KLM forged ahead with its goal to halve carbon emissions by the end of the decade during the pandemic. It's making big investments in sustainable fuels and new jets with the hope that the European travel recovery is right around the corner.
After a steady drumbeat of rising aviation emissions — and a growing public backlash — carbon output plummeted dramatically in 2020. European aviation authority Eurocontrol estimated that the industry’s emissions fell 57 percent year-over-year. But the drop came with a price: the coronavirus pandemic took a steep economic and human toll on the continent, claiming lives and closing businesses.
Now, with the travel recovery seemingly at hand, airlines are renewing their efforts to meet industry targets for net zero emissions by 2050. But it’s more than that; where sustainability was oft a final, frequently forgotten bullet in many earnings calls before the crisis, they are now key talking points — both of airline management and investors.
KLM is one airline that has pushed ahead with its sustainability initiatives, pandemic or not. The carrier flew the first synthetic kerosene demonstration flight ever between Amsterdam and Madrid in February, an event that went off without a hitch CEO Pieter Elbers said in a recent interview. But with just 500 liters of synthetic kerosene used, it was just a drop in the bucket on a plane that can carry as much as 26,000 liters of fuel.
“It’s impossible today to replace 100 percent of fuel by 100 percent, or even 50 percent, of biofuel,” said Elbers.
Synthetic aviation fuels are all the buzz in airline circles. Numerous airlines have made public commitments or flown similar demonstration flights like KLM. However, most projects face high implementation costs — prompting a push in many places for government support — and, for biofuels, issues finding scalable feedstock supplies.
“We should be ambitious but also realistic at the same time about what we can do,” said Elbers.
In addition to sustainable aviation fuel, KLM is looking at fleet renewal and shifting short-haul flights to trains where possible as part of what Elbers called a “cluster” of climate initiatives. The carrier aims to cut its 2005 emissions per passenger in half by 2030 after achieving a roughly 30 percent reduction by the end of 2019. And parent Air France-KLM has joined other airlines in a broad pledge to achieve net zero carbon emissions by 2050.
Lowering Emissions with New Aircraft
“Fleet renewal is the quickest, most feasible thing to do,” said Elbers when asked how KLM aims to meet its targets.
The pandemic allowed KLM to speed up efficiency improvements across its fleet. The airline retired its last Boeing 747 early last October in what was a sad day too many aviation enthusiasts but also an important move to reduce fuel burn. The jumbo jets were KLM’s last passenger aircraft with four engines, allowing it to move entirely to more efficient twin-jets like the Boeing 787 on long-haul routes.
This move was not lost on group management with Air France-KLM Chief Financial Officer Frederick Gagey highlighting it during an earnings call in February. “Basically all the aircraft with four engines, have now left the group fleet,” he said.
Renewal is also about adding new, more efficient jets. KLM took delivery of its first re-engined Embraer E195-E2 in February. The jets burn nearly 10 percent less fuel than the E190s they replace and, with 32 more seats, emit nearly a third less carbon per passenger. KLM has 25 of the aircraft on order.
The airline has also restarted its analysis of the Airbus A320neo and Boeing 737 Max families for a possible order, said Elbers. Both jets would further reduce the fuel burn and carbon emissions of KLM’s fleet in the future.
Limited Shift to Trains
Shifting flights to trains is one area where airlines, at least in Europe, have made some some visible strides during the pandemic. Air France dropped domestic flights between Paris Orly and Bordeaux, Lyon and Nantes in favor of the country’s TGV high-speed trains as a condition to of its Covid-19 relief package in 2020. And pending climate legislation could see at least three more routes suspended in a similar fashion.
KLM, with no domestic network to speak of, does not face the possibility of a similar government edict. But that does not mean it is not looking for opportunities to put passengers on trains. Early last year just before the pandemic, the airline replaced one of its then-five daily Amsterdam-Brussels flights with a connection to a train operated by Thalys.
“Other than Brussels, it will remain very challenging by the simple fact that it will cost an enormous amount of money” to build the necessary rail infrastructure, said Elbers. He cited London, which is a roughly 3-3.5 hour train ride from Amsterdam, as somewhere that train connections could work but that Berlin, which is an 8 hour train trip despite being only 130 miles farther than Heathrow from Schiphol, where they could not.
“I really wouldn’t see on a large scale the ability to replace [flights],” he said.
Europe On The Verge
All of KLM’s sustainability initiatives come amid the historic slowdown in travel during the pandemic. The carrier was hit hard when each EU member state was allowed to set its own border rules to keep the Covid-19 in check, thus making what was supposed to be a single airline market into a morass of 27 different travel regimes. KLM lacks a domestic market and relies on the EU bloc to feed its Amsterdam hub.
The SkyTeam Alliance carrier did its best to maintain connectivity across its vast network even when demand was at historic lows. At the end of last year and before the last round of Covid-19 lockdowns in Europe, KLM was flying roughly 90 percent of its route map with only about 50 percent of its pre-crisis capacity.
“[Now], I’d say we’re at the verge of a more structural recovery rather than another bump,” said Elbers. “I’m not a doctor, I’m not a specialist but looking at what we see in other countries, I think — I hope — that we’re on the verge of a more structural recovery.”
Elbers estimated that travel in Europe will rebound roughly three months behind the U.S., which surpassed 2 million daily travelers on June 11 for the first time since March 2020. KLM — like others — has already seen a jump in bookings to markets that have already reopened, including Greece, Portugal and parts of Northern Europe. While its overall European capacity is scheduled to be down nearly 15 percent during the peak summer travel months of July and August compared to 2019, Greece will be up 45 percent and Portugal 22 percent, according to Cirium schedule data.
“It’s important that we get a harmonization of some of the European travel regimes,” Elbers said when asked what was need to further the recovery in Europe. That comment proved prescient, coming days before EU ambassadors agreed to reopen borders to vaccinated travelers. Travel by those without their jabs will be limited based on the level of Covid-19 infections in the country they are coming from.
The recovery in long-haul international travel remains an unknown. When transatlantic travelers return — nearly 27 percent of KLM’s long-haul capacity in 2019 — is a “big question mark,” said Elbers. The airline is part of an expansive transatlantic joint business with Air France, Delta Air Lines and Virgin Atlantic Airways.
And as for business travel, Elbers is confident that it will return in some form. What he is not sure of is by how much or what flows will come back.
KLM has slimmed its business to adapt to this uncertain future. At the end of 2020, it had achieved most of the cost cuts that it agreed to in exchange for state relief. Nearly one in six staff members had left the airline as it sought to cut employee full-time equivalents by 6,000. And in the first quarter, costs across Air France-KLM were down more than 45 percent compared to a year earlier.
“There’s going to still be some places in the organization where we have a mismatch between supply and demand,” said Elbers on staffing. “But overall, I think the present organization is adequate for what we need to do and also allows us to [be ready for] the first stage of recovery.”
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Photo Credit: KLM is moving forward with its fleet renewal plans even amid the slow European travel recovery. KLM