Dutch airline KLM said it would cut 4,500-5,000 jobs as it embarks on a post-COVID-19 road to recovery that is set to be “long and fraught with uncertainty.”
A full restructuring plan will be unveiled in October, KLM said July 31. The announcement comes a day after parent Air France-KLM reported a €2.6 billion ($3 billion) net loss for the second quarter (Q2) and added that capacity would remain at least 20% below 2019 levels in 2021.
KLM said it had operated 30% of originally planned flights in July, but with load factors lagging behind. Capacity was up from 10% at the start of April, and the 15% averaged in Q2. “As a result, while the network is again being gradually and carefully expanded, revenues are lagging far behind,” KLM said July 31.
“Prospects for the airline industry—and KLM in particular—are uncertain. Different countries are now beginning to tighten their more relaxed travel restrictions. This is making customers more cautious when it comes to booking a ticket. In all scenarios, demand is only expected to recover by 2023 or 2024 at the earliest,” the airline said.
KLM has received a total of €3.4 billion in the form of state loans and guarantees—while larger partner Air France has also been granted €7 billion in state support—but KLM needs to adjust its size to the “new reality,” the company said. That means cutting 4,500-5,000 out of 33,000 jobs over the course of 2021 to leave a total workforce of 28,000.
The airline will achieve these reductions partly through non-renewal of temporary contracts, a voluntary departure scheme and natural attrition through retirement, but said “alternative solutions” would need to be found for around 1,500 positions: up to 500 on the ground, 300 in the cabin and 300 in the cockpit. Another 400 roles at KLM subsidiaries and Air France-KLM group functions will need to go.
The airline left open the possibility of needing to make further cuts in the event of even lower than expected demand in 2021/22.
KLM said it would be working with unions and its works council ahead of presenting a finished restructuring plan in October.
“A great deal has already been done in recent months with respect to adjusting the size of our company in the face of a new reality. Unfortunately, more measures are needed in the short term to guarantee KLM’s continued existence in the future,” KLM CEO Pieter Elbers said.
Air France said earlier in July that it planned to cut 6,560 jobs by the end of 2022, with a further 1,020 to go from its subsidiary HOP!, as the French flag-carrier pushes ahead with its existing plans to shake up its domestic network that have been accelerated by the COVID-19 crisis.
As it presented its half-year results July 30, Air France-KLM said that it expected capacity at 45% of 2019 levels for the third quarter and 65% for the fourth quarter. Capacity will remain at least 20% below 2019 levels in 2021 and a recovery to pre-crisis capacity is not expected until 2024.
The group’s airlines are “carefully” increasing capacity for the summer months, aiming to rebuild their worldwide network “step-by-step” with a wide variety of destinations in the portfolio, Air France-KLM said.
Air France-KLM Group posted a net loss for the first half of the year of €4.4 billion and €2.6 billion in the second quarter, including a €520 million hit for the early phase-out of Airbus A380s and €72 million for its A340s phase-out, as well as €105 million in fuel over-hedging plus restructuring costs linked to voluntary departure plans. Group passenger numbers fell 61.7% to 19.3 million in the first half.
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