KLM responds to VNV-ultimatum


KLM cannot comply with the ultimatum issued by VNV pilots’ union to withdraw from the negotiating table its proposed suspension of the STROT (structural surpluses and shortages) protocol and implementation agreement. KLM has stated that it wishes to keep seeking a suitable solution for this issue together with VNV.

On 29 July, we reported that the new Financial Assessment Framework (nFTK) of the Dutch central bank DNB, the existing agreements in the STROT protocol, dating from 2001 and 2007, in combination with low interest rates would give rise to a situation wherein a substantial supplementary payment would have to be made into the pension funds.

The STROT protocol and the implementation agreement stipulate that KLM should make a supplementary payment if the cover ratio of the pension fund is insufficient for full indexation. The limit for this cover ratio had been set at 105%.

New legislation, which took effect on 1 January 2015, raised this limit to around 122%. Below this cover ratio, full indexation is impossible, which means KLM must make a supplementary payment if the cover ratio is below 122%. In view of the current financial status of the pension fund, this supplementary payment, which is due in late 2016, could amount to hundreds of millions of euros.

This pension issue is an unexpected side-effect of the new legislation passed on 1 January 2015. Since then, KLM and VNV have met on several occasions to discuss this new legislation and its unintended side-effects. These meetings did not result in a solution.

It is not KLM’s intention to reduce pension costs. The point is that the unintended effects of the amended legislation, in combination with low interest rates, have confronted KLM with a disproportionately high supplementation commitment, which jeopardises operational continuity.

KLM therefore cannot pursue the current supplementation scheme for future indexation of the pilots’ pension scheme in its current form. As a result, KLM is compelled to suspend its STROT protocol with the VNV pilots’ union as well as its implementation agreement with the pension funds effective 1 December 2016. The proposed adjustments imply that indexation security will change. All other pension commitments will remain unchanged.

Together with this suspension, KLM presented the VNV with an alternative proposal for the STROT protocol and the implementation agreement. 

Although KLM cannot comply with the VNV’s ultimatum to withdraw its proposal from the negotiating table, it today assured the VNV that it has every intention to keep seeing an equitable solution. This is borne out the four alternatives that KLM offered to the VNV in its latest letter of proposal.

KLM finds it highly regrettable that VNV seems to be opting to take legal rather than engaging in dialogue to resolve this issue.