KLM Royal Dutch Airlines is implementing austerity measures to improve its operational and financial performance, targeting a short-term improvement of €450m and a structural profit margin above 8pc by 2026-2028, while maintaining its €1.3bn fleet renewal plans as much as possible.
Cuts and reductions in unprofitable routes are likely to be part of the process. KLM currently flies four times daily to Dublin, twice daily to Cork and twice daily to Belfast.
The airline reported a €31m operating loss for the first half of 2024 primarily due to high costs despite increased revenues, prompting a review of investments and cost-saving strategies, including the deferral of non-essential projects like a new headquarters.
KLM has announced a series of comprehensive measures to improve its operational and financial performance after reporting a €31m operating loss in the first half of 2024,.
The new initiatives focus on reducing costs through measures such as increasing productivity, simplifying the organizational structure, postponing non-essential investments, and maintaining fleet investment as much as possible.
KLM plans to enhance revenue by at least €100m annually through expanded catering offerings and optimizing aircraft layout, with discussions about potential economy buy-on-board catering on short-haul flights.
Additional measures include increasing labour productivity by 5pc by 2025, addressing pilot shortages, reducing cancellations caused by technician shortages, and exploring outsourcing options, options which will be discussed by trade unions throughout the process which urges the airline to:
- Aim to boost labour productivity by a minimum of 5% by 2025 through the use of automation, mechanization, and strategies to reduce absenteeism.
- Implement strategies to address the pilot shortage, ensuring that KLM can operate all flights with its own pilots while achieving a better balance between intercontinental and European routes.
- Fly fewer routes due to a lack of technicians and persistent supply challenges, KLM is flying fewer routes and will take steps in its engineering and maintenance areas to reduce cancellations. If needed, the airline may explore partial outsourcing of maintenance tasks.
- Reassess all investments and defer where possible, with the exception of those focused on occupational safety and compliance, including plans for a new headquarters and engineering and maintenance facilities.
- Enhance current onboard offerings and introduce new products, with pilot programs for an expanded catering service and optimized aircraft configurations aimed at generating an additional EUR100 million (USD110 million) in annual revenue.
- Streamline the organization by simplifying processes and cutting redundancies, which includes reorganizing flight services and training departments.
- Assess opportunities for outsourcing and consider divesting or ceasing activities that do not directly support flight operations.
Marjan Rintel, president and CEO of KLM, shared: “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.”
