LM has announced a restructuring plan aimed at increasing its profits by €450 million per year over the next few years.
The Dutch airline is grappling with rising costs, including staff, airport fees, and equipment expenses, despite strong revenue growth.
The plan, which focuses on cutting costs, increasing efficiency, and improving the bottom line, includes a range of changes such as optimising aircraft layouts and exploring outsourcing.
KLM’s CEO, Marjan Rintel, stated that while the measures are painful, they are necessary for the airline’s long-term future.
KLM seeks to raise profit margins to 8% by 2026
In its effort to reach a profit margin of 8% over the next three years, KLM has unveiled a series of “firm measures.”
The airline is focused on increasing productivity and simplifying its organisation.
While the company plans to avoid layoffs, it is exploring outsourcing certain services and potentially divesting from non-core activities.
These efforts are intended to tackle the staff and equipment shortages that have been hampering operations, with a special emphasis on boosting revenue streams.
KLM is examining ways to optimise the layout of its aircraft in order to fit more passengers and improve revenue.
Alongside this, the airline is testing an enhanced catering service and is planning to introduce additional in-flight products.
KLM expects these initiatives to increase its annual revenue by at least €100 million as part of a broader strategy to counter rising operating costs while maintaining passenger satisfaction.
Fleet renewal to be prioritised as cost-cutting improves cash flow
CFO Bas Brouns announced that cost-cutting efforts will improve the company’s cash flow, which will allow it to proceed with its fleet renewal programme.
KLM plans to invest billions in replacing its ageing fleet with quieter, cleaner, and more fuel-efficient aircraft.
These investments are critical for the airline’s future, as they will help reduce operating costs and improve the customer experience, ultimately enhancing the company’s competitive edge in the market.
Staff shortages have been a persistent challenge for KLM, as the airline struggles to recruit more employees in the competitive European labour market.
The restructuring plan includes options to simplify operations, streamline overlapping services, and possibly outsource non-critical functions.
While KLM is taking steps to protect jobs, the company may divest certain non-core operations if they do not directly contribute to its flight business.
KLM’s profits decline in 2023 despite revenue growth
KLM saw a sharp decrease in its profits in 2023, dropping to €650 million from €706 million in 2022, despite significant revenue growth.
The airline’s earnings suffered due to higher operating costs, compounded by maintenance delays and weather disruptions.
While revenue increased by €1.4 billion to €12.1 billion, the airline could not match its performance targets, prompting the need for significant cost-saving initiatives in the coming years.
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