KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) hopes to maintain its USD1 billion fleet renewal "as much as possible" despite announcing new austerity measures that include deferring new investments.
Announced on October 3, the measures aim to enhance the Dutch flag carrier's operational and financial performance, targeting a EUR450 million euro (USD497 million) short-term improvement in operating results and achieving a structural profit margin above 8% by 2026-2028. The airline said the measures support its existing fleet renewal programme. Holding firm Air France-KLM has an order for 100 A320neo Family aircraft with a further 60 options. Air France is not participating in the order. "We will strive to maintain our fleet investments as much as possible," KLM said in a statement.
Apart from deferring investments, the plan focuses on boosting productivity, simplifying the organisation, and cutting costs. Despite revenue growth, the airline said these measures are necessary due to rising costs for equipment, staff, and airport fees. In August, KLM reported an operating loss of EUR31 million (USD34.2 million) for the first half of 2024, despite higher revenues compared to the previous year. It postponed plans for its new head office and started critically reviewing its investments, cost-saving strategies, and new revenue opportunities.
KLM Chief Financial Officer Bas Brouns said the new measures would strengthen the airline's cash position and improve its 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."
President and CEO Marjan Rintel emphasised that while these measures would be difficult for KLM employees, they were essential for the airline's future. "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."
Protecting jobs
In implementing the measures, KLM aims to maintain its network and services and to protect jobs across the company as much as possible. The company's internal works council (ondernemingsraad) and trade unions have been informed of the plans, and the airline will engage with them to reach final decisions. Specifically, this engagement will include:
- 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 KLM can operate all flights with its own pilots, with a better balance between intercontinental and European flights;
- KLM is operating fewer flights due to a shortage of technicians and ongoing supply issues. The airline is implementing measures in its engineering and maintenance divisions to minimise cancellations. Should these be insufficient, it will consider partially outsourcing maintenance;
- all investments (except those in occupational safety and compliance) will be reconsidered and postponed, such as the new headquarters and engineering and maintenance buildings;
- improving existing and introducing new onboard products. Trials are underway with an expanded catering offer and optimisation of aircraft layout, aimed at increasing revenues by at least EUR100 million (USD110 million) annually;
- organisational simplification and elimination of redundancies, such as the planned reorganisation of flight services and training organisations;
- exploring outsourcing and divesting or discontinuing activities that do not directly contribute to its flight operations.
