Dutch airline carrier KLM announced plans to reduce costs and delay investments in order to increase profitability. The aviation industry is currently facing challenges such as higher equipment costs, staff shortages, and increased airport fees.
KLM, a part of Air France-KLM group, aims to improve its operating result by 450 million euros in the short term. The goal is to boost its profit margin to over 8% by 2028, up from 5.4% in 2023.
Airline companies in Europe are grappling with rising costs, delays in aircraft deliveries, a plateau in post-pandemic travel demand, and heightened competition. Despite these challenges, Air France-KLM shares saw a 1.5% increase in early trading.
To achieve its financial targets, KLM will be restructuring its flight schedule, eliminating some office positions, and focusing on increasing productivity through automation and mechanization. The airline plans to strike a balance between European and intercontinental flights to optimize capacity utilization and maximize the flying hours of its current pilot workforce.
KLM emphasized the importance of growing with its existing pool of pilots and working with unions to find solutions. While the airline will not be canceling flights, it will be reevaluating and delaying certain investments, such as new headquarters and maintenance facilities.
In an effort to boost revenues, KLM will introduce new onboard products, enhance its catering offerings, and improve the layout of its aircraft. Non-essential activities that do not directly impact flight operations may be outsourced, divested, or discontinued.
Overall, KLM’s strategy focuses on cost reduction, operational efficiency, and revenue enhancement to navigate the current challenges in the aviation industry and drive long-term profitability. By making these adjustments, the airline aims to remain competitive and sustainable in the ever-evolving market.