Dan-Air & Air Europe - An extract from Britain's Airline Entrepreneurs

https://www.burntash.eu/airline-entrepreneurs

Born in 1916, Fred Newman was the son of Frank Newman, a founding partner of Davies and Newman, who were successful shipbrokers based in the City of London. The company had been created in 1922 by Frank, and Captain William Davies, to trade as shipbrokers, oil brokers, and tanker managers. Captain William Davies had first gone to sea in 1875, sailing as a boy in a Welsh barque. He got his master's certificate in 1885 and his Extra Master's Certificate in 1887, making him a master mariner. During the First World War, Winston Churchill, who was then First Lord of the Admiralty, took a crucial decision to switch the Royal Navy from coal to oil as their primary fuel. This created a huge new market for oil and Davies was given responsibility for managing oil tankers for the Admiralty. His partner, Frank Newman, had begun his career with the rival shipbrokers, Lane and MacAndrew in the 1890s and he was regarded as one of the first tanker brokers. When the two men joined forces, Land and MacAndrew was wound up and they traded, henceforth, as Davies and Newman. Newman’s son, Fred, joined the family firm on leaving school, and during the Second World War served in the Honourable Artillery Company, rising to the rank of Captain and being awarded the Military Cross for active service in Burma.


Davies and Newman were members of the Baltic Exchange, then the principal market for international ships’ charter. Like Lloyd’s of London, the Baltic Exchange could trace its history back to an eighteenth-century London coffee house. By the early 1950s they had begun to dabble in aircraft charter, especially to the Middle East. Davies and Newman regularly chartered aircraft to fly ships’ spares to the Persian Gulf, often using a small airline based at Southend Airport called Meredith Air Transport, who owned a single DC3 — G-AMSU. When Meredith ran into financial difficulties, they borrowed money From Davies and Newman, using their DC3 as security. In 1952, the DC3 suffered a broken tail wheel at Jerusalem’s Atarot Aiport, losing them valuable traffic, and Meredith’s financial plight worsened. When the loan fell into arrears, Fred Newman took possession of both the aircraft and one of Meredith’s better contracts — to fly cargo into Berlin during the Second Berlin Airlift. Before long, he had begun to operate the aircraft himself under the name Dan-Air, an acronym of Davies and Newman. In the best traditions of the shipping industry, and to avoid confusion with another Danish airline, Dan-Air’s aircraft bore the name of their home port: DAN-AIR LONDON, which was emblazoned in large black letters across the fuselage. Dan-Air flew the DC3 regularly to Berlin and, as the holiday air charter market grew, they found themselves carrying inclusive tour passengers to popular European destinations from Gatwick and a variety of other British regional airports, as well as a growing network of holiday charter flights from Berlin’s Tegel Airport.


Unlike many other small, cash-strapped operators of the era, Meredith Air Transport managed to survive by operating Viking aircraft in conjunction with South Africa based Trek Airways. By 1954 they had become Air Safaris and were flying ex-BOAC Handley Page Hermes, and later Britannia aircraft, on charters to Africa. They finally ceased trading in 1961, but their manager, Alan Stocks, would later form International Air Services (IAS), which briefly became Britain’s largest all-cargo airline before its own collapse in 1980 (the bankruptcy followed a merger with Stansted based Trans Meridian Air Cargo [TMAC] which created the short-lived British Cargo Airlines).


Dan-Air, however, would grow to become one of the best known of British independent airlines and Fred Newman would serve as chairman until 1990. At its peak, Dan-Air employed 4,500 people and flew more than six million passengers a year. Newman had been shaped from a different mould than his predecessors, he represented a new kind of entrepreneur who had not previously been a pilot or engineer. He was, by contrast, a shrewd businessman with little previous aviation experience, who had seen a burgeoning opportunity as the air transport market began to flourish following the austere post-war years. From the beginning, Dan-Air became known for their canny purchases, often buying second-hand aircraft from the state-run corporations at knock-down prices and continuing to operate them for years, even decades, on holiday charters. Despite being a multi-millionaire, Newman was as modest and prudent in life as he was in business. Whereas Freddie Laker and Harold Bamberg favoured Rolls-Royces and Bentleys, Newman drove a humble Reliant three-wheeler. When he gave his employees lifts to Dan-Air’s City offices, he would politely ask them to contribute to the cost of the petrol and maintenance.


Newman’s speciality was buying older airliners which had been retired by BOAC, BEA and other national carriers, in the knowledge that while these aircraft may have been technically obsolete, their airframes had years of life left in them and their low purchase cost made them ideal for holiday charters. Dan-Air also bought Lasham Airfield, near Alton in Hampshire, and established their own maintenance base there. Like so many other of their purchases, it was a shrewd investment. Former Second World War airfields could then be bought cheaply and Lasham’s runways were able to handle all the aeroplanes (including the Boeing 707) in Dan-Air’s fleet. The cost of positioning aircraft to Lasham from Gatwick, and elsewhere, was more than offset by the savings they made in maintenance costs and parking fees. Best of all, aircraft like the Comet could be flown intensively during the summer months, but parked at Lasham, free-of-charge, in the winter. They also made money servicing and repairing aircraft for other operators for which they had a good reputation.


By 1965, BOAC were disposing of their Comet fleet and Dan-Air bought G-APDK and G-APDO on attractive terms. Not only did BOAC sell the aircraft for barely a third of the price they had paid for them new, they sweetened the deal by amortising most of the cost over four years at an extremely reasonable rate of interest. Also, Dan-Air’s pilots and engineers would receive training directly from both BOAC and de Havilland at BOAC’s cost. Dan-Air were tough negotiators; they even persuaded BOAC to provide an aircraft for crew training at the remarkable price of £250 per flying hour, barely enough to cover the fuel.


Over the next decade Dan-Air would buy 49 of the 77 Comet 4s (of all marks) that de Havilland had built, and they would operate them commercially until 1980. It proved to be a shrewd investment; the Comet’s high fuel consumption was offset by the small amount of capital they had invested. Today, no airline will order new aircraft without carefully considering the likely second-hand value when the time comes to dispose of them, and planes that are known to devalue rapidly are scrupulously avoided. For example, Singapore Airlines took their first A380s out of service in 2017, but there were no buyers for them. The sharp decline in value caused new orders to dry up and, before long, Airbus had ceased manufacturing the aircraft altogether.


The Comets were popular with passengers too, they might not have been fuel efficient, but they were still comfortable, fast and smooth. Many British families took both their first flight, and their first journey abroad, on a Dan-Air Comet and they still remember them affectionately.


Dan-Air’s downfall, however, was largely brought about by their slow adaptation to the changed travel markets of the 1980s and 90s. Inclusive tour operators, who represented the greater part of Dan-Air’s business, were beginning to either create, or take control, of their own non-scheduled airlines, leading to a vertically integrated industry which could significantly reduce its costs. Also, Dan-Air’s major customer, Intasun, was pressing them for lower prices.


In the mid-1970s, one of Dan-Air’s associate directors, Errol Cossey, who ran the charter arm of the company, tried to persuade Newman to change tack and take a leaf out of Britannia Airways book by purchasing new Boeing 737 aircraft. His argument was that the older aircraft in Dan-Air’s fleet were driving them further down market and many inclusive tour operators, including the market-leading Thomson, were now shunning them. Newman would not budge from the tactics he had successfully employed for many years and, finally, Cossey, along with Martin O'Regan and Alan Snudden decided to leave Dan-Air and form their own airline, Air Europe. They got finance from Harry Goodman, the Chairman of Intasun.



Initially, Air Europe prospered and even set new standards in the holiday air charter market. They moved away from the ‘back of seat’ catering pioneered by Court Line (which had been characterised by some as ‘spam salad out and sandwiches back’) and they served three-course hot meals of a high standard. Also, by being vertically integrated with a major tour operator, Intasun, they had a higher level of financial stability than other charter operators. Their first commercial air service was on 4 May 1979, with a brand-new, 130-seat Boeing 737-2S3 Advanced, named Adam (registration G-BMHG) flying Gatwick to Palma de Mallorca with a full passenger load. They became the first newly formed UK charter airline to be profitable during its first year of operation.


By 1989 their holding company, ILG, which included Intasun, recorded a group operating profit of £35.5 million. They were operating 31 jet aircraft and total passenger numbers for all the group's airlines were 5.8 million. These figures were then a record, but behind them the company was beginning to run out of cash. Ironically, their biggest competitor remained Dan-Air, who frequently undercut them. Air Europe had hoped that Dan-Air would fail first, but Dan-Air called in a well-known company doctor, David James, who managed to refinance the company allowing it to struggle on for another few years. In the end, it was Air Europe who failed first. In March 1991, the ILG Group went into administration leaving 4,000 people out of work and many thousands of passengers stranded.


A year later, in 1992, the heavily indebted Dan-Air was sold to British Airways for £1. It should not be forgotten, however, that unlike so many other independent airlines, they did not go bankrupt. British Airways paid all Dan-Air’s creditors in full and hired many of their staff. Fred Newman, who had been appointed a CBE in the 1986 New Year Honours, died on 19 October 2012, aged 96.

Evening Departure by Chris French

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