Today, I received a letter from ‘Sergei’, a Russian guy who
lives in The Netherlands. He responded to yesterday's article upon the aviation industry in The Netherlands. I print this letter and my response to it, for the
benefit of the discussion.
Dear Ernst,
I always enjoy your blog and usually agree
with your views.
Sometimes to get profit in one place, one
needs to run an unprofitable business elsewhere. IMHO, this is the case with KLM/Schiphol
and the modern
economy in general.
I think it would be
interesting to estimate the combined profit from the Dutch aviation sector and
figure out who gets this profit. Hopefully, this would be the tax-payers.
Dear ‘Sergei’
Thanks for your
response.
I want you to know,
that I am not opposed to aviation, by itself.
It made 'the world a smaller
place' and gave us the chance to get acquainted with people from the other side
of the globe. When my wife and I visit Russia, we also travel by plane, of
course. Going by car is simply not an option for this distance: too many
borders and too much potential delay on the route.
On top of that, flying by plane takes only a
few hours.
Besides that,
aviation is an enormous driver for jobs, direct and indirect. That is
where I totally agree with you and what I tried to explain in the introduction
of yesterday's article.
It would be
interesting indeed to investigate how many jobs are driven by Schiphol
Amsterdam Airport and aviation in The Netherlands in general, directly as well as indirectly.
It
would also be very interesting to see the correlation between the size of an airport
and the number of jobs that it provokes. Unfortunately, I don’t have the data
for such an investigation, but it would definitely be an interesting subject
for research.
In my opinion,
there must be an optimal size for Schiphol and any other airport. If the
airport becomes bigger than this optimal size, the ‘number of extra jobs per
million Euro of investment’ will reduce again.
When an airport would be (much) smaller
than the optimal size, it might miss jobs, because aviation companies would not
want to have it as a destination. Also international businesses might consider
it less attractive to establish a subsidiary there. It would be cool to investigate this.
Still, I do have
some objections against the whole aviation industry.
What I am opposed
against, is the business model of most aviation companies. Within this
business model, passenger tickets are sold at prices (almost) below cost-price
and the sales price per ton of freight is also not enough to run a structurally
healthy business. Aviation companies are battling for the cheapest tickets and
tariffs, in a race to the bottom. In the end something has got to give.
This ‘something’ might be the airplane maintenance and – as a consequence –
‘passenger safety’.
You can never run a
sound industry, when the sales price of your product is not enough to earn back
your fixed and variable expenses and a decent profit on top of it. When you
look at it from a distance, the problem of low freight tariffs and low ticket
prices seems to spur efficiency.
In reality,
it could lead to erosion of quality and passenger safety. In my humble opinion,
this is what is going on in the aviation industry.
As far as I’m
concerned, the only solution for this problem is, that a giant shakeout of
aviation companies takes place: the strongest companies with the strongest cash
flow and reserves survive and the others simply perish. After this shakeout
prices have to go up to sustainable levels. This process might take ten years
at least.
The second thing
that I'm opposed against is the enormous excess capacity of airports, in
countries all over West-Europe. These airports are often built with
millions/billions of Euro's in community-money, but will probably never
earn back their initial investments. The capacity of these airports as 'job
factories' is quite limited, IMHO. All service and maintenance workers, shops,
cafe’s and restaurants need planes and passengers. When both stay away or go to
a different airport nearby, the whole jobs driver vanishes.
Third, I don't
agree so much with the growth plans of Schiphol. It is good for Amsterdam and
The Netherlands to have a large airport nearby, as this attracts international
companies and spurs employment in the neighbourhood.
What I don't
understand, however, is why Schiphol should be a main hub for international
transit flights:
- Why do 'we' have to compete with Dubai, for the number one position
of gateway between the USA and Asia?
- Why do we have to sacrifice so many important things in life, in
order to enable the growth plans of Schiphol, when Schiphol in its current
form is 'large enough': the environment, the safety and health of people
living close to the airport, the destruction of nature near the new
charter hub Lelystad Airport?
When Schiphol would keep its current form or
even grow slightly smaller, it would still be an airport to reckon with and a
serious driver for jobs. But Schiphol doesn’t have to be European champion, in
my opinion, as being European Champion doesn’t bring you much more profits and
prosperity. Schiphol airport should be a means and not a goal in itself.
That is how I think about it, but I
appreciate it when you have totally opposite thoughts about this. Wisdom often
comes in the discussion between people.
Ernst
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