E&M in action
KLM E&M Quartely Figures Q3 2024
Below we will take you through the financial results of KLM E&M for Q3 2024.
Key elements
People To promote the retention and attraction of colleagues, we continue various initiatives with full force. The recruitment of new colleagues is carried out through an extensive 14-track Sourcing Plan, which introduces a broader audience to the activities within KLM E&M. At the end of June, we launched the Techniek XXL campaign, which reached a wide audience via Instagram, Facebook, LinkedIn, digital media, radio, and bus shelters. This campaign remains visible on social media and aims to attract technical talents. With 125,000 views on our XXL landing page and 12,000 job vacancies viewed, a big success.
Additionally, it is possible to share job vacancies through our referral program, where you receive a €1000 bonus if the referred person passes the probationary period. This year, 35 colleagues have already made use of this. We have also welcomed 223 new interns to KLM E&M this year, hoping that many will stay. Our improved onboarding process with interactive days and welcome packages ensured that 325 new employees have already received a warm welcome. Furthermore, we are present at and organize events & open days ourselves and recruit technicians from abroad. In the past months, we have hired about 15 people with licenses from abroad. We also collaborate with various vocational schools to inspire students to start working at KLM E&M. A lot of attention is paid to this because we need these young people, now and in the future. One of our upcoming events is the E&M job fair on 30 November at Schiphol-East. Thanks to these efforts, we have already hired 300 new colleagues, and KLM E&M aims to attract another 200 to 250 technicians in 2025.
Operations In Q2, we observed improvements in most operational KPIs thanks to specific improvement plans for each unit. These plans are essential to ensure recovery and further enhancement. Unfortunately, in Q3, we were unable to maintain the positive trend for all KPIs.
At Airframe, the focus remains on improving Deferred Defects (DDs), technical cancellations, and the on-time performance of checks. This leads to higher fleet quality and availability. While we managed to reduce the number of DDs from a peak above 1,100 in March to approximately 600 in Q2, the number of DDs increased again to around 800 in Q3. Technical cancellations within the KLM network also rose in Q3 compared to Q2, peaking at nearly 100 technical cancellations in September. This led to an increase in non-performance costs for KLM passengers.
At Components Services (CS) and Engines Services (ES), the operational improvement plans are contributing to operational enhancements. These improvements depend on multiple external and internal factors, resulting in slow but steady trends in turnaround times and service levels. Non-performance costs at CS and ES remain too high due to long turnaround times, partly due to component borrows, external repairs, and engine leasing.
Finance Good Ops, Better Finance. The foundation for recovery and improvement of our financial results and the reduction of non-performance costs lies in the capacity of our people and the efficiency of our operations. Despite our efforts, we are still facing challenges such as a disrupted supply chain, a shortage of personnel and production capacity, and the need for better alignment of internal processes.
Although our revenues have increased, our operational result lags behind that of last year. Despite significant improvements in Q3 and up until September 2024, these have not been sufficient to fully recover and improve financially. Progress has certainly been made, but not to a sufficient extent, and non-performance costs remain too high.
This situation is also reflected in our negative free cash flow, which affects our ability to invest in E&M in the future. High investments in component rotables, larger inventories, and higher work in progress (before it can be invoiced) contribute to this negative free cash flow, in addition to the lagging operational result
In Q3 as well, we spent more than we received, causing the negative cash flow to increase further up until September.
Funding our Journey Last year, the Funding our Journey program was implemented within KLM E&M, with a total of 19 ongoing initiatives. Each initiative has an owner, a detailed action plan, and designated necessary resources. These initiatives are collectively expected to result in a value of €26 million, contributing to our revenue model and enabling our investments. We monitor and discuss the progress and results of the initiatives in detail on a monthly basis, constantly questioning how we can further improve our outcomes and achieve the set targets. Thanks to the contribution of additional initiatives from EPCOR and KLM UK Engineering in the third quarter, we are well on our way to reaching our goal. In the third quarter, we achieved nearly €11 million of the €26 million, and the first signals from October are in line with expectations. Improvement program: Back on Track (incl. Funding our Journey) Last summer, KLM announced that we need to take measures to improve our financial position and operations by reducing costs and increasing revenues. Although many steps have already been taken, we now need to accelerate to prevent further deterioration of our results. This has led to the launch of the improvement program Back on Track, which aims to help the entire company become structurally profitable and improve the operating result by €450 million in the short term. The program consists of five components, including existing initiatives such as the 5 must-win battles and Funding our Journey, and aims for a structural profit margin of over 8 percent in 2026-2028. Check the CEO update to see what each component entails.
Furthermore, we will continue to focus on our 3 E&M battles: Enough (skilled) people, Enough parts, and Smooth processes, with safety and sustainability forming the foundation of our operation.
Many colleagues within all units and at all levels have worked and contributed to a structural implementation of this improvement program, which is crucial for the future of KLM E&M as an airline MRO. We have worked intensively with a consultancy firm to explore and secure more possibilities (outside-in approach). A joint plan is now on the table with the KLM Management Board. Although we are still waiting for formal approval, we have already started with the initial steps of this improvement program. In the coming period, we will keep you regularly informed about the progress and the steps being taken within KLM E&M across five different components. Thank you for your efforts. Let’s continue together on the path to operational improvement and carry this last period of 2024 forward with the same determination and dedication.
Kind regards,
