Crucial days for KLM: agreement on reorganization and wage sacrifice necessary

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KLM has until October 1 to submit the reorganization plan to Hoekstra. Only when that plan has been approved will he transfer a new tranche of the emergency loan of up to EUR 1 billion.

KLM has already received 277 million from this, Minister Hoekstra recently reported to the Lower House.

In addition, the company has already been able to borrow 665 million euros from banks thanks to the bank guarantee that the state has issued for a maximum of 2.4 billion. The government has set conditions for this emergency financial package, totaling EUR 3.4 billion.

KLM must downsize, because it will operate far fewer flights in the coming years. The company will cut a total of 5,000 jobs for this, it announced at the end of July. Some of them are leaving voluntarily, but 1500 FTEs will be forced to look for other work.

The staff who keep their jobs have to surrender. It has been agreed with Hoekstra that KLM will reduce costs by 15 percent.

Big earners have to give up 20 percent

To achieve this, the staff must make a wage sacrifice, with the cabinet using the credo ‘bear the strongest shoulders the heaviest burdens’. KLM employees who earn more than three times the average must give up at least 20 percent. The rest of the staff also have to give up, depending on what they earn. Staff who earn less than average are spared.

The company has been negotiating with the unions for weeks on how to convert these requirements into an agreement. That is not an easy task, because there are no fewer than eight unions at the table.

These unions roughly represent three types of company personnel: pilots, ground and office personnel and flight attendants, flight attendants and pursers. Each group has a different collective labor agreement, which makes the negotiations complicated.

Social plan and wage sacrifice

Those negotiations are about two things. On the one hand, there must be a social plan for the staff who will end up on the street due to the reorganization. On the other hand, the various personnel groups have to hand in.

The fact that the cabinet has set requirements for how much must be handed in does not make things any easier. There is understanding for the requirements of the government, but the fact that it wants to determine who hands in what “goes a step too far,” says Dario Fucci. As a director of the KLM works council, he spent the past 21 days non-stop assessing the company’s plans.

He does think that the unions will come to an agreement with KLM. “Maybe one or two unions will need more time, but in the end it will work,” he says.

Fucci understands that there is no agreement yet between KLM and unions. “When it comes to deadlines, there is always pressure and it is extremely high on both sides.”

Trade union proposal

Unions are also willing to compromise, according to a proposal made this weekend. Part of the proposal, which is supported by the powerful pilots union VNV, is that a promised wage increase is being waived. The only question is whether abandoning something that was not there yet is enough.

No, said Minister Hoekstra in the weekly meeting with RTL Z. “Just lowering salaries in the short term is not enough”, he responds.

“There are not so many flavors on the table: a wage offering, massive dismissal or on the brink of bankruptcy,” he refers to what is happening at other airlines in Europe.

Whether KLM’s plan is sufficient is not only checked by Hoekstra’s ministry. He hired a British agency, PA Consulting. Hoekstra will report to the House in October how this check ends.

Deadline or postponement?

KLM itself says it will not comment as long as the negotiations are ongoing. Within the company it is still assumed that the deadline of October 1 will be met, according to spokesman Gerrie Brandt.

The company does not have to count on delay either, says Hoekstra. “It is about taxpayers’ money, we have made agreements and have given a number of months to do so. Action will simply have to be taken.”

He is increasing the pressure even further by making a decision on a possible capital injection to parent company Air France-KLM partly dependent on how well KLM is now complying with the agreements. Providing extra capital to the holding company is “not a foregone conclusion” anyway, he says.





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