48
The Social Perspective
Employees
Scope for renewal Social developments in The Netherlands and the dynamism of the aviation industry influence relationships within KLM. On the one hand there is a need for security and assurance and on the other there is a need for flexibility and tailor-made service. This e¤ect is being reinforced by initiatives taken by the Dutch government in various areas to economize on social welfare plans, to pass on costs to employers or employees and to privatize the provision of certain services. This naturally left a mark on the CLA negotiations that were completed during the year. An important objective of the new CLAs was to balance the uncertainties for both the employer and the employees with the need for flexibility and cost control. To achieve its corporate objectives, KLM must be able to operate competitively. The new CLAs o¤er scope for smarter, simpler and more eªcient ways of working and planning. More so than in the past, sta¤ can ‘take the space they need’ to steer their own careers. In The Netherlands, KLM has never addressed so many issues at one time. This makes the KLM CLAs unique. But more important, the agreements create the conditions necessary to anticipate change in a dynamic environment. Four-sided support for employability The pillars of the new agreements are employability and cost control. KLM has formulated four themes for employability: flexibility, mobility, health and participation. Flexibility will enable KLM to balance workloads and manpower. Mobility is the sta¤’s ability to carry out all manner of work and a variety of functions adequately, both within KLM or, if an employee’s or KLM’s limitations after a careful reintegration process prevent this, outside the Group. Health, of course, is a basic condition for current and future productivity, flexibility and mobility. Participation is the degree to which employees can continue to work during the various stages of their lives or the degree to which KLM can motivate them to do so. Increasing productivity, avoiding excessive workloads Higher productivity through eªciency gains has consequences for the sta¤. To reduce their workload, KLM will increase productivity chiefly
learn (verb; learns, learning learned) 1 to gain knowledge: 2 to gain by experience: 3 to study: 4 to master a skill. organization (n.) 1 the act of organizing or being organized: 2 the formation of a structured concern: 3 a structured body, association, etc.
The KLM workforce has a wealth of knowledge. The KLM Academy was founded to stimulate the exchange of valuable expertise between managers and specialists within and between divisions. The KLM Academy o¤ers a series of programs that promote management and organizational development in many ways, with plenty of room for discussion and experimentation. Options include management development programs, master classes, coaching, and wide range of relevant information. The academy’s portfolio is continually updated and extended, aligning it with broader corporate objectives.
Turkana | Kenya Susan goes to the Kalobeyei boarding school. Her parents are nomads and she went with them when they traveled from place to place. Often, however, there were no schools in those places. Now she no longer travels with her parents but she can go to school every day. Susan has chosen to learn and wants to become a doctor.
49
Employees
by working smarter, for example by having fewer people during o¤-peak hours and by building in flexibility for peak hours. The practicalities of such smart solutions are tested in rostering projects. Two trial phases with new rosters at Engineering & Maintenance, Cargo and elsewhere proved successful. In consequence, a far-reaching rostering project has been set up. Employee participation As in previous years, in 2005 | 2006 the Works Council dealt with many business cases arising from the implementation of structural measures and from the further coordination and harmonization of KLM and Air France. The Works Council also advised KLM on various requests for recommendations, such as fleet renewal and the implementation of the Joint Cargo Management Committee. A number of Works Council committees are occupied with such subjects as sta¤ security, health, well-being and the environment, finances, health insurance system and HR aspects. The new health insurance and the reintegration policy are examples of major issues that have been discussed. Furthermore, the Works Council organizes workshops where coadministration colleagues have the opportunity to exchange their experience and knowledge every trimester. At Air France-KLM level, sta¤ interests will be promoted by the European Works Council. After nine months’ negotiation, this consultative body’s regulations were adopted in mid-February 2006. By the end of March the European Works Council has been installed. The European Works Council focuses on subjects concerning the cooperation of KLM and Air France, such as the fair division of employment. External consultation Based on the common interest of employment, KLM and the unions have had a good and constructive relationship over the years. KLM has incorporated a new labor relation theme ‘From Industrial Relations to Human Relations’. As a consequence the collective bargaining in the CLA 2005 concentrated on strengthening trust, managing by commitment and reducing complexity. Besides these leading principles, the pillars under the agreement were cost control and optimal employability of all members of sta¤. As a result of social developments in The Netherlands and changes in Dutch labor law, the new CLAs include collective agreements on
50
The Social Perspective
pensions, life-course plans, medical insurance and salary payment during the second year of sickness. The new CLAs were agreed for the period of 27 months (2005-2007). Extra consideration for participation of all employees Regulatory changes and an aging population are placing pressure on the productivity targets. In the course of a long employment relationship, sta¤ proficiency can decline. But the social safety net has changed and the retirement age is rising. To ensure longer-term productivity of all its employees, KLM pays systematic attention to their sustainable participation. A quick scan of all risk analyses has identified the health and safety risks present in several departments. A top four has been compiled that will be tackled first. They are physical stress, communication of safe working practices, undesirable conduct and calamities. KLM Academy making good progress KLM helps its sta¤ plan their personal and professional development and facilitates follow-up projects at various levels. The KLM Academy was established to improve the quality of KLM’s organizational and management potential. During the fiscal year, several workshops were organized at which managers with proven skills shared their knowledge with others. The program covered such issues as leadership, bridging cultural and behavioral di¤erences, motivation management, change management, innovation management, strategic cost management and talent development. The KLM Evening School has been renamed the Dutch Aviation College – business training. Its objective remains to support sta¤ in their personal development. KLM reimburses the costs when a course is successfully completed. The management development program for KLM’s high potentials has been extended to include a new module. Under the title Focus on your Future, the participants take a multiyear program of workshops, coaching interviews, mentoring and a closing workshop based on their own input. E¤ective support through e-applications In the field of e-services, KLM works with two concepts: Shared Services and Employee Self-service. An example of Shared Services is the HR infoline. It was introduced on the publication of the sixth CLA newsletter in December 2005 because it was thought that the options
51
KLM engages in a wide array of activities. Each activity demands specific expertise and competence. But all KLM sta¤ have one thing in common: together they determine the quality and reliability of KLM as seen by the customer - directly (in the cabin or cockpit) or indirectly (on the ramp or in the hangar).
Employees
in the life-course, pension and medical insurance plans would elicit many questions. The infoline can be contacted on a special telephone number and by email. Experience with the HR infoline has been positive. Initially, some 250 questions were received every week before the number stabilized at around 100 per week. Employee self-service, the program of e-applications available on the intranet site www.myKLM.org, is developing very gradually. Since 2004, myKLM.org has also provided sta¤ with access from their homes to work-related information and support functions. ‘Interapy’ provides intranet-based support from a psychologist. Assistance with career questions and career development is provided in the form of the Virtual Mobility Center, the Career Scan and the Career Guide. A great deal of e-recruitment, too, is conducted over the web but it still requires a lot of personal input. A new system must make it easier to recruit personnel over the Internet.
52
The Social Perspective
KLM Company employees in The Netherlands
KLM Group employees
and abroad* 35,000
35,000 Employees in The Netherlands (2005 | 2006: 22,441)
31,500 28,000
28,000
24,500
Employees abroad (2005 | 2006: 2,790)
24,500
21,000
*
21,000
Average full-time equivalents, including temporary staff.
17,500
KLM Group average full-time equivalents, including temporary staff in The Netherlands and abroad (2005 | 2006: 31,778)
31,500
17,500
14,000
14,000
10,500
10,500
7,000
7,000
3,500
3,500
0
0 01
02
03
04
05
01
02
03
04
05
02
03
04
05
06
02
03
04
05
06
Sta¤ diversity 2005 | 2006 in The Netherlands
Absenteeism at KLM
100
10 Absenteeism at KLM in % (2005: 5.6%)
9 8
80
7
70
6
60
5
50
4
40
3
30
2
20
1
10
0
0 01
02
03
04
05
1 Age structure in % >50: 15% 30-50: 73% <30: 12%
90
2 Women | men Women: 40% Men: 60% 3 Women in management positions Women in The Netherlands: 20% Men in The Nederlands: 80% 4 Part-time: 36% Full-time: 64% 1
2
3
4
53
Employees
Working on the fundamentals: health The rate of absenteeism feel further during the fiscal year: from 6.1% in 2004 | 2005 to 5.6% in 2005 | 2006. The success of targeted investments to reduce absenteeism and prevent incapacity for work has persuaded KLM to focus more attention on preventive care. KLM Arbo Services is now known as KLM Health Services. The change in name highlights that the service is about more than just working conditions. Under the motto, ‘… and a healthy journey home!’ KLM Health Services will position itself as a work, travel and health organization. Another proactive instrument KLM will introduce to keep employees healthy is a health scan. This revolutionary tool provided through www. myKLM.org will give employees insight into their current state of health. The scan will also provide advice on what employees themselves can do to maintain or improve their health. Employees happy with Air France KLM won the employer’s award for the organization with the highest sta¤ satisfaction in 2005. The findings show that 98% of the sta¤ are positive about the cooperation with Air France. Sta¤ are convinced that the airline combination achieves more than KLM would do by itself. They are proud, motivated and confident about the shared future and are eager to make it work. KLM’s sta¤ satisfaction surveys are conducted by an external agency that compiles a benchmark using survey results from several companies. This provides the sta¤ with an insight into their position in comparison with sta¤ elsewhere. KLM came out of this benchmarking exercise as the best employer. To monitor sta¤ satisfaction with the alliance with Air France, KLM has developed a questionnaire that is issued once every quarter. The group of respondents always includes sta¤ who actually work with French colleagues. Where joint teams of KLM and Air France sta¤ encounter problems, training courses are organized. A dedicated form of mediation has been developed that is o¤ered under the name Cultural Bridging. Structural measures program nearing completion Fiscal 2005 | 2006 was the last year of a three-year program to save costs by mean of a package of structural measures. The program included the loss of 4,500 jobs. For some of the sta¤ who became redundant,
54
The Social Perspective
KLM set up the ‘Work to Work Center’ to help them during a period of one year find alternative employment. The merger between KLM and Air France and economic growth increased the number of positions but in general this did not provide a solution for the employees who lost their jobs owing to the aforementioned program. The growth occurred in positions that make a direct contribution to the KLM product whereas the jobs that were lost were mainly clerical and back oªce positions. Participants in the Work to Work project were given priority in the vacancy policy.
55
Social Responsibility
Social commitment in day-to-day operations Together with Schiphol, KLM is participating in the Schiphol Summer School to help prevent youth unemployment by providing underprivileged young people with training and then work at one of the two employers. KLM has signed a covenant with Amsterdam Airport Regional Education Center to provide traineeships for students with a technical education. Students that complete the course with an Aircraft Maintenance License are o¤ered a three-year employment contract. KLM works with the Reading and Writing Foundation and promotes the opportunities, such as literacy courses, it o¤ers to sta¤ who have reading and writing diªculties. In 2006 KLM was named as the favorite employer in The Netherlands among students from ethnic minorities. This was the outcome of the largest survey of labor market expectations, trends and favorite employers, the Student Image Survey conducted by Intermediair Ebbinge. KLM considers this to be an incentive because although it employs 71 di¤erent nationalities the diversity in management positions lags behind that in non-management positions. KLM for children KLM AirCares is a charity sponsorship program that assists less fortunate children. KLM selects a di¤erent project every quarter. The program consists of the provision of KLM’s resources and its communication network to help aid organizations reach the largest possible audience for a period of three months. On January 1, 2006, KLM AirCares extended its activities by setting up a promotional and fund-raising activity for the organizations. In February, visitors to Schiphol could record a personal video message in a special AirCares
56
The Social Perspective
booth and email it to their friends and family. Through this activity, KLM AirCares raised money for the Israeli organization, Save a Child’s Heart. On some projects, AirCares works with Wings of Support and Pilots Without Borders to carry out these projects. Wings of Support is a voluntary charity organization set up by KLM’s sta¤, and Pilots Without Borders is an organization of pilots from various airlines who use their professional know-how and skills to provide logistics assistance. Working together on a knowledge advantage As an employer, KLM actively works on matching education to the needs of industry. In January 2006, for example, KLM and Breda University of Applied Sciences signed an agreement regarding knowledge development and innovation in Aviation Management and Imagineering. KLM expects these to become very important issues for the future competitiveness of the aviation industry and Breda University of Applied Sciences will provide an opportunity to develop new curricula. Assurances on a future in technology Maintenance and revision are playing an increasingly important role in the use of aircraft. Air France-KLM therefore sponsors the chair in Maintenance, Repair and Overhaul (MRO) at the Aerospace Engineering Faculty of Delft University. The teaching and research mandate concentrates on the marketing aspects of MRO. Studies will be made, for example, of whether maintenance can be used as a quality label to improve an airline’s profitability. KLM Engineering & Maintenance is playing a role in keeping MRO work in The Netherlands. To encourage secondary vocational pupils to enter technical professions, KLM Engineering & Maintenance took part in the Future Expedition project, an initiative of Regional TechnoCentrum Amsterdam.
smart (adj.) 1 sharp, quick, keen: 2 bright, quick-witted, intelligent, clever, astute: 3 neat, pleasant, clean: 4 fashionable, stylish, chic. leadership (n.) 1 ability to show the way: 2 power, authority.
Working smart means working di¤erently, better exploiting existing opportunities and creating new ones. You have to take bold steps towards a new horizon. Motivated sta¤ are a key factor in this process. Since the start of the merger, KLM has gauged sta¤ satisfaction regarding cooperation with Air France in order to take concrete measures. These frequent surveys indicate that KLM sta¤ are proud and motivated, that they have faith in our common future, and that they are keen to contribute to this future.
Millau | France The viaduct at Millau, crossing the valley of the River Tarn, is the highest and longest cable-stayed, vehicular bridge in the world. It is also a classic example of European cooperation. Designed by French engineer Michel Virlogeux in collaboration with architects at Britishbased Foster & Partners, the bridge took shape on Dutch-French drawing boards. This innovative viaduct is designed to withstand the strong winds and extreme temperature shifts that are so characteristic of this region. This technical (and political) marvel is the last link of La Méridienne, the shortest route between Paris and Barcelona. And Millau is finally relieved of its annual holiday traªc jams.
57
Shareholder Structure
Air France-KLM Holding company
SAK I
SAK II
State of the
Stichting Administratiekantoor KLM I
Stichting Administratiekantoor cumulatief preferente aandelen C KLM II
Netherlands
Air France S.A.
KLM N.V.
Airline
Airline
KLM’s shareholder structure is outlined
Stichting Administratiekantoor KLM
below:
(SAK I) has 31.9% of the voting rights
– all KLM priority shares and a
in klm on the basis of common shares
proportion of the common shares,
and A-cumulative preference shares.
together representing 49% of the voting
Stichting Administratiekantoor
rights in KLM;
cumulatief preferente aandelen C KLM
– the depositary receipts issued on
(SAK II) has 11.3% of the voting rights
the common KLM shares in excess of
in KLM. The State of The Netherlands
the 49% of the nominal share capital
has the A-cumulative preference shares,
and the voting rights in KLM. The
which represent 5.9% of the voting
depositary receipts carry the beneficial
rights.
ownership but not the voting rights of the underlying common KLM stock;
The State of The Netherlands has an
– the depositary receipts issued on the
option to take an interest of up to 50.1%
A-cumulative preference shares, which
in the issued capital of KLM in certain
carry the beneficial ownership but not
circumstances.
the voting rights of the underlying Acumulative preference shares; – the depositary receipts issued on the C-cumulative preference shares, which carry the beneficial ownership but not the voting rights of the underlying Ccumulative preference shares.
58
Facts and Figures
Balance Sheet Consolidated | In millions of euros
31 March 2006
31 March 2005*
4,487
4,340
Non-current assets Property, plant and equipment Intangible assets
44
40
Financial assets
944
935
1,873
1,742
Pension assets
7,348
7,057
Current assets 186
198
Trade and other receivables
1,126
1,004
Cash and cash equivalents
1,172
738
294
245
Inventories
Other current assets
Total assets
Equity Minority interest
2,778
2,185
10,126
9,242
2,559
2,308
1
1
Group equity
2,560
2,309
Non-current liabilities 3,811
3,626
Provisions for employee benefits
284
336
Other non-current liabilities and provisions
674
729
Financial liabilities and finance leases
4,769
4,691
Current liabilities 1,517
1,175
Financial liabilities and finance leases
506
331
Other current liabilities and provisions
774
736
Trade and other payables
Total liabilities
Total equity and liabilities
*
Restated to IFRS
2,797
2,242
7,566
6,933
10,126
9,242
59
Statement of Earnings Consolidated | In millions of euros
2005 | 2006 Operating revenues
2004 | 2005* 7,201
6,442
Operating expenses External expenses
(4,303)
(3,695)
Employee compensation and benefit expense
(1,723)
(1,711)
Depreciation and amortization
(444)
(391)
Other operating income and expense
(191)
(178) (6,661)
Income from operating activities Net cost of financial debt Other financial income and expense Pre-tax income of consolidated companies Income tax expense Net result after taxation of consolidated companies
(5,975)
540
468
(118)
(127)
19
(27)
441
314
(126)
(84)
315
230
Share of results of equity shareholdings after taxation
(39)
Net result after taxation
276
*
Restated to IFRS
25 255
60
Facts and Figures
Statement of Cash Flows Consolidated | In millions of euros
2005 | 2006
2004 | 2005
Net cash flow from operating activities Net result after taxation
276
255
Depreciation and amortization
444
391
Changes in provisions
69
Changes in operating working capital
69
(170)
Results of equity shareholdings
41
(19)
Results on sale of equity shareholdings
(1)
(1)
(108)
(35)
Other changes
78
790
499
Net cash used in investing activities Capital expenditure on intangible fixed assets Capital expenditure on aircraft Disposal of aircraft Capital expenditure on other tangible fixed assets
(11)
(2)
(579)
(353)
24
54
(77)
(128)
Disposal of other tangible fixed assets
6
32
Investment in equity shareholdings
9
9
Sale of equity shareholdings
3
4
Changes in group of consolidated holdings
1
9
Free cash flow
(624)
(375)
166
124
Net cash flow from financing activities Increase in long-term debt
626
167
Decrease in long-term debt
(329)
(210)
(32)
(30)
Increase in long-term receivables Decrease in long-term receivables
8
14
Dividend paid
(9)
(2)
Other changes
5
15
E¤ect of exchange rate on cash and cash equivalents Changes in cash and cash equivalents
Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Changes in cash and cash equivalents
269
(46)
((1) 1)
(3)
434
75
738
663
1,172
738 434
75
Including Triple A bonds/long-term deposits the overall cash position amounts to 4 1,518 million as at March 31, 2006 (March 31, 2005 4 1,031 million).
61
Traªc and Capacity Traffic and capacity figures comprise KLM and KLM cityhopper.
Passenger Business
Passenger kilometers
Seat kilometers
Load factor
In millions
2005 | 2006
2005 | 2006
2005 | 2006 in %
2004 | 2005 in %
Change in %
Change in %
Route areas Europe/North Africa
11,545
5
15,042
3
76.8
75.2
North America
14,793
1
16,646
(1)
88.9
86.8
6,603
10
7,800
9
84.7
83.7
19,290
17
22,266
11
86.6
82.4
Africa
8,787
9
10,705
12
82.1
84.4
Middle East
4,263
6
5,720
5
74.5
73.3
3,834
(3)
4,557
(2)
84.1
85.5
Total
69,115
8
82,736
6
83.5
81.9
Cargo Business
Traªc
In millions freight ton-kilometers
2005 | 2006
Central/South America Asia
Caribbean and Indian Ocean
Capacity Change in %
2005 | 2006
Load factor Change in %
2005 | 2006 in %
2004 | 2005 in %
2
14.0
17.0
(1)
70.3
70.3
Route areas Europe/North Africa North America Central/South America Asia
30
(16)
214
857
(1)
1,219
428
8
496
11
86.3
88.7
2,927
5
3,619
6
80.9
82.2
Africa
395
(4)
577
2
68.5
72.5
Middle East
154
12
248
13
62.1
62.4
102
5
169
(2)
60.3
56.2
4,893
3
6,542
5
74.8
75.8
Caribbean and Indian Ocean Total
62
Facts and Figures
Fleet Development
Intercontinental
Europe
The KLM fleet (including KLM
KLM’s fleet composition was unchanged
cityhopper and transavia.com) had an
during the year. KLM has ordered
average age of 10.2 years as of 31 March
two Boeing 737-800s, which will be
2006, 0.6 of a year higher than a year
delivered in the current fiscal year.
previously. KLM cityhopper recently added three With the addition to the fleet of one
Fokker 100s to its fleet. The aircraft were
Boeing 777-200 ER (Extended Range)
previously flown by another operator. It
and three Airbus A330-200s and the
also phased out one Fokker 100 and two
phasing out of four Boeing 767s a
Fokker 50s.
start was made on phase 2 of the Fleet Renewal Program. This program entails
transavia.com added one Boeing 737-
the replacement of the 12 Boeing 767s
700 to its fleet at the beginning of the
with eight Airbus A330-200s and four
fiscal year. Its very young fleet now
Boeing 777-200 ERs.
counts 27 aircraft with an average age of less than five years. transavia.com has
A further nine aircraft will be delivered in fiscal 2006 | 2007 (one Boeing 747400 ER Freighter, three Boeing 777-200 ERs and five Airbus A330-200s).
one Boeing 737-800 on order.
63
KLM Fleet As of 31 March 2006
Number
Average age1
Passengers
Freight2 (ton)
KLM Airbus A330-200
3
0.5
251
14
Boeing 747-400 Full Passenger
5
15.3
426
13
17
12.1
278
36
3
2.7
-
103
Boeing 777-200 ER
11
1.7
327
16
Boeing 767-300 ER
8
-
220
13
Boeing 737-900
5
3.2
189
-
Boeing 737-800
13
6.1
171
-
Boeing 737-400
13
14.4
147
-
Boeing 737-300
14
13.5
127
-
Boeing MD-11
10
11.1
282
17
Boeing 737-800
17
5.6
186
-
Boeing 737-700
10
2.6
149
-
Fokker 100
18
16.2
103
-
Fokker 70
21
10.1
80
-
Fokker 50
14
15.1
50
-
8
-
190
10.2
Boeing 747-400 Combi Boeing 747-400 ER Freighter
transavia.com
KLM cityhopper
Training aircraft KLM Group
1 Age in years, excluding operational leases and training aircraft 2 Subject to destination, passenger load factor and nature of goods
64
Acknowledgements KLM Royal Dutch Airlines Head oªce Amsterdamseweg 55 1182 GP Amstelveen The Netherlands Postal address P>O> Box 7700 1117 ZL Schiphol Airport The Netherlands T +31 20 649 91 23 F +31 20 649 23 24 www.klm.com Registered under number 33014286 in the Trade Register of the Chamber of Commerce and Industry, Amsterdam, The Netherlands. This is an English translation of the original Dutch language ‘KLM: 2005 | 2006 in beeld – New Horizon’. Text and advice Jonkergouw & Van den Akker, Amsterdam Final editorship KLM Royal Dutch Airlines, Amstelveen Design, typography and type-setting UNA (Amsterdam) designers Portrait photography Marco Borggreve, Bilthoven Photography KLM photo library, Amstelveen Capital Photos, Amstelveen KLM fotoarchief, Amstelveen Capital Photos, Amstelveen Hollandse Hoogte, Amsterdam (Reinout van den Bergh, Goos van der Veen, Co de Kruijf ) Panos Pictures, London (Crispin Hughes) Lithography and printing Thieme Amsterdam Binding Binderij Hexspoor, Boxtel Paper Invercote G, 240 g/m2 Eurobulk, 115 g/m2 Euroart, 90 g/m2 Type Scala
