KLM has revealed the "painful" measures to improve its operational and financial position. It is estimated to improve the company's operating result by €450 million in the short term, which is estimated to lead to profit margin above 8% by 2026-2028.
The airline said the measures will maintain its network while protecting jobs across the company. It comes as the airline felt the weight of high costs as well as a shortage of staff and equipment.
"Our aircraft are full," said KLM CEO & president Marjan Rintel, "but our capacity is still not back to pre-corona levels. We want to remain at the forefront of customer and employee satisfaction as well as sustainability. To continue doing this effectively, we must make clear and decisive choices now."
Measures include increasing labour productivity by at least 5% by next year, including through automation, mechanisation, and reducing absenteeism.
" This is painful for every KLM colleague, but it is necessary," added Rintel.
KLM said it would have a "better balance" between its intercontinental and European flights to mitigate the impact of pilot shortages. In addition, all investments - except in safety and compliance - will be reconsidered and postponed, such as its new headquarters as well as its engineering and maintenance buildings. The company said it will "strive" to ensure fleet investments remain intact.
"This will strengthen our cash position and improve our financial management," said KLM CFO Bas Brouns. "This will enable us to realise the planned billion-dollar investments in fleet renewal and customer experience improvement."
Measures are also being taken at KLM Engineering & Maintenance (KLM E&M) to reduce cancellations as KLM grapples with supply chain shortages and a lack of technicians. It said if this does not "yield sufficient results", it will consider partially outsourcing maintenance.
The company is exploring options to outsource, divest, or discontinue activities that "do not directly contribute to flight operations". It is also looking at ways to "simplify" and "achieve more synergy" and to remove "overlap and overhead". The company did not specify exactly what this would entail, but gave the example of reorganises flight services and training organisations.
KLM still intends to rejuvenate its fleet in the coming years with new technology aircraft.