KLM counts the cost of the ash cloud
The airline's president talks to Mark Leftly about how the industry viewed the EU's response to the catastrophe
Sunday 16 May 2010
Peter Hartman swings open the door to the cockpit and pokes through his large, bald head. "Easy!" he beams, delighted by the captain's skills.
The first KLM 881 Amsterdam-to-Hangzhou, south-east China, flight has just landed. The pilots have stuck Dutch and Chinese flags through the open cockpit windows, which are still damp from the flight's welcome: firemen used hoses to form a water arch over the aeroplane.
Hartman, a well-padded 61-year-old who at 6ft 6in towers over his colleagues, puts on his suit jacket, readying himself for the coming ceremony. As president and chief executive of Dutch airline KLM, Hartman must be well attired as there are scores of television cameras awaiting him and his VIP entourage on the other side of the Boeing 777-200ER's exit doors.
The Hangzhou flight is the first to connect this extraordinarily scenic city to Europe. KLM was fortunate in its timing. The inaugural flight left Amsterdam's Schiphol airport on 8 March; had it been scheduled three weeks earlier it would have been just another of the more than 100,000 planes grounded by the ash cloud.
For the Netherlands Antilles-born Hartman, that ash just won't go away, be it as a material or an issue. When the other Dutchmen in this party talk football in the top-floor bar of a five-star hotel overlooking Hangzhou's vast West Lake, Hartman checks his mobile phone for updates from ministers and fellow airline bosses on the latest ash dispersal pattern. "This was an act of God," growls Hartman, his English flawless. "It is too easy to put all the blame on the airlines, but we had no choice [but to ground planes]. We were fighting to reopen airspace."
The European Union and national aviation authorities shut down airspace for six days, believing that the cloud was thick enough to jam engines in mid-flight. Leading carriers, most vocally KLM and German airline Lufthansa, argued that the ash did not pose a safety risk over large areas of the continent. The ash cloud cost KLM €70m (£60m) and the wider Air France-KLM group €200m.
However, these figures could rise following further airport closures in the Iberian peninsula last weekend. Also, KLM has massive petrol costs added to its long-haul flights, with aircraft having to steer around the ash cloud to reach South America and the US. Typically, this adds one hour to 90 minutes on flight time.
"No one is compensating us for fuel," moans Hartman. "That is bad for the economy, bad for the environment and it is bad for us."
Hartman is infuriated by what he describes as "the passive stance" that the EU took in reacting to the crisis and that the airlines have so far been pushed to foot the bill for the compensation claims. One of Hartman's colleagues on this trip goes much further, lamenting the "idiocy" of the EU.
"We asked Brussels for a meeting with officials on the Friday [16 April, two days after the eruption] and they told us that it was not possible until the Monday," huffs Hartman. Having boarded a KLM test flight during the crisis, Hartman was desperate to point out that the skies were safe and that some airspace could be reopened.
He scoffs at the notion that the concentration of the ash would have been the same in the Azores as it was at the source in Iceland. Hartman shakes his head that authorities used computer modelling programs to estimate ash dispersal, rather than actually fly into the sky and collect hard data.
He is particularly damning of Estonia's Siim Kallas, the European transport commissioner. In statements early on in the crisis, Kallas suggested that it was the airline industry's duty to resolve the situation, arguing in one press statement: "In practical terms, the first responsibility for re-routing and getting passengers home lies with the airline industry. No one can take that legal responsibility from their shoulders."
Eyes narrowing at the thought, Hartman argues: "The focus out of Brussels has been to blame the airlines. That €70m [that KLM lost] doesn't include additional claims, like people renting cars, though we're not saying that we won't pay that back."
This is not, then, the hardline stance that was so infamously employed by Ryanair's chief executive, Michael O'Leary. The low-budget airline said that it would reimburse stranded passengers only to the value of the cost of the ticket, though O'Leary later climbed down, claiming that he had been misreported.
However, Hartman does think that the airlines, the insurance industry, governments ("They made the mistake in keeping airspace closed") and individuals, who should always be aware that travel involves risks, could more equitably share the burden. The airline industry is eyeing up the EU Solidarity Fund, which has supported 20 countries during 33 natural disasters to the tune of more than €2.1bn over the past eight years.
Like many of his peers, Hartman is pinning his hopes on a meeting of EU transport ministers on 24 June. The European Commission is looking for backing over a plan that will better co-ordinate authorities and transportation flows in the wake of a similar incident that closes the skies. The proposals include guidance on how state aid can be given to financially hit airlines, without that producing an unfair advantage against rivals.
Compensation is vital to the financial health of the big airlines, which struggle enough without volcanic material filling the air. Though carriers are massive businesses – Air France-KLM made €24bn revenue in both 2007-08 and 2008-09, while the market value of British Airways (BA) is around £3bn – they are often loss making. For example, Air France-KLM suffered an operating loss of €129m in the 12 months to 31 March 2009.
"If you look at the results of the airlines for the past 10 years, we only make a profit in one or two years," says Hartman. "We have to cover all these costs, like security. We are a highly capital intensive industry, as well as labour intensive – KLM employs 33,000 people in Holland."
A major problem is that the airline industry is hugely sensitive to sudden dips in demand should terrorism rear its ugly head. "If al-Qa'ida does something, people immediately don't want to travel," says Hartman.
The only way for the big European airlines to grow, he argues, is to form alliances. Hartman , who joined KLM in 1973 as a labour analyst and worked his way up to chief executive three years ago, applauds BA's nearly completed merger with Spanish rival Iberia. This mirrors Air France's takeover of KLM in 2004 and Lufthansa's buyout of Swiss International Air Lines a year later.
"The only way forward is alliances, creating a more seamless service for the customer and the synergies must keep costs down," Hartman smiles. BA's merger with Iberia is expected to save the combined group €400m a year.
A serious, straight talking man, Hartman's big brain soon almost perceptibly wanders from mergers back to ash. Picturesque Hangzhou might be 5,600 miles away from a 1,660m-high volcano in Europe, but this hulking Dutchman cannot seem to escape that ash cloud even here.
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