KLM announces budget cuts over coronavirus setbacks

A series of budget cuts and spending restrictions are being put in place at KLM as financial consequences caused by the global coronavirus outbreak have continued. The Dutch flag carrier said the measures were meant to “safeguard our operating income,” according to a letter sent by the airline’s CFO, Erik Swelheim, on Wednesday.

Last week, the airline extended its suspension of service to China through March 28. KLM attributed this to the rising number of infections tied to the Covid-19 strain of the virus. Analysts noted that ticket sales to such destinations were likely plummeting, another reason the airline would want to eliminate the flights.

“The corona virus has had a significant impact on our air traffic to China and other destinations in Asia. The virus will also probably have an impact on the rest of our network, now that travel advice to Italy has also been adjusted,” Swelheim wrote in a letter to management, according to multiple media outlets.

In it, he outlined a strategy where the staff will be asked to assist by taking vacation days as soon as possible, and spending would only be approved for necessary costs, thus keeping its outlay of cash to an absolute minimum. The new measures are in addition to the airline putting a temporary end to training new cabin personnel, the Telegraaf reported.

The airline will also face a hiring freeze of outside consultants and temporary workers, and workers will be told to limit there business travel dramatically. Meetings between KLM, sister airline Air France, and the parent organization overseeing both will be reduced and mainly held by video conferencing, Swelheim said, as reported by RTL Z.

All construction projects and IT projects which have not yet begun will be delayed. All departments will be asked to find a way to slash 20 percent off the budget to stem the tide of losses at the airline.

The price of Air France-KLM shares on the Euronext Amsterdam exchange rose on the news, in a day which started with the main AEX index falling over two percent. Shares had been trading about 30 cents higher than the 52-week low of 7.46 euros, set in late June. By 1:35 p.m. on Wednesday the share price was nearing 8.03 euros.