Graham Newton talks to Pieter Elbers, President and CEO, KLM, about the need to combine market size with agility in a competitive aviation environment
KLM turns 100 years’ old in October 2019. Arguably, some of the most important developments in the airline’s rich history have occurred recently; from the merger with Air France to the revamp of its product in line with a digital strategy. But operating with a home base in Europe and sustainability expectations are challenges.
What were the reasons behind your successful 2018?
We put together a new team in 2014 and the work that has been done since then is finally coming together. The airline has a comprehensive strategy for moving forward and it is finally bearing fruit.
The strategy is all about being customer-centric. There has been significant improvement across our product offering, such as catering, the digital experience, flat beds in business class, and a new lounge at Amsterdam Schiphol. But more crucially it is about how we interact with the customer and we are developing a good track record with that. Surveys have consistently given us a very high ranking.
At the same time, we are pursuing operational efficiency across the board. That is a combination of cost reduction and shrewd investment. The fleet is being renewed, for example, and the new aircraft will reduce fuel burn, fuel cost and emissions.
Are there still improvements / synergies to be made within the Air France KLM group or do you feel the merger has achieved maximum efficiency?
The merger has done very well in many respects and we have successfully integrated a number of key functions, such as revenue management.
We are now taking the next step and developing the merger across the Atlantic where we are working with Delta Air Lines and taking steps to include Virgin Atlantic. It is the backbone of what we are trying to do as a group. It gives us great synergies on the commercial front, great synergies in purchasing and operational efficiency, and it enables us to develop best practice in customer service and the digital experience. Of course, there is always room for improvement.
“KLM wants to be known as the most innovative airline in the world in terms of the customer experience”
Are the partnerships affecting your ability to respond quickly to the market and making the KLM decision-making process more complicated?
The truth is you need both size and speed. You need size for economies of scale and to have a compelling seat offer, for example. All the reasons why size matters in the airline business still hold true.
But in the modern market, an airline must also be quick to adapt to new circumstances. Here, the Air France KLM group is an asset because it allows us to learn, to test, and to exchange best practice. In other words, we
have a very strong platform that provides plenty of options for the correct market response.
But it is not just about airline-to-airline partnerships any more. There are some very important partnerships being formed with technology companies and these will also help airline agility. KLM is making some important steps in this regard.
Is the transformation to a digital airline difficult to implement?
KLM wants to be known as the most innovative airline in the world in terms of the customer experience. We are very active on social media platforms, we have a number of digital products, and all that is going well. But, a few years ago, we were lacking digital innovation internally. So, we didn’t always have the right structure to support customer-facing opportunities. We’ve started to address this. Thousands of iPads have been handed out and we’ve introduced new e-learning techniques and so forth to help staff be able to help customers.
But the difficulty is you have to keep the shop open even while you are rebuilding the shop. That is the challenge with implementing new processes. Thousands of flights must still leave safely, punctually, and the customer experience must still be excellent—all while you are working hard to change the way you work.
Scalability is another challenge. There has to be operational reliability in everything you do.
But it is possible to do both. You can grow and change at the same time.
1919 - KLM is the world’s oldest airline still operating under its original name. In fact, we had the “Royal” tag even before the first flight. We will be 100 years old in October 2019 and throughout that time there has been a very strong connection with our home country
Is Amsterdam Schiphol airport aligned with your strategy?
We are the second most punctual global airline. That is an achievement as 2017 wasn’t a good year. There were queues all over the airport as a lot of flights were delayed. But we worked together with the airport in 2018 to address the problems. We both wanted Amsterdam Schiphol to get back to being the most convenient airport in the world. Every year, there are some 500,000 flight movements at Schiphol even though the passengers are housed under one roof. It is a unique concept.
The delays are part of a European problem. Can Europe solve its congestion crisis at key hubs and in key airspace areas?
It is true that the lack of capacity is a big problem. Take a look at the statistics about the average delay in Europe and it’s obvious that this a problem that is only going to get worse.
We need to make a breakthrough and we need to make it quickly. From an airline perspective, it is absurd that we have had a single European currency for many years, but we can’t organize a Single European Sky (SES). The extra capacity provided by SES is absolutely essential right now.
I have to say, though, that this is not about what should be in the European Aviation Policy or whether the SES performance targets are strong enough. This can no longer be a paper exercise. We need to take action. It is about execution, not more discussion.
What more can be done to improve the take-up of sustainable aviation fuels?
This is one question that I don’t have the answer to. KLM is one of the biggest buyers and users of sustainable fuels. Yet the amount of sustainable fuel we use overall is still marginal compared with normal jet fuel.
We are exploring opportunities to see where more effort can be made. But KLM is not an oil company or a sustainable fuel company. Our professional partners need to use their expertise to improve the availability of sustainable fuel at a competitive price.
Biofuels: Our partners need to use their expertise to improve the availability of sustainable fuel at a competitive price
Aside from the industry’s emissions goals, there is a plan in the Netherlands to cut CO2 emissions and aviation is a big part of that. And it is worth playing our part because aviation contributes $35 billion in GDP and supports about 350,000 jobs. Cutting emissions is necessary if we are to grow that economic impact.
Where must air cargo improve and, in particular, is it efficient enough to respond to the demands of e-commerce?
Air France KLM cargo has undergone a serious reconfiguration in recent years. There has been a significant downsizing in the freighter fleet and from 35 freighters based at Amsterdam, we are now down to just four.
Our strategy now is about using belly capacity. Actually, in terms of absolute capacity we haven’t lost that much because the new Boeing 777s have a lot more space than the old 747s. But we’re more interested in different types of cargo now, such as pharmaceuticals and perishables. We don’t need the capabilities of a freighter for those types of cargoes.
All this naturally makes us a more e-commerce-savvy cargo operation. In fact, thanks to the new systems and processes we have implemented, e-commerce is fully embedded in our cargo operation. And the extensive long-haul network adds to our offering.
133 destinations are served by KLM across five continents
119 is the number of aircraft in the KLM fleet
KLM became the SkyTeam alliance's 7th full member in September 2004
35,488 employees comprise the airline’s workforce across all divisions
What does 100 years of KLM mean to you?
KLM is the world’s oldest airline still operating under its original name. In fact, we had the “Royal” tag even before the first flight.
We will be 100 years old in October 2019 and throughout that time there has been a very strong connection with our home country. KLM is the third largest private employer in the Netherlands with some 30,000 staff.
Not only is KLM an integral part of Dutch society but also it symbolizes the spirit of the country, which is known for its pioneers and explorers. And we have great teams that wear our brand with pride and represent KLM and the Netherlands across the globe.
The 100-year celebration is a chance to give new impetus to these important qualities and set the airline on a course for another 100 years of flying.