KLM takes further measures to cut costs

KLM Royal Dutch Airlines has said that in view of the current world developments it will soon implement far-reaching measures in an attempt to effect a direct improvement in its results.

On the short term, KLM is intensifying its company-wide focus on reducing costs and is aiming to maximize its cash position. Furthermore, the company is initiating an employment stop and will reevaluate all planned investments.

On the longer term, KLM said it believes that the aviation sector will have to improve its results if it is to survive. In the past ten years, the average returns have fallen below 2% annually. For several months now, KLM has been making changes to bring about a lasting positive effect in the company. In the course of this year, the implementation of a new fleet will bring about lower unit costs. KLM has already instituted a company-wide purchasing policy based on reducing costs at every level. Within the dynamics of their own market environment, the various business units will be taking measures to improve results. By adapting its product and service model, KLM will be able to respond to changing customer demand. The company has set up a temporary project organization to identify and join supplementary initiatives to effect structural cost reduction.

Impact on workforce

Based on an interim inventory of longer-term initiatives, KLM has said it expects to cut several thousand jobs. A number of measures have therefore been implemented by the airline with immediate effect. One of these is a general recruitment stop. In addition, temporary employment contracts will not be extended and the hiring of external workers and advisors will be almost completely suspended. KLM has admitted though that it is inevitable that forced lay-offs will be required.

Capacity adjustments

On March 20, KLM announced capacity adjustments particularly on routes to the Middle East and North America, dome of these have already been implemented. KLM has now also adjusted capacity in other route areas in response to declining demand resulting from developments surrounding the SARS virus.