KLM and TAP fly in BCG to support restructuring efforts

07 September 2020 Consultancy.eu

Two European airlines – Netherlands’ KLM and Portugal’s TAP – have hired Boston Consulting Group to advise the management teams on their restructuring plans. The consultancy was engaged to help find major cost savings and review organisational structures at the airlines, following their applications for state bailouts.

Share prices of most major airlines across the globe took a nosedive in the first half of 2020, as the unprecedented coronavirus lockdown curbed the travel plans of millions of fliers. While the fleets of many commercial carriers are once again operational, however, the Covid-19 pandemic has already created a lasting financial impact on many airlines.

Desperate to avoid joining the growing number of aviation companies entering liquidation, this saw a number of major airlines drastically cut their consulting spend earlier in the year. Having set aside enough funds to plan for a recovery phase though, a number of carriers are once again turning to the advisory industry for help with masterminding their recovery plans.

KLM and TAP fly in BCG to support restructuring efforts

At Air France, for example, McKinsey & Company is helping with revising the corporate strategy, while rival MBB strategy giant Boston Consulting Group (BCG) is advising Lufthans afollowing its bailout by the German Government. The latest development of this kind has seen BCG enlisted by airlines in the Netherlands and Portugal, both of whom are looking to align their operations to the ‘new normal’ in commercial aviation.

KLM

Dutch airline KLM – a sister company of Air France – tapped BCG to draw up a recently presented reorganisation plan. With some 5,000 jobs at risk, and the company currently being kept alive by state aid, the decision to use its thin-spread funds on BCG consultants caused more than a few eyebrows to be raised, however the company recently defended the decision – citing the complex situation KLM finds itself in.

“Boston Consulting Group is helping KLM with drawing up the first contours of the restructuring plan,” a spokesperson told Dutch newspaper De Telegraaf.

While KLM has not disclosed what the specific contribution of BCG is; De Telegraaf also reported that several sources had indicated the strategy consulting firm had helped to draw up plans for a 20% wage cut – a measure the company immediately rolled out. The restructuring plan aims to ensure that KLM’s current controllable costs – including wages – are reduced by 15%, which amounts to savings of around €600 million per year.

This will help the Dutch airline meet the conditions set by Minister of Finance Wopke Hoekstra as part of the airline’s €3.4 billion bailout, which saw the technically bankrupt KLM through the lockdown period.

TAP Air Portugal

Elsewhere in Europe, BCG has also been selected to prepare the restructuring plan for TAP Air Portugal. Portugal’s flagship carrier airline has been granted approval from the European Commission to receive state aid, and TAP subsequently sought out BCG to provide consultancy services to assist in the preparation of a restructuring plan, which will once completed be submitted to the European Commission.

Confirming the plan to reorganise in a letter to the firm’s employees, TAP Chair Miguel Frasquilho said, “We want this restructuring plan to become a real TAP recovery plan… The times we are facing, and are coming, are not and will not be easy. But, working together and united, we will overcome these difficulties and ensure the sustainable future of our TAP.”

Meanwhile, TAP hired a human resources consultancy to assess the company’s managers and support the restructuring process. The company will also help select the new Chief Executive Officer of TAP, who will succeed Antonoaldo Neves in the leadership team.

Both KLM and TAP will have been aware in BCG’s specialised knowledge in the aviation sector before opting to work with them. KLM and BCG in particular have been working closely together for years, even launching a joint venture to offer artificial intelligence solutions to the airline sector. The consultancy also helped KLM develop its ‘high performance organisation’ model a few years ago.