Dutch government halts KLM bailout amid a crisis over conditions

The Dutch finance minister said on Saturday that the Dutch government will halt the multi-billion-euro coronavirus rescue plan for national carrier KLM amid a standoff with the pilots union over the terms of the rescue package.

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If the dispute is not resolved, it could have dire consequences for KLM, which employs around 30,000 people. The company announced, on Friday, that it recorded a loss of 234 million euros (273 million dollars) in the third quarter, as a result of an aviation landing caused by the Corona virus pandemic.

“Without this loan, KLM will not pass through this difficult time,” KLM CEO Peter Elbiers said in a statement. “This makes this predicament very worrying.”

The government dropped KLM a lifeline of 3.4 billion euros ($ 3.96 billion) in June to help the company survive a sharp downturn in air travel amid the pandemic. The package consists of a loan of 1 billion euros and 2.4 billion euros in bank loan guarantees.

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But there were associated limitations, including KLM’s demand to cut costs by 15%, and improve the airline’s sustainability.

In a letter to Parliament, Finance Minister Wopke Hoekstra said: “It is up to the KLM and the unions to ensure that the specified conditions are still met.”

KLM submitted a restructuring plan to the Dutch government on October 1, during which labor unions representing pilots, cabin crew and ground personnel agreed to cut salaries. However, the agreements only apply until 2022; Hoekstra is seeking assurances from the KLM that unions will agree to pay cuts for the duration of the bailout, likely five years.

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KLM said five trade unions have agreed to sign a “commitment clause” that says their members will agree to full-term wage cuts. She said that one of the unions representing the crew and the ground is still studying the matter, while the pilots’ union has not signed.

Hoekstra described the position of the pilots as “disappointing and risky”.

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The Union of Pilots said its members have already agreed to cut their salaries by 20% and are committed to “continuing to take responsibility for getting KLM out of the crisis and making it a healthy company again.”

She said KLM sought an additional commitment at the last minute and that it “was not achievable in this timeframe.”