KLM recently announced plans to launch a package-travel division, KLM Holidays, to sell vacations directly to consumers. The company will offer travelers packaged vacations in which flights, hotels, tours and rental cars can be booked in one purchase. While KLM already offers customers the option to book hotel rooms and rental cars when purchasing a flight, KLM Holidays will concentrate exclusively on selling packaged vacations. The airline purchased Airtrade, an online ticketing organization, to deliver the new service. KLM Holidays will begin operation once the government-imposed COVID-19 travel restrictions are relaxed. The company plans to eventually offer KLM Holidays package deals in countries other than the Netherlands.
KLM hopes to become a major player in the package-travel industry with the launch of KLM Holidays. “We want to be in the top three tour operators for flight holidays ourselves, together with our sister Transavia Holidays,” said KLM Netherlands CEO Harm Kreulen in an interview with De Telegraaf.
This ambition has many in the travel industry concerned due to the structure of traditional package vacations. Travel organizations such as Corendon and Sunweb typically organize and offer vacations with flights, hotels, tours and car rentals included. They purchase seats for their customers on commercial flights often offered by KLM. Travel organizations that typically offer package vacations fear that they will be unable to compete, as KLM reserves seats for its own package vacations. Many in the industry argue that by offering package vacations, KLM will essentially be competing against its own customers. Corendon, for example, has a three-year contract with KLM to provide flights to the Netherlands Antilles as part of its package vacations. KLM Holidays plans to offer similar packages to the Netherlands Antilles, directly competing with Corendon.
Concern has also been expressed about unequal competition given the extraordinary levels of government support KLM has received to survive the COVID-19 downturn. Over the course of the pandemic, the Dutch government has provided KLM with 3.4 billion euros in economic support, while the French government has contributed 7 billion euros. “KLM has received billions in government loans to survive corona. You cannot misuse that for the takeover of a travel company. Bad timing. We’ll have to find out whether that’s allowed,” said Steven van der Heijden, head of Corendon. Mattijs ten Brink, CEO of Sunweb, has expressed concern with KLM receiving government support, while at the same time competing with an already weakened travel industry.
This is not the first time KLM has faced criticism for the ways in which it has used state-provided money intended to relieve the financial difficulties caused by pandemic restrictions. In January of this year, the company announced plans to lay off at least 6000 workers after accepting state-support specifically designed to prevent job loss in heavily impacted industries. “KLM is abusing the corona crisis to reduce the number of permanent jobs and at the same time to hire flex workers. That’s anti-social and in violation of the social plan that we’ve agreed on,” said Joost van Doesburg of FNV Luchtvaart, a union representing aviation employees.
The proposed expansion comes at the end of a financially disastrous year for KLM. The airline’s business model is based largely on the transportation of business travelers and freight. During the pandemic, KLM flew sold 67 percent fewer passenger tickets and transported 21 percent less freight than the year before. Air-France-KLM lost 7.1 billion euros last year, largely as a result of travel restrictions imposed to slow the spread of the virus that causes COVID-19. That loss was the largest in the company’s history, much worse than its prior record loss of 1.6 billion euros between 2009 and 2010.
The company expects consumer demand for air travel to pick up again this summer, when a fair percentage of the population should be vaccinated. In spite of the financial assistance from the Dutch government and plans to launch KLM Holidays, the company does not expect business to rebound completely until at least 2024.
Written by Lorre Luther