BApilotinsider

With a fleet of 105 aircraft KLM employ 3500 pilots and nearly 11000 cabin crew. BA employ 3700 pilots and 14000 cabin crew with 264 aircraft!

irishguy28

KLM's strategic decision 10 years ago appears to have been short-sighted. It achieved one very immediate goal - securing its future, in the short-term. But at what cost? I don't pretend to know how dire KLM's position was in 2003/4, and there have indeed been many failures in the intervening years, as well as others that have teetered close to the brink...but has the strategic decision of 10 years ago merely delayed the same problem by 10 years?

As an entity, AFKL has some of the highest costs and lowest productivies of any European carrier (Just look at BApilotinsider's numbers above!). But this time around, KLM can't make any further strategic decisions - the decision making is largely out of their hands now. They can't influence how the AF side of the business is run. They've apparently made a profit every year but one since the merger, but yet they are part of an entity that is far from healthy.

There was talk upthread about synergies. I'm not sure the saving on maintenance and IT, etc, are enough to get excited about. Sure, AF feeds passengers onto KLM, probably more so than before they got into bed together, but doesn't alliance membership, taken with other strategic partnerships, provide the same feed without giving away control of the airline? The group management appear to know that change is needed, but appear powerless to do anything, and seem now even further away than ever from achieving this, given the damaging strikes last month.

If KLM truly could not have staggered on independently, then did they just give up and, in a blind panic, sell out to the next available suitor, who just so happened to Air France?

johan rebel

You hit the nail on the head there.

KL's pilot and cabin crew unions have managed to hold on to most of the benefits negotiated in the golden days of the IATA cartel. Specifically, they fly very few hours. Not sure about the pilots, but at 640 hours per annum for a full-time FA, KL's fly even fewer than AF's do, and that's saying something.

KL also employs very many part-time FAs, which drives up costs.

Johan

Dieuwer

...and still manage to turn a decent profit!
Hours worked means nothing. Productivity means everything. @:-)

irishguy28

KLM should have taken the crisis of 10 years ago as an opportunity to drive home some badly needed cost cutting and emerge as a slimmer, more nimble concern.

A bit of brinksmanship to get the unions rowing in, like what SAS have tried to do!

This would also have made them a far more attractive consolidation target - so they could have negotiated a merger from a position of greater strength. Rather than hiding their problems in a larger, even worse whole, and hoping for the best.

johan rebel

Try telling that to the unions!

Elbers gave a presentation to the Dutch unions yesterday, after which cabin crew union FNV Cabine concluded that KL needs to invest in its employees by offering:

1. Substatial pay increases.
2. Improved working conditions.
3. Employment guarantees.

Head in the clouds, anyone?

Johan

johan rebel

The closest they got was when they threatened to move shorthaul flights to KLC. The cabin crew unions screamed blue murder, whereupon a deal was negotiated which guarantees current FAs their pay and perks, but future ones will be paid slightly less. Even that was very hard for one of the unions to swallow, they only finally gave in because the other two signed on the dotted line.

Johan

irishguy28

It seems that airlines are the only industry in the private sector where unions have any power these days!!!

Or is that an oxymoron - are there any other private/privatised industries with unions?

Henry III

Although I certainly don't dispute the basic point you're making (which is, indeed, very pertinent), one should add a degree of 'amelioration' to the figures by noting that the KLM fleet has a considerably higher proportion of large, long-haul aircraft (requiring more flight-deck and cabin crew than small, short-haulers) than does the BA fleet ... especially as your figure for KLM appears not to include the Cityhopper fleet (which would bring the total up to around 160). But I don't know whether or not your staff numbers include KLc.

-- Henry

orbitmic

To be honest, I find the discussion a little bit surreal. It seems that people still discuss AF and KL as though they were discrete entities and as though KL was a waterskier being taken into murky waters by the crazy AF pilot. There has been a unified management for both companies for a long time. It is simply not the case that AF makes its little decisions on the AF side of the business and impose them onto KL nor for that matter that KL make their own decisions on the KL side of the business without AF's meddling. While operations remain separate, decisions are not, and in effect, the joint leadership of the company oversees the strategy of all airlines within the group. The reciprocal resentment between the two sides of the group is not new, and the blame game is a very natural way to escape one's responsibilities in any collaborative situation. Ultimately, however, I think that as people on the other "side" of the company, we should not be naïve or accept the pretence of entity separation that is, effectively, a very traditional corporate mascarade in groups that choose to keep separate brands for commercial reasons.

Henry III

Well, in terms of staff conditions, pay levels, and trades unions, they are very much separate entities!

-- Henry

irishguy28

AFKL is a bit like Belgium. Nominally, it's a single, united entity. But there is very little done at the "federal" level.

The two airlines rub along, seemingly almost independently, and with seemingly different cultures, and different languages (the same ones as Belgium, in fact!!!). They deliberately (and quite rightly, I think!) maintained their own, quite different, identities. And they just look different - different aircraft, different seat, different cabins/classes, etc etc.

orbitmic

Yes, but that is exactly what I am saying - they have entirely different conditions (that is the operational separation), but they do not fix them each for their own staff (that is the joint management structure). There is absolutely zero chance that AF people handled the strike "on their own" without the full approval of the AFKL board, and similarly the AFKL board will have been fully involved in all discussions relating to KL conditions.

In effect, this is exactly what the said AFKL management wants to do with Transavia France/Europe: they want it to be operationally separate with its own conditions, etc. but they do not want to let it be independently managed which is effectively what would be far more efficient.

In that sense, to me, the AFKL picture is not like Belgium. It would be like a Belgium where the very same government would make different decisions for Wallonia, Brussels, and Flanders.

jsfr

Very well put!!!^^^^^

Maybe if they had just called the main company something very different people would understand - the confusion doesn't seem to exist for IAG...

When it comes down to the profitability of each "separate" airline, I truly believe that this is driven primarily by financial adjustments, the impact/truth of which we will never truly know.

Ever since the merger, every year there have been some fairly significant adjustments/provisions/write-offs/etc. and I'm sure that AFKL is driving where these are entered and when, pretty much as they must be ding some interesting things on the revenue attribution from joint/code share flights.

It really is first year economics for any major international company that you make sure that you make profit in countries that have lower taxes and losses in countries that have high ones - ever heard of the Irish o'Google and Mac Microsoft?

KLM is not "paying for its unprofitable French cousin", its just a money game!

irishguy28

So they missed a trick when they sold their Irish subsidiary?

They should have funnelled any profits through to Cityjet to benefit from lower taxes there?

It does sound like a better strategy than racking up losses in high-tax jurisdictions, I'll admit.