KLM has detailed its plans to bring the airline back to profitability next year. The measures include a cost-cutting programme and a change in fleet deployment to bring total savings of DFl700 million ($307 million).
The airline says the measures, aimed to tackle rising fuel costs, decreasing yields and increasing unit costs, were only the beginning if the airline was to achieve long-term profitability.
The plan has been welcomed by analysts, but doubts remain about the response of the labour force to job cuts of 2,000 - or 2,700, if the expansion originally planned for this year is included. The unions have accepted the plan in principle. Of the job losses, 400 will be externally sourced and temporary staff. Many cuts will be either voluntary or through natural attrition, but 600 compulsory redundancies are needed.
KLM has revised its summer route network with the aim of improving yield and results. The carrier announced in February that it would suspend several routes which were loss making or breaking even. "For the summer season, capacity will either be redeployed on more profitable routes, or withdrawn," the carrier says. A further 5% capacity reduction is set for the winter.
Seven aircraft will be leased to subsidiary Transavia, 50%-owned Martinair and Kenya Airways, in which KLM has a 26% stake. The reduction in capacity comes on the back of moves by American Airlines and British Airways to reduce seat numbers.
The airline is cutting costs by a "temporising investment" in information technology, although it emphasises that this excludes e-commerce expenditure. It is also raising tariffs by an average of 3% around the world.
The airline says its cost reduction programme will save DFl500 million, while the rationalised route network and enhanced yield will add DFl200 million. Analysts warn, however, that these figures come from an inflated baseline, based on the airline's original plans for the financial year to the end of March 2001.
Source: Airline Business
