Since the
Dutch economy grew by a teenie weenie 0.1% in Q3, quarter over quarter,
many politicians and pundits treat this event as a ‘divine’ signal, showing the
light at the the end of the tunnel. They think that the end of the crisis is nigh
and the Dutch economy might show again some cautious, but unmistakable growth
in 2014.
All this renewed confidence has to do with an increased
purchase managers confidence, slightly increased housing sales and
stabilizing housing prices in The Netherlands. And the most important thing:
these pundits think that world trade might grow considerably in the remainder
of this year and next year, as the Dutch exports already have been growing
slightly over the last six months (see the aforementioned link).
Well, let me tell you a story from a true insider:
A good friend of mine – let me call him ‘Henk’ – works at
the cargo department of KLM aviation at Schiphol, Amsterdam Airport: KLM Cargo.
When our children are playing together, Henk and I often talk about his work
and the economy in general. If there is one company, where a serious increase
in exports would be noticed immediately, it is KLM Cargo; air cargo is a very volatile
and pro-cyclical line of business.
Although Henk is a positive and strong man, who likes his
work, he had often worries about the amount of business that KLM Cargo could do
during the last year. To say that business was rather quiet at his employer would
not be an overstatement. And when KLM Cargo has structurally too little work
for its people, it might cost many workers their jobs.
When Henk and I talked briefly today, Henk stated that KLM
is considering to sell a number of its freight planes and – when I understood
him right – even thinks about abolishing the freight transport business, as it
is loss-bearing at the moment.
Freighter planes are currently standing still and idle at
the airport and cause triple expenses for
KLM:
- First, when these don’t fly, freighter planes cost thousands of Euro’s per day, as a consequence of depreciation, necessary maintenance and/or lease expenses;
- Second, Schiphol airport charges considerable amounts in airport dues, when it is used as a ‘parking lot’ for freighter planes.
- Third, the personnel that is standby in order to load planes – the stowers, team leaders, inspectors and administrative personnel – all have to be paid, even when there is little work to do. Although KLM will definitely have a flexible shell of workers around their fixed staff, the expenses of idel personnel will nevertheless be considerable.
This is the main reason that KLM considers to sell some of these
freighter planes and ponders about additional measures, which might even mean
abolishing the cargo business.
From the 2013Q3
report of KLM come the following snippets:
“The Group continued
to improve its operating result during this quarter. This is very encouraging
since it shows that the roll-out of the measures in the Transform 2015 plan is
proceeding in line with our expectation. However, it was considered necessary,
last September, to supplement them with additional measures to strengthen the
Group within the prevailing uncertain economic environment, particularly in the
medium-haul and cargo sectors which are facing major difficulties” said
Alexandre de Juniac during the meeting.
Cargo continued to be
affected by the economic slowdown and the situation of overcapacity. As a
result, traffic declined by 3.8% for capacity down 1.4%. The load factor stood
at 60.4% (-1.5 points). Unit revenue per available tonne kilometre (RATK)
declined by 9.1% and by 5.2% on a constant exchange rate basis. This sharp
decline in revenues (-9.3% to 687 million euros) led to a deterioration in the
operating result to -84 million euros (against -69 millions at 30th September
2012) despite significant cost efforts.
In cargo the
industrial measures are the continued reduction in the full freighter fleet at
Air France and KLM (-4 aircraft taking the fleet to 10 aircraft in 2015)
and the sub-contracting of the Orly cargo station.
The industrial
reorganisation of the medium-haul and cargo activities at Air France will
entail a headcount reduction of 2,880. To deal with the surplus headcount among
ground staff, Air France presented a voluntary departure plan covering 1,826
jobs. The departures will be staggered between February and December 2014. The
new voluntary departure plan should generate savings of some 150 million euros
on an annualised basis. Pilot (350 FTEs) and cabin crew (700 FTEs)
over-staffing will be addressed in 2014 through other measures. Elsewhere, the
company is also seeking to better adapt its organisation to the seasonality of
the business, which has accentuated in recent years.
These additional
measures, to be put in place during 2014, will deliver their full effect in
2015. However, they should enable, in 2014, a significant reduction in
medium-haul and cargo losses, but without enabling them to break even, as
initially targeted. As a result, in an environment of low growth and high oil
price and currency volatility, and in spite of the strong improvement in the
long-haul and maintenance activities, the group expects EBITDA in 2014 to be
around 2.5 billion euros, at the bottom of the targeted range, while the two
billion euro reduction in net debt will be achieved in 2015.
These snippets speak of four planes that will be sold (see red and bold
text) in the coming two years. I don’t know if my friend Henk has
been talking about these four planes or that additional planes will be sold.
Anyway, the next snippet about the headcount reduction could be extremely bad
news for Henk and his colleagues.
I do indeed believe that there is a structural overcapacity
in the air cargo business, as it was mentioned by KLM.
What I don’t see, however, is how a 29% reduction of KLM’s
cargo fleet can be matched with rising Dutch (international) exports in 2014
and 2015. If the very pro-cyclical KLM air cargo department does not believe in
rising exports in the coming years, who does then anyway?!
This development brought me to the following cynical ‘fake’ statement
about the Dutch economy: “The Dutch economy
is growing and exports will increase next year. By the way, do you know someone
who wants to buy freighter planes from KLM? They don’t need them anymore”
And there is more: Kees de Kort, the BNR News Radio
macro-economist and someone who is almost as bearish as I am, made
the following observation today:
The ‘ultimate economic
indicator in The Netherlands aka the Holy Grail of Dutch economics’ is the foreign
vacation rate of the Dutch. Kees: “Jobs, salaries, these are all mainly annoying
factors for many people. Housing prices, pensions etc, in other words, the
works. Serious, but not disastrous.
 |
| Kees de Kort, macro-economist of BNR News Radio Picture copyright of : Ernst Labruyère Click to enlarge |
But the Dutch not
going on a foreign vacation?! That is about as bad as things can be. The fact
that there is a serious slump in the amount of booked foreign vacations is a tell-tale
factor that the recovery of the Dutch economy is rather sluggish”.
I couldn’t agree more, Kees.
The fact that these days the global stock exchanges show
record quotations everywhere, says more about the enormous void between the
financial economy and the real one than that it does about the coming economic
recovery. People like my friend Henk, however, have to deal with the real
economy on a daily basis. And their outlook is still quite grim…
No comments:
Post a Comment