CEO Column

“You never know what's around the corner. It could be everything. Or it could be nothing. You keep putting one foot in front of the other, and then one day you look back and you've climbed a mountain."

Datum: 6 May 2021

Dear Colleagues, Since the start of 2021, we have been looking and longing for the end of the COVID-19 crisis. In my columns, I have used imagery and words like: finally light at the end of the dark COVID-19 tunnel, hope, resilience and persistence. Meanwhile, we are already in the fifth month of 2021, we are still not where we want to be and it still requires a lot of perseverance from us. I am proud of how we continue to do that with all our colleagues. The situation varies greatly between countries. The rapid and high rate of vaccination in, for example, the US, UK, Dubai and Israel make us optimistic. It is also important for us as a company that operates worldwide. Looking at domestic travel in the US, for example, we see a strong rebound. That is really hopeful. The huge interest in the test flights to Rhodes and Gran Canaria also underline our customers' enormous desire to fly again. Europe and the Netherlands are still significantly behind this leading group in terms of vaccination. This also means that there are still many restrictions in European countries. However, in the coming weeks and months, we will also get closer to the turning point in Europe. The strong EU call this week for the early reopening of intra-European borders is a particularly important step. Vaccination programmes are also getting underway in certain parts of the world, aided by our cargo division's pharmaceuticals shipments. Pictures coming through of our aircraft and crew being welcomed locally as ‘heroes’ and ‘bringers of hope’ continue to be beautiful and inspiring.

“I am proud of how we continue to do that with all our colleagues."

In columns a year ago, I gave special attention to China and Italy, among others, which were the worst affected areas at the time. At present, I am looking with concern and great sympathy at India, which has been hit so incredibly hard. A sincere (blue) heart to all AF/KL colleagues in India. Stay safe! I read somewhere ‘Global aviation - A most uneven recovery in store’. With our global network, we must therefore prepare for this by remaining flexible and adapting quickly. The fact that the situation is still bad in many countries means that not only our local teams are working under difficult conditions, but also that our crews are still working under challenging conditions. My respect and appreciation for that remains undiminished. At many levels, KLM is in talks with the Dutch government about travel restrictions, testing policy, vaccination, etc. We have succeeded in a number of areas, but to be honest, we still have a long way to go. For example, we were able to adjust the crew testing requirement in terms of protocol, but in terms of content, with a percentage of 0.07% (76 positive cases out of 97,600 tests already carried out), it cannot really be justified as a sensible measure. Also, in terms of mandatory testing for transfer passengers, the rapid test (4 hours) has been replaced by a NAAT test: 72 hours. This change already helps a lot, but it is still a rule that affects us disproportionately. And all the more once countries lift the PCR entry requirement. We will continue our efforts and our discussions in order to come up with customised measures that contribute to safety. In doing so, it is good to realise that many companies and sectors bring their specific concerns and wishes to the fore.

“At present, I am looking with concern and great sympathy at India, which has been hit so incredibly hard."

Results of AFKL Group Q1-21

And now to the figures we are publishing today. Figures that visualise the exceedingly difficult start of 2021. With the ‘rough and tumble’ annual figures presented in February still fresh in our minds, the quarterly figures of the Air France - KLM Group unfortunately do not yet tell a different story. During the first three months of the year, AF/KL realised a turnover of €2.2 billion, a decrease of 57% compared to Q1 last year. The group's operating loss came to €1.2 billion, a deterioration of €364 million compared to the first quarter of last year. It should be noted that in the first two months of 2020, the COVID-19 crisis had not yet hit in full force. See the AF/KL press release for more detailed figures.

KLM results Q1-21

In the first quarter of 2021, KLM's revenue was €930 million, a decrease of 57% per cent. The operating loss was €337 million, compared with losses of €275 million last year. And let us not forget that this is where the positive effect of the Temporary Emergency Bridging Measure (NOW) support lies. Without the NOW, the loss would be even greater. These figures show that the consequences of the COVID-19 crisis are still as great as ever! The recovery of the Passenger Business is disappointing due to travel restrictions in many countries. In addition, the specific Dutch test requirements for transfer passengers at Schiphol have a negative effect on KLM. Good cost control and very strong freight volumes, including vaccine transport, have only partly mitigated the negative impact on Passenger Business. The focus on costs will therefore remain as high as ever in the coming period as well. Due to these poor ongoing conditions and lagging traffic, we have adjusted our production plan compared to last year. As a result, we are making further adjustments to the organisation. The Works Council is currently considering the request for an opinion on this, in which we foresee overcapacity in cabin crew, despite all the measures already taken. It is painful to see that the crisis has lasted so long that we have to take this step.

“Figures that visualise the exceedingly difficult start of 2021."

Investments in product and sustainability In short, the pressure on finances continues due to travel restrictions as a result of COVID-19. A higher vaccination rate and a sharp decline in the number of infections worldwide will be the only way to generate growth in revenue. At the same time, we must also look beyond this crisis and continue to do the right things as part of our restructuring plan. Investments Selective and necessary investments in our product and therefore in passengers will continue. For example, the interior of 14 Boeing 737-800s will be completely renewed. We have already fitted the first aircraft with this new interior, and we expect to complete the entire project in March 2022. And all that in-house by our colleagues at E&M. The new cabin interior is not only good for our passengers, but also for the environment - the new interior is 700 kg lighter. All aircraft with this interior together result in an annual fuel saving of 812 tonnes and a CO2 reduction of over 2,500 tonnes. KLM also introduced Wi-Fi on our European Boeing flights. We will provide a total of 18 aircraft with this service. It is a question of persevering: continuing to invest despite the setbacks because investing means looking to the future and securing our earning capacity. Fleet renewal Furthermore, we remain committed to fleet renewal, something that is clearly demonstrated by the arrival of two new Boeing 777-300s in March. Fleet renewal means investing in our passengers and in the environment, because only then can we further reduce our CO2 emissions. This focus on sustainability is what our colleagues desire from us and what society demands of us. These are investments in our right to exist. And that, of course, also applies to KLM Cityhopper, which welcomed its third Embraer 195-E2 a fortnight ago. That is what is meant by: ‘from more to better’. This fact sheet provides more details on the progress of our restructuring plan. Brand commercial Who has seen it? It has received a lot of positive feedback and will help us with the restart as soon as the borders are open again. We are ready when you are! That is why we also ensure we maintain the KLM network as far as possible. The reality right now is 90% of destinations, 50% of capacity and 25% of passengers. We fly where we can and make sure that income exceeds variable costs. So as soon as the markets open, we will be ready! Innovation & sustainability The new cabin and fleet renewal has an essential aspect of sustainability and shows that we are still serious about making aviation more sustainable. This does not go unnoticed by our customers either. For example, the pioneering Dutch company Koppert Biological Systems is the first cargo shipper to join our Sustainable Aviation Fuel (SAF) programme. It is an important step and I expect many more companies to follow. Creativity and innovation also remain important. A good example is the development of the Cargo Seat Bag, which allows us to transport more cargo in the cabin. Making a virtue of necessity, as it were. In this way, KLM can still make and improve its contribution to the transport of vital medical supplies. And it provides the extra income that we so desperately need. Dear Colleagues, it is a very difficult period, and we are not done yet. I am aware that there is still a great demand on everyone's resilience. This is reflected in the EPS (Employee Promoter Score). I see and feel that we all get a bit discouraged at times and that tensions are rising somewhat in some places as a result. That is quite understandable. But keep persevering, we will continue to rebuild and ensure that we can look back with pride and a sense of satisfaction at what we have achieved with all KLM colleagues: a healthy and solid company again in the future! Thanks to our passion and perseverance, we will definitely succeed, I have full confidence in that!

“It is a question of persevering: continuing to invest despite the setbacks."

Foto's: Desril Santoso Teguh en Mark Wagtendonk