Dutch carrier KLM has rolled out a string of cost-saving initiatives aimed at improving its operating result by €450 million ($498 million) in the short-term as it bids to boost its efficiency.
The wide-ranging programme forms part of Air France-KLM’s overall target to deliver a structural profit margin of above 8% by 2026-28.
KLM chief executive Marjan Rintel says: “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.”
The measures include efforts to increase productivity, simplify the organisation, reduce costs and defer some investments.
Specifically it aims to increase labour productivity by at least 5% by 2025 through ”automation, mechanisation and reducing absenteeism” and to “resolve the impact” of the pilot shortage to ensure it can operate all flights with its own pilots.
It will also take steps at its engineering unit to reduce the number of flight cancellations – an impact of the shortage of engineers and continued parts supply challenges – noting it will consider party outsourcing maintenance if these measures do not yield sufficient results.
KLM plans to reduce overlap and overhead by simplifying the organisation – an example of which it cites is a planned reorganisation of its flight services and training organisations – while it will reconsider or postpone some investments.
The programme also includes plans to increase revenues through the improvement and introduction for new onboard products, noting an expanded catering offering and optimised aircraft layout targets annual revenue improvements of at least €100 million.
”Finally, KLM will explore options for outsourcing, divesting or discontinuing activities that do not directly contribute to flight operations,” it adds.
KLM chief financial officer Bas Brouns says: “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.”
The SkyTeam carrier, which has briefed unions and its Works Council of the plans, says the measures aim to maintain its network and service for customers, and protect jobs “as much as possible”.
