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Wednesday, 7 March 2012

Pitiful Schiphol and KLM complain about CO2 taxes, scaring away passengers. I state that KLM should rethink its earning’s model. For Schiphol, flying is only a bad excuse to make money.

The aviation industry lobby, in The Netherlands so impassionedly represented by aviation company Air France-KLM and airport Schiphol, is angry and sad simultaneously.

That darn European Union had the nerve to impose the infamous CO2 emission tax on the aviation industry. And this pitiful industry already feels so heavily the weight of the credit crisis, in spite of the duty-free air fuel and the countless subsidies and other benefits it enjoys.

Therefore it was time for Dutch airliner  Air France-KLM  and national airport Schiphol to join forces and to make up a story that would bring tears in the eyes of the readers of the Dutch financial newspaper Het Financieele Dagblad ( 

They did so with the help of a research institute that executed an investigation into the CO2 emission permit trade of the European Union. Here is the story that these companies came up with:

Schiphol and  Air France-KLM  have been hit above average by the deployment of the European system for the trade in emission permits for the aviation industry.

This is caused by the circumstance that both the airport and the aviation company are much more dependent on transit passengers than their European competition that enjoys a larger domestic market.

Dutch deputy-minister Joop Atsma (CDA) of Infrastructure and Environment sent today the results of an investigation into the consequences of the European trade system for CO2 emission permits, to the Second Chamber of Parliament. This European trade system is in force since the beginning of 2012 for all aviation companies that fly to the countries of the European Union.

According to the investigation, that has been executed by the Knowledge institute for Mobility Policy (KiM), this trade system will cost  Air France-KLM  about €30 mln per year in the period from 2012-2020. In the EU system the aviation companies will receive a steadily declining part of the CO2 emission permits for free. Required, but missing permits need to be bought separately. In its calculation KiM used an average price of €10 per permit.

If  Air France-KLM   recharges these expenses in its tickets, this will lead to a decline in the passenger number of 150,000 for 2012, compared to 2011 (i.e. 0.6%). This is a relative decline, as the total number of passengers in the aviation industry is still rising. The decline could rise to 225,000 passengers in 2020 (0.9%), according to KiM.

At a CO2 price of €10 per permit, Schiphol will handle 200,000 passengers less in 2012. The airport will therefore miss €3.6 mln in revenue. KLM and Schiphol are especially vulnerable for the effects of the European Emission Trade System (EU ETS), as they handle relatively many transit traffic.

This kind of air traffic is more price-sensitive, as passengers from the US that fly to India, can easily avoid Schiphol and make a stopover outside the European Union; in Dubai for instance.

The European trade system is in force for all flights to EU-countries, even if aviation companies from outside the EU make these flights. There is heavy resistance against this legislation. A number of countries, among others the United States, Russia and China have threatened with counter-measures. According to the KiM investigation, these countermeasures could hit the Dutch aviation industry extra hard.

Darling, where is my handkerchief?! I suddenly feel tears burning…

About one half year ago, on September 29, 2011, I wrote an article on this subject: Tormented aviation industry and China, Russia and the United States cry blue murder. Here is an important snip of this article:

You can call me a left-wing idiot, but for me this is a good plan. It is ridiculous that the aviation industry is the only transport industry that is totally free of taxes and excise duties on fuel. And the only industry that doesn’t have to pay (in any form) for the massive pollution it causes.

But the exclusion of excise duties for the aviation industry is a worldwide accepted agreement, that made much sense at the moment when it was signed many years ago. For global political reasons, this agreement is not likely to be withdrawn within the next 15 years.

However, nobody can deny that the pollution by the aviation industry is enormous on a global scale; especially in countries with an obsolete air fleet that, as a consequence, uses excess amounts of jet fuel.

Therefore, it is a logical step that the EU tries to do something to stimulate countries and airliners in finding more (fuel-) efficient ways of flying, through the sales / auctioning of CO2 emission rights. Whether this is an effective way, or not is a different discussion.

Nevertheless, I understand the pain of the aviation industry; this industry suffers already for years from minimal net margins and a fierce competition that suppresses the ticket prices. The cost of these emission rights could lead to distortion of competion as European airliners have a competitive edge, due to the received free emission rights.

I’m still in favor of this legislation, as it clearly helps to bring down the amount of carbon oxide pollution by the aviation industry, which is truly massive. And I still think that the aviation industry should think of a better business and earnings model than it currently has, when even the slightest taxation could bring it off-balance. This is true for Air France-KLM and 99% of all other airliners.

And concerning Schiphol, it is a totally different story: if Schiphol puts only €0.50 euro cents per hour on top of the already ridiculous parking prices of €6 per hour, the €3.6 mln loss, due to this CO2 legislation, is totally wiped out.

Schiphol has been and still is a giant money making machine, disguised as an airport. Read the story behind the link and you will understand that these €3.6 mln are simple change for Schiphol. But it is always good for a heartfelt, sad story…

Schiphol is such a money making machine that today’s sworn friend  Air France-KLM had been complaining about the airport one month ago, in another FD article. I didn’t print this article yet, as I had other stories to tell in those days, but I will print the pertinent snips just to show you how Schiphol is only meant to make money with flying as a bad excuse:

There is growing pressure on Dutch national airport Schiphol to reduce the tariffs for airliners. The airport wants to charge an extra 4% per passenger.

However, according to chairman Frank Allard of the Barin, the special interest association for airliners in The Netherlands, Schiphol would be willing to abandon this increase.

‘Schiphol has two budgets: one for the airliners and one for the yields of shops, parking and commercial real estate. The second budget is filled to the brim with greenbacks’, according to Allard. According to the Barin-chairman, Schiphol would be willing to use a small part of the non-aviation revenues, for keeping the aviation tariffs at the same level. ’There is light at the end of the tunnel’.

‘The smartest thing to do would be lowering the tariffs’, thinks Allard. ‘Schiphol had a passenger growth of 10% with tariffs remaining equal. It seems that an increase is therefore not necessary’.

Recently, Schiphol CEO Jos Nijhuis announced a multi-billion Euro investment, enabling the construction of new passenger piers and terminals in the coming years. Besides that, Schiphol wanted to invest in the New York airport JFK, where it owns a terminal. This investment money had to be financed partially from the raised port dues for the airliners.

I rest my case…

Schiphol wants to claim more building ground surrounding its terrains, it wants to develop more terminals and more Commercial Real Estate in Amsterdam and New York and it wants the airliners to pay for this desire.

Schiphol owns already more landing tracks, a larger terrain and more terminals than the busiest airports in Europe and the rest of the world: Heathrow and Hartsfield-Jackson Atlanta International Airport. It does so, with only half the yearly passenger number of Atlanta. And still it wants more, while there is absolutely no need for this out of economic or safety reasons.

My opinion is: if  Air France-KLM would decide to leave Schiphol as a host airport in the not so distant future (f.i. in the period 2017-2020), then Schiphol owns a zillion acres of building ground near the Dutch capital Amsterdam, which it can sell for billions of Euro’s. 

Then the airport could be continued on a much smaller scale than today, while the Schiphol company counts its proceedings of building ground sales. The Amsterdam money making machine goes on and on and on.

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