If KLM had hoped that a different wind would blow in The Hague, that hope turned out to be in vain this week. The new Minister of Finance – and therefore major shareholder – Sigrid Kaag takes a square behind the state agent who checks whether the airline is spending the billions it received in corona aid well.
The official snooper, Jeroen Kremers, has released his second progress report. In it, he points out that KLM has so far succeeded in a cost reduction of 15 percent and a cutback in employment conditions, to 20 percent for the high earners – read: the pilots with the longest employment. Those were the minimum efforts that Kaag’s predecessor required to avert the acute crisis.
Support base
The stocking is not over with that. The airline must also comply with other conditions set out in the Framework Agreement to stand. That secret document contains broader goals than just financially patching up the company. It’s also about the Royal doing everything to be public license to operate to maintain its ‘social support’. To do this, it must show that the Dutch economy benefits from all that blue in the sky, while at the same time limiting the nuisance to people and the environment.
Those efforts will not stop if KLM pays back the pennies before 2025. “Materials can be expected from KLM that they continue to meet the economic and aviation-related conditions even after that,” writes the state agent. Some agreements extend until 2030.
With all that in mind, Kremers kicks against all kinds of holy houses. He foresees that KLM will have to make cutbacks again in 2023, to more than 400 million annually from 2024. The employees will have to contribute again this year if the collective labor agreements are renewed. Productivity must and can be increased, for example if the pilots work more hours. The number of night flights must be reduced.
Tax evasion
The state agent devotes a separate chapter to the tax benefits enjoyed by 350 pilots (11 percent of the total) and 330 cabin crew (5 percent) who live abroad. This ‘significant group’ benefits from a KLM arrangement whereby they usually fly to Schiphol for free to do their work.
‘This commuting scheme is considerably more generous than that for employees who live in the Netherlands,’ says Kremers. KLM thus facilitates tax avoidance. Nothing illegal is happening, but it still feels uncomfortable with a company that is being propped up by the taxpayer.
The state agent often suggests that society expects KLM not only to act according to the letter of the law, but also in the spirit. He refers, for example, to the Train and Aviation Action Agenda, which aims to encourage travelers to Brussels, Paris, London, Düsseldorf, Frankfurt and Berlin to take the train more often than by plane. This initiative bears KLM’s signature. But in a newspaper interview, Kremers sees, KLM CEO Pieter Elbers states that the train cannot compete with the plane when traveling across national borders and says that he takes the plane himself to four of the destinations.
Price tag
The holiest house the state agent blows at is that of network quality. KLM states that the entire globe connects the Netherlands with the whole world and enriches it economically. Not everyone is convinced of that. The Council for the Living Environment and Infrastructure believes that KLM interprets network quality too much as ‘maximum destination quantity’. The House of Representatives has also asked for an analysis of how many and which destinations are needed for good international accessibility.
The state agent reports that he will check with outside help whether all those flights serve a purpose. He wants to make a distinction between ‘the public interest of the network quality of Schiphol and the commercial hub interest of KLM’.
At KLM, the staff, the trade unions and the investor association VEB, the progress reporting has been bad. ‘Kremers will take the seat of the board of directors’, the accusation sounds. They wonder whether the lifebuoy will not turn into a millstone. The fact is: 6.5 billion euros in aid, and the will of society to cough it up, comes with a price.