KLM Royal Dutch Airlines
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- KLM Royal Dutch Airlines
P.O. Box 7700
1117 ZL Schiphol
- Main hub
- Amsterdam Schiphol Airport
- Business model
- Full Service Carrier
- Domestic | International
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- Part of Air France-KLM S.A.
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Established in 1920, KLM Royal Dutch Airlines is the national carrier of the Netherlands. KLM operates an extensive network which includes services within Europe and to Asia, Africa, North America, Central and South America and the Middle East. The carrier also operates freight services, and handles all service operations from its hub at Amsterdam Schiphol Airport. KLM is a founding member of the SkyTeam alliance, and is part of Air France-KLM S.A.
Location of KLM Royal Dutch Airlines main hub (Amsterdam Schiphol Airport)
3,221 total articles
256 total articles
One swallow does not make a spring and nor does a rash of aviation strike news guarantee a turning point for the aviation industry. But the signs are ominous. In the month of Jun-2016 (to 20-Jun-2016), there have been 136 articles on CAPA's website mentioning the word 'strike'. This compares with 81 for the first 20 days of Jun-2015. For 2016 so far (1-Jan-2016 to 20-Jun-2016), the 's' word has occurred in 594 articles – about 20% more than in the same period in each of the past two years. If this rate continues, 2016 could be the biggest year for strike-related articles since before the global financial crisis.
The vast majority of the Jun-2016 articles – 80% – relate to Europe. A significant source is air traffic control disputes, particularly French ATC. There have also been strikes and/or strike threats involving airport workers and ground handlers. Among European airlines, Air France has generated the most coverage for its ongoing dispute with its pilots, and it may also face a cabin crew strike. Lufthansa has not yet faced a strike by its employees this year, but has not yet reached new agreements with pilots or cabin crew after industrial action last year.
History tells us that labour's demands grow as profits rise. The apparent increase in industrial action this year could be a signal of an approaching peak in the airline profit cycle. There are other causes of unrest, such as impending French labour legislation, but the correlation reflects some history.
Over 20 years the responses of Europe's big three legacy groups to the short/medium haul LCC revolution have all been through phases of denial, submission, retreat, and counter-attack.
Now all three now have a more clearly defined LCC strategy than in the past. IAG, with Vueling and Iberia Express, has the largest, most pan-European and most profitable LCC, helping the group to grow its short/medium haul traffic. The Lufthansa and Air France-KLM LCCs are more defensive, to preserve market share. Both have only recently started LCC bases outside their original home markets. Lufthansa (after a false start with high cost Germanwings, now transferring to Eurowings) has replaced mainline capacity with LCC capacity, route-for-route. Air France-KLM has grown Transavia while cutting mainline capacity, but without substitutions route-for-route.
Only Lufthansa has taken its LCC onto long haul routes, albeit on a limited scale. Facing the more complex challenges on long haul, all three are developing a growing range of partnerships with other airlines. They have also sought to improve labour productivity in their legacy network airlines, with varying degrees of success, but again led by IAG. A next step may even be to connect with their arch rivals.
Air France-Singapore Airlines partnership talks highlight lack of Gulf airline penetration in France
The growth of Gulf airlines continues to force competitors to innovate and adapt to the new market, sometimes forgoing long-standing partnerships and business views. The next response may be a partnership between Air France and Singapore Airlines, the two of which are reportedly in talks.
Such a partnership would be symbolically significant. Both are anchor members of opposite alliances – Star and SkyTeam – and are bitter about the growth of Gulf airlines. Air France is boisterous in its remarks while Singapore Airlines keeps complaints out of the public space. Air France has not been silenced by a partnership with Etihad; one that appears to have never been fully consummated. Singapore Airlines’ Air France talks come at the same time as SIA plans to implement a JV with the Lufthansa Group.
The view from SIA appears to be that France is a significant market, and connections from Lufthansa Group hubs are not sufficient. As Air France and SIA move towards a partnership, Gulf airlines continue to be denied French traffic rights: they have one quarter as many flights to France as to the UK. Air France has cut Southeast Asia capacity but KLM has grown, indicating that the group is seeking new strategic solutions.
Air France-KLM: 1Q margin gain beats IAG & Lufthansa, but lack of 2016 target betrays low confidence
Air France-KLM narrowed its operating loss in 1Q2016 – mainly thanks to lower fuel prices, and also helped by lighter downward pressure on unit revenue than was felt by either IAG or Lufthansa. This probably reflects its tighter capacity management. Moreover, Air France-KLM's operating margin improvement from a year earlier was greater than both IAG's and Lufthansa's.
However, Air France-KLM's margin remained well below those of its rivals, both for the group as a whole and also for its LCC subsidiary Transavia in comparison with the LCC divisions of the other two. Emphasising the uncertain outlook for unit revenue (and echoing comments made by both IAG and Lufthansa in this respect), it does not expect its relative strength in 1Q to continue throughout the year.
Furthermore, Air France-KLM is still the only one of the three leading European legacy airline groups without a 2016 profit target. It rightly continues to prioritise capacity discipline, unit cost reduction and the lowering of net debt, while working to gain pilot union agreement to vital productivity improvements. However, as the global industry is enjoying cyclically high margins, Air France-KLM's reticence over profit guidance reveals its lack of confidence. The incoming CEO, Jean-Marc Janaillac, will need to rebuild this.
Reports that easyJet may be considering a bid for Monarch Airlines could herald a much anticipated wave of consolidation in Europe's LCC segment. The CEOs of both Lufthansa Group and Air France-KLM have indicated that they expect consolidation, while IAG has previously been active in this field, by acquiring Vueling in 2013.
This report compares the market structure of Europe's LCC segment with that of North America and considers the prospects for consolidation among European low cost airlines. As with the broader market, Europe's LCC segment is more fragmented than North America's. However, viewed as a market in its own right, it is more concentrated than the broader European market.
The two leading LCCs, Ryanair and easyJet, have almost half of all intra-Europe LCC seats between them (but Southwest has more than 60% of intra-North America LCC seats on its own). Notwithstanding speculation about easyJet and Monarch, whose Europe seat share is only 2%, any meaningful LCC consolidation in Europe seems more likely to involve second-tier LCCs. This may include the LCC subsidiaries of the legacy groups, although none of the big three appear ready to lead the process currently.
Part one of this report on European airline market structure and consolidation highlighted that the top twenty airline groups in Europe hold 75% of seats. This is the same share as the top six groups in North America. This equivalence, in market share terms, between Europe's top 20 and North America's top six underlines the huge gap in consolidation progress between the two regions' airlines. It would take a large number of merger and acquisition deals to recreate North America's market structure in Europe, consolidating 20 into six.
This second part of the report is a kind of fantasy, a hypothetical. It suggests an illustrative series of combinations among Europe's top 20 that would approximately replicate the market shares, in terms of seat share, held by North America's top six.
This would require large merger and acquisition transactions involving pairings between members of Europe's smaller top six of Lufthansa Group, IAG, Ryanair, Air France-KLM, Turkish Airlines and easyJet. It would also mean several deals involving second-tier FSCs and LCCs. However, for now the larger deals in Europe remain relatively unlikely, and there are even hurdles to the smaller deals.