KLM’s CEO Is So Popular With Employees That It’s A Problem

Filed Under: KLM

Airline CEOs are generally disliked by frontline employees. That’s not true across the board, but I can’t think of many airlines where the average frontline employee would say “we love our CEO.”

Why are airline CEOs so unpopular?

There are probably a variety of reasons for this:

  • Most airline CEOs seem to come from other industries and are viewed as being out of touch
  • Many airlines have unionized workforces, and in general the dynamic between unions and management causes management to be unpopular
  • Airlines historically just aren’t very profitable, so running them in a way that makes shareholders, employees, and customers happy, is really difficult; as a result, they often have to make tough decisions that won’t be popular

For example, last November American Airlines released the results of an employee survey, which gives you a sense of how employees feel about management. For example, only 26.4% of employees felt favorably about the statement “leaders at American Airlines make the right decisions that take care of our frontline team members.”

KLM’s CEO is really popular

Last week I wrote about the current challenge at Air France-KLM. Air France-KLM has a new CEO, Ben Smith, who is doing a fantastic job. He’s an incredibly competent leader, and he’s exactly what the company needs to turn things around.

There were rumors last week that Smith might be looking to replace KLM CEO Pieter Elbers, as his contract expires this April. The rumored reason for this is that Elbers doesn’t want KLM to work more closely with Air France, which is a big part of Smith’s vision.

The problem is that Elbers has done a phenomenal job running KLM. Like, a really, really great job, as he has made the airline extremely profitable.

But his strengths go beyond the profitability of the company. In light of the news that he may be replaced, the Dutch government sent a letter to KLM’s supervisory board praising his record. But there’s even more.

25,000 KLM employees have signed a petition demanding that Elbers stay on as CEO of KLM. The airline has 35,000 employees, so that represents over 71% of the company’s workforce. And that doesn’t even mean that the other 29% disapprove, but rather just that they didn’t sign it.

The letter accompanying the petition states the following:

“There would be a very real risk of unrest among the employees and unclear and potentially unstable management if Pieter Elbers were to be forced to step down.”

That’s pretty remarkable, and off the top of my head I can’t think of another CEO who is this popular (please let me know in the comments of any you know of!).

Smith is in a tough situation

Ultimately we don’t really know what’s going on behind the scenes here. I feel confident in the following:

  • Smith wants the entire Air France and KLM operation to be run as smoothly as possible; while it’s Air France that needs the most help, the two companies need to work more closely together if they’re going to do as well as their major European competitors
  • Elbers wants KLM to be run as well as possible, and he has shown that through his track record at the airline

The big outstanding question here is to what extent Elbers is resistant to closer cooperation with Air France. We don’t know if he’s just putting his foot down and saying “as long as I’m here we’re not going to be working more closely with the basket case which is Air France,” or how strong their disagreement is.

Ultimately Smith is CEO of Air France-KLM, and has three interests to balance — those of Air France, those of KLM, and those of Air France-KLM. Right now KLM is doing well, Air France has room for improvement (and is improving), and Air France-KLM as a whole is somewhere in the middle.

With Elbers’ support, Air France-KLM could likely be in a better situation long term. Without Elbers’ support (or if he were let go), KLM might suddenly become a problem as well.

We’ll have to see how this plays out…

Comments
  1. ‘Ultimately we don’t really know what’s going on behind the scenes here.’, but sure enough you made wild assumptions that Smith is doing a great job. On top of that you claim that Smith wants two airlines to run closer, while Elbers does not. Says who? There are internal memos being released that Smith’s plan is not two airlines running more closely, but KLM completely dissappearing.

    As one of those 25 000, non-Dutch employee of KLM, I have to say that I hope KLM continues to exist for many years to come and dear Ben cut down on worshipping Mr Smith without facts. In my eyes what Smith did is 1) gave up on union requests in AF which will cost the airline additional 300+ mil this year and 2) completely ruined any backing from KLM employees and Dutch government.

  2. Doing business with a France based company is always risky. You risk shutdowns, strikes, and labor issues on a near constant basis. I am generally on the pro-labor side of things but France takes it to the extreme. Striking is a hobby more than a legitimate tactic there. On top of the insane contract negotiations you have with your own employees, you also risk ancillary strikes, such as with truckers that halt fuel and supplies, that can slow down your business greatly. If I was working with profitability and stability in mind I would also forgo strengthening any any alliance.

    Don’t get me wrong. I LOVE France. Its an incredible, beautiful country that has contributed a lot to the world. If KLM was MASSIVELY profitable it would be a great alliance. As it sits they should work on a very strong foundation before propping up Air France.

  3. Quick correction – the 25k signatures weren’t only from KLM employees; the petition was open to anyone to sign and many of the signatures were from non-KLM employees.

  4. Rumours ! Unless you are psychic and can read Ben Smith’s mind. And everyone on this forum appears to entirely overlooks Anne Rigail who is one of the only female CEOs of a major airline.

  5. I think it is quite remarkable that even when KLM’s CEO cut employee benefits, the employees came to his defense. For example, whenever someone criticized Elbers in the comment section of the petition, an employee of KLM (I assume) would defend him and say something along the lines of: “I am not happy about that either, but he did what he had to do.”

  6. @Icarus – not sure what Anne has to do with the above, since OMAT have written about her before, but she does tend to fly under the radar! Many airline CEO’s do. Name the CEO of AZ, LH, NH, ?

    I think its time for KL to grow up. There are the better half for sure, but they signed (were FORCED) to join AF, and so should at the very least co-operate. As long as they can remain dutch, then all good. NOW, if AF-KLM is trying to turn KLM into AF then hmmmm massive problems will surface. If they fire the KL CEO (I see it happening) watch KL go downhill.

  7. Important to add, anyone could sign the petition. Even though 25,000 would indeed be a high percentage of the staff at KLM, this would only be true if only KLM staff could sign the petition. I don’t know how many KLM employees signed the petition, and how many people outside of KLM since the petition has gotten quite some attention in Dutch media.

  8. Let me also guess the reason why this guy is so popular if I may. Is it because he allegedly gives away free Givenchy cologne? LOL

  9. I agree this article is a little too speculative, frankly. I normally love these posts about the workings of the airline business but we don’t have enough information – or even close to it – to speculate like this.

    I have also heard that KLM employees (and management) are furious at Ben Smith’s climbdown to the French unions. Yes he has stopped the strikes paralysing Air France, but at a massive cost that will see them require even more of a revenue premium (which they are not in a position to get since they are a total basket-case in terms of reliability and don’t offer flat beds in J in over half their fleet) to regain profitability.

    I can completely understand why a KLM employee would not regard these developments as positive, so while I find the subject matter interesting, I think we need to reserve judgement, even of Ben Smith’s actions.

  10. I understand this blog is for entertainment purposes only (yes I finally read the bottom part of your site) so speculation is welcome.
    As for me, if Elbers did a super amazing job at KLM, then why didn’t he become the CEO of AF-KLM? From an outsider’s perspective that seems to be the next step, right? We don’t know the behind-the-scenes here but if anything, I can see Ben Smith seeing Elbers as a threat and just wants him out (mind you this is also just a mere speculation.) Whatever happens, I hope KLM remains a strong airline and that employees won’t lose morale.

  11. As an employee of KLM I can say that there is a massive amount of unrest under employees of KLM. A lot of people are scared of a centralized system in which KLM will even start compromising for Air France more than it is doing right now. Besides the latest rumours there are a lot of others playing a part in this whole dispute i.e. the pilots of Air France striking constantly and a lot of other issues. It will be very interesting to see what happens and how Smith and Elberd find a solution or if there is even room for a solution.

  12. “Air France-KLM has a new CEO, Ben Smith, who is doing a fantastic job. He’s an incredibly competent leader, and he’s exactly what the company needs to turn things around.”

    Those are very strong words that really should be backed up with verifiable facts. Smith hasn’t really been in the job long enough to qualify your statement. To be honest all we have to go on is his performance at Air Canada. From a shareholder perspective that was a successful stint but from a passenger perspective not so much. Smith’s tenure saw one of the biggest service reductions in AC history and the introduction of AC Rouge. Rouge was Smith’s creation and heralded the age of low cost long haul travel and the race to the bottom we have seen with Level, Joon et.al. Ironically enough Smith has seen the error of his ways with AF now discontinuing Joon.

  13. Ben, Thanks for the piece.

    This situation is far more complicated than ‘getting AF and KL to cooperate closer’. Cooperation as equals is no problem.

    The main issues seem to arise from 1) ‘fantastic Ben’ having to now find funding for his giveaways to the French unions and the KLM positive cash flows looks oh so tempting, and 2) getting AF to grow/recover at the expense of KLM by making it a secundary brand, instead of growing at the expense of competing brands in the market.
    Both reasons obviously trigger an emotional reaction from employees and violate regulatory requirements set by the Dutch government during the time where AF bought a stake in KLM. For the record, AF is not the sole owner of KLM.

  14. The nationalist element to this is obviously a major factor. Dutch people want their iconic Dutch airline to remain Dutch. Combine that with the relative success KLM has had recently while AF suffers from highly visible disruptions like strikes it is quite easy to understand the popularity of the Dutch CEO and the resistance to growing closer. Imagine Aeromexico combining with American in a similar fashion and you’ve probably found the only way in which Doug Parker could become a popular airline CEO.

    To get a functioning combined airline you’d surely need KLM to become less tied to its Dutch image and AF to become less tied to its French image. Get rid of both brands and build a new one. That will never happen so I have a tough time seeing how this will end in success.

  15. @bgqp

    Not so sure if there is a strong nationalistic sentiment here. In my view it is more sentiment for justice in the sense that the dutch do not want to see their hard earned money to be used to subsidize a not well-run overstaffed airline.
    Therefore Elbers may or may not be so immensely popular amongst his employees. Surely as President Director he will have had to do things that employees did not like. However Elbers is seen as the guy who stands for the company interest, and the interest of all shareholders by sticking to the agreements in place and preventing AF from cash grabbing. In doing so, he is firmly seen as acting in the interest of the company, which is his statutory duty.
    That fact himself, that he does what he is required to do instead of bowing to the whims of Paris, has earned him the respect of employees, the shareholders as well as public sentiment.

    Lets not forget that AF does not own KLM. KLM is for >80% privately owned. Therefore any cash grab by AF has no legal basis and is to the detriment of all shareholders.

  16. Thank you @SchipholOost, finally someone who knows what’s happening speaks up! I have repeated posted that people’s fascination over Mr. Smith is ungrounded. For his past glory, i agree with what @majik said. I have Canadian friends swore never to fly AC ever since his ‘reform’. For his doing at AF, I don’t think he did anything wrong. He did it the easy way, and all his ambitions bring serious financial uncertainties to AF. KLM just can’t be part of it!

  17. Why on earth would Ben Smith of AF want to sack this CEO, he’s clearly across the airline, he’s fit and he appears to be very well respected. Make him CEO of Air France as well as KLM and get rid of the new guy at AF. No brainer if you ask me. Besides this guy would more than likely sort those Lazy French union wankers out. They need it, christ they’re lazy bastards the French.

  18. I just thought of an even better idea, if he does get sacked, Qatar should sack that Arab recalcitrant Big Al Baker, the rude, disgusting dickhead and replace him with this guy. But maybe Piers would not want a job at an airline like Qatar that treats people so badly, uses virtual slave labour in their country, kills gays, bans women from doing most things and where most people have no human rights. Sorry Piers, bad idea!

  19. The AF-KLM model is common enough in Europe: eg, IAG is more like a federation of national(istic?) airlines.

    The activities at group level are largely ones which are invisible to the end user (eg, negotiating fleet purchases together, so securing larger discounts from manufacturers); the management of individual airline brands is kept separate to enable the Spanish-ness or Irish-ness or British-ness of the brand to shine through.

    It should be a successful corporate formula if the underlying values are shared. But I suspect the big problem here is that AF and KLM values are incompatible.

  20. Making decisions based on the created emotions is always a weak sign. I am affraid KLM have to deal with the situation which factually was already created with the merger in 2004 with AF.

  21. To me, as a KLM employee, this all is rather simple to figure out…

    Ben wants to drain klm’s routes and cash, for the benefit of AF, where he has bought the support for his actions by raising wages in a company that’s already far from efficient.

    KLM would then become a low cost, secondary airline without any own input and most likely a large reduction in jobs.

    Elbers knows this and wants to prevent this scenario. He knows how to successfully run a profitable airline and doesn’t want to see this airline going down the drain to support a company that, without extreme reformation, will never be profitable.

    The Dutch refuse to donate their airline, where they made lots of sacrifices the last few years to become profitable, in favour of the French who have been striking the cashflow out of it without any regards to ‘the group’s’ wellbeing.

    Get AF profitable first. Sort out he whole union thing. Get rid of greedy pilots.
    Then we’ll talk…

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