KLM Targets Savings, Explores Asset Sales to Counter High Costs -- Update

By Pierre Bertrand

Dutch airline KLM said it plans to cut costs, push back some investments and consider asset sales as part of a plan to counter rising expenses and lift profitability.

The Netherlands' flagship carrier--part of airline group Air France-KLM--said the measures aim to improve its operating result by 450 million euros ($497 million) in the short term.

KLM has been grappling with rising costs of equipment, staff and airport fees as it invests a billion dollars in renewing its aircraft fleet. The airline reported an operating loss for the first half of the year despite higher revenue.

The airline on Thursday put forward a plan to reduce costs, simplify its organization and increase productivity. All investments outside of safety and compliance will be reconsidered and postponed, it said.

The company will also explore ways to add new revenue streams and look at options to outsource, sell or discontinue activities that don't directly contribute to its flight operations, it said.

The plan is expected to lead to a profit margin above 8% by the 2026 to 2028 period, in line with Air France-KLM's group goal, the company said. The measures are required to allow the group to hit its medium-term profitability targets, KLM said.

"Just as many other airlines, KLM is suffering from high costs and shortages of staff and equipment. Our aircraft are full, but our capacity is still not back to pre-corona levels," KLM Chief Executive Marjan Rintel said.

The company said it is working to maintain its network and services for customers and to protect jobs as much as possible.

The company aims to boost labor productivity by at least 5% by 2025, including through automation, mechanization and reducing absenteeism.

KLM will consider outsourcing maintenance operations if efforts to reduce flight cancellations prove insufficient, KLM said. The airline can operate fewer flights due to a shortage of technicians and supply problems affecting parts.

In addition, trials are underway to reassess aircraft layout and catering options to increase revenue by at least 100 million euros a year, it said.

Write to Pierre Bertrand at pierre.bertrand@wsj.com

(END) Dow Jones Newswires

October 03, 2024 04:47 ET (08:47 GMT)

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