KLM’s Restructuring Plan Rejected By Dutch Government

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KLM and unions are reportedly in emergency talks. This follows news on Friday that the Dutch government had rejected the airline’s restructuring plan. The reason for the refusal seems to be what The Hague considers to be an insufficient commitment from KLM employees to freeze wages.

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The Dutch government on Friday rejected KLM’s restructuring plan. Photo: Getty Images

Billions of euros riding on the plan’s approval

According to Reuters, which in turn cited two sources from De Telegraaf, the government’s rejection of the plan was based on unions’ refusal to freeze wages through to 2025. The Dutch government has made its national airline’s €3.4 billion ($4 billion) rescue package dependent on the restructuring plan, which was submitted on October 1st.

The plan includes cutting costs by 15%. The company will also let go of 20% of its workforce, which equals approximately 4,500 jobs this year. Furthermore, the airline has committed to reducing its carbon dioxide emissions by 50% by 2030. Meanwhile, it would seem this was not enough for The Hague, and it is back to negotiations.

When asked for a comment on the unfolding situation, a spokesperson for KLM confirmed to Simple Flying that the airline is indeed in talks with the unions. However, they also wished to highlight that the government’s official assessment of the plan is yet to be published.

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KLM’s CEO says the state-guaranteed loans are needed to safeguard the future of the airline. Photo: Getty Images

Loan and guarantees of “crucial importance”

The news of the government’s reported rejection of KLM’s plan comes on the same day that Air France-KLM released its third-quarter results for the year. As expected, it made for rather grim reading. KLM reported losses of €234 million ($273,5 million) for Q3. The carrier warns that the figures for Q4 could be even more discouraging, given the new set of lockdowns.

“To safeguard the future of our airline and employment opportunities, the loan and loan guarantees offered by the Dutch government are of crucial importance,” Pieter Elbers, KLM’s CEO, commented on the results and the continued grim outlook for aviation throughout the year.

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Mr Elbers also said that without the aid of the government’s Temporary Emergency Scheme for Job Retention (NOW), the carrier’s losses would have reached €500 million ($585 million).

The second wave of infections across Europe is pushing KLM’s capacity even lower for Q4. Photo: Getty Images

Second wave may cause further rightsizing

KLM also expressed that given the recent developments and the second wave of the pandemic, and the “somber outlook” ahead, further rightsizing of the organization will be considered. However, it did not specify whether or not this would entail more job cuts or potential fleet reductions.

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The SkyTeam Alliance member also said its operating capacity would be down by around 55% for the fourth quarter compared to 2019. This is even lower than that of the third quarter, which landed at around 50%.  Its partner airline, Air France, is planning for only 35% of capacity, but KLM is boosted somewhat by a strong cargo demand.

Do you think the Dutch government is reasonable in its request for wage freezes? Or should it just approve the plan already? Let us know in the comments. 

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