Air France-KLM airline company posted record losses on Tuesday. KLM's CEO, Peter Hartman, explains how he hopes to deal with the trouble ahead.

Air France-KLM is in trouble. The company is haemorrhaging money and seems unable to stop. It feels duped by the authorities, which have been banning many flights because of the volcanic ash cloud emanating from Iceland, and it has to watch in constant horror as its bargain-basement competitors, such as Ryanair, continue to grow.

You have done a poor job.

"This interview is over. That goes without saying, doesn't it? Of course we aren't doing as well as we would like to. Last year was a very bleak one for us, thanks to the economic crisis. But who is doing well in our industry?

Lufthansa? The German airline posted a loss of 'only' 112 million over 22 billion euros in revenue.

"That is true. Lufthansa is doing better. But British Airways on the other hand, is doing much worse than we are."

What are you doing to cushion the blows?

"The sector's answer is further consolidation and increased cooperation. We have initiated joint ventures with Delta Airlines and Chinese airliners. We have also cut costs on our own: we spent 10.5 percent last year, without any forced lay-offs.

Has the volcanic ash crisis been solved?

"No, it will return. If we continue down our current path, an entire industry will end up in the ditch. On Monday, air traffic was shut down for half the day for no reason whatsoever, and Tuesday was a close call. The [Dutch meteorological service] KNMI called to inform me that a suspicious ash cloud was hovering over Northern Ireland and that another closure of airspace was being considered. I became livid, and was finally able to convince them that nothing was wrong, because nothing was wrong. Planes that flew through ash-covered areas last Monday weren't bothered in the least. Ever since the [Eyjafjallajökull] volcano erupted, some 190,000 flights have crossed Europe and not one of them has shown even the slightest trace of ash.

Do you feel powerless?

"Sometimes. Europe is too tightly regulated. In other parts of the world, like the US and Asia, the response to volcanic eruptions is far more relaxed, and they don't see any accidents caused by volcanic ash either. But I have the feeling that we are making progress in Europe. The first time, Europe's entire airspace was closed down. The second time only parts of it were. Now it is time to enter the third phase, where airline companies can make air safety decisions for themselves. But authorities and meteorologists in a number of countries – I won't mention any names - are not yet ready to mend their ways."

What do you mean exactly?

"They maintain that, from the beginning, the ash clouds were dangerous. Because if it turns out they were wrong, they fear they will be liable for massive amounts in damages."

Will you be asking for help in Brussels?

"Yes, you cannot call this a normal business risk any more. A volcanic eruption is a natural disaster and there are EU schemes governing compensation that we would like to make use of."

Source: www.nrc.nl

Article by Lolke van der Heide in Paris

Published: 21 May 2010 11:14 | Changed: 23 May 2010 11:14

The unemployment rate in Spain surpassed 20 percent last week. The country's young are hardest hit in the economic crisis sweeping through the southern European nation.

Almost every workday, Beatriz Mera heads to her bank's branch office in the centre of Barcelona. She sidles up to the counter with a folder bulging with documents under her arm. "Then I demand an explanation, I whine and I complain until they send me away," Mera said, sitting in a bar around the corner from the bank. "I have few options left other than being a pain in the behind." 

Mera (30) grabbed her folder and spread out the documents and forms it contained in front of her. They showed how she and her partner took on massive debt during the economic boom. Apart from two mortgages, they also took out an 'insurance policy' that turned out to be a risky financial product. This is the reason she is now waging war against her bank. "For 18 months now we have to pay instalments of 2,000 euros a month," Mera lamented. "We simply don't have the money, and we won't have it for years to come."

A trillion euros in debt

Beatriz Mera's worries illustrate the Spanish economy as a whole. All together, 45 million Spanish consumers are currently a trillion euros in debt. For two years, the poor job market has effectively prevented any economic recovery. This week, Spain, the fourth economy in the eurozone, emerged as a potential next victim of the crisis that has already taken hold of Greece and could soon spread to Portugal. Whether the unrest in the markets is justified, or whether it is merely the result of speculators ganging up on the euro, it certainly has forced the country further onto the economic defensive.

Last week, more bad news was announced in Madrid: unemployment has now risen to 20 percent. Spain is now home to 4.6 million unemployed people. Before the crisis, the number was below two million. Odds of quickly finding a job again are poor. Even the most optimistic forecasts assume that unemployment will decrease by no more than a few points in the coming years. The root cause is the Spanish economy has become structurally less competitive since the country joined the euro. Prices and wages have risen sharply, but productivity has failed to keep up the pace. Economists like Nobel Prize winner Paul Krugman have advised the country to reduce wages by ten percent to regain its competitive edge.

But even though Spain is in an ever deeper hole thanks to the Greek debt crisis, social support or political manoeuvring room for such an extreme measure has yet to materialise.

"Krugman's suggestion could have been put into practice if we were living in the 19th century, or if Spain was an Asian country," said Angel Laborda, an analyst with the authoritative Funcas think-tank, and an economic columnist for El País newspaper. "But our system lacks that type of flexibility."

The crisis has led the government to conclude the labour market is in dire need of reform. Measures are not only required to stimulate recovery, but particularly to prevent similar massive job losses from occurring during a next crisis. Economists mostly agree that the exceptionally large number of temporary contracts the Spaniards work under needs to be reduced.

Close to half of youths unemployed

Young people in particular have been finding it hard to get a steady job in recent years. They are the same people who have been let go en masse: 43 percent of all Spaniards below the age of 25 are unemployed.

One proposal for reform would stimulate contracts guaranteeing less severance pay. Unions have resisted such reform. Their 'social dialogue' with the government and employers should have resulted in a social pact by the end of this month, but that deadline won’t be met. This is a setback for prime minister José Zapatero's government. A pact could go a long way towards reassuring the jittery international capital markets that Spain is dealing with the crisis in an effective manner.

Outside pressure on Spain seems to weigh more heavily on it than that emanating from its own youth caught up in the crisis. Plenty of them welcome a few months on the dole as an enjoyable break. "I don't mind all those temporary contracts. At least they lead to a long holiday once in a while," joked 25-year-old Lena, who had joined some friends for an afternoon beer on the street of an old fishing neighbourhood in Barcelona.

"And if you really need work, you can always find something," said her friend Israel, who is originally from Colombia. "The problem is that many Spaniards feel they are too good for it. Nobody has to die of hunger here."

Besides, many unemployed people can fall back on their family. Support from parents and other relatives has spared many, mainly young, Spaniards the worst of the crisis. Beatriz Mera for instance, had – up until now – been able to pay everything she owed the bank, thanks to her parents and in-laws. "They have already pitched in some 30,000 euros," she said.

Mera added she believed families were a better source of solidarity in these times of crisis than society. She did not see the point of making it cheaper to let employees on fixed contracts go to benefit young workers. "That would only mean more people would lose their jobs," she said. "People 50 or 60 years old may never get back to work. And they could also even have families to support."

Source: www.nrc.nl

Article by: Merijn de Waal in Barcelona

Published: 4 May 2010 16:46 | Changed: 20 May 2010 09:35