KLM Plans Austerity Measures While Renewing Fleet
KLM Royal Dutch Airlines (KL) is committed to maintaining its USD 1 billion fleet renewal plan “as much as possible,” despite announcing new austerity measures that involve deferring new investments. The airline’s recent announcement on October 3 aims to improve its operational and financial performance, targeting a short-term improvement of EUR 450 million (USD 497 million) in operating results and a structural profit margin above 8% by 2026-2028. These measures are designed to support KLM’s existing fleet renewal program, which includes an order for 100 A320neo Family aircraft and 60 additional options, with Air France opting out of this order.
The plan entails deferring investments, enhancing productivity, streamlining the organization, and cutting costs. Despite experiencing revenue growth, KLM highlights the necessity of these measures due to rising costs related to equipment, staffing, and airport fees. In August, KLM reported an operating loss of EUR 31 million (USD 34.2 million) for the first half of 2024, even with increased revenues compared to the previous year. The airline has also postponed its plans for a new head office while critically reviewing its investments, cost-saving strategies, and new revenue opportunities.
KLM Chief Financial Officer Bas Brouns stated that these measures would bolster the airline’s cash position and enhance financial management. He emphasized that this strategy would facilitate the planned billion-dollar investments in fleet renewal and improve customer experience. The new strategy will see older aircraft replaced with quieter, cleaner, and more fuel-efficient options, aligning with government agreements and addressing noise pollution concerns for Schiphol’s local residents.
President and CEO Marjan Rintel acknowledged the challenges these measures pose for KLM employees but stressed their importance for the airline’s future. He noted that, like many airlines, KLM is grappling with high costs and shortages of staff and equipment. Although KLM’s aircraft are full, capacity has yet to return to pre-COVID levels.
In implementing these measures, KLM aims to preserve its network and services while protecting jobs across the company. The airline’s internal works council and trade unions have been informed, and KLM will work with them to finalize decisions. Key initiatives include increasing labor productivity by at least 5% by 2025, addressing the pilot shortage to ensure all flights are operated by KLM pilots, and improving existing onboard products. The airline is also considering outsourcing maintenance if internal measures prove insufficient.
Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com