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KLM Cuts Jobs in Wake Of Rising Oil Prices

October 12, 1990

AMSTELVEEN, Netherlands (AP) _ KLM Royal Dutch Airlines announced Friday it was cutting 500 jobs and warned that rising jet fuel prices and a weak dollar could wipe out profits this fiscal year.

The company also may cut part of its foreign network as part of a $231 million cost-cutting plan over the next three years, said KLM spokesman Hugo Baas.

But an industry analyst said the measures were too little, too late.

Rob Sweers, head of institutional investment at the Parisbas bank in Amsterdam, noted that the cuts represent only a small percentage of KLM’s total workforce of 25,000.

″Under the present circumstances, it may not be enough,″ he said.

Prices of jet fuel have skyrocketed in recent weeks because of tensions in the Middle East, and all the major airlines have felt the effects.

At the same time, the U.S. dollar, on which KLM’s international ticket sales are based, has been sliding to lows not seen in years.

Baas warned that unless both trends are reversed, KLM will probably face a loss in the current fiscal year.

The airline also blames its troubles on the low cost of labor in the Far East, which allows competitors there to operate more economically. ″We are living in a totally different social system,″ said Baas, referring to the relatively high social welfare costs that boost European wages.

The layoffs will take place in the Netherlands, where 19,000 of KLM’s personnel are based.

KLM had net income of 340 million guilders, or $197 million, in the fiscal year ending March 31.