Connect with us

KLM announces reorganization to boost profits by €450 mil. per year

KLM announces reorganization to boost profits by €450 mil. per year

Internashonal

KLM announces reorganization to boost profits by €450 mil. per year


KLM announced a restructuring plan on Thursday that aims to boost annual profits by about 450 million euros per year. The company said it is looking at how it can change the interior of its aircraft so it can potentially fit more passengers into its already-full cabins. The plan does not specify any layoffs but does indicate that outsourcing or divestment may be needed if labor shortages cannot be tackled.

The Dutch airline said the “firm measures” will include at least seven specified changes meant to improve the bottom line. It pointed out that it has realized annual revenue growth, but “the rising cost of equipment, staff and airport fees” means it is missing profit targets set by its parent company, Air France-KLM.

Ultimately, the Dutch airline wants to bring down costs while boosting revenue to realize a profit margin of about 8 percent during a three-year period starting in 2026. “These measures include increasing productivity, simplifying the organization, cutting costs, and deferring or postponing investments,” the airline said.

“Like many other airlines, KLM is suffering from high costs and shortages of staff and equipment. Our aircraft are full, but our capacity is still not back to pre-corona levels,” KLM CEO Marjan Rintel said. To meet its targets and continue being a good choice for customers and employees, the airline has to make “clear and decisive choices now,” she said. “This is painful for every KLM colleague, but it is necessary, and it has to be done now.”

According to CFO Bas Brouns, the cost-cutting measures will improve KLM’s cash position. “This will enable us to realize the planned billion-dollar investments in fleet renewal,” he said. “In the coming years, KLM will replace older aircraft with a quieter, cleaner, and more fuel-efficient fleet.”

KLM is examining its aircraft layout to see if it can be optimized to get more passengers on board. It is also conducting trials with “an expanded catering offer,” improving existing products and introducing new ones. The airline wants these measures to boost revenues by at least 100 million euros per year.

Like many companies in the Netherlands and Europe, KLM is struggling with staff shortages and is finding it very challenging to attract more employees. The company is, therefore, looking at measures to “simplify the organization, achieve more synergy, and get rid of overlap.” The Dutch airline is exploring options for outsourcing certain services. It could also end up “divesting or discontinuing activities that do not directly contribute to flight operations.”

“Our goal is and remains running a healthy, future-proof KLM. We will do everything we can to maintain our network and services for our customers and protect jobs throughout our company,” Rintel said.

The Dutch airline started the year with a 31-million euro loss, compared to a 129-million euro profit during the first half of 2023, despite gross revenue rising by 400 million euros to 6 billion euros. The KLM Group, including its subsidiaries, saw profit results miss targets, with 260 million euros in earnings against 3.2 billion euros in revenue. The disappointing figures were a continuation of trouble that started to take shape towards the end of last year.

The KLM Group’s 2023 profit fell to 650 million euros, down from 706 million euros a year earlier. This was despite a sharp increase in revenue, from 10.7 billion euros in 2022 to 12.1 billion euros in 2023.

In its 2023 annual report, KLM said maintenance delays meant the airline had access to fewer aircraft during the fourth quarter. Combined with weather-related issues, the airline struggled with higher costs due to renting extra airplanes, rebooking, and passenger compensation payouts.

“Operating profits came under pressure as costs rose while we were still operating below pre-Covid capacity,” Chief Financial Officer Erik Swelheim said when the annual figures were released.

The group includes passenger airlines Transavia and KLM Cityhopper, cargo airline Martinair, KLM’s flight school, reservations center Cygnific, and various firms for engineering, maintenance, charters, catering, and other services.



Source link

More in Internashonal

A2Z ADMINISTRATION

AD

To Top