“Pieter Elbers must continue at KLM.” Less than three hours after the announcement on Thursday evening that president Elbers will resign next year, an ex-employee of the airline already started a digital petition.
By Friday afternoon, four thousand people had already signed the call to keep Pieter Elbers (51) for KLM. No one else could better safeguard the Dutch interests within Air France-KLM, according to the initiator of the poll.
The action resembles a petition from three years ago. At the time, 25,000 people signed a statement of support for Elbers. The CEO, who took office in 2014, wanted to stay but threatened to be thrown out by the holding board. The quarrel exposed a deep-rooted conflict between KLM on the one hand and Air France-KLM holding company and sister Air France on the other. The central question: what is the best formula for a successful airline company, as much integration as possible or two relatively separately operating subsidiaries in Paris and Schiphol? In the end, the holding company gave in and Elbers was appointed for another four years.
The new petition has little chance of success. In 2019, Elbers was still enthusiastic about a second term. His cost savings – under the motto ‘Change, participate, win’ – paid off. Since 2016, KLM has achieved a higher gross profit than (the larger) Air France. Elbers also wanted to celebrate KLM’s centenary in the position of chief executive in the Netherlands.
But now the situation is quite different. Firstly, Elbers seems to have reconciled with a departure as of 1 May 2023. He has decided “in close consultation” with the KLM supervisory directors to waive a third term. “After eight years, I hand over the baton with confidence,” he said in a statement from KLM. French news media speak of a switch to the American Delta Air Lines, shareholder of Air France-KLM.
In a statement from the holding company, Canadian CEO Ben Smith seems especially relieved that there is no hassle this time. “I am grateful for the atmosphere in which this process has taken place,” said Smith. „I know I like him [Elbers] and the entire KLM team can count on a smooth transfer.”
Secondly, relations within Air France-KLM have changed. The French State has gained more power in the past year. Paris could use it for genuine industrial policy, giving greater priority to national interests such as the employment of French aviation personnel. For example, some KLM technicians at Schiphol fear that they will lose the maintenance of the fleet as soon as the Boeings of KLM and Transavia (including Air France-KLM) are replaced by aircraft from Airbus. At the end of last year, the group announced the purchase of 100 A320 aircraft from the French (and German and British) manufacturer Airbus, with an option for another 60 aircraft. KLM has always had a preference for – and know-how about – Boeing aircraft.
In February 2019, the State of the Netherlands had increased its interest in the group in the utmost secrecy. The Netherlands acquired 14 percent of the shares, for 744 million euros. At the time, this amounted to approximately EUR 12 per share; Air France-KLM traded more than 4 euros per share on Friday.
But since April 2021, the Dutch interest has diluted and Air France-KLM has become more French. As a result of the recapitalization, the French State now owns 28.6 percent of the shares, airline China Eastern has 9.6 percent, the Netherlands 9.3 percent and Delta 5.8 percent. Because the Dutch interest has been registered for more than two years, the Netherlands does have voting rights as if it owned 14 percent – half of the French.
Topman Smith has won the duel with Pieter Elbers, French news media reported on Friday. According to the French business newspaper La Tribune Elbers’ position had been discussed within the group for months. Headhunters would already be looking for a new KLM boss.
However, the announcement of the departure came as a surprise to many involved. KLM employees reacted with disappointment and the trade unions involved expressed their fear for the position of the Dutch company in the group.
The timing may be a bit unfortunate, KLM works council chairman Dario Fucci told ANP news agency, because the company is still in a difficult phase. “The morale of the employees is taking a hit. We are currently working very hard with very few people and have been fighting for our existence for two years now.”
Reinier Castelein of trade union De Unie thinks that Elbers’ departure is too early. He told the ANP that the company “needs a strong chairman of the board who can pull KLM out of the corona crisis, but above all who can offer the anti-aviation cabinet a response”.
Birte Nelen of FNV Cabine, also against the ANP: “There is a lot of appreciation for what he has done during the corona crisis.” In recent years, Elbers assured the company of substantial state aid, but that meant cutting the workforce, creating 6,000 jobs. Nelen is not immediately afraid of more interference from the parent company. “Good agreements were made during the merger and they are still in place. We will make sure that is adhered to.”
Are those guarantees strong enough? Or should the Netherlands push itself harder in Paris for more commitments to KLM, especially if the cabinet will support the company in a new recapitalization in the coming period? Negotiations on this have been going on for months. In April last year, when the Dutch interest had diluted, then minister Wopke Hoekstra (Finance, CDA) and Cora van Nieuwenhuizen (Infrastructure and Water Management, VVD) wrote a reassuring letter to the House of Representatives. “This change in shareholder relations has no consequences for the safeguarding of public interests.” The Netherlands is sitting at the table when it comes to matters that are important to KLM, both said. “In addition, agreements have been made, for example about extending the period to cancel the landing rights at Schiphol from nine months to five years. And about preserving Schiphol as an important transfer airport (hub).”
In the coalition agreement, the new cabinet also shows itself to be a fan of the hub function of Schiphol and KLM. “The presence of Schiphol airport means that the Netherlands has an excellent air connection with the rest of the world,” write the four government parties. “Schiphol also provides a lot of employment directly and indirectly.” The fact that Rutte IV states that he would like to retain that hub function comes from the VVD and CDA. The sentence on it comes more from D66 and CU: “At the same time, attention must be paid to reducing the negative effects of aviation on people, the environment and nature.”
In the coming months, the government will have to weigh up all these interests against each other. The coalition agreement promises concrete decisions about Dutch aviation in 2022. For Pieter Elbers and his successor at KLM, the cabinet is therefore no longer just an ally, a financial life buoy in times of corona. The new cabinet can no longer ignore the social criticism of flying and may have to limit Schiphol – and therefore KLM – to achieve the climate targets.
For KLM, the best guarantee for some independence is healthy business operations. That has improved considerably under Elbers. Since 2016, KLM has achieved (much) better gross results than Air France: in 2018, the Dutch airline achieved four times more profit than the French one, and three times in 2019.
Corona then plunged aviation into a deep crisis. Air France-KLM suffered a record loss of 7.1 billion euros. The gross loss at KLM was 1.2 billion, at Air France 3.4 billion. In the third quarter of 2021, the Dutch achieved a positive result of 168 million euros. The French suffered a loss of 45 million. On February 17, the group will present the results for 2021.
Also read: How should aviation be more sustainable? KLM CEO Pieter Elbers speaks
Elbers leaves at a moment that is uncertain for KLM
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