A few sentences about the chaos at Schiphol. And some comments about the cabinet decision to limit the number of flights at Amsterdam airport to 440,000 per year. It was a modest public debut for Marjan Rintel on Friday, at the presentation of the quarterly figures of Air France-KLM. The former president of NS has been at the head of KLM since 1 July.
Air France-KLM presented positive results for the second quarter on Friday. They were better than analysts expected. Air France, KLM and budget airline Transavia not only sold many more airline tickets than last year, they could also ask a higher price for them. The group does expect it to take longer than previously reported before the planes are as full as before the pandemic.
Partly thanks to a tax windfall at KLM of 300 million, the Franco-Dutch airline made a profit for the first time since the pandemic.
“The strong recovery we are seeing this summer is putting the entire aviation industry to the test,” said Air France-KLM CEO Ben Smith. “While Air France-KLM had been preparing for near-pre-pandemic demand, our airlines are not immune to the major operational challenges facing the world.”
Marjan Rintel’s contribution to the cracking telephone presentation was modest, but it did deal with the pain points that Air France-KLM will have to work hard on in the coming period.
In addition to inflation and high kerosene prices, these are the personnel shortage in aviation and the forced shrinkage of Schiphol.
The announcement that the airport has to reduce by 12 percent has surprised the Air France-KLM management. It is up to Rintel – more than her predecessor Pieter Elbers did – to strengthen ties with the government. Rintel must become more top woman of KLM, stepping out. Elbers, who worked at KLM for thirty years, was previously the CEO before KLM. For the staff and against the evil outside world of The Hague, Paris or Brussels.
The debut – and the challenges – of Marjan Rintel in seven figures.
€318
The price of a return ticket to Amsterdam and Paris Nord. Former NS top woman Marjan Rintel did not fly to the Air France-KLM presentation this week, she took the high-speed train.
on Instagram she posted a photo at the station in Paris: „I am on my way to Paris city center with Thalys for meetings about the figures. You can now meet KLM transfer passengers on the stretch to Brussels. Nice to see that the air-rail product is being further developed.” In her first weeks, for example, Rintel does what Pieter Elbers almost never did. Elbers did not think the international train was an adequate alternative to the airplane, even though KLM, NS, government and other stakeholders had agreed to seriously work on cooperation between aviation and rail. If you replace short-haul flights with travel by train, it saves CO2emissions and free up space at Schiphol.
In one of his reports, state agent Jeroen Kremers, who supervises the agreements that KLM and the cabinet have made about corona support, criticized Elbers’ attitude towards the train. It is obvious that former NS boss Rintel will put more effort into a smooth plane-train combination.
€262 million
KLM’s operating profit in the second quarter. In the same period last year, KLM still suffered a loss of 185 million euros. For the fourth consecutive quarter, KLM achieved a positive operating result. KLM’s quarterly turnover grew to 2.8 billion euros. “These figures show that customers want to fly with us again, for both business and leisure travel,” a statement said.
The entire Air France-KLM group achieved a quarterly turnover of 6.7 billion euros, 2.5 times as much as last year. The group is almost at the turnover of 2019. The group profit in the second quarter was 324 million euros (second quarter 2021: 1.4 billion loss). IAG, parent company of British Airways, Aer Lingus and Iberia, also reported profits for the first time since the pandemic on Friday.
KLM also did better than Air France. The turnover of the French company was 4.1 billion euros, the gross result 133 million. Air France is therefore at a profit margin of 3 percent, KLM at 9 percent. Despite the queues at Schiphol and the strikes by, among others, the airport fire brigade at Charles de Gaulle, Air France’s home port.
€ 70 million
Air France-KLM expects to have to spend extra on compensation for passengers. This is mainly due to the chaos at Schiphol. Steven Zaat, the group’s Dutch financial director, said Friday that 70 million was much more than the group usually pays in compensation – without going into further detail. Zaat does not expect that Air France-KLM will have to pay out such an amount.
CEO Smith stated on Friday: “The good results after the severe corona period bring mixed feelings. Customers were severely affected by the major operational disruptions in May and June. Airlines and airports across Europe are insufficiently prepared for the rapidly increasing passenger numbers.” Air France-KLM is considering a lawsuit against Schiphol because of the disruptions, but did not provide any further explanation on Friday.
Earlier this month, Marjan Rintel already sent an email to regular KLM customers. “We sincerely apologize to anyone who has had to deal with disruption to their KLM flight or experienced problems with baggage.”
440,000
That is the maximum number of flights from Schiphol from the end of 2023. Before the pandemic shut down air traffic, the airport was home to 500,000 flights. KLM operates about half of all those flights. The Dutch government is limiting Schiphol’s capacity because air traffic causes too much noise nuisance. The contraction also appears to be an advance on the nitrogen measures for the transport sector that the government will announce later this year.
Also read: Schiphol airport has to shrink and that is the first time
Both Rintel and Smith reiterated that the group was completely surprised by the cabinet decision. According to Rintel, there are alternatives to limit the nuisance of air traffic. She will discuss this with Minister Mark Harbers (Infrastructure and Water Management, VVD) in September.
Harbers repeated this week against Bloomberg news agency what he had already said in the House of Representatives: Schiphol must stop wanting to be the ‘price fighter’ of European aviation. What that means for KLM’s network is still unclear. Air France-KLM is considering legal action to challenge Schiphol’s shrinkage.
€924 million
KLM has used a total of 924 million euros in the year and a half of the state guarantees of a total of 3.4 billion euros that it received to survive the pandemic. The company paid off the aid in three steps. This means that Marjan Rintel is not freed from the interference of state agent Jeroen Kremers. KLM keeps the credit facility – for worse times.
Kremers checks the conditions that the government attached to the aid. He publishes a critical report every few months. Kremers says time and again that KLM should no longer facilitate tax avoidance by pilots living abroad. Elbers had little appetite to tackle that. The matter is now on Rintel’s board.
Air France-KLM has also significantly reduced the corona support from the French state to the group and to airline Air France. The share issue earlier this year (revenue: 1.6 billion euros) and an agreement with investment company Apollo (500 million) has been used by the group to pay off the French support. That has now happened for 60 percent.
If Air France-KLM has refunded at least 75 percent, all kinds of business restrictions will expire. Then the group can make takeovers again – European aviation is waiting for a consolidation and takeover battle, experts say – and then the company can again pay bonuses to the management. The Dutch government, 9.3 percent shareholder, is strongly against the multi-million bonuses for Ben Smith, among others.
KLM still has to pay 1.5 billion euros to the Dutch tax authorities. That’s how much income tax deferral the company got. KLM will be repaying from October.
€1.34 billion
The extra fuel costs. A figure that Marjan Rintel has little grip on, but is confronted with. Air France-KLM had to spend no less than 1.34 billion euros more on kerosene in the second quarter of 2022 than in 2021. In total, fuel costs were 1.86 billion euros. At the time, significantly less was flown, of course, but the kerosene costs in 2019 were also considerably lower than now. Two years ago, kerosene cost according to the international aviation organization IATA still about 40 euros per barrel; now that is about 100 euros more.
Air France-KLM and many other airlines usually try to arm themselves against large fluctuations in the oil price. To this end, they conclude long-term contracts (hedging) with oil companies. The airline group has hedged 71 percent of its forecast fuel for the third quarter. For the fourth quarter, that is only 57 percent.
100
KLM is looking for at least a hundred more employees at Schiphol, said Marjan Rintel. She has hired 150 new people in recent weeks. Like Air France, KLM has made significant cutbacks in its personnel.
The company cut 13 percent of its workforce and now has 28,000 employees. “The numbers are good,” Rintel said. “But we have to keep a tight grip on the structural costs. This is very important for KLM’s financial health and to be able to continue investing in sustainability and the product for our customers.”
Despite this, KLM agreed a generic pay increase with the entire staff in May. All employees, from check-in employee and luggage porter to pilot, will receive an additional 5 percent.
Jeroen Kremers was critical about it: “For the money for which you give one pilot a wage increase of 5 percent, you can also give ten ground employees 5 percent more.” It was a gift from outgoing CEO Pieter Elbers, you could say, while his successor Marjan Rintel may now be faced with painful measures. KLM will have to limit its structural (staff) costs in order to remain competitive against IAG, Lufthansa, easyJet and Ryanair, among others.
A version of this article also appeared in the newspaper of 30 July 2022