What's Wrong At KLM?
It was once the darling of Air France-KLM. No longer. But the group CEO is ready to fix the Dutch airline.
Dear readers,
Before Ben Smith arrived as CEO of Air France-KLM in 2018, the company's Dutch arm regularly produced higher margins than its bloated Paris-based cousin. But since the pandemic, the situation has reversed, and during the airline’s third quarter earnings call on Thursday, Smith said he's now prioritizing KLM and promising to stabilize it following a series of post-pandemic external shocks.
"KLM in 2018 was performing very well [with] 9 percent margins and throughout Covid did reasonably well," Smith told analysts. "Since Covid, we've had an unbelievable number of, I'd say challenges that were not expected. As you know, we've been managing through this unilateral decision on the part of the Dutch state to lower the capacity at Schiphol Airport, which has thrown a number of unknowns toward us: how many airplanes, how many pilots, how many mechanics, what's the bank structure going to be? Is there going to be a curfew to navigate through? That has been a big distraction."
All that is true, and it should come as a warning to any government that wants to raise taxes or increase regulations on national airlines. But I think it’s also worth mentioning a legitimate criticism I’ve heard about Smith over the past five years — that he’s acted more like the CEO of Air France (the airline) than the leader of a multi-national group.1 Smith, who runs the company from Paris, has almost always stressed the Air France turnaround in his conversations with me, while saying little about KLM.
I sense that’s over, and if anything, we’ll soon probably be chiding Smith for too closely managing what’s happening in Amsterdam. This is Ben Smith we’re talking about — one of the more hands-on airline executives (he loves to have input in everything from liveries to LOPAs). But the financial results suggest that KLM needs some tough love, and who better to do that than an executive who has led turnarounds at two national airlines?