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MARKET FORCES
The Airport as marketplace A couple of months ago reporting of fierce competition raging between the handling agents at Schiphol caught my eye. The unions were holding discussions about the way in which competition is negatively affecting working conditions. Recently, via the Dutch Safety Board, the long-standing discussion concerning the safety awareness of parties active at Schiphol cranked up once more and a link was made with the competitive relationships between, amongst others, the handling agents. Other reports have pointed to pressure on the quality of the service provision of Schiphol as airport.
Text Albert Veenstra
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t is clear that this is a protracted issue. A quick search finds similar reports from 2017, 2015, 2010. What is more interesting is that this is certainly not typically a ‘Schiphol problem’. Tension also exists between competitive and collective interests, such as performance, at major sea ports. And what is perhaps more relevant: there too, the important players are often globally operating companies so local problems in just one sea port or airport are not easy to tackle. Economic science can offer some insight into these issues. Port economists point directly to the fact that transport hubs, such as airports, consist of a market superintendent, or a port authority, and commercial players offering all sorts of services. The port authority must create conditions allowing the service providers to work effectively and safely. Competition is part of this, but the degree of competition can be promoted or restricted by the port authority. The latter with an eye to the greater
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objective, namely the efficient performance of the hub as a whole. Schiphol does this, for example, by issuing licences for handling agents. A licence is an entrance ticket to Schiphol’s handling market. Schiphol does not let just any company in. At the moment there are a (considerable) handful of licenced handling agents. There is limited dynamism: the small group of companies is relatively stable, although last year Schiphol issued a new licence to ground handler Viggo, which is active
at Eindhoven Airport. Viggo therefore worked hard throughout 2021 recruiting for positions at Schiphol. Everyone agrees that the number of handling agents at Schiphol is relatively high compared to other airports. If there is fierce competition between handling agents – whereby labour conditions, safety and performance are put under pressure – then there is something amiss with the competitive balance. The size of the market and the service provision capacity of all companies together are mismatched. Economic science has a concept for this called the Minimum Efficient Scale. This answers the question: what is the smallest volume of economic activity for a company to be able to offer a competitive price? The instrument to determine the minimum scale is the long-term average
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