KLM made much more profit last year than its sister company Air France. Where the French ended 2019 with an operational result of 280 million euros, this was 853 million euros at KLM. The profit margins declined for both Air France and KLM.
It is no secret that KLM is performing better than Air France in terms of profitability. At the strategy update in November of parent company Air France-KLM, CEO Ben Smith also said that there was a lot of work to be done at Air France, among other things through fleet renewal. The French indicate, among other things, that they are faced with more tax burden and higher airport costs.
KLM boss Pieter Elbers draws the comparison with 2014 when KLM was faced with similar measures. “You can see that the course-stable efforts at KLM at the time also paid off last year,” he said. Elbers expressed confidence in his French colleague Anne Rigail, who faces a monster job at Air France. At the end of 2019, it had already taken cautious steps to improve profit margins, helped by cost savings.
KLM also pulled on the belt to compensate for other extra costs. Dutch society was faced with higher personnel costs, among other things. These are a consequence of the new collective agreements at KLM, part of which only came about after strikes. They have been in force since the summer and give society two years of relative peace. Pension and fuel costs also increased. Spending at Schiphol also increased.
The new coronavirus is saddling KLM this year with the necessary additional costs, although the precise effect is still uncertain. The profit drop of up to 200 million euros that Air France-KLM foresees for the first quarter of 2020 can, according to Elbers, be spread almost equally over Air France and KLM.
The loss of income as a result of the virus may have an effect on the investments that KLM stands for. Last year, KLM spent around 1.3 billion euros on fleet renewal, among other things. That amount would initially be even higher this year. Elbers now points out that KLM has flexibility in this.
In addition, KLM should in time benefit from the impending capacity expansion at Schiphol and the upcoming opening of Lelystad Airport. The airline has no certainty about both of these issues.