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KLM Restructures European Operation

KLM is to follow the lead of fellow European flag carriers Air France and Lufthansa and shift inter-European flights to a lower cost subsidiary.

The airline, the junior partner in Air France-KLM, wants all its European services to be operated by KLM Cityhopper within five years.

Since Cityhopper workers have cheaper labour agreements than mainline KLM staff, the switch – to be implemented from 2014 to 2019 – is expected to save €20m.

Cityhopper is Europe’s largest regional carrier, operating a fleet of 28 100-seat E190s and 19 80-seat Fokker 70s.
Unions, naturally, are expected to fight the decision, which they have described as “unworkable”, although the move to Cityhopper is reported to have been prompted by unions’ failure to agree an earlier cost-cutting deal that included lower holiday entitlements and a three-year pay freeze.

Nonetheless, KLM has already made big strides for its part in Air France-KLM’s Transform 2015 plan.
The Dutch airline’s losses have been cut by €100m this year and are expected to be less than €75m, with KLM expected to approach break-even by 2015.

Indeed, Air France has recognised that losses on medium-haul routes – down roughly a quarter this year to €650m – are chiefly its responsibility. KLM, in contrast, has been lauded for its cabin densification and frequency improvements, which are expected to yield 11 per cent more capacity with no increase in aircraft numbers.

Yet, even though savings from the Cityhopper switch are paltry in comparison with Air France-KLM’s wider losses in Europe, KLM’s decision is firmly in step with current market trends, which show that passengers have little appetite for expensive, full-service options on short trips.

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