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Best of Airways — Exclusive Interview with Pieter Elbers, Chief Operating Officer of KLM

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Best of Airways — Exclusive Interview with Pieter Elbers, Chief Operating Officer of KLM

Andreas Spaeth

Best of Airways — Exclusive Interview with Pieter Elbers, Chief Operating Officer of KLM
October 06
14:57 2017

Interview by Andreas Spaeth • Airways Magazine, August 2014

KLM’s top manager sits down for a rare talk in Amsterdam with Airways to discuss the success of the Air France-KLM merger over the past ten years, fleet renewal and the carrier’s engagement in social media.

Airways: Ten years ago, in May 2004, KLM merged with Air France. How do you think this has worked out for KLM?

Pieter Elbers: It was the first merger of its kind in Europe and the start of the European consolidation. At the time there was a lot of cooperation, but never a merger of two carriers from different states into one entity being Air France-KLM. There was a lot of negative speculation that KLM would be swallowed and absorbed into a big French entity. The reality is that after ten years we have maximized the synergies in the group. It has made both KLM and Air France stronger and especially in overseas markets we have been able to create a very strong position being together.

Airways: And what is the outcome just for KLM alone?

Elbers: If I look purely at KLM, we have grown from a company of less than €6 billion in annual revenue to a €10 billion company, we have opened dozens of new destinations in that time and now serve more airports than ever before. If I look at what it has done to KLM, we have the strongest partnership across the North Atlantic with Air France, KLM and Alitalia on the one side and Delta on the other. We have a very strong foundation in Skyteam, but yet we have been able to maintain the identity of the two different brands, two very valid and rich brands in their own right.

Airways: How do you define the essence of the KLM brand today?

Elbers: We have put a lot of emphasis on our Dutch roots and backgrounds. But we are very much an international carrier and only a quarter of our customers are of Dutch nationality. We have put the Dutchness at the very core of what we are in terms of hospitality, inspiration, creativity, innovation, ease of travel, and all that, in a relaxed and very cordial, yet professional way.

Airways: Has the stressing of “Dutchness” become more important after the merger?

Elbers: I wouldn’t put it in specific relation with the merger, but in the last five years we have put a bigger emphasis on our Dutchness since we see this is something to differentiate us from our competition. As the world is becoming more and more global and one could say more and more similar, there is an increasingly dynamic to try to differentiate the entire experience on board of your flight, and that’s only possible in the “software“, as seats or aircraft are very much alike. For example, we are the only airline communicating on board to all our 27 million customers a year that through social media, you get a response within one hour. We are also specifically using Dutch designers for everything from cutlery to uniforms. Schiphol Airport is going to introduce a new central security system in mid-2015 and we are going to totally refurbish our Crown lounge for long-haul passengers at the same time.

KLM’s COO Pieter Elbers giving a speech in Santiago de Chile for the re-inauguration of KLM flights in February 2014. PHOTO: AUTHOR.

Airways: What does this fundamental change of Schiphol’s passenger flow concept mean to KLM?

Elbers: It is a big, big change to move from security checks at the gate for non-Schengen and long-haul flights, as it is done now, to centralized security checkpoints. That will enable us to renovate the entire airport and create a much more spacious, customer-friendly experience. Moreover, it will help passengers avoid going through security twice, as is still the case today, which has become unnecessary for UK flights. That’s a very big step forward for us.

Airways: How satisfied are you overall with your hub operations in Amsterdam?

Elbers: We have a minimum connecting time of 40 minutes for intra-Europe and 50 minutes for Europe to the long haul, so 45 minutes on average, that’s an important differentiation. It is not our intention to further lower this; this would not be convenient for our passengers. We have to continue to invest to remain the best transfer hub in the world and for sure in Europe. The newly introduced central non-Schengen security will be a very important element. More capacity is also being created and more piers are being built on the A concourse, where the Cityhopper platform is now.

Airways: Where is KLM today in its so-called “Transform 2015” plan?

Elbers: We had a target of €1.1 billion structural cost reductions and revenue improvements in a three-year time frame from 2012 to 2014, finishing in 2015. Revenues and costs, internal and external, were the main categories touched by the plan. We delivered in the first two years what we promised to deliver, and we are on the way to deliver also in the third year, 2014. We are on track, but we are not yet there, the easy tasks have been achieved, but there are still some more complicated ones to fulfill.

Airways: What are they?

Elbers: We still have some labor issues like increasing productivity. In the last two years, we have already achieved about a 10% higher productivity. We have done that by labor rule adjustments, shorter turnaround times and a densification of aircraft cabins. We have put eight more and newer seats on the Boeing 737-800 and reconfigured the Fokker 70 fleet, for example. So the Fokkers also look like new aircraft inside now, defying their up to 18 years of age, and also offer comfortable leather seats. The 737-700 still needs to get a denser cabin layout. We also have reduced turnaround times for the Embraer fleet, thus creating more aircraft utilization. We have introduced lower fares to many destinations, at the same time charging somewhat more for baggage at these fares for those who aren’t members of our frequent flyer program, Flying Blue.

Airways: How much are you aligned with Air France in implementing the measurements from the transformation plan?

Elbers: We are doing similar things as Air France, but not exactly the same things; we run under the same umbrella. The specific dynamics of the transform program, which we share, are not exactly the same per airline. So we might change some seat configurations at KLM and not at Air France, or the other way round.

Airways: The Fokker and Embraer fleets are flying for your affiliate KLM Cityhopper. How important is that as a cheaper production platform for KLM?

Elbers: It is significant. We have 50 regional aircraft and also 48 Boeing 737, operated by the mainline, meaning that 50% of our European fleet is operated by KLM Cityhopper. Out of the total of 22.6 million seats, we offer this year in Europe, 8.7 million are offered by KLM Cityhopper, which is a very efficient producer with a rich and diverse network.

Airways: At KLM Cityhopper, an important fleet decision is imminent during the course of this year. Can you elaborate?

Elbers: In 2013, we used to have 26 Fokker 70. We have recently replaced a batch of seven Fokkers by six Embraers, so we now are down to 19 Fokkers that still have to be replaced. We are currently evaluating the options until later this year –  if we should stick with the Embraer family or if there are other scenarios offering other propositions. The Fokker 70 is still a fairly reliable aircraft being able to operate under difficult circumstances; that is amazing, so many years after their production ended.

Airways: Another significant phaseout this year will be the MD-11 in October, with KLM remaining the last major passenger operator.

Elbers: We still fly four of them and there are quite a few customers with special feelings for the MD-11. But it is the appropriate time to phase them out and concentrate on new generation aircraft such as the Boeing 777, the Airbus A330 and the 15 Boeing 787-9 we start to get in October 2015. From an operational and economic perspective it is time for the phaseout of the MD-11, but also because they are only operated as freighters elsewhere. Spares are sometimes hard to come by, which makes them more difficult to maintain and get online support. We will sell them mostly to companies who strip them of parts that can be used for the freighters and then scrap the rest.

Airways: Where will you deploy the 787-9s?

Elbers: We don’t have a final plan yet. The range would clearly allow the US East Coast, the Dutch Antilles, up to the Middle of Africa and then places in China like Chengdu it could be perfectly operated to. So it will be the shorter long-haul routes.

Airways: You also get the A350-900 as part of the recent Air France-KLM order. When will they join your fleet?

Elbers: It will probably be 2019 before we get the A350. Air France will be operating it earlier in 2017. So KLM will be the first in the group with the 787 and Air France with the A350.

Airways: How will your long-haul fleet be looking in the mid-term future? It still seems like you will have a rather complicated mix of types.

Elbers: Not in seven years time, when all the A330 aircraft will be replaced by either the 787-9 or A350. Eight or ten years down the road, we’ll have the 777, the 787 and the A350; that’s it.

Airways: Why did you start to install your new Business Class cabin in the fleet of your Boeing 747-400 first, when they will be leaving the fleet from 2016 onwards already?

Elbers: That seems like a fair comment. But the 747 fly only long-haul routes where the need for flatbeds is absolutely the highest. Also, the older seats in the 747 were in higher need for replacement, and finally we felt we could no longer wait, so it is better to have some more time to depreciate the seats. All the 20 747-400 we fly will be finished this summer. Then we will start with the 777-200 that should be finished before the summer of 2015. Afterwards, we start with the 777-300. Before 2017 we’ll see where we stand with the A330. But by the end of 2016, about 80% of the fleet will be done.

KLM’s leadership is very young: COO Pieter Elbers (left) is 44, and CEO Camiel Eurlings (right) only 41. PHOTO: AUTHOR.

Airways: Will you shed a tear when the 747-400 Combis with main deck cargo loading will be gone?

Elbers: Of course cargo is currently not a good business case. But we achieved a lot with the Combi. It has helped us to open up routes with a relatively thin passenger but significant cargo flows like Seoul, Chengdu or Houston, where we still operate these excellent aircraft. Indeed the last two to three years have not been very good for cargo demand, but we see some improvements coming up in the business climate. In hindsight, they did their duty that we bought them for.

Airways: Are all your new aircraft part of orders by Air France-KLM or former separate orders?

Elbers: All these aircraft are delivered as a result of orders by the group. These are typically the things we do together, where there are lots of synergies in combining forces.

Airways: How does that show up in the bottom line?

Elbers: While we achieved the annual benefits of €400 million to €500 million in synergies in the first years after the merger as envisaged, these days it has become more difficult to quantify the benefits. But with giants like Delta in the US, it is clear that if you want to partner with them, you need to be a sizable European party. And we need to have Air France-KLM as one entity in that ballgame, rather than just KLM or Air France. If you look at places like Japan, where one customer out of five traveling to Europe travels Air France-KLM, or in Brazil, where our market share is also one out of five or six passengers traveling to Europe, those are eventually the synergies we are looking for.

Airways: You are serving several long-haul destinations like the newly extended route to Buenos Aires and Santiago just a few times a week rather than daily. What is the route strategy of KLM?

Elbers: The objective of every route we open is to move to a daily service. Markets that are big like Los Angeles, Hong Kong, New York or Seoul are all served daily. Then we have a host of developing markets where we are not sure at first how it will go, so we start up with three to five frequencies a week. Some of these like Calgary or Panama prove to be a big success, so they become daily quickly. The latter we started with three frequencies on the MD-11 and we are now at daily Boeing 777-300 flights. Some of the markets take longer to develop, for example, Chengdu, where we started with three, and now have four. There are some destinations with us being the only carrier flying directly to Europe, like in Hangzhou and Xiamen in China, from Fukuoka in Japan as well as in Calgary in Canada and from Lusaka in Zambia. As part of our strategy with Air France-KLM, we reinforce the places we are strong and make sure we have enough unique destinations for the total portfolio of the group.

Airways: So it is like “divide and conquer“ among the two companies?

Elbers: Clearly we would not open a new destination together at the same time. Air France has now started Brasilia. It is clear that KLM would not open that at the same time. But in Santiago for example, we could clearly benefit from the strong market presence Air France already has. Vice versa, Air France started Panama a year ago with three flights a week now going up to five and makes use of our strong market position there. The strategy is that if we start up it’s one of us, and once we feel confident, we add the other one as well.

Airways: You mentioned Brasilia – Air France-KLM has invested in Brazilian LCC Gol. Is that a one-off thing in Brazil or an overall strategy followed elsewhere?

Elbers: Teaming up with local carriers is very much part of our strategy, for example in Calgary, where we have a perfect cooperation with WestJet. We already had a codesharing with Gol to 20 destinations, and that will further intensify. Clearly, Gol is the perfect partner for us in Brazil.

Airways: Within Europe, KLM has a strong presence in some countries like the UK or Scandinavia, establishing Amsterdam as a major hub for these nations. How does that work?

Elbers: Let’s take Norway as an example. We operate to seven destinations in Norway and offer almost 1.2 million seats annually, a very sizeable number. We operate to 15 destinations in the UK, making Amsterdam the better alternative to Heathrow, offering excellent connections to many smaller cities like Bristol or Teesside via Schiphol.

Airways: What triggered KLM to be apparently so far ahead of many industry peers in the utilization of social media?

Elbers: We already started early, several years back. But the real recognition of the power of social media came during the airspace closure due to the volcano in Iceland. At that time, we only had a rather small scale social media presence. In that situation, we found it was much easier, quicker and more appreciated by our customers to communicate via social media. And that is right; these days, the best channel to get in touch with us is via social media. If somebody stands in line and tweets with a complaint in Amsterdam, we have people there to get him or her out of the line and try to solve the problem right on the spot. We are, in fact, ahead of the pack and are now investigating how we can get it even more embedded in our processes. But I admit, if five people in a line of 200 tweets, we can handle it; if all of them start to tweet, we need a different protocol.

The new World Business Class, installed first on Boeing 747-400. PHOTO: KLM.


About Author

Andreas Spaeth

Andreas Spaeth

Based in Hamburg, Germany, lifelong passenger aviation geek, aviation journalist, book author, TV expert and avid traveler to over 100 countries and counting.

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