KLM looks to Dutch government for €3.4 billion loan which has strings attached

KLM Royal Dutch Airlines (KLM) has submitted its critical restructuring plan to the Dutch government as part of its commitment to reduce operating costs. The government had stipulated that the carrier needed to reassess its strategy, cost-cutting initiatives, financial considerations and how staff will embrace reduced employment conditions amounting to income-dependent, graduated cutbacks of up to 20%.

According to a press release from KLM issued October 2, it has now reached agreement with all unions for ground, cockpit and cabin staff on key principles of this plan for the period through 2022. This includes the unions VNC and FNV Cabine in the cabin domain and the unions FNV Luchtvaart, CNV, De Unie, VKP and NVLT in the ground domain, as well as the Dutch Airline Pilots Association VNV in the cockpit domain.

The government also wants KLM to reduce controllable costs by 15%, which can only be achieved through downsizing. It is estimated that by the end of 2020, 4,500 fewer people will be employed by KLM than were employed before the COVID-19 pandemic struck. The option of terminating lease agreements and operating a more efficient fleet will be a likely outcome.

Pieter Elbers, KLM CEO, commented that: “Today (Friday) we took a major, exceedingly important step towards restructuring KLM. The plan we submitted to the Ministry of Finance today is a condition for obtaining a financial package, making this an important milestone in KLM’s recovery. The aim is to ensure that KLM survives this crisis and emerges stronger than before. The measures are far-reaching and painful for KLM staff, but they are necessary. I am grateful for the support of the Netherlands government and proud of the efforts of all involved – KLM staff, our Works Council and trade unions – who worked together to achieve this result. (€1.00 = US$1.17 at time of publication.)