KLM has announced plans to freeze employee salaries for the next two years, citing financial pressures and the need to curb rising costs. This proposal, detailed in a letter to unions at the start of collective labor agreement (CCT) negotiations, comes after employee salaries increased by 25 percent since 2019.

The airline’s existing CBAs for ground staff, cabin crew and pilots are set to expire at the end of February 2025. Negotiations with unions began in October to discuss the terms of a new agreement.

In mid-November, KLM informed unions of its growing financial difficulties despite high demand and full flights. The airline highlighted challenges such as limited capacity for intercontinental flights, rising operational costs and uncertainties over the future of Schiphol Airport, including rising fares.

“Costs are not under control,” KLM said in its communication to unions, stressing that these challenges have contributed to the weakness of the Air France-KLM share price and the pessimism of analysts.

To address these concerns, KLM aims to improve its annual financial results by €450 million through productivity improvements, cost reductions and increased revenue. The company is also reassessing its investments and considering outsourcing certain activities, including catering.

KLM has proposed a two-year CBA, or longer if acceptable, arguing that recent pay increases place its pay levels among the highest in the Netherlands. The airline highlighted that “compared to other airlines and large Dutch companies, salaries at KLM for similar positions are higher.”

Given the current financial environment, the airline said a “pause” in salary increases was necessary.

KLM has proposed additional cost-cutting measures for cabin and cockpit crew, including changing travel allowances by replacing the current daily meal allowance for alcoholic beverages with an allowance for non-alcoholic beverages, citing safety and health issues. The airline also plans to consider booking hotel rooms outside city centers to European destinations in order to get lower fares and intends to engage pilots in discussions about raising the retirement age.

The airline also announced long-term goals to further reduce staff costs. In May, KLM revealed plans to cut 700 million euros a year, a significant portion of which will come from staff-related savings.

The Dutch pilots’ union (VNV) and the cabin crew union (VNC) are reviewing KLM’s proposals with the help of external consultants.