As this and many other European countries emerge from the toughest restrictions implemented to help control the spread of COVID-19, attention turns to the economic and social changes that the pandemic may usher in. When it comes to changes in business, one of the first candidates for change is predicted to be that of passenger air travel. The almost total collapse in demand for air travel from March onwards has already threatened the business of many airlines. Lufthansa for example has closed its Germanwings subsidiary, and will sell off many of its planes. It says that “it will take years before demand for air travel reaches pre-coronavirus levels. “
In fact, Lufthansa was one of the airlines that had already anticipated reduced demand, before the virus struck. Germany was one of several countries which had already observed the new social trend called “flight shaming”, where people vowed to reduce their flying because of concern about the environmental damage caused by aviation. This was assisted by the growth of an alternative travel mode ; high speed rail, which is set to grow further across Europe; and in the business travel sector, the increasing efficiency of video-conferencing software, often completely free to use.
Despite being a land-locked country in the very heart of Europe, the Czech Republic sometimes seems to me like an island (and of course, I come from an island). Ideas, discussions, changes which take place in other European countries often seem slow to appear here; and that suits those who, for their own selfish reasons, would rather not see such changes.
And so it was that last year, Prague Airport started to step up its PR campaign in support of its plan to expand; this plan involved building a second runway, parallel to the existing one. And, in another apparent break with modern global environmental thinking, the new runway would be built closer to the Prague city centre. Fortunately many of us living in one of the worst affected areas, Prague 6, were already part of an active network of citizens working to improve transport and urban development problems. We have already started to organise our opposition to the plans.
A business expansion without a business plan
Are you familiar with the English word “stacking” as it is used in the aviation industry? It refers to the situation where your plane needs to circle around for up to 30 minutes before landing, because the airport is so busy. If you fly into Heathrow, you will be lucky if this does not happen to you. Now, ask yourself, when did you last get “stacked” before landing at Prague Airport? The question of expanding Heathrow has been argued over for 30 years. It has been the subject of numerous studies, and furious arguments. A high level Airports Commission (an independent body set up by the Government) concluded in 2015 that expanding Heathrow was overall a better option than others (e.g. expanding Gatwick). Yet Boris Johnson, in his speech when he was elected as a Member of Parliament in 2015, responded to this in typically bombastic fashion, saying “I will lie down in front of those bulldozers and stop the construction of that third runway.” In the following four years, the mood in the UK changed again, and the Court of Appeal ruled that building the third runway was unlawful, as the government’s commitments to combat climate change under the Paris Agreement were not taken into account. The government announced that it would not appeal against the decision (thus excusing Johnson from the need to lie down in front of some bulldozers).
I mention all this to show Czech readers how controversial airport expansion is. I’ve used Heathrow regularly for over 40 years (and lived close to it for 15 years). The Heathrow Airport Authority repeatedly says that it is running at 95% capacity, and I believe them. Something needs to be done there, but after all this time, that “something” is still not agreed to be a 3rd runway. So when I saw the plans for Prague being announced with barely a murmur of dissent outside the immediate neighbourhood, I thought that was odd, that so few people questioned the need for it. I asked myself what the the business case is for expanding an airport which seems to get the planes up and down without a problem, even if there are the usual problems inside the terminals.
So I used the Freedom of Information law to request the Airport’s future traffic forecasts on which it had based its business plan for the expansion. It seemed like a reasonable request because the Airport operates commercially, even though its shareholders are the State (the Ministry of Transport, and the Ministry of Finance, and ultimately, you and I). At first the Airport ignored my request completely, but it eventually answered…saying that it does not have its own projections.
This was a surprise not just to me but to the two Ministries which control the Airport, of whom I had asked the same question. Both answered my FOI questions promptly and in detail. If you read their answers you may form the impression that both Ministries are anxious to distance themselves from the project (or at least, from responsibility for initiating it). The Ministry of Transport wrote that the Airport was financing the project itself and “made the analysis relevant to the decision probably based on its own statistics and market knowledge”. The Ministry of Finance went into even more -very helpful -detail. It listed the four external sources which the Airport relied on for predicting future growth (thus implying that the Airport did no original work). Three of those sources – IATA, Boeing and Airbus- have an interest in promoting air travel, and can be expected to provide growth forecasts on the high side. The fourth however is Eurocontrol, the authority responsible for managing all flights in European skies. It makes a lot of its data public, and turned out to be a friendly and communicative organisation which is happy to help people understand its work.
Eurocontrol’s seven year forecast published in Oct 2019 was already pessimistic about future growth. Its forecast for flight growth in the Czech Republic through to 2025 was only 1.6% per annum. This indicated that Prague Airport had no clear evidential data to justify the claim that it would be handling 21m passengers by 2028, still less Babiš’ claim that it would rise to 30m by 2038. We should also observe that passenger growth might require expansion of the terminal, but not necessarily more runway capacity. The Airport was already noting that more high capacity long distance planes were using Prague – i.e. more passengers per flight movement.
Eventually the Airport provided me with its “Long Term Forecast Summary”. It is not a long or detailed document, certainly a bit light as a justification for a huge, expensive, and disruptive capital investment. It has a graph which dutifully repeats Babis’ assertion of 30m passengers by 2038, but if you can work out from this 5-slide presentation how it calculated that figure, you are much smarter than me. You probably are, but I am equally sure that if in my corporate life I had delivered such a flimsy document to support such a massive investment, I would have been fired. Further, the document quotes figures from Eurocontrol, but when I asked Eurocontrol if they recognised the figures, which included a growth target for the CEE region, they said, among other things, that “we do not publish a figure for CEE”.
So we expected a long hard battle over figures that would be of little interest to most people, to prove that the Airport would not see the expected growth. We would be arguing over the difference between 1.6% and 2.0%.
And then came COVID-19, and all I could hear in Sarka Valley was birdsong…
Virus? What virus?….
By April all our lives had been up-ended. One of the Czech government’s first measures had been to ban flights to and from China, but now Prague Airport was virtually closed other than for a few (very useful) freight flights. Globally, the media reported on airlines already facing bankruptcy without State assistance. Norwegian Air, Virgin Atlantic, and Alitalia were among the first to be mentioned. By May, the question was asked, how many people would ever choose to fly again? It was suggested that aircraft might have to remove the middle seats, but this was quickly rubbished as an idea by airline leaders such as Ryanair’s Michael O’Leary. What about the air-conditioning in aircraft? Does it spread germs around the cabin, as many of us passengers believe, or is it super-efficient at killing them, as airlines have recently claimed?
Then the discussion moved on to leisure travel itself. Prague City Hall encouraged a debate about an opportunity to permanently reduce the number of tourists, while at the same time trying to encourage a different “higher quality” tourist. It had already taken steps against the proliferation of AirBnB properties in central Prague, a very popular move with most people other than the landlords.
Similar discussions took place across Europe, and then inevitably people asked if further expansion of airports is now necessary. Remarkably, one of those people was the CEO of Heathrow Airport, John Holland Kaye. On 6th May he was called to give evidence to the UK Parliament, and appeared to accept that there is uncertainty as to whether the third runway would be needed in the future. Referring to how demand may recover over the next few years, he stated “Whether that [third runway] will be needed – we will have to see how things turn out over the next few years. If we are successful in rebuilding the UK economy, we will be needing that in 10-15 years’ time; if not, then I think we’re all in a different world”.
That was a remarkable admission from somebody who had previously lobbied hard for years for a new runway; although you might simply conclude that he had thought about the effects of the virus on flying, and come to a sensible conclusion. You might also have thought that people would be making similar conclusions in Prague…
And then, on 26 May, Vaclav Řehoř gave an interview to Hospodarske noviny. (Unfortunately HN operates a paywall). Before considering this interview, I should say that I do not think Mr Řehoř has done a bad job in his role at Prague Airport. I agree with those who feel that it has improved in many ways, even if there are definitely areas for further improvement. But in this interview, and compared with John Holland Kaye, he appears to have been asleep for the last three months. In the whole interview the word “coronavirus” appears just once, wherein he calls its effect on flight numbers, a “blip”. (na výkyv) There is not one reference to the trends and influences I referred to earlier; and while the financial difficulties of Smartwings are discussed, the interview makes no mention of the pessimistic outlook for Norwegian, Lufthansa (including Germanwings, Austrian, Swiss, and Brussels Airlines), or the possible restrictions on tourist numbers in Prague. For him, nothing has changed. He still expects “aviation to double every 15 years” and therefore that the second runway should still be built and ready by 2028.
Oh, but there was one small change that Mr Řehoř acknowledged. Just a small thing. Previously the Airport had boasted that the expansion would be financed by Airport profits so the State budget will not be troubled. Not any more. Now he expects the State to pay for it. He means that you and I pay for it, from our taxes.
I could hardly believe what I was reading. Mr Řehoř appears to be in a state of self-denial, suffering from acute myopia, and lacking any empathy for his fellow Czech citizens who are faced with the cost of rebuilding the country. Of course he sees it as his job to promote the interests of the airport, but surely if Mr Holland Kaye, whose airport needs capacity far more than Prague does, can admit that COVID-19 has fundamentally changed the outlook, could not Mr Řehoř do that too? And as a citizen, does he not recognise that so many things we all need the State to pay for, are now threatened by acute financial shortfalls, which will inevitably lead to tax rises? Is a second runway, which was not needed even before the virus struck, so much more important than the many other capital projects, large, medium, small, that may now have to be set aside or scrapped completely?
In the next post I will consider why Mr Řehoř is saying these things, and suggest some alternative solutions for the travel needs of Czech citizens.