THE ECONOMICS OF THE ' QUEEN MARY '
LETTERS TO THE EDITOR
[Correspondents are requested to keep their letters as brief as is reasonably possible. The most suitable length is that of one of our "News of the Week " paragraphs. Signed letters are given a preference over those bearing a pseudonym.—Ed. THE SPErrA•roa.j [To the Editor of THE SPECTATOR.]
SIR,—The Cunard-White Star liner Queen Mary' is of the greatest interest to a large part of the population of five great nations and has attracted more attention, carefully cultivated, than any ship in history. This interest, especially In Britain where the public is naturally most enthusiastic, tends to hide the fact that her purpose is to earn money for her owners ; perhaps you may be interested in a short discussion of her chances of doing so.
It is admitted freely that the policy of building such a ship involves a big financial risk, with the huge capital laid down and the totally disproportionate effects of any mishap or delay. There is, even among the most experienced ship- oWners, a sharp division of opinion as to whether the giant or the moderate-sized ship is the more profitable in present circumstances, and many estimates of the Queen Mary's ' finances have been made and published by both sides. These are of little use without accurate figures as a basis, and it is im- possible to obtain such figures. There are so many other ships to consider in the company's accounts that no outsider can separate the figures of one ship ; the Government has no right to demand them and the Cunard-White Star Line is never likely to offer to publish them. The only definite indication is the anxiety of the directors, with more informa- tion at their disposal than anybody else, to get a second ship built without delay to balance the service.
In general terms, however, the economics of the big ship offer interesting ground for study and speculation. The basis of her plan is that two ships are to maintain the same weekly service as three have done hitherto, and the whole of her design is framed for that purpose ; other considerations are secondary although they may be of great importance. Taking it for granted that the weekly service has to be main- tained, is the proposal to do so with only two ships economically and practically sound, and can those ships save sufficient money to pay their way ? Obviously the greatest economy is needed. So many expenses go by the ship, with com- paratively little variation through her size, that a big ship is generally more economical than a small. She is demon- strably less expensive to build and to run per head of the passengers carried, while her publicity is likely to make her more popular and permit the owner to charge higher fares. The larger number of passengers greatly facilitates cheaper catering.
At the same time both capital and running costs are colossal. In the case of the Queen Mary' the value placed on the building risk for insurance was 14,500,001 and her insured value at sea is £4,800,000, on which the company pays a premium of about £60,000 per annum, part of which goes to the Government for its share of the risk. - The company has borrowed the price of her construction from the Government at a low rate of interest, one half per cent. below bank rate until 1940, after which it will be at the current rate of interest of State guaranteed loans. The Government has the security of debentures on the whole of the company's assets and a share of the profits—not of the ship but of the whole fleet.
The depreciation that the ship has to earn, over and above her running costs and other expenses, is therefore in the neigh- bourhood of a quarter of a million sterling per annum, a very heavy charge for any ship, while running costs and overheads are estimated unofficially as between £2,000 and £1,509 per day while the ship is at sea, with a considerable variation according to season and circumstances.
The main factor of her cost, both capital and running, is speed, which controlled her design through the necessity of two ships carrying out the weekly service. The cost of the speed is therefore a matter of very elaborate calculation, for the ship, with her present dimensions, could maintain a speed of twenty knots with considerably less than a quarter of her horse-power and fuel consumption, and very much more space left in the hull for earning money. And all the time there is the consideration that an ill-judged increase in speed may be very expensive by bringing the ship to port at an inconve- nient hour, involving extra cost all round and losing the favour of passengers. Moreover, with such huge overheads, the time spent in port, when nothing is coming in, has to be cut down to the minimum, and a surprising number of features in the design, unnoticed by the layman, contribute to this and have a big effect on the ship's figures.
Carrying practically no cargo except the mails and bullion, the ' Queen Mary's' whole future depends on her passenger receipts. Public attention has been centred almost exclusively on the luxuries of the first, now called cabin, class ; but owing to the smaller space that it occupies, and the little attention that it demands, the lower-priced accommodation can be the most profitable if it is filled. Formerly the emigrants supplied this business, but the tourist and third class are now mainly devoted to holiday traffic and speed is a great attraction where the vacation time of the passenger is limited.
The ` Queen Mary ' carries 776 cabin, 784 tourist, and 579 third class, a total of 2,139, which is no greater than in a 5,000- ton ship half a century ago, so that there is no comparison of the comfort. All the economics of the ship depend upon the extent to which this accommodation can be filled. It has been announced that the directors anticipate an average of 75 per cent. of capacity, and the question is whether this is not quite unduly optimistic. It is certainly a much higher proportion than any post-boom figures justify, for with all existing ships 45 per cent. full is considered most satis- factory. As far as the figures can be examined, it would appear that 50 per cent. of the Queen Mary's ' accommodation, averaged through the year, would enable her to pay her way, without providing the interest on the borrowed capital.
The ship's value as a figurehead to the fleet 'is a big factor, but one that is very difficult to reckon indefinite figures. The possession of the Blue Riband always brings passenger trade _ t') the rest of the fleet, but times have changed during the last forty years, and the Cunard-White Star Company cannot hope for the 25 per cent. of the whole of New York's passenger business which went to the North German Lloyd after they had won the Blue Riband with the Kaiser Wilhelm der Grosse' in 1897.
Since the War the smaller and slower ships of the North German Lloyd, Italia and Compagnie Generale Transatlantique Lines have derived great benefit from the possession of the record-breaker of the moment. Should the Queen Mary' be successful in obtaining the trophy she will undoubtedly be helped by improving times, her own qualities and the remark- able publicity which she has been given. Whether this will give her 1,100 passengers a trip, in all season, remains to be
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