KLM is in the final stage of deciding on the order for 160 aircraft for KLM, Dutch Transavia, and Transavia France. “We are in the final ten laps of the race”, said Boet Kreiken, Executive Vice President Customer Experience. AirInsight spoke to him on the sidelines of the 102nd-anniversary party of KLM in Amsterdam.
The Dutch airline said in July that it had issued a tender with Boeing and Airbus for the renewal of the medium-haul fleet of Boeing 737-700s, -800s, and -900s. KLM has 48 Boeings, Transavia 38, and Transavia France is about to grow its 737NG-fleet to 54. Boeing has offered all versions of the MAX and hopes to continue its historic relationship. Airbus is offering the A320neo and A321neo and its sub-variants. Except for operating four A320ceo’s in 2014 and 2015 with Transavia France, the European aircraft has never established itself with the two leisure airlines.
The decision is extremely tough
Boet Kreiken, who in the recent past has been closely involved in selecting the Embraer E1s and E2 for KLM Cityhopper, says that the fleet decision is “extremely tough. Both offers are very close”. They are judged on eight to nine criteria, of which the right price is just one. The engine manufacturers Pratt & Whitney and CFM are also closely involved and their offer plays a key role in the final choice. In 2019, Transavia said it would almost certainly order the MAX 10. This situation has changed and is now completely open, says Kreiken.
Kreiken confirmed that KLM has set itself a specific deadline but he is unwilling to say when this will be, nor if there will be an announcement at next month’s Dubai Airshow. KLM would get some fifty aircraft or one-third of the order, the two Transavia’s the remaining two-thirds. These could be directly purchased or sourced through lessors, as Cityhopper is doing with the E195-E2.
KLM celebrated its 102nd anniversary in downtown Amsterdam with an event for sixty of its most loyal customers and other relations. Each year on October 7, it announces the latest of its typical Dutch houses of which a million are offered to passengers who travel in Business Class. The newest is the Pathé Tuschinski Theater/Cinema, which celebrates its 100th anniversary this year. (see main picture)
Absent from the party was CEO Pieter Elbers, who had caught a cold after returning from the IATA meeting in Boston on Wednesday. In his place, Chief Financial Officer Erik Swelheim gave an update on KLM’s position and answered questions from Dutch and foreign media. KLM has done quite well during the summer, reaching eighty percent capacity. All regions except Asia are developing well. Transavia has also had a busy summer. “Our strategy was to keep our network, so in the past months we have almost flown 100 percent of our destinations with fewer frequencies of course.”
Swelheim said that KLM has been successful with its restructuring. It has been “extremely tight” on cash and cost control and reduced its workforce from 33.000 to 27.000. Investments have been delayed where possible. From the €3.4 billion loans and loans guarantees it received from the Dutch government in 2020, KLM has used only €1.0 billion. “After a phase of surviving we now look at a face of recovery and even building back a better company. With the development in traffic we see that the perspective is coming back”, said Swelheim.
CFO Swelheim is positive that KLM is strong enough again
Since the start of the Covid-crisis, KLM has asked for some €1.7 billion in payroll support from the Dutch government in six tranches. The full extent will become known at a later date, but since October, the so-called NOW program has ended. Swelheim thinks that KLM is now strong enough to continue without NOW, which allowed it to keep its workforce even when many were placed on furlough. “It stopped on October 1, but it would also have stopped if we would reach eighty percent of our pre-pandemic revenues. Are we strong enough? I am quite positive about how the business develops and will not need any more aid.”
KLM said in June at the HY1-results presentation that it is still looking at a recapitalization to bolster its liquidity position. At the time, it said that this was being discussed by the Dutch government and the European Commission. “Of the aid, €2.4 billion is still unused. However, our balance sheet has weakened, debt has increased, our equity has become negative. It is important to restructure the balance sheet and that’s something we would like to do. Not because it is necessary for the short term but it helps you in financing your fleet. It is much cheaper if you do that with a healthy balance sheet”, said Swelheim. If this means that KLM will turn to the government to raise equity or do it the Lufthansa way and go to the capital markets isn’t something Swelheim as a CFO is in a position to say. “When we have something to tell about our recapitalization, you will hear more about it in a press release.”
KLM has nine more Boeing 787-10s on order. Swelheim said that “one or two” are scheduled for delivery this year but this depends entirely on when Boeing can start redelivering Dreamliners again. The airframer hopes to get FAA approval for the fix of the quality issues that have plagued the 787 for most of the year. KLM’s aircraft are entirely in the hands of this situation.