Monday, August 15

More underperforming "strategic" industries


It seems that a lot of people were surprised when I described telecommunications as a "strategic" industry - one whose efficiency affects the health of the nation as a whole. There are other such industries. I don't want to talk about energy companies. Everybody in business understands that they are 'strategic'. I'd rather consider some others, which are part of our daily lives, but perhaps are not immediately thought of as 'strategic'.

Let's start with Czech Airlines. Or rather, Prague Airport-Czech Airlines, since they are one company, still under state control. Does this company behave in a way which helps the competitiveness of the Czech Republic?

Recently Czech Airlines has made some very odd decisions. It stopped flying to London, claiming the route was unprofitable. The result was that we all had to pay more to either BA or EasyJet to fly there. Soon after Emirates started flying to Dubai, Czech Airlines stopped flying on that route. Never mind. Czech Airlines can fly you to no less than 5 Ukrainian cities, and five Russian ones too. And Minsk. Whereas if you want to fly to neighbouring Austria, or to Munich, sorry, Czech Airlines can't help you at all. Now I ask you...does this reflect the Czech economy? In other words, are Czech companies doing much more business in Ekaterinburg than in Munich? Or could this strange pattern have anything to do with the fact that last time a sale of Czech Airlines was considered, the only interested foreign airline was Aeroflot?

As for the pricing, it is becoming ridiculous. If you wish to do business in Sofia for example, as I did recently, Czech Airlines wanted to charge me 23,000CZK. Economy! For this amount, they can however let you fly to Paris and back (a similar distance) six times. Why? Because they have a monopoly on the Sofia route.

So why doesn't the EU 's "Open Skies" policy bring more competition on such routes? Wouldn't Austrian Airlines or Fly Niki like to run direct flights from Prague? Probably they would but the question is, how much will Prague Airport charge them for the landing slots? Since Prague Airport and Czech Airlines are one company, I think we can assume that the foreign airlines will be offered unattractive schedules, for high prices.

Never mind, nowadays people across Europe travel by train. In France, Germany, Spain, Italy and Benelux, trains connect major cities at speeds of 250km/h or more. Even poor old Britain with its broken privatised railway offers speeds of up to 200km/h and some of the trains there have been running at that speed since 1973.

So what do we have here? We have the Pendolino which is capable of 230km/h. However despite a huge amount of money - much of it from the EU - being spent on 'upgrading' the Decin - Praha- Breclav line, the maximum speed is 160km/h, and this only in a few places. The Pendolinos were bought to run on the Berlin - Prague - Vienna route, but Czech Railways has now decided they will only run to Ostrava - and to Bratislava if you are OK to travel at 05.00 in the morning. Possibly this is because they only bought 7 Pendolinos, which is nowhere near enough for the Berlin - Vienna route. (Britain's Virgin Trains has more than 120 Pendolinos). The government seems to think that the answer is privatisation, but without any strategic input. So by next year, three different companies will compete for passengers between Prague and Ostrava. Will there be three times as many passengers?  Meanwhile the service to Vienna gets worse and worse, so business people will continue to brave the roadworks and the maniacs on the D1.

Of course some of this situation comes about because Transport Ministers have tended to be people who should not even be allowed near a toy train (Rebicek, Barta). But people underestimate the wider implications of poor transport systems. If you are an international company thinking about your Central European base, will you choose Prague, Vienna or Berlin? Prague is getting more expensive for rental and living costs. When the accountants start to work out the cost of business travel to and from Prague, and the poor quality of it compared to the other cities, they will recommend against Prague. Meanwhile, I could develop my business in Bulgaria, but that is a country where it is always recommended to make regular personal visits. At 6,000CZK a ticket I could do that, but at 23,000CZK, forget it. So the Czech state misses out on more corporation tax and GDP growth, because for sure, my example is being replicated every day in SME's throughout the economy.

Transport is a strategic industry sector and it is being very badly run, in the interests of very few people. Certainly not in the interests of normal businesses. And unlike in telecommunications, there is no sign of strategic decisions to make it better. Transportation has been described as the 'arteries' of a country. You know what happens to your body when your arteries clog up...

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