Dutch airline KLM to cut investments due to rising costs

Reuters

Dutch airline KLM to cut investments due to rising costs

Oct 3, 2024 at 7:13 am GMT

<html xmlns="http://www.w3.org/1999/xhtml"><head><title>UPDATE 2-Dutch airline KLM to cut investments due to rising costs</title></head><body>

KLM seeks to improve operating result by 450 mln euros

Looks to improve productivity with new flight schedule

Postpones investments, but aims to protect fleet renewal

Shares rise 1.5%

Adds share price reaction, more detail throughout

By Bart H. Meijer

Oct 3 (Reuters) -Dutch airline KLM will cut costs and postpone investments to lift profits, it said on Thursday, as the industry grapples with rising equipment costs, staff shortages and higher airport fees.

The Dutch arm of airline group Air France KLM AIRF.PA said it aimed to improve its operating result by 450 million euros ($497 million) in the short term, boosting its profit margin to above 8% by 2028 from 5.4% in 2023.

Airlines across Europe have been struggling with rising costs, aircraft delivery delays, a levelling off of the post-pandemic travel boom, and a step up in competition.

Air France KLM shares were up 1.5% in early trade, bucking a lower Amsterdam market.

Measures include rejigging flights and scrapping an undisclosed number of office jobs, while seeking to increase productivity through automation and mechanisation.

"Just as many other airlines, KLM is suffering from high costs and shortages of staff and equipment," Chief Executive Marjan Rintel said in a statement.

The new flight schedule should provide a "better balance" between European and intercontinental flights, in an effort to improve the use of KLM's capacity and get more flying hours out of its existing staff of pilots.

"We are not at 100% of our intercontinental capacity, which is where we should be," spokesperson Anoesjka Asperslagh said.

"We will have to grow with our existing pool of pilots. We will look together with unions for ways to do so."

The rebalancing does not mean that KLM will scrap flights, she added.

KLM said it would "reconsider and postpone" investments, such as those in a new headquarters and new engineering and maintenance buildings, while striving to maintain planned billion-dollar investments in the renewal of its fleet.

It will also try to boost revenues by at least 100 million euros per year by introducing new onboard products, such as an expanded catering offer, and improving the layout of its planes.

Activities that don't directly contribute to flight operations could be outsourced, divested or discontinued, KLM said.

($1 = 0.9060 euros)

Reporting by Bart H. Meijer; Editing by Mark Potter

</body></html>