Dutch government rejects KLM coronavirus restructuring plan

Air France luggage tags are pictured at Nice international airport, France February 20, 2020. REUTERS/Eric Gaillard

AMSTERDAM (Reuters) - The Dutch government on Friday rejected a restructuring plan presented by Air France-KLM’s Dutch subsidiary to cope with the effects of the pandemic due to what The Hague sees as insufficient commitment by the company’s workers to wage freezes.

Two sources familiar with negotiations between the company and government said the rejection was triggered by a refusal by unions to commit to wage freezes through 2025. The Finance Ministry and KLM could not immediately comment. De Telegraaf newspaper, which first reported the news, reported unions and the company were in emergency talks on Friday.

Parent company Air France-KLM AIRF.PA on Friday reported a 1.05 billion-euro (952.2 million pounds) quarterly operating loss and warned of worse to come as resurgent coronavirus infections bring new travel curbs.

The Dutch government has made its bailout of the KLM subsidiary - a 3.4 billion euro package of loans and loan guarantees - contingent on the restructuring plan, which KLM submitted on Oct. 1.

It includes plans to cut costs by 15% and the company’s workforce by 20%, as well as reducing carbon dioxide emissions by 50% by 2030.

KLM said on Friday that in light of Europe’s second wave of coronavirus cases, it must now consider further “right-sizing” of the company, without elaborating on whether that means fleet reductions or cutting more jobs.

Reporting by Toby Sterling and Bart Meijer; editing by Jason Neely