KLM Makes Further Cuts

In view of the current world developments, KLM Royal Dutch Airlines will soon implement far-reaching measures to effect a direct improvement in results.

The company has also taken a variety of specific measures in an attempt to improve returns on the longer term. KLM will now go about identifying initiatives for the whole of the KLM Group which could contribute to a structural ten percent reduction of unit costs. The first results of these steps will be demonstrated in the fiscal year, which begins today.

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. All previous measures and those set for the short term will be assessed according to their ability to contribute to improving results. A conscious choice has been made to avoid any measures which only add incidentally to cost-savings.

On the longer term, KLM 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 The measures outlined above will have an impact on our workforce. The exact short-term consequences will only become clear in a couple for weeks. Based on an interim inventory of longer-term initiatives, KLM expects to cut several thousand jobs. A number of measures have therefore been implemented 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. It is, however, inevitable that forced lay-offs will be required. KLM today informed the Works Council and trade unions of its decision.