Boston Review editor Simon Waxman wrote a piece this June in the Washington Post, saying that the US Army’s decision to name its weaponry after Native American tribes – like the Apache helicopter above – is worse than the Washington Redskins’ decision to keep its gross racial slur name.
Waxman is white and not of Native American descent . His piece doesn’t contain quotes from, or interviews with, Native American writers tribal leaders, or members of the public. Or indeed anyone at all, except Noam Chomsky, which is probably slightly worse than not quoting anyone at all.
This makes him less qualified to comment than, uh, the US Army. Who, sensibly, require any decision to name a weapon after a Native American tribe or chief to be approved by both the relevant tribe and the Bureau of Indian Affairs:
Native Americans get to decide whether the Washington Redskins is an acceptable term. They think that it is totally unacceptable. Therefore, the Washington Redskins need to change their name. Native Americans get to decide whether Apache helicopters is an acceptable term. They think it is fine. Therefore, Apache helicopters don’t need to change their name.
Neither white sports fans, nor white Boston lefties trying to demonstrate their contrarian right-on-ness, get a say in either, and nor should they. Case closed.
Why am I bringing this incredibly basic point up now? Well, because of a response to Waxman’s piece by US Army aviator Crispin Burke. It is well-researched; indeed, it is where I found the reference to the consultation with Native American tribes that I’ve reproduced above.
But the tone it takes is absolutely terrible. The lede is:
Everyone Relax—The Army’s Native American Helicopter Names Are Not Racist
There’s a difference between honor and exploitation
The piece goes on from the tone set there, pointing out for several paragraphs how the names are chosen to honour Native American warriors, complaining that Waxman’s piece reads like an Onion parody of political correctness, and generally following the irrelevant ‘it’s honour! Not a slur!” line that the Washington Redskins’ defenders tend to spout.
The key point that Burke has found: that all decisions to name military hardware after Native American tribes are approved by the tribe and the Bureau of Indian Affairs is buried almost as a sarcastic aside.
And it ends with this sign-off, which is a vat of aaaaaaagh no large enough to pickle an elephant:
Taking Waxman’s logic to the extreme, we should expect to see legions of Peloponnesian-Americans demand the military purge its references to Spartans from its lexicon. And let’s not forget the howls of protest from disgruntled Fighting Irish.
No, if Greek-Americans were overwhelmingly offended by the term Spartans; if Irish-Americans were overwhelmingly offended by the term Fighting Irish, then changing them would be a good idea. The only reason changing them is not a good idea is that those groups aren’t offended .
Neither Simon Waxman nor Crispin Burke get to decide whether the use of a term is racist. Only the people on the other end of the term get to decide that. Although Burke’s conclusion is the right one in this particular case, that appears to be only by coincidence.
 Unless I’ve missed something whilst researching his biography and his other work, in which case I apologise. Although if he is of Native American descent then it might have been a good idea for him to mention this in the original piece.
 Relative privilege and historical guilt may also mean that people in the US are obliged to give special consideration to the views of Native Americans compared to those of Greek- or Irish-Americans. But since the latter groups aren’t making these requests, we don’t need to worry about that here.
Qantas announced its financial results today. Predictably, they were a car crash (Qantas still hasn’t had a plane crash [*], but they’re definitely a crash). $646 million operating loss, and $2.6 billion in one-off write-offs from revaluing the company’s aircraft fleet. No rock and roll fun.
Fiddling and burning
As Qantas CEO for the last six years, and about as many restructuring programs, much of the blame has fallen on Alan Joyce. “Alan Joyce is to Qantas what Caligula was to the Roman Empire”, said independent Senator Nick Xenophon, who never met an exaggeration he didn’t love.
And it’s true: while he hasn’t yet made his horse a board director, Joyce’s strategy has been something of a disaster. His approach to a long-term structural weakening in Qantas long-haul, combined with an epic boom in domestic demand, was to ignore the former (leaving the long-haul airline with a fleet of fuel-guzzling 747-400s, highly-efficient-when-full-but-hard-to-fill A380s, and senescent 767s up to the end of 2013), and deal with the latter by starting a price war with its only real domestic rival, smaller, lower-resourced, lower market share Virgin Australia. Although at least the domestic airline’s ageing planes were replaced with efficient new 737-800s.
Under Joyce, Qantas’s investment has been focused on expanding pan-Asian short-haul budget airline Jetstar, which has had modest success in Australia and Singapore, less success in Japan, embarrassment in Vietnam, and dismal failure to even get an operating license everywhere else (including Hong Kong, for which the airline bought six brand new A320s that have been sitting idle). Much of the failure has been due to Qantas’s and Joyce’s failure to understand the Asian operating environment, where the perception that the airline is controlled by local partners is vital to local regulators.
More recently, as long-haul became predictably loss-making, the airline has slashed services, cancelled further A380 deliveries, life-extended 747-400s up to the point where they’ll be welcomed in museums on decommissioning, postponed 787 deliveries (despite the fact that, due to Boeing’s program delays, the airline is due an exceptionally good price on its 787s), made no effort to lease 777s in order to decommission 747-400s, and negotiated a codeshare with its biggest international rival that hands over most of its long-haul services out of most Australian cities.
And rather than attempting to either blitz or alleviate Qantas’s troubled relationship with staff and their unions, Joyce ratcheted the tension up to maximum, closed the airline for a day to hold a lockout, and then stuck a band-aid over the wound.
So, yes, Joyce has been inept. But what about the environment he’s facing?
They can’t be better than us, so they must be cheating
A lot of cant is talked about this, partly because local airlines in rich-people countries are very good at placing PR stories in the media, and partly because it’s the only area where rich-people country airlines and airline staff have aligned incentives. The general story is that it’s grossly unfair that airlines like Qantas are losing out, because their rivals in less-rich-people countries are “government sponsored foreign airlines with unlimited piles of cash”.
Anyone using this lie should be banned from aviation commentary. It is a bullshit excuse used to defend the incompetent management & overpaid staff of legacy airlines in rich-people countries from profitable foreign rivals.
Looking at airlines that could be considered Qantas’s competitors, Emirates is immensely profitable; it does not have any state subsidy. Singapore Airlines and Air New Zealand, both major shareholders in Virgin Australia, and Cathay Pacific are all slightly less profitable, but also unsubsidised. The remaining foreign government-controlled airlines that run on subsidy are basket cases that can’t fill their seats anyway: Malaysian Airlines, Air India, Alitalia.
The alleged indirect subsidies that critics like to pretend Qantas’s rivals receive are also illusory. Yes, fuel is cheaper in Dubai than it is in Sydney. But the economics of long-haul air travel are such that you have to refuel every time you land, so a Qantas flight that goes Sydney-Dubai-London has exactly the same fuel cost as an Emirates flight that does the same. It’s also true that company profits are taxed less in Dubai than they are in Australia, but you need to be making a profit in the first place before anyone taxes it.
The problem is, if you are an airline with new planes, new IT systems, and staff recruited on current contracts, you have a hell of a cost base advantage over an airline which doesn’t. This is highlighted by, um, Jetstar and Virgin Australia, never mind the foreign rivals. The foreign rivals also have the advantage of being on the way between somewhere and somewhere (with the exception of Air New Zealand, which really doesn’t).
The “cheating” narrative exists, of course, because it’s a first step in the one cause that unites unions and management everywhere: extorting money from the taxpayer to preserve unviable business models. Once you’ve established the trope that it’s unfair of Emirates and Cathay Pacific to steal all of Qantas’s international passengers using their home advantage, a subsidy to ‘level the playing field’ is a logical next step. To the current Australian government’s credit [**], it doesn’t so far seem to be showing any signs of playing ball.
Portrait of the CEO as a doomed man
Alan Joyce said in the results statement, “We expect a rapid improvement in the Group’s financial performance – and a return to Underlying PBT profit in the first half of FY15, subject to factors outside our control”. Note that ‘factors outside our control’ here means whatever he wants it to, like Humpty Dumpty. And note that he has said variations on this theme at almost every results announcement so far.
Things should be less terrible for the airline going forward. The various doomed attempts to forge new Asian carriers seem to have been dropped; Qantas has addressed some of the terrible usage patterns of its international fleet (no longer leaving $300m aircraft parked up in London for 20 hours a day), 2,500 of the 5,000 layoffs in February have actually been made; and the write-off to aircraft values will save about $200m a year in depreciation charges. If not quite profit, that would seem to be enough to keep the airline’s loss manageable given its cash in the bank.
But while Qantas’s future is reasonably secure, Alan Joyce’s surely can’t be. The results today were greeted with near-universal incredulity that he hadn’t been sacked already, given the sheer number of times he’s come forward with another round of sorry apologies, another insane unworkable Asian solution, and failed to save money on the core business. He’s a hate figure for the airline’s staff and the Australian public.
So why hasn’t he been, then? There are two possible alternatives:
1) As with the sacking of BP CEO Tony Hayward following the Deepwater Horizon disaster, there is no point in bringing in the untainted CEO until the worst of the disaster is over. Joyce’s head needs to roll, but this might as well happen in six months when the current cost-cutting program is complete and it’s time to make longer term strategy decisions again; or
2) Australian business is utterly nepotistic and corrupt, with supine boards made up of drinking buddies who cosily tolerate each other’s incompetence no matter how gross.
We’ll see which it is over the next 12 months. Meanwhile, if I were the chairman at Qantas, I’d offer the Australian CEO of Abu Dhabi carrier Etihad, James Hogan, all of the money in the world and total free reign over all decisions to come home and repeat some of the magic he worked out in the desert.
[*] Fatal or hull-loss accident since the start of the jet era.
[**] Given the current Australian government’s performance at literally everything else, you have no idea how much this pains me to say.
Safety and security are brilliant. Safety and security theatre is bullshit. If you support safety and security theatre measures, which includes nearly all routine airport security, you are helping to make everyone worse off and nobody safer.
Whilst world-travelling over the last month, I discovered that most European carriers  now allow the use of small electronic devices except for actual RF transmitters throughout the flight – including take-off and landing. Which isn’t surprising, because there isn’t and never has been any evidence that they ever have (or indeed potential that they ever could) do anything whatsoever to harm a plane.
However, most Asian and Australian carriers  still make you switch off your Kindle during take-off, despite the clear evidence and overseas best practice confirming that this is bullshit. This is solely because of safety theatre, enforcing archaic rules for no reason.
There is some (still only hypothetical) evidence that interference from actual RF transmitters could harm older aircraft, so banning mobile phone use in aircraft which haven’t actively been demonstrated to be phone-safe is for the best. It reflects the evidence-based precautionary rules which have made air travel the second-safest transport mode in existence .
However, efforts to provide mobile phone cells on modern aircraft which are certified safe have also flagged on many carriers, because they are required to overfly countries whose non-evidence-based regulatory requirements prevent it (chiefly China and the US, although US carriers do at least provide ground-cell-based wifi domestically). So online internet connectivity is a painful process confined to a few carriers, where it generally doesn’t work very well. Entirely because of dumb, non-evidence-based safety theatre.
Security theatre, meanwhile, is the one thing which makes short-haul flying unequivocally worse than 15 years ago, despite the immense improvements in the in-flight experience. The only thing which can prevent a terrorist attack on a flight is intelligence on terrorist groups. If a terrorist gets anywhere near an aircraft, that is an epic and terrible failure in security policy on a par with letting him blow the damn thing up – which, in any case, he almost certainly will be able to do despite the security theatre currently in place.
When a country is ruled by ignorant fuckwits and its security agencies are incompetent, as with the USA in 2001, evidence which would have got the 9/11 gang arrested even by the Keystone Kops long before any attack took place is ignored, terrorists gain access to planes, and terrible things happen. This is followed (hopefully) by improvements in intelligence, and (certainly, because people are stupid) by additional useless security theatre.
This is why getting a plane to America is now even more unpleasant than it used to be. It’s why you can’t take nail clippers on a plane, despite the fact that even McGyver could do no more harm with them than his nails. Even the US TSA floated the idea of resisting the ban on small pointy objects in 2013, on the grounds of its obvious uselessness, only to be shot down by grandstanding politicians screaming TERRORISM!!!!!.
When a country is not and its security agencies are not, as with the UK in 2006, a major terrorist gang gets intercepted and arrested long before they get anywhere near an aircraft with their ridiculous plot , and nothing bad happens at all. This is followed (hopefully) by improvements in intelligence, and (certainly, because people are stupid) by additional useless security theatre.
Which is why you  now need to stick your tubes of piles and herpes ointment in a transparent bag for public viewing, drink breast milk in front of random strangers, and pay $6 for a bottle of water airside. It’s why – if flying to the US or Australia – you can’t even buy duty free gin in the departure airport (or are forced to check it as cargo and hope it turns up in some random corner of the arrival airport within a few hours of your luggage).
As with safety theatre rules, security theatre rules don’t apply consistently across countries, because they are all made-up bullshit. If there were any need for them, they would be universal. For any rule which does apply universally – like, say, the transport of lithium batteries in hold luggage, or the prohibition on firearms in the cabin – this reflects the fact that it is evidence-based.
I’m not arguing that we should compromise on safety for the sake of convenience . But if every airline, airport and regulator worldwide adopted EU rules on electronic devices on all aircraft (they’re fine), RF devices on tested aircraft (they’re fine), and Hong Kong’s rules on liquids, belts, and shoes (they’re fine), then flying would be a better experience, and the level of public safety would not be diminished at all.
Instead, for the sake of nothing but appeasing ignorant morons, we still have to arrive two hours early for a plane in order to queue endlessly whilst someone’s grandma gets interrogated over the forgotten nail clippers and syrup of prunes in her handbag.
 BA and Ryanair, who represent a decent cross-section. Probably there are some who don’t.
 Cathay Pacific and Qantas, likewise.
 Rail is safest, obviously.
 The plan would have failed due to its physical impossibility even had the plotters made it onto a plane – at best, the leaders could have burned their own dicks off, like the Nigerian gentleman whose Christmas 2009 was even worse than mine. Nonetheless, I accept that preventing people from burning their own dicks off on aeroplanes is for the best.
 Yes, you, specifically. You do all of these things. I know you. I know where you live.
 This is an argument I am happy to make in general, but I’m not using it in this piece.
Something which gets neglected by most travel writers – I think because long-haul economy-class flying is inherently a bit shit – is the immense extent to which the actually-flying bits of the long-haul rigmarole have improved over the last 15 years. The pre- and post-flying bits have worsened, of course, which makes short-haul flight far, far worse, but that’s a story for another piece.
At the turn of the millennium, by no means all planes flown by serious airlines even had seat-back in-flight entertainment (IFE). The last time I flew long-haul on a BA plane with only ceiling CRT screens was in 2002; the last time I flew long-haul on a US carrier (who count as somewhere between top-tier and third-world) which had them was in 2004. Surprisingly, the last time I ever flew long-haul without seat-back entertainment was on Air Canada in 2008.
But back then, even seat-back IFE was shit. You had perhaps eight channels playing on a continuous loop, so once you’d watched a film, you were stuck with whatever was next on the channel for 90 minutes until the loop ended, or joining something else completely halfway through. So even if there were channels featuring things you might reasonably want to watch, it was still a frustrating process. The same was true for music: at best, there might be one radio station vaguely to your taste, which repeated every two hours.
If you had a decent laptop, it’d be twice the size of your seat tray and would have a battery life of an hour or two. There were no power sockets in economy. If you were ridiculously dedicated to work, you might bring a second battery, taking your laptopping time up to a grand total of three hours. The concept of doing anything other than work was fairly ridiculous, not least because downloading films in the first place would have taken you all month and most of your disk space.
So you were often left with books, which are obviously a great medium, but a bit of a pain in the arse to lug around, especially if flying 20 hours for a two-week trip away.
Compare all of this with now, where any half-decent carrier has a video-on-demand system. As I’ve discovered on this Cathay Pacific flight, any carrier which isn’t from an English-as-first-language country [*] will end up with a fairly average range of videos to watch. Qantas are exceptionally good at VOD programming. BA and Virgin aren’t bad. But even Malaysian Airlines has enough to keep you occupied for 12 hours if you don’t mind watching HBO re-runs (and come on, there are worse ways to spend 12 hours).
If you do object to HBO, you also most likely have a Kindle with every book you own on it, a tablet or small-form laptop onto which you’ve pre-loaded your own favourite TV shows, music and online long-reads to catch up on, and you have access to AC and USB power sockets. The only thing you’re missing is the internet (unless you’re on Emirates, in which case you have all the fun of 1998-era dial-up internet, or above the continental US on a domestic flight). Noise cancelling headphones cost under $50.
And if you’re on an A380 or B787, newer thin-material seat designs, airflow systems and lighting systems mean that you can pack more people in without making legroom worse than it was in a 2000-era 747-400, you can breathe better and feel less groggy, and you’re subjected to lighting patterns designed to maximise sleep and wakefulness and minimise jetlag.
Don’t get me wrong. We’re not built to sleep in upright seats, and once a flight goes over the nine-hour mark even a Broadwalk Empire marathon starts to lose its appeal. Economy-class flying is still more of a chore than a joy; otherwise nobody would pay the price of a car to travel in the premium classes. And the improvement is largely down to wider improvements in the electronics industry, rather than anything specifically to do with carriers improving.
But that doesn’t negate my point. Long-haul flying is a hell of a lot better than it was when I was a callow youth – even though back then I was able to drink solidly through the whole thing and not worry about the destination consequences of hangover, no sleep and horrible back pain…
[*] insert your preferred first language if not English.
There is much wailing and gnashing of teeth over the news that Toyota will follow its fellow foreign-owned carmakers GM Holden, Ford and Mitsubishi in ending car assembly in Australia. But at least from an economic point of view, there shouldn’t be.
The basic problem for the Australian car industry has nothing to do with unions or pay rates, despite the government’s outrageous lies to the contrary. It’s far simpler than that. Australia is a country of 23 million people, with a new car market of just under a million a year, while car manufacturing is an industry with massive economies of scale where the most efficient factories have annual production levels of more than half a million a year.
Toyota Australia employs 2,500 people to produce 100,000 cars year, which is about 40 cars per worker. In the rest of the industry (as of now-ish, before Ford and Holden begin their shutdown), 1200. So carmaking in Australia employs 6600 people directly, for a total of 220,000 cars per year, or about 33 cars per worker (as you might have expected, Holden and Ford are less efficient than Toyota).
Scaling the supply chain in line with NMMUK employment (i.e. assuming Australian suppliers are as inefficient as Australian carmakers) would suggest that about 25,000 supply jobs will be lost when the Australian industry shuts down. Scaling it in line with Nissan output (i.e. assuming Australian suppliers are just as efficient as UK suppliers), you’d assume about 10,000 jobs will be lost.
These 21,000 jobs are being lost because the Australian car market isn’t large enough to support an efficient domestic carmaking industry, even if every single car Australians bought were manufactured domestically. A large, remote, resource-rich and wealthy island of 23 million people has more productive uses of time and resources than subsidising industries that require greater scale than can possibly be achieved domestically, and where we’ve never excelled at exporting. Economically speaking, we would do better to buy new cars from South Korea, import second-hand cars from Japan, redirect the labour and capital involved towards things we are good at, and spend the subsidy money on things that we actually need.
But whence will come the V8 Supercars of the future?
Economics isn’t the whole story. It’s possible that having a carmaking industry is so important to Australia’s wider culture and self-image that it is worth protecting, whether by direct taxpayer subsidy or by higher import tariffs (which are a tax on everyone who buys a car, whether it is domestic or foreign-made). If Australia agrees as a society that this is the case, then continuing to subsidise carmaking is a completely legitimate decision – just as is the case for the large subsidies that go to farmers.
But if you think that the car industry has closed because wage rates are too high, you are wrong, and you believe the toxic bullshit the Liberals are seeking to peddle in order to erode everyone’s employment conditions. If you think that the decision to stop subsidising inefficient lossmaking industries will cost Australia money, you are wrong, and you believe the economically illiterate bullshit Labor is seeking to peddle in order to bash the Liberals. The only grounds on which to support a domestic car industry are sentimental grounds.
[*] Wider estimates of up to 200,000 job losses have been published in various ‘newspapers’. These are lies.
The death of Great Train Robber (which, rather like the Holy Roman Empire, is a descriptive phrase that falls down on all possible counts) Ronnie Biggs has led to some predictable, polarised reactions: the geezer-ish “he was a fackin’ legend!”, and the handwringing “but he was a violent cwiminal!”.
Both are fairly stupid.
Ronnie Biggs certainly wasn’t a great robber. By 1963, he had a record for a couple of inept property crimes, but had been clean for a few years. He asked his (more seriously and more competently criminal) friend Jack Reynolds for a loan; as a favour, Reynolds cut him into the mail train robbery he was planning.
Biggs had a friend who claimed to know how to drive trains; Biggs’s role was to escort his friend to the scene of the crime so that he could drive the train. It turned out that Biggs’s friend had no idea how to drive the train at all. The two of them were instead sent off in disgrace to count the money.
At the same time, going against the plan that Reynolds had devised and the conspirators had agreed to, a thug probably going by the alias of Alf Thomas  bashed train driver Jack Mills repeatedly in the head with an iron bar. Mills suffered a black eye, bruising, concussion, and what we’d now call PTSD. After trying to go back to work and not being able to concentrate, Mills took early retirement, and not long afterwards developed fatal leukaemia .
Biggs was a man who signed up for an awesome, audacious and non-violent (while obviously, extremely criminal) plan which he had no role in formulating. He screwed up his only actual job in the plan, quite possibly contributing to the failure of the wider exercise. He was an incompetent petty thief out of his depth, not a legend.
Biggs was not a man who was morally culpable for the beating of Jack Mills by someone he’d never previously met, against the plan that he’d signed up for, whilst he was somewhere else. He was an incompetent petty thief out of his depth, not a violent thug.
 I’m informed by Archie V on Twitter that the conspirator named James Hussey confessed on his deathbed to assaulting Mills, although the accuracy of his confession is questioned .
 Which, despite the claims sometimes made by the handwringers, is not caused by a blow to the head.
 It’s considered likely that the conspirator known as Alf Thomas was later allowed to escape by the police, in exchange for returning a proportion of his share of the money. Hussey was jailed for the robbery, but had not been accused of the assault before he made his confession.
The average woman weighs less than the average man, as does the average child. This is undeniably true.
By far the most important cost for the average aeroplane flight is fuel, which is directly dependent on total take-off weight. This is undeniably true.
The average woman joining a passenger aeroplane flight carries more luggage than the average man, and families with kids carry more luggage still. This is also undeniably true, as is is the fact that women are still far more likely to be primary carers.
So the current model under which fuel costs for passenger aeroplanes are based on the total weight of passengers, but excess charges for luggage are based solely on luggage weight irrespective of passenger weight, is grossly sexist on aggregate. Small people with luggage (overwhelmingly women) are subsidising big people without luggage (overwhelmingly men).
Now, you could argue that this is an unavoidable consequence of micro-level decisions and not deliberate discrimination, but if you did you’d be an oaf.
Laws in western countries agree, rightly, that an establishment that makes decisions that end up with men being overwhelmingly privileged and women being overwhelmingly shafted, despite those decisions not being expressly gender-based, is a discriminatory establishment.
I can’t see how this could possibly fail to apply to airlines. The sooner everyone joins up with Samoan Airlines and the weight scheme kicks in, the better…
I’ve not abandoned this blog – just, whilst struggling with painful paid work on the kind of social media and consumer goods marketing work I tend to post here (it’s rewarding and worthwhile paid work, but whilst working on it for pay I’m not so keen to blog on it for no money), most of what I post tends towards the political, so I tend to post it on Liberal Conspiracy. If you’ve missed out, my work for LC is here. I’m also on Twitter a lot, and am slightly disturbed to see from my tweet figures that I’ve written more than a book’s worth of Tweets. Oh, and also I was blogging as part of my MA course – I should really repost those blogs here.
However, this current topic is definitely unsuited to any of those media. Roger Ford, who’s probably the best railway journalist working in the UK at the moment (sorry Nick!) writes a great technical column in Modern Railways magazine, and sends out a monthly email based on his work for the mag. But although he’s a brilliant rail industry writer, he’s not a great finance industry writer. And so he’s fallen for an insiduous and silly myth spread by the Telegraph’s Alistair Osborne in this piece.
The last UK government put out a tender for 1,200 new train carriages to be built for the Thameslink project, which links southeast London and its commuter belt with north London and its commuter belt via upgraded lines running from London Bridge to St Pancras via Farringdon. The tender didn’t specify any British-built content for the trains, and was won by Siemens with trains that will be built in Germany rather than Bombardier with trains that would’ve been built in Derby. Siemens bid cheaper than Bombardier, and the government wasn’t allowed to take British jobs into account because a specification of British jobs wasn’t part of the invitation to tender.
This created anger, especially as Bombardier used the announcement as a catalyst to announce that it’d sack two thirds of its contract staff and 25% of its permanent staff in UK train-building, because it doesn’t have any UK train orders after it’s finished building new London Underground trains. Europhobics used it as an opportunity to attack the EU’s anti-corruption rules; more sensible people used it as an opportunity to attack the previous government for failing to specify British jobs (as would’ve been allowed by EU rules) in its invitation to tender.
Which is fair comment. A related question, though, is why – as the biggest supplier of trains to the UK railway network over the last five years – is why Bombardier couldn’t outbid Siemens to the contract. Osborne’s claim was that this was a reflection on Bombardier’s credit rating relative to Siemens. Siemens’s debt is rated at A+ by Standard & Poor’s, compared with Bombardier’s BB+ rating, and the contract was to provide the trains on a leasing basis rather than to buy them outright. He says that because it costs Bombardier more to borrow (credit ratings are basically like individual credit scores, so A+ means you get a cheaper loan than BB+), it would’ve cost Bombardier 1.5% more than Siemens per year in interest costs to supply the trains than Siemens, so no bloody wonder Siemens won.
However, this is rubbish. Neither Bombardier nor Siemens bid on their own. Bombardier teamed up with Deutsche Bank, services outsourcing company Serco, PFI investment company Amber Infrastructure and SMBC Leasing for its bid. Siemens teamed up with PFI investment company InnisFree and private equity company 3i Infrastructure. In neither case would the train manufacturer have put up the money for the trains – in Bombardier’s case it would have been SMBC (which has an A+ rating, befitting its position as one of Japan’s least bankrupt banks), and Siemens’s case, it would have been its own corporate finance division (A+) plus 3i Infrastructure (BBB+). For the Bombardier consortium, the money would have been borrowed against SMBC’s account; for the Siemens consortium, it would have been borrowed against Siemens’s account – they would both have had an A+ credit rating.
So, in other words, the Bombardier consortium and the 3i consortium would have had the same financing costs. The only difference is that, had the bid been successful, Siemens’s credit rating and ownership of a finance company would have allowed it to take a higher proportion of the profits. The difference between Bombardier and Siemens based on credit rating is that Bombardier wouldn’t have been able to take an additional slice of the profits based on the financing part of the project, and therefore had to bring in an external partner for the financing. But that’s about how the profits from winning the bid are shared, not about the cost of delivering the trains.
The same EU rules that ban the government from choosing Bombardier because it’s designed and built in Derby also ban the bid from being awarded on a cross-subsidy basis from companies’ finance arms compared to their building arms. In other words, Siemens’s assessment of the cost of building the trains had to be on the same basis as Bombardier’s, and it wasn’t allowed to pretend that the trains were cheaper and offset that money on the basis of any financing that its finance company did. So there’s no sane reason why this should have made the Bombardier consortium’s bid more expensive than the Siemens bid.
In short, either Siemens overbid (presumably because it was desperate to keep a foothold in UK rail, having lost most major recent contracts to Bombardier), or Bombardier underbid (either because it thought the government would somehow dodge the EU rules and pick the British-based trains, or because it couldn’t really be bothered and was looking for an excuse to cut Derby anyway). The financing problem is not important.
Since I’ve been blethering on about aviation, that’s the quiz topic:
1) Which single airport (domestic or international) is the most popular passenger destination for people flying out of Boston Logan Airport?
2) Where was Air Berlin headquartered for the first 12 years of its existence?
3) Out of the top 40 international destination airports flown from the US, which five have the highest percentage of passengers flying there on US airlines? (ie as close as possible to “100% of people who fly there use Delta, United, AA, Southwest, etc”)?
4) Out of the top 40 international destination airports flown from the US, which five have the lowest percentage of passengers flying there on US airlines (ie as close as possible to “100% of people who fly there use Aeroflot / Zimbabwe Airlines”)?
5) From which airport in the EU can you catch a direct, non-stop flight to Australia?
From an occasional correspondent who knows about this sort of thing:
RR engines do not like oil in the wrong places because it may stop the air-cooled turbine blades being cooled
All RR “B” checks are supposed to include a look for oil in the wrong places
Qantas seem less good at finding it than Singapore Airlines or Lufthansa
There is a problem with wear on some A380 engine components which is why the need for checks was highlighted in August
Qantas are more likely to have a problem because they operate their A380’s with higher thrust ratings than SQ or LH
The Trent 900 is the first RR engine to introduce contra-rotation, where one of its three shafts runs in the opposite direction to the other two
That massively increases the entertainment value of, say, bits of one broken turbine meeting a turbine rotating in the opposite direction
Since Qantas engineers have now looked at all their T900 engines jointly with RR engineers they have found two more with oil where oil shouldn’t be
Which begs the question why they didn’t find it before…
His words, not mine. Although, much as I respect Ben Sandilands, this is the most convincing analysis I’ve read. Apart from the misuse of “begs the question”, which is unforgiveable.