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Royal Mail Steam Packet Company Kylsant Empire Part 5

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Contents
  • 1 The futile purchase of Oceanic Steam Navigation (White Star)
  • 2 Oceanic Steam Navigation Co
  • 3 White Star Line Ltd
  • 4 Shaw, Savill & Albion Co Ltd
  • 5 George Thompson & Co Ltd (Aberdeen Line)
  • 6 Transatlantic Rationalisation
  • 7 Oceanic Superliner Order
  • 8 The Continuing Incompetence of Harland & Wolf's Management
  • 9 The Final Corporate Acquisitions
  • 10 The First Loan Repayment Default
  • 11 The Beginning of the End
  • 12 Bibliography
  • 13 Photographs
The futile purchase of Oceanic Steam Navigation (White Star)[edit]

Owen Cosby Philipps was appointed chairman of the moribund Royal Mail Steam Packet Co in 1903. By the outbreak of the First World War, he had transformed the Company into the flagship of a dynamic leading British shipping group. Most of this expansion was undertaken in collaboration with his friend and close business associate, William James Pirrie of the Belfast shipbuilder, Harland & Wolff (H&W). The story of the development of this remarkable relationship is told in Parts 1 and 2 of this history. The expansion of the Royal Mail group was of immense benefit to H&W but Pirrie's greatest coup was persuading Philipps to join him in taking financial control of H&W in 1918. Part 3 covers the immediate post-war years, during which period Pirrie was elevated to the rank of Viscount and Philipps became Baron Kylsant, of Carmarthen and Amroth. It also relates the extent to which H&W became an increasing burden upon the finances of Royal Mail. Part 4 takes the history onward from Pirrie's death during a trip to South America in June 1924. Kylsant took over the chairmanship of H&W and discovered that he was in charge of a financial nightmare. The Royal Mail group became focused upon keeping the monstrously overgrown H&W part of its empire alive, assuming ever increasing quantities of debt in the process.

The overwhelming majority of the major shipbuilding orders placed with H&W during this period came from the Royal Mail group and Oceanic Steam Navigation Co the company that was invariably known as the White Star Line. Oceanic and H&W had a very close relationship from the 1870s. H&W built the first Oceanic liner, which was the first liner ever built by H&W. Every subsequent new-built OSN liner was ordered from H&W. The relationship is referred to in each of the earlier parts of this history. When the owners of Oceanic announced in mid 1926 that they were terminating their relationship with H&W, Kylsant recklessly bought Oceanic for the very high price of ÂŁ7 million to ensure it remained a H&W client. As will be seen from this section, many of Oceanic's ships were near the end of their life or were unsuited for its operations, but neither Oceanic, nor Royal Mail had the funds needed to replace the obsolete units in the fleet.

Oceanic Steam Navigation Co[edit]

As related in Part 1, at the turn of the century the American railroad owner J Pierpont Morgan attempted to control the pricing of transatlantic travel to the USA by acquire as many as possible of the major transatlantic shipping lines through his International Mercantile Marine Company (IMMC). At this time Pirrie was already in control of H&W. In return for an exclusive ship building and repairing contract, the shipyard made a substantial investment in the Morgan company and Pirie became the main negotiator for IMMC. It was through Pirrie that IMMC acquired Oceanic in 1902.

In addition to Oceanic, the major wholly owned IMMC companies were American, Atlantic Transport, Dominion, Leyland and Red Star. Hamburg Amerika and Norddeutscher Lloyd were independent partners and Holland America was jointly controlled. The failure of IMMC's attempt to acquire Cunard prevented Morgan from establishing his immigration monopoly.

Oceanic was the premier IMMC owned company and to enhance its position in the transatlantic market, three very large liners ("Olympic", "Titanic" and "Britannic") were ordered from H&W. The 45,334 grt "Olympic" entered service in 1911, by which time the emigrant boom was reducing. She carried 2,431 passengers but only 1,022 emigrants. As is well known, "Titanic" sailed on her maiden voyage in April 1912 with 1,308 passengers (only 51% of her capacity) and 898 crew. She sank with the loss of 1,503 lives, after colliding with an iceberg. This tragedy had a devastating impact on the business and White Star had not recovered before WW1 broke out, when the brand-new "Britannic" was also lost.

The IMMC group lost direction and its difficulties increased after Morgan's death in 1913 (See Part 2). In 1919 the Morgan organisation decided to sell IMMC and a British consortium agreed to buy the entire group, except its American interests, for ÂŁ27 million. Unfortunately US President Wilson vetoed the sale. This decision resulted in IMMC being subsequently run on a shoestring.

A further severe post-war problem was the United States Immigration Act of June 1921, which restricted the annual intake of immigrants to 3% of the US population, as recorded in the 1910 census, segregated original nationality by nationality. This reduced the total number of European immigrants from about 800,000 to 360,000 per annum for the years 1921 to 1923 but the limit was further tightened to 160,000 in 1924. These restrictions had a devastating effect on transatlantic passenger lines, especially IMMC, which was unable to adapt its fleets because of its very limited capital expenditure budget. In 1926 Furness Withy offered to buy Oceanic for ÂŁ3.5 million, but the British General Strike halted negotiations, allowing Kylsant to buy Oceanic for a knock-out ÂŁ7 million, with payment of part of the price being spread over ten years. Including interest on the deferred payments the total cost was ÂŁ7.9 million.

White Star Line Ltd[edit]

The mechanism that Kylsant devised for the purchase was to create a new ÂŁ9 million company, White Star Line Ltd as the vehicle for the transaction. He issued ÂŁ5 million White Star 6.5% Preference Shares to the public, with the dividend guaranteed by Royal Mail Steam Packet Co. A further 4 million ÂŁ1 ordinary shares were issued to other group companies, including Royal Mail, with only 10% of the nominal value paid-up. Kylsant's concept was that the balance of the nominal value would be called-up over the next 10 years to meet the deferred payments due to IMMC. The crucial flaw in his plan was that legally the entire unpaid amount could be demanded by the Company at any time. Provided the Preference dividend was paid in full, the publically held Preference Shares had no voting rights, but if a dividend payment was missed the shares became fully enfranchised. In which event they could, in theory, stabilize White Star by pushing through a demand for immediate payment of the amount that was still outstanding on the White Star Ordinary Shares. The Royal Mail group companies had been so impoverished by H&W that very few had sufficient cash reserves to meet such a call. If they failed their White Star shares would be forfeited.

In addition to owning the ships operated as White Star Line, Oceanic controlled Shaw, Savill & Albion Co Ltd (SSA) by holding the majority of its Management Shares and 44% of its Ordinary Shares, with Sir John Ellerman owning the remainder. Oceanic also owned 60% of George Thompson & Co Ltd (who traded as Aberdeen Line), while SSA held the remaining 40%. As a result of the acquisition of these three companies on 1 January 2007, the Royal Mail group became the largest shipowners, as well as being the largest shipbuilders in the world.

Oceanic Steam Navigation Co (White Star)

When Kylsant acquired Oceanic its main operations were the Southampton - New York mail service; Liverpool - New York; Liverpool - Canada; London or Liverpool - Australia routes. Its major vessels are listed below: -

  • Southampton - New York

One of the major factors that created the post-war slump was the Allies insistence that the Central Powers pay war reparations. The immediate availability of ex-German tonnage had an obvious impact upon the requirement for new vessels. By far the most important of the appreciable number of German ships received by the British Government were the two HAPAG transatlantic giants, Bismarck and Imperator. Cunard and White Star made a joint purchase to avoid a bidding war, but with each line taking full control of their respective ship. White Star acquired the incomplete Bismarck and placed a contract with H&W for her completion in Germany by Blohm & Voss. She was the largest ship in the world when she was delivered to Liverpool and renamed Majestic in April 1922.

Majestic was by far the largest and fastest liner ever owned by Oceanic. During one crossing in 1923 she carried 2,625 passengers, the Company's post-war record. In September 1923 she made a crossing at an average speed of 24.75 knots and the following year recorded a crossing at 25 knots. Only Cunard's Mauretania was faster. Majestic was not without problems however. In 1924 a crack developed on one side of her hull amidships. This was plated over and the hull strengthened, but the quality of her construction was always suspect, which contributed to her early retirement in 1936.

Vehicle Ship Ocean liner Boat Watercraft


Photo 1: Majestic - 56,551 GRT; quadruple screw, four Parsons-B&V direct drive steam turbines, 86,000 shp = 23.5 knots service speed, oil burning; 750 First, 545 Second and 850 Third Class Passengers; 1000 Crew.

The second ex-German ship employed on the premier White Star service was really a large intermediate liner, but she was all that Oceanic could afford. Homeric was launched at the F Schichau yard in Danzig in December 1913 as Columbus for Norddeutscher Lloyd. She was 80% complete when construction ceased at the outbreak of war. She was allocated to Britain under the provisions of the treaty of Versailles and purchased by Oceanic for completion in Danzig under H&W supervision. Homeric entered service in January 1922, but with a service speed of only 18 knots was painfully slow. Her steadiness in rough seas was however, much admired by the travelling public.

During the winter of 1923/24 she received a major refit from H&W, including conversion to oil-firing and improvements to her engines, which increased her service speed to 19.5 knots. It is interesting to note that her sister remained with Norddeutscher Lloyd (she was also named Columbus) and was refitted with steam turbines in 1929, which modification increased her service speed to 22 knots.

Vehicle Ship Ocean liner Boat Watercraft


Photo 2: Homeric - 34,351 GRT; twin screw, two 4 cylinder triple expansion steam engines, 32,000 IHP = 19.5 knots service speed, oil burning; 529 First, 487 Second and 1,750 Third Class Passengers; 625 Crew.

Olympic was the lead ship and the only survivor of three pre-war transatlantic superliners built by H&W for Oceanic. Her sister Titanic famously sank in mid-Atlantic after colliding with an iceberg in 1912, while the third ship, Britannic sank in the Mediterranean in 1916 after striking a mine. Olympic was extensively refitted and her boilers converted to oil by H&W in 1919.

Vehicle Ocean liner Ship Boat Royal mail ship


Photo 3: Olympic - 45,324 GRT; triple screw, two 4 cylinder triple expansion steam engines plus one low-pressure steam turbine driving the centre shaft, 51,000 IHP = 21 knots service speed, oil burning; 750 First, 500 Second and 1,150 Third Class Passengers; 786 Crew.

  • Liverpool - New York

During the nineteenth century Liverpool was the primary departure port for UK - US passenger services. In the first decade of the twentieth century Southampton emerged as serious rival and by the 1920s the importance of the Liverpool service was steadily declining. In 1927 the White Star Liverpool - New York passenger service was operated by its ships that were popularly known as "The Big Four". When the Celtic class was introduced at the start of the century, they were the largest ships in the world, but by 1927 they had become completely eclipsed. They were built on the design concept of great size and comfort allied to moderate speed. Their great cargo capacity meant that turnaround in the terminal ports required a week. There were minor differences between the four ships. Celtic entered service in 1901; Cedric in 1903; Baltic in 1904 and Adriatic in 1907.

Vehicle Boat Ship Watercraft Ocean liner


Photo 4: Adriatic - 24,541 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 17,000 IHP = 17 knots service speed, coal burning; 400 First, 460 Second and 1,320 Third Class Passengers.

Vehicle Ship Boat Ocean liner Watercraft


Photo 5: Baltic - 23,876 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 15,000 IHP = 16 knots service speed, coal burning; 425 First, 450 Second and 1,000 Third Class Passengers.

Ship Passenger ship Vehicle Ocean liner Boat


Photo 6: Cedric - 21,035 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 15,000 IHP = 16 knots service speed, coal burning; 347 First, 200 Second and 1,000 Third Class Passengers.

Ship Vehicle Ocean liner Royal mail ship Boat


Photo 7: Celtic - 20,904 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 14,000 IHP = 16 knots service speed, coal burning; 350 First, 250 Second and 1,000 Third Class Passengers.

  • Liverpool - Canada

In January 1927, Oceanic was awaiting the delivery of the long delayed Laurentic for its "White Star Line (Canadian Service)". In the meanwhile it was employing Doric (1922) and her Dominion Line near sister Regina (built in 1917 as a cargo ship - 1922 completed as a passenger liner) plus Megantic (1909).

Vehicle Ship Passenger ship Ocean liner Watercraft


Photo 8: Doric - 16,484 GRT; twin screw, two H&W Brown-Curtis geared steam turbines, 9,000 SHP = 15 knots service speed, coal burning; 600 Cabin Class and 1,700 Third Class Passengers, 350 Crew.

Vehicle Ship Ocean liner Boat Watercraft


Photo 9: Regina - 16,314 GRT; triple screw, two 3 cylinder triple expansion steam engines plus one low-pressure steam turbine driving the centre shaft, 12,000 IHP = 15 knots service speed, coal burning; 631 Cabin Class and 1,824 Third Class Passengers, 280 Crew.

Vehicle Ocean liner Ship Boat Passenger ship


Photo 10: Megantic - 14,878 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 11,000 IHP = 16 knots service speed, coal burning; 452 Cabin Class, 260 Second Class and 1,824 Third Class Passengers.

  • UK - Australia

In 1921/22 the British shipping companies operating passenger/emigrant/refrigerated cargo services from London or Liverpool to Australia via the Cape were thrown into disarray by the arrival of the new Government backed Australian Commonwealth Line of Steamers. The Australian organisation targeted the same market using, five new passenger liners and two cargo ships routed via Suez. Although the Australians made colossal operating losses, they reduced the traffic available to the services via the Cape and severely undermined their viability. As defensive measure the White Star, Aberdeen and Blue Funnel Joint Service was formed, reducing the tonnage employed on the Cape route. In January 1927, Oceanic was operating Vedic (1918), Gallic (1918), Delphic (1918), Ceramic (1913), Suevic (1901), Runic (1901) and Medic (1899) on the service.

Vehicle Boat Ship Watercraft Depot ship


Photo 11: Vedic - 9,302 GRT; twin screw, four H&W Brown-Curtis geared steam turbines, 6,000 SHP = 14 knots service speed, coal burning; 1,250 Third Class Passengers.

Vehicle Watercraft Ship Boat Armored cruiser


Photo 12: Gallic - 7,914 GRT; twin screw, two 3 cylinder triple expansion steam engines, 5,500 IHP = 12.5 knots service speed, coal burning. Cargo only

Vehicle Ship Boat Watercraft Depot ship


Photo 13: Delphic - 8,006 GRT; twin screw, two 3 cylinder triple expansion steam engines, 5,500 IHP = 12.5 knots service speed, coal burning. Cargo only

Vehicle Boat Ship Watercraft Ocean liner


Photo 14: Ceramic - 18,481 GRT; triple screw, two 3 cylinder triple expansion steam engines plus one low-pressure steam turbine driving the centre shaft, 9,000 IHP = 15 knots service speed, coal burning; 600 Third Class Passengers.

Vehicle Boat Ship Watercraft Depot ship


Photo 15: Suevic - 12,531 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 5,000 IHP = 13.5 knots service speed, coal burning; 266 Cabin Class Passengers.

Vehicle Boat Ship Watercraft Protected cruiser


Photo 16: Runic - 12,482 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 5,000 IHP = 13.5 knots service speed, coal burning; 266 Cabin Class Passengers.

Vehicle Watercraft Boat Ship Sailing ship


Photo 17: Medic - 11,985 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 5,000 IHP = 13.5 knots service speed, coal burning; 260 Cabin Class Passengers.

Medic's sister Persic (1899) was laid-up in Liverpool with severe engine wear that was beyond economical repair for a ship of her age. She was sold for scrap in July 1927.

  • Charters

The liner Arabic was built For Norddeutscher Lloyd in 1909 as Berlin. She was surrendered to UK and bought from the Shipping Controller by Oceanic in 1920. In October 1926 she was placed on charter to Red Star and remained on their Antwerp - New York service until 1930.

Ocean liner Ship Passenger ship Vehicle Boat


Photo 18: Arabic - 16,786 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 16,000 IHP = 17.5 knots service speed, coal burning; 500 Cabin Class and 1,200 Second Class Passengers.

In addition to Arabic, Oceanic also had three liners operating on the Shaw, Savill & Albion passenger service from London to New Zealand via Panama. These were Ionic (1903), Corinthic (1902) and Athenic (1902). (See below)

Shaw, Savill & Albion Co Ltd[edit]

The UK-New Zealand trade was one of the last routes to convert from sail to steam. Early steamships needed to carry so much coal fuel for the great distance from New Zealand to the first bunkering facility in the Falkland Islands, that steam service was unprofitable.

Two British companies provided most of the sailing ships. These were Shaw, Savill & Co (founded in London in 1858 by Robert Shaw and Walter Savill) and Patrick Henderson's Albion Shipping Co (founded in Glasgow in 1864). Both companies mainly acted as brokers, advertising for passengers and cargoes for New Zealand and utilising chartered ships. Over the years the two companies bought the best of the chartered ships, especially ships with 'tween decks that were suitable for the carriage of emigrants.In 1873 the New Zealand Shipping Co was formed by local settlers. From 1879 Shaw, Savill and NZSC jointly financed pioneer steamship voyages (without financial success), while in 1882 NZSC successfully converted a sailing ship to carry a cargo of frozen meat to UK. These experiments produced a strong political campaign in New Zealand for a refrigerated steamer service to UK. This resulted in a joint Mail Contract being awarded to Shaw, Savill and NZSC in 1883.

This led to the 1883 amalgamation of the two British companies as Shaw, Savill & Albion Co Ltd with a combined fleet of 31 sailing ships. (It was 1913 before the last sailing ship was sold) SSA needed five mail ships. SSA built two liners and entered into a joint-venture agreement with White Star covering three steamers that were surplus in its fleet. This became a permanent arrangement with White Star providing passenger ships under SSA management.

  • UK - New Zealand Mail Service

On 1 January 1927 the SSA mail fleet consisted of the steamers Tamaroa and Mataroa (Both built in 1922 and chartered from Aberdeen - see below) and three Oceanic ships - Ionic (1903) Corinthic (1902) and Athenic (1902). As Tamaroa and Mataroa only arrived on charter in September and December 1926, the SSA fleet also included their predecessors, Tainui (1908) and Arawa (1906), which remained in service as supplemental vessels.

Vehicle Boat Ship Watercraft Troopship


Photo 19: Tamaroa - 12,354 GRT; twin screw, two H&W Brown-Curtis geared steam turbines, 5,200 SHP = 15 knots service speed, oil burning; 131 First Class and 422 Third Class Passengers.

Vehicle Ship Boat Watercraft Ocean liner


Photo 20: Mataroa - 12,333 GRT; twin screw, two H&W Brown-Curtis geared steam turbines, 5,200 SHP = 15 knots service speed, oil burning; 131 First Class and 422 Third Class Passengers.

Vehicle Boat Watercraft Ship Cargo ship


Photo 21: Ionic - 12,232 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 5,000 IHP = 14 knots service speed, coal burning; 121 First Class, 117 Second Class and 450 Third Class Passengers.

Vehicle Ship Ocean liner Boat Royal mail ship


Photo 22: Corinthic - 12,231 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 5,000 IHP = 14 knots service speed, coal burning; 121 First Class, 117 Second Class and 450 Third Class Passengers.

Vehicle Ship Royal mail ship Watercraft Boat


Photo 23: Athenic - 12,234 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 5,000 IHP = 14 knots service speed, coal burning; 121 First Class, 117 Second Class and 450 Third Class Passengers.

Vehicle Ship Ocean liner Passenger ship Watercraft


Photo 24: Tainui - 9,957 GRT; twin screw, two 3 cylinder triple expansion steam engines, 1,086 NHP = 14 knots service speed, coal burning; 40 First Class, 75 Second Class and 400 Third Class Passengers.

Vehicle Ship Boat Watercraft Ocean liner


Photo 25: Arawa - 9,372 GRT; twin screw, two 3 cylinder triple expansion steam engines, 899 NHP = 14 knots service speed, coal burning; 220 Cabin Class Passengers'

  • UK - New Zealand emigrant and refrigerated ships

In the nineteenth century emigrants travelled to New Zealand in primitive knock-down facilities fitted into the tween-decks of sailing ships. SSA continued to provide the same Spartan facilities when steam ships were introduced onto the route. During the 1920s the number of emigrants declined and this standard of accommodation became increasingly unacceptable. The steerage figures given below are therefore largely theoretical and were rarely utilised in service.

Vehicle Ship Boat Watercraft Depot ship


Photo 26: Matakana (1921) 8,011 GRT, Twin screw coal burning, 12 knots

Tairoa1920 7,983 GRTTwin screw coal burning12 knots
Maimoa1920 8,011GRTTwin screw coal burning12 knots
Otira1919 7,995 GRTTwin screw coal burning12 knots

Vehicle Ship Boat Watercraft Protected cruiser


Photo 27: Mahana (1917) 11,796 GRT, Twin screw coal burning, 13 knots, 12 First Class Passengers

Mahia1917 10,853 GRTTwin screw coal burning13 knots 1,000 Steerage Passengers
Raranga1916 10,040 GRTTwin screw coal burning13 knots 1,000 Steerage Passengers
Pakeha1910 7,899 GRTTwin screw coal burning13 knots 1,000 Steerage Passengers
Rangitira1909 10,118 GRTTwin screw coal burning13 knots 1,000 Steerage Passengers
Kai Ora1907 6,558 GRTTwin screw coal burning13 knots 12 First Class Passengers

Vehicle Boat Ship Watercraft Armored cruiser


Photo 28: Matatua (1904) 6,448 GRT, Twin screw coal burning, 13 knots, 12 First Class Passengers

Mamari19047,062 GRTTwin screw coal burning13 knots12 First Class Passengers

George Thompson & Co Ltd (Aberdeen Line)[edit]

George Thompson & Co Ltd was formed in 1905 to take over the partnership of the same name, which had been in business as ship managers and shipowners since 1825. The firm had built up a fleet of magnificent sailing ships operating under the brand name of Aberdeen Line. They owned the famous Thermopylae (1868), arguably the greatest clipper ship of all time. The firm also became the leading operator of sail passenger ships to Australia and in 1882 began a steamship service to Australia via the Cape. This route was heavily dependent upon emigrant traffic and as explained in the White Star Australia notes above, was very adversely effected by the creation of the hopelessly uneconomic Government backed Australian Commonwealth Line of Steamers. As defensive measure the White Star, Aberdeen and Blue Funnel Joint Service was formed, reducing the tonnage employed on the Cape route. In January 1927 this service employed Thompson's Horatius (1919) Euripides (1914) Demosthenes (1911) Themistocles (1911) and two ships chartered from SSA - Mamilius (1911) and Herminius (1911).

Vehicle Boat Watercraft Ship Convoy rescue ship


Photo 29: Horatius - 7,962 GRT; twin screw, two 3 cylinder triple expansion steam engines, 5,500 IHP = 12 knots service speed, coal burning. Cargo only. Horatius was a G-Type Standard Ship launched by H&W in 1918 as War Priam, which was bought by Oceanic S N Co and renamed Bardic before she was delivered in 1919. On 31 August 1924 she ran aground on the Lizard as shown in the photograph. She came off and was repaired, before being transferred to Aberdeen in 1925 as Hostilius. The name was unpopular and was changed to Horatius in 1926.

Vehicle Ship Steamboat Royal mail ship Ocean liner


Photo 30: Euripides - 14,947 GRT; triple screw, two 3 cylinder triple expansion steam engines plus one low-pressure steam turbine driving the centre shaft, 8,300 IHP = 15 knots service speed, coal burning; 140 First Class, 324 Second Class and 750 Steerage Passengers. Euripedes was transferred to Shaw, Savill & Albion in 1932, refurbished by Hawthorn Leslie on Tyneside and renamed Akaroa. This photograph was taken after she re-entered service.

Vehicle Ship Boat Watercraft Armored cruiser


Photo 31: Demosthenes - 11,223 GRT; triple screw, two 3 cylinder triple expansion steam engines plus one low-pressure steam turbine driving the centre shaft, 6,000 IHP = 14 knots service speed, coal burning; 100 First Class, 250 Second Class Passengers and 750 Steerage Passengers; 150 Crew.

Vehicle Ship Boat Watercraft Royal mail ship


Photo 32: Themistocles - 11,231 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 6,000 IHP = 14 knots service speed, coal burning; 103 First Class, 256 Second Class Passengers and 750 Steerage Passengers; 150 Crew

Vehicle Boat Ship Watercraft Protected cruiser


Photo 33: Herminus - 10,389 GRT; twin screw, two 3 cylinder triple expansion steam engines, 5,600 IHP = 13 knots service speed, coal burning; 6 First Class and 1,000 Steerage Passengers.

Vehicle Boat Ship Watercraft Depot ship


Photo 34: Mamilius - 10,898 GRT; twin screw, two 4 cylinder quadruple expansion steam engines, 596 NHP = 14 knots service speed, coal burning; 6 First Class and 1,000 Steerage Passengers.

Transatlantic Rationalisation[edit]

With the acquisition of the White Star companies the opportunity was taken to rationalise the group's services. The Royal Mail transatlantic passenger service was discontinued releasing its liners. Ohio and Orca were transferred to Oceanic as Albertic and Calgaric respectively for employment on the Liverpool - Canada service, while Orbita and Orduna were resold to PSNCo to run from Liverpool to the West Coast of South America.

Vehicle Ship Boat Ocean liner Watercraft


Photo 35: Albertic

Vehicle Ship Boat Watercraft Ocean liner


Photo 36: Calgaric

Vehicle Boat Ship Watercraft Protected cruiser


Photo 37: Orbita

Vehicle Ship Boat Ocean liner Watercraft


Photo 38: Orduna

Oceanic Superliner Order[edit]

Homeric was far too slow to satisfactorily maintain the White Star transatlantic mail service and to replace her Oceanic S N Co ordered a grand 60,000 ton liner from H&W in 1925, with the intention of naming the new ship Oceanic. H&W extended and strengthened one of its Belfast building berths to build the ship. Unfortunately it proved impossible to finance the ship contract. When Kylsant acquired Oceanic S N Co he immediately initiated efforts to raise the ÂŁ3.5 million to meet the H&W estimated cost of the vessel. Design work was resumed early in 1927 and the order was confirmed the following June, only to be abandoned in 1929 after expending ÂŁ150,000 and the contract replaced by an order for the much more modest Georgic. (See Part 4)

The Continuing Incompetence of Harland & Wolf's Management[edit]

As explained in Part 4 of this history, Kylsant normally restricted his direct involvement to grand strategy, together with absolute control over the capital structure and margins of the Royal Mail group. Having established strategic policies, he usually left the operation of his companies to his band of very competent lieutenants. When Kylsant acquired the majority of the shares in H&W, he uniquely left Pirrie in complete charge of the business and remained content to merely receive Pirrie's very sketchy and highly misleading accounts at the Company's annual general meeting. When Pirrie died, Kylsant appointed himself as chairman of H&W and began investigating the private ledgers he was stunned to discover that the Company was on the verge of bankruptcy. Worse still, the H&W management was generally incompetent. In his latter years, Pirrie had filled most of the Company's management positions with servile yes-men. The team had no knowledge of the finances of H&W; how estimates were prepared and contract details were a mystery to them. Over three decades of cost-plus Commission Club contracts (See Part 1) had produced a management with no interest in or experience of efficient cost control. Only John Craig of Colville's Steelworks had any overall management experience. John Craig was appointed deputy chairman and under Kylsant's direction he attempted to reform the management of H&W. In April 1925 the superintending engineer of Union-Castle was appointed as general manager of H&W's shiprepair establishments located in London, Southampton and Liverpool. He was horrified by the extravagance and opulence of their management and he set about a programme of reform. This convinced Kylsant and Craig that similar reforms were needed in the H&W shipbuilding and engineering establishments in Belfast and on the Clyde. They made little progress however against the silent opposition of the managing directors.

Government guaranteed loans provided under the Trade Facilities Act (TFA), enabled Royal Mail group and other shipowners to place orders with H&W, while Kylsant's creative accounting disguised the Company's parlous financial situation. Even Kylsant could not permanently hide the truth. The Kylsant empire was not organised like a modern group, with a parent company and a hierarchy of subsidiaries. Instead there was a network of cross-shareholdings between the companies, which became more complex with each year. Philipps controlled the empire through his ownership of management shares and his personal shareholdings in the relatively small management companies. Only Philipps understood the entire financial picture.

Each of the companies in the group was required to make an annual payment equal to 5% of the company's capital employed, including investments in other group companies. These dividends filtered through the cross-shareholding network. In the early years most of this money was used to buy companies to expand the group. After the war however, much of the surplus earned by the shipping companies was invested in the H&W portion of the empire and as H&W had great difficulty in meeting the dividend payments on the ÂŁ4,000,000 Preference Shares it had issued to the general public in 1924, no payment was possible on the Ordinary and Preference shares held by various group companies. In the difficult trading conditions of the 1920s most of the shipping companies were unable to earn sufficient profit from their business to cover the payment they were expected to make on their non-performing H&W investment. In these cir***stances the companies were required to make the annual payment from reserves. If a company exhausted its cash reserves, it was expected to use bank borrowings to maintain its annual payment.

As a result the Royal Mail Group became dependent upon Government TFA loans to raise cash for new building and capital expenditure. This policy concentrated power in Kylsant and a small group of directors by enabling them to raise money, without the discipline of needing to explain the board's actions to the entire body of shareholders and to obtain their approval.

The profitability of many of the non-subsidised freight routes became so slender in the 1920s that the group shipping companies could not continue to place cargo ship orders with H&W on a cost plus basis, where the price of the ship was only established upon completion. In addition Kylsant and Craig were convinced that decades of cost-plus contracts had created the situation where H&W had become hopelessly uncompetitive. A new policy was established whereby all Royal Mail requirements continued to be exclusively placed with H&W, but the contract value could be fixed before work was authorised.

Despite the hiatus in production caused by the miners' strike, the H&W recorded a profit of ÂŁ200,000 in 1926. This was largely achieved because no provision was made for depreciation of plant and machinery and the delayed ship deliveries enabled contract losses to be postponed. Production recovered in 1927 but the financial results were catastrophic, with a real loss for the year before depreciation of almost ÂŁ390,000. Nearly every vessel delivered during the year lost money, some as high as 35% of their contract value. Once again this outcome was due to incompetent estimating and poor cost control.

Kylsant and Craig issued instructions to the managing directors to be more vigilant in their control of costs and to establish an independent estimating department. With both Kylsant and Craig diverted by growing problems elsewhere in the group, the shipyard managing directors lost interest in savings and no changes were made.

The Final Corporate Acquisitions[edit]

In April 1928, in a typical cavalier action, Kylsant agreed to buy the Ellerman shareholding in Shaw, Savill for ÂŁ995,000 without consulting his board. He made this move despite the fact that he already controlled the management shares in Shaw, Savill and that the Royal Mail group was facing increasing financial constraints.

The following month Kylsant purchased in the name of White Star Line the seriously loss making Australian Commonwealth Line from the Australian Government for ÂŁ1.85 million payable over 10 years. The transaction involved five passenger liners built 1921/22 and two cargo ships built in Australia in 1924: -

Moreton Bay - 13,850 GRT; twin screw, four Parsons double reduction geared steam turbines, 9,000 SHP = 15 knots service speed, oil burning; 12 First Class and 712 Third Class Passengers; 216 Crew

Largs Bay13,851 GRT
Hobson's Bay13,837 GRT
Esperance Bay13,851 GRT
Jervis Bay13,839 GRT

The two cargo ships were 9,949 GRT; twin screw, quadruple expansion steam engines, 1,205 nhp = 16 knots; oil burning and were built to maintain Bay Class schedules.

The ships were moved to the British register, placed in a new orginisation - Aberdeen & Commonwealth Line - under the management of George Thompson & Co Ltd, operating from Southampton on a fortnightly basis.

Vehicle Boat Ship Watercraft Ocean liner


Photo 39: Hobson's Bay

Vehicle Ship Boat Watercraft Depot ship


Photo 40: Jervis Bay

The First Loan Repayment Default[edit]

As a result of these purchases, Oceanic was unable to meet the cash cost of the repayment due on its TFA loans and Kylsant negotiated a one year deferment. The Government assumed that the problem was unique to Oceanic. Also in May 1928, H&W was required to pay its first annual repayment instalment of ÂŁ300,000 on its ÂŁ1,500,000 Trade Facilities Act loan. It also did not have the money to make the payment. Kylsant was very anxious to avoid telling the TFA Committee of H&W's situation, as this would have raised their doubts about the quality of all of the ÂŁ9,000,000 TFA loans that the rest of the Royal Mail group had taken, but where repayments were not yet due. To resolve this dilemma, Kylsant ordered five group companies to make sufficient unscheduled advance payments on ships being built by H&W to enable the TFA repayment to be made.

The Beginning of the End[edit]

The corporate acquisitions described in this part of the history cost the Royal Mail group ÂŁ10.75 million in cash and increased debt obligations. It is generally accepted that in making these purchases Kylsant was largely motivated by the hope of preserving shipbuilding orders for H&W. It is true that a large part of the fleets owned by the newly acquired companies was at the end of its working life or unsuitable or obsolete. This should have produced substantial orders for H&W, but the companies could not afford to buy new ships. The entire gigantic take over was futile.

Kylsant's fellow directors were furious at his irresponsible use of the group's extremely scarce funds. His brother, Viscount St David, resigned from the board and publicly accused Kylsant of mismanagement. The companies in the Royal Mail group were coming under increasing pressure from their bankers to reduce their borrowings and it was clear that they would have great difficulty in meeting future TFA repayments. Kylsant had exhausted the group's bank credit and the new Chancellor of the Exchequer, Winston Churchill, had terminated the TFA guarantee scheme. In typical fashion, Kylsant decided to solve this debt problem by increased borrowing. He proceed to raise money from the general public through the issue of a Royal Mail Steam Packet Co ÂŁ2 million debenture loan. The consequences of this action are described in Part 6 of this Article.

Bibliography[edit]

A complete Bibliography for all Parts of this Article is given at the end of Part 7

Photographs[edit]

Many of the photographs used to illustrate this article are from the very large collection contained in the Allen Collection hosted by Benjidog at: -

http://www.benjidog.co.uk/allen

Most of the remaining photographs are from the Ships Nostalgia Galleries, which are available for use in the Directory. Special thanks are extended to Marconi Sahib for his SN postings from the Dickinson collection. The individual photographs used in Part 5 have been provided as follows: -

  1. Ships Nostalgia - Marconi Sahib
  2. Benjidog - Allen Collection
  3. Ships Nostalgia - WLH
  4. Benjidog - Allen Collection
  5. Benjidog - Allen Collection
  6. Benjidog - Allen Collection
  7. Ships Nostalgia - Marconi Sahib
  8. Benjidog - Allen Collection
  9. Benjidog - Allen Collection
  10. Benjidog - Allen Collection
  11. Benjidog - Allen Collection
  12. Benjidog - Allen Collection
  13. Ships Nostalgia - Roymuir
  14. Benjidog - Allen Collection
  15. Ships Nostalgia - Marconi Sahib
  16. Ships Nostalgia - Marconi Sahib
  17. Benjidog - Allen Collection
  18. Ships Nostalgia - Marconi Sahib
  19. Benjidog - Allen Collection
  20. Benjidog - Allen Collection
  21. Benjidog - Allen Collection
  22. Ships Nostalgia - Brent Chambers
  23. Ships Nostalgia - Brent Chambers
  24. Ships Nostalgia - Marconi Sahib
  25. Ships Nostalgia - Marconi Sahib
  26. Ships Nostalgia - Marconi Sahib
  27. Ships Nostalgia - Marconi Sahib
  28. Ships Nostalgia - Marconi Sahib
  29. Ships Nostalgia - Marconi Sahib
  30. Ships Nostalgia - Thamesphil
  31. Ships Nostalgia - Brent Chambers
  32. Ships Nostalgia - Marconi Sahib
  33. Ships Nostalgia - Marconi Sahib
  34. Ships Nostalgia - Marconi Sahib
  35. Benjidog - Allen Collection
  36. Benjidog - Allen Collection
  37. Ships Nostalgia - Tom Haywood
  38. Ships Nostalgia - Roger Bentley
  39. Ships Nostalgia - Brent Chambers
  40. Ships Nostalgia - Roger Bentley

Article written and compiled by Fred Henderson

Royal Mail Steam Packet Company Kylsant Empire
Intro Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7
 
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