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spiplane
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KLM To Save 700 Million Euro

Thu Nov 27, 2014 8:33 pm

In the Dutch news:

http://nos.nl/artikel/2006052-klm-ga...t-700-miljoen-euro-bezuinigen.html

Bottom line: save 700M over 5 years while investing 550M, the latter partly in new aircraft. Also a vacancy stop effective today regarding cabin crew.
A380 fan
 
captainmeeerkat
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RE: KLM To Save 700 Million Euro

Thu Nov 27, 2014 8:49 pm

Oh, I expected to see they were detaching themselves from AF!
              
my luggage is better travelled than me!
 
Byrdluvs747
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RE: KLM To Save 700 Million Euro

Thu Nov 27, 2014 10:40 pm

So is this a case of KL saves 700 million in order to cover AF's multimillion loses?
The 747: The hands who designed it were guided by god.
 
RealTom
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 7:04 am

Once again French bashing !!! And nothing with KLM which is a very good arilines. It is not Airliner but Airlfrench bashing !!! Event though a lot of thing have be blame in France and within Air France and especially Air France pilots. I think that most of Airliners guys forgot or don t understand that the French market count not only other airlines but as weel the TGV. Some tough competition here. For Captainmeeerkat you might forget that KLM growth since the merger is linked as well to AF strong commercial presence in a lot of market where KL was not and a lot of pax trave throught AMS via AF ticket. So therefore it is a common benefits...But bashing might be too easy lol
 
76er
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 8:32 am

Both AF and KL management have said the burden of the pilot strike is AF's to bear.

700 Million is not much, considering this is to be the total savings over the next 5 years during the Perform 2020 program. IMHO it is even a very low number and doesn't show a great deal of ambition. Many details are unknown as of yet, but KL will be looking for a 4% productivity improvement from its staff. KL is also looking to cut out any unneeded management layers. There is an immediate hiring freeze for flight and cabincrew.

More details in the coming weeks.
 
hooverman
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 8:38 am

Quoting RealTom (Reply 3):
Once again French bashing !!!
Quoting RealTom (Reply 3):
It is not Airliner but Airlfrench bashing !!!
Quoting RealTom (Reply 3):
But bashing might be too easy lol

LOL. Don't cry me a river please...

Quoting RealTom (Reply 3):
For Captainmeeerkat you might forget that KLM growth since the merger is linked as well to AF strong commercial presence in a lot of market where KL was not and a lot of pax trave throught AMS via AF ticket

This way KLM is not benefiting anything are they. KLM is nothing more than an orange they can squeeze out.

Quoting 76er (Reply 4):
Both AF and KL management have said the burden of the pilot strike is AF's to bear.

Doesn't look like it.When is AF doing their part?
 
76er
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 8:43 am

Quoting hooverman (Reply 5):
Doesn't look like it.When is AF doing their part?

That will indeed be an interesting one to watch.


When the news broke late yesterday afternoon, AFKL stock rose over 4%, this morning it is up more than 9% in early trading. It appears investors like the news coming from AMS.
 
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KarelXWB
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 8:45 am

Saving a few bucks is fine, there will be no job cuts it seems.

Quoting hooverman (Reply 5):
When is AF doing their part?

Air France will make an announcement early next year.
What we leave behind is not as important as how we've lived.
 
76er
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 8:55 am

Quoting KarelXWB (Reply 7):
Saving a few bucks is fine, there will be no job cuts it seems.

There will be. A lot of office workers are getting nervous. Furthermore, new KL boss Elbers said yesterday KL will get rid of hangar 10, leading to the loss of 100 jobs. Hangar 10 by the way, is the hanger where KL performs 737 maintenance. Did anyone say HV?   
 
vinniewinnie
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 9:29 am

Quoting RealTom (Reply 3):
Once again French bashing !!! And nothing with KLM which is a very good arilines. It is not Airliner but Airlfrench bashing !!! Event though a lot of thing have be blame in France and within Air France and especially Air France pilots. I think that most of Airliners guys forgot or don t understand that the French market count not only other airlines but as weel the TGV. Some tough competition here. For Captainmeeerkat you might forget that KLM growth since the merger is linked as well to AF strong commercial presence in a lot of market where KL was not and a lot of pax trave throught AMS via AF ticket. So therefore it is a common benefits...But bashing might be too easy lol

You are overestimating the impact of TGV's. They do compete indeed but take out only a small chunk of passengers (a fair amount of domestic passengers + some international destinations)

All in all AF should be doing better with or without TGV:

- Huge business sector in Paris (regions have crumbs in comparison),
- Number one tourism destination in the world

Truth is despite this AF can't compete due to cost and strategy reasons! That's why our dutch friends have reasons to complain! If you were the biggest earner in your household, would you tighten the belt for your wife who is not able to manage her money well? I don't think so!
 
TYCOON
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 11:41 am

I don't know if it is French bashing or what, but a number of members of this forum appear deaf and dumb on this matter.
As pointed out by many on the matter of AF/KL losses, including myself, it is not as easy to arrive at a conclusion that all losses are AF related and all profit is KL related.
With France having a higher corporate tax rate, as a responsible corporate manager, you would want to show your losses there in order to off-set any taxes due. Profit should be registered in geographies with a lower tax regime, such as the Netherlands. This explains in great part this profit and loss shuffle.
That being said, AF still has a lot to do to improve its operating margin, let alone its imagine. But as a frequent flyer of the airline, I can say it is one of my favourites and I find each experience to be a very professional one.
Of my Top 5 Airlines flown ( 1 - AF, 2 - DL, 3- BA, 4 - LH and 5 - AZ), AF is miles ahead of the others in my view in customer service, professionalism, catering, clean interiors (take note BA) reactivity and even FF programme (at least compared to DL and BA). I have flown all of them short-haul, long-haul, up front or in the back... and the one I feel most comfortable with is AF.
KL is my 8th most flown carrier and I like them alot as well... not up to AF's level in my view... but not too far.
Vive AF!!
(Just for info: rounding out my top 10 most flown airlines are two which no longer exist: 6 - PA and 10 - RG, with 7th being IB and 9th UX.)
 
FlySSC
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 12:24 pm

Quoting captainmeeerkat (Reply 1):
, I expected to see they were detaching themselves from AF!

"Detach" KL from AF and they are dead within 18 months
 
kl911
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 12:53 pm

Quoting TYCOON (Reply 10):
With France having a higher corporate tax rate, as a responsible corporate manager, you would want to show your losses there in order to off-set any taxes due. Profit should be registered in geographies with a lower tax regime, such as the Netherlands. This explains in great part this profit and loss shuffle.

Don't forget the French unions. I never bash bash AF , but rather its unions. They need to be more lean and cost effective, but unions scream already 'strike' before you mention that.

Quoting TYCOON (Reply 10):
That being said, AF still has a lot to do to improve its operating margin, let alone its imagine.

Same story.... French Unions
 
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hilram
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 12:57 pm

Quoting FlySSC (Reply 11):
Quoting captainmeeerkat (Reply 1):, I expected to see they were detaching themselves from AF!
"Detach" KL from AF and they are dead within 18 months

AF or KL are dead within 18 months?

(KLM is the oldest airline in the World, just saying...)
Flown on: A319, 320, 321, 332, 333, 343 | B732, 734, 735, 736, 73G, 738, 743, 744, 772, 77W | BAe-146 | DHC-6, 7, 8 | F50 | E195 | MD DC-9 41, MD-82, MD-87
 
lexer
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 1:16 pm

Quoting FlySSC (Reply 11):
"Detach" KL from AF and they are dead within 18 months

I take it you mean both KL and AF.

I believe KL would most likely be acquired by someone else (e.g. Delta). I am not sure if AF could be bought; I don't know that there would be parties ready to acquire AF, or whether France could swallow the koolaid to sell its national carrier.
 
FlySSC
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 1:36 pm

Quoting hilram (Reply 13):
AF or KL are dead within 18 months?

KL would be.

As they would be probably dead by now if not bought by AF in 2004… try to remember in what situation KL was at that time ...
 
FlySSC
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 1:40 pm

Quoting hilram (Reply 13):
(KLM is the oldest airline in the World, just saying...)

So what ? prestigious old airlines are immortal just because of that ?
Say that to SABENA, SWISSAIR, PAN AM, EASTERN ….
 
lexer
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 2:23 pm

Quoting FlySSC (Reply 16):

Unless the contrary is demonstrated very quickly, I think you overestimate AF's ability to function without KLM, or its ability to reform itself quite profoundly. Deep reforms are essential as it is in the current situation, never mind if it loses KLM.

I am not suggesting that KLM would survive on its own (as I said, I think it would be bought by another carrier) so I'm not sure how relevant 1994 is at the moment.
 
AirGAbon
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 2:29 pm

Quoting lexer (Reply 14):
or whether France could swallow the koolaid to sell its national carrier.

AF is private company, not State owned!

I think you forgot a bit quickly that CDG is the first airport in continental Europe (second in Europe after LHR) and that the trafific is huge there.

So I don't believe AF has to be sent to the trash so fast.... When they merged with KL they were among the most profitable airline in the world.

Wait to see positive changes soon.
 
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usdcaguy
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 2:41 pm

I feel sorry for those at KL who will be losing their jobs as a result of the cost-saving plan. They are some of the most professional airline staff I've encountered in the world. There will certainly be other companies who will welcome their dedication and can-do attitude.
 
GoAibusGo
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 2:43 pm

As a KLM employee, a lot of people here at A.net don't know nothing about the situation KLM is in especially the Dutch, who should better (Nationalistic pride ?). You guys should know better. Every day of the week some company in The Netherlands is laying off personal and you think KLM is imune.
The Airfrance/KLM group is doing badly at the moment. Changes have to come to whole group, no matter how painfull. Competion is getting fiercer by the day in Europe.
For KLM cabin crew, the good times are now over. Time to get ready for the real world. BA have done it already a couple of years ago with 'mixed fleet'.
For a better Airfrance/KLM who can compete in the future.
 
Azure
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 3:39 pm

It is really too easy to put the blame on AF for KLM's cost cutting plan.

KLM is still profitable, but its revenue has dropped by 26% in one year.
Source (sorry, in French) : http://airinfo.org/2014/11/28/pourqu...m-va-devoir-se-serrer-la-ceinture/

Quote : "In fact, all is not rosy at KLM. The company has been profitable since 2009, but its accounts are deteriorating.

Operating income fell by 26% in Q3 2014 compared to 2013, from 358 to 265 million euros. Meanwhile, revenues remained more or less stable at 2.75 billion euros against 2.80 last year.

The situation was deemed "disappointing" by the group finance director, Pierre-François Riolacci, commenting on these results by telephone on October 29. "It's disappointing in terms of income," he acknowledged. " KLM has outperformed Air France in terms of margins in recent years. But the costs are rising. KLM needs to adjust its costs, "he added. "Everyone knows that something must be done," he warned then. "


Also according to this article, KLM has encountered an unexpected loss of revenue on its Asian and East-African network and should prepare to restructure its network accordingly...
Does anyone has more info about this ?



Quoting GoAibusGo (Reply 20):

Thank you for your post and testimony. You sound quite right !

Quoting FlySSC (Reply 15):
try to remember in what situation KL was at that time ...

Pre-merger, KLM was half the size it is now... Some on this forum seem to forget this discomforting fact (for them).
 
kl911
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 3:45 pm

Quoting Azure (Reply 21):
Also according to this article, KLM has encountered an unexpected loss of revenue on its Asian and East-African network and should prepare to restructure its network accordingly...Does anyone has more info about this

Well, they are dropping AMS - DEL.....
 
Azure
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 4:11 pm

Quoting kl911 (Reply 22):
Well, they are dropping AMS - DEL.....

Is it confirmed or is it just a rumor ?
 
mozart
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 6:28 pm

Funny how some people blame others to take the easy road by just doing "French bashing" when all they do themselves is dismiss valid criticisms as bashing.

Yes, AF has to deal with competition from the TGV. And Lufthansa has to deal with competition from the ICE, British Airways from high speed trains. Paris-Marseille 3 hours, Paris-Bordeaux 3 hours, Frankfurt-Munich 3 hours, Frankfurt-Cologne 55 minutes, Frankfurt-Dusseldorf 90 minutes, Hamburg-Berlin 1h45, London-Manchester 2hours... All of these were routes where people used to take planes in the past and now they take the train. But guess what: Air France complains and makes losses. LH and BA complain less, reform more, and are profitable.

Yes, AF has to deal with LCC competition. But what market share do LCCs have in France? I read 6%. What market share do they have in the UK? I would guess more than 50%. Guess what? BA is profitable, AF is not.

AF also complains about the ME3. EK has 15 flights a day to the UK (many on A380), but only 5 to France. Guess what? BA is profitable, AF is not.

So, all the excuses that are brought forward cannot be the real reason. THe reason is that AF is poorly managed, has been late or still is late to upgrade its service standards to what is common in the market (sure, some people still prefer the sliding seats in 2-2-2 configuration with the tiny screens to lie-flats with better IFE and WIFi on board - but those are not the majority). Also, France as a country is badly managed, so the the airline suffers.

Having said all of that, I do agree that its NOT a matter of "KL is great and AF is destroying everything". In fact KL would not have survived without AF or another bigger partner, and today does benefit from some synergies. Sure, you could argue that AF could try to benefit from those same benefits and be as profitable, but the KL case shows that it does make sense to move early and cut the fat. Something AF has more trouble doing than others (they do it, but it's more painful and it happens later).

In the end, AF needs KL and KL needs AF. And even though on the surface KL looks like in a less disastrous situation, making constant efforts to stay competitive is a good thing.
 
Pihero
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 7:00 pm

Mozart.
So typical of your posts.
Air France is bad, badly managed...etc...
What I's like to see on this forum is some objective posts, without jugements of value and - yes, definitely - outright bashing.
First, a comparison between AF and BA business models ; then a reference to history ; and lastly the airlines' vulnerabilities.
History-wise, it'(s very easy to forget that BA wasn't long ago " the world favourite airline", twice the size of AF or LH.
Yes, they are profitable, at half the size. The day LH and AFKL would start going after their network will usher some very interesting times.
Second, it's also very easy to forget the social and labour laws situation in France, the taxes... it's now common knowledge that just setting AFKL as a Dutch concern will see savings of 750 M to 1 bn € per year... and that's not even counting the so-called *Chirac Tax* which costs around 100 M€/ year to promote vaccination in Africa ( have you heard of the effect of that tax on the Ebola crisis ?).
LH is a far more valid comparison. The solutions that have been implemented by both airlines are so similar they could be called the same name. Fortunately for the German airline, their salary base is much lower, so they have a two or three years head start ...

HIgh speed train in the UK ? with a puff of the best Jamaican grass, please !

Let's have the same discussion in 18 months'time.
Contrail designer
 
KL577
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 8:16 pm

Quoting Azure (Reply 23):
Quoting kl911 (Reply 22):
Well, they are dropping AMS - DEL.....

Is it confirmed or is it just a rumor ?

Still a rumor. The flight remains bookable. For now changes for S15 mostly include a new destination (Edmonton) and more frequencies to MEX, LAX, IAH, CUR and some others. Rumor has it that KLM will launch services to Krakow in S15.... But nothing on suspending DEL...
 
hooverman
Posts: 279
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 10:27 pm

Quoting KarelXWB (Reply 7):
Saving a few bucks is fine, there will be no job cuts it seems.

I am not against any cost saving action at all but as long as AF doesn't get their pilots to either fly more hours or cut their wages they will not be able to compete to the ME3 and low cost carriers.

Quoting KarelXWB (Reply 7):
Air France will make an announcement early next year.

I really hope they find the magic formula but I don't believe AF-KLM will make the structural changes needed to make the company healthy.

Quoting 76er (Reply 6):
When the news broke late yesterday afternoon, AFKL stock rose over 4%, this morning it is up more than 9% in early trading. It appears investors like the news coming from AMS.

They trust KLM to be a good boy and make the changes needed to help the company become profitable.
And I don't doubt they will, but it takes two to tango.
 
vinniewinnie
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 10:57 pm

Quoting Pihero (Reply 25):
History-wise, it'(s very easy to forget that BA wasn't long ago " the world favourite airline", twice the size of AF or LH.
Yes, they are profitable, at half the size. The day LH and AFKL would start going after their network will usher some very interesting times.

So AF is twice the size yet loses bucket loads of money? I'd rather be BA, twice smaller but profitable and apparently sustainably so.

AF has a market to itself (francophone Africa) which nor BA nor LH has. U'd think that with such a competitive advantage AF would do better...

Tell me where AF and BA don't compete? Because as I see it there are very few destinations served by BA that are not served by AF-KLM...

Quoting Pihero (Reply 25):
Second, it's also very easy to forget the social and labour laws situation in France, the taxes... it's now common knowledge that just setting AFKL as a Dutch concern will see savings of 750 M to 1 bn € per year... and that's not even counting the so-called *Chirac Tax* which costs around 100 M€/ year to promote vaccination in Africa ( have you heard of the effect of that tax on the Ebola crisis ?).

It's indeed more complicated for AF then most countries given french labor laws and taxes...

Quoting Pihero (Reply 25):
HIgh speed train in the UK ? with a puff of the best Jamaican grass, please !

I'm sorry but what's important? Having high speed rail or being time competitive? The answer is being time competitive...

Thus London - Edinburgh & Glasgow can be done by train in about 4H30 (same as Paris-Nice), London- Manchester in 2 hours (Same as Paris - Lyon) for example... All in all there is little difference between competition between rail and air in the UK and rail and air in France.

As for competition in the airline market, let's be honest, it's way fiercer in the UK than it is in France...

French bashing does exist, and obviously it's tough to swallow for a french person (french pride is fierce). But let's be real Mozart points are fair...
 
lexer
Posts: 135
Joined: Thu Sep 01, 2005 10:21 pm

RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 11:44 pm

Quoting mozart (Reply 24):
Having said all of that, I do agree that its NOT a matter of "KL is great and AF is destroying everything". In fact KL would not have survived without AF or another bigger partner, and today does benefit from some synergies. Sure, you could argue that AF could try to benefit from those same benefits and be as profitable, but the KL case shows that it does make sense to move early and cut the fat. Something AF has more trouble doing than others (they do it, but it's more painful and it happens later).

In the end, AF needs KL and KL needs AF. And even though on the surface KL looks like in a less disastrous situation, making constant efforts to stay competitive is a good thing.

Well put, I agree.

Quoting Pihero (Reply 25):
Let's have the same discussion in 18 months'time.

But we're discussing it now, what's your point exactly? We're talking about AF and KL being competitive and there are justified doubts about the ability of AF, KL, and AFKL, to adjust and fend off LCCs, ME3, LH and BA. France as a whole is not proving to be a very welcome nest for business and these problems are pretty structural. The pilots and maybe other staff of AF do not seem to realize the urgency of the situation, in a bizarre failure to properly evaluate their own interest.

KL also has a very serious cost problem, their organization is expensive and productivity is lagging. The new CEO of KLM has already hinted that the 'blue family' idea among staff will not protect from possible layoffs, as in the past. And he's right of course. As much as this solidarity and safety is valuable and fuzzy, the reality is that this model is too expensive and unproductive, no airline can afford this social mode with the current competition, unfortunately.

There is a lot to be done at KLM, this 'sudden revenue issue' they reported is ME3 and TK biting into their East-Africa and Asia traffic and it's going to get worse. There is really no time to waste for them.

But if it's preferable to talk about 'French bashing' rather than the problem, or wait another year and half to discuss it, then that pretty much proves the wider point, dunnit.

[Edited 2014-11-28 15:48:39]
 
mozart
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Joined: Thu Aug 14, 2003 12:21 am

RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 11:54 pm

Quoting Pihero (Reply 25):

Mozart.
So typical of your posts.

I took the trouble of stating facts. Which one is wrong?

Quoting Pihero (Reply 25):
Air France is bad

I didn't say that AF is bad. I said that they took significantly longer or still haven't started bringing their product quality to what is standard in the market. I gave examples, such as lie-flat seats in Business which AF is just starting to roll out whilst BA has had them for, what, 15 years?, and LH, another latecomer, has retrofitted the bulk of their fleet. Not to mention smaller airlines like Swiss, Austrian, brussels, virgin Atlantic, Finnair, Alitalia - all have lie-flat seats.

Quoting Pihero (Reply 25):
badly managed...etc...

Because you think it is well managed? By which measure? Profits - clearly not, they losing heaps of money and have not turned a profit since years (it has lost EUR 5.3 Billion since 2009!). Market cap - it is significantly smaller than the two other European power houses: IAG is 3 times larger, LH is two times larger. Share price - not bad this year, but worse than others over time. Another measure you can think of that would be indicative of successful management?

Quoting Pihero (Reply 25):
Yes, they are profitable, at half the size.

So size is the objective of a company? Even at the expense of profitability? Interesting, in many many years of studying economics I never heard that... Also, what is "size"? Revenue? Or market cap? That of IAG is three times larger

Quoting Pihero (Reply 25):
he day LH and AFKL would start going after their network will usher some very interesting times.

Not sure I understand. Are you saying LH and AFKL do not really compete with all their force against BA/IAG? Do you really think they can afford that?

Quoting Pihero (Reply 25):
Second, it's also very easy to forget the social and labour laws situation in France, the taxes... it's now common knowledge that just setting AFKL as a Dutch concern will see savings of 750 M to 1 bn € per year... and that's not even counting the so-called *Chirac Tax* which costs around 100 M€/ year to promote vaccination in Africa ( have you heard of the effect of that tax on the Ebola crisis ?).

And your point is what?

Quoting Pihero (Reply 25):
HIgh speed train in the UK ? with a puff of the best Jamaican grass, please !

The point is not which country has more miles of high speed network and higher average speeds. France does. Britain's network is ridiculous in comparison The point is how many domestic routes that used to be important for airlines have been affected by high speed trains that now link the centre to big cities in around 3 hours.. In France, those are primarily Lyon, Marseille, Bordeaux, Nantes, Strasbourg. There are now fewer flights to those destinations than in the past. In the UK, Manchester is now at slightly over 2 hours from London, Leeds is at slightly over 2 hours. Newcastle just under 3 hours. Liverpool less than 2.5 hours. There are still air routes in the UK where trains aren't competitive, particularly London-Edinburgh and Gatwick. Just as there are air routes in France where the train isn't competitive, particularly Toulouse and Nice. So my point that Britain's traditional domestic trunk routes have been affected by high speed trains as much as they have been in France. Plus Britain has more LCC competition on most of these routes.

Thus, wnat *is" your point, other than saying that my points - albeit well research and fact-based - are bashing?

Do you disagree with the fact that all is not rosy at KLM? Do you believe, unlike me, that KLM is the success case and AF destroys it all?

[Edited 2014-11-28 16:00:30]
 
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par13del
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RE: KLM To Save 700 Million Euro

Fri Nov 28, 2014 11:56 pm

Quoting Pihero (Reply 25):
Second, it's also very easy to forget the social and labour laws situation in France, the taxes... it's now common knowledge that just setting AFKL as a Dutch concern will see savings of 750 M to 1 bn € per year... and that's not even counting the so-called *Chirac Tax* which costs around 100 M€/ year to promote vaccination in Africa ( have you heard of the effect of that tax on the Ebola crisis ?).

The incorporation of AF/KL outside of France is interesting given the current atmosphere in the EU where complaints are heard daily of companies not paying their fair share or tax.

In relation to Mozart's points, does this mean that AF is handicapped serving its primary market due to the economic policies of government? Short of AF getting political to create change, is there anything else they can do?
Paris I believe get's more tourist than London, for those arriving by air I would like to hope that AF carriers a major share.
 
mozart
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Joined: Thu Aug 14, 2003 12:21 am

RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 12:03 am

Quoting par13del (Reply 31):
In relation to Mozart's points, does this mean that AF is handicapped serving its primary market due to the economic policies of government?

No, my point was that the French economy is in a bad state. Low or no growth, very high and increasing unemployment, low profitability of firms, high indebtedness of households and public sector, high proportion of GDP of pblic sector - all of those things dampen demand for air transport
 
Pihero
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 2:17 am

Quoting mozart (Reply 30):

Because you think it is well managed? By which measure?

The first would be the progress made in the past three years.
The second would be the progress against all the burden of silly taxes and costs heaped over the airlines by the French administration : CDG is the most expensive airport in Europe in terms of charges : affects all flights on the AF hub, but only a tiny fraction of BA, LH.... etc...
AF has been for decades the cash cow of every finance minister and a means for some employment maneuvers by every labour minister ( the neuf trois FAs are just an example ).
The high speed train ? Heavily subsidised while airlines are taxed to their gullets ( does the SNCF pay a security levy ? ).
You say the LoCo penetration is just 6% of France domestic ? Do you think that is just because they don't want a bigger share through the kindness of their hearts ? Or is it that AF has in fact a better strategy and position than - say - BA or LH ?

That the AF management had been ossified after the initial success of the AF-KLM merger is a point. That's the reason the team has vastly been changed ( and if these guys / girls were so bad, why are they being hired by the ME3 ? ).
A lot of changes have been introduced and still are being implemented : the plan is to regain the lost high yield client.
That cannot be done overnight, but at least it is worked on.
As for share prices / capitalisation ... let's see how they fare in 12 months' time...

I have never hidden the problems and the obstacles AFKL is facing. But the group has to make-do with their own operating environment... In this respect, comparing BA and AF is seeing where the financial burdens are quite different :
30 tà 40% less social charges in the UK, firing as easy as pie ( when did you see that in France ? instead of those very costly PDVs (voluntary resignation plans ) ?
Things are changing - at last, some would say ; RASK is improving while CASK is going down : the group will even this year show an operating profit - as it did, btw last year .
And when I have a quick look at the stratregic situation of the group compared to BA, I'd even put more money on AFKL than BA.

All that said, if A.netters refuse to fly AF is ok for me. People are free and so is the market in Europe.
Contrail designer
 
TYCOON
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 6:15 am

Quoting Pihero (Reply 33):
No, my point was that the French economy is in a bad state. Low or no growth, very high and increasing unemployment, low profitability of firms, high indebtedness of households and public sector, high proportion of GDP of pblic sector - all of those things dampen demand for air transport

May I be rather bold, Mozart, and ask you what your academic background is that leads you to make (false) economic claims about France. High indebtedness of French households??? WHAT?? Definitely not the case... actually French household indebtedness is relatively lower than most OECD countries, and much lower than either the UK or Germany. Furthermore, most of any debt which French households have (home mortgages) are long-term fixed rates so immune to any increase in interest rates (unlike the heavily indebted Brits who will see consumer spending diminish rapidly with any jump in interest rates as most is on a floating basis).
You also fail to point out that France has one of the highest savings rates among OECD nations... so on a net basis, French are relatively wealthy and have a tendency to better manage their household budget, which is less the case of the Brits or the Americans who on a net basis have next to a negative savings rate as household borrowing almost exceeds savings.
I'm an economist... that's my background... and once again, what is yours?

People like to discuss how bad the French economy is because maybe they have read press headlines somewhere. But when one takes the time, and is trained to dig through the figures, in relative terms to other European economies... it ain't so bad! And what actually makes me laugh is how the smug Brits talk about their economic growth, when all they are doing is getting back to where they were pre-2008-9 crisis. If you look over 2005-14, the UK economy hasn't really grown by much more than the French one... which withstood the crisis much better than either the UK, the US, Germany or the Netherlands.

France needs to reform its economy further to be competitive, this I will admit. But I cannot stand intellectual dishonesty.

Also LH has not retrofitted the bulk of their long-haul fleet in lie-flat seats. Hell, even the recent A380s do not have lie-flat seats, only the same angled product they have on most of their A340s and 744s. Only the 748 is truly lie flat.
 
RealTom
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 6:42 am

Happy to see that this threat is no more AF bashing but very interesting :

- on KL :
- they have very good and friendly staff but the product is odd (especially on their old 747 but they are changing it now, (to compare the last one of AF refurbished by new IFE is very nice)
- for the same price you can get better service via a ME3 hubs especially if you agree a lay over there
- AMS hub is easier to deal with than CDG but some tasks should certainly be sub contracted to make more savings. I agree it is not before because you are the oldest company in the world that you won t died.
- on the East African Network ; it is not only the competition but the security issues in this part of world. If you look carefully : the tourism is heavily impacted especially in Kenya with a strong impact on traffic. But, their strong point once local issues will be solved is KQ. A nice company with nice product which needs to have an improved airport.
- on Asia, the yields on cargo and therefore on Combi planes does not allowed the results they had in the past, and they need to make some change as well

- on AF : they are improving the products which was already good in economy for the price they offer, even so they need to really have a cabin crew friendly atttitude or staying at the same level at any time. No word about the technical crew,( last our captain never said a word during the entire flight). So the product is no more an issue.
CDG is a nice airport but expensive and hasn t been created as a hub, and connection are difficults, lack of indications and once again, as a french citizen I complaining about the staff everywhere in this airport. They must be more friendly (no word about most of the taxi if you end your trip in Paris)
I m not bashing the unions, but it is key element for AF futur and past failures (not only for AF but for all the country), if they want to be a more cost effective airlines and if they want to gain share markets. IE Look at MRS station, overstaffed, with people never helping KL integration due the inability to work outside their scope.

So, they both have problems but they have as weel external to deal with :
- open market to ME3 carriers...so the reasons we know.
- lack of open market to Asia (the UE is working on)
- open market for ME3 in a lot of countries like South African who loose their "national carrier".

Based on that, it is good for passenger and growth of the markets but we must understand that this group has to change is internal mindset whilst being heavily challenged by external factors

And we must say that Alitalia cost them a lot of wasting money, for KL when they broke 15 years ago and for the group which gaves them 500m€ or more in the last years for...nothing. BA has been more lucky with IB as LH is with Swiss, Austrian and SN.
 
kl838
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 8:01 am

Air France and KLM both need as much cost savings as possible at the moment, but they are both trying to recapture the higher end of the market where the previous management had just kept cutting costs and wastefully spent on NEV4 seats when a new lie flat seat should have been ordered. Anyone who tells me CDG is a nightmare to travel through, I don't understand, because ever since the new S4 hub, transferring to AF flights is seamless now. This is coming from someone who regularly travels through CDG and AMS. I flew through the horrible CDG terminal 2C days, and my god that terminal is so run down. March would be my first Lufthansa flight, and I want to see what all the fuss is about, though many say there isn't much to look forward to. I flew BA in June and was not impressed, and this was in First and their newest domestic product. Once AF's new products are fleet wide, you will see how customers will have nothing but good things to say.

As for customers, anyone I spoke to says they would rather take a cheaper option regardless of income. While my personal opinion is to fly European airlines to support European jobs (and frequent flyer status). I have been doing so for my whole life, and will continue to do so. I for one do not support Qatar and their slave labour, and that is an airline I will never fly with. I will give Etihad a try as they seem like the modern SQ, while I just find Emirates overhyped and quite gaudy and brash.

AF has a challenging environment ahead of them, and if the unions can support the management it will soon prove to be a much more powerful player. It is going to be leaner and more efficient than ever before, and sure certain things might be gone but as a customer I still look forward to flying AF and KL. They offer so much more, better crew, better food, pleasant, always clean (BA take notice), mostly on time. Though many disagree with me, I haven't had any serious issue in the last 20 years. Sure a bag had been delayed or my food wasn't the best at times, but you expect that. There has always been a negative view against the airline on here, I believe they are underrated while the likes of BA are overrated.
 
mozart
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 8:51 am

Sensible discussion, thanks.

@Pihero, very briefly: we seem to be largely in agreement then. AF's performance has improved substantially, that is true. THe company has to deal with some particularly handicapping factors such as French labour law. Still, in comparison to others, it is doing less well. I have my doubts whether AF's market cap will overtake that of IAG in the next 18 months, but maybe I am wrong.

You also agree with something that especially TYCOON refused to recognise in the past, which is the lost market share with high yield clients. On low cost penetration: I took the 6% number from another post you made, and there you argued that in large parts it was due to slot issues at ORY.

It is the job of managers to deal with adverse circumstance. France has restrictive labour laws for instance and high social charges. But it has CDG as a hub that still has capacity for expansion. BA has a more emplyer-friendly labour law environment and less social charges. But it has to deal with a hub that is basically full to the rim and there is no political backing to expand it. To each his own problems.

@TYCOON: indeed, very misleading wording from me. I should have said "high indebtness per household". So the way I wrote it it is wrong. NB note that the share of mortgage debt is higher in UK household debt than in French household debt, where there is a higher portion of consumer credit. You're right on interest rates. The discussion about which country has better weathered the financial/economic crises one can have long debates. France did not see the slumps in output that the UK saw, but then France is still waiting to rebound.

But even if I didn't have any formal education (I happen to have a PhD in Economics from Columbia, an MBA from Columbia, an undergrad degree in Industrial Economics from the LSE) it's just reading numbers.

But all of that is a complete side discussion and does not invalidate my argument which is that the French economy is not doing well which also hurts Air France.

Back to topic: any crying in the Netherlands about KLM paying for the bad performance of AF is missing the point. KLM has its own issues and needs to address them. Any crying about KLM would have done better without Air France: maybe, but not if KLM had stayed independent. It would not have survived without a partner. AIr France was the best available choice at the time. It was the right thing to do for both companies to merge
 
Pihero
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 9:36 am

Quoting mozart (Reply 37):
On low cost penetration: I took the 6% number from another post you made, and there you argued that in large parts it was due to slot issues at ORY.

It's now in the public domain since the Paris Air Forum in July, a conference I attended with a lot of attention.
But, some small correction : The slots, yes, but not only at ORY or CDG : it's all around the AF network ( that includes MUC, FRA... )
If you haven't seen it, this is one of the discussions on whether the LCCs are winning
The interventions are from the EasyJet and Vueling CEOs and Didier Bréchemier whom I quite like.
This small video puts to rest a lot of fallacies and, as a matter of fact, explains in great detail what Transavia (France or Europe) and HOP! are about.

Quoting mozart (Reply 37):
AF's performance has improved substantially

But it still has the worst management possible by any measure, right ?
Contrail designer
 
TYCOON
Posts: 476
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 9:46 am

mozart, once again you are misleading... the average consumer credit per UK household is staggeringly higher than in France. If you would like some tips on sources, more than happy to send them to you.
France cerainly needs to take some painful decisions to improve its economic situation, but doesńt need to 'rebound´ as the UK because the economy hadńt lost as much ground as the UK.
FYI, my economics degrees are from the LSE and MIT.
 
mozart
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 3:20 pm

Thanks for the video link, very interesting.

Quoting Pihero (Reply 38):
But it still has the worst management possible by any measure, right ?

If that's your opinion, fine. It isn't mine. I think that for instance Alitalia is much worse, and so is Air Berlin. Just two examples of companies that are still (sort of) alive. Others had bad management as well and they already bid the dust. Spanair, bmi?

Quoting TYCOON (Reply 39):
mozart, once again you are misleading... the average consumer credit per UK household is staggeringly higher than in France. If you would like some tips on sources, more than happy to send them to you.

That wasn't my point. I said "the share of mortgage debt is higher in UK household debt than in French household debt". Which means that of all the debt households have, a higher portion of that debt in the UK is mortgage debt than in France. In France, the portion of consumer credit is higher than in the UK. My point was about relative numbers, not absolute numbers.

In absolute terms you are of course right, UK households have more debt, and signficantly higher per household consumer credit (with often crazy APRs). I never doubted that, you are right, but not responding to my point  

But you have an interesting debating technique: you pick the micro-element of the sub-point of one element in a chain of argument - but without bringing an anti-(hypo)thesis to the entire argument.

Thus: do you disagree that the state of the French economy hurts AF? If so, I'd be curious to hear that reasoning.

Off-topic: when was your last lunch at the Beaver Café? Same time?

[Edited 2014-11-29 07:21:00]
 
icarus75
Posts: 751
Joined: Mon Oct 27, 2003 2:18 am

RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 3:48 pm

Quoting RealTom (Reply 35):
and connection are difficults, lack of indications and once again, as a french citizen I complaining about the staff everywhere in this airport. They must be more friendly (no word about most of the taxi if you end your trip in Paris)

I disagree with you with the lack of indications! There are indications everywhere but people do not read them.
About lack of indications : FRA & LAX are worst!

About the staff in the airport : I've never had to complain but again, I'm french and I speak the language! That said, I have american friends coming to Paris trough CDG and they never complained either.

Regarding the taxi drivers, I agree with you. They are a true disgrace for France and it is a shame that they are the first "french" people the foreigners see upon arrival!

Somethind almost never mentioned about CDG : the queue at the immigration when you arrive, depending the time of the day. This is a real big problem!
Flying is amazing!
 
RealTom
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 3:58 pm

@icarus75, I agree with and lucky are those with paraph , to pass the border in 30s
 
Pihero
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Joined: Mon Jan 31, 2005 5:11 am

RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 3:59 pm

Quoting mozart (Reply 40):
Quoting Pihero (Reply 38):
But it still has the worst management possible by any measure, right ?

If that's your opinion, fine. It isn't mine.

Euh ! Your words :

Quoting mozart (Reply 24):
THe reason is that AF is poorly managed,

My opinion is that it is turning the group around.
Still some progress to be made but at least now employees have a vision of the future.

If you now put the infos given by Alex and Carolyn in that video into the AFKL yearly financial reports, the progress is quite - in my eyes, of course - impressive.
Contrail designer
 
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PW100
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RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 6:00 pm

Quoting TYCOON (Reply 39):
FYI, my economics degrees are from the LSE and MIT.

Nice. La Crosse Regional Airport, WI [LSE] and Shafter Airport Minter Field, CA [MIT]  
Immigration officer: "What's the purpose of your visit to the USA?" Spotter: "Shooting airliners with my Canon!"
 
Planesmart
Posts: 2891
Joined: Sun Dec 05, 2004 3:18 am

RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 6:10 pm

The usual legacy issues - politics, management, efficiency, finance and fleet, probably in that order.

When you see where they started, changes have and are occurring. They are just not fast enough. And the hardest, and most controversial (the political), have gone nowhere. If they don't occur soon, all the other pain will have been for nought.
 
TYCOON
Posts: 476
Joined: Sun Feb 18, 2007 8:20 pm

RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 6:14 pm

Quoting mozart (Reply 40):
Off-topic: when was your last lunch at the Beaver Café? Same time?

Some time ago... I never really went that often... Hung out more at the Thirsty Ear
 
mozart
Posts: 2154
Joined: Thu Aug 14, 2003 12:21 am

RE: KLM To Save 700 Million Euro

Sat Nov 29, 2014 11:15 pm

Quoting Pihero (Reply 43):

Quoting mozart (Reply 40):
Quoting Pihero (Reply 38):
But it still has the worst management possible by any measure, right ?

If that's your opinion, fine. It isn't mine.

Euh ! Your words :

Quoting mozart (Reply 24):
THe reason is that AF is poorly managed,

... and you do recognise the difference between "poorly" and "the worst", don't you? One can be bad, without being the worst. I never said AF was the worst managed airline.
 
JRadier
Posts: 3951
Joined: Mon Sep 27, 2004 11:36 pm

RE: KLM To Save 700 Million Euro

Sun Nov 30, 2014 10:47 am

Quoting mozart (Reply 37):
Back to topic: any crying in the Netherlands about KLM paying for the bad performance of AF is missing the point. KLM has its own issues and needs to address them

I think the key issue is the chain of events. First the Air France strike, and then cost cutting at KLM. That Air France will cut costs as well isn't that well mentioned. This leads to believe that the Air France strike and the KLM cost cutting are related, even if they are not.

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