Today: Tuesday, 4 August 2020 year

KLM group to cut up to 5,000 jobs due to COVID

KLM group to cut up to 5,000 jobs due to COVID

Dutch carrier KLM announced plans to cut jobs significantly, FT reports. On Friday, the company’s statement informed that between 4,500 and 5,000 jobs will be axed because of the COVID-19 crisis.

KLM confirmed in its statement 1,500 job losses, some 1,500 temporary contracts won’t be renewed and 2,000 jobs will be suppressed via a voluntary departure scheme. In addition, the Dutch company also expects “natural attrition through retirement” to help cut an extra 500 jobs.

Thus, the axing 4,500 jobs at least is a forced move amid the coronacrisis times. No demand means no offer, so, KLM bosses said it does not expect demand to fully recover before 2023 or 2024 and said further staff reductions are possible “given the high level of uncertainty.”

Air France-KLM, which reported an operating loss of €597m in the first quarter of this year, is battling high operating costs and a heavy debt burden. It has targeted a 20 per cent improvement in productivity by 2015.

According to the recent AT Kearney study, Air France’s costs, excluding fuel and landing charges, were 30 per cent higher on average than its competitors, including traditional rivals such as Lufthansa.

Despite KLM is smaller than Air France, the company contributed more to group profits in the years before 2020, leading at times to friction between the French and Dutch governments. Traffic is gradually resuming at KLM, although the latest uptick in cases in many countries could threaten that.

Air carriers faced the toughest times

The commitment to cut jobs through voluntary departures, if agreed, will reduce the risk of industrial conflict at Air France, which has been plagued by strikes over the years. The airline is also negotiating with unions on pay, working hours and other working conditions to improve efficiency.

The government is backing Air France’s voluntary approach, said Michel Sapin, labour minister, adding that “dialogue” would enable the airline “to recover its financial balance”. “The management says if nothing is done this great company risks capsizing,” he said.

The Dutch and French governments have given the two national carriers, which merged in 2004, a combined EUR10.4 billion in bailout money, in a mix of loans and loan guarantees. Conditions imposed by the Dutch government include pay cuts for executives and pilots, and a ban on bonuses and dividends.

To cope with coronacrisis consequences in the transport sector, the European Commission approved recently a bailout package of EUR3.4 bln in loans offered by the Dutch government to help the company navigate the crisis.