CEO Column


‘It’s a new day, the sun rises while mist fades away’

Date: 29 Oktober 2021

Dear Colleagues,

The third quarter (July-Sept) of 2021 can be summed up in one word: encouraging. Why? For the first time since the outbreak of the pandemic 19 months ago, we had a positive operating result last quarter! The cautious recovery in the second quarter continued into the third quarter. Our network strategy in terms of destinations and connections worked well. Thanks to the KLM network, Schiphol was the busiest airport in Europe during this period.

In Q3, we clearly saw an upward trend in the search and booking behaviour of our customers. In this quarter, the KLM Group generated a revenue of €1.9 billion, compared to €1.1 billion in 2020 and €3.1 billion in 2019. In other words, nearly double compared to 2020 and around 60% of the 2019 revenue.

In this third quarter, our operating result was +€169 million! Whereas in 2020 we still had a loss of €234 million. However, we are not there yet. To put this into perspective: in the third quarter of 2019, our operating profit was €511 million.

Furthermore, the summer holidays fall in Q3, which is the reason why we usually make most of our profits in this quarter. This year, the improvement recorded in the third quarter was mainly due to the reopening of borders within Europe. Intercontinental travel still lagged behind, but travel restrictions to the Caribbean part of the Kingdom were relaxed and, in September, Canada finally reopened.

With regards to the amount of passengers on board a similar trend can be observed: twice as much as last year and at around 60% compared to 2019. In Q3, 5.2 million passengers boarded KLM, compared to 2.3 million in 2020 and 9.5 million in 2019. Not only KLM Passenger Business but also Transavia showed a positive trend. This shows the first signs of recovery. There is clearly demand in the market. Our customers want to travel and the effect of borders reopening is directly visible in bookings. Cargo also remained strong in the third quarter. Volumes were roughly at 2019 & 2020 levels, but unit revenues were particularly strong. Great work by the teams!

Despite the improved financial results, it is important to remain vigilant. The saying ‘one swallow does not make a summer’ is a good metaphor for the fact that there are still some steps to be taken. One good quarter does not mean we are there. Over the first nine months of this year, we still sustained a loss of €353 million. Tight cost management remains as important as ever to emerge from the crisis. And to be able to pay off the loans as soon as possible. In addition, we are facing rising costs, partly due to the discontinuation of the NOW scheme on 1 October and also because of the rising price of oil.

“ One swallow does not make a summer”

Commitment

With the market picking up and larger numbers of customers, our colleagues’ work has been busier, and sometimes too busy. Recently, I spent a morning at Schiphol in various departments (baggage, loading, departure hall and Crew Centre) where the hustle and bustle and – at certain locations and at specific times – shortages were clearly visible and tangible. Together we are working hard to solve these problems. I have said it many times before, but cannot stress it often enough: my appreciation and thanks go to ALL KLM colleagues who, after having fought through the crisis for 15 months, in the last few months have once again put their shoulders to the wheel in order to rebuild and recover.

“On the road again”

At the beginning of October, I attended the IATA conference in Boston. Last year it had been held in virtual format while this year, fortunately, it went back to being an on-site meeting. On the way there, it was a great opportunity for me to speak with the cockpit and cabin colleagues on board. Once in Boston it was great to connect with many people from the industry. There was an atmosphere of optimism and “excitement to be back”. We were also able to unveil our KLM House 102 in the presence of our customers. And here too, there was the same feeling of optimism: “The worst should be behind us, we are looking ahead again”.

Looking ahead

Looking ahead, we see further encouraging signs. Slowly but surely, the world is opening up again. And that means we can focus on what we do best: connecting people, reuniting families, strengthening business relationships and transporting essential goods. From 8 November, vaccinated Europeans will finally be able to fly to the US again. That is very good news for KLM! And we can already see it in the bookings. In Asia, too, countries are taking steps in admitting passengers. Think, for instance, of Thailand, Singapore and, to a limited extent, Indonesia.

The rules surrounding travel are still changing regularly. Therefore, planning a trip is unfortunately not so easy at the moment. Our colleagues in the Digital department have responded well to customer needs by developing a convenient interactive tool. With the help of ‘Where can I fly to?’, everyone can find inspiration. This tool clearly shows where you can travel. A map shows the current travel requirements for all countries to which KLM flies. This allows customers to choose their next destination at a glance.

We continue to be entrepreneurial and ambitious in our network choices; in total, we are flying to 162 destinations this winter, including four new ones. The total capacity on intercontinental flights amounts to 75%, while we can use 84% of our capacity within Europe. Our hope is that this trend will continue in the coming period, so that we can take further steps in making our company financially healthy. The waters in which KLM is currently operating may have slightly calmed down, but we are not there yet. I have said it before: the road to recovery is unpredictable, long and bumpy.

The pandemic is not over yet. This can be seen in the rising infection rates both in the Netherlands and abroad. Moreover, there are still parts of the world where vaccination coverage is very low.

From more to better

Against this backdrop of the road to recovery, other challenges are also emerging; I have already mentioned the staffing levels in some departments, the tight labour market, the need to invest and pay off the loans. The implementation of our restructuring plan ‘from more to better’, on which we have been working hard since mid-2020, meets these challenges. You can read more about it on this fact sheet.

We continue to invest in our product. For instance, I am confident that our Premium Comfort cabin is well suited to the new market situation. Moreover, we invest in sustainability. We were pioneers in the field of sustainability and, although we cannot hold this position unchallenged, we do want to remain at the forefront in this field. And with results!

“ Focus on what we do best: connecting people, reuniting families, strengthening business relationships and transporting essential goods.”

Sustainability

In addition to all the previous commitments of KLM and the aviation industry regarding, among other things, SAF (Sustainable Aviation Fuel) and CO2 reduction, we as airlines, united in IATA, took a very important step this month during the annual IATA conference by announcing the goal of ‘Net Zero’ emissions by 2050. This is in line with the Paris Climate Agreement. A logical next step for us, therefore, is to have our targets validated by the so-called ‘Science Based Targets’ (SBT). That is why today we have announced that the Air France-KLM Group, Air France and KLM will align with these Science Based Targets. By using SBT, we can continue to reduce our CO2 emissions step by step in a transparent manner, which is key to a clear path that is supported by science. Among other things, replacing aircraft with more fuel-efficient ones and further operating innovation will enable us to achieve these goals. In addition, we are also investing heavily in SAF (Sustainable Aviation Fuel), in line with national and European objectives. Within our company, too, we are already seeing tangible results that go hand in hand with a sustainable KLM. A good example is the installation of almost 7,000 solar panels on the roof of hangar 14, a wonderful initiative by E&M. These panels can generate a significant part – about 25 per cent– of the hangar's electric energy consumption. This makes a considerable difference to the CO2 emissions produced by generating ‘regular’ electricity. A great step forward in a CO2-neutral ground operation!

In addition, I would like to pay a big compliment to the more than 80 colleagues who have worked on the ‘Bold Moves’ over the past period. This group developed 10 concrete sustainability initiatives and presented them to the Board. A good example of this is the Sustainable Flight Challenge. At the initiative of KLM, SkyTeam organises this Industry Challenge in which we share information on how to reduce CO2 emissions even further. This Challenge is entirely in line with the Sustainable Development Goals formulated by the United Nations, which KLM has also embraced where relevant. We strive for profit for KLM as well as profit for the entire society of which we are a part.

Resilience

Dear colleagues, I opened this column with an adjective: “encouraging”. At the end of this column, I would like to add two words to that: appreciation and resilience.

Appreciation, because together will all KLM colleagues we have achieved better financial results. We have started to move upwards and we will continue to do so. Resilience, because KLM has been in business for more than 100 years, sometimes against all odds, but always with boundless dedication, adaptability and a pioneering spirit.

In short, we draw energy and strength from the encouraging results, appreciation for all the good work, and we remain resilient in the face of challenges. And we do it together!

Photos: Peter Roelofs, Mark Wagtendonk en Desril Santoso Teguh.