival included dropping all scheduled flights to Belfast, Copenhagen, Gibraltar, Ibiza, Málaga, Palma de Mallorca and Tunis, indefinitely suspending scheduled services on the Glasgow—Southampton route as well as cutting the number of frequencies on the Gatwick—Glasgow and Gatwick—Edinburgh routes from six to four daily round trips. Two surplus aircraft were leased out to Air Malta and Austrian Airlines respectively for the duration of the 1975 summer timetable period. Another aircraft was stationed at West Berlin's Tegel Airport during the month of July of that year to fulfill a short-term charter contract to carry Turkish migrant workers to and from Istanbul on behalf of a local tour operator. BCal also decided to increase its 707 freighter fleet from one to four aircraft and to acquire a five-seater Piper Aztec to serve the rapidly growing executive charter market. These changes left BCal with 25 operational aircraft for the 1975 summer season. To reduce operating costs further, the airline decided to contract out its scheduled operations between Gatwick and Le Touquet to BIA. The reason for replacing BCal's One-Eleven 200 jet aircraft on this route with that airline's Herald turboprops at the beginning of the 1975 summer timetable period was the high price of jet fuel, which had made BCal's own jet operation uneconomic.

Even during this period of severe retrenchment, BCal continued launching scheduled services to new destinations. Dakar joined the airline's network on 1 November 1974, followed by Kinshasa on 1 April 1975.

As a result of the "success" of Plan "S", BCal's fortunes quickly recovered. The airline operation itself managed to return to the black during the financial year ended 30 September 1975 with a small profit of £250,000 after having lost £4.3 million the year before.