KLM Delays New HQ, Reviews Costs After €31 Million Operating Loss in First Half of 2024
KLM Royal Dutch Airlines has put the brakes on its plans for a new headquarters and is undertaking a critical review of its investments and cost-saving strategies following a disappointing financial performance in the first half of 2024. The airline reported an operating loss of €31 million (USD 34.1 million) for the period, despite an increase in revenue compared to the previous year.
In a recent statement, Chief Financial Officer Bas Brouns expressed dissatisfaction with the airline’s financial results, describing them as “downright disappointing.” He emphasized the urgent need to improve profit margins and highlighted the airline’s plan to enhance efficiency, boost revenue, and cut costs. “We are flying more than last year, but costs are rising faster than revenues. We are already working on initiatives to work more efficiently, generate more revenue, and cut costs. We are going to accelerate and expand this. Among other things, this means postponing the plan for KLM’s new headquarters. In addition, we are taking a critical look at other investments. We will also continue to reduce the growth in indirect staff,” said Brouns.
CEO Marjan Rintel attributed the financial setback to a combination of operational challenges, including a shortage of pilots and engineers, as well as supply chain delays that hampered the airline’s fleet capacity. “Our results fell short of expectations due to significantly higher costs. The operation was more stable, but capacity could not yet be fully utilized. The fleet could not be fully deployed. We have insufficient numbers of pilots and engineering staff and face long delivery times for spare parts,” Rintel explained.
Looking ahead, Rintel indicated that KLM will be implementing additional measures aimed at cost control and improving financial performance. These measures will be announced after the European summer break. “In the period ahead, the focus will be on cost control and improving our financial performance. We will soon announce additional measures for the entire company. This is a difficult message but essential for KLM’s future,” she added.
KLM’s operating loss of €31 million in the first half of 2024 is a stark contrast to the operating profit of €129 million (USD 142 million) reported during the same period in 2023. This loss comes despite an increase in revenue to €6 billion (USD 6.6 billion) in the first half of 2024, up from €5.6 billion (USD 6.1 billion) in the corresponding period last year. During this period, KLM transported nearly 16 million passengers.
The airline reported more stable operations in the second quarter of 2024, with fewer disruptions thanks to measures like increased staffing and spare fleet availability. Despite achieving an operational result of €260 million (USD 286 million) on revenue of €3.2 billion (USD 3.5 billion) for Q2 2024, the high costs significantly impacted overall performance.
KLM’s engineering and maintenance division saw increased revenues and ongoing recruitment efforts, while the cargo division experienced higher demand, boosting revenues despite global supply chain challenges. Meanwhile, KLM subsidiary Transavia Airlines (HV) also reported higher revenues, transporting nearly 4.5 million passengers and achieving positive results in Q2 2024 under challenging conditions.
As KLM navigates these financial challenges, the airline is focusing on recalibrating its strategies to ensure long-term sustainability and profitability in an increasingly competitive aviation market.
Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com