Managing the crisis at KLM
This interview was conducted at the World Aviation Festival Virtual on 24th September in 2020. Any reference to the coronavirus pandemic was at that stage in time.
Interview with Pieter Elbers, President and CEO, KLM by Guy Johnson, News Anchor, Journalist and Aviation Enthusiast, Bloomberg
Air France–KLM very much focused on preserving cash and transforming operations, basically to try and survive what is looking like an increasingly difficult winter. Tough decisions are already being made. They’re grounding aircraft, and obviously having to lay off staff, which is very difficult to do for any business.
The company has already been forced to accept 10.4 billion euros of state aid; that comes with consequences as well. Let’s talk about what is happening operationally, what the demand picture looks like, and where we go from here.
What we see over the last couple of weeks is a real alteration of the trajectory of recovery which we have started. As from June, we have been able to gradually rebuild our network and July was already much better than June, and that recovery continued also well into August.
With that, we have been able to pick some of the summer business and realise some of the traffic we wanted to realise. As from the middle of August, we see some alteration there where countries are closing their borders, where the UK is imposing quarantine measures, and with that the return of travellers is really halting. We should further postpone our planned network expansion and go back in some of the plans we had in restoring our network.
What is the feedback you get from customers? What are they telling you about their desire to travel?
I think first and foremost, our travellers want to have some stability and want to have predictability and certainty if a country is okay to travel to. In what situation will I arrive? And not so much health-wise, but mostly in terms of travel restrictions. The ever-changing local rules and regulations for many countries are really creating a lot of uncertainties. Do I need to have a test before? When I come back, do I need to say in quarantine? How will I be treated upon arrival as coming from a certain country? This unpredictability is mentioned by all our travellers.
Then if we look to the various segments, again, in the summer months we have seen a real quick return of the leisure market, where many people had booked their summer holidays and still wanted to take their summer holidays. July and August, as I mentioned, were not too bad given the circumstances of COVID.
Business is taking a bit longer. The business traffic normally is returning – from September-October, but we see a lot of hesitation to return to the aircraft, precisely for the reasons I just mentioned: all these changing regulations and travel restrictions.
How do you stimulate demand in that kind of environment? Is it possible? Does discounting work? I’m curious what you can do operationally to encourage people to book.
Clearly, the price is an important element for customers, but our experience is that in fact two elements are more important now.
One is to have all the safety precautions being done, both at the airport processes as well as onboard the aircraft. Minimising the number of interactions with the crew, having face masks, explaining as much as possible the about the ventilation we have on board. So, to have the sanitary measures being fully explained and fully implemented on board, that’s one.
The second one is the flexibility of changing your booking. Usually, we have a whole range of restrictions for that depending on the type of ticket. We’ve decided to let that go and maximise the number of possibilities. We’ve basically cancelled all these restrictions in to make sure that if customers feel good to book, they should feel also a relief that they can change it at any point they want to change it.
These two points combined, the sanitary measures and the flexibility, it’s combined into the Travel with Confidence campaign which we have launched some while back at Air France–KLM.
Let’s talk about a couple of issues that you’ve raised there. The first one I’d like to tackle is the last point you made in terms of talking about flexibility. Is that something that sticks, do you think, after this crisis?
Maybe to some extent it will stick, but I think many of the regulations also have helped customers to have a choice of control in terms of higher prices with more flexibility and very low prices with no flexibility.
There’s always a natural balance between the flexibility part and the pricing part. My expectation is that post-COVID, we will go back to a balanced situation where companies need to make money and customers would like to have the choice whether to pay for the flexibility or not. I would assume that gradually, we would go back to the situation we had before.
*This interview is edited slightly to make it into a readable article. Please note that the interview was conducted in September 2020, so any reference to the current situation regarding COVID-19 will have changed now.