KLM Bankruptcy Averted as Airline and Pilot Union Agree on Salary Reduction
A looming bankruptcy of KLM has been averted as the airline and pilots agreed on a salary reduction, thereby securing a vital government loan.
Bailout
Dutch media were fervently discussing the real possibility of a KLM bankruptcy last week as the refusal of pilot union VNV (Union of Dutch Commercial Pilots) to agree with a salary reduction meant that a vital government loan was being withhold.
Last summer, the Dutch government announced a support package worth 3.4 billion euro, although this came with some demands.
One of the prerequisites of the loan meant to support the Dutch flag carrier during the challenging corona times was that all employees had to agree with a salary reduction, which in the case of KLM’s pilots meant a salary reduction of at least 20%.
Negotiations
Although five different labour unions, among which those representing cabin crew and ground staff, agreed with these demands, the VNV refused to give in, thereby threatening the sheer existence of KLM Dutch Royal Airlines.
According to the VNV, the pilots were willing to agree with a salary reduction until 2022 and do whatever is needed to save KLM in the years after, but were not willing to already agree in advance with a blanket loan reduction up to 2025.
After the refusal, the Dutch government cut off all ongoing negotiations with KLM, leaving the airline in limbo.
Agreement
The refusal of the pilot union caused a minor uproar among both the general public as well as among other KLM employees who were willing to agree with the demands.
According Dutch national daily ‘Telegraaf’, the pilot union has since backed down. During new negotiations with KLM’s management, the VNV has now agreed with the loan reduction.
Deal
The details of the deal between KLM and the union have not been publicly communicated, although the Dutch airline reported that a fixed end date for the temporary loan reductions has been agreed on.
KLM’s President and CEO Pieter Elbers said: “The last few days were unbelievably intensive for everyone, with great pressure on the company, negative influence on its reputation and internal divisions.
“We can now look forward and to the outside world, so that we can jointly rebuild our route network for our customers and continue to connect the world with and via the Netherlands.”
In short
It indeed sounds like KLM’s CEO Elbers was quite right as it has been quite some hectic days for the Dutch national airline judging by internal chatter and media reports.
With the government loan secured, and airline group partner Air France having secured French state support as well, Air France-KLM is now in a position where it can sit out the ongoing COVID-19 pandemic and hopefully bounce back to its former glory.
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