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The challenges faced by the KLM Airline

Info: 5324 words (21 pages) Essay
Published: 1st Jan 2015 in Business

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The KLM is one of the biggest and the leading airline companies of the world. The work will focus on following items the background of the company and its current position also will focus about the human resource and the organization structure of Klm and also the organization culture, Klm corporate social responsibilities and its contribution to the world not only that but also leader ship and management, also team working which include selection methods, coaching and monitoring, resourcing together with training and development,

How does the organization communicate with its employee, negotiating and influencing, also about the performance, motivation and appraisal, the management systems and policy.

Not only will that but the paper discuss about the SWOT analysis also the management of change.

Due to its experience of long time service, Klm takes the leading position in the world market. The airline uses new airliners and operates in all over the continent.

The company is competiting very well due to technical and financial potential of the company as well as effective managerial structure.

Though, the company still has to cope with the problem of the growing competition as many airlines are emerging with very competitive strategies.



EXCOM Executive committee

GEC Group executive committee

SARS Severe acute respiratory syndrome


1. Abstract

2. Introduction

3. Company overview

a. Background and profile of the company

b. Managerial hierarchy and division and managerial functions

c. Competitive advantage

d. Impact of the company on the economy

e. SWOT analysis

f. Impact on local businesses

4. Conclusion and summary

5. Appendix

6. References

7. Foot




KLM Royal Dutch Airlines was founded on October 7, 1919. It has continued to operate under the same name to this day, making it the oldest scheduled airline in the world with a continuous history.

The carrier’s first scheduled flight was on May 17, 1920, connected Amsterdam and London. By the end of that year the company had carried 345 passengers, 22 tons of cargo and three tons of mail.

The airline operated its first intercontinental flight to Indonesia, then still the Dutch East Indies, in October 1924. Regular scheduled flights to the Far East began in 1929 the route remained the world’s longest until the outbreak of World War II.

Klm aircraft continued to fly from England throughout the war, but operations from its home base, Amsterdam Airport Schiphol, had to be reconstructed from zero in 1945.

Albert Plesman, who had founded and led the airline from the beginning, threw himself into this task with the same energy he had applied to the pre-war company. By the fall of 1945, Far Eastern services had recommenced.

And in May 1946, Klm was the first continental European airline to open transatlantic services to the USA

In the year 1998/99, KLM carried 15,041 million passengers and 578,000 tons of cargo and mail. The company operates a fleet of 117 aircraft, averaging 8 years old, one of the worlds youngest.

The 2000s were marked by the ongoing renovation of the fleet of the company. To put it more precisely, in 2002 the company announced the replacement of its old Boeings by Boeings 777-200ERs and Airbus A-330-200s.

At the same time, the company started to accelerate its international market expansion and international cooperation. In this regard, it is worth mentioning the merger of KLM with Air France in 2004,

Though both KLM and Air France continue to fly under distinct names preserving their uniqueness and brand images.

This merger was very important since it allowed the company to improve its competitive position consistently due to the increasing fleet, number of routes and, therefore, a number of passengers.

In addition, the merger opened new markets for the company where the position of Air France was traditionally strong.

In actuality, the merger of KLM with Air France is a part of the current strategy of the company’s international market extension.

In this respect, it is also worth mentioning the fact that KLM is a member of the Sky Team alliance which also facilitates the penetration of new markets and allows the company to maximize its performance in the markets where it has strong positions.

The membership in the airline alliance optimizes the performance of the company since members of the alliance, as a rule, share routes to maximize their profits and avoid undesirable competition between members of the alliance.

In such a way, companies-members of the alliance can maximize their profits since they can maintain the high price and minimize costs due to the decrease of the competition, which allows them schedule flights in accordance with their technical capabilities and customers actual demand regardless of the position of other companies because members of the alliance have their own routes and schedules which do not intersect to avoid the competition.

Klm attempts to achieve a higher flexibility to maintain its leading position in the highly competitive environment.

Not only that but also Klm maintains its orientation on the international market expansion, which it realizes through mergers and acquisitions as well as through its membership in the airlines alliance.

Klm and its partner airlines operate a route network connecting more than 500 cities in 90 countries on 6 continents

With a small home base from which to work, KLM has maintained an international orientation since its beginning.

Klm’s strength lies in the tightly-knit, worldwide network it has built up with its partners, most notably, Air France. This network links just about every important economic region in the world with the Netherlands, and with each other. Passengers can transfer quickly and easily at Schiphol,

Klm Royal Dutch Airlines is a worldwide airline company. It comprises the core of the Klm Group, which further includes;

KLM City hopper,



Klm works very closely with Air France within the Air France Klm Group, which exists since the two companies merged in 2004. The Air France Klm Group is Europe’s leading Group in the Airline business.


Mullins (2007) defined swot analysis as the study of strenghts, weakenesses, opportunities and threat facing an organization that may provide a basis for decision making and problem solving.

In order for any organization to survive it must assess the competitive position and it’s potentiality on the market, it is necessary to analyze in details its marketing position and among the best method PEST and SWOT analysis is a very effective tool to achieve this goal. In this respect SWOT analysis will be analyzed to asses the position of Klm in the market, it should be said that KLM, being one of the world’s leaders of the airline industry, still has both strength and weaknesses which affect its performance consistently and it is very important for the company to overcome existing problems and minimize possible threats to realize its full potential and opportunities.


According to Mullins (2007) strengths are those positive aspects or distinctive attributes or competencies which provide a significant market advantage or upon which the organization can build.

Among the Klm strength is the Comfortable connections between many and even relatively small airports around the world this is one of the biggest strength as Klm is also operating in Tanzania with daily flights at Kilimanjaro airport and Mwl nyerere airport in Dar es Salaam

Innovative project, Klm is one of the airlines with very innovative projects like that of electronic check in where passengers can check inn at home and still coming with other new innovative projects

Punctuality, flights delayment is only by coincidence such as weather and technical problems and customers are always informed on the situation.

Environmental friendly, technology used by this airline is environmental friendly

Not only that Klm has effective and flexible organization structure with a huge experience which contribute to the stable performance of weaknesses

Experience, the airline has a very huge experience in serving it’s customers with the experience of about 27 years of service


According to Mullins (2007) weaknesses are those negative aspects or deficiencies in the present competencies or resources of the organization, or its image or reputation, which limit its effectiveness and which need to be corrected or need action taken to minimize their effect.

Klm have the following weaknesses;

No research and development department, the airline lacks these two important departments in their organization structure.

Sometimes customers may not be satisfied with the services for example the baggage, not all the customers are satisfied with the airline services for example baggage services a passenger may reach his/her destination and find his/her baggage missing this cause inconvenience.

The policy of mergers and acquisitions raises the problem of restructuring of the company and integration of new units into the organizational structure for example Air France Klm merger.

The organization has a very huge growing functional organizational hierarchy and this raises the problem of effective control over the performance of all the units of the company.

Klm grow very fast and this Extensive growth inevitably provokes the growing complexity of the relationship within the company.


Opportunities are favorable conditions and usually arise from the nature of change in the external environment, opportunities provide the potential for the organization to offer new, or develop existing, products, facilities or service. Mullins (2007)

Klm as an organization has the following opportunities;

Sector investing increase in engineering, maintanance and cargo the improvement of these department makes the airline increase it profit and providing the first class services

Increasing the proportion of electronic booking, the e-booking reduce a lot of inconvenience to the customers as they can check inn and print the boarding pass at home so this attract many customers to fly with Klm.

Long term focus, Klm has a long term focus and they keep coming with innovative project everyday and attract many customers due to its excellence services.

Opportunities for the penetration into new markets, it keep on penetrating in new market as the formation of alliances and as for now it almost goes fly all over the world

The growing demand for the cargo carriers services open new opportunities for klm as a major cargo carrier.

Klm also has opportunities to develop its subsidiaries, including Kl helicopters, Klm city hopper to take new riches of the market


These are the converse of opportunities and refer to unfavorable situations that arise from external developments likely to endanger the operations and effectiveness of the organization. Mullins (2007)

Klm airline undergo the following threats

Terrorist attack this slows down the growth of the number of passengers and cargo for example the case of September eleven

SARS this disease is known as severe acute respiratory syndrome which started to between Nov 2002 to July 2003, SARS spread from the Guangdong province to China to rapidly infect individuals in some 37 countries around the world and it affected the airline industry to a great extent.

Intensive competition due to the presence of many competitive airlines with quality services and customer care so passengers have a wide range of choices.

The company faces a threat of the increase of costs on the improvement of safety of flights and quality of its services

Strong regulation in the environment protection which does not favor many airlines and cause them to incur a lot of costs.

Fuel price increase this is due to various reasons such as inflation and the like which cause airlines to increase fares to compensate the cost of operations.

Increase in price for the security measures this is due to terrorism so the airline has to put so much effort to security in order to overcome this danger.

Changed weather which most of the time causes the delayment of flights and hence loss to the airlines and also sometimes it may cause crash.

Frequent airport workers strikes, this has been the case of many airports in Europe and America it cause a lot of inconvenience to customers and the airline.


According to Mullins (2007) defined Structure as the pattern of relationships among positions in the organization and among member of organization. Structure makes possible the application of the process of management and creates a framework of order and command through which the activities of the organization can be planned, organised, directed and controlled. The structure define tasks and responsibilities, work roles and relationships, and channel of communications

The span of control arises in line of authority and refers to the number of subordinates who report directly to a given manager or supervisor. It does not refer to the total of subordinates operating staff that is those staff who report first to another person. Mullins (2007).

KLM’s management is in the hands of its Executive Committee (Excom). This consists of the statutory managing directors and eight executive vice presidents of KLM’s business units.

They are responsible for;




Engineering & Maintenance,

In-flight Services,

Ground Services,

Information Services and

Human Resources & Industrial Relations.

The statutory managing directors are President and Chief Executive Officer Peter Hartman, Chief Financial Officer Frédéric Gagey and Managing Director Jan Ernst de Groot. Together they comprise the Managing Board and as such bear responsibility for Klm.

KLM has an independent Supervisory Board which is responsible for supervising the company and it’s Managing Board.

On 31 March, 2009, the Supervisory Board consisted of K.J. Storm (chair), J.F.H. Martre (vice-chair), I.P. Asscher-Vonk, J.D.F.C. Blanchet, H. Guillaume, W. Kok, R. Laan, J. Peyrelevade, and H.N.J. Smits.

Klm is a Dutch company and is part of Air France Klm S.A., as is Air France. The management of Air France Klm lies in the hands of the Group Executive Committee (GEC), which focuses on such group related subjects as







And fleet development.

The GEC has eleven members and sets and monitors Air France Klm’s strategic course. The GEC is headed by Air France Klm Chief Executive Officer Pierre-Henri Gourgeon, in cooperation with Klm President and Chief Executive Officer Peter Hartman.


Klm use functional organization structure as each part has its own function the aim is to help its internal and external customers as decision and authority are distributed to various heads in functionally defined departments.

And it is a tall structure as there is a long chain of command from the board of managing director down ward and most of the decision has to come from upward


It’s effective because there is specialization of job; everyone is doing something that is capable of so he/she will perform it effectively.

Also there is clear job description and everyone knows his/her responsibilities in each job hence clear line of responsibility and control.

Once there are ranks it is easier to upgrade or to promote someone if he/she has performed well in various areas of operations of the organization.


Though it is easy to manage but it is very difficult to do a work quickly as every decision has to pass through a chain of command.

Though people may be promoted and rise up to the top level but the cost of management will be as high as always managers are paid high in terms of salary and other fringe benefits compared to other subordinates at lower levels

Not only that but any matter must be communicated to all layers of management before any decision to be made this cause delayment as there are matters which need quick decisions.

Subordinates who are at low level are not very free to make decision as most of the decision has to come from the chain of command upward hence their freedom to make decision is restricted.


Culture is the collection of traditions, values, policies, beliefs, and attitudes that constitute a pervasive context for everything we do and think in an organization. Mullins (2007).

According to Deal and Kennedy (1982) culture is a system of informal rules that spells out how people are to behave most of the time.

Culture of the organization refers to the unique configuration of norms, values, beliefs and ways of behaving that characterize the manner in which groups and individuals combine to get things done.Eledridge and Crombie (1974).

Huczyinski and Buchanan (2007) organization behavior is concerned with the study of structure, functioning and performance of organizations and the behavior of groups and individual within them.

The study of the structure, functioning and performance of organizations, and the behavior of groups and individuals within them. (Pugh, 1971)

The study of human behaviour,attitudes,and performance within an organizational setting; drawing on theory, methods and principles from such disciplines as psychology,sociology,political science and cultural anthropology to learn about individuals,groups,structure and processes.(Ivancevich et al 2008)



KLM is one of the largest companies in Holland with large number of staffs, due to that reason it has to pays specific attention to staff flexibility, mobility, participation, and health.

This has to be done in order to overcome the competition which is very intense and also the technology is changing and customer markets demand that.

In order for any organization to survive it has to be flexible and to adapt to its organization structure and this flexibility must come from individual employees.

Employees at Klm are encouraged to expand their skills and knowledge through training, and to change jobs from time to time.

This change of job from time to time and training broadens the employees’ prospects within Klm and the Klm Group, and it also enriches competences and increases creativity and flexibility.

Also the company culture insists on customer’s satisfaction through providing the following assurance to customers

• More choices, frequencies and convenient schedules on 230 daily flights operated by 135 aircraft.

• Convenient access to nearly 300 destinations in North America and close to 200 destinations in Europe, Asia and Latin America and Africa

• Competitive fares compared too many airlines.

• Harmonized ground and in-flight services.

• The opportunity to earn miles with the Flying Blue and Sky Miles frequent flyer programs.

• Access to the largest lounge network across the Atlantic.

• Dedicated reservation center in Europe and North America.

Staff of Klm wears special uniforms and also they provide special training in various parts of the world.

Klm is committed to the sustainable development of its employees. It is striving to keep its staff motivated through every phase of their career as the idea is to identify differences to gain maximum benefit from them.

Health and safety at Klm are a common concern for customers, staff, and for the company as the organization believes that they can contribute to society by way of good collaboration and communication.

As Klm Play a leading role in the airline industry so it’s customers expect a modern

Product coupled with service that satisfies their requirements.

Klm offers a modern product by responding to market opportunities and technological developments and its level of service is characterized by the professionalism and efforts of its crew Members.

In so doing, Klm has established a good reputation nationally and internationally that the company can afford to be proud of.

To retain the present customers and attract new ones in today’s highly competitive market, Klm need to continually improve the level of service they provide.

In order to achieve this, there is a need to rely on Staffs personal efforts. Because the staffs are in contact with the customers.

That is why Klm has introduced what they call 7 Service Standards that have been defined for

Common use to bring the quality of customer service provided by Klm

The seven Service Standards apply for all Klm employees who maintain direct contact with customers.

They customers expect the service the can get from the Klm staffs to comply with these basic principles.

These standards also supplement the core values upheld by Klm:

• Safety,

• Security,

• Reliability,

• Punctuality

• And sustainability.

These seven Service Standards tie in completely with the behavioral values that determine the Klm brand.

These values are:

• treat me as a guest,

• control the situation,

• Use your creativity and make the difference.

Together with the seven Service Standards, they comprise the “Pure & Professional” approach. This means that KLM’s staffs are supposed to be;

• Friendly,

• Decisive,

• Resourceful and naturally genuine towards all customers.

Klm believes that if a customer is satisfied with your service, then he or she experiences what makes the products of Klm unique and distinctive.

Staffs are supposed to be tactful, warm and friendly towards customers be involved and anticipating customers requirements.

Staffs are supposed to makes every effort to meet all customers’ needs behind the words but how?

These can be achieved through;

• Taking an interest in customers, by showing concern and making them feel at ease.

• Customers should feel their needs are being taken into account and that Klm can meet their expectations.

• Be positive towards customers about KLM’s products and policies.

A proactive approach and interaction with customers are positive values that constitute the backbone of a genuine service culture.

By adopting a proactive approach Klm staffs prove that they are efficient and able to adapt to all situations.

Klm customers always say “He helped me before I had a chance to ask, and did his best to make sure I had everything I needed.”

Klm staffs are willing to help customers and are attentive to their needs they focus on the customer and respond to their needs appropriately.

Before the take off the captain introduced himself and the crew and took some time to explain a few details about the flight ahead.

Crew members address by name and ask how the customers are doing – that personal touch is very important to customers.

Customers are greeted with caring smile Deliver a high level of expertise with efficient, reliable service under all circumstances

Klm’s reputation and professional image in the airline industry relies on the compliance with stringent standards and the provision of consistently efficient and reliable service under all circumstances.

The quality of the service the company provides compensates somewhat for possible operational hitches.

Klm staffs are always perfectly dressed this means looking clean and tidy and wearing the uniform in accordance with the uniform manual.

Klm knows that Customers need relevant, up-to-date information to make the necessary plans for themselves that why they are putting much effort on provision of accurate information so as not to confuse the customers. This reaffirms customer perception that Klm is efficient and dedicated.

Klm staffs create a clean, peaceful and inviting environment that contributes towards determining the company image and reflecting the company’s high service standards.


• Staffs are supposed to help customers and be attentive to their needs

• Be involved and proactive

• Be courteous and friendly

• Be perfectly dressed and well mannered

• Deliver a high level of expertise

• Provide relevant information regularly

• Create a welcoming environment



Armstrong (2006) defined Leadership as the ability to persuade others willingly to behave differently. The function of team leaders is to achieve the task set for them with the help of the group. Leaders and their group are therefore interdependent.

Leadership is a relationship through which one person influences the behavior or action of other people. Mullins (2007)

The successful development of KLM was, to a significant extent, determined by its effective leadership.

At the same time, it is important to underline that the management of the organization, its managerial hierarchy and division changed in the course of time respectively to the changes in the business environment and the position of the company in the international market.

To put it more precisely, the managerial hierarchy of Klm should adapt new strategies and new forms in order to maintain the effective performance of the organization.

It is obvious that the substantial enlargement of the company which took place in the second half of the 20th century and the enlargement of its operations worldwide stimulated the change in the organizational hierarchy since the company could not function effectively using the traditional managerial hierarchy. In fact, today, the company tends to develop a flexible organizational structure in order to avoid unnecessary bureaucratization, which can produce a negative impact on the performance of the company.

This means that the company is managed by its headquartering Amsterdam where the company’s CEOs take the strategic decisions concerning the further development of the company.

However, today, it is practically impossible to manage effectively such a huge organization as KLM since the company operates domestic and worldwide scheduled passenger and cargo services to more than 90 destinations and it has over 30,000 employees.

Naturally, such a large number of employees and complicated organizational structure needs effective management.

Obviously, the effective management may be achieved only through the minimization of a bureaucratization of the organizational hierarchy. The latter is achieved through the provision of KLM’s subsidiaries and its units located worldwide with a higher degree of autonomy.

In fact, the company tends to introduce liberal management strategies which target at the higher autonomy of the company’s units and employees. In practice, this means that the subsidiaries and units of the company function autonomously and take decisions concerning the regular and routine performance relatively independently from the headquarter of the entire company.

Instead, the headquarter of the company and CEOs are not involved in the process of taking decisions concerning routing, technical questions. In fact, CEOs of the company are working on the problem of the strategic development of the company.

In other words, they define the basic directions of the development of the company, strategic goals and ways of their achievement, set tasks which their subordinates should achieve.

The subsidiaries and various units of the company, on the lower level of the managerial hierarchy, get the strategic directions and goals which they have to achieve and work on the fulfillment of tasks set by CEOs. In such a situation, the technical way in which the strategic goals are achieved is mainly the prerogative of subsidiaries and units of the company and their managerial staff, which does not concern top executives of the company.

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As a result, the managerial hierarchy allows the company to function effectively since decisions are taking fast and the managerial hierarchy is flexible enough to provide the personnel with a high degree of autonomy, which allows various units of the company operating in different countries and different environment to use methods and techniques which contribute to the achievement of strategic goals set by CEOs of KLM.


Katzenbach and Smith (1993) defined a team as a small number of people with complementary skills who are committed to common purpose, performance goals and approach for which they hold themselves mutually accountable. The teams are basic unit of performance for every organization they meld together the skills, experiences, and insights of several people.

Team work and team building is a challenge in every organisation, this is mainly because most working environment tend to foster rugged individuals working for personal goals for personal gains. Typically reward, recognition, and pay system single out the achievements of individual’s employees

At Klm staffs and the management work as a team to contribute to the overall success, at Klm even though you have a specific job and you belong to a certain department you are supposed to corporate with other members of the organization to accomplish the overall objective


Every staff cooperate with the management to make things work, managers are positive individuals who encourage and praise other members of the staff, they don’t seat around doing nothing they like to move things along by suggesting ideas,clarifing ideas of others and confronting problems.


Coaching is a supportive relationship aimed at creating understanding, direction and action. Coaching uses deductive techniques and the coach does not have to be an expert on the subject. Mullins (2007)

In coaching and monitoring team working, the leaders are the energizers where by they energize groups when motivation is low through humor or being enthusiastic.

Leaders are also compromiser as they are sociable, interested in their followers and will introducing people to make them feel that they are the part of the team.

They also direct the trend of the group and keeps the group on track by controlling people and the resources, this can also be done by recognizing the sk


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