KLM Steps Up Labor Talks to Meet Dutch Revamp Deadline, CEO Says

(Bloomberg) -- Air France-KLM’s Dutch arm is stepping up labor talks aimed at securing employee wage cuts in time to qualify for a 3.4 billion-euro ($4 billion) bailout by the Netherlands government.

Discussions with KLM’s unions and works council have accelerated as the airline strives to secure the 20% salary reduction by Oct. 1, Chief Executive Officer Pieter Elbers said in an interview Thursday.

“We are now in the midst of very intensive talks to come to a comprehensive package meeting these requirements,” Elbers said. “It’s our ambition to have it finalized by Oct. 1. It’s a hard deadline.”

Part of the plan is already in place after 2,000 staff signed up for voluntary departure and the carrier retired older planes and slimmed down its network. Still, pay cuts for pilots, cabin crew and ground staff are central to the pay deal required by the Dutch state in exchange for the funds secured to get the carrier through the pandemic.

“One of the key conditions is a pay contribution from workers,” Elbers said. “Stakeholders should make a contribution as well.”

According to the settlement under negotiation, lower-paid staff will take a cut of significantly less than 20%, with their higher-paid colleagues bearing a heavier burden, he said.

KLM has cut back on capacity plans for the winter timetable after a late-summer bounce anticipated by European airlines failed to materialize. Elbers said it would be premature to revisit targets in its restructuring plan, since they’re based on market assumptions for next summer.

KLM is at 50% of capacity but is operating 90% of its European routes, helping to feed transfer passengers through its Amsterdam Schiphol hub, he said.

The French and Dutch governments, which own a combined 28% stake in Air France-KLM, came to the rescue earlier this year with loans and guarantees totaling 10.4 billion euros.

Group CEO Ben Smith has said that the refinancing should see Air France-KLM through the next year, while Dutch Finance Minister Wopke Hoekstra has said it will need to trim costs further should the pandemic last until the end of 2021.

©2020 Bloomberg L.P.