“KLM’s corporate interest is not automatically public interest”

The airline KLM is far from meeting all the conditions set by the Dutch state for corona aid. The company, which received billions from the government during the pandemic, has not yet taken adequate structural measures to reduce costs, must do more to become more sustainable and has taken very little action to facilitate tax evasion for employees for two years.

State Agent Jeroen Kremers, who oversees the conditions that the state attached to corona support in 2020, is again critical in his latest report on KLM. His client, the Ministry of Finance, sent Kremer’s third report to the Folketing on Thursday.

In this report, the state agent warns against the – in his view wrong – idea that what is good for KLM is automatically good for the Netherlands. “There is a common interest, but KLM’s corporate interest is not the same as the public interest,” Kremers said in a statement via Teams. “The Netherlands should not be held hostage by that idea.”

No company in the Netherlands has been offered as much support in recent years as KLM: 7 billion euros in total, which it has to repay in part.

The support consists of three parts. KLM received 2 billion in NU wage cost subsidy. This is 8 percent of the total NOW support provided in the Netherlands, while KLM employs only 0.4 percent of the Dutch employees. The company also received a deferral of payroll tax for 1.5 billion euros. And during the corona crisis, there was additional financial support for KLM; a package of loans, of which 1 billion euros directly from the state and 2.4 billion from banks. KLM has not used it all. It raised 665 million euros in bank loans; which was recently paid. 227 million of the state share has been withdrawn.

The Netherlands has attached conditions to corona support: economic (for example, cost savings), economic (no dividends and bonuses) and aviation content (fly more sustainably, fly less at night, which causes less inconvenience). Economist Kremers, a former banker, former director of the IMF in Washington and former chief financial officer, surveys quarterly whether KLM complies with these conditions.

Another critical report on KLM as it does its best to emerge from the corona crisis …

“I therefore also start my report with the comment that KLM has had a hard time. The employees have had a hard time. They lost their jobs or had to work hard because there were fewer colleagues. I have great appreciation for all KLM employees. But it is in my role that I zoom in on the areas where performance lags behind. The agreements that the board has signed are not to punish KLM, but to make the company viable for the future. ”

One condition is that KLM must save at least 15 percent on ‘controllable’ costs. It succeeded, KLM cut even 30 percent.

“KLM has chosen temporary savings. For example, the company has postponed a wage increase of 2.5 percent, which was stated in the agreement, one year. It’s temporary. KLM could also have said: we will give up that wage increase. It can also reduce external employment, allow pilots to fly more hours, get people to work harder. “

Why does KLM not choose structural savings to survive in the battle with Lufthansa, easyJet, Wizz Air? Do not want a new hassle with the staff? In the fall of 2020, management and pilots clashed fiercely over wage restraint in the support package.

“It is not my job to assess it. I need to monitor, map facts and yes, also give them some context and interpretation. It is in itself understandable that it is better to have an overview of what you are doing in the short term than in the longer term. Circumstances are changing … “

Despite the need to reduce costs, KLM presented a 5 percent pay rise for all employees in May. The state agent was not informed, you write.

“KLM has not documented that the wage increase meets the conditions of the support package. It was also possible to choose not to give a generic increase, but to solve bottlenecks. For the money you give one pilot a pay rise of 5 percent for, you can also give ten ground workers 5 percent more. We have invited KLM to discuss such proposals, even though they may not fit the conditions, but it has not responded. ”

Facilitating tax evasion is also reflected in your report. More than one in ten pilots live abroad. KLM offers them a generous event for commuting. In this way, it facilitates tax evasion under the aid conditions. It has been agreed that it must stop.

“We have discussed this over and over again. KLM says: we abide by the law. But that is not the intention. Anyone who does not obey the law is guilty tax evasion† That’s what it’s about avoidance† It is permissible according to the letter of the law, but it is contrary to its spirit. KLM does not seem to understand that. Especially for such a large company with a social role, which has also been kept afloat with billion-dollar support. Without that support, KLM would have gone bankrupt, which would have been mass layoffs. ”

And now?

“I’m going out. It’s now up to Finans and Folketinget. They discussed it recently. The ministry can put pressure on, and that should be enough, but the state and KLM have also agreed conditions for these situations in the support contract. I can not get closer to. “

Has KLM not set up a working group to investigate the circumvention?

“It has been suspended without any action. Many more working groups are being set up. I no longer write that in my reports.”

Also read: Book a ticket, plant a tree? It’s not that simple

The support also includes ‘aviation-related’ requirements, for example in the field of sustainability. Does KLM do enough about it?

“KLM and the parent company Air France-KLM are certainly committed to this. Take CO2† In the Sustainable Aviation Agreement, the Netherlands has agreed that airlines will limit their emissions to 2005 levels by 2030. Before the corona crisis, KLM was on track to achieve this goal. In fact, that would equate to a 15 percent reduction. But there is still a long way to go to reach all the goals by 2030. “

The support package also includes agreements on the network of destinations that KLM serves. The more the better, was always the motto. But growth also means: more noise pollution, nitrogen emissions, ultrafine particles. For example, the conditions of support directly affect the debate on which aviation is best for the Netherlands.

“Yes. The working group on the Future of Aviation, including the local residents, says that Schiphol can continue to function as a hub even with fewer flights. In a response to that report, KLM only highlights the disadvantages of flying less. I understand that well, that KLM does. I do not blame them either. But from a public interest point of view, one has to look at it a little more nuanced.

“It is clear that KLM has a public interest – the accessibility of the Netherlands, the network, the connection to the world … But what is often seen in the public debate is that it is reversed. Care must be taken that the commercial interest is not automatically declared a national interest. And that this is so uninhibitedly supported. ”

The idea that the interests of the public and companies are the same is as old as KLM itself.

“It has grown so much. KLM has that attitude. But as a country, you can not be taken hostage by the interests of a company and its employees. Aviation is simply a competitive market.”

Leave a Comment