Sunday, August 26, 2012

It there a life after Malév? A challenge for transport economists

Let’s imagine the following picture. Near our beautiful, charming city a well organized, well staffed, well equipped high quality airport is working. Citizens like it as well as trading companies. People can reach the airport easily and quickly with low cost, airport crew is always smiling so people like to travel. That means active airport activity through high demand. Because of these tendencies the environment for airlines is favourable, airport attracts them. The result will be more airlines who compete which drives the prices down and led to better services or simply larger airport capacity. The process makes the airways even more attractive to businessmen, companies and turists. The whole thing ends up like a city with more exporting and importing companies more employees who can share their ideas and get ideas from abroad so economic prosperity begins.
That story about circular causation tells us spillover effects are in the table not appear directly in the profit of the airport since the process has advantages to the broader economy. As we see the airport doesn’t have the right amount of incentives to stimute airtraffic, state should play a role. The main question is simple: HOW? Some possible answers follow.

State owned airline

A case strongly related to Malév. Maintaining a state owned airline for create those spillover effects has advantages. Focus on the disadvantages! This is prohibited by the EU law because of this action’s countercompetitive impacts. In the past that plan is worked, see figure, which shows how decrease airport traffic in short run after Malév went bankrupt. In the short run Budapest Airport (BA) has difficulties to fill the gap that Malév made but in the long run the absence of Malév may push down traffic intensity. In reality set up a sate owned airline is not a possibility.

Ruin down alternatives

With the MÁV’s recently launched new train line Schwechat, the largest airport of the region, can be reached in four hours. No question this causes pain to BA, so to stimulate it’s airtraffic the MÁV project should be stopped. Not suprise the BA lobby raised their voice against the issue.
Is to stop MÁV trains travelling to Schwechat useful? Yes it is useful for BA. Is it useful for the citizens? I have doubts. Supporting the airport is not equals with supporting the country. If people travel to Schwechat to take their plane there rather than to travel from Ferihegy this will deliver the evidence that MÁV project is useful for citizens. In very short run stopping that railway line can be useful if BA is on the edge of collapse, but in other cases it is not a good idea.

Reach the airport easier

There is a plan to build a fast train line from Keleti railway station to Ferihegy. State currently having the negotiations with the chinese constructor. May the investment doesn’t pay off but again think to spillover effects! If Hungary supports the project in a clever way it can have positive overall effects.

Develop airport services

A lot of people complaining about the rudeness of airport workers, about the lack of organisation in Ferihegy (for example airport buses) and about flights that are usually late. What about provide incentives to solve these problems? Or airport can introduce some yummy campaign based on the peolple’s psychological factors to attract them. The airplane museum next to terminal 2 is a good step.

Cope with transit

Pass through passengers and cargo should be served. Some experts say low cost airlines are not able to handle the transit traffic. What can we do? This question is not clear and need some consideration.

Is developing air traffic harm other means of transport? Which are the alternetives of air travel? Since air transport don’t have real alternative the stimulation effects economy and not just damages others. 
What do you think, attractive air travelling causes bustling business life or vica versa? How do you think state should stimulate the airtraffic? Do you have ideas? Share with us in comment below!

Dávid Réfi


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