KLM 2020
KLM 2020
2020
Headoffice
Amsterdamseweg 55
1182 GP Amstelveen
the Netherlands
Postal address
P.O. Box 7700
1117 ZL Schiphol
the Netherlands
2
Table of contents
Report of the
Board of Managing Corporate Financial Statements
Directors governance 2020
06 Letter from
the President 84 Board and governance
110 Consolidated financial
statements
10 Key figures
92 Report of the
Supervisory Board 186 Company financial
statements
12 Review 2020:
resilience 100 Remuneration report
and policy Other Information
16 105
Supervisory Board and
The world we
operate in
Board of Managing
Directors
Miscellaneous
22 Financial results
30 Sustainability
36 People
43 A resilient response:
crisis and recovery
56 A resilient response:
restructuring
62 Risk Management
and Control
3
Report
the Boa
of Mana
Director
KLM 2020 Annual Report
4
Corporate Governance
of
ard
aging
ors KLM 2020 Annual Report
5
Corporate Governance
Letter
from the
President
The year that is behind us proves how a year can feel short, yet long at the
same time. The year was short because it was not too long ago in October
2019 that KLM celebrated its 100th year anniversary.
And how? KLM sizzled with a zest for life! There was confidence that the
positive trend of 2019 would continue. The prospects for the company were
promising. Our financial position was good, the leadership team aligned and
the organisation agile. Between 2014 and 2019 we improved on key metrics
such as financial performance, customer experience and staff engagement.
KLM was fit for the future. Who would have thought that only a few months
after our centenary we would be in the grip of a global pandemic? A crisis that
would affect the world, our industry and our company so drastically.
At the same time, the year felt long, very long. It seemed have been able to maintain liquidity through a strict focus on
as if the world stood still. As we look at the images of the cash preservation and cost reduction. Throughout the crisis,
last year we saw empty departure halls, parked aircraft, we operated a skeleton network to facilitate repatriation,
empty offices and a closed engine shop. No one has ever essential travel and crucial cargo operations.
experienced this before and sometimes it all looks and feels
surreal. In total, over 5,000 colleagues have left KLM during True Colours
the year. A reduction from some 33,000 colleagues within The crisis brought out the best in KLM. There was solidarity,
the KLM group at the start of the year to below 28,000 at courage and creativity throughout the entire organisation.
year’s end. Painful, difficult and emotional, yet unavoidable KLM staff repatriated 250,000 Dutch nationals and fellow
sacrifices. This has been KLM’s biggest crisis since WWII and Europeans, even from far-away places such as Australia,
the road to recovery is unfortunately not linear. To weather where we had not flown to in decades. The Queen of the
this unprecedented storm we adopted a four-pillar approach, Skies, recently retired after nearly 50 years, returned to
which can be compared with simultaneously playing on four service and lived up to her name as these Boeing 747s
different chessboards. delivered vital personal protective equipment. Together
with Royal Philips, we set up an air-bridge to China and
1. Crisis Management conducted more than 130 flights with cargo in the passenger
In January 2020, news of a virus came from China. The cabins, delivering urgently needed medical equipment. KLM
period since then has been a roller coaster. By March, the staff with a reduced workload volunteered in healthcare,
virus had spread all over the world and almost our entire elderly care and other places of societal importance.
operation came to a halt at the beginning of April. Our Hence, we supported society and society was supportive
customers stranded or were forced to fly under difficult of us with the governments loans and the NOW payroll
circumstances. The crisis lead us to deviate from our initial support scheme. For me these initiatives were inspiring and
2020 plans. We shifted to crisis mode and implemented all motivating.
necessary measures to safeguard the future of KLM. We
(22.5)
OPERATING ACTIVITIES* OF REVENUES
(1,546)
449
(1,154)
(Loss)/ 853 7.7
Profit for
the year EQUITY EARNINGS PER ORDINARY SHARE
(EUR)
(115) (33.05)
1,560 9.57
AS A % OF TOTAL
PROFIT LONG-TERM LIABILITIES
(1,546) (2)
4,015 4,034
16.1
449 22
(21.5)
NET DEBT/ADJUSTED EBITDA* DIVIDEND PER ORDINARY SHARE
(EUR)
CASH FLOW NET CASH FLOW USED IN INVESTING FREE CASH FLOW ADJUSTED FREE
FROM OPERATING ACTIVITIES (excluding investments in and proceeds CASH FLOW
ACTIVITIES on sale of equity shareholdings, dividends received and
purchase of short-term deposits and commercial paper)
Financial
(294) (681) (975) (1.354)
position 1,835 (1,323) 512 132
Average
number
FTEs
of KLM
Group
staff
Still, while KLM’s production and finances have been set back
for years, Elbers, like the rest of the Board, is optimistic. ”People
will fly again and the industry will recover, albeit slowly. And
KLM is well positioned to capitalise on this. Our global network
and Schiphol Airport continue to be a powerful combination.
Our purpose has not changed, our vision remains the same
and our people and processes proved to be resilient. We have
tuned and reconfirmed the strategy for the years ahead and
our business model is still valid. We will work on initiatives that
make our business model more viable in the field of customer
CFO COO
The world
we operate in
developments
for both passengers and airlines and to reduce costs to
reasonable levels.
Developments in Europe were dominated by COVID-19 In 2019, the European Commission launched the European
and Brexit and on the longer term the acceleration of the Green Deal, which aims for the European Union to be
sustainability of the aviation industry. climate neutral in 2050. The Green Deal also imposes
ambitious targets to make the European aviation industry
Due to the COVID-19 pandemic, KLM’s network was severely more sustainable. These targets contribute to those of the
affected. KLM’s primary aim remained to offer customers the Sustainable Development Goals of the United Nations, which
widest possible range of destinations at all times. In March, provide an ambitious global agenda, as well as those of the
the European Commission proposed a slot waiver for the Paris Agreement, which aim to keep the rise in temperature
entire summer timetable, to prevent airlines from having to below 2 degrees, preferably 1.5 degrees, celsius, compared
fly empty aircraft just to keep their slots. In October, due to to pre-industrial levels.
the continued impact of the pandemic, the slot waiver was
extended to the winter schedule. These waivers enabled The airline industry’s contribution to CO2 reduction is
KLM to respond more adequately to the rapidly changing organised globally through the International Civil Aviation
market conditions. Organisation (ICAO), which aims for carbon neutral growth
of the aviation industry as from 2020. KLM aims to reduce
The United Kingdom is a very important market for KLM absolute CO2 emissions by 15 per cent in 2030, compared
and a key trade partner for the European Union. With 17 to 2005 levels, which is a more ambitious objective than
destinations, KLM is one of the largest carriers operating the realisation of a carbon neutral growth by means of CO2
to and from the United Kingdom. On January 31, 2020, the compensation only.
United Kingdom left the European Union with a withdrawal
agreement that allowed for a transition period until January In 2020, KLM provided input for and welcomed the European
1, 2021, in which the new trade relation between the Commission’s Sustainable and Smart Mobility Strategy that
United Kingdom and the European Union was negotiated. was presented in December 2020. KLM agrees with other
KLM is pleased that a deal was finally reached, allowing for European airlines that Europe needs to realise a true Single
passenger and cargo flows to continue as before. Naturally, European Sky, support the production and deployment
there are extra formalities as the United Kingdom has of affordable and high-quality sustainable aviation fuels
officially become a third country, but the new European and modernise air passenger rights. KLM encourages the
Union-United Kingdom Trade and Cooperation Agreement European Commission’s efforts to promote a level playing
keeps these to a minimum. Furthermore, there are some field for aviation within and outside the European Union.
important provisions on fair competition, data flows and
aligning safety standards. Building on the comprehensive KLM emphasises the importance of a level playing field in a
agreement it is important that a level playing field with highly competitive industry and prefers to see sustainability
the United Kingdom remains, for instance in terms of efforts be organised on a global or European level and
environmental policy, data protection standards, passenger the revenue of any taxes reinvested in the research and
rights and economic regulation. development of sustainable aviation fuels and efficient
aircraft and equipment. The introduction of national
In 2020, EU Regulation 261/2004 regarding air passenger guidelines or taxes, like for example, the Dutch ticket tax,
rights continued to contribute to confusion among could put a break on investments in sustainability, which
passengers and airlines. The EU Regulation 261/2004 is would undermine efforts to improve the quality of the living
not defined and therefore not suitable for the number of environment.
cancellations and re-bookings caused by COVID-19. Lack
of clarity in the regulations leads to various interpretations
and numerous court cases, often forcing airlines to pay
compensation for disturbances outside of their control,
such as weather conditions and strikes. Between 2013 and
2019, the cost of Regulation 261 has risen 500 per cent and
a large portion of the money goes to claim agents rather
Netherlands
moderate growth at Schiphol is important.
In 2020, KLM took off from a good starting position. In KLM’s adjusted operational loss of EUR 1,154 million includes
the years from 2014 to 2019, the company improved EUR 1,049 million Temporary Emergency Bridging Measure
financial key performance indicators in many areas in all for Sustained Employment (NOW) support from the Dutch
businesses. Also, the financial and equity position improved Government. The NOW support was designed to cover a
over those years. Consequently, KLM was resilient and significant portion of wages. The swift commitments as
financially healthy when COVID-19 hit. The financial result regards the NOW and the quick payments thereof by the
of 2020 offset the good performance of the years before. government have been extremely important for KLM.
KLM revenues were only EUR 5.1 billion, compared to last
in €bln
-1,154
1.3 1.3
10.3% 10.0%
1.0 7.7%
0.8 6.9%
0.7
0.5 3.9%
in €bln
in %
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
IFRS 9/15/16 applied IFRS 9/15/16 applied
-22.5%
408 387
360
in €mln
311
132
-1,354
KLM 2020 Annual Report
23
Report of the Board of Managing Directors
KLM was hit hard across its portfolio of businesses. The out less efficient aircraft types or renegotiating leases.
passenger side of KLM’s network business was impacted KLM’s purchasing and cost-cutting initiatives achieved EUR
most severely by the almost total evaporation of passenger 350 million of savings reducing the monthly cash burn rate
demand as from April. The passenger business was reduced significantly.
to below 10 per cent of its normal level in the early stages
of the COVID-19 crisis, and even when the network started Securing loans
to recover, never rose above 25 per cent. Intercontinental The government provided a EUR 1 billion subordinated loan
flights never recovered from global restrictions, but in to KLM and guaranteed 90 per cent of a combined EUR
summer KLM’s European network managed to run 60 2.4 billion revolving credit facility by a consortium of 11
per cent of normal flights with 70 per cent load factors. banks. At year-end KLM has drawn EUR 942 million of the
Transavia, KLM’s leisure brand, also made losses in spite of a EUR 3.4 billion loan, leaving some EUR 2.4 billion available
relatively good summer, but it ceased flying entirely for two for the coming five years. By granting the loans, the
months in the second quarter and the latter part of the year. Dutch Government stressed the value of KLM’s extensive
intercontinental network in combination with the hub at
Cargo had a good year, almost doubled its contribution Schiphol to the open economy of the Netherlands, the value
to KLM’s result, due to higher demand and increased of KLM as a major employer in the Netherlands as well as the
prices. Cargo revenues, however, did not compensate for jobs connected to the wider Schiphol region and the value
the decline in passenger revenues, and will not support thereof. The support did, however, come with a number of
the rebound of the European network. Engineering & financial and non-financial conditions that will remain valid
Maintenance (E&M) suffered from lower flight hours, both until the loans have been paid back.
within AIR FRANCE KLM and other airlines, as well as the
decision by most airlines to postpone maintenance. In The obligation to repay the loans curtails KLM’s ability to
addition, E&M dealt with an increasing number of unreliable invest. While in 2019 KLM invested EUR 1.3 billion in people,
debtors, although this will improve once flights resume. fleet and IT, investments in 2020 dropped to less than
Within E&M, where demand usually lags passenger demand EUR 700 million. At this level, KLM can maintain the current
with one to two years, a reduction of maintenance demand state of its product and assets. Current projections assume
is observed as both KLM and Air France as well as third passenger growth will return and when it does, KLM aims to
parties stopped or heavily reduced flying. return to an investment level of around EUR 1 billion per year
in sustainability, product and services, data analytics and
When the severity of the COVID-19 crisis became apparent, better booking tools.
KLM took immediate action to retain cash and reduce costs.
At the start of the crisis, KLM had EUR 1.3 billion in cash. KLM Consolidated statement of profit or loss
postponed IT and real estate projects, renegotiated new
payments terms with suppliers, and pushed back investments In millions of Euros 2020 2019 Variance %
in aircraft. Also the possibility to delay the payment of labour Revenues 5,120 11,075 (54)
taxes amounting to EUR 764 million as per December 31,
2020 has been used. An existing revolving credit facility of
External expenses (3,455) (6,116) (44)
EUR 665 million was immediately used. KLM chose to offer
Employee compensation
passengers a voucher instead of immediate cash refunds (1,867) (3,189) (41)
and benefit expenses*
upon flight cancellations, although passengers retained their
Other income and expenses 127 173 (27)
right to a cash fund later in the year.
Total expenses (5,195) (9,132) (43)
fees, which account for around 50 per cent of all costs, Share of results of equity shareholdings 3 11
dropped by some 45 per cent because the number of flights (Loss)/Profit for the period (1,546) 449
decreased. Employee compensation and benefit expenses
were helped with EUR 1,049 million temporary NOW support * See note 28 Alternative performance measures (APM) for the reconciliation to
and also a reduction of staff count by more than 5,000 adjusted EBITDA and adjusted income from operating activities. Also see the
colleagues. Furthermore, a reduction of labour conditions Alternative performance measures section in the Notes to the Consolidated
was implemented as part of the conditions imposed by the financial statements
Dutch Government in relation to the loans.
If cash is king, then Vijay Panday should be called the King One such measure was to ensure that at all times KLM has
of Cash. As Director Group Treasury and Risk Management, enough cash available to ensure it can meet its financial
Vijay leads a small team of three experts, surrounded by nine obligations. A second was to develop scenarios for various
operational staff, that manages all of the airline’s cashflows and crises, such as the fall of the euro, caused by the 2008
financial risks. “KLM is a labour and capital intensive company. financial crisis, followed by the 2012 euro debt crisis.
We lease some of our assets, such as aircraft, and use loans, Another and important measure was the creation of a
which costs money. Our goal is to minimise these costs and centralised Group Treasury that oversees KLM Group’s
manage the risks involved.” financial risks and payments worldwide. If that sounds
simple, think again: KLM’s pre-COVID-19 network spanned
Some of these risks are inherent to the cyclical and event- 171 destinations and the group’s turnover mounted to
driven nature of the airline industry. Broadly speaking, people fly EUR 11.1 billion in 2019, of which 95 per cent is managed
when the economy is doing well, but when a crisis hits, holidays centrally by the Group Treasury.
to sunny destinations or business trips are less of a priority.
Earlier crises provided KLM with tough but valuable lessons. “We used to pay our vendors in dollars and euros
everywhere, but now we pay a large part in local currencies,
“The day after the 9/11 attacks, the majority of the 25 banks around 85 in total. In Uganda we pay with shillings, in Korea
we did business with stopped answering our calls. Suddenly, we pay our vendors with wons and in Mexico we pay with
we were too risky for them. Something similar happened in pesos. Seeing the money flow in and out is like seeing
2003 with the SARS virus outbreak followed by the financial blood run through the veins of an organism.”
crisis in 2008. Banks hesitated to provide us with credit lines Any local net result is transferred to KLM’s Group Treasury
that are necessary for a secured treasury operation. We head office accounts and converted into euros. This sounds
learned from this and took measures to ensure we were less complicated, but in practice it’s a lean process that requires
dependent on banks.” only a handful of people and a Treasury Management
KLM is one of the few airlines that manages its finances this When it became apparent that, in order to overcome the
way and Vijay was glad of it when the COVID-19 crisis hit. crisis and to secure the future of KLM, additional loans were
“When KLM’s network was shut down in March, we were needed, a financing team together with representatives of
prepared. Thanks to the centralisation we were able to act the banks and the Dutch Government negotiated the loans
swiftly. Initially, KLM had enough cash in hand to fulfil its and state guarantees, for which KLM is grateful.
short-term financial obligations. But soon it became clear the
crisis would last longer. Also, mass cancellations meant KLM Reflecting on 2020, Vijay says KLM’s centralised system has
would have to pay significant refunds. Eventually in March, proven its worth. “Most of our peers have a decentralised
we drew on the standby facility with twelve international system and in a crisis like this that is a liability. It prevents
banks.” a clear view of cash flows and rolling cash flow budget
forecasts.” Having said that, he sees room for improvement.
One aspect of crisis management was the formation of “We want to do more with the financial data that is
a central payment team, consisting of the Chief Financial captured by our Group Treasury system to further optimise
Officer, Treasury, Corporate Control and Procurement. This risk awareness, maximise the return on our cash and
team managed and monitored every outgoing payment. further reduce the financing cost. Our next step is to use
Some of the main stakeholders chipped in to secure technology to analyse that data, develop better scenarios
KLM’s cash position. Financial agreements were made with and become more financially agile.”
suppliers, airports, lessors, insurers and other stakeholders,
who all contributed their part. IATA was very cooperative and
offered to trade foreign currencies with KLM at the deepest
Fly Responsibly been conducted at Schiphol with the use of electric taxi
equipment.
initiative in 2019 already In order to meet society’s need for making flying more
positioned KLM as a
sustainable, KLM is in favour of a European network of
high-speed trains replacing short distance flights. Early 2020,
KLM replaced one of its five daily flights to Brussels with a
sustainability leader in journey on the Thalys. KLM is actively investigating with the
Dutch rail company (NS), Schiphol Airport and the Dutch
the airline industry." Government how to replace more short flights by trains.
47% 44.000
less absolute CO² tonnes CO²
-50%
emissions compared compensated
non-recycled waste
to 2005 thanks to KLM’s
(compared to 2011)
compensation service
CO2ZERO
191
tonnes of
Sustainable Aviation
2020 3700
Repatriation flights
due to COVID-19
2030 0
emission of ground
Fuel purchased operations by 2030
28% 21% 5
of the Netherlands less CO² emissions People
based managers at produced by ground Sustainability
KLM is female operations compared ambitions
to 2019
54% 338
less non-recycled hectares of tropical
waste compared to forest planted in
2011 Panama by KLM
CO2ZERO service
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Lavazza part of Blue Heart Days Multiple initiatives Launch Economy class First flight of scale SAF Paper Clean Launch of Cargo
Corporate SAF KLM employees in Air France-KLM catering of EU model Flying V Skies for SAF Programme
Programme community Principles fights all vegetarian Tommorow
involvement Coalition
Trial with hybrid Green Recovery
towing vehicle Statement Fuelling Flight
statement
140
120
112
100 104
100 97 95 96 95 96
85
80
60
53 50
40 92 90 89 88 52
83
20
0
2005 2015 2016 2017 2018 2019 2020 2030
Total CO2 emission Net CO2 emission Production (RPK & RTK) CO2 emission per pax-km
When flights worldwide were grounded, Dutch citizens found In some cases, KLM had to get really creative. When crew
themselves stuck far away from home, feeling concerned was not allowed to disembark in South Africa, it became
about their wellbeing and uncertain of how the pandemic impossible to fly directly from and to Amsterdam. Realising
would evolve. Quickly, the Dutch Government set up a that Réunion, off the coast of Madagascar, was French
repatriation desk, where these citizens could register, and territory, KLM worked with Air France to make a stop over
called KLM to ask if they could organise the repatriation there so that crew could rest. “And KLM also ended up flying
flights. Not thinking twice, KLM took its responsibility, even to Sydney, where it hadn’t been in over 20 years. To make
deciding to offer the flights at cost price. Over several this possible, KLM had to obtain an Operating Permit from
intense weeks, dozens of people at KLM worked 16 hour a the Australian Government and upload maps to the aircraft’s
day to bring these people home. onboard computer,” Frank explains proudly.
Before COVID-19, work was relatively straightforward for Mila KLM had no choice but to comply. Failure to do so could lead
Overmars, Shift Leader Preparation and Boarding ICA, and to a EUR 5,000 fine per passenger and passengers would
Julie van der Wilden, Unit Manager Preparation and Boarding simply be refused entry and returned on the next flight. In
Air France & Delta Air Lines. Each flight was prepared in the practice, this meant KLM had to organise test facilities at
back office and handled at the gate. Some families had Schiphol, ensure protective equipment could be purchased in
special seating needs and there was the occasional rowdy the airport stores and organise quarantine facilities for those
passenger. Speed and safety were top priorities and the who tested positive. “These requirements could change at
process was usually smooth. “The longer an aircraft is on the a moment’s notice, which gave us just one or two days to
ground, the more money it costs. In recent years, KLM had adapt,” according to Julie.
become good at quickly turning around an aircraft at the
gate,” Mila says. Mila explains that the restrictions caused a great deal of
hardship. “Elderly people often didn’t have a mobile phone,
The pandemic changed everything. Julie took a seat on the which meant they couldn’t scan QR codes or make online
COVID-19 Implementation Team, an expert-team that was payments. Some transfer passengers got stuck for days
linked to the Contingency Team, liaising closely with Mila at the airport because they were refused entry by their
and her team. Getting an aircraft off the ground became an destination. And on one flight we had to refuse 15 people at
arduous task. “Each country had its own demands. A PCR the gate, because an hour before departure the government
test that is not older than 48 hours or 72 hours. A PCR test decided to bar their nationality from entry.” Luckily, the crisis
combined with an IGM test. An online questionnaire that also inspired moments of kindness and compassion.
can only be accessed with a QR code. Checking people’s
temperatures. Proof of payment of a test that will be Mila remembers “people without a credit card, who
conducted upon arrival. Our job became to organise these couldn’t make the online payment for the PCR test at their
conditions and police it,” Julie explains. destination. So they would give cash to our KLM colleagues,
Crisis and
customer centricity, KLM kept the Crown Lounge at Schiphol
open to ensure passengers could rest in comfort. This made
KLM the only major European airline to keep its lounge at
recovery the hub open from the beginning of March through to the
end of the year. Initially the food and beverage services
were limited but from July the lounge cautiously expanded to
the full‑service offering.
The months of March, April and May saw KLM thrust into
an unprecedented global crisis. The organisation quickly Positive trend of Net Promotor Score
and adroitly responded to secure the safety of everyone 53
in %
entertainment, a dedicated service and more exquisite
catering. Furthermore, KLM will invest in a direct aisle 2015 2016 2017 2018 2019 2020
business class on all Boeing 777-300 aircraft, which already
can be found on the Boeing 787. KLM launched an improved
website, including a content management system based on When the crisis began to unfold, KLM’s Contingency Team
AI that supports personalised offering to customers. leapt into action to handle the number of unprecedented
situations, and KLM’s Integrated Safety Service Organisation
By the end of the year, trans-Atlantic partners Delta Air played an important role by managing the risks of increased
Lines and KLM launched a travel corridor with COVID-19 variability. KLM retired its fleet of passenger Boeing 747s
tested flights from Atlanta to Amsterdam. The airline partners ahead of schedule and eventually temporarily parked the
worked with the Dutch Government, Schiphol and Hartsfield- majority of its fleet at Schiphol and Groningen airport.
Jackson Atlanta International Airport to allow eligible
passengers to be exempted from quarantine after receiving By September, a second COVID-19 wave washed over
a negative PCR test result after landing in the Netherlands. Europe, impacting the winter schedule that started late
October. KLM had to scale back operations from 40 per cent
Operations and network of its normal capacity to 20 per cent, using the smaller and
In the 2015-2019 period, KLM streamlined its fleet, invested more cost-efficient Embraers of KLM Cityhopper instead of
in IT, began implementing the Operational Excellence the larger and less efficient Boeing 737. This meant KLM
philosophy, and developed a more integrated operation and was able to make the most of a precarious situation, even
safety organisation. As a result, the reliability, the agility and becoming the number one airline in Europe in terms aircraft
the cost-efficiency of the operation significantly improved movements. Ultimately, though, the flow of passengers
and safety came at an even higher plan. It was with this dropped from 35.1 million in 2019 to 11.2 million in 2020.
robust foundation that KLM entered the crisis.
Due to the COVID-19 crisis passenger numbers
decreased significantly in 2020
Capacity KLM Group 35.1
34.2
32.7
30.4
141,708 28.6
135,173 139,118
in mln
128,593 11.2
122,748
72,621
in mln ASK
Average age in years Owned *** Finance leases* Operating leases Total
**/****
Training aircraft 16 - - 16
* With the implementation of IFRS 16, these aircraft are regarded as in substance purchases and therefore included as Owned aircraft in the financial statements
** With the implementation of IFRS 16, these aircraft are recorded as Right of use assets in the financial statements
*** Excluding 2 Boeing 747-400's out of service and to be sold and 1 Boeing 787-10 temporarily not in operation
**** Excluding 2 Airbus A330-200's and 1 Boeing 737-700 to be returned to lessors in 2021
Route areas
Europe & North Africa 6,804 20,048 (66.1) 10,450 22,960 (54.5) 65.1 87.3
North America 6,763 23,666 (71.4) 15,125 26,474 (42.9) 44.7 89.4
Central and South America 5,437 15,989 (66.0) 10,155 17,798 (42.9) 53.5 89.8
Asia 7,175 28,625 (74.9) 17,081 31,398 (45.6) 42.0 91.2
Africa and Middle East 4,823 14,503 (66.7) 7,840 16,509 (52.5) 61.5 87.8
Caribbean and Indian Ocean 2,871 6,645 (56.8) 4,191 7,313 (42.7) 68.5 90.9
Route areas
Europe & North Africa 6 11 (46.9) 171 366 (53.3) 3.4 3.0
North America 782 994 (21.3) 1,037 1,675 (38.1) 75.4 59.3
Central and South America 1,332 1,250 6.6 1,682 1,875 (10.3) 79.2 66.7
Asia 1,205 1,454 (17.1) 1,280 1,767 (27.5) 94.1 82.3
Africa and Middle East 790 879 (10.1) 1,010 1,281 (21.2) 78.2 68.6
Caribbean and Indian Ocean 69 90 (23.5) 205 289 (29.1) 33.7 31.3
Route areas
Europe & North Africa 5,349 17,670 (69.7) 7,779 19,256 (59.6) 68.8 91.8
Airbus A330-300/200
Number of aircraft 5/6 Maximum passengers 292/268
Cruising speed (km/h) 880/880 Total length (m) 63.69/58.37
Range (km) 8,200/8,800 Wingspan (m) 60.30/60.30
Max. take-off weight (kg) 233,000/233,000 Personal inflight entertainment
Boeing 737-900
Number of aircraft 5 Maximum passengers 188
Cruising speed (km/h) 850 Total length (m) 42.12
Range (km) 4,300 Wingspan (m) 35.80
Max. take-off weight (kg) 76,900
Boeing 737-800/700
Number of aircraft KLM 31/16 Max. take-off weight (kg) 73,700/65,317
Number of aircraft Transavia 35/4 Maximum passengers 186/142
Cruising speed (km/h) 850/850 Total length (m) 39.47/33.62
Range (km) 4,200/3,500 Wingspan (m) 35.80/35.80
Embraer 190/175
Number of aircraft 32/17 Maximum passengers 100/88
Cruising speed (km/h) 850/850 Total length (m) 36.25/31.68
Range (km) 3,300/3,180 Wingspan (m) 28.72/28.65
Max. take-off weight (kg) 45,000/36,500
A multidisciplinary team with representatives from all worked closely with the Dutch National Institute for
operational departments, the Contingency Team (CT) is Public Health and the Environment, KLM’s safety organisation
part of the Operational Control Centre (OCC) that monitors and KLM Health Services.”
and guides all KLM flights worldwide. Normally reserved for
short-term contingencies like strikes, major system errors or To make matters more complicated, every country
bad weather, the CT quickly became the nerve centre for implemented its own safety and health regulations, making
all of KLM’s operations. Coen Swaanenburg, Vice President it a nightmare to plan flights and ensure compliance.
Operations Control and Chairman of the CT, played a central “Some countries demanded crew used separate toilets,
role during the incredible months of the crisis. others specified we had to clean toilets after five visits
during a flight. Some demanded masks, others also gloves.
“Once the news emerged of a new virus in China, the CT Implementing social distancing in a small cabin was a
jumped into action. Initially we thought it was a local issue challenge. The simple act of handing out catering became
and we tried to move network capacity to other areas in the a complex puzzle. And in some countries, crew were not
world. But then the virus spread, more parts of our network allowed to disembark, which made it hard to board new
were impacted and the US suspended all travel from Europe. passengers.”
Suddenly, we had to bring our network to a controlled
shutdown and we realised we were going into a situation The CT also had to deal with people’s emotions.
that would last a long time.” “Understandably, crew were anxious. If you flew abroad and
tested positive, you could end up in quarantine in some
What followed were long days of work and the pressure to hospital for two weeks. Some people were concerned about
make major decisions with little time and information. “In the their children and partners. Others, still, were desperate to
beginning, like the rest of the world, we were fighting an fly, having been locked up at home unable to do what they
unknown enemy. We didn’t know how infectious COVID-19 loved. We had to factor this in as well.”
was and how to protect against it. To find answers, we
Cargo was proud to become an integral part of the Cargo revenues were 35 per cent higher than in 2019
fight against the pandemic. Working with the Dutch and the contribution to KLM results almost doubled. KLM
Government and Philips, KLM set up an air bridge from Asia benefited from IT investments in previous years, seeing
to the Netherlands to supply health care organisations direct online bookings above 60 per cent for the first time
with important medical goods. Cargo also launched the and direct online revenue 35 per cent on average. Visits to
innovative Cargo in Cabin freight concept, which involves the myCargo portal were up 35 per cent in 2020. Total KLM
Dutch Government 2019 period and net debt was set back to a high level. KLM’s
network business was impacted severely and revenues from
and Philips, KLM set up cargo, while enjoying an uptick, were unable to compensate
for this. Demand for E&M will remain lower than pre-COVID-19
to supply health care as to repay the debt to the Dutch government and banks by
2025.
organisations with In light of this and the enduring uncertainty about the
important medical
pandemic, KLM has developed a restructuring plan that aims
to achieve four strategic objectives. First, to protect KLM’s
core business and strategic position, by re-assessing and
goods.” sharpening our strategic choices. Second, to protect liquidity,
by strictly managing cash levels and adjusting capex plans.
Third, to adjust KLM’s size to the recovery of demand, by
developing market scenarios specific to KLM and adjusting
In 2020, cooperation regarding sustainability increased the network, fleet plans and workforce accordingly. And
within the KLM group. Transavia is now part of the finally, to emerge stronger, by achieving a structurally better
Sustainability Leads group and the Fuel Efficiency group. (lower cost, more flexible, more collaborative) organisation
Transavia partnered with KLM on the CO2 compensation and achieving 15 per cent manageable cost reductions. By
program CO2ZERO. Participation is stable at around 5.4 per achieving this, KLM will be able to pay off its debt, meet the
cent of passengers. Transavia worked on more waste and conditions set by the government and realise its ambition
weight reduction initiatives with external partners like the to become a leading European network carrier in customer
Amsterdam University of Applied Sciences and Product for centricity, efficiency and sustainability.
Product. Another example is the circular approach for our
coffee cups introduced in December. All coffee cups on A slow recovery is expected, whereby the 2019 levels will
board and in the hangar will be recycled into toilet paper. not be reached before 2023 or 2024. KLM will operate fewer
In future, cups from the Transavia offices will be included. flights and reduce capacity for an extended period of time.
Therefore the organisation will be resized and KLM will
become smaller. Cost levels will need to be adjusted because
it is expected that revenues will remain lower than 2019
levels for a number of years. KLM will have to be more frugal
because there will be less room for investment and focus will
be set on repaying the debts as soon as possible. The road
STAFF ENGAGEMENT
We care about our customers, our people and our planet. We are KLM for you!
KLM rose to the occasion to ensure hospital, shops to be prevented from damaging the seats. And then there
and factories received a constant supply of goods. was a whole range of regulations that had to be complied
A challenge that was taken up by Ton Veltman, Program with. “On our flights to Shanghai to pick up medical supplies,
Manager Cargo in Cabin. “Basically, we set up our own we had 10 extra crew members on board. Amongst these
business within two months. A new Cargo in Cabin product were specific Cargo in Cabin Coordinators, who we trained
was developed and organised. The project team recruited ourselves. We taught them to handle the cargo properly and
volunteers from across KLM, trained them and organised to tie down boxes. It was tough and labour intensive work.
the sales activities. More than 120 passionate KLM
colleagues were involved, working as volunteers, next Then, there was a lightbulb moment: develop a special cargo
to their regular work. They were happy to put in the bag that fits on a chair. “This would double our capacity,
extra hours. protect the interior and make it easier to load and unload
supplies. Together with a supplier we made sketches and
Before COVID-19, cargo was transported in a handful of we put the product in production.
dedicated freighters or, usually, in the belly of regular
passenger aircraft. But the cabins were now empty while Then came the hard part: making sure everything complies
the bellies were full because demand for medical equipment with regulations and getting permission from local authorities.
skyrocketed and cargo capacity went down. KLM brought We are working towards introduction early 2021,” Ton states.
its three Boeing 747 combi aircraft back from retirement, as
part of an air bridge with Philips to deliver medical quipment Throughout 2020, the Cargo in Cabin team conducted 153
from China to the Netherlands. flights, delivering a total of 125 million masks, 5 million gloves
and 7.5 million other relief goods. With Philips, meanwhile,
Cargo in Cabin was easier to imagine than to realise. KLM set up special flights for the transport of much-needed
Flight safety has to be guaranteed at all times and cargo had ventilators, both to the Netherlands and North America.
Financial asset
Kenya Airways Ltd. .......................................................................................................8
Risk profile For each reported risk, members of the Board of Managing
The airline industry is a cyclical, capital and labour-intensive Directors and the KLM Executive Team are responsible for
business with high levels of fixed cost and relatively small reviewing measures implemented to control and mitigate the
margins. In addition, the airline industry has to deal with risks. Twice a year, the most significant strategic, operational,
strongly fluctuating oil prices and currencies, as well as with compliance and financial risks are presented to the Board of
increasing numbers of laws and regulations, for instance in Managing Directors, the KLM Executive Team and the KLM
the areas of compliance, environment, flight safety, security Supervisory Board.
Intercontinental/business travel in particular has been To strengthen the cash and liquidity position, KLM has
impacted by these regulatory restrictions and cost-saving taken various measures, including a revolving credit line of
plans of corporate customers of KLM. EUR 2.4 billion supported by the Dutch Government and a
Given these travel restrictions and the collapse in passenger direct loan of EUR 1 billion. The Group also took financial
traffic and revenues, since March 2020, KLM was obliged to action in order to save cash by cut of operating costs and
significantly reduce its capacity and, notably, drastically curtail capex investment plan, labour cost reduction, halt of non-
its flight activity. critical projects and significant reduction of consultants and
external staff.
KLM has also implemented substantial cost-saving measures,
in terms of staff reductions and reductions in non-essential With the crisis continuing and the conditions for a recovery
investments and expenditure, the implementation of which remaining uncertain, KLM will continue to monitor the
could in particular damage KLM’s reputation due to negative unfolding situation on a daily basis, to make adjustments as
reactions from public authorities or unfavourable media necessary and define/deploy protection resources like the
coverage, or even lead to labour disputes, with a negative appropriate health measures.
impact on KLM’s activity.
In this context, KLM has also taken various measures to
strengthen its cash and liquidity position described in the
“mitigating principles and actions” paragraph below.
The current and forthcoming measures from the public
authorities in many countries could further disrupt, or even
prevent, any activity by KLM for an indefinite period. In this
context, several countries where KLM conducts its activities
have again taken lockdown measures at the year-end. In view
of the uncertainties inherent in any health crisis, KLM cannot
guarantee that this situation will stabilise in the short-term;
KLM’s baseline scenario is a return to pre-crisis capacity in
2024. These elements could, in the current state of visibility
and analysis and depending on their persistence, have a very
significant negative impact on KLM’s operating results, financial
performance and liquidity, despite the measures taken, and
on those of some of its partners.
risks relating to
of airlines. Point-to-point operations of long-haul low-cost
airlines are growing rapidly, especially between Europe and
the USA. Furthermore, US carriers are bigger and stronger
the air transport and non-Western global carriers are rapidly expanding. Non-
EU airlines operate under very different regulatory and state
– risks related to
to re-engineer its procedures in order to operate in a safe
way for their customers, employees and the environment.
This includes continuous adaption to all restrictions imposed
KLM uses sales representatives in certain countries to help KLM has implemented specific policies to ensure compliance
generate maintenance business with third party customers. with anti-bribery and corruption laws and regulations for
Non-compliance with rules and regulations by a sales sales representatives that are used by KLM in certain
representative could have a negative impact on the Group’s countries to help generate maintenance business with
activity and financial results. third party customers. KLM monitors compliance with such
policies and executes background checks and implemented
Mitigating action(s): In order to secure supplies of goods specific information protocols to ensure compliance with
and services, the contracts signed with third parties include, laws and regulations including periodic reporting to the
whenever applicable, clauses for services, continuity and Board of Managing Directors and the Supervisory Board. In
responsibility. 2020, KLM paid EUR 6.4 million (2019: EUR 9.6 million) to sales
representatives. New contracts will comply with the updated
The financial health of key suppliers in core operational policies. During a transition period the current contracts will
categories, such as airport and inflight services is being be renewed in accordance with the new policies unless they
reported and followed on on-going basis. In addition, are terminated.
business continuity plans are developed by the Group’s
different operating entities to ensure the long-term viability
of all commercial and operational activities.
– risks related to
the Netherlands (BARIN), regarding changes in European and
national regulations.
and regulation
legislation and subsequent civil claims.
On March 17, 2017, the European Commission announced
that it would fine eleven airlines, including KLM, Martinair
and Air France, for practices in the Air Cargo sector that
Risks linked to changes in international, are considered anti-competitive and relate mainly to the
European, national or regional laws and period between December 1999 and February 2006. This
regulations new decision follows the initial decision of the Commission
Air transport activities are highly regulated, particularly of November 9, 2010. This decision, issued to the same
with regard to the allocation of traffic rights, time slots and airlines for the same alleged practices, was annulled on
conditions relating to operations like safety standards and formal grounds by the General Court of the European Union
security, aircraft noise, CO2 and NOx emissions and airport in December 2015. The new fine for KLM and Martinair,
access. Institutions such as the European Commission or the as announced on March 17, 2017, amounts to EUR 142.6
national authorities decide on regulations that may restrict million. On May 29, 2017, KLM submitted its appeal to the
airlines or have a significant organisational and/or financial General Court of the EU and oral hearings have been
impact. held in July 2019. While the decision is under appeal, there
The new European Commission that came into office at the is no obligation to pay the imposed fines. Reference is
end of 2019 has a strong focus on sustainability and many made to note 22 “Contingent assets and liabilities” of the
of the issues outlined in the European Green Deal will affect consolidated financial statements.
KLM. Implementation of a Single European Sky is rightly one
of the European Commission’s priorities. Furthermore, we Mitigating action(s): Compliance is a priority for KLM. Various
can expect a revision of the EU Emission Trading System programs and procedures aimed at preventing breaches
and a proposal on ReFuelEU to ramp up the production and of legislation, such as codes and manuals, online training
deployment of SAF in Europe. The airline industry also closely modules and on-site and tailor-made training sessions, have
follows the implementation of the European Aviation Safety been implemented and staff has been appointed. Continued
Agency (EASA) basic regulation and a possible revision of the business management attention is needed for compliance.
passenger rights regulation. KLM will further expand its procedures to secure and monitor
The Dutch Government presented a new Dutch Aviation Act compliance.
for the period 2020-2050, which aims at the development
of aviation in the Netherlands, and a strengthening of the Risks linked to commitments made by KLM and
mainport function of Schiphol. This aviation policy document AIR FRANCE KLM to the European commission or
recognises the essential role of the network of KLM and governments
partners. The government asserted that Schiphol is of major For the European Commission to clear the merger between
importance to the Dutch economy, and therefore it will be KLM and Air France, a certain number of commitments
allowed to continue to grow provided its reduces hindrance. had to be made, notably with regard to the possibility of
making landing and take-off slots available to competitors
Mitigating action(s): For KLM it is important to monitor that at certain airports. The fulfilment of the commitments
the implementation of laws and regulations does not lead to should not have a material impact on the activities of
a distortion of the level playing field in the airline industry, KLM and Air France. In addition, the implementation of the
and does not disproportionately burden our industry, e.g. aforementioned measures to strengthen the Group’s liquidity
through excessive taxation. (revolving credit facility of EUR 2.4 billion guaranteed by
KLM, in close coordination with Air France, actively clarifies the Dutch Government and an EUR 1 billion loan from the
its position towards the European institutions and the Dutch Dutch Government) has been submitted for prior approval
Government, both directly and through industry bodies of the European Commission in accordance with state aid
Financial risks
documented cross-border intercompany transactions.
– risks related have been introduced, such as an AIR FRANCE KLM guideline
and an active monitoring of the arms-length character of the
to integrity of transactions.
In Control Statement
KLM Control Governance Structure
Control
Environment
COSO Framework
Risk
Assessment
Control
Activities
Info &
Communication
Monitoring
Activities
Domains
KLM applies the COSO (Committee of Sponsoring Safety management
Organisation of the Treadway Commission) 2013 standards The Safety and Security Organisation assures compliance
for internal control. According to these standards, internal with the rules, regulations and principle of secure, safe and
control is a process, defined and implemented by the effective operations.
executives, businesses and employees to provide a
reasonable level of comfort regarding: Safety governance is accomplished by the Safety Review
» Reliability of accounting and financial information; Board (SRB), the ISMS Board and the Safety Action Groups.
» Compliance with the applicable laws and regulations; and
» Performance and optimisation of operations. Safety review board
KLM has organised its operations in such a manner to The SRB is a strategic meeting chaired by the Accountable
anticipate on these aforementioned risks and minimise Manager (Chief Operating Officer) that deals with high-level
exposure. To that end KLM has dedicated departments or issues. Its objective is continuous improvement of KLM’s
functions to help the operation to manage and control the safety and compliance.
risks in daily activities, in line with the risk groups, as defined
in the chapter on Risks and Risk Management. The SRB sets strategic safety objectives, establishes the
In addition, to the control organisation, additional comfort safety policies, decides on KLM wide safety improving
and/or assurance is given by the department of Internal initiatives and provides the platform to:
Audit. As with any control system, it is not possible to provide » Monitors the integrated safety and compliance
an absolute guarantee that risks will be eliminated. performance against safety policies and objectives; and
» Ensure appropriate resources are allocated to achieve the
Risk management desired safety and compliance performance.
The Risk Management process is described in the chapter
Risks and Risk Management.
Support
of the corporate three-year plan. The budget is drawn
up on an entity level and consolidated at company level.
As mentioned before, this process is fully aligned in AIR
FRANCE KLM. The corporate three-year plan, including
budget 2021, has been prepared and approved before the functions
start of the financial year 2021 (January 2021); and
» Tactical Planning Meetings (TPMs) held quarterly on a Internal audit
business level, where the performance of the businesses KLM has an independent Internal Audit Function (IAF) to
is evaluated (and updated) in the context of the budget. strengthen the internal controls. The presence and activities
of an IAF provides a powerful element to assure proper risk
Accounting process and establishment management, governance and internal control.
of accounts The IAF has been subject to a regular external quality
The Corporate Control Department prepares monthly group assessment by the Dutch and French affiliates of the
financial information based on the information submitted worldwide Institute of Internal Auditors. The overall opinion is
by the businesses and subsidiaries. The AIR FRANCE KLM positive.
accounting manual meets the compliance objectives for The IAF aims to add value to the KLM Group and improve its
accounting records. The accounting information feedback operations by bringing a systematic, disciplined approach to
from the subsidiaries is required to follow the Group's evaluating and strengthening the effectiveness of decision
accounting rules, methods and frames of reference are making, risk management, internal control and governance
laid down by the company and presentation of financial processes. The IAF objectively reviews the accuracy and
statements must be in the format circulated by the Group. reliability of the KLM Group’s internal controls in general and
related processes in particular. Management will be pro-
The consolidated and company financial statements are actively advised on required improvements.
submitted twice a year (half-year and year-end) for review The IAF conducts audits at KLM and AIR FRANCE KLM level at
by the Vice President Reporting & Control to the external request of the AIR FRANCE KLM and KLM Audit Committees,
auditors prior to their closure at a summary meeting, and are the AIR FRANCE KLM Group Executive Committee and KLM
then forwarded for discussion to the Audit Committee. Executive Team, and the KLM Board of Managing Directors.
These audits are conducted by the internal auditors from
KLM, who are also operating jointly with the Air France
internal audit team. An annual audit plan is presented to
On December 31, 2020, SAK I held 33.59% of the voting Pursuant to the Articles of Association, KLM’s Supervisory
rights in KLM on the basis of common shares and cumulative Board shall consist of at least nine and at most eleven
preference shares A. SAK II holds 11.25% of the voting rights members. On December 31, 2020, KLM’s Supervisory Board
in KLM on the basis of cumulative preference shares C. The consisted of nine members. Supervisory Board members
Dutch Government directly holds cumulative preference are appointed and reappointed by the General Meeting of
shares A, which represent 5.92% of the voting rights. Shareholders. The General Meeting of Shareholders may
recommend candidates to the Supervisory Board, whereby
Physical bearer share certificates issued the KLM Works Council has the legal right to recommend one
by KLM third of the Supervisory Board members. Five members are
On July 21, 2005 all bearer shares in KLM’s issued share appointed upon recommendation of AIR FRANCE KLM. The
capital were converted into registered shares pursuant to General Meeting of Shareholders can reject the nomination
an amendment of the Articles of Association made at the by an absolute majority of the votes cast, representing at
time. In order to exercise the rights vested in the shares, least one third of the issued capital.
holders of former bearer shares were required to hand in
their bearer share certificates. Pursuant to an amendment of A Supervisory Board member is appointed for a term of four
Section 2:82 of the Dutch Civil Code (DCC) in 2019, a bearer years and can be reappointed for another term of maximum
share certificate which has not been handed in with KLM four years. In case of a reappointment after eight years of
on or before December 31, 2020, has become void and the service, the Supervisory Board states the reasons for such
share represented by the bearer share certificate has been reappointment. The candidates are selected in accordance
acquired by KLM for no consideration. A shareholder who with the Supervisory Board’s profile, which also includes its
hands in a bearer share certificate with KLM no later than diversity policy.
5 years after December 31, 2020 is entitled to receive from
KLM a replacement registered share. KLM shareholders who
still have not handed in their bearer share certificates on
January 1, 2026, will lose any entitlement to exchange their
bearer share certificates for a registered replacement share.
During the February 2020 meeting, the Audit Committee Remuneration Committee
discussed the first implications of the COVID-19 outbreak, The Remuneration Committee is charged with the
which was, at that point in time, mainly limited to KLM’s China responsibility to prepare a clear and understandable
market. This meeting focused primarily on KLM’s financial proposal for the remuneration policy, the remuneration of
results for 2019. Also, the Audit Committee discussed the KLM the individual members of the Board of Managing Directors
Group operational risk report, fraud risk report, internal audit and to make proposals for the remuneration of the individual
activity report for the period July-December 2019 and KLM’s members of the Supervisory Board. The Remuneration
policy for
a clear and understandable remuneration structure that
enables KLM to attract and retain qualified Managing
Directors and to offer them a stimulating reward. Furthermore,
Process Other
The Supervisory Board’s Remuneration Committee is Managing Directors may retain payments they receive from
responsible for formulating, implementing and evaluating the other remunerated positions (such as membership of a
remuneration policy of KLM with regard to the terms and supervisory board or similar body) with the maximum number
conditions of service and remuneration of the members of of remunerated positions set at two per Managing Director.
the Board of Managing Directors and the remuneration of Acceptance of such position requires the prior approval
the members of the Supervisory Board. The remuneration of the Supervisory Board. Any payment in connection with
policy is thereafter proposed by the Supervisory Board and, Supervisory Board memberships with KLM Group companies or
in accordance with the Articles of Association, adopted by with other airline companies remains due to KLM. Members of
the General Meeting of Shareholders. the Board of Managing Directors are furthermore entitled to
make use of travel facilities comparable to the travel facilities
In accordance with the Articles of Association and the as described in the travel regulations for KLM employees.
remuneration policy, and subject to prior approval of the
Meeting of Priority Shareholders (AIR FRANCE KLM), the Claw back clause
Supervisory Board sets the remuneration and further terms The Supervisory Board has the authority to reclaim payments
and conditions of service of the individual members of the on the basis of article 2:135 sub 8 of the Dutch Civil Code.
Board of Managing Directors. These decisions are prepared
by the Supervisory Board’s Remuneration Committee. Any Pensions
changes in individual remuneration resulting from the In accordance with KLM’s pension policy the Pension Plan for
evaluation are proposed by the Remuneration Committee to members of KLM’s Board of Managing Directors is a career
the Supervisory Board. The Supervisory Board in turn adopts average salary scheme. The short-term incentive (up to a
the remuneration, subject to approval of the Meeting of maximum of 30 per cent) is part of pensionable income.
Priority Shareholders.
In line with the fiscal regime, pensionable income is capped
at EUR 110,111 (2020). In addition, Managing Directors are
entitled to an allowance, comparable to the premium available
for pension accrual for the part of base salary above EUR
110,111, which can be used as a premium (deposit) for a net
pension scheme that is offered by KLM’s pension fund.
* Only memberships of Supervisory Boards and functions with large companies on December 31, 2020 are shown here
** Appointed upon recommendation of KLM’s Works Council
*** Appointed upon recommendation of AIR FRANCE KLM
ASSETS
Non-current assets
Property, plant and equipment 1 5,398 5,361
Right-of-use assets 2 1,745 2,028
Intangible assets 3 475 509
Investments accounted for using the equity method 4 18 16
Other non-current assets 5 175 223
Other financial assets 6 411 617
Deferred tax assets 17 77 21
Pension assets 18 211 420
8,510 9,195
Current assets
Other current assets 5 78 151
Other financial assets 6 295 161
Inventories 7 180 298
Trade and other receivables 8 902 1,269
Cash and cash equivalents 9 482 697
1,937 2,576
EQUITY
Capital and reserves
Share capital 10 94 94
Share premium 474 474
Reserves 11 (441) (315)
Retained earnings 1,303 858
Result for the year (1,547) 448
Total attributable to Company's equity holders (117) 1,559
Non-controlling interests 2 1
Total equity (115) 1,560
LIABILITIES
Non-current liabilities
Financial debt 12 1,129 1,130
Lease debt 13 872 1,173
Other non-current liabilities 5 931 148
Other financial liabilities 14 1,924 1,005
Deferred income 16 258 229
Deferred tax liabilities 17 - 84
Provisions for employee benefits 18 429 398
Return obligation liability and other provisions 19 1,219 1,343
6,762 5,510
Current liabilities
Trade and other payables 20 1,485 2,145
Financial debt 12 226 181
Lease debt 13 334 404
Other current liabilities 5 174 85
Other financial liabilities 14 193 77
Deferred income 16 998 1,382
Current tax liabilities 17 - 82
Provisions for employee benefits 18 23 22
Return obligation liability and other provisions 19 367 323
3,800 4,701
The accompanying notes are an integral part of these consolidated financial statements
Expenses
External expenses 24 (3,455) (6,116)
Employee compensation and benefit expenses * 25/28 (2,079) (3,187)
Other income and expenses 26 127 173
Total expenses (5,407) (9,130)
Attributable to:
Equity holders of the Company (1,547) 448
Non-controlling interests 1 1
(1,546) 449
*S
ee note 28 Alternative performance measures (APM) for the reconciliation
to adjusted EBITDA of EUR 75 million negative (2019: EUR 1,943 million
positive) and adjusted income from operating activities of EUR 1,154
million negative (2019: EUR 853 million positive). Also see the Alternative
performance measures section in the Notes to the consolidated financial
statements
The accompanying notes are an integral part of these consolidated financial statements
Tax on items of comprehensive income that will be reclassified to profit or loss 11 (41)
Total of comprehensive income that will be reclassified to profit or loss (4) 112
Tax on items of comprehensive income that will not be reclassified to profit or loss 73 (65)
Total of comprehensive income that will not be reclassified to profit or loss (101) 53
Fair value of equity instruments revalued through OCI - - (24) - - (24) - (24)
Other movements - - - 4 - 4 - 4
The accompanying notes are an integral part of these consolidated financial statements
KLM 2020 Annual Report
113
Financial Statements 2020
KLM Royal Dutch Airlines Consolidated cash flow statement
Changes in:
(Increase) / decrease in inventories 103 (18)
(Increase) / decrease in trade receivables 333 57
Increase / (decrease) in trade payables (306) (96)
(Increase) / decrease in other receivables and other payables 89 94
Change in working capital requirement 219 37
The accompanying notes are an integral part of these consolidated financial statements
* Including unrestricted Triple A bonds, deposits and commercial paper the overall cash position and other highly liquid investments amounts to EUR 1,031 million as
at December 31, 2020 (December 31, 2019 EUR 1,390 million)
The exchange rates used for the most significant currencies were as follows:
Average in Statement
Balance Sheet December 31, of profit or loss Balance Sheet December 31,
2020 2020 2019
EUR EUR EUR
1 US dollar (USD) 0.81 0.89 0.89
1 Pound sterling (GBP) 1.11 1.13 1.18
1 Swiss franc (CHF) 0.93 0.93 0.92
100 Japanese yen (JPY) 0.79 0.82 0.82
100 Kenya shilling (KES) 0.71 0.81 0.86
Accounting
Segment reporting
The Company defines its primary segments on the basis of
the Group’s internal organisation, main revenue generating
activities and the manner in which the Board of Managing
Directors manages operations. policies for the
The Group has as its principal businesses: network
activities, which include air transport of passengers and
balance sheet
cargo activities, aircraft maintenance, leisure and any other
activities linked to air transport. Property, plant and equipment
Property, plant and equipment are stated initially at historical
Business segments acquisition or manufacturing cost, less accumulated
The activities of each segment are as follows: depreciation and any accumulated impairment loss. Flight
equipment acquired in foreign currency is translated at the
» Network exchange rate applicable at the date of acquisition or the
Includes air transport of passengers and cargo activities: hedged rate where a hedging instrument has been used.
» Passenger main activity is the transportation of Manufacturers’ discounts are deducted from the acquisition
passengers on scheduled flights that have the Company’s cost.
airline code. Passenger revenues include receipts from
passengers for excess baggage. Other passenger Aircraft fixtures and fittings and initial potentials to be
revenues are derived from commissions from SkyTeam restored on aircraft by major maintenance operations, which
alliance partnership arrangements and revenues from include life limited parts (which are defined as a major engine
block-seat sales; and part whose failure would jeopardise the engine’s operation),
» Cargo activities relate to the transportation of freight on are classified as separate components from the airframe and
flights under the Company’s code and the sale of cargo depreciated separately.
capacity to third parties.
The cost of major maintenance operations (such as
» Maintenance airframes, engines and life limited parts) which are carried
Maintenance revenues are generated through maintenance out in accordance with specifications and schedules defined
services (engine services, component services and airframe by manufacturers and regulating authorities are capitalised
maintenance) provided to other airlines and clients around when incurred. Other maintenance costs are expensed as
the world. incurred.
The useful lives of property, plant and equipment are as Following the initial recognition, the right-of-use asset must
follows: be depreciated over the useful life of the underlying assets.
This is the lease term for the rental component, flight hours
Category Useful life (years) or expected period until engine removal for the component
Aircraft 20 to 25 relating to engine maintenance or on a straight-line basis
Aircraft fixtures and fittings, major
for the component relating to the airframe until the date
maintenance components and
spare parts 3 to 25
of the next major overhaul, for life limited parts over the
Land Not depreciated lease term for wide body aircraft and over the time until the
Buildings 10 to 40 maintenance event in which they are replaced for narrow
Equipment and fittings 3 to 15 body aircraft.
Other property and equipment 5 to 20
The discount rate used to calculate the lease debt Types of non-capitalised lease contracts
corresponds, for each aircraft, to the implicit rate determined The Group uses the two exemptions foreseen by the
by the contractual elements and residual market values. This standard allowing for non-recognition in the balance sheet:
rate is based on the readily availability of current and future short-term lease contracts and lease contracts for which the
data concerning the value of aircraft. The implied rate of underlying assets have a low value.
the contract is the discount rate that gives the aggregated
present value of the minimum lease payments and the » Short duration lease contracts
unguaranteed residual value. This present value should be There are contracts whose duration is equal to or less than
equal to the sum of the fair value of the leased asset and 12 months. Within the Group, they mainly relate to leases of:
any initial direct costs of the lessor. » Surface areas in our hubs with a reciprocal notice-period
equal to or less than 12 months;
Most of the aircraft lease contracts are denominated in » Accommodations for expatriates with a notice period
US dollars. The Group put in place a cash flow from these equal to or less than 12 months; and
lease contracts as hedging instruments in cash flow hedges » Spare engines for a duration equal to or less than 12
with its US dollars revenues as hedged items. The effective months.
portion of the foreign exchange revaluation of the lease
debt in US dollars at the closing date is recorded in “other » Low-value lease contracts
comprehensive income”. This amount is recycled in revenues Low-value lease contracts concern assets with a value
when the hedged item is recognised. For the COVID-19 equal to or less than USD 5,000. Within the Group, these
related impact reference is made to note 11. include, notably, lease contracts on printers, tablets, laptops
and mobile phones.
» Real-estate lease contracts
Based on its analysis, the Group has identified lease Sale and leaseback transactions
contracts according to the standard concerning surface The Group qualifies as sale and leaseback transactions,
areas rented in its hubs, lease contracts on building operations which lead to a sale according to IFRS 15
dedicated to the maintenance business, customised lounges “Revenue from Contracts with Customers”. More specifically,
in airports other than hubs and lease contracts on office a sale is considered as such if there is no repurchase option
buildings, including leasehold land when applicable. on the goods at the end of the lease term.
The lease term corresponds to the non-terminable period. » Sale according to IFRS 15
The discount rate used to calculate the lease debt is If the sale by the vendor-lessee is qualified as a sale
determined, for each asset, according to the incremental according to IFRS 15, the vendor-lessee must:
borrowing rate at the signature debt. The incremental (i) de-recognise the underlying asset; and
borrowing rate is the rate that the lessee would pay to (ii)
recognise a right-of-use asset equal to the retained
borrow the required funds to purchase the asset over a portion of the net carrying amount of the asset.
A deferred tax asset is recognised for all deductible temporary Other long-term employment benefits
differences associated with investments in subsidiaries, The provision for other long-term employment benefits
associates and interests in joint ventures, except to the relates to benefits (other than pensions and other post-
extent that is not probable that the temporary difference will employment benefits and termination benefits) which do not
reverse in the foreseeable future and taxable profit will not fall within twelve months after the end of the period in which
be available against which the temporary difference can be the employees render the related service. The provision
realised. covers jubilee benefits. The benefits are unfunded.
A deferred tax liability is recognised for all taxable temporary The amount recognised as a liability for other long-term
differences associated with investments in subsidiaries, employment benefits at the balance sheet date is the
associates and interests in joint ventures, except to the extent present value of the defined benefit obligations. Appropriate
that the Group is able to control the timing of the reversal of assumptions are made about factors such as salary
the temporary difference and it is probable that the temporary increases, employee turnover and similar factors impacting
difference will not reverse in the foreseeable future. the measurement of the obligations.
Provisions for employee benefits The service cost, the interest accretion to the provisions
and the remeasurement of the net defined liability are
Pensions and other post-employment benefits included in the statement of profit or loss under “Employee
Pensions and other post-employment benefits relate to compensation and benefit expense”.
provisions for benefits (other than termination benefits) which
are payable to employees on retirement. The provisions cover Termination benefits
defined benefit pension plans, early-retirement schemes and Termination benefits are employee benefits payable as
post-employment medical benefits available to employees. The a result of either the Group’s decision to terminate an
Group has various defined benefit and defined contribution employee’s employment before the normal retirement date or
pension plans, which are generally funded through payments an employee’s decision to accept voluntary redundancy.
to separately administered funds or to insurance companies.
profit or loss The main types of contracts with customers identified within
the Group are:
statement
may have to recognise additional impairment charges in the
future as a result of changes in (market) conditions that may
take place in future periods.
The cash flow statement is prepared using the indirect The COVID-19 crisis resulted in a significant 2020 loss in
method. Changes in balance sheet items that have not income from operations and consequently an impairment
resulted in cash flows such as translation differences, trigger was identified. The recoverable value of the CGU
financial debts and fair value changes have been eliminated assets has been determined by reference to their value in
for the purpose of preparing this statement. Assets and use as of December 31, 2020.
liabilities acquired as part of a business combination are
included in investing activities (net cash acquired). Dividends Revenues (network, leisure and maintenance), costs and
paid to ordinary shareholders, if any, are included in financing investments forecasts are based on reasonable hypothesis
activities. Dividends received, if any, are classified as and are management’s best estimates. They are subject to
investing activities. Interest paid and received are included in the uncertainties related to the current situation, specifically
operating activities. the WACC and the extrapolated cash flows after the five-
year period due to the timing, extent and degree of the
recovery on the operations after the COVID-19 pandemic.
Accounting
The forecasts reflect the increased risks arising from
COVID-19 and take into account a gradual return from the
second quarter 2021 onwards to the level of 2019 activity in
Management
relating to fuel hedging and to physical cost. The instruments
used are swaps and options.
The decisions made by the RMC are implemented by the With regard to the US dollar, since expenditures such as fuel,
treasury and fuel purchasing departments within each right-of-use leases or component cost exceed the level of
company, in compliance with the procedures governing revenue, AIR FRANCE KLM is a net buyer. This means that
the delegation of powers. In-house procedures governing any significant appreciation in the US dollar against the euro
risk management prohibit speculation. Regular meetings are could result in a negative impact on the Group’s activity and
held between the fuel purchasing, treasury departments financial results. Conversely, AIR FRANCE KLM is a net seller
and Chief Financial Officers of both companies in order to of the Japanese yen and of British pound sterling, the level
exchange information concerning matters such as hedging of revenues in these currencies exceeding expenditure. As
instruments used, strategies planned and counterparties. a result, any significant decline in these currencies relative
to the euro could have a negative effect on the Group’s
The treasury departments of each company circulate activity and financial results. In order to reduce its currency
information on the level of cash and cash equivalents to exposure, AIR FRANCE KLM has adopted hedging strategies.
their respective executive managements on a daily basis. Both KLM and Air France hedge progressively their net
Every month, a detailed report including, amongst other exposure over a rolling 24-month period.
information, interest rate and currency positions, the
portfolio of hedging instruments, a summary of investments Aircraft are purchased in US dollars, meaning that AIR FRANCE
and financing by currency and the monitoring of risk by KLM is highly exposed to a rise in the dollar against the euro
counterparty is transmitted to the executive managements. for its aeronautics investments. The hedging policy plans
The instruments used are forwards, swaps and options. the progressive and systematic implementation of hedging
between the date of the aircraft order and their delivery date.
The policy on fuel hedging is the responsibility of the
fuel purchasing departments, which are also in charge Despite this active hedging policy, not all exchange rate risks
of purchasing fuel for physical delivery. A weekly report, are covered. AIR FRANCE KLM might then encounter difficulties
enabling the evaluation of the net-hedged fuel cost of the in managing currency risks, which could have a negative
current financial year and the two following ones, is supplied impact on AIR FRANCE KLM business and financial results.
to the executive managements. This mainly covers the
transactions carried out during the week, the valuation of all b. Interest rate risk
positions, the hedge percentages as well as the breakdown At both KLM and Air France, most financial debt is contracted
of instruments and the underlying used, average hedge in floating-rate instruments in line with market practice.
levels, the resulting net prices and stress scenarios, as well However, given the historically low level of interest rates,
AAA 257
c. Fuel price risk
AA+ 97
Risks linked to the jet fuel price are hedged within the frame
AA- 43
work of a hedging strategy for the whole of AIR FRANCE KLM.
A+ 247
A 436
Following IFRS 9 the hedging strategy of the Group involves
components of non-financial items (crude oil and gasoil Total 1,080
are specified as components of jet fuel prices). These
components are considered as separately identifiable and At December 31, 2020, the exposure consists of the fair
reliably measurable as required by IFRS 9. market value of marketable securities, deposits and bonds.
2. Credit risk
Credit risks arise from various activities including investing
and operational activities as well as hedging activities with
regard to financial instruments. The risk is the loss that could
arise if a counterpart were to default in the performance
of its contractual obligations. The Group has established
credit limits, based on geographical and counterparty risk,
for its external parties, in order to mitigate the credit risk.
These limits are determined on the basis of ratings from
organisations such as Standard & Poor’s and Moody’s
Investors Service.
Accumulated depreciation
As at Jan 1, 2020 2,102 1,030 3,131 362 295 133 791 - 3,922
Depreciation 216 204 420 32 12 25 69 - 489
Disposals (44) (246) (290) (1) (3) (25) (29) - (319)
Other movements (4) 73 70 1 (82) 82 1 - 71
As at Dec. 31, 2020 2,270 1,061 3,331 394 222 215 832 - 4,163
As a consequence of management’s decision to take measures limiting the effects of the COVID-19 crisis, it was decided to
early phase-out the passenger and combi Boeing 747 aircraft as per April 2020. Thereupon an impairment of EUR 19 million
was recorded, which is reflected in the other movements. The asset is related to passenger activities within the network
business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision and
note 28 Alternative performance measures.
Accumulated depreciation
As at Jan 1, 2019 1,950 995 2,945 361 340 145 846 - 3,791
Depreciation 204 235 439 32 27 9 69 - 508
Disposals (53) (332) (385) (31) (66) (27) (124) - (509)
Other movements 1 132 132 - (6) 6 - - 132
As at Dec. 31, 2019 2,102 1,030 3,131 362 295 133 791 - 3,922
Borrowing cost capitalised during the year amounts to EUR 10 million (2019 EUR 13 million). The interest rate used to
determine the amount of borrowing cost to be capitalised was 2.6% (2019 2.7%).
Land and buildings include buildings located on land which has been leased on a long-term basis. The book value of these
buildings at December 31, 2020 amounts to EUR 227 million (December 31, 2019 EUR 198 million).
2. Right-of-use assets
Land & Real
Aircraft Maintenance Estate Others Total
Net value
As at January 1, 2020 1,151 643 111 123 2,028
New contracts - - 20 10 30
Renewal or extension options 60 (10) 8 7 65
Disposals - (8) - - (8)
Reclassifications - 99 1 11 111
Amortisation (318) (110) (19) (34) (481)
Other movements - (1) 1 - -
As at December 31, 2020 893 613 122 117 1,745
As a consequence of management’s decision to take measure limiting the effects of the COVID-19 crisis, it was decided to
take out 2 leased Airbus A330-200 earlier out of the operation, notably in the fourth quarter of 2020. Thereupon a write-
off of EUR 9 million was recognised in the right-of-use asset aircraft. The asset is related to passenger activities within the
network business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision
and note 28 Alternative performance measures.
The table below indicates the rents resulting from lease and service contracts which are not capitalised:
Software under
Goodwill Software development Total
Historical cost
As at January 1, 2020 40 511 240 791
Additions - 87 25 112
Disposals - (13) (56) (69)
Other movements - 1 (2) (1)
As at December 31, 2020 40 586 207 833
Historical cost
As at January 1, 2019 40 490 177 707
Additions - - 153 153
Disposals - (33) (16) (49)
Other movements - 54 (74) (20)
As at December 31, 2019 40 511 240 791
Main part of the software and software under development relates to internally developed software. As at December 31,
2020, software additions mainly relate to commercial, operational and aircraft maintenance systems.
Following the COVID-19 crisis, the Company assessed the recoverable amount of intangible assets that may not be
recoverable. Related to software and software under development an impairment of EUR 8 million was recorded. The asset
is related to passenger activities within the network business segment. In the table above this amount is included in other
movements and reference is made to note 27 Amortisation, depreciation, impairments and movements in provision and note
28 Alternative performance measures.
Investments in associates
2020 2019
Carrying amount as at January 1 8 5
Movements
Investments - 1
Share of profit after taxation 3 2
Other movements (2) -
Net movement 1 3
Carrying amount as at December 31 9 8
The share of profit/(loss) after taxation as at December 31 has been adjusted to reflect the estimated share of result of the
associate for the year then ended.
On December 23, 2020, the Group sold its equity interest of 4.49% (December 31, 2019 4.49% interest, with a carrying amount
of EUR 3 million) in Transavia France S.A.S. to Air France Finance S.A.S., for an amount of EUR 17 million. This price was based
on a put option whereby Transavia C.V. was granted the right to sell to Air France S.A. its 4.49% equity interest in Transavia
France S.A.S. in 2020 at a fixed price depending on the average normalised net results over 2018 and 2019 of Transavia
France S.A.S. A gain of EUR 17 million has been recorded as result on disposal of an associate. Reference is made to note 27
Amortisation, depreciation, impairments and movements in provision and note 28 Alternative performance measures.
The Group’s interest in its principal jointly controlled entity, Schiphol Logistics Park C.V., which is an unlisted company, can be
summarised as follows:
Non-current assets 4 3
Current assets 13 22
Profit after taxation - 17
Share of profit after taxation - 9
The Group did not receive dividend in 2020 (2019 EUR 8 million) from Schiphol Logistics Park C.V.
Assets Liabilities
2020 Current Non-current Current Non-current
Exchange rate risk
Fair value hedges 13 19 (30) (23)
Cash flow hedges 39 - (52) (17)
Items not qualifying for hedge accounting 2 - (4) (1)
Assets Liabilities
2019 Current Non-current Current Non-current
As at December 31, 2020 the types of derivatives used, their nominal amounts and fair values are as follows:
Forward purchases
USD 1,349 773 448 - 128 - - (30)
Forward sales
USD 534 300 234 - - - - 9
Options
CHF - - - - - - - -
GBP 32 32 - - - - - -
Forward purchases
USD 922 719 203 - - - - (66)
GBP 92 92 - - - - - -
Forward sales
CAD - - - - - - - -
GBP 165 115 50 - - - - (1)
JPY - - - - - - - -
SGD - - - - - - - -
USD 441 439 2 - - - - 37
Other - - - - - - - -
Forward purchases
GBP 45 45 - - - - - -
JPY 25 25 - - - - - -
USD 491 471 20 - - - - (4)
Forward sales
USD 179 179 - - - - - 1
Other - - - - - - - -
Total items not qualifying for hedge accounting 740 720 20 - - - - (3)
The total fair value hedges of EUR 21 million negative relates to exchange rate hedging on future fleet purchases
denominated in USD. Fair value adjustments included on the carrying amount of the hedge items amount to EUR 63 million
and are recognised in the balance sheet in the line item property, plant and equipment. The related costs of hedging amount
to EUR 31 million negative and are recorded in other comprehensive Income.
In millions
In local currency millions of Euros
>1 year >2 years >3 years >4 Years
Nominal and and and and Fair
As at December 31, 2020 amount <1 year <2 years <3 years <4 years <5 years >5 years Value
Fair value hedges
Swaps - - - - - - - -
Total fair value hedges - - - - - - - -
Swaps 99 21 18 12 10 11 27 (3)
Total items not qualifying for hedge accounting 99 21 18 12 10 11 27 (3)
Total interest rate risk derivatives 686 89 85 47 38 69 358 (21)
The total cash flow hedges of EUR 18 million negative relates to interest rate hedging on borrowings. The cash flow hedge
reserve relating to the outstanding hedges amounts to EUR 11 million.
In the normal course of its business, the Group conducts transactions on petroleum product markets in order to effectively
manage the price risks related to its purchases of fuel.
The nominal amounts of the Group’s commitments on the crude and refined oil markets as at December 31, 2020 are shown
below:
In millions
In USD millions of Euros
Nominal <1 year >1 year >2 years >3 years >4 Years >5 years Fair
amount and and and and Value
<2 years <3 years <4 years <5 years
Commodity risk hedges
Cash flow hedges
Valuation methods for financial assets and liabilities at their fair value
As at December 31, 2020, the breakdown of the Group’s financial assets and derivative instruments, based on the three
classification levels, is as follows:
No significant changes in levels of hierarchy, or transfers between levels, have occurred in the reporting period.
For the explanation of the three classification levels, reference is made to “fair value hierarchy” paragraph in the accounting
policies for the balance sheet section.
Sensitivity analysis
The sensitivity is calculated solely on the valuation of derivatives at the closing date of the period presented. The
hypotheses used are coherent with those applied in the financial year ended as at December 31, 2020.
The impact on “reserves” corresponds to the sensitivity of effective fair value variations for instruments and is documented
in the hedged cash flow (options intrinsic value, fair value of closed instruments). The impact on the “income for tax”
corresponds to the sensitivity of ineffective fair value variations of hedged instruments (principally time value of options)
and fair value variations of transactions instruments. For fuel, the downward and upward sensitivity are not symmetrical when
taken into account the utilisation, in respect of the policy of optional hedged instruments in which the risk profile is not linear.
For further information reference is made to the Financial Risk Management paragraph in the text to the notes to the
consolidated financial statements.
The fuel price sensitivity is only calculated on the valuation of derivatives at the closing date of each period presented.
The amounts of monetary assets and liabilities disclosed above do not include the effect of derivatives.
The impact on “change in value of financial instruments” and on “reserves” of the variation of a 10% weakening in exchange
rates in absolute value relative to the Euro is presented below:
The impact on “change in value of financial instruments on financial income and expenses” consists of:
» Change in value of monetary assets and liabilities (in accordance with IAS 21, including the effect of fair value and cash
flow hedges);
» Changes in time value of currency exchange options (recognised in financial income);
» The changes in fair value of derivatives for which fair value hedges accounting is applied or no hedging accounting is
applied.
The impact on “reserves” is explained by the change in exchange rates on changes in fair value of currency derivatives
qualified for cash flow hedging, recognised in “reserves”.
Others
The increase in the other non-current liabilities in 2020 mainly relates to deferred payments for wage tax and social securities.
Following the COVID-19 crisis, the Dutch Government issued a number of measures to support Dutch companies, such as
deferral of wage tax and social securities payments for the period between March 2020 and February 2021. As from April
1, 2021, the Group will pay the regular monthly wage tax and social securities and as from July 1, 2021 the related deferred
payments over a period of 36 months. As per December 31, 2020 the related non-current deferred payments amount to EUR
764 million (December 31, 2019 nil million). This non-cash transaction is in line with IAS 7.43 included as an increase in other
payables as part of the movement in working capital in the cash flow statement.
After December 31, 2020, the Dutch Government extended the payment terms from April 1, 2021 to July 1, 2021 for the
regular monthly wage tax and social securities payments and from July 1, 2021 to as from October 1, 2021 for the related
deferred payments.
Movements
Additions and loans granted 15 66 1 43 - - 16 109
Loans and interest repaid (59) (16) (7) - - - (66) (16)
Interest accretion 12 - - - - - 12 -
Foreign currency translation differences (39) 7 - 1 - - (39) 8
Other movements (1) 7 (1) - 7 (24) 5 (17)
The Group’s stake in Kenya Airways Ltd. is 7.76% as at December 31, 2020 (December 31, 2019 7.76%). The Group has no
significant influence on Kenya Airways and due to its intention it is regarded as a financial asset at fair value through other
comprehensive income under IFRS 9.
The interest-bearing financial assets have fixed interest rates. The weighted average effective interest rates at the balance
sheet date are as follows:
The triple A bonds and long-term deposits are held as a natural accounting hedge to mitigate the effect of foreign exchange
movements relating to financial debt. Except as described below these securities are at the free disposal of the Company.
Access to triple A bonds and long-term deposits, loans and receivables amounting to EUR 323 million (December 31, 2019 EUR
236 million) is restricted.
The contractual re-pricing dates of the Group’s interest bearing assets are as follows:
7. Inventories
In the financial year EUR 25 million (December 31, 2019 EUR 3 million increase) increase of provision trade receivables has
been recorded in other financial income and expenses in the consolidated statement of profit or loss. Main part of the
increase of provision trade receivables relates to airline debtors in the maintenance business segment, which were, like KLM,
severely impacted by COVID-19.
Maintenance contract cost incurred to date for contracts in progress at December 31, 2020 amounted to EUR 160 million
(December 31, 2019 EUR 302 million).
Advances received for maintenance contracts in progress at December 31, 2020 amounted to EUR 72 million (December 31,
2019 EUR 102 million).
The effective interest rates on short-term deposits are in the range from -0.34% to 3.35% (2019 range -0.33% to 3.35%). The
short-term deposits are invested in money market instruments or in liquid funds with daily access to cash.
The part of the cash and cash equivalents held in currencies other than the Euro is as follows:
The fair value of cash and cash equivalents does not differ materially from the book value.
The rights, preferences and restrictions attaching to each class of shares are as follows:
Priority shares
All priority shares are held by AIR FRANCE KLM S.A. Independent rights attached to the priority shares include the power to
determine or approve:
a. To set aside an amount of the profit established in order to establish or increase reserves (art. 32.1 Articles of Association
(AoA));
b. Distribution of interim dividends, subject to the approval of the Supervisory Board (art. 32.4 AoA);
c. Distribution to holders of common shares out of one or more of the freely distributable reserves, subject to the approval
of the Supervisory Board (art. 32.5 AoA);
d. Transfer of priority shares (art. 14.2 AoA).
Before submission to the General Meeting of Shareholders prior approval of the holder of the priority shares is required for:
a. Issuance of shares (art. 5.4 AoA);
b. Limitation of or exclusion from pre-emptive rights of the holders of other classes of shares (art. 5.4 AoA);
c. Repurchase of own shares (art. 10.2 AoA);
d. Alienation of own priority shares and C cumulative preference shares (art. 11.2 AoA);
e. Reduction of the issued share capital (art. 11.3 AoA);
f. Remuneration and conditions of employment of the Managing Directors (art. 17.4 AoA);
g. Amendments of the Articles of Association and/or dissolution of the Company (art. 41.1 AoA).
As at December 31, 2020 the State of the Netherlands held 3,708,615 A cumulative preference shares to which a voting right
attaches of 5.9%. This has not changed since financial year 2006/07. For details of the right to dividend distributions attaching
to each class of share see the section Other information.
11. Reserves
Remeasurement
Hedging of defined benefit Translation
reserve pension reserve Other reserve Total
As at January 1, 2020 (31) (781) 12 485 (315)
The volatility from the KLM pension plans has reduced significantly after the transfer of the cockpit crew and cabin crew to
a collective defined contribution pension schemes in 2017. However, the volatility in the value of fuel derivatives and the
remeasurement of the current defined benefit pension plans remains for the ground staff pension plan and other smaller
defined benefit pension plans. The non-cash changes in pension obligations together with the level of plan assets linked
to the changes in actuarial assumptions (such as the current very low discount rate) that need to be recognised in the
Company’s equity do not directly affect the statement of profit or loss.
Following the significant impact of COVID-19 the Company’s equity became negative during 2020. Reference is made to the
Going concern paragraph in the Notes to the consolidated financial statements section.
For an elucidation on the remaining volatility of defined pension plans and equity, reference is made to the paragraph
Risks linked to the impact of external economic factors on equity and Risks linked to pension plans in the Risks and risk
management section.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
Fuel hedges
Following the COVID-19 impact the Group’s fuel consumption became far less than the volume of fuel hedges outstanding
as from the end of first quarter 2020. In accordance with IFRS the Group discontinued the fuel hedge relationship of these
overhedges and released the market to market value of those hedges from other comprehensive income to the Consolidated
statement of profit or loss. Reference is made to note 29 Cost of financial debt.
Currency hedges
Most of the aircraft lease contracts are denominated in US dollars. The Group designates the cash flows from these lease
contracts as hedging instruments in cash flow hedges with its US dollars revenues as hedged items. This limits the volatility
of the foreign exchange variation resulting from the currency related revaluation of its lease debt. The effective portion of the
foreign exchange revaluation of the lease debt in US dollars at the closing date is recorded in “other comprehensive income”.
This amount is recycled in revenues when the hedged item is recognised. This also included the fair value changes in equity
investments which are deemed to be business investments.
Because of COVID-19 US dollar revenues sharply decreased as from March 2020. As a consequence the Company
temporarily stopped to record the foreign exchange revaluation of the lease debt on US dollars at the closing date in “other
comprehensive income” but records those in foreign currency exchange gains/(losses) in the Consolidated statement of
profit or loss. When the US dollar revenues will become sufficient again, the Company will start using the US dollar revenues
as hedging instruments again.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the consolidated figures of
non-Euro foreign subsidiaries, as well as from the translation of the Company’s net investment in foreign associates and jointly
controlled entities.
Other reserve
The other reserve relates to the amount in investments accounted for using the equity method and development cost
incurred on computer software and prepayments thereon at the balance sheet date, as required by Article 365.2 of Book 2 of
the Dutch Civil Code.
The carrying amount for the financial debt approximates the fair value as at December 31, 2020. The fair value of the financial
liabilities is based on the net present value of the anticipated future cash flows associated with these instruments. For the
lease liabilities restricted deposits are used as collateral. Reference is made to note 6 Other financial assets for the restricted
deposits.
2020 2019
Carrying amount as at January 1 1,082 1,199
After careful discussions with both the Dutch Government and banks, KLM has secured a financing package to ensure
liquidity. This has been announced by the Dutch Government and KLM on June 26, 2020. The financing package and the
conditions imposed by the Dutch Government in connection therewith have been approved by Dutch parliament and by the
European Commission on July 13, 2020.
Both the revolving credit facility and the direct loan will be drawn simultaneously on a pro rata basis.
On October 1, 2020, KLM submitted its restructuring plan to the Dutch Ministry of Finance. The presentation of this
restructuring plan was a key condition in obtaining the aforementioned direct State loan and guarantees to the value of EUR
3.4 billion. The plan outlines how KLM intends to fulfil the conditions imposed by the Dutch Government.
Substantively, the plan includes elements such as the reassessment of strategy, becoming more sustainable, the restored
performance and competitiveness of the entire KLM Group, including a comprehensive restructuring plan, manageable cost
improvements, financial considerations and how KLM staff will contribute by way of reduced employment conditions. In
addition KLM has undertaken to suspend dividend payments to its shareholders until these two loans have been repaid in full.
As per December 31, 2020 KLM has drawn in total EUR 942 million (the aforementioned EUR 665 million under the revolving
credit facility and the aforementioned EUR 277 million under the direct State loan). The loans have been recorded at
amortized cost based on a 5 and 5.5 year drawn down assumptions with the Effective Interest Rate method (3.95 per cent for
the revolving credit facility and 7.05 per cent for the direct State loan).
Both the revolving credit facility and the direct State loan are presented as non-current liabilities based on IAS 1
(presentation of financial statements). The revolving credit facility has a contractual maturity of 5 years and the direct State
loan has a contractual maturity of 5.5 years. With that, the loans are not due for settlement in the coming
12 months after balance sheet date. Furthermore, covenant testing is not required per balance sheet date, and therefore it is
not relevant to the assessment.
The classification of loans as current or non-current as described IAS 1 is amended, with an effective date in 2022. Future
conditions need to be incorporated in a hypothetical test at reporting date. For the revolving credit facility and the direct
state loan this would entail a covenant test per balance sheet date, while the covenant test is contractually required as of
September. In the hypothetical test per balance sheet date, KLM is meeting the covenant requirements in September 2021
and December 2021 for both the revolving credit facility and the direct state loan. Following that, there is a right to defer the
settlement for at least 12 months after balance sheet date, and both the revolving credit facility and the direct State loan
would also required to be classified as non-current if the amended version of IAS 1 would have been applied.
As per August 28, 2019 KLM has reduced the principal amount of the Japanese Yen subordinated perpetual loan to JPY 20
billion (EUR 164 million) by repaying JPY 10 billion to the lender. As from this date a fixed JPY interest of 4.0% is applicable.
The Swiss Franc subordinated perpetual loans amounting to CHF 375 million, being EUR 347 million as at December 31, 2020
(December 31, 2019 EUR 345 million) are listed on the SWX Swiss Exchange, Zurich.
The carrying amounts of financial liabilities denominated in currencies other than the Euro are as follows:
The fair value of the financial liabilities is based on the net present value of the anticipated future cash flows associated with
these instruments.
The exposure of the Group’s borrowing interest rate changes and the contractual re-pricing dates are as follows:
The effective interest rates at the balance sheet date, excluding the effect of derivatives, are as follows:
The interest rates of the revolving credit facility, direct State loan, subordinated perpetual loans and other loans,
taking into account the effect of derivatives, are as follows:
The variable interest rates are based on EURIBOR or the USD LIBOR rate.
2020 2019
Carrying amount as at January 1 2,525 2,825
Advance ticket sales corresponds to sold passenger tickets and freight airway bills which will be recognised in revenues at
the date of transportation. The COVID-19 crisis and the lockdown of borders caused the Group to reduce capacity and cancel
an important number of passenger flights. In that case, customers can either ask for a refund of the ticket or the issuance of
a voucher. As per December 31, 2020, the advance ticket sales includes EUR 285 million of passenger tickets (fare and carried
imposed charges) for which the date of transportation has passed and which are eligible to refund and
EUR 351 million of vouchers that can be used for future flights.
During 2019 the Group used all its remaining tax losses carry forwards in the Netherlands (December 31, 2018: EUR 0.2 billion).
Consequently the Group had a current income tax payable position as per December 31, 2019. In 2020 no current income tax
has been paid following a relief from the Dutch tax authorities, related to the COVID-19 impact as from March 2020. Companies
which expected 2020 tax losses did not have to pay the 2019 current income tax payable, but could offset them with the
expected 2020 tax losses.
Given the COVID-19 crisis the Group made significant taxable losses in 2020 and subsequently has significant tax losses carry
forwards amounting to EUR 1,075 million as per December 31, 2020. Due to the high degree of uncertainty about the timing
and degree of recovery and in line with IAS 12, no deferred tax asset for unused operating losses has been recognised as
per December 31, 2020. KLM has an amount of EUR 270 million for unused operating losses not recognised as per December
31, 2020.
The amounts of deferred tax assets recognised in the KLM income tax fiscal unity in the Netherlands are included in the
deferred tax asset line within non-current assets on the balance sheet. Deferred income tax assets and liabilities are offset
when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred
income taxes relate to the same fiscal authority.
Under income tax law in the Netherlands, the maximum future period for utilising tax losses carried forward is six years. As
from January 1, 2022, this period is likely to become indefinite for tax losses. However, utilising tax losses carried forward is
limited to 50% of taxable profits per year. Current income tax has to be paid over the other 50% of taxable profits per year.
These changes are not substantially enacted as per December 31, 2020. In the United Kingdom, this period is indefinite.
The Group includes a fully consolidated Cell in Harlequin Insurance PCC Limited – Cell K16, St. Peter Port (Guernsey).
Respective income from the Cell is also included in the taxable basis of KLM fiscal unity in the Netherlands.
End 2019 it was announced that the Dutch income tax would be lowered to 21.7% in 2021. The impact of this change was
taken into account in the 2019 financial statements. Given the COVID-19 impact the Dutch tax authorities announced end
2020 that the Dutch income tax will remain at 25% in 2021. This has been taken into account in the 2020 financial statements.
The movements in deferred tax assets and liabilities, without taking into consideration the offsetting of balances within the
same tax jurisdiction, are as follows:
2020
Deductible interest expenses carried
forward - 10 - - 10
Provisions for employee benefits 21 - 7 (1) 27
Other tangible fixed assets 18 11 - - 29
Derivative financial instruments (4) - 21 - 17
Other 1 8 (19) 12 2
Total 36 29 9 11 85
2019
Tax losses 75 (75) - - -
Fleet assets 1 (1) - - -
Provisions for employee benefits 25 - (4) - 21
Other tangible fixed assets - - - 18 18
Derivative financial instruments 43 - (47) - (4)
Other 8 (14) 14 (7) 1
Total 152 (90) (37) 11 36
2020
Other tangible fixed assets - - - - -
Pensions and benefits (asset) 99 (25) (66) - 8
Total 99 (25) (66) - 8
2019
Other tangible fixed assets (13) (5) - 18 -
Pensions and benefits (asset) 43 (5) 61 - 99
Total 30 (10) 61 18 99
The Group has tax loss carry forwards in the United Kingdom in the amount of EUR 8 million (December 31, 2019 EUR 9 million)
as well as deductible temporary differences for which no deferred tax asset has been recognised, due to the uncertainty
whether there are sufficient future tax profits against which such temporary differences and tax losses can be utilised. The
unrecognised deferred tax assets relating to temporary differences amount to EUR 26 million (December 31, 2019 EUR 24
million).
Pension plans
The Company sponsors a number of pension plans for employees world-wide. As per December 31, 2020, the major defined
benefit plans include KLM ground staff based in the Netherlands, the United Kingdom, Germany, Hong Kong, and Japan. These
plans are funded through separate pension funds which are governed by independent boards and are subject to supervision
of the local regulatory authorities.
In addition to these major plans there are various relatively insignificant defined benefit and defined contribution plans for
employees located in- and outside the Netherlands.
In December 2020, KLM and KLM ground unions agreed on a protocol to arrive at a future proof pension agreement. This
pension agreement is expected to have the characteristics of a collective defined contribution scheme. It will require before
implementation, amongst others, the approval of the Board of the KLM Ground pension fund and should qualify as a defined
contribution scheme under IFRS. It is expected that in the course of 2021 these conditions will be met and subsequent
derecognition of the related pension asset will take place.
If the coverage ratio is under the funding rules detailed above, the pension fund is required to implement a recovery plan
that aims for compliance with the threshold of 125% within 10 years and includes projected future return on investment. As a
consequence, the existing recovery plan for the ground staff plan has been updated as per April 1, 2020.
If the threshold cannot be realised within 10 years additional contributions are payable by the Company and the employees.
The amount of regular and additional employer contributions is not limited. The amount of possible additional employee
contributions is limited to 2% of the pensionable contribution basis. A reduction of contribution is possible if the indexation
of pensions is fully funded. Besides Dutch pension law, this reduction is not limited and can be performed either by a
reimbursement of contributions, or by a reduction in future contributions. Given the Dutch fiscal rules, among other things, a
maximum pensionable salary of EUR 100,000 (as a result of indexation EUR 110,111 as per January 1, 2020) and lower future
accrual rate are applicable since 2015.
The return on plan assets, the discount rate used to value the commitments, the longevity and the characteristics of the
active population are the main factors that impact both the coverage ratio and the level of the regular contribution for future
pension accrual. The regular contributions for the yearly pension accrual are limited to 22% of the pensionable base. The
funds, fully dedicated to the Company, are mainly invested in bonds, equities and real estate.
The required funding of this pension plan also includes buffer against the following risks: interest rate mismatch, equity risk,
currency risk, credit risk, actuarial risk and real estate risk. For example, to reduce the sensitivity to a decline of the interest
rate, a substantial part of the sensitivity to an interest rate shock on all maturities is covered by an interest hedge.
Investment strategy
The board of the aforementioned ground staff plan, consults independent advisors as necessary to assist them with
determining investment strategies consistent with the objectives of the fund. These strategies relate to the allocation of
assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term
returns. The fund uses asset and liability management studies that generate future scenarios to determine their optimal asset
mix and expected rates of return on assets.
Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall
level of assets. The plan invests a large proportion of its assets in equities which is believed to offer the best returns over the
long-term commensurate with an acceptable level of risk. Also a proportion of assets is invested in property, bonds and cash.
The management of most assets is outsourced to a private institution, Blue Sky Group, under a service contract.
Developments 2020
In 2020 the financial markets firstly showed a significant decrease following the COVID-19 crisis, but strongly increased in
the second half of 2020, which overall resulted in increased plan assets with EUR 502 million. This was more than offset by a
considerable decrease of the discount rate used to calculate the pension obligations from 1.15% to 0.75%, which results in a
marked higher defined benefit obligations of EUR 750 million.
The funding ratio (based on the average 12 months rolling policy coverage), as set by the Dutch Central Bank, for the Ground
staff pension fund is 97.9% at December 31, 2020 (December 31, 2019 108.2%).
As per year-end 2020 the ground staff pension fund is below the required coverage ratio and therefore has to issue an
updated recovery plan before April 1, 2021. As a result of the 10 year rolling recovery plan no additional recovery payments
are needed for 2020 nor for 2021.
No limit (i.e. after the impact of IAS 19 and IFRIC 14 “The limit on a defined benefit asset, minimum funding requirements
and their interaction” on IAS 19) on the net assets recognised in the balance sheet is applied since, based on the current
financing agreement between the ground staff pension fund and the Company, future economic benefits are available in the
form of a reduction in future contributions. These net assets recognised are not readily available for the Company.
The accounting standards require management to make assumptions regarding variables such as discount rate, rate of
compensation increase and mortality rates. Periodically, management consults with external actuaries regarding these
assumptions. Changes in these key assumptions and in financing agreements between the ground staff pension fund and the
Company can have a significant impact on the recoverability of the net pension assets (IFRIC 14).
For the main ground staff pension plan, the 2020 Generation mortality tables (with certain plan specific adjustments) of the
Dutch Actuarial Association were used.
The Company refines its calculations, by retaining the adequate flows, on the discount rate used for the service-cost
calculation. In the Euro zone, this leads to the use of a discount rate of 0.10% higher for the service-cost calculation
compared to the one used for the discount of the benefit obligation.
Following the KLM voluntary leave plan the number of active KLM Ground staff participants decreased by some 1,450
employees. Since this is a substantial change a curtailment, resulting in lower funded obligations, of EUR 16 million has been
recorded and released to the profit or loss account. Reference is made to note 25 Employee compensation and benefit
expenses and note 28 Alternative performance measures.
The movements in the fair value of assets of the wholly or partially funded pension plans in the year can be summarised as
follows:
2020 2019
Fair value as at January 1 10,216 8,865
2020 2019
Benefit obligation 86 20
Plan asset 490 1,218
The sensitivity of the defined benefit cost recognised in profit or loss and the defined benefit obligation to variation in the
salary increase is:
Sensitivity of the assumptions
for the year ended December 31,
In millions of Euros 2020 2019
0.25% increase in the salary increase
Impact on service cost 3 3
Impact on defined benefit obligation 36 30
The sensitivity of the defined benefit cost recognised in profit or loss and the defined benefit obligation to variation in the
pension increase rate is:
The major categories of assets as a percentage of the total pension plan assets are as follows:
As at December 31,
in % 2020 2019
Debt securities 50 48
Real estate 9 9
Equity securities 40 42
Debt securities are primarily composed of listed government bonds, equally split between inflation linked and fixed interest, at
least rated BBB, and invested in Europe, the United States of America and emerging countries. Real estate is primarily invested
in Europe and the United States of America and equally split between listed and unlisted. Equity securities are mainly listed
and invested in Europe, the United States of America and emerging countries.
The movements in the present value of wholly or partly funded obligations in the year are as follows:
Interest expense 1 1
Actuarial losses/(gains) demographic assumptions - (1)
Actuarial losses/(gains) financial assumptions 2 2
Actuarial losses/(gains) experience adjustments - (2)
Past service cost - (1)
Benefits paid from plan/company (2) (2)
Exchange rate changes (2) 1
Net movement (1) (2)
Carrying amount as at December 31 24 25
The provisions were calculated using actuarial methods based on the following assumptions (weighted averages for all plans):
2020 2019
Jubilee benefits 68 76
Other benefits 37 36
Total carrying amount 105 112
The provision for jubilee benefits covers bonuses payable to employees when they attain 25 and 40 years of service. The
provision for other benefits relates to existing retirement entitlements.
Termination benefits
2020 2019
Redundancy benefits
Non-current portion 9 9
Current portion 1 1
Total carrying amount 10 10
Termination benefits relate to a provision for projected dismissal benefits (also called severance or termination indemnities) to
current employees in case they voluntary choose to leave the Company.
Other provisions
Return obligation Maintenance Legal and civil Restructuring and
liability on leased liability on leased litigations voluntary leave
aircraft aircraft Other Total
As at January 1, 2020 366 1,106 154 - 40 1,666
Current/non-current portion
Non-current portion 232 820 152 - 15 1,219
Current portion 113 154 2 66 32 367
Carrying amount as at December 31, 2020 345 974 154 66 47 1,586
Current/non-current portion
Non-current portion 297 1,043 1 - 2 1,343
Current portion 69 63 153 - 38 323
Carrying amount as at December 31, 2019 366 1,106 154 - 40 1,666
The discount rate used to calculate these restitution liabilities relating to leased aircraft, determined on the basis of a short-
term risk-free rate increased by a spread on risky debt (used for companies with high financial leverage), is 3.4 per cent as of
December 31, 2020 versus 4.5 per cent as of December 31, 2019.
Other provisions
Other
Other provisions include provisions for onerous contracts (third party maintenance contracts in which the unavoidable costs
of meeting the obligations under the contract exceed the economic benefits expected to be received under it), onerous
leases of aircraft and site restoration cost for land and buildings under long-term lease agreements.
Other payables include an amount of EUR 91 million per December 31, 2020, which relates to the 2019 profit share for
employees. Given COVID-19 and the related agreed reduced employment conditions with all unions, this amount has not been
paid out in 2020. Part of this profit share, EUR 37 million, is expected to be paid out in 2021 or upon departure of employees
from the Group.
An amount of EUR 54 million, of this profit share is interpreted as a negative short-term employee benefit. Management
concluded that the aforementioned approach best reflects the economic substance of the agreement with the unions.
The amount should remain on the balance sheet as per December 31, 2020, and will be released, to the 2021 consolidated
statement of profit or loss.
21. Commitments
As at December 31, 2020, KLM has commitments for previously placed orders amounting to EUR 1,474 million (December 31,
2019 EUR 1,311 million). EUR 1,379 million of this amount (December 31, 2019 EUR 1,189 million) relates to future owned and
new right-of-use aircraft of which EUR 436 million is due in 2021. In the amount for new right-of-use aircraft EUR 92 million
relates to future interest.
The balance of the commitments as at December 31, 2020 amounting to EUR 95 million (December 31, 2019 EUR 122 million)
is related to property, plant and equipment.
As at December 31, 2020 prepayments on aircraft orders have been made, amounting to EUR 541 million (December 31, 2019
EUR 506 million).
Contingent liabilities
An assessment of litigation risks with third parties has been carried out with the Group’s attorneys and provisions have been
recorded whenever circumstances require.
a. Actions instigated by the EU Commission and several competition authorities in other jurisdictions
for alleged cartel activity in air cargo transport.
Air France, KLM and Martinair have been involved, since February 2006, with up to twenty-five other airlines in investigations
initiated by the antitrust authorities in several countries with respect to allegations of anti-competitive agreements or
concerted actions in the airfreight industry.
As of December 31, 2016, most of these investigations and related public proceedings have been concluded, with the
following exceptions:
On March 17, 2017, the European Commission announced that it would fine eleven airlines, including KLM, Martinair and Air
France, for practices in the air cargo sector that are considered anti-competitive and relate mainly to the period between
December 1999 and February 2006. This new decision follows the initial decision of the Commission of November 9, 2010. This
decision, issued to the same airlines for the same alleged practices, was annulled on formal grounds by the General Court of
the European Commission in December 2015.
Contingent assets
Other Litigation
The Company and certain of its subsidiaries are involved as plaintiff in litigation relating to commercial transactions and tax
disputes. Although the ultimate disposition of asserted claims and proceedings cannot be predicted with certainty, it is the
opinion of the Company’s management that the outcome of any such claims, either individually or on a combined basis,
will not have a material favourable effect on the Company’s consolidated financial position, but could be material to the
consolidated results of operations of the Company for a particular period.
23. Revenues
2020 2019
Services rendered
Passenger transport 2,518 7,952
Cargo transport 1,535 1,171
Network 4,053 9,123
Maintenance contracts 712 941
Leisure 335 986
Other services 20 25
Total revenues 5,120 11,075
2020 2019
Aircraft fuel 1,072 2,286
Chartering costs 164 185
Landing fees and route charges 432 783
Catering 73 215
Handling charges and other operating costs 292 576
Aircraft maintenance costs 738 882
Commercial and distribution costs 172 463
Insurance 24 24
Rentals and maintenance of housing 129 130
Sub-contracting 140 212
Other external expenses 219 360
Total external expenses 3,455 6,116
In aircraft fuel expenses an amount of EUR 173 million negative (2019 EUR 19 million positive) is included which was
transferred from OCI to the consolidated statement of profit or loss. Following the COVID-19 impact the Group’s fuel
consumption became far less than the volume of fuel hedges outstanding as from the end of first quarter 2020. In
accordance with IFRS the Group discontinued the fuel hedge relationship of these overhedges and released the market to
market value of those hedges from other comprehensive income in equity to the Consolidated statement of profit or loss.
Reference is made to note 29 Cost of financial debt.
2020 2019
Wages and salaries 2,245 2,418
NOW subsidy (1,049) -
Social security premiums other than for state pension plans 264 263
Voluntary leave and restructuring plans 228 (2)
Share-based remuneration 1 (1)
Hired personnel 73 216
Pension and early-retirement plan costs 332 271
Curtailment pension plans (16) -
Post-employment medical benefit costs 1 2
Other long-term employee benefit costs - 20
Total employee compensation and benefit expenses 2,079 3,187
Following the COVID-19 crisis, the Group applied for the “Temporary Emergency Bridging Measure for Sustained Employment”
(NOW) as installed by the Dutch Government. The 2020 NOW compensation amounts to EUR 1,049 million for the period March
until December 2020. Given the ongoing COVID-19 crisis, NOW compensation is, under specific conditions, also applicable for
the first half year 2021. Depending on result developments in the first half year 2021, the Group will apply for the prolonged
NOW compensation.
For the voluntary leave and restructuring plans and curtailment pension plans, reference is made to note 28 Alternative
performance measures.
2020 2019
Defined benefit plans 203 161
Defined contribution plans 129 110
Total 332 271
2020 2019
Current service cost 198 155
Interest expense 118 166
Interest income (120) (169)
Administration cost 7 9
Total 203 161
In the financial year 2020 the defined benefit cost recognised in profit or loss for the major defined benefit plans recognised
in the statement of profit or loss amounted to EUR 203 million (2019 EUR 161 million) and the total contributions paid by
the Group amounted to EUR 69 million (2019 EUR 148 million). The contributions paid in the financial year 2020 include
additional deficit funding for the Dutch KLM plans amounting to EUR nil million (2019 EUR nil million) and in the United Kingdom
amounting to EUR 11 million (2019 EUR 10 million).
The Group’s projected defined benefit plans and early retirement plan cost for 2021 amount to EUR 201 million. The Group’s
expected cash contributions for these plans amount to EUR 152 million.
2020 2019
Interest cost 1 -
Losses/(gains) arising from plan amendments - (1)
Total 1 (1)
2020 2019
Current service cost 6 5
Interest cost - 1
Immediate recognition of (gains)/losses (6) 14
Other - -
Total - 20
2020 2019
Average for year
Flight deck crew 3,573 3,492
Cabin crew 8,188 8,497
Ground staff 18,207 18,583
Total 29,968 30,572
2020 2019
Average for year
The Netherlands 26,866 27,293
Outside the Netherlands 3,102 3,279
Total 29,968 30,572
2020 2019
Capitalised production 129 224
Operating currency hedging recycling 49 33
Other expenses (51) (84)
Other income and expenses 127 173
2020 2019
Intangible assets 81 61
Flight equipment 420 440
Other property and equipment 69 69
Right-of-use assets 479 506
Sale of assets (46) (20)
Impairment of fixed assets 25 -
Movements in provision 30 14
Total amortisation, depreciation and movements in provision 1,058 1,070
For sale of assets and impairment of fixed assets, reference is made to note 28 Alternative performance measures.
For a description of APMs reference is made to the Alternative performance measures section in the Notes to the
consolidated financial statements.
The 2020 APM adjustments show an overall negative amount of EUR 191 million (2019: EUR 22 million positive). As a result of
the COVID-19 crisis a number of measures and actions have been taken. The definition of APM was not adjusted due to the
impact of COVID-19.
The 2020 APM adjustments to EBITDA relate to voluntary leave plans in the Netherlands and abroad amounting to EUR 203
million, restructuring provisions in the Netherlands and abroad amounting to EUR 25 million and a curtailment related to the
Ground staff plan in the Netherlands amounting to a release of EUR 16 million.
The 2020 APM adjustments to income from operating activities relate to result on sale of assets (mainly Boeing 747 passenger
and combi aircraft/engines, results on purchase of former right-of-use Boeing 737 aircraft and sale of emission trade rights)
amounting to EUR 38 million, the disposal of the associate Transavia France S.A.S. amounting to EUR 17 million and right-of-
use assets write-off of 2 Airbus 330-200 aircraft, which were taken out of operation, amounting to EUR 9 million. Impairments
relate to passenger and combi Boeing 747 aircraft in April amounting to EUR 19 million, impairment of intangible assets in use
or under development amounting to EUR 8 million and a reversal of an impairment of engines of EUR 2 million.
The 2019 APM adjustments show a positive amount of EUR 22 million. This mainly relates a release of a voluntary leave plan
in the Netherlands amounting to EUR 2 million and the sale of Boeing 747 engines and 2 Boeing 737-700’s amounting to
EUR 20 million.
2020 2019
Cost of financial debt
Loans from third parties 53 41
Interest on financial debt 14 32
Interest on lease debt 92 110
Other interest expenses 5 (11)
2020 2019
Foreign currency exchange gains/(losses) (13) 5
Fair value gains/(losses) (110) (52)
Other Financial income and expenses (69) (80)
Total other financial income and expenses (192) (127)
The fair value results recorded in the financial year mainly consist of the unrealised revaluation of other balance sheet items
amounting to EUR 124 million positive (2019: EUR 49 million negative), the ineffective/time value portion of fuel, interest rate
and foreign currency exchange derivatives for EUR 6 million positive (2019: EUR 3 million negative), revaluation of Air France
KLM S.A. shares for 5 million negative (2019: EUR nil million) and the COVID-19 related fuel overhedge amounting to EUR 240
million negative (2019: nil million).
The latter relates to the COVID-19 impact on the Group’s fuel consumption that became far less than the volume of fuel
hedges outstanding as from the end of first quarter 2020. In accordance with IFRS the Group discontinued the fuel hedge
relationship of these overhedges and released the market to market value of those hedges from other comprehensive
income in equity to cost of financial debt. Reference is made to note 11 Reserves.
Other financial income and expenses includes additions of EUR 65 million (2019: EUR 77 million) to (maintenance) provisions
resulting from the discounting effect in provision calculations.
2020 2019
Deferred tax (income)/expense relating to the origination and reversal of temporary
differences and tax losses (54) 80
Current tax (income)/expense (82) 82
Total tax (income)/expenses (136) 162
The applicable average tax rate in the Netherlands for the financial year 2020 is 25% (2019: 25%).
End 2019 it was announced that the Dutch income tax will be lowered to 21.7% in 2021.
Given the COVID-19 impact the Dutch tax authorities announced end 2020 that the Dutch income tax will remain at 25% in
2021. The impact of these changes related to the specific years are presented in the line “Reduction tax rate” in below table.
Phantom shares
The movement in the number of phantom performance shares granted is as follows:
2020 2019
As at January 1 513,202 548,468
Granted 215,422 97,348
Forfeited (4,532) 8,068
Exercised (43,398) (140,682)
As at December 31 680,694 513,202
2020 2019
Phantom shares expiry date
The phantom shares generate an amount of cash, which is equal to the AIR FRANCE KLM share price at the moment of selling
of the shares. The number of vested phantom shares depends on the following criteria: AIR FRANCE KLM total shareholders
return (30%), KLM Group Return on Capital Employed (40%) and AIR FRANCE KLM position in the Dow Jones Sustainability
Index (30%). The maximum number of phantom shares that may be granted to an individual employee in any year is related to
their job grade.
Subject to restrictions relating to the prevention of insider-trading, phantom shares may be exercised at any time between
the third and the fifth anniversary of the day of grant. Phantom shares are forfeited when employees leave the Company’s
employment.
Under the Long-Term Incentive plan 2015, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2016. The first tranche has vested for 108.6% per April 2016. The second tranche has vested for
116.0% per April 2017. The third tranche has vested for 114.0% in April 2018. It is noted that the total number of Phantom
Performance shares vested over the three years cannot exceed the amount of Phantom Performance Shares granted
(maximum 100%). The 2015 plan has an intrinsic value of EUR 0.4 million as at December 31, 2020.
Under the Long-Term Incentive plan 2016, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2017. The first tranche has vested for 116.0% per April 2017. The second tranche has vested
for 114.0% per April 2018. The third tranche has vested for 74.8% in April 2019. It is noted that the total number of Phantom
Performance shares vested over the three years cannot exceed the amount of Phantom Performance Shares granted
(maximum 100%). The 2016 plan has an intrinsic value of EUR 0.6 million as at December 31, 2020.
Under the Long-Term Incentive plan 2018, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2019. The first tranche has vested for 74.8% per April 2019. The second tranche has vested for
102.1% in April 2020. The third tranche is still conditionally awarded.
Under the Long-Term Incentive plan 2019, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2020. The first tranche has vested for 102.1% per April 2020. The second and third tranche are
still conditionally awarded.
Under the Long-Term Incentive plan 2020, no grantings have taken place for the year 2020.
2020 2019
As Super-visory As Committee As Super-visory As Committee Total
(Amounts in EUR) Board member member Total Board member member
C.C. 't Hart 37,542 1,000 38,542 37,433 2,000 39,433
P.C. Calavia (until April 23, 2020) 8,244 - 8,244 26,500 - 26,500
F. Enaud 23,408 1,000 24,408 26,500 2,000 28,500
M.T.H. de Gaay Fortman 23,408 1,500 24,908 26,500 4,000 30,500
J.C. de Jager (as from April 25, 2019) 23,408 2,600 26,008 18,991 2,000 20,991
C. Nibourel (as from April 23, 2020) 15,164 - 15,164 - - -
F. Pellerin 23,408 2,600 26,008 26,500 2,000 28,500
J. Peyrelevade (until April 25, 2019) - - - 8,465 2,000 10,465
P.F. Riolacci 23,408 5,200 28,608 26,500 4,000 30,500
A.J.M. Roobeek (until April 25, 2019) - - - 8,465 1,000 9,465
B. Smith (as from April 25, 2019) - - - - - -
H.N.J. Smits (until April 25, 2019) - - - 13,576 1,000 14,576
B.J. Vos (as from April 25, 2019) 23,408 - 23,408 18,991 - 18,991
Total 201,398 13,900 215,298 238,421 20,000 258,421
Mr. C.C. ’t Hart is KLM Supervisory Board Chairman since the Annual General Meeting (AGM) in April 2019.
Due to COVID-19 and its significant impact on the Company, the Supervisory Board voluntarily reduced its base remuneration
by 20% as from June 2020 until and including December 2020.
For further information on the remuneration policy relating to Supervisory Board members, see the Remuneration Policy and
Report in the Board and Governance section. The remuneration paid to the Supervisory Board is not linked to the Company’s
results.
The execution of the remuneration policy is affected by the conditions imposed by the State in connection with the financial
support package. Therefore, the existing KLM remuneration policy has not been applied in 2020 with respect to the variable
income (both short-term and long-term incentive).
Due to COVID-19 and its significant impact on the Company, the Board of Managing Directors had already decided and
communicated in April 2020 to refrain from their variable income over 2020. In July, in the context of the State supported aid
package, conditions were set on no granting of variable income as long as the loan has not been repaid.
Total remuneration (base salary, short- and long-term incentive plan and pensions)
Base salary
Mr. Elbers voluntarily reduced his base salary of EUR 600,000 by 20% as from June 2020 until and including December 2020.
The base salaries of the Board of Managing Directors have not been increased.
As a general remark, the base salaries of the Board of Managing Directors remain significantly below the median of the
applicable market benchmark as well as below that of previous KLM CEOs in the case of Mr. Elbers.
2020 2019
(amounts in EUR) Short-term incentive plan Short-term incentive plan
P.J.Th. Elbers 0 342,000
R.M. de Groot 0 159,120
E.R. Swelheim 0 154,050
Total 0 655,170
Pensions
As per the remuneration policy the total pension benefits for the Board of Managing Directors, like for other KLM employees
with a salary above the fiscal regime of EUR 110,111 (2020), consists of two parts: 1) pension cost and 2) pension allowance.
Annual variations based on the pension calculations provided for by the KLM Ground pension fund.
In general, as an incentive to make a longer-term commitment to the Company, phantom shares are granted to members of
the Board of Managing Directors on the basis of their reaching agreed personal performance targets. Subject to restrictions
relating to the prevention of insider-trading, (phantom) shares may be exercised at any time between the third and the fifth
anniversary of the day of grant. After five years the outstanding (phantom) shares are forfeited.
Under the AIR FRANCE KLM specific long-term incentive (SLTI) plan, the KLM CEO is entitled to a number of AIR FRANCE KLM
shares. The shares granted in 2018 and 2019 under this SLTI will vest after three years if the predetermined SLTI plan criteria
are met. The evaluation and subsequent vesting will only take place after three years, hence in 2022.
Possible payment to the Board of Managing directors related to the exercise of pre-COVID vested phantom shares has been
suspended.
The members of the Board of Managing Directors have the following positions with respect to the phantom shares granted
under the KLM long-term incentive plan at December 31, 2020:
P.J.Th. Elbers
2015 10,000 April 1, 2021 - - - - 10,000 10,000
2016 10,000 April 1, 2022 - - - - 10,000 10,000
2017 10,000 April 1, 2023 303 - - - 9,697 9,697
2018 21,354 April 1, 2024 1,645 - - 7,118 12,591 19,709
2019 46,875 April 1, 2025 - - - 30,922 15,953 46,875
2020 nil - - - - - -
98,229 1,948 - 38,040 58,241 96,281
R.M. de Groot
2015 6,000 April 1, 2021 - - - - 6,000 6,000
2016 6,000 April 1, 2022 - - - - 6,000 6,000
2017 6,000 April 1, 2023 182 - - - 5,818 5,818
2018 11,688 April 1, 2024 900 - - 3,896 6,892 10,788
2019 24,375 April 1, 2025 - - - 16,079 8,296 24,375
2020 nil - - - - - -
54,063 1,082 - 19,975 33,006 52,981
E.R. Swelheim
2014 6,000 April 1, 2020 104 5,896 5.25 - - -
2015 6,000 April 1, 2021 - - - - 6,000 6,000
2016 6,000 April 1, 2022 - - - - 6,000 6,000
2017 6,000 April 1, 2023 182 - - - 5,818 5,818
2018 11,688 April 1, 2024 900 - - 3,896 6,892 10,788
2019 24,375 April 1, 2025 - - - 16,079 8,296 24,375
2020 nil - - - - - -
60,063 1,186 5,896 19,975 33,006 52,981
Cost of phantom shares is based on IFRS accounting standards and does not reflect the value of the phantom shares at the
vesting date.
Granted and vested phantom shares are recorded in April following the year it relates to and as such added to the total out
standing of the following year. The addition of phantom shares compared to last year relates to the achievements of 2019 targets.
Cost in 2020 of the committed 2019 phantom shares and AIR FRANCE KLM SLTI plan, for Mr. Elbers are EUR 905 negative
(2019: EUR 215,699), relate to achievement of 2019 targets and an annual technical revaluation, at December 31, 2020 of the
phantom shares portfolio and AIR FRANCE KLM shares following the 2020 decrease of the AIR FRANCE KLM share price.
Cost in 2020 of the 2019 committed phantom shares, for Mr. de Groot are EUR 22,989 negative (2019: EUR 78,880) and for
Mr. Swelheim EUR 50,523 negative (2019: EUR 89,245), relate to achievement of 2019 targets and a technical revaluation of
the phantom shares portfolio following the 2020 decrease of the AIR FRANCE KLM share price.
As at December 31, 2020 Mr. Elbers, Mr. de Groot, and Mr. Swelheim had no interest in AIR FRANCE KLM S.A.
In February 2019 the State of the Netherlands acquired a 14.0% stake in the Group’s ultimate parent company, AIR FRANCE
KLM S.A. As a result the State of the Netherlands and Royal Schiphol Group, being a State-owned entity, are regarded as
related parties as from 2019.
As part of its business operations, The Group enters into transactions with related parties which are negotiated at commercial
conditions and prices and are not more favourable than those which would have been negotiated with third parties on an
arm’s length basis.
Transactions conducted with the Dutch State are limited to normal economic transactions, taxation and other administrative
relationships, with the exception of items specifically disclosed in this note. Normal economic transactions mainly relate to air
transport and are entered into under the same commercial and market terms that apply to non-related parties. The Dutch
Government is a shareholder in KLM N.V. (reference is made to Note 10).
In addition, in financial year 2020 the Group applied for the “Temporary Emergency Bridging Measure for Sustained
Employment” (NOW) as installed by the Dutch Government (reference is made to Note 25), made use of the possibility to
delay payment of labor taxes (reference is made to Note 5) and received a financing package in 2020 (reference is made to
Note 14 Other financial liabilities).
The transactions with Royal Schiphol Group relate to land and property rental agreements and airport and passenger related
fees. In addition Royal Schiphol Group collects airport fees on their behalf.
2020 2019
Sales of goods and services
AIR FRANCE KLM Group companies 204 197
Associates - -
Other related parties 25 67
For details of the year-end balances of amounts due to and from related parties see notes 8 and 20.
In 2020 no dividends have been received from jointly controlled entities interests (see note 4).
In 2020 the Group sold its equity interest in Transavia France S.A.S. to related party Air France Finance S.A.S. Reference is made
to note 4 Investments accounted for using the equity method.
In 2019 KLM and Air France concluded a swap of part of their outstanding wide body fleet orders with the aim to simplify the
management of their own fleet (creation of synergies and costs reductions). In the 2021-2023 timeframe six Boeing 787’s,
previously allocated to Air France, will enter the KLM fleet and seven Airbus A350’s, previously allocated to KLM, will enter the
Air France fleet.
For information relating to transactions with members of the Supervisory Board and Board of Managing Directors, see note 31
to 33. For information relating to transactions with pension funds for the Group’s employees see note 18.
Amortisation, depreciation and movements in provision (821) (145) (89) (24) - (1,079)
Other financial income and expenses (146) 16 (43) (19) - (192)
Assets
Intangible assets 213 246 16 - - 475
Flight equipment 3,741 588 389 - - 4,718
Other property, plant and equipment 364 313 3 - - 680
Right-of-use assets 1,321 109 315 - - 1,745
Trade receivables 295 (21) 6 (11) - 269
Other assets 503 412 100 1,545 - 2,560
Total assets 6,437 1,647 829 1,534 - 10,447
Liabilities
Deferred revenues on sales 1,185 72 71 - - 1,328
Other liabilities 5,450 245 715 2,824 - 9,234
Total liabilities 6,437 317 786 2,824 - 10,562
Amortisation, depreciation and movements in provision (862) (85) (120) (23) - (1,090)
Other financial income and expenses (87) 2 (18) (24) - (127)
Assets
Intangible assets 183 74 17 235 - 509
Flight equipment 3,640 642 430 (5) - 4,707
Other property, plant and equipment 158 99 3 394 - 654
Right-of-use assets 1,499 98 324 107 - 2,028
Trade receivables 473 (11) 26 (4) - 484
Other assets 572 687 333 1,797 - 3,389
Total assets 6,525 1,589 1,133 2,524 - 11,771
Liabilities
Deferred revenues on sales 1,469 114 142 - - 1,725
Other liabilities 5,244 302 837 2,103 - 8,486
Total liabilities 6,713 416 979 2,103 - 10,211
* See note 28 Alternative performance measures (APM) for the reconciliation to adjusted EBITDA and adjusted income from operating activities. Also see the
Alternative performance measures section in the Notes to the Consolidated financial statements
The intangible assets, flight equipment, other property, plant and equipment, right-of-use assets and allocated working capital
have been tested for impairment as disclosed in the Impairment of assets section in the Accounting policies for the balance
sheet in the Notes to the consolidated financial statements.
Geographical analysis of assets: the major revenue-earning asset of the Group is the fleet, the majority of which are
registered in the Netherlands. Since the Group’s fleet is employed flexibly across its worldwide route network, there is no
suitable basis of allocating such assets and related liabilities to geographical segments.
37. Subsidiaries
The following is a list of the Company’s significant subsidiaries as at December 31, 2020:
The full list of the Company’s subsidiaries, associates, jointly controlled entities and non-controlling interests has been, in line
with Section 379 and Section 414 of Book 2 of the Dutch Civil Code, filed at the Chamber of Commerce together with this
Annual Report.
ASSETS
Non-current assets
Property, plant and equipment 38 4,443 4,328
Right-of-use assets 39 1,310 1,561
Intangible assets 454 486
Investments accounted for using the equity method 40 422 560
Other non-current assets 5 180 231
Other financial assets 41 281 429
Deferred tax assets 50 20 -
Pension assets 18 211 420
7,321 8,015
Current assets
Other current assets 5 100 158
Other financial assets 41 163 100
Inventories 127 243
Trade and other receivables 42 1,244 1,686
Cash and cash equivalents 43 120 186
1,754 2,373
EQUITY
Capital and reserves
Share capital 44 94 94
Share premium 474 474
Reserves 44 (441) (315)
Retained earnings 1,303 858
Result for the year (1,547) 448
Total attributable to Company's equity holders (117) 1,559
LIABILITIES
Non-current liabilities
Financial debt 46 764 648
Lease debt 47 706 946
Other non-current liabilities 5 839 150
Other financial liabilities 48 1,911 918
Deferred income 49 258 228
Deferred tax liabilities 50 - 92
Return obligation liability and other provisions 51 1,109 1,176
5,587 4,158
Current liabilities
Trade and other payables 52 1,737 2,480
Loans from subsidiaries 45 - 32
Financial debt 46 123 96
Lease debt 47 255 321
Other current liabilities 5 178 113
Other financial liabilities 48 119 73
Deferred income 49 926 1,240
Current tax liabilities 50 - 59
Return obligation liability and other provisions 51 267 257
3,605 4,671
Total liabilities 9,192 8,829
The accompanying notes are an integral part of these Company financial statements
The accompanying notes are an integral part of these Company financial statements
General
The Company financial statements are part of the 2020 financial statements of KLM Royal Dutch Airlines (the “Company”).
Going concern
Regarding going concern as at the date of this Annual Report reference is made to the Going concern paragraph in the Notes
to the consolidated financial statements.
Subsequent events
Regarding subsequent events as at the date of this Annual Report reference is made to the Subsequent events paragraph in
the Notes to the consolidated financial statements.
Principles for the measurement of assets and liabilities and the determination of the result
In determining the principles to be used for the recognition and measurement of assets and liabilities and the determination
of the result for its separate financial statements, the Company makes use of the option provided in Section 362 (8) of Book 2
of the Dutch Civil Code. This section permits companies to apply the same principles for the recognition and measurement of
assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of
the Company financial statements as those applied for the consolidated EU-IFRS financial statements.
The Company makes use of the option provided in Section 402 of Book 2 of the Dutch Civil Code. This section permits
companies to present a condensed company statement of profit or loss given that the Company’s financial information is
consolidated in the Consolidated financial statements of the ultimate parent company AIR FRANCE KLM S.A.
Subsidiaries are accounted for using the equity method and investments accounted for using the equity method, over which
significant influence is exercised, are stated on that basis. The share in the result of these investments comprises the share of
the Company in the result of these investments. Results on transactions, where the transfer of assets and liabilities between
the Company and its investments and mutually between these investments themselves, are not incorporated insofar as they
can be deemed to be unrealised.
All amounts (unless specified otherwise) are stated in millions of Euros (EUR million).
For notes and/or details, which are not explained in the notes to the Company financial statements reference is made to the
notes and/or details of the Consolidated financial statements.
As a consequence of management’s decision to take measures limiting the effects of the COVID-19 crisis, it was decided to
early phase-out the passenger and combi Boeing 747 aircraft as per April 2020. Thereupon an impairment of EUR 19 million
was recorded, which is reflected in the other movements. The asset is related to passenger activities within the network
business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision and
note 28 Alternative performance measures.
The assets include assets which are held as security for mortgages and loans as follows:
Land and buildings include buildings located on land which has been leased on a long-term basis. The book value of these
buildings as at December 31, 2020 was EUR 227 (December 31, 2019 EUR 198 million).
Net value
As at January 1, 2019 1,051 412 107 123 1,693
New contracts 85 - 4 38 127
Renewal or extension options 47 - 2 - 49
Disposals - - - - -
Reclassifications (21) 122 3 - 104
Amortisation (254) (103) (14) (32) (403)
Other movements - - - (9) (9)
As at December 31, 2019 908 431 102 120 1,561
As a consequence of management’s decision to take measure limiting the effects of the COVID-19 crisis, it was decided to
take out 2 leased Airbus A330-200 earlier out of the operation, notably in the fourth quarter of 2020. Thereupon a write-
off of EUR 9 million was recognised in the right-of-use asset aircraft. The asset is related to passenger activities within the
network business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision
and note 28 Alternative performance measures.
The table below indicates the rents resulting from lease and service contracts which are not capitalised:
2020 2019
Subsidiaries
Movements
Investments - -
Share of profit/(loss) after taxation (79) 90
OCI movement (55) 25
Dividends received - (6)
Foreign currency translation differences 1 (1)
Other movements (7) (3)
Net movement (140) 105
Carrying amount as at December 31 404 544
For details of the Group’s investments in subsidiaries see note 37 to the consolidated financial statements. For details of the
Group’s investments in associates and jointly controlled entities see note 4 to the consolidated financial statements.
50 21 50 29
For details about the Company’s stake in Kenya Airways see note 6.
Maintenance contract cost incurred to date for contracts in progress at December 31, 2020 amounted to EUR 147 million
(December 31, 2019 EUR 276 million). Advances received for maintenance contracts in progress at December 31, 2020
amounted to EUR 50 million (December 31, 2019 EUR 81 million). The maturity of trade and other receivables is within one
year.
The effective interest rates on short-term deposits are in the range from -0.34% to 3.35% (2019 range -0.33% to 3.35%). The
short-term deposits are invested in money market instruments or in liquid funds with daily access to cash.
For details of the Company’s share capital and movements in other reserves see note 10 and 11 to the consolidated financial
statements. For details of the Company’s equity see the consolidated statement of changes in equity.
The Company has other reserves relating to hedging, remeasurement of defined benefit plans, translation and other legal
reserves. Reference is made to note 11.
2020 2019
Less than 1 year 316 394
Between 1 and 2 years 259 350
Between 2 and 3 years 201 280
Between 3 and 4 years 129 190
Between 4 and 5 years 86 94
Over 5 years 184 218
Total 1,175 1,526
Including:
- Principal 961 1,267
- Interest 214 259
For details about the other financial liabilities see note 14.
Advance ticket sales corresponds to sold passenger tickets and freight airway bills which will be recognised in revenues at
the date of transportation. The COVID-19 crisis and the lockdown of borders caused the KLM to reduce capacity and cancel
an important number of passenger flights. In that case, customers can either ask for a refund of the ticket or the issuance of
a voucher. As per December 31, 2020, the advance ticket sales includes EUR 243 million of passenger tickets (fare and carried
imposed charges) for which the date of transportation has passed and which are eligible to refund and EUR 322 million of
vouchers that can be used for future flights.
2020 2019
Carrying amount as at January 1 92 (9)
Movements:
Income statement expense (49) 74
Tax (credited)/charged to equity (67) 65
Reduction due to tax rate - 29
Other movements 4 (67)
Net movement (112) 101
Carrying amount as at December 31 (20) 92
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
The movements in deferred tax assets and liabilities, without taking into consideration the offsetting of balances within the
same tax jurisdiction, are as follows:
Tax losses - - - - -
Non-deductable interest - 10 - - 10
Other tangible fixed assets 18 11 - - 29
Derivative financial instruments (4) - 21 - 17
Other - 19 (19) - -
Total 14 40 2 - 56
Current/non-current portion
Non-current portion 45 744 169 136 - 15 1,109
Current portion 11 143 24 2 55 32 267
As at December 31, 2020 56 887 193 138 55 47 1,376
Other Provisions
Return
obligation Maintenance Restructuring
liability liability and
on leased on leased Employee voluntary
aircraft aircraft Benefit Legal Issues leave Other Total
As at January 1, 2019 (38) 976 178 131 - 35 1,282
Current/non-current portion
Non-current portion 55 949 169 1 - 2 1,176
Current portion 4 63 22 136 - 32 257
As at December 31, 2019 59 1,012 191 137 - 34 1,433
For details about the Return obligation liability and other provisions see note 19.
Other notes
For information relating to contingency assets and liabilities, including guarantees, see note 22.
For information relating to share-based payments, Supervisory Board and Board of Managing Directors remuneration
see note 31 to 33.
To: the General Meeting of Shareholders and the Basis for our opinion
Supervisory Board of KLM Royal Dutch Airlines (‘Koninklijke We conducted our audit in accordance with Dutch
Luchtvaart Maatschappij N.V.’) law, including the Dutch Standards on Auditing. Our
responsibilities under those standards are further described
Report on the audit of the financial statements in the ‘Our responsibilities for the audit of the financial
2020 included in the annual report statements’ section of our report.
75% 16%
risks of material misstatement, and set out the information
required to be reported back to the group audit team.
For all components in scope of the group audit, we held Audit of the complete Audit of
both physical and virtual meetings with the auditors of the reporting package specific items
components. During these meetings the audit approach,
the findings and observations reported to the group audit
team were discussed in more detail. Also, file reviews were
performed for most of these components; and Our focus on the risk of fraud and non-compliance
» performed analytical procedures on components not in with laws and regulations
scope for audit procedures to validate our assessment
that there are no significant risks of material misstatement Our objectives
within these components.
The objectives of our audit with respect to fraud and non-
compliance with laws and regulations are:
Description of responsibilities regarding the Our audit has been performed with a high, but not absolute,
financial statements level of assurance, which means we may not detect all
material errors and fraud during our audit.
Responsibilities of the Board of Managing Directors
and the Supervisory Board for the financial Misstatements can arise from fraud or error and are
statements considered material if, individually or in the aggregate, they
The Board of Managing Directors is responsible for could reasonably be expected to influence the economic
the preparation and fair presentation of the financial decisions of users taken on the basis of these financial
statements in accordance with EU-IFRS and Part 9 of statements. The materiality affects the nature, timing and
Book 2 of the Dutch Civil Code. Furthermore, the Board of extent of our audit procedures and the evaluation of the
Managing Directors is responsible for such internal control effect of identified misstatements on our opinion.
as management determines is necessary to enable the
preparation of the financial statements that are free from A further description of our responsibilities for the audit of
material misstatement, whether due to fraud or error. the financial statements is included in the appendix of this
auditor’s report. This description forms part of our auditor’s
report.
Appendix: Description of our responsibilities for the audit of the financial statements
2018 2017
(in millions of EUR, unless stated otherwise) 2020 2019 Restated* Restated** 2016
Consolidated statement of profit or loss
Passenger 2,518 7,952 7,766 7,496 7,114
Cargo 1,535 1,171 1,284 1,211 1,123
Other revenues 1,067 1,952 1,839 1,723 1,563
Adjusted income from current activities *** (1,154) 853 1,091 1,079 681
Total APM adjustments *** (191) 22 (13) (1,849) 3
Income from operating activities (1,345) 875 1,078 (770) 684
Financial income and expenses (340) (275) (315) 91 (99)
Pre-tax income (1,685) 600 763 (679) 585
Income tax expenses 136 (162) (201) 171 (69)
Net result after taxation of consolidated companies (1,549) 438 562 (508) 516
Share of results of equity shareholdings 3 11 4 11 3
Profit/(loss) for the year (1,546) 449 566 (497) 519
* 2018 restated following implementation of Customer compensation and Component approach for Life Limited Parts in 2019
** 2017 restated following implementation of IFRS 9, 15 and 16 in 2018
*** See note 28 Alternative performance measures (APM) for the reconciliation to adjusted EBITDA and adjusted income from operating activities for the
financial years 2020 and 2019. Also see the Alternative performance measures section in the Notes to the Consolidated financial statements
* 2018 restated following implementation of Customer compensation and Component approach for Life Limited Parts in 2019
** 2017 restated following implementation of IFRS 9, 15 and 16 in 2018
*** in millions