The cabinet wants to get rid of the corona support that KLM can still claim. The airline must “speed up” in finding private funding sources and withdrawing support.
That is what ministers Sigrid Kaag (Finance, D66) and Mark Harbers (Infrastructure and Water Management, VVD) say. KLM can still claim bank guarantees that the Dutch state gave in August 2020 to help the company through the corona crisis.
Kaag and Harbers respond with their position to a new, critical report from Jeroen Kremers, state agent for KLM. Former top civil servant Kremers supervises the conditions in the field of finances, quality of life and sustainability, which are attached to the billion-dollar support for KLM.
No company in the Netherlands has received as much government support as KLM in recent years, says Kremers. “Not even by a long shot. It amounts to almost a quarter of a million per employee whose job was saved.” The company received 2 billion euros in NOW support, intended to pay staff (a gift), and 1.5 billion euros in payroll tax deferral. Of this, 84 million has been repaid.
KLM also used 277 million euros from a loan offered by the government and 665 million euros from bank loans with state guarantees. KLM has repaid these loans to the government and banks, but has not yet canceled the facility. That is why Kremers still supervises the conditions. For example, the financial interests of the state are safeguarded, Schiphol’s economic position is monitored and the ‘social boundaries’ are monitored in areas such as noise nuisance and the emission of harmful substances.
Strongest shoulders
Kremers notes in his fourth report, which Kaag and Harbers sent to the House of Representatives on Thursday, that KLM does not comply with all support conditions. For example, the strongest shoulders no longer carry the heaviest burden at the airline, a tricky issue. Since March 2022, pilots and senior ground and cabin crew have barely paid in salary, while lower-level staff are still being cut proportionately. Kremers: “Apparently KLM assumes that the condition will expire from March 2022.” The state and the state agent emphasize that they take into account the high inflation.
Another point of criticism: KLM’s board and senior management received a variable remuneration at the end of 2022 for performance in 2019, because the judge had awarded such a remuneration in August 2022 to the departed CEO Pieter Elbers. Kremers denies that KLM should have paid this to other managers as well. A support condition was that KLM would not pay any bonuses.
In their response, Ministers Kaag, on behalf of shareholder Finance, and Harbers, responsible for Dutch aviation, write: “Based on the conclusions of the state agent, the cabinet finds it no longer easy to explain that KLM can use the loan and guarantee in the support package.”
The ministers praise all the efforts that made KLM profitable again last year, but call compliance with the conditions in some areas “disappointing”. It is “particularly regrettable” that KLM has not made sufficient cuts to be structurally financially sound. Over 2023, the cost reduction will lag a quarter of a billion behind the agreements with the government, according to Kremers. According to him, that gap will increase to 475 million euros on an annual basis in the following years.
In their response, both ministers write that they have asked KLM’s board and supervisory directors for accountability. It is unknown whether and, if so, what sanctions the state can impose on KLM if the company does not comply with all support agreements.
According to Kremers, the airline still makes too many “optimistic assumptions” in the remuneration of pilots and other higher paid personnel. These assumptions are not consistent with government policy to reduce capacity at Schiphol. Harbers wants to reduce the number of flight movements to 465,000 in November 2023 and to 440,000 a year later. That also limits KLM. After that, a new system must come into effect that takes into account noise nuisance, among other things.
In a letter from KLM, which Kaag and Harbers sent to Kamer on Thursday, the airline refers in particular to the high inflation and the tight labor market. This would make it necessary to pay staff better. However, Kremers writes in his report that there is no shortage of pilots in Europe and that KLM pilots are paid better than competing airlines in Europe and they work fewer hours.