CEO Column

“Optimism is the most important human trait, because it allows us to evolve our ideas, to improve our situation, and to hope for a better tomorrow”

Date: 30 July 2021

Dear KLM Colleagues,

For 1.5 years now, we have been dealing with the massive consequences of COVID-19. Today, the effect of this on KLM is once again painfully evident with the publication of our figures, with a loss of €185 million for the 2nd quarter and a total of €522 million for the 1st half year. The period we are looking back on was again one of contrasts and unpredictability, but also the start of the road to recovery, albeit a long and bumpy one.

In the 1st quarter of 2021, we still had to deal with the double testing requirement, the slow start of vaccinations and numerous travel restrictions worldwide. Good income from the cargo business, the NOW support (Temporary Emergency Bridging Measure) and measures to reduce costs made it possible to compensate part of the loss within the passenger business. Sadly, this still resulted in a loss of €337 million for the first quarter of the year.

Fortunately, the 2nd quarter was better; some of the restrictions were reduced and the extremely important vaccination campaign got underway worldwide. It is our network strategy to offer as many destinations and therefore as many city pairs as possible. This helps enormously in increasing passenger numbers. This allowed us to limit the loss somewhat and KLM ended up with a loss of €185 million for the 2nd quarter. Add to that €337 million from the 1st quarter and you come to a total of €522 million loss for the first six months of this year.

That is not as bad as the loss of €768 million in the 1st half of 2020, but compare it to the profit of €223 million in the1st half of 2019. Thanks to our efforts, however, the loss has been reduced from €3.5 million per day in the 1st quarter to €2 million per day in the 2nd quarter of this year. Within the 2nd quarter, we already see that June, close to breaking-even, is significantly outperforming April 2021. We are working very hard together to continue this line of improvement for the 2nd half of this year. The long road we have travelled together over the past 18 months has been one with many ups and downs. I also get a lot of questions about how I have experienced the past year and a half. That is why I was enticed to another reflection, in addition to the financial results. You can watch that via the link below.

“Good income from the cargo business, the NOW support and measures to reduce costs made it possible to compensate part of the loss within the passenger business. ”

It is clear that COVID-19 is not going away. In short, we will have to learn to live with it and to deal with it. However, in a way that we can continue to meet the need for mobility of holidaymakers, business travellers and freight shipping, but also for family visits, academics or sport.

We will continue to talk, as KLM and through IATA, with the Dutch government, Brussels and other institutions to arrive at an effective, proportionate and harmonised policy. Unfortunately, that is still a long way off. The current responses and new restrictions due to the Delta variant underline the uncertainty and unpredictability that we still face. Especially now that we are finally back to some 60,000 customers a day. Hopefully, the US will open up further in the near future and this number of passengers per day can continue to grow. All this creates an incredible amount of complexity in our operations, which colleagues in operations have to respond to every day. It is clear that all KLM colleagues do their utmost to take care of our customers and to help the company get back on its feet. My respect and appreciation for that!

“It is clear that all KLM colleagues do their utmost to take care of our customers and to help the company get back on its feet. ”

'From more to better’

The new restrictions are very frustrating, cost money and create a lot of extra (operational) work. We will have to continue to pay attention to crisis management. At the same time, I want to keep my eye on the bigger picture, building the future of KLM with our plan 'From more to better'.

The KLM network strategy of ‘Fly where it is allowed, safe and where we can recover at least the variable costs’ is effective. At the beginning of July, Schiphol was even the busiest airport in Europe. Thanks to our strategy, the KLM network has largely recovered, and we have new destinations lined up for this summer and next winter. We can expand capacity per destination based on demand. This shows that we continue to be entrepreneurial and to look for opportunities for KLM. The results show that we are not doing as badly as some of our competitors.

In addition, our sharp focus on costs, costs and more costs remains as important as ever. We are also maintaining our focus on cash management. After all, it is specifically the recovery of the business market with higher revenues that is lagging.

By means of the Voluntary Departure Scheme and other instruments, the size of the organisation was sharply reduced last year. Almost 6,000 colleagues have left KLM. For 2021, the focus is on flexibility and agility. I know and realise that in some places, in combination with new restrictions, this leads to extra work pressure and tension. We are committed to seeking constructive and realistic solutions together with the Works council, KLM colleagues and the trade unions.

In the area of sustainability, for example, we are continuing our efforts unabatedly. In addition to fleet renewal, the new cargo customers for our SAF programme is a tangible example of this. The enclosed fact sheet shows what else we have achieved in the context of 'from more to better' during the past quarter.

It is a good feeling that, thanks to these initiatives, we are on our way up again. Although we are not there yet. After all, a restored network is not the same as full aircraft. During the 2nd quarter of this year, KLM flew to 90% of the pre-COVID-19 destinations. Compared to the 2nd quarter of 2019, it is still at only 60% of capacity, with passenger numbers rising from only 20% in April to ~40% in June. The recovery across Europe is moving in the right direction. Unfortunately, passenger numbers on the intercontinental network still lag far behind due to the many travel restrictions. Think of large parts of Asia. And the U.S. has also been closed to travellers from Europe for almost 1.5 years. The recovery in Europe is moving in the right direction and is leading to a further increase in destinations and passenger numbers in July. Unfortunately, the passenger numbers on the intercontinental network in particular are still lagging due to the many entry restrictions. Exemplary of this are the 2 IATA publications this week “June Air Travel Recovery Continues to Disappoint” and “Air Cargo Posts Strongest First Half-Year Growth Since 2017”. In terms of entry restrictions, one can think of large parts of Asia. And the US has been virtually closed to travelers from Europe for almost 1.5 years. Fortunately, vaccinated Americans can already return to Europe and that already helps.

With the meticulous implementation of the 'From more to better' plan, we are showing that we are serious about becoming a healthy company again. The requirements and conditions set by the Dutch State for the loans provided, given the importance of KLM for the Dutch economy, are an integral part of this. It is good that last week the European Commission again approved the Dutch State aid to KLM. That means a lot to us.

"The KLM network strategy of ‘Fly where it is allowed, safe and where we can recover at least the variable costs’ is effective."

Customer Focus

Despite the disappointing financial results, KLM and its staff have shown that our innovative strength has not diminished. With Upload@Home, for example, we can help customers in a growing number of destinations by checking their corona-related documents in advance. And that makes it a lot easier for them and for KLM to travel in a relaxed way. Because that, of course, is our priority, especially now. A big compliment to the colleagues of IT & Digital who have made this happen.

Every year, the Airline Passenger Experience Association (APEX) conducts a comprehensive survey of airline passengers. Passengers are asked about their experiences with seat comfort, cabin service, entertainment and Wi-Fi, among other things. APEX recently announced the rating for KLM. And this year again, KLM maintains its five-star rating! This is a great recognition for all KLM colleagues worldwide who work hard every day to deliver on KLM's promise to its customers.

Dear colleagues, a difficult period is behind us. Many uncertainties could be turned into opportunities in the end. The financial results are improving, but are still far from good. Nevertheless, thanks to our network strategy, the many cost savings and the huge focus on cash, we were able to offset part of the decline in revenue and limit the loss. In addition, the cargo business makes optimal use of the improved supply-demand ratio in the market and opportunities are turned into excellent revenues. The fact that we can still do this as KLM is encouraging and positive. And when we do achieve results, we can be proud of them. The recovery is fragile, but emphatically not hopeless. We have started the long and bumpy road to recovery together. That still demands a lot from everyone; individually but also collectively.

I am proud of the start we have made to recover and proud of what we have achieved together in dealing with this crisis. Let me conclude with the hope that in the near future we will be able to give further shape and substance to Albert Plesman's famous statement 'The ocean of the air unites all people'.

“And this year again, KLM maintains its five-star rating!”

“ We have started the long and bumpy road to recovery together.”