KLM announces firm measures to strengthen operational and financial position
KLM today announced measures to structurally improve the company's operational and financial performance. These measures include increasing productivity, simplifying the organisation, cutting costs and deferring or postponing investments. Despite revenue growth, these interventions are necessary because of the rising cost of equipment, staff and airport fees. Furthermore, KLM is engaged in an extensive fleet renewal - a billion-dollar investment aimed at cleaner, quieter and more fuel-efficient flying.
We want to maintain KLM's 105-year pioneering role in aviation and continue to connect the Netherlands with the rest of the world. However, just as many other airlines, KLM is suffering from high costs and shortages of staff and equipment. Our aircraft are full, but our capacity is still not back to pre-corona levels. We want to remain at the forefront of customer and employee satisfaction as well as sustainability. To continue doing this effectively, we must make clear and decisive choices now. This is painful for every KLM colleague, but it is necessary, and it has to be done now.
Marjan Rintel, President & CEO KLM
With the total package of measures, KLM aims to improve its operating result by €450m in the short term. In line with Air France-KLM's group ambition, this should lead to a structural profit margin above 8% by 2026-2028.
The measures we are announcing today contribute to increasing our revenues and lowering our costs. This will strengthen our cash position and improve our financial management. This will enable us to realise the planned billion-dollar investments in fleet renewal and customer experience improvement. In the coming years, KLM will replace older aircraft with a quieter, cleaner and more fuel-efficient fleet. In doing so, we will also meet the agreements with the government and reduce noise pollution for Schiphol's local residents.
Bas Brouns, Chief Financial Officer KLM
KLM is taking these and other measures to maintain its network and services for customers and to protect jobs across the company as much as possible. The Works Council and trade unions have been informed by KLM of the (proposed) measures and objectives. They will continue to be engaged through the standard consultation process to reach final decisions. Specifically, this involvement includes:
- Increasing labour productivity by at least 5% by 2025, including through automation, mechanisation and reducing absenteeism,
- Measures to resolve the impact of the pilot shortage and ensure that we can operate all flights with our pilots, with a better balance between intercontinental and European flights,
- Due to the shortage of technicians and ongoing supply problems of parts, KLM can operate fewer flights. Measures are being taken at Engineering & Maintenance to reduce the number of cancellations. If this does not yield sufficient results, options to partly outsource maintenance will be examined,
- All investments (except those in (occupational) safety and compliance) will be reconsidered and postponed, such as the new headquarters and Engineering & Maintenance buildings. We will strive to maintain our fleet investments as much as possible,
- Improvement of existing, and introduction of new products on board. Trials are underway with an expanded catering offer and optimisation of aircraft layout, aimed at increasing revenues by at least €100 million a year,
- Measures to simplify the organisation, achieve more synergy, get rid of overlap and overhead. One example is the planned reorganisation of flight services and training organisations,
- Finally, KLM will explore options for outsourcing, divesting or discontinuing activities that do not directly contribute to flight operations.
Our goal is and remains running a healthy future proof KLM. We will do everything we can to maintain our network and services for our customers and protect jobs throughout our company. With this package we are laying the foundation of a strong KLM that in the coming 105 years will continue to connect the Netherlands with the rest of the world.
Marjan Rintel, President-Directeur & CEO van KLM