KLM to shed 2,500 jobs

October 4, 2001 Posted: 0730 GMT

LONDON (CNN) -- KLM Royal Dutch Airlines said on Thursday 2,500 jobs would be eliminated, as Europe's fourth-largest airline combats the impact of terror attacks.

About 12,000 workers will be placed on "short-time" employment and the Dutch national carrier is in talks with unions and employees to take a "substantial" cut in pay. The carrier currently employs 28,000 people.

Like its troubled European rivals, KLM has been hit hard by the September 11 terrorist attacks as travellers decide to cancel plans to fly. British Airways, Europe's biggest airline, is axing 5,200 jobs and announced on Wednesday a 22 percent fall in passenger traffic during September.

But other airlines like Swissair and Belgium's Sabena have sought protection from creditors through the courts. Swissair was forced to cancel flight for two days as it ran out of money but late on Wednesday the Swiss government injected 450 million Swiss francs ($280 million) into the cash strapped airline.

Before the September 11 attacks, KLM was suffering from a global economic slowdown, high fuel prices and rising labour costs. KLM's problems were exacerbated by the fact it still has not secured a partnership that would help it to share planes and cut costs. Merger talks with British Airways collapsed in September last year.

The latest troubles could see European and U.S. regulators relaxing rules on mergers and acquisitions in the airline industry. KLM's chief executive Leo Van Wijk told CNN in February that the company expected there would be "between three to five global airlines in the next few years," meaning "Europe's 20 flag-carriers would have to consolidate."

KLM, which operates transatlantic routes with Northwest Airlines of the U.S., said it is reducing capacity by 15 percent. That follows reduction in capacity of five percent on September 19, as demand slumped after the hijackings.

The carrier plans to reduce the frequency of flights to various destinations and will fly smaller aircraft. KLM lost about 50 million ($45.8 million) in revenue and damages in September due to the attacks.

KLM reassured investors that it had enough money to keep flying. The Dutch carrier has "substantial cash position of 1.4 billion... " and about 1.1 billion directly available in cash and marketable securities.

"More far-reaching measures may have to follow in view of the uncertainty on further developments in the global airline industry," said KLM.

KLM shares rose 3.4 percent to 9.00 in early Thursday trade. The stock has plunged 70 percent from a high this year of 28.90 in January and dropped to a low of 7.30 on September 21.

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