KLM CEO Pieter Elbers Plans His Next Move

Madhu Unnikrishnan
June 6th, 2022 at 12:01 AM EDT

At the start of the pandemic and through 2020 and much of 2021, industry observers predicted airlines without domestic markets — like Cathay Pacific Airways, Emirates, KLM, and Singapore Airlines — would struggle to regain their pre-pandemic markets, and that when travel demand returned, passengers would prefer to fly point-to-point. But KLM CEO Pieter Elbers, citing the airline’s recent successes, emphasized that the death knells were premature.

The Covid-19 pandemic was “obviously” the biggest challenge of his 30 years at KLM and eight as CEO, Elbers told Airline Weekly in an expansive interview as he wraps up his tenure at the airline before taking the helm of IndiGo. “We were at almost a complete standstill as an airline for a couple of weeks in April 2020,” he said. “It was the greatest challenge in KLM’s 102-year history.”

But it’s what KLM did in response to the crisis that Elbers credits with its success. “We kept our network largely in place,” he said. “There were certain specific city pairs where the only connection was through Amsterdam — for many city pairs we were the only airline, the only window to the world.” Some routes operated with a handful of passengers and the full hold of cargo. But aside from the cargo revenue, these flights served to keep KLM — and its Amsterdam hub — connected to is passengers, Elbers said. KLM has now restored between 80-90 percent of its pre-pandemic destinations, the most notable absences being cities in China and those affected by lengthier routes due to the closure of Russian airspace.

The airline also showed the enduring importance of the connecting hub model and proved the doomsayers wrong. “The first stage of the recovery in long-haul traffic was to be led through the hubs,” Elbers said. “Hubs by nature are a very efficient and effective way to combine city pairs, and that is precisely what we have seen, with some of the strongest hubs airports on both side of the Atlantic.” Point-to-point routes will have their place as a complement to connections over large hubs, he added.

European low-cost-carriers, like Ryanair and Wizz Air, have been ascendent during the pandemic, capitalizing on what Ryanair CEO Michael O’Leary has called the vacuum left by legacy carriers that cut routes during the crisis. Elbers was not concerned, however. Air France-KLM’s Transavia subsidiaries are more than capable of fighting the discounters on their own turf. “Transavia is effectively competing with some of the low-cost airlines,” he said.

While leisure traffic has led the recovery, Elbers believes business travel is also on its way back but in a different shape than it was before the pandemic. “I speak to frequent fliers, and they say they have come to realize that being on a plane every other week is not something they want to do,” he said. “But there’s a whole new generation that wants to fly. It’s their turn. I’m optimistic. Nothing beats face-to-face contact.” Some segments of the corporate market are likely to travel more than before the pandemic, and others less, with the final calculus yet to be determined, he added.

“People want to travel. I’ve always believed that the moment people could start to travel again, they would do so,” Elbers said. “The biggest challenge for us collectively as an industry — airlines and airports — is how to cope with the surge in demand.”

Elbers is optimistic that this summer will be strong for European airlines, but what the future holds for the industry is less clear. Further realignment may occur. “History has taught us that after every crisis, a new consolidation will take place, but maybe not immediately,” he said. Repayment of government pandemic loans and the terms of government support may dictate when European airlines are free to consider consolidation. “It’s probably something that will happen again, but the timing is uncertain.”

Elbers pointed to the 2004 Air France-KLM merger for KLM’s strength. It made two European airlines more global and more relevant, particularly on the North Atlantic, bolstered by the group’s partnership with Delta Air Lines. The combination gave the group two strong hubs in Amsterdam and Paris Charles de Gaulle, expanding their reach in Europe, Latin America, Asia, and Africa as well, he said. “It was visionary,” Elbers said of the merger, but not without “challenges that got more than their fair share of attention.”

But Elbers is less optimistic about transnational mergers elsewhere. Although Abra, the tie-up between Gol and Avianca, builds on a series of Latin American transnational mergers, the region’s regulatory framerwork is unique. So is the European Union’s, Elbers noted. Ownership and control laws in most other regions of the world will stymie other such mergers, Elbers said. “We need to see a bit more stabilization in the recovery before we see any of that,” he said.

Asked why he would leave KLM now for IndiGo, Elbers said “what IndiGo has done over the last 16 years is super impressive in such a short time frame.” India is an “enormous” market, both domestically and internationally. “I was attracted by that combination of an impressive track record over the last 16 years and an incredible set of opportunities and challenges going forward,” he said. “I will do as much as I can to add to the next journey of IndiGo.”

Madhu Unnikrishnan

Madhu Unnikrishnan
June 6th, 2022 at 12:01 AM EDT

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