How to celebrate your 100th birthday? KLM knows only one way to do it: BIG and in style. Koninklijke Luchtvaart Maatschappij used its founding date October 7 to good effect to invite special guests, former KLM bosses, the minister of Finance, and media to commemorate this special occasion, as KLM is the only airline in the world still to fly under its original name a century on.
While October 7 is THE date, it has been and will be party-time for the past and next weekend too, with more staff and guests invited to visit the special KLM Experience, where the airline showcases its heritage, today and future. For the occasion, it fittingly changed Hangar 10 Albert Plesman into a party hall, the hangar named after the founding father and the first CEO of KLM.
Although he still feels emotion and proudness each time he sees historical footage in KLM’s latest video, CEO Pieter Elbers is very much a man of today with the difficult task of steering the blue birds safely into the future. It was his remarks and those of Air France-KLM Group CEO Benjamin Smith during a Q and A-session that were of most interest to the invited media.
Where to grow?
Since its first services started in May 1920 between London and Amsterdam (yes, the first flight departed the UK…), KLM has grown to fly 34 million passengers last year with a fleet of 200+ aircraft. For years, KLM has been used to growth at Amsterdam Schiphol, but last year the airport reached the ceiling. With aircraft movements capped at 500.000 a year until 2020 following a government decision made back in 2008 and Schiphol having reached this limit in 2018, there is literally little room left for growth.
The current minister of Transport has said she has the intention to allow Schiphol to grow to 540.000 movements but only if it ‘earns’ the extra flights by reducing noise pollution and emissions through airlines operating the latest spec of aircraft. This plan has met strong opposition from environmentalists, part of parliament and Schiphol’s neighbors. Add to this an unresolved issue about how to curb nitrogen oxide emissions which is ‘hot’ in The Netherlands, and Elbers’ intention that KLM must grow to earn money in order to pay for sustainability projects is far from certain.
Airinsight asked Elbers and Smith where this leaves KLM if the airline can’t grow at Schiphol and how that relates to Paris? Elbers: “We have reached the ceiling of 500.000. A sort of guidance has been given by parliament about how to grow to 540 and we are filling in the conditions and timing for that. I am confident that we will be able to continue to grow at Schiphol, albeit at a slower and more moderate rate.”
Smith added: “At our main base at Roissy (Paris Charles de Gaulle) there is still room for growth, there is still runway capacity. At Orly, we see similar challenges as we see in Amsterdam. One way to grow at airports that are slot-constrained is of course to grow the size of the aircraft. That’s always an option”.
Ben Smith (left) and Pieter Elbers (right) answer media questions.
In June, KLM launched the “Fly Responsibly’-campaign to challenge travelers to think more carefully if flying is the only solution to their plans. It has been met with skepticism, but since then has been embraced by others like Lufthansa, Qantas, and Emirates. Air France will launch its own CO2-compensation scheme next January, but the French won’t copy-paste the Dutch initiative, says Ben Smith: “In The Netherlands, there is no real aero-domestic market except maybe Amsterdam-Brussels. In France, the domestic market is quite large and there is an extensive high-speed train network in place. Over the last few decades, a number of travelers have changed from the plane to the train, so this is not new. When there is an alternative, you already see this.”
Stability is the word
KLM has seen a few days of industrial action in September as unions tried to bully their position by calling ground staff to go on strike. With a final deal having been rejected by a majority of the cabin crew union members, it puts KLM in a position that Air France knows all too well before Smith arrived in August 2018. Both Smith and Elbers seek stability. “When I arrived a year ago, my first priority was to try to improve the social dialogue within Air France. When trust is developed and alignment is in place and there is good transparency you can see major improvements take place. In France, there is now labor-stability. There is still a lot of history and some mistrust between management and frontline staff, but I can tell you it is much better now. At KLM, there is a long history between management and frontline staff. Of course, every time there is a contract renewal people like to push for what is best from their side, but Pieter and his group have always come to a satisfactory agreement. I can’t say that about every airline in Europe.”
Elbers added: “We need to keep in mind the economic reality of the company. On that balancing-act, I guess every airline and CEO has to deal with that of keeping happy employees.”
Governments want back-role again
In February, the Air France-KLM relationship became highly political when the Dutch government unexpectedly announced it had bought itself a 14-percent share into the Group to leverage its position against the French. The man responsible for this, Dutch minister of Finance Wopke Hoekstra, elaborated on this a bit in his birthday-speech: “We did what we did because a small country like The Netherlands with a very open economy depends on its connectivity. Schiphol’s function as a hub is crucial to us. The same goes for Air France-KLM and for KLM. That is why we work very hard to further shape together our role as a shareholder in close consultation with the French state and the company. The aim for both countries is to return to play a background role in the not too distant future in full equality and then Air France-KLM can continue to pursue its goal of becoming the very best airline in Europe.”
An ‘only natural’ reaction, Ben Smith said about the Dutch move, adding: “Yes, there may be some tensions about how the exact governance should look like, but there is no misalignment about how we should be running this business”.
It is no secret Smith wishes to run Air France-KLM more efficiently as one single Group. Bringing stability is the first step, Smith says. “With employees really understanding this is their brand and this is their business, you see a lot more focus on ensuring that the company is as healthy as possible and run as efficiently as possible. Air France is not the most efficiently-run carrier in Europe, we have a lot of room to improve. Pieter and his team at KLM have shown a phenomenal job of showing what is possible. We are ‘laser-focused’ on our four major European competitors Lufthansa Group, IAG, Ryanair, and Easyjet and we are working very hard to regain our position at the top of the European competence.”
No decision of fleet renewal
While Air France announced its order for the Airbus A220 and KLM has signed a Letter of Intent for Embraer E195-E2s, both airlines are taking their time to decide on replacing the Airbus A321 and Boeing 737-fleet of which some are up for replacement. “We and Transavia have some 90 737s. You said they are rather old and that’s correct for some of them, but we recently added some last-of-line 737NGs, so we are not in a rush to make any decisions”, said Elbers. Smith said: “We have a lot of flexibility within the group. We have a relatively young fleet, both narrow-body, and wide-body, which gives us some choice to renew now or wait for the longer term. Many airlines keep their aircraft a lot longer than the average age we have today. When we order planes, we will do it at the right moment at the best possible pricing. Depending on how we will like to see our route network evolve we will make a decision.”
Elbers says Air France-KLM has no intention to grow its full freighter-fleet again, having already parted out all 10 Martinair McDonnell-Douglas MD-11. “Indeed we will be replacing our combi-aircraft by belly aircraft. The belly cargo capacity of a 777-300 is about 18 tons, so we have moved into lower capacity and to a different kind of cargo, like pharmaceuticals. We have the four full freighters (Boeing 747-400Fs) as a basis supplement by the belly’s of 66 wide-body aircraft”.
KLM used its centenary to unveil a photobook and its 100th Delfts Blue House, to become a treasure with many collectors in a series of china that was launched back in 1952. Number 100 depicts the central part of Huis ten Bosch, the house of King Willem-Alexander. Sure, he’ll get one too.