The decade-old KLM Royal Dutch Airlines has been suffering since the pandemic started just like the whole travel industry. In the current moment of crisis, the company reached out to the Dutch government with a proposed restructuring plan.
However, the Dutch government on Saturday rejected the multi-billion-euro bailout package proposal over the failure of KLM to secure a five-year pay-cut plan from unions. The airline will not be allowed to make any further draws on the loan put forward to support it.
According to the Dutch finance ministry, the first draw on the loan amounted to €277 million which was made on August 26. On the same day, a €665 million draw was made on a revolving credit facility. However, the government refused to make a second tranche available until KLM’s restructuring plan satisfies the state.
KLM had submitted the plan on 1st October for which it had been trying to secure a commitment from unions over pay cuts which would run for the loan’s full term. The airline was not able to secure commitments by the 31st October deadline.
The talks had been going on between KLM and the unions to reach an agreement over the package. Finance Minister Wopke Hoekstra said that the deal would go through only if KLM could follow several cost-cutting measures.
On Saturday, the minister gave KLM and the unions a deadline until 12:00 pm to sign the deal to get access to the second tranche of the 3.4 billion-euro package. The union is represented by pilots, cabin crew, and ground crew.
The Dutch pilots’ union, VNV, pointed out that there were last-minute changes in the conditions of the deal due to which they refused to sign it. Another union, FNV, put the blame on the government accusing them of creating greater uncertainty with changes made at the “11th hour”.
The argument centers around the clause in the agreement that says that the airlines’ staff would have to burden salary cuts for as long as the next five years. The plan presented by KLM to the Finance Ministry demanded a 15 percent reduction in costs while observing a downsizing of 5000 jobs because of the lasting global impact of the pandemic on the airline industry.
The agreement specified that the salaries of the pilots would be cut until March 2020, and those of the cabin and ground crews would be slashed until the start of 2023.
The Finance Minister rejected the plan saying that the salary cuts should be aligned with the government’s five-year bailout package.
The airline had already suffered greatly due to the coronavirus pandemic and due to the stringent conditions, some 3000 pilots have been said to be hit the worst by the plan with salary cuts to as much as 20 percent, according to Dutch news reports.
On the brighter side for KLM, some unions including the cabin crew union and the aerospace technicians’ union, have signed the deal, saying that KLM flying was the number one priority.
The firm has been suffering along with other airlines. As of the third quarter, KLM recorded a net loss of 1.7 billion euros ($1.9 billion), compared to a profit of 363 million euros that was made at the same time last year.
Following the news on Saturday, KLM would find it almost impossible to survive without massive support from the government.