Plan to build one million houses in ten years What are we going to do with all that money saved during corona?

What are we going to do with all that money saved during corona?

Believe it or not, according to the Dutch National Bank (DNB), in 2020 the Dutch managed to hoard an astounding 42 billion euros extra in savings and checking accounts, because they could not go on vacation and shop due the lockdowns. This is twice as much as in 2019, and averages about 5,000 euros in savings per household.

By the year’s end, Dutch households had a total of 487 billion stuffed away in their bank accounts. Normally, these savings would have been spent on vacations and Christmas shopping, but not in 2020. Many households instead spent money on fixing up their homes (interior designers have been working over-time), home repairs (try to find an electrician or carpenter these days!) and big-ticket improvements such as installing solar panels.

According to Carlijn Prins, economist at the Rabobank, the corona measures have changed Dutch consumer behavior drastically. Although cafes, hotels and restaurants have been shut since December, consumers are buying more products online than ever before, using payments methods such as Ideal, credit card, pin and bank transfers.

The minister of Economics, Wopke Hoekstra, who is up for re-election next month, optimistically foresees consumers storming cafes and stores once the corona restrictions have been lifted. However, a report by the Dutch bureau of statistics CBS indicates that folks might be keeping their purse strings tight. More than half of people are saving up for major economic setbacks. Moreover, there are plenty of people, such as entrepreneurs, who have been forced to dig into their savings to keep their businesses going during the enforced closures.

The truth of the matter is that the extent and the economic fallout of the crisis are not yet clear. According to a report dated 23 February, the Dutch province that has been hardest hit by the crisis is NoordHolland, where the economy shrunk by 7% in 2020, followed by Groningen with 5%. On an average, in 2020 the Dutch economy declined by 3.7%.

In many regards, corona has changed the world economy forever. The pandemic has catapulted developments such as remote working, e-commerce and automation from the marginal to the standard. Once the lockdown is over, consumers will not be returning to their old spending habits. For those who had computer-based office work, they will most likely will be working remote at least a couple days of week, if not more. They will be spending less on train travel, take-away coffees and formal clothing. For companies, this is also a win-win deal. They will save on expensive office space, utility costs, office cleaning, employees’ travel expenses and office supplies. Computer-based office work will give employees the option to live in more remote areas of the country, where house and rent prices are much cheaper, thus saving on living expenses.

In the long term, this picture might look rosy, but for the near future, the economic situation looks rather bleak. According to a recent McKinsey report “The future of work after COVID-19”, the alarming news is that while many people have been able to work from home, approximately 25% of all jobs have been made redundant. This means that many will have to retrain and switch occupations. Until now the Dutch government has paid 12.4 billion to companies to continue paying their employees’ salaries, but once the government’s spending frenzy is over, most likely companies will have to start laying off personnel. They in turn will have to start eating into their savings. The good news is that for those who are willing to retrain, the crisis has generated a plethora of new jobs and occupations, especially in the sciences, technology and engineering sectors. If we are lucky, just like after the last world-wide pandemic a hundred years ago, prosperous times are on their way and we’re headed towards our own Roaring Twenties.

Written by Benjamin Roberts

KLM to launch KLM Holidays package-travel division

KLM recently announced plans to launch a package-travel division, KLM Holidays, to sell vacations directly to consumers. The company will offer travelers packaged vacations in which flights, hotels, tours and rental cars can be booked in one purchase. While KLM already offers customers the option to book hotel rooms and rental cars when purchasing a flight, KLM Holidays will concentrate exclusively on selling packaged vacations. The airline purchased Airtrade, an online ticketing organization, to deliver the new service. KLM Holidays will begin operation once the government-imposed COVID-19 travel restrictions are relaxed. The company plans to eventually offer KLM Holidays package deals in countries other than the Netherlands.

KLM hopes to become a major player in the package-travel industry with the launch of KLM Holidays. “We want to be in the top three tour operators for flight holidays ourselves, together with our sister Transavia Holidays,” said KLM Netherlands CEO Harm Kreulen in an interview with De Telegraaf.

This ambition has many in the travel industry concerned due to the structure of traditional package vacations. Travel organizations such as Corendon and Sunweb typically organize and offer vacations with flights, hotels, tours and car rentals included. They purchase seats for their customers on commercial flights often offered by KLM. Travel organizations that typically offer package vacations fear that they will be unable to compete, as KLM reserves seats for its own package vacations. Many in the industry argue that by offering package vacations, KLM will essentially be competing against its own customers. Corendon, for example, has a three-year contract with KLM to provide flights to the Netherlands Antilles as part of its package vacations. KLM Holidays plans to offer similar packages to the Netherlands Antilles, directly competing with Corendon.

Concern has also been expressed about unequal competition given the extraordinary levels of government support KLM has received to survive the COVID-19 downturn. Over the course of the pandemic, the Dutch government has provided KLM with 3.4 billion euros in economic support, while the French government has contributed 7 billion euros. “KLM has received billions in government loans to survive corona. You cannot misuse that for the takeover of a travel company. Bad timing. We’ll have to find out whether that’s allowed,” said Steven van der Heijden, head of Corendon. Mattijs ten Brink, CEO of Sunweb, has expressed concern with KLM receiving government support, while at the same time competing with an already weakened travel industry.

This is not the first time KLM has faced criticism for the ways in which it has used state-provided money intended to relieve the financial difficulties caused by pandemic restrictions. In January of this year, the company announced plans to lay off at least 6000 workers after accepting state-support specifically designed to prevent job loss in heavily impacted industries. “KLM is abusing the corona crisis to reduce the number of permanent jobs and at the same time to hire flex workers. That’s anti-social and in violation of the social plan that we’ve agreed on,” said Joost van Doesburg of FNV Luchtvaart, a union representing aviation employees.

The proposed expansion comes at the end of a financially disastrous year for KLM. The airline’s business model is based largely on the transportation of business travelers and freight. During the pandemic, KLM flew sold 67 percent fewer passenger tickets and transported 21 percent less freight than the year before. Air-France-KLM lost 7.1 billion euros last year, largely as a result of travel restrictions imposed to slow the spread of the virus that causes COVID-19. That loss was the largest in the company’s history, much worse than its prior record loss of 1.6 billion euros between 2009 and 2010.

The company expects consumer demand for air travel to pick up again this summer, when a fair percentage of the population should be vaccinated. In spite of the financial assistance from the Dutch government and plans to launch KLM Holidays, the company does not expect business to rebound completely until at least 2024.