KLM has a powerful brand and should be able to withstand this crisis. But it is not a good time for legacy European airlines that usually rely on lucrative corporate travelers.
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Dutch airline KLM is seeing modest recovery on short-haul routes, but the long-haul business remains “challenging” and the carrier does not expect full recovery until at least “2023-ish,” the carrier’s CEO said during a session for Skift Forum Europe on Tuesday.
“There is still a lot of uncertainty for consumers,” KLM’s Pieter Elbers told Skift Airline Weekly Editor Madhu Unnikrishnan.
KLM is one of many European carriers struggling to survive after Covid-19 decimated its business. The good news is the Dutch government recently came to its aid, with about 3.4 billion euros (about $3.8 billion) in loans and loan guarantees. That should be enough to ensure the airline, which has one of the strongest brands in Europe, survives this crisis. Air France, the other major airline in the Air France-KLM group, received a bailout from France.
Still, it will be a long road back. In June, KLM resumed flying to about half of its European destination, but only with 15 percent of its planned capacity. By August, it plans to fly to almost all of its European destinations, but with half of the capacity it had planned, Elbers said.
The airline is trying to capitalize on an early recover wave, as some Europeans flock to traditional summer vacation spots. But so far, KLM has had many of the challenges as U.S airlines — because the situation is so fluid, the carrier does not know how many passengers who buy tickets will show up.
And that’s the good news. KLM’s long-haul franchise is behind, with the airline flying all-cargo flights to many destinations, including Nairobi and Tokyo Narita, despite using passenger airplanes.
KLM’s passenger long-haul operation will open more in July, with more flights coming in August. It said it will fly to about 75 percent of international destinations in July, though with less frequency than before the crisis.
There is some question about who will be on those long-haul flights. KLM is a premium airline that previously generated significant revenue from its corporate business, especially on intercontinental flights.KLM expects some self-managed business customers to return later this year, Elbers said, but management is less optimistic about bigger companies.
“Some of the large corporates may take longer,” Elbers said. “They have introduced their own travel bans if you wish, especially with long-haul travel.”
Market Share Shakeout
As much as KLM has shrunk, many of its competitors cut capacity even more. Some, including Scandinavian Airlines and Lot Polish Airlines, effectively shut down this spring.
When airlines emerge from the crisis, market share by airline is likely to be different than before Covid-19. Long-term, KLM could benefit from increasing capacity earlier, at the expense of weaker competitors. But Elbers cautioned it’s too soon to know how it will shake out.
“What we see today in the industry is unprecedented,” he told Unnikrishnan. “It’s way too early to give any indication of who is benefiting from what capacity reduction. What I do see, though, is that we are committed to come back, and we are committed to take back our position and our market.”
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Photo credit: KLM CEO Pieter Elbers. KLM