Annual Report

2020
KLM Royal Dutch Airlines – Annual Report 2020
 Table of contents
Report of the
Board of Managing Corporate Financial Statements
Directors governance 2020

06 Letter from
the President 84 Board and governance
110 Consolidated financial
statements

10 Key figures
92 Report of the
Supervisory Board 186 Company financial
statements

12 Review 2020:
resilience 100 Remuneration report
and policy Other Information

16 105
Supervisory Board and
The world we
operate in
Board of Managing
Directors
Miscellaneous

22 Financial results

Headoffice
Amsterdamseweg 55
1182 GP Amstelveen
30 Sustainability

36
the Netherlands
People
Postal address
P.O. Box 7700
1117 ZL Schiphol
the Netherlands 43 A resilient response:
crisis and recovery

56
Telephone: +31 20 649 9123
A resilient response:
Internet: www.klm.com
restructuring
Registered under number 33014286 in the Trade Register
of the Chamber of Commerce and Industry Amsterdam,
the Netherlands. 62 Risk Management
and Control

2 3
 Report of
the Board
of Managing
Directors
KLM 2020 Annual Report KLM 2020 Annual Report
4 5
Corporate Governance Corporate Governance
Letter
from the
President Pieter Elbers
CEO

The year that is behind us proves how a year can feel short, yet long at the At the same time, the year felt long, very long. It seemed have been able to maintain liquidity through a strict focus on
as if the world stood still. As we look at the images of the cash preservation and cost reduction. Throughout the crisis,
same time. The year was short because it was not too long ago in October
last year we saw empty departure halls, parked aircraft, we operated a skeleton network to facilitate repatriation,
2019 that KLM celebrated its 100th year anniversary. empty offices and a closed engine shop. No one has ever essential travel and crucial cargo operations.
experienced this before and sometimes it all looks and feels
And how? KLM sizzled with a zest for life! There was confidence that the surreal. In total, over 5,000 colleagues have left KLM during True Colours
the year. A reduction from some 33,000 colleagues within The crisis brought out the best in KLM. There was solidarity,
positive trend of 2019 would continue. The prospects for the company were
the KLM group at the start of the year to below 28,000 at courage and creativity throughout the entire organisation.
promising. Our financial position was good, the leadership team aligned and year’s end. Painful, difficult and emotional, yet unavoidable KLM staff repatriated 250,000 Dutch nationals and fellow
the organisation agile. Between 2014 and 2019 we improved on key metrics sacrifices. This has been KLM’s biggest crisis since WWII and Europeans, even from far-away places such as Australia,
the road to recovery is unfortunately not linear. To weather where we had not flown to in decades. The Queen of the
such as financial performance, customer experience and staff engagement.
this unprecedented storm we adopted a four-pillar approach, Skies, recently retired after nearly 50 years, returned to
KLM was fit for the future. Who would have thought that only a few months which can be compared with simultaneously playing on four service and lived up to her name as these Boeing 747s
after our centenary we would be in the grip of a global pandemic? A crisis that different chessboards. delivered vital personal protective equipment. Together
with Royal Philips, we set up an air-bridge to China and
would affect the world, our industry and our company so drastically.
1. Crisis Management conducted more than 130 flights with cargo in the passenger
In January 2020, news of a virus came from China. The cabins, delivering urgently needed medical equipment. KLM
period since then has been a roller coaster. By March, the staff with a reduced workload volunteered in healthcare,
virus had spread all over the world and almost our entire elderly care and other places of societal importance.
operation came to a halt at the beginning of April. Our Hence, we supported society and society was supportive
customers stranded or were forced to fly under difficult of us with the governments loans and the NOW payroll
circumstances. The crisis lead us to deviate from our initial support scheme. For me these initiatives were inspiring and
2020 plans. We shifted to crisis mode and implemented all motivating.
necessary measures to safeguard the future of KLM. We

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Report of the Board of Managing Directors Report of the Board of Managing Directors
2. Banks & Government providing additional flexibility, safety and sanitary measures. Personally, this year has been an unprecedented roller changed. Our ambition to be a leading European network
Mid-March the United States announced travel restrictions During 2020 KLM retained its five-star classification based coaster. From intense hands-on (operational) crisis carrier in customer centricity, efficiency and sustainability
between the United States and the European Union. It on customer evaluations gathered by the Airline Passenger management to securing loans to intensive communication remains. The Cargo activity already anticipated Pharma and
became apparent that we needed additional financing and Experience Association (APEX). We are incredibly grateful to efforts both internally as well as externally. KLM was in Express products. There is light at the end of the tunnel
therefore we started discussions with the Dutch Government our customers for this evaluation and very proud of all KLM the middle of a lot of attention in the public arena and and I am proud that KLM will play a key role in the vaccines’
and a consortium of banks. We secured a State financial staff for this achievement. media, which required an adequate response. Also, I missed global distribution.
support package, comprising of a combination of loans travelling as well as the interaction with customers, partners
and credit lines, which brought financial stability during this By November, we had restored most of our destinations, but and colleagues all over the world. December 1, marked an This year KLM went through a storm of unprecedented
difficult period. The State financial support package did come then the second wave emerged and European governments exceptional sad moment for more than 2,000 KLM colleagues magnitude that demanded an equally unprecedented
with stringent conditions, which we met by delivering a announced renewed lockdowns. The hoped for rebound who opted for the Voluntary Leave Plan (VLP). Never in effort from our staff. The continuously changing rules
restructuring plan and by reducing manageable costs by 15 did not materialise. The sentiment of hope was replaced by our company’s history, have so many colleagues left our and regulations tested our agility and perseverance.
per cent. The conditions were focussed on a contribution by resilience. With the government expressing its conditional company at the same time. These departures made a deep We, as KLM delivered. It was hard work, often under difficult
staff, in the form of a wage cut, contribution from suppliers support, discussions about this topic attracted a lot of and lasting impression on me. Yet, I am proud that we could and challenging circumstances. I have great respect and
and targets on sustainability and reducing our environmental attention in parliamentary debates and the media. Despite do this in a good, professional and respectful manner. admiration for that and I would like to sincerely and deeply
impact on society. complicated negotiations with the unions, I am proud that we thank all of my KLM colleagues for their commitment, their
reached agreements with the works council, the unions and I believe in the future of aviation and KLM. KLM will get perseverance and for their Blue Heart. Looking towards the
3. Road to Recovery the government to lower costs and thereby securing the through this period, not only by adapting the size of the second half of 2021, I feel optimism and hope. People will fly
As of May, we made a cautious start with our recovery. The future of our company. company and cost levels to the new market conditions, but once again and slowly but surely, we will revive our global
KLM network recovered gradually as we added a number of also by continuing to care for our customers. The years network. With the help of our loyal customers and committed
European destinations. During the summer, we progressively 4. Restructuring – “Van meer, naar Beter” to come will be a continuous balancing between people, employees, we will weather this storm and build back better.
expanded the network and were able to fly around 90 per (Building Back Better) planet and prosperity. KLM’s purpose “Moving your world by
cent of our European destinations, though sometimes at The world of aviation will be significantly different for an creating memorable experiences” for our customers has not Pieter Elbers – President & CEO
50 per cent reduced capacity. The intercontinental network extended period, with less traffic and pressure on revenues.
remained constrained but the increased demand for cargo The expectation is to be back on pre-COVID-19 levels as
allowed us to maintain a skeleton network. from 2023 to 2024. With the ambition not only to survive
and repay loans but also to remain an important player in
Maintaining a relatively broad network, considering the aviation, we have drawn up a restructuring plan, called “Van
circumstances, was possible thanks to the loyalty of our Meer naar Beter” (Building Back Better). The restructuring
customers within the areas of Engineering & Maintenance plan is agile, based on various market and recovery
(E&M), Cargo and our Passenger activities. Our E&M scenarios, and will allow us to be flexible. It also creates
colleagues continued the aircraft, engine and component opportunities in the areas of digitisation, sustainability, data
support. Our services ensured our third party airline and technology. These domains were already in the very
customers could keep their aircrafts flying. Even during heart of our focus and strategy before the pandemic and
these challenging times we acquired two new long-term with the aim to build back better these efforts are now
component customers for the Boeing 787. Another important accelerated. The restructuring plan is integral part of the AIR
aspect is that we supported our customers worldwide FRANCE KLM Group. Implementation activities will be well
in irregular operations. On average we transported 250 aligned with the Group.
components to clients in 50 countries, every single day.
In addition, we were able to make the difference for our KLM’s financial results demonstrate how serious the
customers in the cargo industry with more than 1,800 situation is. Our actions during the year have helped to
cargo only flights. We kept vital supply chains in place with partially mitigate the financial effects of the pandemic.
the distribution of medicines, medical equipment, personal Thanks to the support of the Dutch Government, including
protective equipment and other critical products. We can the NOW, and the possibility to delay payment of labour
be very proud that for the second consecutive year, Air taxes, KLM maintained its financial liquidity. I know I speak
France KLM Martinair Cargo has been named “Cargo Airline for everyone at KLM when I say that we are very grateful
of the Year”. On the passenger side, at the beginning of to the government, and through them, Dutch society. We
the crisis the majority of the efforts were on rebooking feel a genuine responsibility to meet the conditions of the
and informing our customers. The massive cancellations, State financial support package and to focus on repaying
due to government restrictions, have led to a tremendous the loans. By granting the loans, the Dutch Government
challenge in terms of refunds and vouchers. I am glad that underlined the economic importance of KLM’s extensive
at the end of 2020 the situation was under control. We have intercontinental network and the value of KLM as a major
worked hard to restore the confidence of our customers by employer in the Netherlands.

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Report of the Board of Managing Directors Photo: LVNL Report of the Board of Managing Directors
Key figures
REVENUES TOTAL EXPENSES* ADJUSTED EBITDA* AMORTISATION, DEPRECIATION,
IMPAIRMENT AND MOVEMENTS
IN PROVISIONS*

5,120 5,195 (75) 1,079

11,075 9,132 1,943 1,090
Passenger Cargo
ADJUSTED INCOME FROM AS A %

(22.5)
OPERATING ACTIVITIES* OF REVENUES TRAFFIC (in millions of revenue CAPACITY (in millions of TRAFFIC (in millions of revenue CAPACITY (in millions of available
(1,546) passenger-kilometers, RPK) available seat-kilometers, ASK) ton freight-kilometers, RTFK) ton freight-kilometers, ATFK)
449

(1,154) 33,873 64,842 4,184 5,385

(Loss)/ 853 7.7
109,476 122,452 4,678 7,253
Profit for
the year EQUITY EARNINGS PER ORDINARY SHARE
(EUR)
PASSENGER LOAD FACTOR NUMBER OF PASSENGERS CARGO LOAD FACTOR WEIGHT OF CARGO CARRIED
(%) (x 1,000) (%) (in tons)

(115) (33.05) 52.2 11,231 77.7 520,458

1,560 9.57 89.4 35,092 64.5 599,320
AS A % OF TOTAL
PROFIT LONG-TERM LIABILITIES

Average
(1,546) (2)
4,015 4,034
16.1
number
FTEs
449 22 of KLM
(21.5) Group
NET DEBT/ADJUSTED EBITDA* DIVIDEND PER ORDINARY SHARE staff
(EUR)

47.4 - AVERAGE RETURN ON

PERMANENT TEMPORARY EMPLOYED BY KLM AGENCY STAFF TOTAL KLM

1.3 0.415
CAPITAL
EMPLOYED
CAPITAL
EMPLOYED (%)
28,368 1,600 29,968 772 30,740
28,615 1,957 30,572 2,454 33,026
CASH FLOW NET CASH FLOW USED IN INVESTING FREE CASH FLOW ADJUSTED FREE
FROM OPERATING ACTIVITIES (excluding investments in and proceeds CASH FLOW
ACTIVITIES on sale of equity shareholdings, dividends received and
purchase of short-term deposits and commercial paper)
FTE's PER END FINANCIAL YEAR
Headcount PER END FINANCIAL YEAR

Financial
(294) (681) (975) (1.354) KLM Group 27,833 KLM Group 32,667
position 1,835 (1,323) 512 132 Staff 32,942 staff 36,549

* See Consolidated financial statements note 28 Alternative Performance Measures (APM)

KLM 2020 Annual Report for the reconciliation to adjusted EBITDA and adjusted income from operating activities. ● 2020 ● 2019 KLM 2020 Annual Report
10 11
Report of the Board of Managing Directors Also see the APM section in the Notes to the Consolidated financial statements In millions of Euros, unless stated otherwise Report of the Board of Managing Directors
Review 2020:
A relentless pandemic pushed passengers Chief Executive Officer Pieter Elbers acknowledges that 2020
has profoundly impacted KLM’s passengers and staff. ”Flying
and staff to the brink, brought the network
has always been associated with excitement and endless
to a halt and lead to unheard losses and possibilities. This year, our passengers dealt with uncertainty
an increase of debts. KLM responded with and discomfort, if they could fly at all. Their challenges

resilience
moved us deeply, just as we felt for colleagues who worked
resilience, creativity, and agility but also with
hard and cared for our customers, often under difficult and
hard choices that will allow KLM to survive challenging operational circumstances.
and emerge stronger than before. The
Chief Financial Officer Erik Swelheim agrees it was an
Management Board reflects on this
exceptionally tough year, saying that, despite immediate
and more. actions the losses are record-breaking and debt is at its
highest point in years. KLM has put many ambitions on
hold and agreed to some conditions to secure a financial
lifeline from government and banks. “Our first priority
was to preserve cash and reduce costs. We had to take
tough decisions, stopped almost all our projects and most

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Report of the Board of Managing Directors Report of the Board of Managing Directors
investments, froze our hiring and said goodbye to external centricity, sustainability, including KLM’s societal role, as well as
and temporary staff. We postponed refunding tickets of data and technology.
cancelled flights, which protected our liquidity but caused
distress amongst passengers. Eventually, though, we Having said that, KLM has realised that when it comes to flying,
distributed 1.5 million vouchers and refunded 1.3 million passenger’s needs and expectations have changed. “Hygiene,
tickets. We were grateful with the immediate support of the personal safety and ticket flexibility are important and they
government as this provided firm ground during difficult times
and it gave time to work on the recovery and restructuring
remain a priority for us. But also society is more critical of
flying, whether for pleasure or business. People, rightly, expect "People will fly
again and the
of the company. By granting the loan and credit lines, the us to make flying more sustainable. That is why in 2020, we
Dutch Government stressed the value of KLM’s extensive continued the Fly Responsibly campaign as well as the Smart
intercontinental network in combination with the hub at and Sustainable program we launched in 2019. And together
Schiphol to the open economy of the Netherlands, the value
of KLM as a major employer in the Netherlands as well as the
with the Dutch Government we set targets for the further
reduction of CO2 emissions and noise pollution at Schiphol, as
industry will
jobs connected to the wider Schiphol region and the value
thereof.”
well as better air-to-rail options,” Elbers adds.
recover, albeit
slowly. And KLM is
Cost reductions and re-sizing and re-shaping of the company
Chief Operations Officer René de Groot admits it was painful are necessary to return to profitability. This is where KLM’s
seeing the network grind to a halt. “We spent the last few restructuring plan comes in. “At its core are five simple goals:
years chasing operational excellence and suddenly there
were no flights anywhere. This was terribly frustrating, but the
become smaller, cheaper, more frugal, more agile and more
sustainable. “The crisis brought out the best in us and in a
well positioned to
silver lining, is that our network has proven to be resilient. We
managed to run a network that changed every day and we
matter of 10 weeks we developed the restructuring plan
that includes - without exception - every division and every capitalise on this."
flew safely at all times. Cargo contributed much to our result by department. It was endorsed by the Works Council and Pieter Elbers
capitalising on opportunities and creating new products.” approved by KLM’s Supervisory Board and the AIR FRANCE CEO
KLM Board and formed the basis for our talks with the Dutch
Ultimately, a smaller KLM will emerge. One of KLM’s key Government. We are grateful to everyone who contributed to
measures was to reduce its workforce within six months, the plan under such incredible pressure,” De Groot says.
in order to structurally lower costs, improve processes
and become more agile. KLM used voluntary leave plans Implementation of the plan will pick up pace in 2021. It is KLM’s
as much as possible with the first round open in June and ambition to fulfil the government’s conditions, attached to the
the second one in October. But unfortunately, KLM had to State financial support package and to repay the loans by
propose a social plan for specific jobs that will disappear the government and the banks. At the same time, to continue
or be reduced in number as a result of the resizing of the to earn the loyalty of our customers, KLM needs to invest
company. “Throughout the company people said goodbye in its product and services, fleet renewal, hygiene measures,
and colleagues waved each other farewell. Many of them people and sustainability. “We will have to make smart
worked for KLM for a long time. If one thing has become clear choices. KLM decided to invest in the establishment of a new
in the past difficult period, it is the enormous commitment and Premium Economy class, which will lead to a better product
solidarity of all KLM staff. Saying goodbye to so many talented segmentation, as well as the introduction of direct aisle access
and passionate people was heartbreaking, but the harsh truth in all of our business classes of the intercontinental fleet. KLM
was that it was inevitable. We are grateful for their years of also continued the development of AI-tools and supported
dedication” De Groot says. innovative initiatives” Swelheim adds.

Still, while KLM’s production and finances have been set back
for years, Elbers, like the rest of the Board, is optimistic. ”People
will fly again and the industry will recover, albeit slowly. And
KLM is well positioned to capitalise on this. Our global network
and Schiphol Airport continue to be a powerful combination.
Our purpose has not changed, our vision remains the same
and our people and processes proved to be resilient. We have
tuned and reconfirmed the strategy for the years ahead and
our business model is still valid. We will work on initiatives that
make our business model more viable in the field of customer

KLM 2020 Annual Report KLM 2020 Annual Report

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Corporate Governance Erik Swelheim René de Groot Corporate Governance

CFO COO
The world Global
KLM ‘s year 2020 needs to be understood in
the context of international developments.
In 2020, the COVID-19 pandemic dominated
the aviation industry as a whole. European
developments

we operate in
and national developments influenced KLM’s
The economy
level playing field on various topics. The COVID-19 pandemic impacted the world in an
unprecedented way and caused high and rising cost. Travel
restrictions, isolation, lockdowns and widespread closures
to slow the spread of the virus were required in order to
protect lives and to allow health care systems to cope. This
health crisis has a severe impact on economic activities,
causing the global economy to contract sharply in 2020.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 European than passengers. KLM is of the opinion that the European
Union should revise Regulation 261/2004 to increase clarity

developments
for both passengers and airlines and to reduce costs to
reasonable levels.

Developments in Europe were dominated by COVID-19 In 2019, the European Commission launched the European
and Brexit and on the longer term the acceleration of the Green Deal, which aims for the European Union to be
sustainability of the aviation industry. climate neutral in 2050. The Green Deal also imposes
ambitious targets to make the European aviation industry
Due to the COVID-19 pandemic, KLM’s network was severely more sustainable. These targets contribute to those of the
affected. KLM’s primary aim remained to offer customers the Sustainable Development Goals of the United Nations, which
widest possible range of destinations at all times. In March, provide an ambitious global agenda, as well as those of the
the European Commission proposed a slot waiver for the Paris Agreement, which aim to keep the rise in temperature
entire summer timetable, to prevent airlines from having to below 2 degrees, preferably 1.5 degrees, celsius, compared
fly empty aircraft just to keep their slots. In October, due to to pre-industrial levels.
the continued impact of the pandemic, the slot waiver was
extended to the winter schedule. These waivers enabled The airline industry’s contribution to CO2 reduction is
KLM to respond more adequately to the rapidly changing organised globally through the International Civil Aviation
market conditions. Organisation (ICAO), which aims for carbon neutral growth
of the aviation industry as from 2020. KLM aims to reduce
The United Kingdom is a very important market for KLM absolute CO2 emissions by 15 per cent in 2030, compared
and a key trade partner for the European Union. With 17 to 2005 levels, which is a more ambitious objective than
destinations, KLM is one of the largest carriers operating the realisation of a carbon neutral growth by means of CO2
to and from the United Kingdom. On January 31, 2020, the compensation only.
United Kingdom left the European Union with a withdrawal
agreement that allowed for a transition period until January In 2020, KLM provided input for and welcomed the European
1, 2021, in which the new trade relation between the Commission’s Sustainable and Smart Mobility Strategy that
The economic fallout depended on factors that interacted Uncertainty about the post COVID-19 economic landscape United Kingdom and the European Union was negotiated. was presented in December 2020. KLM agrees with other
in ways that were hard to predict. The development of the has discouraged investments and concerns about the viability KLM is pleased that a deal was finally reached, allowing for European airlines that Europe needs to realise a true Single
pandemic, the intensity and effectiveness of containment of global value chains and the course of the pandemic have passenger and cargo flows to continue as before. Naturally, European Sky, support the production and deployment
efforts, shifts in spending patterns, behavioural changes and weighed heavily on international trade and tourism. As with there are extra formalities as the United Kingdom has of affordable and high-quality sustainable aviation fuels
consumer confidence effects lead to a profound economic previous economic crises, the pandemic is expected to leave officially become a third country, but the new European and modernise air passenger rights. KLM encourages the
uncertainty worldwide. Many countries faced a multi-layered long-lasting adverse effects on global economic activity. Union-United Kingdom Trade and Cooperation Agreement European Commission’s efforts to promote a level playing
crisis comprising a health shock, domestic economic disruptions, keeps these to a minimum. Furthermore, there are some field for aviation within and outside the European Union.
a drop in external demand, and capital flow reversals. The aviation industry important provisions on fair competition, data flows and
Within the aviation industry, COVID-19 created an external aligning safety standards. Building on the comprehensive KLM emphasises the importance of a level playing field in a
Because the economic impact particularly had its effect on shock unlike any previous crisis, both in terms of length and agreement it is important that a level playing field with highly competitive industry and prefers to see sustainability
specific sectors, policymakers were forced to implement depth of the crisis. Earlier crises like the Gulf War in 1990, the the United Kingdom remains, for instance in terms of efforts be organised on a global or European level and
substantial fiscal, monetary, and financial measures to support terrorist attacks in 2001, SARS in 2003 and the financial crisis environmental policy, data protection standards, passenger the revenue of any taxes reinvested in the research and
affected households and businesses. These measures have in 2009 impacted aviation with 10 to 25 per cent for a year or rights and economic regulation. development of sustainable aviation fuels and efficient
helped to maintain economic relationships throughout the less before recovering to pre-crisis levels with a typical V-shape. aircraft and equipment. The introduction of national
crisis and are essential to enable activity to normalise once the COVID-19 differs from these crises because of its global scale, In 2020, EU Regulation 261/2004 regarding air passenger guidelines or taxes, like for example, the Dutch ticket tax,
pandemic is under control and containment measures are lifted. and its depth, with traffic reduced significantly depending on rights continued to contribute to confusion among could put a break on investments in sustainability, which
The response of national governments in affected countries the markets, its length and the expected shape of the recovery. passengers and airlines. The EU Regulation 261/2004 is would undermine efforts to improve the quality of the living
was swift and sizeable in many advanced economies, such as It is not yet possible to predict the precise recovery path. The not defined and therefore not suitable for the number of environment.
France, Germany, the Netherlands, Italy, Japan, Spain, the United aviation business depends on defining recovery scenarios cancellations and re-bookings caused by COVID-19. Lack
Kingdom and the United States. Many emerging market and and then monitor actual developments to assess which of the of clarity in the regulations leads to various interpretations
developing economies, followed in providing or announcing scenarios will be the most obvious. The impact of the crisis is and numerous court cases, often forcing airlines to pay
support. During the year when the pandemic continued to expected to differ between different types of players. compensation for disturbances outside of their control,
impact economic activity, fiscal measures and financial support such as weather conditions and strikes. Between 2013 and
were further scaled up around the world. 2019, the cost of Regulation 261 has risen 500 per cent and
a large portion of the money goes to claim agents rather

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Report of the Board of Managing Directors Report of the Board of Managing Directors
The that progress in Schiphol's decision-making in the form of
“Luchthavenverkeersbesluiten” that will enable timely and

Netherlands
moderate growth at Schiphol is important.

Sustainable aviation policy

COVID-19 has had tremendous impact on Dutch society and (Akkoord Duurzame Luchtvaart)
its economy. The country went through two lockdowns, Within the Netherlands, the aviation industry’s contribution
forcing many businesses to downsize or seize activities, to sustainability is implemented through the Aviation Climate
and halting social and cultural activities for much of the Table. This government initiative embraces the objectives
year. Throughout 2020, KLM played an important role with of the Smart and Sustainable program jointly developed
repatriation flights and by transporting crucial medical and in 2018 by KLM and partners in the air transport industry
protective equipment. KLM intends to continue to play a and knowledge centers. KLM contributed to the Aviation
key role through the distribution of vaccines all over the Climate Table, which resulted in a government policy
world and kick-start economic recovery in 2021 and beyond. (Akkoord Duurzame Luchtvaart) for the airline industry that
Nearly 300 Dutch companies, including KLM, have signed was approved in 2020. This policy, with a primary focus on
the statement ‘Dutch businesses endorse sustainability’ reducing CO2 emissions by 2030, promotes the large-scale
in COVID-19 recovery, in which they pledge support for use of Sustainable Aviation Fuel (SAF), and the electrification
taking sustainability as the cornerstone in the COVID-19 of small-scale aviation and ground operations and promotes
restructuring plans. research in the field of sustainable aviation.

Aviation policy (Luchtvaartnota)

Two years in the making, the Dutch Government finalised
its new aviation policy (Luchtvaartnota), which will provide
direction for the development of the Dutch airline industry
“Throughout 2020,
until 2050. The Luchtvaartnota recognises Schiphol together
with a successful home carrier as an essential value for
KLM played an
the Dutch economy and for attracting business to the
Netherlands. The policy allows for moderate growth of the important role with
repatriation flights and
number of flights to and from Schiphol in return for lower CO2 to safeguard a safe and healthy journey for passengers projects. Schiphol decided to halt or to delay a number
emissions and a smaller noise footprint. The Luchtvaartnota traveling from or through Schiphol. Passenger flows and of projects. However, the development of the A-Pier was
allows the government to set conditions for growth. KLM processes were aligned to guarantee social distancing. continued which will ultimately add extra capacity at the
already committed reducing the number of night movements
in order to reduce noise. The Dutch Government has stated
by transporting crucial Plexiglass screens were placed at all check-in counters and
at places were the social distance could not be realised.
airport. SkyTeam will be the main user of the pier. Also,
the doubling of taxiway Q continues as planned. The
that quality is key in the aviation policy. In implementing
the new aviation policy, the balance between the quality
medical and protective The use of the compulsory facemasks was monitored at all
times. The KLM Crown Lounge remained open to customers,
reconstruction of the taxiway will improve the safety
level of the airport as it increases the accessibility of the
of the living environment and the quality of the worldwide
network needs to be recalibrated. The government will equipment.” offering them the opportunity to use the most important
facilities.
western runways. Furthermore, it will improve punctuality.
The renovation of Departure Hall 1 is accelerated to secure
develop a framework to support a qualitative development passengers safety. KLM emphasises the importance of
of aviation activities within the Netherlands. To this end, KLM In April, KLM had parked almost all of its aircraft at Schiphol. investments in Schiphol’s infrastructure to accommodate
will carry through her efforts in sustainability and reducing Schiphol The airport graciously halved the usual parking fee, and also passenger’s experience and passenger’s needs. With
its footprint while developing its worldwide network. The Following the excellent year 2019, the year 2020 could not proposed for a discount on the landing and take-off charges. passenger flows and aircraft movements expected to
Luchtvaartnota also encourages the growth of air-rail be more contrasting for aviation. The COVID-19 pandemic Unfortunately, the airport increased the airport charges with recover around the year 2024, and COVID-19 safety
connections on short haul destinations. KLM is content downsized passenger numbers to approximately 1992 levels. 8.7 per cent, although it postponed the implementation of measures requiring more space per passenger, KLM wishes
with the aviation policy and is grateful for the opportunity The number of passengers, traveling via Schiphol fell from this increase by three months. to avoid the congestion experienced at the airport in
to cooperate with the Dutch Government on the definition 72 million in 2019 to around 21 million in 2020 of which earlier years.
thereof. The Luchtvaartnota sets the conditions for a 11.2 million from KLM. The number of flights decreased from As a result of the crisis, Schiphol fully focused on the
sustainable development of the Dutch aviation industry and 497,000 in 2019 to 227,000 thousand, of which 125,000 re-planning of infrastructure projects in this decade and
it allows alignment with new insights from the industry. In from KLM. delayed the development of the Schiphol master plan to
order to fulfil KLM’s commitments regarding noise and CO2 next year. The Schiphol masterplan provides an outline of
reduction, investments in fleet and sustainable airline fuel are Like KLM, Schiphol went through an unprecedented crisis. Schiphol’s infrastructural development and lay-out towards
necessary. Therefore, it is important to have a perspective KLM and Schiphol worked together in order to mitigate 2050. After consultation of stakeholders, including KLM,
on Schiphol’s development beyond 2023. KLM emphasises the impact from COVID-19 and put all measures in place Schiphol re-considered major and costly infrastructure

KLM 2020 Annual Report KLM 2020 Annual Report

20 21
Report of the Board of Managing Directors Report of the Board of Managing Directors
 KLM suffered significant losses in 2020 year’s EUR 11.1 billion, resulting in an adjusted income from
operating activities loss of EUR 1,154 million compared to a
but was able to survive by cutting costs,
2019 adjusted income from operating activities income of EUR
managing cash and the support from the 853 million. The operating margin decreased from 7.7 per cent
Dutch Government with an EUR 3.4 billion positive to 22.5 per cent negative. Equity, EUR 1,560 million
in 2019, decreased to EUR 115 million negative and net debt
financing package, NOW and the possibility
increased from EUR 2,525 million to EUR 3,536 million. As a
to delay payment of labour taxes. consequence, KLM’s financial ratios weakened in 2020.

In 2020, KLM took off from a good starting position. In KLM’s adjusted operational loss of EUR 1,154 million includes
the years from 2014 to 2019, the company improved EUR 1,049 million Temporary Emergency Bridging Measure
financial key performance indicators in many areas in all for Sustained Employment (NOW) support from the Dutch
businesses. Also, the financial and equity position improved Government. The NOW support was designed to cover a
over those years. Consequently, KLM was resilient and significant portion of wages. The swift commitments as
financially healthy when COVID-19 hit. The financial result regards the NOW and the quick payments thereof by the
of 2020 offset the good performance of the years before. government have been extremely important for KLM.
KLM revenues were only EUR 5.1 billion, compared to last

Adjusted income from operating activities Net debt  ● ● Lease debt

1,079 1,091 3.3 3.5

853 2.8 2.5
681 2.1 1.8
384

in €mln

in €bln
1.3 1.1 1.0 2.3
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
IFRS 9/15/16 applied
IFRS 9/15/16 applied

-1,154

Investments Operating margin

1.3 1.3
10.3% 10.0%
1.0 7.7%
6.9%

Financial
0.8
0.7
0.5 3.9%

in €bln

in %
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
IFRS 9/15/16 applied IFRS 9/15/16 applied

results Adjusted free cash flow

-22.5%
408 387
360
in €mln

311
132

2015 2016 2017 2018 2019 2020

IFRS 9/15/16 applied

-1,354
KLM 2020 Annual Report KLM 2020 Annual Report
22 23
Report of the Board of Managing Directors Report of the Board of Managing Directors
KLM was hit hard across its portfolio of businesses. The out less efficient aircraft types or renegotiating leases. Revenues Income from operating activities
passenger side of KLM’s network business was impacted KLM’s purchasing and cost-cutting initiatives achieved EUR The first two months of 2020 showed strong result, until
most severely by the almost total evaporation of passenger 350 million of savings reducing the monthly cash burn rate COVID-19 severely hit KLM’s revenues in all businesses, with In millions of Euros 2020 2019
demand as from April. The passenger business was reduced significantly. the only positive exception being the Cargo activities in the Adjusted income from operating activities* (1,154) 853
to below 10 per cent of its normal level in the early stages Network business unit. Overall revenues dropped 54 per cent Total APM adjustements* (191) 22
of the COVID-19 crisis, and even when the network started Securing loans compared to 2019, with far less traffic and capacity, much
Net cost of financial debt (148) (148)
to recover, never rose above 25 per cent. Intercontinental The government provided a EUR 1 billion subordinated loan lower load factors and significant lower unit revenues.
Other financial income and expenses (192) (127)
flights never recovered from global restrictions, but in to KLM and guaranteed 90 per cent of a combined EUR
Income before tax (1,685) 600
summer KLM’s European network managed to run 60 2.4 billion revolving credit facility by a consortium of 11 Expenses
per cent of normal flights with 70 per cent load factors. banks. At year-end KLM has drawn EUR 942 million of the Variable costs such as fuel, aircraft maintenance and airport Income tax expense 136 (162)

Transavia, KLM’s leisure brand, also made losses in spite of a EUR 3.4 billion loan, leaving some EUR 2.4 billion available fees, which account for around 50 per cent of all costs, Share of results of equity shareholdings 3 11
relatively good summer, but it ceased flying entirely for two for the coming five years. By granting the loans, the dropped by some 45 per cent because the number of flights (Loss)/Profit for the period (1,546) 449
months in the second quarter and the latter part of the year. Dutch Government stressed the value of KLM’s extensive decreased. Employee compensation and benefit expenses
intercontinental network in combination with the hub at were helped with EUR 1,049 million temporary NOW support * See note 28 Alternative performance measures (APM) for the reconciliation to
Cargo had a good year, almost doubled its contribution Schiphol to the open economy of the Netherlands, the value and also a reduction of staff count by more than 5,000 adjusted EBITDA and adjusted income from operating activities. Also see the
to KLM’s result, due to higher demand and increased of KLM as a major employer in the Netherlands as well as the colleagues. Furthermore, a reduction of labour conditions Alternative performance measures section in the Notes to the Consolidated
prices. Cargo revenues, however, did not compensate for jobs connected to the wider Schiphol region and the value was implemented as part of the conditions imposed by the financial statements
the decline in passenger revenues, and will not support thereof. The support did, however, come with a number of Dutch Government in relation to the loans.
the rebound of the European network. Engineering & financial and non-financial conditions that will remain valid
Maintenance (E&M) suffered from lower flight hours, both until the loans have been paid back.
within AIR FRANCE KLM and other airlines, as well as the
decision by most airlines to postpone maintenance. In The obligation to repay the loans curtails KLM’s ability to
addition, E&M dealt with an increasing number of unreliable invest. While in 2019 KLM invested EUR 1.3 billion in people,
debtors, although this will improve once flights resume. fleet and IT, investments in 2020 dropped to less than
Within E&M, where demand usually lags passenger demand EUR 700 million. At this level, KLM can maintain the current
with one to two years, a reduction of maintenance demand state of its product and assets. Current projections assume
is observed as both KLM and Air France as well as third passenger growth will return and when it does, KLM aims to
parties stopped or heavily reduced flying. return to an investment level of around EUR 1 billion per year
in sustainability, product and services, data analytics and
When the severity of the COVID-19 crisis became apparent, better booking tools.
KLM took immediate action to retain cash and reduce costs.
At the start of the crisis, KLM had EUR 1.3 billion in cash. KLM Consolidated statement of profit or loss
postponed IT and real estate projects, renegotiated new
payments terms with suppliers, and pushed back investments In millions of Euros 2020 2019 Variance %
in aircraft. Also the possibility to delay the payment of labour Revenues 5,120 11,075 (54)
taxes amounting to EUR 764 million as per December 31,
2020 has been used. An existing revolving credit facility of
External expenses (3,455) (6,116) (44)
EUR 665 million was immediately used. KLM chose to offer
Employee compensation
passengers a voucher instead of immediate cash refunds (1,867) (3,189) (41)
and benefit expenses*
upon flight cancellations, although passengers retained their
Other income and expenses 127 173 (27)
right to a cash fund later in the year.
Total expenses (5,195) (9,132) (43)

KLM’s cost base changed significantly. Variable costs such

as fuel, aircraft maintenance and airport fees, which account Adjusted EBITDA* (75) 1,943 (104)
for around 50 per cent of all costs, dropped by some Amortisation, depreciation,
45 per cent because the number of flights decreased. A impairments and movement (1,079) (1,090) (1)
concerted plan to achieve structurally lower costs include a in provisions*
simplification of the organisation structure, a reduction of the Adjusted income from (1,154) 853
staff count by more than 5,000 colleagues and a reduction operating activities*
of labour conditions. These measures will eventually lead to
an overall manageable cost reduction of more than 15 per See note 28 Alternative performance measures (APM) for the reconciliation to
*
cent. The fleet will be made more cost-efficient by phasing adjusted EBITDA and adjusted income from operating activities. Also see the
Alternative performance measures section in the Notes to the Consolidated
financial statements

KLM 2020 Annual Report KLM 2020 Annual Report

24 25
Report of the Board of Managing Directors Report of the Board of Managing Directors
Alternative performance measures (APM) Income tax
adjustments End 2019, KLM was in a current income tax payable position.
The 2020 APM adjustments show an overall negative amount Given the huge COVID-19 related losses in 2020, KLM was
of EUR 191 million (2019: EUR 22 million positive). As a result entitled to offset the tax payable with the 2020 taxable
of the COVID-19 crisis a number of measures and actions losses. Given the current uncertainty about the timing and
have been taken. degree of recovery, KLM decided not to recognise a deferred
tax asset for unused taxable operating losses. Last year’s
The 2020 APM adjustments relate to voluntary leave plans announced decrease of the corporate income tax rate to
in the Netherlands and abroad amounted to EUR 203 21.7 per cent as per 2021, has been rolled back by the
million, restructuring provisions in the Netherlands and government and will remain 25 per cent.
abroad amounted to EUR 25 million, a curtailment related
to the Ground staff plan in the Netherlands amounted to
a release of EUR 16 million, result on sale of assets (mainly Cash flow statement
Boeing 747 passenger and combi aircraft/engines, results
on purchase of former right-of-use Boeing 737 aircraft and In millions of Euros 2020 2019
sale of emission trade rights) amounted to EUR 38 million, the Net cash flow from operating activities (294) 1,835
disposal of the associate Transavia France S.A.S. amounted Net cash flow used in investing activities
to EUR 17 million and right-of-use assets write-off of 2 (excluding investments in and proceeds
Airbus 330-200 aircraft, which were taken out of operation, on sale of equity shareholdings, dividends
amounted to EUR 9 million. Impairments relate to passenger received and purchase of short-term
and combi Boeing 747 aircraft in April amounted to EUR deposits and commercial paper) (681) (1,323)
19 million, impairment of intangible assets in use or under Free cash flow (975) 512
development amounted to EUR 8 million and a reversal of an
Payments on lease debt (379) (380)
impairment of engines of EUR 2 million.
Adjusted free cash flow (1,354) 132
The 2019 APM adjustments show a positive amount of
EUR 22 million. This mainly relates a release of a voluntary
leave plan in the Netherlands amounting to EUR 2 million The 2020 operating cash flow was severely hit by the
and the sale of Boeing 747 engines and 2 Boeing 737-700’s impact of COVID-19. KLM took immediate action to retain
amounting to EUR 20 million. cash and reduce costs. Overall, a positive working capital of
EUR 219 million was achieved as a result of the immediate
Net cost of financial debt actions and the deferred payments for wage tax and social
Net cost of debt remained stable compared to previous year, securities, being one of the COVID-19 measures of the Dutch
mainly related to the reduction of net debt (including lease Government to support Dutch companies.
debt related to IFRS 16) in 2019 and increase of net debt in
the second half of 2020. This related to the drawing of EUR Investing cash flow was strongly reduced from EUR 1,343
942 million from the government loan and new revolving million in 2019 to EUR 670 million in 2020. Where possible
credit facility from KLM’s relationship banks. commitments for new fleet, intangible and tangible fixed
assets have been postponed or cancelled.
Other financial income and expenses
Other financial income and expenses were positively Equity
impacted by positive currency exchange result mainly related Equity stood at EUR 1,560 million as per December 31, 2019.
to a positive impact on the US Dollar debt and maintenance Due to the 2020 net loss of EUR 1,546 million and a net
and phase out provisions. Following the COVID-19 impact, negative movement in the remeasurement of defined benefit
the Group’s fuel consumption became far less than the pension plan, KLM has a negative equity of EUR 115 million
volume of fuel hedges outstanding as from the end of as per December 31, 2020. KLM foresees no immediate
first quarter 2020. The group discontinued the fuel hedge issues from this negative equity position. EUR 2.5 billion of
relationship of these overhedges and released the market the EUR 3.4 billion State Loan and RCF is still undrawn and
to market value of those hedges from other comprehensive available for KLM.
income in equity to the profit or loss account resulting in a
loss of EUR 240 million in total.

KLM 2020 Annual Report KLM 2020 Annual Report

26 27
Report of the Board of Managing Directors Report of the Board of Managing Directors
 King
of cash
Lessons learned from previous crises,
good preparations and some lateral
thinking enabled KLM to weather the
financial challenges of the pandemic.
Vijay Panday
Director Group Treasury and Risk Management

If cash is king, then Vijay Panday should be called the King One such measure was to ensure that at all times KLM has System to run. “It saves us tens of millions each year and point of the crisis when the banks were not able to help.
of Cash. As Director Group Treasury and Risk Management, enough cash available to ensure it can meet its financial acts as a form of natural hedging.” An unusual way of working but very effective.
Vijay leads a small team of three experts, surrounded by nine obligations. A second was to develop scenarios for various
operational staff, that manages all of the airline’s cashflows and crises, such as the fall of the euro, caused by the 2008 KLM is one of the few airlines that manages its finances this When it became apparent that, in order to overcome the
financial risks. “KLM is a labour and capital intensive company. financial crisis, followed by the 2012 euro debt crisis. way and Vijay was glad of it when the COVID-19 crisis hit. crisis and to secure the future of KLM, additional loans were
We lease some of our assets, such as aircraft, and use loans, Another and important measure was the creation of a “When KLM’s network was shut down in March, we were needed, a financing team together with representatives of
which costs money. Our goal is to minimise these costs and centralised Group Treasury that oversees KLM Group’s prepared. Thanks to the centralisation we were able to act the banks and the Dutch Government negotiated the loans
manage the risks involved.” financial risks and payments worldwide. If that sounds swiftly. Initially, KLM had enough cash in hand to fulfil its and state guarantees, for which KLM is grateful.
simple, think again: KLM’s pre-COVID-19 network spanned short-term financial obligations. But soon it became clear the
Some of these risks are inherent to the cyclical and event- 171 destinations and the group’s turnover mounted to crisis would last longer. Also, mass cancellations meant KLM Reflecting on 2020, Vijay says KLM’s centralised system has
driven nature of the airline industry. Broadly speaking, people fly EUR 11.1 billion in 2019, of which 95 per cent is managed would have to pay significant refunds. Eventually in March, proven its worth. “Most of our peers have a decentralised
when the economy is doing well, but when a crisis hits, holidays centrally by the Group Treasury. we drew on the standby facility with twelve international system and in a crisis like this that is a liability. It prevents
to sunny destinations or business trips are less of a priority. banks.” a clear view of cash flows and rolling cash flow budget
Earlier crises provided KLM with tough but valuable lessons. “We used to pay our vendors in dollars and euros forecasts.” Having said that, he sees room for improvement.
everywhere, but now we pay a large part in local currencies, One aspect of crisis management was the formation of “We want to do more with the financial data that is
“The day after the 9/11 attacks, the majority of the 25 banks around 85 in total. In Uganda we pay with shillings, in Korea a central payment team, consisting of the Chief Financial captured by our Group Treasury system to further optimise
we did business with stopped answering our calls. Suddenly, we pay our vendors with wons and in Mexico we pay with Officer, Treasury, Corporate Control and Procurement. This risk awareness, maximise the return on our cash and
we were too risky for them. Something similar happened in pesos. Seeing the money flow in and out is like seeing team managed and monitored every outgoing payment. further reduce the financing cost. Our next step is to use
2003 with the SARS virus outbreak followed by the financial blood run through the veins of an organism.” Some of the main stakeholders chipped in to secure technology to analyse that data, develop better scenarios
crisis in 2008. Banks hesitated to provide us with credit lines Any local net result is transferred to KLM’s Group Treasury KLM’s cash position. Financial agreements were made with and become more financially agile.”
that are necessary for a secured treasury operation. We head office accounts and converted into euros. This sounds suppliers, airports, lessors, insurers and other stakeholders,
learned from this and took measures to ensure we were less complicated, but in practice it’s a lean process that requires who all contributed their part. IATA was very cooperative and
dependent on banks.” only a handful of people and a Treasury Management offered to trade foreign currencies with KLM at the deepest

KLM 2020 Annual Report KLM 2020 Annual Report

28 29
Report of the Board of Managing Directors Report of the Board of Managing Directors
 Launching the Fly Responsibly initiative in 2019 already proposition was broadened by expanding the corporate
positioned KLM as a sustainability leader in the airline biofuel program to cargo customers and Air France decided
industry, but in 2020 KLM committed itself to even higher to adopt KLM’s corporate biofuel program in 2021. KLM
ambitions. The COVID-19 pandemic has strengthened calls remains committed to being the launch customer of Europe’s
to make the aviation industry more sustainable. This comes first and dedicated SAF plant, that will be developed within
on the back of a more dominant role of governments and the Netherlands as announced in 2019. KLM sharpened its
other stakeholders, and through them the general public, as policy and strategy for SAF and stands for the adherence
well as more ambitious climate goals set by European and to strict sustainability criteria for the use of SAF. KLM
national authorities. In light of this, as well as the conditions participates in the World Economic Forum Clean Skies for
set to the State financial support package granted by the Tomorrow Coalition, which aims to align partners on a
Dutch Government, KLM felt called upon to take even more transition to SAF as part of a meaningful and proactive
responsibility, both on its own and in conjunction with pathway for the industry to achieve carbon-neutral flying.
industry partners. A sustainable operation, innovation and Together with SkyNRG and Schiphol, KLM also participates
cooperation with other parties have been – and still are – in the Fuelling Flight Project. This projects aims to overcome
the foundations on which our operation is built and they controversies about the use of sustainable airline fuel and
will continue to play a vital role in the reconstruction of our provides recommendations on the sustainability aspects of
company and sector after the crisis. the EU’s policy design to support SAF.

KLM’s ambition is to have zero emissions from ground

operations by 2030. Therefore, KLM has invested in the
"Launching the electrification of ground equipment. Some 62 per cent
of KLM’s ground equipment is now electric. Tests have

Fly Responsibly been conducted at Schiphol with the use of electric taxi
equipment.

initiative in 2019 already In order to meet society’s need for making flying more

positioned KLM as a
sustainable, KLM is in favour of a European network of
high-speed trains replacing short distance flights. Early 2020,
KLM replaced one of its five daily flights to Brussels with a
sustainability leader in journey on the Thalys. KLM is actively investigating with the
Dutch rail company (NS), Schiphol Airport and the Dutch

the airline industry." Government how to replace more short flights by trains.

KLM expanded its notion of sustainability to not only

Compared to 2005, KLM has reduced its total CO2 emissions encompass environmental goals, but to include the role it

Sustainability
by an absolute four per cent and 31 per cent per passenger has in serving society, enabling economic activity and being
per kilometer as per 2019. For the sake of transparency it is one of the largest private employers in the Netherlands.
noted that KLM’s production in 2020 deviated significantly This deepening and broadening of KLM’s sustainability
from previous years as a result of which this year’s CO2 ambitions aligns well with KLM’s restructuring plan “Building
emission figures can not be compared easily with other Back Better”. Within this context, KLM developed a vision of
years and targets. For 2030, the goals are to reduce these how sustainability applies to the people side of the business,
levels by 15 and 50 per cent respectively. To this end, KLM by means of a ten-year roadmap that will improve staff
continued to invest in more fuel efficient aircraft with a lower engagement, diversity and inclusion, community engagement
KLM has embraced the ambition to become a leading noise footprint. Meanwhile, KLM’s CO2ZERO program enables and human rights across the supply chain.
passengers to compensate their CO2 emissions and in 2020
European network carrier in customer centricity, efficiency
some 51,053 ton was offset this way. In 2020, Transavia Engagement for sustainability has increased in 2020.
and sustainability, setting ambitious targets that will impact partnered with KLM on CO2ZERO. Sustainability was integrated into KLM’s Compass, which
its operations, fleet and culture, as well as how KLM co- outlines the values, principles and behaviours of staff. A
KLM, which in 2011 was the world’s first airline to carry out sustainability eco system of people involved in the subject
operates with key partners in the aviation industry.
a commercial flight partly fuelled by Sustainable Aircraft Fuel was set up across the company, including Transavia, Cargo
(SAF), committed itself to use 14 per cent SAF of the total and E&M. An internal sustainability portal was built to inspire
volume used in the Netherlands by 2030. The customer and educate staff throughout the company.

KLM 2020 Annual Report KLM 2020 Annual Report

30 31
Report of the Board of Managing Directors Report of the Board of Managing Directors
KLM already worked with academic institutions, airline submitted to the Dutch parliament. More waste and weight KLM Sustainability: 2020 at a glance
partners and the government on several initiatives to reduction initiatives have been worked on with external
reduce CO2 emissions. Strategies for achieving this include partners like the Amsterdam University of Applied Sciences. Please note that
COVID-19 impact on

fleet renewal, the use of SAFs, optimising flight paths and KLM’s 2020 operations TOP
is directly reflected in
the environmental of the Dow Jones
procedures, the aim for emission-free airports and the In 2020, for the sixteenth time in a row, KLM together with results of 2020, and
thus data does not 10
Sustainability Index
as Air France-KLM 100 -15%
Group
adoption of the train on short distances. With help of KLM, Air France ranked in the top of the Dow Jones Sustainability follow the trend of
last years.
Aircraft retired
earlier as planned
projects in 17
countries supported
CO² of ou r flight
operation in 2030
the Delft University of Technology made the maiden flight World Index. This achievement is the reward of more than a by Wings of Support (compared to 2005)

of its revolutionary Flying V model aircraft. KLM contributed decade of constructive work in the field of sustainability.
47% 44.000
to the action program Hybrid Electric Flight, which was less absolute CO² tonnes CO²
-50%
emissions compared compensated
non-recycled waste
to 2005 thanks to KLM’s
(compared to 2011)
compensation service
CO2ZERO

191
tonnes of
Sustainable Aviation
2020 3700
Repatriation flights
due to COVID-19
2030 0
emission of ground
Fuel purchased operations by 2030

28% 21% 5
of the Netherlands less CO² emissions People
based managers at produced by ground Sustainability
KLM is female operations compared ambitions
to 2019
54% 338
less non-recycled hectares of tropical
waste compared to forest planted in
2011 Panama by KLM
CO2ZERO service

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Lavazza part of Blue Heart Days Multiple initiatives Launch Economy class First flight of scale SAF Paper Clean Launch of Cargo
Corporate SAF KLM employees in Air France-KLM catering of EU model Flying V Skies for SAF Programme
Programme community Principles fights all vegetarian Tommorow
involvement Coalition
Trial with hybrid Green Recovery
towing vehicle Statement Fuelling Flight
statement

KLM Group CO2 emissions have decreased steadily, with a significant

drop in 2020 due to COVID-19
(index 2005=100)

140

120
112
100 104
100 97 95 96 95 96
85
80

60
53 50
40 92 90 89 88 52
83

20

0
2005 2015 2016 2017 2018 2019 2020 2030

Total CO2 emission Net CO2 emission Production (RPK & RTK) CO2 emission per pax-km

KLM 2020 Annual Report KLM 2020 Annual Report

32 33
Report of the Board of Managing Directors Report of the Board of Managing Directors
 Leave
no one
behind
During the crisis, KLM worked tirelessly
and selflessly to repatriate 250,000 Dutch
Max Ligthart (L) citizens from all continents. Getting that
Team Lead Pricing Benelux done, while COVID-19 was raging, was a
feat of persistence and responsibility.
Peter Cordes (R)
Manager Cabin Crew & Senior Purser

When flights worldwide were grounded, Dutch citizens found In some cases, KLM had to get really creative. When crew Max Ligthart, Team Lead Pricing Benelux, worked closely with how they felt about not being able to see their family upon
themselves stuck far away from home, feeling concerned was not allowed to disembark in South Africa, it became Frank, contacting the Dutch Ministry of Foreign Affairs each return because of quarantine rules. People volunteered, but
about their wellbeing and uncertain of how the pandemic impossible to fly directly from and to Amsterdam. Realising day to see which people could be booked on what flight. we had to keep them safe.”
would evolve. Quickly, the Dutch Government set up a that Réunion, off the coast of Madagascar, was French “Many people were desperate. Some were stuck in Peru for
repatriation desk, where these citizens could register, and territory, KLM worked with Air France to make a stop over weeks with nothing to do. Others were sick and in need of All in all, KLM conducted some 65 repatriation flights. Like
called KLM to ask if they could organise the repatriation there so that crew could rest. “And KLM also ended up flying their medication. In one case, people chartered a private jet everybody else, Max is proud not just of that it was done,
flights. Not thinking twice, KLM took its responsibility, even to Sydney, where it hadn’t been in over 20 years. To make from Honduras to get on board our flight from Costa Rica. but also how it was done. “We were like an exciting start-up
deciding to offer the flights at cost price. Over several this possible, KLM had to obtain an Operating Permit from Often we would be trying to get people on board right up within an established business, with high energy and speed.
intense weeks, dozens of people at KLM worked 16 hour a the Australian Government and upload maps to the aircraft’s to departure. We wanted to leave no man behind and we In the past it could take longer to start up a new destination,
day to bring these people home. onboard computer,” Frank explains proudly. didn’t.” now we did it in two weeks. We pulled off something quite
remarkable.”
Frank Prillevitz, Vice President Government and Industry Now, organising flights was one thing, manning them was
Affairs, says the flights were challenging to pull off. “Countries
were closing their borders and restrictions changed often.
“During the crisis, KLM quite another challenge. At the beginning of the pandemic,
when COVID-19 was less well understood, people were
Every day, we had to negotiate with governments to let us
in. At the same time, the Operational Control Centre had to
worked tirelessly and worried. And yet, Peter Cordes, Senior Purser, recalls how a
massive 2,000 crew volunteered for the repatriation flights
make sure the flights could actually be flown. Sometimes,
after permission, we had just an hour to get an aircraft in the selflessly to repatriate and a lot of those had to be disappointed. “This is KLM’s
blue heart: we rise to the occasion.”

250,000 Dutch citizens

air. Sometimes, people were already boarding when last-
minute talks with local authorities had to be finalised. We had The evening before each flight, Peter would personally
to pull out all the stops to make this happen.” call each crew member, from the pilot to the junior cabin
from all continents.” attendant. “I asked about their physical and mental state,
whether they knew all the safety precautions on board. Or

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34 35
Report of the Board of Managing Directors Report of the Board of Managing Directors
People
On the other hand, staff displayed remarkable flexibility a voluntary basis to departments with a strong need for
and compassion. It was impressive how KLM staff, both at support or extra workforce. With the gradual recovery of the
Amsterdam as well as at the outstations, worked 24/7, often KLM operation, there will be even more need for this internal
under difficult circumstances to ensure that regular flights, mobility.
repatriation flights and Cargo in Cabin flights ran smoothly.
These efforts made passengers feel that KLM cares for them At the beginning of the year, before COVID-19, KLM
in good and in bad times. organised the Blue Heart Days. More than a thousand KLM
The COVID-19 crisis had a profound impact on how staff staff committed themselves as a volunteer on charity work
The safety, wellbeing and engagement of staff are one of and reached out to the Dutch society. The Blue Heart Days
worked and felt. On the one hand, staff were concerned
KLM’s key priorities. In addition to ensuring cabin crew and were experienced as inspiring and educational and engaged
about their job and health, increased pressure and an ground staff practiced social distancing and had protective staff from all over the company. Blue Helps, a spontaneous
inability to interact with colleagues and passengers. equipment, KLM shifted focus of the health portal to initiative by KLM staff, also demonstrates the connection of
COVID-19 and a telephone helpline was opened. These KLM with society. Blue Helps facilitates KLM staff that has
The Employee Promotor Score fell from 68 at the end
provided access to coping sessions, guidance on creating temporarily less work to volunteer in charity work, such as
of 2019 to 52 in 2020. a healthy workspace at home, both physically and mentally, healthcare institutions, in need of extra support during the
and helped with managing teams at a distance. KLM set up COVID-19 crisis.
the Blue Counter, which internally transferred 1,500 staff on

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36 37
Report of the Board of Managing Directors Report of the Board of Managing Directors
KLM EPS December 2020 The aim of the restructuring plan is to ensure that KLM
Employee Promoter Score survives the COVID-19 crisis and that the company will
How likely are you to recommend KLM as employer? emerge from it stronger. The restructuring plan is ambitious.
Together with the Works Council and divisional works
67.4% 15.4% councils, the entire business was re-assessed and detailed
plans were laid down in 37 requests for advice. These
adjust KLM to a lower cost level and the need to become
more agile and increase productivity. All plans were advised
positively by the Works Council and will be implemented
- = +52 Latest
EPS
by the end of March 2021. The speed with which KLM
developed these plans under pressure is a testimony to the
Target 68
creativity and resilience of the organisation. The constructive
approach of the employee participation bodies and the
Works Council in this process is worth a great deal of praise.
Very likely Very unlikely
8 – 10 0–5 KLM consulted the trade unions about the social plans and
how to meet the government's condition regarding the
Staff motivation remained high despite a large amount of uncertainty and reduction of labour conditions. Based on the prognosis that
restructuring in the deepest airline crisis. passenger flows will only recover to 2019 levels by 2023
or 2024, KLM sadly concluded that a reduction of 5,000
KLM remained committed to diversity and inclusion. colleagues was necessary. This number was reached by
By 2030, KLM wants 100 per cent of its employees to the end of 2020 by ending temporary contracts, reducing
experience a diverse and inclusive working climate. The hired staff and the launch of two voluntary departure plans.
focus was on gender diversity, which is why KLM continued Around 2,200 colleagues opted for voluntary redundancy.
a Female Leadership Program. Women on Board, KLM’s Others made use of opportunities for part-time work, re-
informal network of female colleagues, organised online education and secondments to other companies. Never in
masterclasses to inspire women. For the active LGBTI the company’s history, have so many colleagues left our
community, a slimmed-down Coming Out Day was organised. company at the same time. In the “Goodbye Lane” in hangar
Attention was paid to Amsterdam Pride, and an improved 10, KLM said goodbye to many of them. People handed
result was shown in the Workplace Pride benchmark for over their uniforms, suitcases, laptops and KLM ID and for
the third year in a row. the last time exchanged good memories. Unfortunately,
these measures were not enough and KLM had to draft
In 2020, the re-design of the KLM pension schemes was a social plan for staff that became redundant because of
finalised. In 2017, the pension schemes for cockpit crew and the lower production levels. It is with pain in the heart that
cabin crew were de-risked while the pension fund for ground KLM said goodbye to so many enthusiastic, dedicated and
staff remained a defined benefit scheme. In 2020, KLM and professional colleagues.
the unions for ground staff agreed to a defined contribution
scheme from 2021 onwards. It is expected that the pension Early November, all eight trade unions that represent KLM
fund for ground staff will become a defined contribution plan employees committed to a contribution on the labour
in the course of 2021. conditions for the duration of the financial support package
of the Dutch Government. As a result, KLM fulfilled an
KLM continued investing in talent. KLM launched a new important condition set by the government to be eligible
digital learning environment and expanded the KLM Portal, for further government support in the form of loans and
home to all HR information. In addition, KLM adopted ORBA, guarantees. The agreements include pay cuts up to 20
the Dutch national standard for job evaluations and grading, per cent and a cap on pay increases. Agreement has also
for its 9,000 technical and administrative employees. KLM been reached about the way in which KLM will deal with
also implemented a new talent management system. In redundancies. The process to come to the commitment
2020, KLM received the Learning Technology Award, an clauses was turbulent and put pressure on the company.
international award for the best learning technology project
in a commercial organisation and the Excellence in Learning
Award for the Field Marketing Excellence program, an award
for the most innovative blended learning program.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 Compassion
and creativity:
how ground
staff boarded
aircraft during
covid-19
KLM’s purpose is to move the world of
its passengers and create memorable
Julie van der Wilden (L) experiences for them. During the crisis,
Unit Manager Preparation and ground crew tasked with boarding flights
Boarding Air France & Delta Air Lines
faced incredible challenges to make this
Mila Overmars (R) a reality.
Shift Leader Preparation and Boarding ICA

Before COVID-19, work was relatively straightforward for Mila KLM had no choice but to comply. Failure to do so could lead who would then use their personal credit card to pay. And eight. And preparations start 2.5, even 3.5 hours before
Overmars, Shift Leader Preparation and Boarding ICA, and to a EUR 5,000 fine per passenger and passengers would on the flight to Accra, this elderly lady in a wheelchair was departure, instead of the usual 1.5. Even then, flights to
Julie van der Wilden, Unit Manager Preparation and Boarding simply be refused entry and returned on the next flight. In unable to pay online, and then a man on the flight paid for destinations like Accra and Dubai are usually delayed by up
Air France & Delta Air Lines. Each flight was prepared in the practice, this meant KLM had to organise test facilities at her. She was so grateful that she started crying. Everybody to an hour, which costs KLM money.
back office and handled at the gate. Some families had Schiphol, ensure protective equipment could be purchased in knew that you were only flying because you had to get
special seating needs and there was the occasional rowdy the airport stores and organise quarantine facilities for those somewhere urgently, and it kindled generosity everywhere.” Needless to say, ground crew were strained. “People lost
passenger. Speed and safety were top priorities and the who tested positive. “These requirements could change at their routine. And while our responsibilities grew, cost cutting
process was usually smooth. “The longer an aircraft is on the a moment’s notice, which gave us just one or two days to Another profound change was that for many crew and meant there were fewer staff. It also became harder for us
ground, the more money it costs. In recent years, KLM had adapt,” according to Julie. passengers, flying was no longer the joy it used to be. “Our as a business to make money. Our instinct is to fly as many
become good at quickly turning around an aircraft at the crew love their work because we can really move people’s routes as possible, but now we had fierce discussions about
gate,” Mila says. Mila explains that the restrictions caused a great deal of world and offer them memorable experiences. Now, we had whether to fly to certain places or not. We did have to
hardship. “Elderly people often didn’t have a mobile phone, to refuse passengers on their way to a funeral, wear masks balance the constraints of every destination and the cost
The pandemic changed everything. Julie took a seat on the which meant they couldn’t scan QR codes or make online and stay behind plexiglass sheets. Instead of being close involved versus our, always present willingness to fly,” says
COVID-19 Implementation Team, an expert-team that was payments. Some transfer passengers got stuck for days to passengers and smiling, we had to keep our distance. Julie.
linked to the Contingency Team, liaising closely with Mila at the airport because they were refused entry by their This goes against everything we love and believe in. Of
and her team. Getting an aircraft off the ground became an destination. And on one flight we had to refuse 15 people at course we tried to do everything we could to still give our Eventually, KLM’s ground crew slowly became more
arduous task. “Each country had its own demands. A PCR the gate, because an hour before departure the government passengers a memorable experience. We have learned to accustomed to the changes. Looking ahead, Mila and Julie
test that is not older than 48 hours or 72 hours. A PCR test decided to bar their nationality from entry.” Luckily, the crisis laugh with our eyes, for example. But, it was hard, and it still wonder what will happen when the pandemic abates and
combined with an IGM test. An online questionnaire that also inspired moments of kindness and compassion. is,” Julie says. passenger volumes return to normal. “We have begun to
can only be accessed with a QR code. Checking people’s prepare for this, though. We are working with other airlines
temperatures. Proof of payment of a test that will be Mila remembers “people without a credit card, who What also changed is that the boarding process has become and airports to agree to standards and we are preparing
conducted upon arrival. Our job became to organise these couldn’t make the online payment for the PCR test at their much harder and time-consuming. In the past, KLM needed alternative working methods that will help to manage higher
conditions and police it,” Julie explains. destination. So they would give cash to our KLM colleagues, three people to board an aircraft, now it needs seven or passenger volumes” Mila concludes.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 KLM responded to the pandemic and The introduction of QR codes on boarding passes reduced
the need for physical contact. This enabled passengers
the shutdown of the airline industry by
to identify themselves and it supported more self-service
managing the crisis, ensuring short-term activities at the airport. KLM digitised the health declaration
recovery and developing a long-term and connected it to the boarding pass and introduced
virtual waiting lines in the lounge and at transfer desks,
restructuring plan. To weather the crisis,
which reduced the need for physical lines. Working together
we adapted an approach along the lines with other SkyTeam members, KLM set standards for hygiene,
of the four quadrants. The actions and distance, screening, preparation and pre-testing.
It developed software to create a seating plan that
measures taken in all four quadrants are
maximises distance between passengers and launched
closely interrelated. the Willingness to Fly program, which bundled information
about flight restrictions and conditions to fly. In line with
its ambition to be a leading European network carrier in

Crisis and
customer centricity, KLM kept the Crown Lounge at Schiphol
open to ensure passengers could rest in comfort. This made
KLM the only major European airline to keep its lounge at

recovery the hub open from the beginning of March through to the
end of the year. Initially the food and beverage services
were limited but from July the lounge cautiously expanded to
the full‑service offering.
The months of March, April and May saw KLM thrust into
an unprecedented global crisis. The organisation quickly Positive trend of Net Promotor Score
and adroitly responded to secure the safety of everyone 53

involved. As health risks of the coronavirus in countries 40 42 41

38 39
diminished and local governments relaxed their travel
policies, the focus of action shifted from acute crisis

NPS
management to preparations for recovery. However, the road
to recovery appeared not to be linear and much longer than 2015 2016 2017 2018 2019 2020
anticipated at the beginning of the pandemic. Activities in
the quadrants of crisis management and recovery very much In 2020 NPS is only measured in quarter 1 and quarter 4
mingled. 
When KLM was forced to shut down its network, a wave
Passenger activity of more than two million cancellations washed over the
The COVID-19 pandemic particularly impacted the passenger organisation. Initially this put much pressure on customer

A resilient
activity. KLM made maximum effort to guarantee  passengers care processes, leading to waiting times. Needing to
a safe journey. Passenger traffic reduced immediately at the manage liquidity in a responsible manner, KLM made the
start of the crisis and apart form a small peak in summer, did tough decision to offer vouchers upon cancellations. KLM
not pick up during the rest of the year. Passenger numbers compensated passengers by increasing the value of the
were reduced to historically low numbers and revenues voucher by 15 per cent, relaxing the conditions of the

response
dropped. Flying Blue program and offering flexible booking terms. In
due course, KLM mobilised extra staff and expertise and
Customer and product developed a series of digital tools that allowed passengers
KLM did everything in its power to provide passengers with to get refunds and rebook their flights.
a safe experience. Preventive measures were taken within
every step of the customer journey on the ground and on KLM recalibrated its product in order to increase
board. Products and services were adjusted to minimise competitiveness. On the one hand, KLM cancelled or
contact moments and to maximise distance. Passengers postponed projects and investments and renegotiated
clearly expressed the need for reassurance in the areas of contracts. These decisions impacted the customer
hygiene and sanitation, physical and social distancing, health experience and were difficult for suppliers and KLM staff, who
screening and actual and transparent information. had dedicated years to building a product.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
On the other hand, KLM continued installing Wi-Fi Load factor KLM Group KLM maximised the number of destinations even if at low In 2020 the partners worked on a prediction model that
connectivity on the intercontinental fleet. In addition, frequencies in order to maintain the global network. helps to manage scarce public spaces. Also, 5 (assistant) AI
KLM decided to introduce Premium Economy, a class in 87.0% 87.5% 88.7% 89.5% 89.7% professors were appointed at the participating companies
its own right between Economy and Business Class. It will 54.0% KLM endeavoured to perform a role that was now more while 5 more will follow. KLM is in contact with the University
feature more space and multimedia screens for inflight crucial than ever: moving people and goods across the of Twente and the University of Utrecht to discuss ways to

in %
entertainment, a dedicated service and more exquisite world. Working closely with the Dutch Government, KLM work together in the field of AI.
catering. Furthermore, KLM will invest in a direct aisle 2015 2016 2017 2018 2019 2020 flew back home some 250,000 Dutch natives who were
business class on all Boeing 777-300 aircraft, which already stranded somewhere in the world. Around 65 repatriation Looking ahead, KLM will implement the final phase of its
can be found on the Boeing 787. KLM launched an improved flights were organised, often from destinations were KLM Operational Excellence methodology, which will create
website, including a content management system based on When the crisis began to unfold, KLM’s Contingency Team had not operated from in years. The Boeing 747s, just retired, a better and more reliable operation that delivers on its
AI that supports personalised offering to customers. leapt into action to handle the number of unprecedented were temporarily returned to service to deliver vital medical customer promise at the lowest integral cost. To this end,
situations, and KLM’s Integrated Safety Service Organisation equipment. Together with Philips, an air bridge with China KLM will reorganise the Operations Control Department,
By the end of the year, trans-Atlantic partners Delta Air played an important role by managing the risks of increased was set up to transport important medical and protective resulting in a centralised decision-making department for all
Lines and KLM launched a travel corridor with COVID-19 variability. KLM retired its fleet of passenger Boeing 747s equipment. KLM conducted more than 153 flights with cargo European and intercontinental flights. Also, E&M, Operations
tested flights from Atlanta to Amsterdam. The airline partners ahead of schedule and eventually temporarily parked the in the cabins, delivering a total of 120 million protective and Fleet Services departments will be aligned to increase
worked with the Dutch Government, Schiphol and Hartsfield- majority of its fleet at Schiphol and Groningen airport. facemasks, medical overcoats and gloves. fleet availability and reduce cost. In practice, these measures
Jackson Atlanta International Airport to allow eligible will lead to a better preparation of the flights, a faster return
passengers to be exempted from quarantine after receiving By September, a second COVID-19 wave washed over Throughout the year, passengers and crew endured to the schedule in case of disruptions and an increased
a negative PCR test result after landing in the Netherlands. Europe, impacting the winter schedule that started late pressure and discomfort. On board of many flights, catering ability to learn from the execution of flights. In time, as
October. KLM had to scale back operations from 40 per cent services were reduced and staff had to wear protective passenger flows return to pre-COVID-19 levels, KLM will be
Operations and network of its normal capacity to 20 per cent, using the smaller and clothing. Some destinations did not allow crew to disembark, able to run the operations at maximum capacity against
In the 2015-2019 period, KLM streamlined its fleet, invested more cost-efficient Embraers of KLM Cityhopper instead of forcing them to fly back to Schiphol straight away, while lower cost.
in IT, began implementing the Operational Excellence the larger and less efficient Boeing 737. This meant KLM other places forced crew to stay in a hotel room until
philosophy, and developed a more integrated operation and was able to make the most of a precarious situation, even the next flight home. Ground staff had to deal with time- Alliances
safety organisation. As a result, the reliability, the agility and becoming the number one airline in Europe in terms aircraft consuming boarding procedures that included checking In January 2020, the Transatlantic Extended Joint Venture
the cost-efficiency of the operation significantly improved movements. Ultimately, though, the flow of passengers whether passengers complied with the COVID-19 regulations Partnership Blue Skies was implemented. Blue Skies connects
and safety came at an even higher plan. It was with this dropped from 35.1 million in 2019 to 11.2 million in 2020. of the destination. the networks of the existing joint venture partners, KLM,
robust foundation that KLM entered the crisis. Delta Air Lines and Air France with that of Virgin Atlantic
Due to the COVID-19 crisis passenger numbers This pressure echoed on the planning side of the network: Airways. This extended cooperation aims to deliver better
decreased significantly in 2020 while a schedule is usually prepared months in advance and service across a larger network. Discussions are ongoing
Capacity KLM Group 35.1 adjusted on a monthly basis, KLM’s network now changed to enhance this joint venture with additional partners, but
34.2
32.7 daily. In addition, the pandemic also forced passengers to the pandemic has delayed this. In light of an unpredictable
30.4
28.6 book closer to the day of departure and cancel more easily market, KLM and its partners have agreed to review the
135,173 139,118 141,708
in mln

128,593 11.2 at the last moment. KLM was able to adjust to this by having financial terms related to their cooperation as the parties
122,748
72,621
the commercial side of the company work even closer wish to avoid uncontrolled financial exposure. Once universal
in mln ASK

2015 2016 2017 2018 2019 2020

with the operational side. Cargo was also closely involved, travel restrictions are eased and borders reopen, KLM and its
as passenger flights were increasingly based on cargo partners plan on stepping up their joint activities.
KLM maximised the number of destinations even if at low demand. KLM built IT tools that allowed to keep track of the
2015 2016 2017 2018 2019 2020 frequencies in order to maintain the global network. This income and costs per flight, to inform passengers and to re- Discussions were initiated to include Virgin Atlantic in the
made it easy to capitalise on opportunities and adjust to accommodate crew two weeks in advance. AIR FRANCE KLM and China Eastern Airlines joint venture in
From March, in a matter of three weeks, KLM’s network was new travel restrictions. KLM even managed to add new the fall of 2019. The pandemic has delayed this process and
forced to scale down and production dwindled to ten per destinations, including Zanzibar (Tanzania) and Riyadh (Saudi KLM continued to make use of artificial intelligence (AI)- Virgin Atlantic is expected to join the joint venture in 2021. In
cent of normal capacity. By May, as the first COVID-19 wave Arabia). The winter schedule, which runs from October 2020 based tools to make its operations safer, more reliable and 2020, China Southern Airlines left the SkyTeam Alliance. This
in Europe abated, KLM increased production to 20 per cent to March 2021, has been developed on various scenarios, more cost-efficient. In 2020, KLM launched Terra, a tool to has not affected the successful joint venture between KLM,
of normal capacity. The summer schedule was reduced to making KLM flexible to adjust it to whatever changes and improve the resource scheduling process of ground handling China Southern Airlines and Xiamen Airlines.
a skeleton network of 32 European and 25 intercontinental opportunities occur. staff ‘on day of operations’. The system ensures an equal
destinations, compared to the normal 171. The frequency distribution of the workload across all employees, lower Unfortunately, the joint venture between Kenya Airways
of flights was reduced and was adjusted to match the Destinations 171 171 delay costs and enhanced task times based on actual load. and KLM was ended in 2020 because of changed market
167
availability of cargo. Over the summer KLM was able, to 166 circumstances. The termination will become effective in
gradually restore the network even though the load factors 153 KLM remained committed to Kickstart AI, a cooperation with September 2021. The successful strategic cooperation
were still far behind. The goal was to achieve 75 to 80 per 140 Ahold Delhaize, NS, Philips and ING aimed to accelerate between AIR FRANCE KLM and GOL was extended for
cent recovery towards 2021. the development of AI technology and nurture AI talent. another five years at the end of 2019. Pre-COVID-19, this

2015 2016 2017 2018 2019 2020

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Report of the Board of Managing Directors Report of the Board of Managing Directors
partnership met more than 99 per cent of demand between and International Air Transport Association (IATA). The IATA improved safety and compliance organisation that features a KLM Cityhopper’s fleet ambitions have been adjusted in
Brazil and Europe. The partnerships with China Southern Operational Safety Audit (IOSA) is a benchmark within the renewed Integrated Safety Management System, expert staff line with KLM’s restructuring plan. The 15 Embraer E-190s
Airlines / Xiamen Airlines, China Eastern Airlines and China industry and leads to certification that must be renewed on all disciplines, safety innovation, advanced automation will not be densified, but will receive new seats that will
Airlines from Taiwan, have made Schiphol Airport the leading every two years. The IOSA audits for the renewal of KLM’s and full focus on safety culture and leadership. also fit the new Embraer 195-E2s. The Embraer 195-E2s are
gateway from Europe to greater China and from greater and KLM Cityhopper’s certification were carried out at the expected as from early 2021. In preparation of their delivery,
China to Europe. end of 2020 and resulted in the renewal of the certificates in KLM Cityhopper KLM Cityhopper has purchased an Embraer 195-E2 simulator
March 2021. While demand for European flights collapsed in 2020, KLM and adjusted the KLC hangar. The Embraer 195-E2 is one of
SkyTeam is the first global alliance to commit to common Cityhopper was able to utilise its fleet of smaller and more the most environmentally friendly single aisle aircraft, which
health safety measures and is cooperating with its nineteen When KLM was confronted with the pandemic, its Integrated cost-efficient aircraft to not only operate its own network emits 30 per cent less CO2 and produces 50 per cent less
members and governmental organisations to restore Safety Service Organisation (ISSO) took on an important role. but also take over some of KLM’s flights, which are usually noise than the E190, thereby contributing to KLM’s overall
confidence in air travel. First, it determined the risks and mitigation measures of the conducted with larger aircraft. This network change, sustainability goals. The Embraer 195-E2 requires a third
network’s variability, delivering the required analysis and combined with changing local lockdowns, last minute cabin attendant and these will be drawn from the pool of
Fleet information for KLM to ensure safety for both passengers cancellations and night flights, made this a tough challenge. KLM cabin crew. On KLM group level this secures an optimal
KLM’s long-term fleet plan remains unchanged, which is to and staff in a constantly changing environment. Second, Thanks to perseverance and exceptional flexibility, KLM use of resources and a lowering of cost.
focus on operating fewer types of aircraft and more fuel ISSO identified, assessed and embedded all restrictions by Cityhopper crew managed to do all this in a commercially
efficient aircraft, thereby reducing the carbon footprint, local governments and institutions worldwide in order to viable way. KLM Cityhopper was even able to start three
emission and noise. In early 2020 and as part of the fleet ensure compliance at all times. Where possible, the safety of new destinations, which are Poznan (Poland), Cork (Ireland)
renewal program, KLM phased-in the quieter and more passengers and crew were enhanced, based on studies and and Southampton (United Kingdom). Catering and safety
fuel efficient Boeing 787-10. When the effects of COVID-19 risk analyses and far-reaching measures. precautions were scaled up or down depending on the latest
became clear, KLM phased out all remaining passenger requirements.
Boeing 747-400s, although three combi aircraft temporarily Throughout the year, ISSO contributed to the safety, health
resumed service later to meet increased demand for cargo. and wellbeing of all KLM staff. ISSO conducted staff surveys
Lease payment deferrals and discounts were negotiated with in order to monitor the mental health condition of employees
the majority of the lessors, followed by more structural lease and advised on measures to increase social coherence.
obligation reductions with the most important lessors. Three KLM continued its focus on Occupational Safety hazards by
expected Boeing 787-10 deliveries in 2020 were delayed renewing the main Occupational Safety policies to provide
to 2021. One Boeing 777-300ER was delayed by Boeing to structure for the required mitigating actions. However, the
beginning of 2021. Two Airbus A330-200s were taken out of main focus in 2020 was on COVID-19. Occupational risk
service and will be returned to their lessors in 2021. analyses have been performed on the transmission of the
virus followed by the implementation of mitigating measures.
For the medium haul fleet, due to COVID-19, the decision As a result all aircraft, offices and operational spaces were
was made to accelerate the phase-out of the less efficient turned into a safe working environment.
Boeing 737-700 starting in 2021. KLM purchased three
Boeing 737-900s back from the lessor, which reduced the Together with stakeholders within the aviation industry,
number of operating leases and long-term commitments. KLM carried out a number of joint safety risk assessments
KLM increased the existing order for 21 Embraer 195- and conducted mitigating actions to improve safety at and
E2’s by an additional four; all 25 Embraer 195-E2s for the around the airport. These activities were performed within
European network will be leased and operated by KLM the joint sector Integrated Safety Management System, a
Cityhopper. The Embraer 195-E2 will significantly contribute unique cooperation between the aviation partners at the
to KLM’s sustainability objectives.  KLM will take the first airport which was established in 2018.
delivery of the Embraer 195-E2 in the first quarter of 2021.
Transavia also plans a reduction of the Boeing 737-700 As KLM did not seize flight operations during the pandemic,
fleet in 2021. In 2020, one lease of a Boeing 737-700 was the impact on safety and compliances has constantly been
ended and one Boeing 737-700 was sold. The Cargo fleet analysed, assessed and, where needed adjusted. In the
remained unchanged with four full freighter aircraft. The total aftermath of the pandemic additional challenges on all
consolidated KLM Group fleet shrank from 214 to 202 aircraft. divisions and employees involved will occur and will have
their effect in the fields of health, regulations, training,
Integrated safety and security operations and crew and consumer confidence. These topics
Air transport is heavily regulated and is subject to will be subject to continued investigation and analysis.
numerous checks and certifications. KLM meets extremely
strict standards at the highest level of regulations in the KLM will further integrate the safety operations of KLM,
industry, specifically the European Aviation Safety Agency KLM Cityhopper and KLM E&M. This will form the basis of an

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Report of the Board of Managing Directors Report of the Board of Managing Directors
Fleet composition klm group Traffic and capacity

Average age in years Owned *** Finance leases* Operating leases Total
Passenger Passenger kilometers Seat kilometers Load factor
**/****
In millions 2020 2019 % Change 2020 2019 % Change 2020% 2019%
Consolidated fleet as at December 31, 2020
Boeing 777-300ER wide body 7.9 3 7 4 14
Route areas
Boeing 777-200ER wide body 15.9 9 - 6 15
Europe & North Africa 6,804 20,048 (66.1) 10,450 22,960 (54.5) 65.1 87.3
Boeing 787-10 wide body 1.2 3 2 - 5
North America 6,763 23,666 (71.4) 15,125 26,474 (42.9) 44.7 89.4
Boeing 787-9 wide body 4.0 2 2 9 13
Central and South America 5,437 15,989 (66.0) 10,155 17,798 (42.9) 53.5 89.8
Airbus A330-300 wide body 8.1 - - 5 5
Asia 7,175 28,625 (74.9) 17,081 31,398 (45.6) 42.0 91.2
Airbus A330-200 wide body 14.8 6 - - 6
Africa and Middle East 4,823 14,503 (66.7) 7,840 16,509 (52.5) 61.5 87.8
Total wide body 9.3 23 11 24 58
Caribbean and Indian Ocean 2,871 6,645 (56.8) 4,191 7,313 (42.7) 68.5 90.9

Boeing 747-400ER Freighter wide body 17.4 3 - - 3

Total 33,873 109,476 (69.1) 64,842 122,452 (47.0) 52.2 89.4
Boeing 747-400BC Freighter wide body 30.5 1 - - 1
20.7 4 - - 4
Cargo Traffic Capacity Load factor
In million cargo ton-km 2020 2019 % Change 2020 2019 % Change 2020% 2019%
Boeing 737-900 narrow body 18.8 5 - - 5
Boeing 737-800 narrow body 11.9 20 7 39 66
Route areas
Boeing 737-700 narrow body 11.6 2 5 13 20
Europe & North Africa 6 11 (46.9) 171 366 (53.3) 3.4 3.0
Total narrow body 12.2 27 12 52 91
North America 782 994 (21.3) 1,037 1,675 (38.1) 75.4 59.3
Central and South America 1,332 1,250 6.6 1,682 1,875 (10.3) 79.2 66.7
Embraer 190 regional 9.1 7 10 15 32
Asia 1,205 1,454 (17.1) 1,280 1,767 (27.5) 94.1 82.3
Embraer 175 regional 3.5 3 14 - 17
Africa and Middle East 790 879 (10.1) 1,010 1,281 (21.2) 78.2 68.6
Total regional 7.2 10 24 15 49
Caribbean and Indian Ocean 69 90 (23.5) 205 289 (29.1) 33.7 31.3

Training aircraft 16 - - 16
Total 4,184 4,678 (10.6) 5,385 7,253 (25.8) 77.7 64.5

Total consolidated fleet 10.3 80 47 91 218

Transavia Passenger kilometers Seat kilometers Load factor
In millions 2020 2019 % Change 2020 2019 % Change 2020% 2019%
* With the implementation of IFRS 16, these aircraft are regarded as in substance purchases and therefore included as Owned aircraft in the financial statements
** With the implementation of IFRS 16, these aircraft are recorded as Right of use assets in the financial statements
Route areas
*** Excluding 2 Boeing 747-400's out of service and to be sold and 1 Boeing 787-10 temporarily not in operation
Europe & North Africa 5,349 17,670 (69.7) 7,779 19,256 (59.6) 68.8 91.8
**** Excluding 2 Airbus A330-200's and 1 Boeing 737-700 to be returned to lessors in 2021

Total 5,349 17,670 (69.7) 7,779 19,256 (59.6) 68.8 91.8

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Fleet composition
Boeing 777-300ER/200ER
Number of aircraft 14/15 Maximum passengers 408/320
Cruising speed (km/h) 920/900 Total length (m) 73.86/63.80
Range (km) 12,000/11,800 Wingspan (m) 64.80/60.90
Max. take-off weight (kg) 351,543/297,500 Personal inflight entertainment

Airbus A330-300/200
Number of aircraft 5/6 Maximum passengers 292/268
Cruising speed (km/h) 880/880 Total length (m) 63.69/58.37
Range (km) 8,200/8,800 Wingspan (m) 60.30/60.30
Max. take-off weight (kg) 233,000/233,000 Personal inflight entertainment

Boeing 787-10/9 Dreamliner

Number of aircraft 5/13 Maximum passengers 344/294
Cruising speed (km/h) 920/920 Total length (m) 68.30/62.80
Range (km) 9,900/11,500 Wingspan (m) 60.10/60.10
Max. take-off weight (kg) 254,000/252,650 Personal inflight entertainment/
Wi-Fi on board

Boeing 747-400ER Freighter

Number of aircraft 3 Max. freight (kg) 112,000
Cruising speed (km/h) 920 Total length (m) 70.67
Range (km) 11,500 Wingspan (m) 64.44
Max. take-off weight (kg) 412,800

Boeing 737-900
Number of aircraft 5 Maximum passengers 188
Cruising speed (km/h) 850 Total length (m) 42.12
Range (km) 4,300 Wingspan (m) 35.80
Max. take-off weight (kg) 76,900

Boeing 737-800/700
Number of aircraft KLM 31/16 Max. take-off weight (kg) 73,700/65,317
Number of aircraft Transavia 35/4 Maximum passengers 186/142
Cruising speed (km/h) 850/850 Total length (m) 39.47/33.62
Range (km) 4,200/3,500 Wingspan (m) 35.80/35.80

Embraer 190/175
Number of aircraft 32/17 Maximum passengers 100/88
Cruising speed (km/h) 850/850 Total length (m) 36.25/31.68
Range (km) 3,300/3,180 Wingspan (m) 28.72/28.65
Max. take-off weight (kg) 45,000/36,500

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 The beating
heart of
the crisis
The Contingency Team took the reigns
during KLM’s greatest crisis since World
War II, dealing with unprecedented
uncertainty and taking responsibility for
the safety of passengers and crew.
Coen Swaanenburg
Vice President Operations Control

A multidisciplinary team with representatives from all worked closely with the Dutch National Institute for While the pandemic caught the world by surprise, KLM Apart from the personal impact on our crews, this was quite
operational departments, the Contingency Team (CT) is Public Health and the Environment, KLM’s safety organisation was not entirely unprepared. Over the years, the CT has a logistically challenge to organise.”
part of the Operational Control Centre (OCC) that monitors and KLM Health Services.” developed and practiced numerous scenarios, and though
and guides all KLM flights worldwide. Normally reserved for a COVID-19 one did not exist, others were useful. “KLM Asked what his team learned Coen says COVID-19 forces
short-term contingencies like strikes, major system errors or To make matters more complicated, every country developed a scenario after the 2003 outbreak of the SARS KLM to let go of much of what it has learned. “We used to
bad weather, the CT quickly became the nerve centre for implemented its own safety and health regulations, making virus. This did not cover all aspects of the COVID-19 crisis but distinguish between a contingency and a crisis, and our
all of KLM’s operations. Coen Swaanenburg, Vice President it a nightmare to plan flights and ensure compliance. it gave us something to work with.” systems were not designed for something that happens
Operations Control and Chairman of the CT, played a central “Some countries demanded crew used separate toilets, once every 100 years. We used to live in a world where
role during the incredible months of the crisis. others specified we had to clean toilets after five visits A curious aspect of the CT was that its impact went beyond next season’s schedule was predictable. COVID-19 shows
during a flight. Some demanded masks, others also gloves. crisis management. “In a ‘normal’ situation, the CT conducts us the world is more complex and dynamic than that. I see
“Once the news emerged of a new virus in China, the CT Implementing social distancing in a small cabin was a crisis management, which is limited in time and scope. Now, the need to become even more agile in responding to crises
jumped into action. Initially we thought it was a local issue challenge. The simple act of handing out catering became because our work touched upon almost every aspect of and developing our IT and processes in order to respond
and we tried to move network capacity to other areas in the a complex puzzle. And in some countries, crew were not KLM and the crisis lasted so long, by taking crisis decisions dynamically.”
world. But then the virus spread, more parts of our network allowed to disembark, which made it hard to board new we were effectively creating policy. Once things began to
were impacted and the US suspended all travel from Europe. passengers.” calm down, we were glad to return some responsibilities back
Suddenly, we had to bring our network to a controlled to the standing organisation.”
shutdown and we realised we were going into a situation The CT also had to deal with people’s emotions.
that would last a long time.” “Understandably, crew were anxious. If you flew abroad and The CT is still frequently activated to find solutions for
tested positive, you could end up in quarantine in some several challenges in our operation. “The men and women
What followed were long days of work and the pressure to hospital for two weeks. Some people were concerned about of the CT are like firefighters, they act well and quickly under
make major decisions with little time and information. “In the their children and partners. Others, still, were desperate to pressure. We worked on a COVID-19 test facility for transfer
beginning, like the rest of the world, we were fighting an fly, having been locked up at home unable to do what they passengers from China in December and in February we
unknown enemy. We didn’t know how infectious COVID-19 loved. We had to factor this in as well.” worked on the implementation of the COVID-19 tests for KLM
was and how to protect against it. To find answers, we crews. Each day more than 800 colleagues had to be tested
prior and after their flight.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 Cargo capacity decreased by 30 to 35 per cent. The number Digitisation and innovation remained important to E&M
of full freighters remained at four, but as part of KLM’s fleet in spite of the crisis. Repair development within engine
renewal program, the Boeing 747 combi aircraft was phased services, for example, tips the equation of ecological
out in 2020. For the second consecutive year, Air France impact, cost reduction and logistic hassle to the right
KLM Martinair Cargo were named Cargo Airline of the Year by side. Repair management is the continuing process of
the readers of Air Cargo Week/World Air Cargo Awards. identifying, developing and industrialising new and smart
repairs on expensive engine parts. Instead of replacing
As for its recovery, Cargo aims to become more frugal, more these parts, technologically advanced repairs are being
agile, and more sustainable. It also aims to increase its developed. Repairs enable cost effective engine operation
market share in Short and Medium Enterprises and offer a and significantly reduce the need for raw materials and
new service model that uses data analytics and real-time transportation between suppliers worldwide. In turn, this
information to optimise customer satisfaction and value. improves sustainability.
Under the banner of the ‘From Good to Excellent’ program,
Cargo will safeguard operational continuity, minimise In addition, E&M continued several social innovation
complexity, improve quality and optimise the deployment initiatives. Engagement, employee ownership and its ongoing
of employees. The starting points for this process will be cultural leadership program to support ‘teaming’ will be
operational excellence, the philosophy that has guided the essential building blocks in the new E&M organisation.
improvement of KLM’s operations for several years now. Various employee councils were set up, empowering
employees to contribute to the implementation of the new
Engineering & maintenance (E&M) organisation.
E&M provides KLM and other airlines with competitive aircraft,
engine, and component maintenance and engineering Transavia
support. Crisis management at E&M in the early months of At the start of the year, Transavia was on its way to another
the pandemic focused on making quick but good decisions. record year. COVID-19, however, forced Transavia to shut
As a result, work in the hangars continued at a safe distance, down its entire operation for 11 weeks in April/May and
technical training was provided online, and only basic to cancel 17,000 flights. More than one million passengers
activities or legally required tasks were carried out. Demand demanded refunds and Transavia quickly ramped up
for third-party services plummeted, but KLM did acquire customer support and developed a chat bot to speed up
two new component customers on the Boeing 787, Air the process of customer care. Transavia focused on cash
Cargo carrying freight on passenger seats. Tens of millions of Premia (South Korea) and Bamboo Airways (Vietnam). KLM’s control and froze all spending and investments. Only asset-
The global air cargo industry faced a double challenge medical supplies have been transported this way. The internal demand for service was simultaneously reduced and light investments that directly added value to customers
in 2020: capacity fell by 30 to 35 per cent because of next unprecedented logistical challenge will be the global changed. With 166 aircraft temporarily parked at Schiphol, were permitted. This included the launch of Transavia
COVID-19 restrictions, but demand, especially for medical distribution of COVID-19 vaccines. In the years leading up E&M ran a fleet parking program to keep aircraft on the Holidays and Transavia Dichtbij, which supports Transavia’s
goods, increased. KLM Cargo met both challenges to the pandemic, Cargo had already begun to invest in its ground in good working condition. All aircraft were maintained sustainability ambitions by focusing on travel within a 750
head on and became a vital partner in the delivery of pharma business and in 2020 work started on a 1,118 m³ in accordance with manufacturer and regulatory demands. km radius. An ancillary product called Flex was introduced to
medicines, personal protective supplies and medical climate controlled storage facility and an additional 2,061 m³ offer certainty and flexibility, features that have become of
equipment. It tapped into its creativity and resilience cool room. As part of the restructuring plan, E&M focused its recovery increasing importance for passengers. Transavia partnered
to maintain the global airfreight network, substantially and restructuring on two goals. First, to renew the with Takeaway.com to offer “in-flight delivery”, which reduces
operating on a cargo-only basis. Passenger aircraft Late 2020 also saw the launch of the world’s first SAF balance between fleet availability, fleet health and fleet waste and weight on flights.
were deployed for cargo-only charter purposes and the program in the cargo industry, a considerable part of an (maintenance) cost. Second, related to its engines and
freighter fleet was fully utilised. More than 1,800 cargo- ambitious sustainability roadmap. This program enables components work, maximising the use of own resources, and During the restart in June, production was initially increased
only flights were carried out in 2020, serving more than shippers and freight forwarders to power a percentage of (re)-defining future investments. to 65 per cent of the normal schedule during the peak
100 long-haul destinations. This meant Cargo kept global their flights with SAF. This will not only make KLM’s cargo summer months. Spain and Greece, representing more than
supply chains functioning for the most time-sensitive flights more sustainable, but will also increase the market for In 2020, E&M together with Fleet Services developed a half of the production, introduced new travel restrictions
materials. SAF, contributing to a cleaner future for air transport. long-term fleet availability strategy and program. This will in August, resulting in another setback. Winter production
increase fleet health, which in turn improves fleet availability hovered around 20 to 30 per cent and the load factor was
Cargo was proud to become an integral part of the Cargo revenues were 35 per cent higher than in 2019 and lowers the integral costs for KLM. This is particularly 45 per cent on average. Countries where restrictions were
fight against the pandemic. Working with the Dutch and the contribution to KLM results almost doubled. KLM important now that KLM will be smaller and needs to be lifted showed an immediate uptick in bookings, indicating
Government and Philips, KLM set up an air bridge from Asia benefited from IT investments in previous years, seeing more agile. This requires more airline-driven maintenance as passengers are eager to fly.
to the Netherlands to supply health care organisations direct online bookings above 60 per cent for the first time well as integrated decision-making and optimisation. That
with important medical goods. Cargo also launched the and direct online revenue 35 per cent on average. Visits to is why the program is run by a multi-disciplinary team from
innovative Cargo in Cabin freight concept, which involves the myCargo portal were up 35 per cent in 2020. Total KLM Fleet Services, E&M, Network & Operations Control.

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Transavia’s restructuring plan is based on reshaping the
strategy, restructuring the organisation and cost reductions.
Transavia will remain the number one leisure carrier in
Restructuring to recovery will be long and full of uncertainties. Therefore,
it is important to become more agile and more flexible. As
public expectations on our societal role are increasing,
the Netherlands. The strategic focus will be on customer, KLM embraces this role and will continue to be a leader in
proposition and distribution, on integral airline planning and KLM has developed a restructuring plan that sustainability, including a supporting role in society.
on the purpose, people and organisation. Continued fleet
will make KLM smaller, cheaper, more frugal,
renewal will contribute to meeting passengers’ expectations, The basic premise of the restructuring plan is that our
cost reduction, future growth and Transavia’s sustainability more agile, and more sustainable. Called KLM business model is still valid and valuable, but that we
targets. “Van Meer naar Beter” (Building Back Better) explicitly need to take far-reaching and structural action
to ensure its future success. Ten initiatives have replaced
it will enable KLM to emerge stronger after
the KLM Flight Plan and Transformation Agenda as a way to
the pandemic. realise the restructuring. These initiatives affect the entire
“Working with the The pandemic offset KLM’s good performance of the 2014 to
company, including subsidiaries, and aim for objectives in
areas like revenues, customer proposition, portfolio choices,

Dutch Government 2019 period and net debt was set back to a high level. KLM’s
network business was impacted severely and revenues from
cost reduction, cash management, fleet adjustments and
renewal, innovation, data and technology. There is a detailed

and Philips, KLM set up cargo, while enjoying an uptick, were unable to compensate
for this. Demand for E&M will remain lower than pre-COVID-19
plan for each of these initiatives. The restructuring plan is
financially substantiated for the next five years but the set-

an airbridge from Asia

levels because KLM and third parties fly less and airlines up is flexible and can be aligned with future uncertainties,
have reduced their fleet. Nevertheless, KLM maintains its including uncertain future income level. Implementation of
purpose and ambition and believes that, while strategic the plan began in 2020.
to the Netherlands objectives have been sharpened, the strategy does not
require an overhaul. KLM has adjusted its financial targets so

to supply health care as to repay the debt to the Dutch government and banks by
2025.

organisations with In light of this and the enduring uncertainty about the
Moving Your World
important medical
pandemic, KLM has developed a restructuring plan that aims
By creating memorable experiences
to achieve four strategic objectives. First, to protect KLM’s
core business and strategic position, by re-assessing and
goods.” sharpening our strategic choices. Second, to protect liquidity,
by strictly managing cash levels and adjusting capex plans.
Ambition Customer Centric Sustainable

Third, to adjust KLM’s size to the recovery of demand, by Make KLM’s business model viable again
developing market scenarios specific to KLM and adjusting
In 2020, cooperation regarding sustainability increased the network, fleet plans and workforce accordingly. And
within the KLM group. Transavia is now part of the finally, to emerge stronger, by achieving a structurally better Customer Proposition & Cost reduction Demand &
portfolio choices Innovation
Sustainability Leads group and the Fuel Efficiency group. (lower cost, more flexible, more collaborative) organisation Capex & production scenarios
· Passenger network cash management
Transavia partnered with KLM on the CO2 compensation and achieving 15 per cent manageable cost reductions. By · Cargo (suppliers) Fleet adjustments &
· E&M Data & technology
renewal
program CO2ZERO. Participation is stable at around 5.4 per achieving this, KLM will be able to pay off its debt, meet the · Transavia
cent of passengers. Transavia worked on more waste and conditions set by the government and realise its ambition Societal role & Direct workforce, Management & Support, agility
weight reduction initiatives with external partners like the to become a leading European network carrier in customer sustainability
Amsterdam University of Applied Sciences and Product for centricity, efficiency and sustainability.
Revenue initiatives Group Transformation
Product. Another example is the circular approach for our
coffee cups introduced in December. All coffee cups on A slow recovery is expected, whereby the 2019 levels will Financial plan and targets
board and in the hangar will be recycled into toilet paper. not be reached before 2023 or 2024. KLM will operate fewer
Monitoring & implementation including government conditions
In future, cups from the Transavia offices will be included. flights and reduce capacity for an extended period of time.
Therefore the organisation will be resized and KLM will STAFF ENGAGEMENT
become smaller. Cost levels will need to be adjusted because
Desired Customer Optimal Working Optimal
it is expected that revenues will remain lower than 2019 Experience Behaviour Climate Leadership
levels for a number of years. KLM will have to be more frugal
because there will be less room for investment and focus will
We care about our customers, our people and our planet. We are KLM for you!
be set on repaying the debts as soon as possible. The road

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 Protecting
the world
When the world needed it the most,
KLM Cargo transported vital protective
equipment and medical ventilators
through its innovative Cargo in Cabin
initiative. Now KLM Cargo is working
on an ever more important challenge:
delivering COVID-19 vaccines.

But when global flights were halted in March, countries

Ton Veldman (L) were cut off from the things they needed the most.
Project Leads Cargo Not just day-to-day goods, but novel necessities like
face masks for medical professionals and ventilators for
Paul Crombach (R) COVID-19 patients.
Program Manager Cool Chain

KLM rose to the occasion to ensure hospital, shops prevented from damaging the seats. And then there was a Then, towards the end of 2020, the news came that right temperature. The BioNTech/Pfizer vaccine is the most
and factories received a constant supply of goods. whole range of regulations that had to be complied with. “On COVID-19 vaccines were on their way. While pharmaceutical challenging with a storage temperature of -70 celsius.
A challenge that was taken up by Ton Veldman and Bert our flights to Shanghai to pick up medical supplies, we had 10 companies were rushing to get their vaccines approved Our aircraft holds can only be maintained at temperatures
Jansen, both Project Leads Cargo. “Basically, we set up our extra crew members on board. Amongst these were specific and produced in large enough quantities for more than 7 between 2 and 8 degrees celsius at the lowest. To be able
own business within two months. A new Cargo in Cabin Cargo in Cabin Coordinators, who we trained ourselves. We billion people, a logistic challenge emerged: transporting the to maintain even lower temperatures special packaging
product was developed and organised. The project team taught them to handle the cargo properly and to tie down vaccines from a handful production facilities to all corners of and special containers can be used that are filled with
recruited volunteers from across KLM, trained them and boxes. It was tough and labour intensive work. the world. dry-ice.  KLM already used the right containers and we
organised the sales activities. More than 120 passionate have increased our dry-ice stock and our storage and
KLM colleagues were involved, working as volunteers, next Then, there was a lightbulb moment: develop a special cargo Paul Crombach, Program Manager Cool Chain, who leads handling capacity for the containers to facilitate the vaccine
to their regular work. They were happy to put in the extra bag that fits on a chair. “This would double our capacity, KLM’s COVID-19 operational vaccine taskforce, describes transport. Next to that KLM upgraded its security protocols
hours. protect the interior and make it easier to load and unload how temperature is one of the factors. “Pharmaceutical and warehouse security, because the vaccines are high-
supplies. Together with a supplier we made sketches and we companies are legally responsible for the quality of their value goods.
Before COVID-19, cargo was transported in a handful of put the product in production. product until it gets to the patient.
dedicated freighters or, usually, in the belly of regular We have already transported vaccines to various South
passenger aircraft. But the cabins were now empty while Then came the hard part: making sure everything complies Fluctuations and peaks in temperature can have a negative American and African destinations, being the first to deliver
the bellies were full because demand for medical equipment with regulations and getting permission from local authorities. effect on the quality of the medicine. Therefore, each vaccines to Ecuador, Colombia, Guatemala, Peru, the French
skyrocketed and cargo capacity went down. KLM brought We are working towards introduction early 2021,” Ton states. medicine has to be transported at just the right temperature overseas territories and the Dutch Antilles. As production
its three Boeing 747 combi aircraft back from retirement, as and temperature fluctuations need to be reduced to a of the various vaccines is ramping up and more and more
part of an air bridge with Philips to deliver medical quipment Throughout 2020, the Cargo in Cabin team conducted 153 minimum. vaccines are completing their clinical trials, we expect to play
from China to the Netherlands. flights, delivering a total of 125 million masks, 5 million gloves an increasingly large role in this important transport.
and 7.5 million other relief goods. With Philips, meanwhile, KLM worked flat out to prepare for the transport of the
Cargo in Cabin was easier to imagine than to realise. Flight KLM set up special flights for the transport of much-needed vaccines. For example, KLM upgraded its cooling capacity
safety has to be guaranteed at all times and cargo had to be ventilators, both to the Netherlands and North America. at Schiphol, which is needed to store the vaccines at the

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Report of the Board of Managing Directors Report of the Board of Managing Directors
Overview of significant
klm participating interests

As at December 31, 2020

Subsidiaries KLM interest in %

Transavia Airlines C.V. .......................................................................................... 100

Martinair Holland N.V. .......................................................................................... 100
KLM Cityhopper B.V. ............................................................................................. 100
KLM Cityhopper UK Ltd. .................................................................................... 100
KLM UK Engineering Ltd. .................................................................................. 100
European Pneumatic Component Overhaul & Repair B.V. ... 100
KLM Catering Services Schiphol B.V. ...................................................... 100
KLM Flight Academy B.V. ................................................................................... 100
KLM Health Services B.V. .................................................................................. 100
KLM Equipment Services B.V. ........................................................................ 100
Cygnific B.V. ................................................................................................................... 100

Jointly controlled entity

Schiphol Logistics Park C.V. ................................ 53 (45% voting right)

Financial asset
Kenya Airways Ltd. .......................................................................................................8

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 The KLM In Control Statement is the KLM and passenger rights. KLM is fully aware of this risk profile
and has a risk management process and internal control
approach to voluntarily apply to the Dutch
monitoring in place to manage this profile.
Corporate Governance Code 2016. The
purpose of the Code is to facilitate – with or Risk appetite
The risk appetite of KLM differs per type of risks:
in relation to other laws and regulations –
» Strategic risk: with an ambition to be a leading European
a sound and transparent system of checks network carrier in customer centricity, efficiency and
and balances and, to that end, to regulate sustainability taking and accepting strategic risks is
inevitable;
relations between the Board of Managing
» Operational risk: KLM operations are diverse. KLM accepts
Directors, the Supervisory Board and the zero risks in the field of flight safety and operational
Shareholders. Compliance with the Code safety, other operational risks are considered in view of
the (daily) business;
contributes to confidence in good and » Compliance risk: KLM is averse to risks that could
responsible management of companies and jeopardise compliance with applicable external laws, and
their contribution to society. Building blocks internal rules and regulations; and
» Financial risk: KLM is averse to risks that could endanger
of the In Control Statement are the next two the integrity of finance and reporting.
paragraphs on Risks and Risk Management
Risk management process
and Control and Monitoring. The In Control
KLM has implemented a system to identify, analyse,
Statement can be found in the Board and monitor, manage and control risks, which is in line with
Governance paragraph. international risk management standards (COSO Enterprise
Risk Management) and complies with the risk management
part of the 8th EU Company Law Directive. Strategic and
Risks and risk management operational risk mapping processes have been established
KLM is exposed to general risks associated with the by all the relevant entities, facilitated by Corporate
air transport industry and with airline operations, and Administrative Organisation / Internal Control (AO/IC) and
consequently has a system to identify, analyse, monitor, Internal Audit, where also consolidation of KLM-wide risks
manage and control risks. A distinction is made between takes place.
strategic, operational, compliance and financial risks.
Strategic risks are related to KLM’s strategic choices, Twice a year, KLM divisions, departments and Group entities
operational risks are related to operational activities update their decentralised operational risk report that
and compliance risks are related to applicable laws and contains an outline of risks, the probability these risks

Risk management
regulations. Financial risks are related to Financial Reporting will occur, the potential financial impact and mitigating
and to financial markets and market developments. The actions taken or proposed. Risks are discussed within
financial risks are also elaborated upon in the Financial the management teams owning the risks. Both specific
Risk Management section in the notes included in the decentralised risks to each entity and transversal risks
consolidated financial statements. Overall risks of AIR affecting the whole Group are the subject of reporting.

and control
FRANCE KLM are explained in the relevant parts of the AIR In 2020, special attention is on COVID-19 emerging risks and
FRANCE KLM financial disclosure reporting. These risks can the way we act upon them. The Fraud Risk management
also have an impact on KLM’s brand, reputation, profitability, process, initiated in 2019, evolved also in 2020 and is an
liquidity and access to capital markets. ongoing yearly assessment.

Risk profile For each reported risk, members of the Board of Managing
The airline industry is a cyclical, capital and labour-intensive Directors and the KLM Executive Team are responsible for
business with high levels of fixed cost and relatively small reviewing measures implemented to control and mitigate the
margins. In addition, the airline industry has to deal with risks. Twice a year, the most significant strategic, operational,
strongly fluctuating oil prices and currencies, as well as with compliance and financial risks are presented to the Board of
increasing numbers of laws and regulations, for instance in Managing Directors, the KLM Executive Team and the KLM
the areas of compliance, environment, flight safety, security Supervisory Board.

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Impact of COVID-19 Mitigating principles and actions
The COVID-19 crisis has had a significant adverse impact KLM is supported by a coordination structure responsible
on KLM’s activities, financial position and results during the for prevention, crisis management, the circulation of health
2020 financial year and is expected to continue to negatively advice and liaising with the national and international
impact the Company in the near future. authorities on outbreaks of epidemics or threats of
epidemics. Concerning the management of the public health
Since March 2020, KLM’s activities have been strongly crisis associated with the COVID-19 virus, KLM is supported
affected by the COVID-19 epidemic. Declared as a “pandemic” by a dedicated coordination structure.
by the WHO on March 11, 2020, the COVID-19 epidemic has The company has also implemented a Network Contingency
resulted in numerous restrictive measures to limit its spread. Planning, for capacity and schedule optimisation, in
The measures put in place by the public authorities in coordination with AIR FRANCE KLM and partner airlines and
numerous countries have led to the temporary suspension of is continuously monitoring restrictions of various countries,
airline operations and the reduction or suspension of travel, adapting schedules and route planning accordingly. To this
thereby having a material and negative impact on KLM’s end, the processes for building and adjusting flight programs
activity. had to be reinvented.

Intercontinental/business travel in particular has been To strengthen the cash and liquidity position, KLM has
impacted by these regulatory restrictions and cost-saving taken various measures, including a revolving credit line of
plans of corporate customers of KLM. EUR 2.4 billion supported by the Dutch Government and a
Given these travel restrictions and the collapse in passenger direct loan of EUR 1 billion. The Group also took financial
traffic and revenues, since March 2020, KLM was obliged to action in order to save cash by cut of operating costs and
significantly reduce its capacity and, notably, drastically curtail capex investment plan, labour cost reduction, halt of non-
its flight activity. critical projects and significant reduction of consultants and
external staff.
KLM has also implemented substantial cost-saving measures,
in terms of staff reductions and reductions in non-essential With the crisis continuing and the conditions for a recovery
investments and expenditure, the implementation of which remaining uncertain, KLM will continue to monitor the
could in particular damage KLM’s reputation due to negative
reactions from public authorities or unfavourable media
unfolding situation on a daily basis, to make adjustments as
necessary and define/deploy protection resources like the Strategic risks – On its long-haul flights KLM competes, within the boundaries
of governmental air transport agreements, with a multitude

risks relating to
coverage, or even lead to labour disputes, with a negative appropriate health measures. of airlines. Point-to-point operations of long-haul low-cost
impact on KLM’s activity. airlines are growing rapidly, especially between Europe and
In this context, KLM has also taken various measures to the USA. Furthermore, US carriers are bigger and stronger
strengthen its cash and liquidity position described in the
“mitigating principles and actions” paragraph below. the air transport and non-Western global carriers are rapidly expanding. Non-
EU airlines operate under very different regulatory and state
The current and forthcoming measures from the public
authorities in many countries could further disrupt, or even
prevent, any activity by KLM for an indefinite period. In this
activity aid regimes that allow them to compete successfully in the
global market and with lower cost bases. These carriers are
actively building positions in the European airline market,
context, several countries where KLM conducts its activities disturbing the ‘level playing field’.
have again taken lockdown measures at the year-end. In view Risks linked to competition from other air
of the uncertainties inherent in any health crisis, KLM cannot and rail transport operators The accelerating capacity growth of Middle Eastern and
guarantee that this situation will stabilise in the short-term; The air transport industry is extremely competitive with – as Turkish carriers in combination with the capacity growth of
KLM’s baseline scenario is a return to pre-crisis capacity in a general trend throughout the economic cycle – increasing Asian carriers will further increase the imbalance between
2024. These elements could, in the current state of visibility traffic volumes and reduced airfares. On its short and medium supply and demand to and from East Asia, resulting in the
and analysis and depending on their persistence, have a very haul flights to and from the Netherlands, KLM competes with expectation of lower airfares in general.
significant negative impact on KLM’s operating results, financial alternative means of transportation, such as the high-speed
performance and liquidity, despite the measures taken, and rail network in Europe. In addition, KLM faces competition Due to COVID-19, the outlook for 2021-2024 is not clear. It is
on those of some of its partners. from low-cost airlines for European point-to-point traffic. To unclear to what extent and with which pace demand returns,
increase revenues per seat, some of the low-cost airlines especially the corporate business class passenger. Much
Reference is made to the going concern paragraph in the adopt a more hybrid model by also focusing more on the depends on the development of the virus and development
Notes to the consolidated financial statements and the business travel market. KLM expects downward pressure on and distribution of vaccines. When demand returns, it is not
mitigating principles and actions described hereafter. airfares in Europe to continue. clear whether business and leisure-oriented demand return
in the same pace. In addition, it is not clear how competition

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Report of the Board of Managing Directors Report of the Board of Managing Directors
will position or regroup itself. This can vary per continent and Mitigating action(s): KLM has an Integrated Safety Risks linked to the passenger compensation Risks linked to competition from aircraft, engine
depends on the operational and financial capabilities of the Management System, contingency plans and procedures in regulations and component manufacturers in maintenance
carriers. place that enable the company to adapt quickly to changing Passenger rights in the European Union are defined by Aircraft, engine manufacturers and aircraft component
environments and to anticipate and respond effectively to European regulations. One of them (EU 261/2004) applies manufacturers are rapidly expanding their after-sales
Mitigating action(s): Reference is made to section 4 the above-mentioned events. The aim of these measures is to all flights, departing from an airport located in a Member departments to offer customers increasingly integrated
Restructuring - "Van meer, naar Beter" (Building Back Better) the effective protection of passengers and staff, operational State of the European Union or flying to the EU if it concerns aircraft maintenance solutions. This positioning corresponds
section in the Letter from the President in the Report of the and service continuity and the preservation of the long-term an EU carrier. More recent judgements of the European to a long-term strategy based on leveraging intellectual
Board of Managing Directors. viability of KLM’s businesses. These measures are regularly Court of Justice, however, have extended the applicability to property by selling licenses to maintenance providers
evaluated and adapted to reflect changes in the threat marketing carriers of flights departing from the EU even if not seeking to exercise its business activity on certain products.
Risks linked to the air cargo market environment. KLM complies with national, European and the marketing carrier, but its codeshare partner experienced Ultimately, if it were to result in reduced competition in the
2020 was a very good year for the air cargo market with international safety and security regulations and submits a delay. aviation maintenance market, this trend could have a material
high yields and high load factors, driven by the sharp decline regular reports to the national authorities of the measures Regulation EU 261/2004 establishes common rules for adverse impact on airline maintenance costs.
in capacity in wide body belly passenger flights due to and procedures deployed. compensation, uniform enforcement and assistance on The COVID-19 pandemic and its impact on the MRO market
COVID-19. Although international production and trade show denied boarding or substantial delay in embarkation, flight may lead to additional pressure on competitiveness and
signs of recovery and are expected to bolster air cargo Especially when COVID-19 evolved, KLM has responded cancellation or seat class downgrading. However, the therefore a drop in sales prices and overcapacity, leading to
volumes, economic outlook for 2021 looks promising, but flexibly. KLM reduced its flight schedule as destinations interpretation of this regulation differs per jurisdiction. The a loss of profitability. In addition, several airlines which are
remains uncertain. The air cargo capacity evolution depends were closed for incoming flights and engaged in crisis European Commission therefore published a proposal to also customers of the Group for E&M services have incurred
on air travel recovery and the availability of COVID-19 management under fast changing circumstances. KLM aims amend the regulation issued in March 2013. The proposal is losses due to the crisis, which exposes the Group to a risk
vaccines. to meet its ongoing commitments in order to overcome still under review by the Council of the European Union. The of delayed payment of its receivables or even bankruptcy of
the crisis and restore business activity as and when the timetable for this regulation to become effective is unclear as such companies.
Mitigating action(s): KLM addresses the Cargo risks by opportunity arises. no presidency of the European Council intends to place this
enhancing the connection to the customer and adding value item on their agenda in the near future, blocking any review Mitigating action(s): KLM discusses the Original Equipment
by digital developments and digitalisation initiatives and by Risks of loss of airport slots or lack of access to of this proposal. After this issue has been solved, agreement Manufacturer (OEM) license agreements and is actively
structurally lowering unit cost. airport slots must be reached at European Parliament, Commission and developing scenarios for further discussions with
Due to congestion at major European airports including Council level, which will take time. Another issue is the manufacturers. Regarding the impact of COVID-19 on the
Risks linked to the oil price Schiphol, all air carriers must obtain airport slots, which are emergence of claim agents who assist passengers in claiming MRO market, the Group is continuously monitoring the
Jet fuel is one of the largest cost items for an airline. The allocated in accordance with the terms and conditions compensation from airlines. Due to the spectacular growth customer and competitive landscape and adapts where
volatility of oil prices therefore represents a material risk for defined in EU Council of Ministers Regulation 95/93. Pursuant of the number of claim agencies, the number of claims for possible.
KLM. Both an increase and decrease of the oil price may to this regulation, at least 80 per cent of airport slots held compensation ending up in court has grown substantially.
have a material impact on the profitability. Furthermore, any by an air carrier must be used during the period for which Risks linked to the environment
change in the US dollar relative to the euro also results in they have been allocated. Unused slots will be lost by the Outside the European Union, air passenger rights apply, but There is increasing public pressure on global and local flight
volatility in the fuel bill. relevant carrier and transferred into a slot pool. Any loss of sometimes conflict with other passenger rights. This may lead pollution generated by the airline industry. KLM has a deep-
airport slots or lack of access to airport slots due to airport to regulatory conflicts. rooted belief it has a responsibility towards its customers,
Mitigating action(s): KLM has a policy in place to manage saturation could have negative impact in terms of market Though - due to the COVID-19 crisis – the amount of EU 261 employees, and our home base in the Netherlands and the
these price risks, which are set out in the section “Financial share, results or even future development. claims has decreased extremely, we are now confronted with world beyond. The air transport industry has to manage
risk management” in the notes attached to the consolidated a new risk posed by EU 261 in light of the crisis. Namely the its impact on the environment and is subject to numerous
financial statements. Mitigating action(s): Given the 80/20 utilisation rule applying right of passengers to receive a refund of their ticket (after environmental laws, regulations and financial measures
to each pair of airport slots for the duration of the season cancellation by the airline) within 7 days. Almost all National covering carbon emissions, such as the Dutch Aviation Act
Risks linked to terrorist attacks, the threat of concerned, KLM manages this risk at a preventive and Enforcement Bodies (NEB’s) within Europe (and many others (Luchtvaartnota), the EU Emission Trading Scheme and the
attacks, geopolitical instability and (threats of) operational level. Schiphol has reached the maximum within other jurisdictions based on their regulations) will Carbon Offsetting and Reduction for International Aviation
epidemics capacity, agreed in the 2008 Alders Agreement, therefore penalise KLM if it doesn’t abide by this. (CORSIA).
Any terrorist attack or threat, geopolitical instability and access to new airport slots will be limited. Given the Alongside KLM’s sustainability ambition, state loans
armed conflict may have a negative effect on KLM’s business. COVID-19 crisis, the EU Council of Ministers decided on Mitigating action(s): KLM actively supports a global come with conditions including environmental footprint
It could lead to a decrease in demand and an increase of March 26, 2020 on an exemption of the 80/20 utilisation standardisation of passenger rights, also in light of a level requirements (50% lower CO2 emission per Available Seat
operational, insurance and security cost. rule between March 1 and October 24, 2020. On October 14, playing field and the competitive position of EU carriers. For Kilometer (ASK) by 2030, restriction on night flights and the
During the first months of 2020, the COVID-19 outbreak has 2020, the EU Council extended the exemption until March refunds a strong recovery and action program has been use of 14% SAF in 2030.
evolved into a pandemic of unprecedented magnitude, with 27, 2021. For IATA summer 2021 period 50 per cent of the implemented to fulfil all requirements. Progress is monitored
a severely negative impact on all air traffic around the world. slots could be returned before February 26, 2021 to retain on a frequent basis.
historical precedence. Slots which are not returned require
a minimum operation rate of 50 per cent to retain historical
precedence.

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 carbon emission, local emissions and noise. In addition,
aviation is subject to laws on aircraft noise and engine Operational risks environmental safety and operational security.
The effects of the COVID-19 pandemic have prompted KLM

– risks related to
emissions, the use of dangerous substances and the to re-engineer its procedures in order to operate in a safe
treatment of waste and contaminated sites. Over the last few way for their customers, employees and the environment.
years, the Dutch and European authorities have adopted This includes continuous adaption to all restrictions imposed
various measures, regarding noise pollution.
the operations by local governments and agencies within the operation
based on the result of safety studies and risk analysis.
Mitigating action(s): For KLM flight operations and all
relevant ground activities in the Netherlands, compliance
with environmental rules and regulations and improving
of KLM Mitigating action(s): KLM continuously aims to improve
its industry-leading, risk and performance-based safety
environmental performance is ensured by the externally management system in which risk-based decisions can be
verified environmental management system according to Operational integrity taken at all levels within KLM. Its Safety Culture program,
ISO 14001. In addition, KLM actively engages with the local Operational integrity is one of the essential conditions which includes promotion, communication, training and
community and sector parties to reduce noise disturbance for success in the airline industry. Airline operations are learning interventions, is embedded throughout the
through the Minder Hinder (Less Disturbance) program. KLM sensitive to disruptions. Delays reduce the quality of the company in order to enhance safety awareness and relevant
is also committed to local emission reduction plans of the network and are costly. safe attitudes and behaviours on all levels.
government and Schiphol covering ultrafine particles and Air transport depends, amongst others, on meteorological
nitrogen, and takes part in the Air Rail program with mobility conditions, which can lead to flight cancellations, delays Air transport is also heavily structured by a range of
partners and the government. and diversions. Adverse weather conditions such as heavy regulatory procedures issued by both national and
fog and heavy storms may require the temporary closure international civil aviation authorities. The required
KLM is subject to the Emission Trading Scheme (EU ETS)¹ of an airport or airspace and thus lead to significant costs compliance with these regulations is governed through
implemented by the European Commission, covering (repatriation and passenger accommodation, schedule an Air Operator Certificate (AOC), awarded to KLM for an
emissions from flights within Europe. In November 2017, the modifications, diversions, etc.). unlimited period. The civil aviation authority carries out a
EU decided to extend the current intra-EU scope of EU ETS series of checks and audits on a continuous basis covering
until 2023 and in 2021 a decision will be made on the period Due to COVID-19, there is a risk of further shrinkage of the these requirements and associated quality system.
2024-2030. In 2010, the global airline industry agreed to network due to the closure of destinations and/or airports
stabilise emissions from 2020. In 2016, ICAO concluded the or due to further decreasing passengers trust in a safe flight. In addition to this regulatory framework IATA, member airlines
Mitigating action(s): KLM has formulated an ambitious and global climate agreement CORSIA for international aviation, in In addition, as a result of the COVID-19 outbreak a large need to meet the requirements for IATA Operational Safety
comprehensive sustainability strategy with clear targets which 88 countries will voluntary participate in the first stage, number of countries continue to enforce various health Audit certification (IOSA). The IOSA audits for the renewal
and timelines. One of our chief goals is to reduce our 2030 covering more than 77 per cent of the global routes from measures and travel restrictions for both passengers and of KLM's and KLM Cityhopper's certification were carried
carbon footprint in absolute terms by 15 per cent compared international aviation. It is still uncertain how EU ETS will be crew. This impacts the entire operation. This includes items out at the end of 2020 and resulted in the renewal of the
to 2005 and to achieve a 50 per cent per passenger aligned with the proposed global ICAO measure. such as health forms, crew temperature checks, aircraft certificates in March 2021.
reduction in CO2 emissions. KLM is best in class in fuel cleaning/ disinfection, and various EASA directives.
efficiency and reducing CO2 emissions and has the ambition Mitigating action(s): It risks and cybercrime
to go beyond the target, set by the ICAO. In order to realise KLM has set a strategy to reduce its fuel consumption and Mitigating action(s): KLM has taken a number of operational the IT and telecommunications systems are of vital
these ambitions, KLM is acting to reduce its fuel consumption defined targets towards 2030 to reduce the carbon footprint initiatives to safeguard its operational integrity, in order importance to day-to-day operations. They comprise the IT
and carbon emissions by: from its operations. This will reduce exposure to both ETS to deliver a high-quality service to its customers. The applications in the operating centers that are used through
» Fleet renewal, improved fuel management, continuous and CORSIA. In addition, KLM hedges the EU ETS price two Operations Control Center, where all network-related the networking of tens of thousands of different devices.
reductions in weight and improved operating procedures; years in advance to limit price volatility. decisions on the day of operations are taken, is central to The number of cloud providers, and thus dependency, is
» Active engagements in scaling up the use of SAF for ensuring operational integrity. increasing, as well as virtualisation of external data centers.
international aviation. KLM invested in the development 1
The principle of the European Emissions Trading Scheme is that each This requires more focus on protecting data outside our
of a SAF plant in the Netherlands and supports research, Member State is allocated an annual allotment of CO2 emission allowances. Airline accident risk, safety and security internal environment.
development and creation of a market for SAF together Each Member State then, in turn, allocates a specific quantity of emission Safety and security are fundamental elements of KLM IT systems and the information they contain may be
with SkyNRG, corporate customers and several coalitions; allowances to each relevant company. At the end of each year, companies operations and essential to our customers, our employees, exposed to risks concerning continuity of functioning, data
» Support of research on alternative transport modes and must return an amount of emission allowance that is equivalent to the tons of our environment and therefore KLM’s future. KLM is security and regulatory compliance. These risks arise from
aircraft design with TU Delft, and developing low carbon CO2 they have emitted in that year. Depending on their emissions, they can committed to, maintaining the highest level of safety and both inside and outside of the company. The materialisation
alternatives for the KLM network; and also purchase or sell allowances to certain markets in the EU. Furthermore, security. of one of these risks could have an impact on KLM’s activity,
» Cooperation with national, European and international they can earn a limited amount of credits for their greenhouse gas reduction KLM builds upon the best safety and security practices reputation, revenues and costs, and thus its results.
authorities, e.g. on optimisation of traffic control, scaling efforts in developing countries through Clean Development Mechanisms through an Integrated Safety Management System, The Cybercrime program, approved by the AIR FRANCE KLM
up SAF and by creating effective market-based solutions (CDMs). a working environment of continuous learning and Group Executive Committee, covers the prevention and
to manage the climate impact of the airline industry. improvement and independently positioned oversight of detection procedures such as cyberthreat surveillance,
The Dutch Aviation Act sets out a vision and policies for the four safety domains: operational, occupational and evaluations of information system security and tests to

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pinpoint any information system incursions via the internet. Mitigating action(s): As per 2019, when a governance
Threats and number of attacks are increasing. The fast- structure was implemented, privacy is the responsibility Mitigating action(s): KLM fosters social dialogue and
moving technologies of this risk means that the AIR FRANCE of the business, with support from the Corporate Privacy employee agreements among other things in order to
KLM Group will always retain a certain level of vulnerability. Office. Awareness campaigns were launched and training prevent the emergence of a conflict.
was provided. Privacy Impact Assessments (PIA) have been
A cyber-incident occurred at KLM IT infrastructure in performed in order to get a clear understanding of the Risks linked to the use of third-party services
December 2020. It was detected by KLM’s Endpoint lawfulness of personal data processing, the risks involved KLM’s activities depend in part on services provided by third
detection and response tooling and blocked by the security and the security measures taken. The Information Security parties, such as air traffic controllers, airport authorities and
specialists. Cyber investigations started immediately in Report (ISR) is also used to define risks and necessary public security officers. KLM also uses suppliers, which it does
the Netherlands and France with support of external security measures. To improve the acceptance of both not directly control, like aircraft handling companies, catering
investigators. Executive Management as well as the documents by the business, focus must be on alignment companies, aircraft maintenance companies and fuel supply
Dutch authorities National Cyber Security Center and the of these documents. Additionally, the measures of “Privacy companies. The poor financial situation of suppliers due to
Authority AP have been informed. Whilst blocking the by design” and “Privacy by default” which are prescribed COVID-19, may result in cost increases that are necessary for
attack, immediate precautionary measures were applied. IT by GDPR must be implemented in formal procedures for their survival.
Management has per end March 2021 no indications that developing IT solutions. This will reduce the risk of privacy
applications and/or customer data are impacted. Based on non-compliance from the start and will prevent costly IT Any interruption in the activities of these third parties or any
the (expected) investigation reports by specialized external changes later in the process. increase in taxes or prices of the services concerned could
parties an action plan will be executed to further strengthen have a negative impact on the Group’s activity and financial
IT security measures in 2021. As with any business making extensive use of modern results. This is especially the case in the current crisis where
communication and IT data processing technologies KLM is most suppliers are heavily impacted by the decrease in
Mitigating action(s): exposed to threats of cybercriminality. The risk of damage to economic activity.
Tools and services have been introduced to prevent from IT facilities is covered by an insurance policy, but the risk of
and respond to cyberattacks. The secure functioning of the the operating losses that such damage might cause is not. In addition, KLM could suffer reputational damage in case a
IT systems is monitored on a permanent basis. Identified supplier violates a sustainability principle, e.g. by using child
vulnerabilities are addressed. The related processes are Mitigating action(s): To protect itself against this risk, AIR labour.
regularly evaluated and adapted to the changing risk FRANCE KLM deploys substantial resources aimed at ensuring
scenario. business continuity, data protection, the security of personal KLM uses sales representatives in certain countries to help KLM has implemented specific policies to ensure compliance
Dedicated help centers and redundant networks guarantee information pursuant to the law, and the safeguarding of generate maintenance business with third party customers. with anti-bribery and corruption laws and regulations for
the availability and accessibility of data IT systems stay at-risk tangible and intangible assets. During the COVID-19 Non-compliance with rules and regulations by a sales sales representatives that are used by KLM in certain
reasonably safe by¬ integrating cybersecurity into business crisis, the budget and efforts are safeguarded to further representative could have a negative impact on the Group’s countries to help generate maintenance business with
contingency,¬ investing in qualified staff and in the AIR strengthen, where appropriate, activities such as patch activity and financial results. third party customers. KLM monitors compliance with such
FRANCE KLM Cybercrime program. management, monitoring of cloud usage, and end-point policies and executes background checks and implemented
detection & response tooling for devices like workstations, Mitigating action(s): In order to secure supplies of goods specific information protocols to ensure compliance with
The AIR FRANCE KLM IT division implemented security rules laptops and iPads. and services, the contracts signed with third parties include, laws and regulations including periodic reporting to the
aimed at reducing the risks linked to new technologies, whenever applicable, clauses for services, continuity and Board of Managing Directors and the Supervisory Board. In
(mobile) devices and data. The access controls to IT Risks linked to labour disruptions responsibility. 2020, KLM paid EUR 6.4 million (2019: EUR 9.6 million) to sales
applications and to the computer files at each workstation Labour costs account for around a quarter of the operating representatives. New contracts will comply with the updated
together with the control over the data exchanged outside expenses of KLM. As such, the level of salaries has an impact The financial health of key suppliers in core operational policies. During a transition period the current contracts will
the company are in line with international standards. on operating results. Any strike or cause for work to be categories, such as airport and inflight services is being be renewed in accordance with the new policies unless they
stopped could have a negative impact on KLM’s activity and reported and followed on on-going basis. In addition, are terminated.
Mitigating action(s): Campaigns to raise the awareness of all financial results. business continuity plans are developed by the Group’s
staff to the potential threats to encourage best practices different operating entities to ensure the long-term viability
are regularly carried out. Specialised companies and Internal Risks linked to labour cost of all commercial and operational activities.
Audit, comprising of IT experts, regularly evaluate the In 2020, as a consequence of the COVID-19 pandemic, KLM
effectiveness of the solutions in place. and all unions had to re-negotiate the Collective Labour Also, to mitigate sustainability risks suppliers in categories
Agreements (CLAs) for ground staff, cockpit crew and cabin with a higher sustainability risk, such as the production of
Data security is a priority, especially the protection of crew in line with government conditions. The duration of inflight hardware, are being assessed by a specialist rating
personal data pursuant to the General Data Protection these CLAs is 17 months (until March 1, 2022) for cockpit agency.
Regulation (GDPR). Non-compliance may lead to penalties as and 27 months (until January 1, 2023) for cabin and ground.
high as four per cent of the annual turn-over. The relations with (specific) unions are tense. No immediate
labour disruptions/ industrial actions are to be expected, but
developments are closely monitored.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
Compliance risks such as IATA, the trade body Airlines for Europe (A4E),
BusinessEurope and the Board of Airline Representatives In
regulations. The loans involve various financial covenants. A
significant decrease in revenues compared to budget could
The State financial support package with banks and Dutch
Government include various financial covenants. A significant

– risks related to
the Netherlands (BARIN), regarding changes in European and result in not meeting the covenants, which could lead to a shortfall of EBITDA could lead to a covenant breach. In that
national regulations. default situation vis-à-vis the government. case KLM needs to request for a waiver from a majority of
the revolving credit facility banks and from the Dutch State.

non-compliance Risks linked to non-compliance with antitrust

legislation and compliance in general
Mitigating action(s): The honouring of the commitments is
closely monitored and the related (information) dialogue with Mitigating action(s): AIR FRANCE KLM and KLM have set up

to applicable laws KLM and its subsidiaries have been exposed to

investigations by authorities alleging breaches of antitrust
the European Commission is ongoing. The covenants are
continuously monitored, in coordination with the government.
a Risk Management Committee to manage the financial risks
and keep those risks within predetermined boundaries, as

and regulation
legislation and subsequent civil claims. described in the part Financial Risk Management.
On March 17, 2017, the European Commission announced Legal risks and arbitration proceedings In addition to financing risks, AIR FRANCE KLM and KLM are
that it would fine eleven airlines, including KLM, Martinair In relation to the normal exercise of activities, KLM and its exposed to market risks and credit risks. These risks and
and Air France, for practices in the Air Cargo sector that subsidiaries are involved in disputes or subject to monitoring mitigating actions are set out in the section “Financial risk
Risks linked to changes in international, are considered anti-competitive and relate mainly to the actions or investigations by authorities. management” in the notes attached to the consolidated
European, national or regional laws and period between December 1999 and February 2006. This financial statements.
regulations new decision follows the initial decision of the Commission Mitigating action(s): Any and all proceedings and
Air transport activities are highly regulated, particularly of November 9, 2010. This decision, issued to the same investigations are duly addressed and claims are defended. The covenants, related to the State financial support
with regard to the allocation of traffic rights, time slots and airlines for the same alleged practices, was annulled on External counsel is appointed. Where applicable, provisions package, are constantly monitored, actual covenants are
conditions relating to operations like safety standards and formal grounds by the General Court of the European Union are included in the consolidated financial statements and/or quarterly reported to the revolving credit facility banks and/
security, aircraft noise, CO2 and NOx emissions and airport in December 2015. The new fine for KLM and Martinair, information is being included in the notes to the consolidated or the Dutch State.
access. Institutions such as the European Commission or the as announced on March 17, 2017, amounts to EUR 142.6 financial statements as to the possible liabilities. Please
national authorities decide on regulations that may restrict million. On May 29, 2017, KLM submitted its appeal to the refer to note 23 “Contingent assets and liabilities” of the Transfer pricing
airlines or have a significant organisational and/or financial General Court of the EU and oral hearings have been consolidated financial statements for more information. The combination of KLM and Air France requires measures
impact. held in July 2019. While the decision is under appeal, there to ensure compliance with tax legislation including well

Financial risks
The new European Commission that came into office at the is no obligation to pay the imposed fines. Reference is documented cross-border intercompany transactions.
end of 2019 has a strong focus on sustainability and many made to note 22 “Contingent assets and liabilities” of the
of the issues outlined in the European Green Deal will affect consolidated financial statements. Mitigating action(s): Strong monitoring and mitigating controls
KLM. Implementation of a Single European Sky is rightly one
of the European Commission’s priorities. Furthermore, we Mitigating action(s): Compliance is a priority for KLM. Various – risks related have been introduced, such as an AIR FRANCE KLM guideline
and an active monitoring of the arms-length character of the
can expect a revision of the EU Emission Trading System
and a proposal on ReFuelEU to ramp up the production and
programs and procedures aimed at preventing breaches
of legislation, such as codes and manuals, online training to integrity of transactions.

Risks linked to pension plans

finance and
deployment of SAF in Europe. The airline industry also closely modules and on-site and tailor-made training sessions, have
follows the implementation of the European Aviation Safety been implemented and staff has been appointed. Continued kLM’s main commitments in terms of defined benefit schemes
Agency (EASA) basic regulation and a possible revision of the business management attention is needed for compliance. as per December 31, 2020 is the KLM ground staff pension
passenger rights regulation.
The Dutch Government presented a new Dutch Aviation Act
for the period 2020-2050, which aims at the development
KLM will further expand its procedures to secure and monitor
compliance. reporting plan based in the Netherlands.
Both the fiscal rules for accruing pensions and the financial
assessment framework (part of the Pension Act) in the
of aviation in the Netherlands, and a strengthening of the Risks linked to commitments made by KLM and Financing risks Netherlands changed as per January 2015. On the one
mainport function of Schiphol. This aviation policy document AIR FRANCE KLM to the European commission or KLM finances amongst other things its capital requirements hand this has resulted in higher minimum required solvency
recognises the essential role of the network of KLM and governments via secured financing - using mainly aircraft as collateral, levels. On the other hand pension funds have more time
partners. The government asserted that Schiphol is of major For the European Commission to clear the merger between via bilateral unsecured loans with banks and through the to recover from immediate and material shortages through
importance to the Dutch economy, and therefore it will be KLM and Air France, a certain number of commitments COVID-19 related, State financial support package with banks a rolling ten year restructuring plan. This also mitigates the
allowed to continue to grow provided its reduces hindrance. had to be made, notably with regard to the possibility of and the Dutch Government. A portion of KLM’s financing short-term risk that in case of shortages, based on existing or
making landing and take-off slots available to competitors consists of perpetual debt that does not have a repayment future financing agreements, KLM could be required to make
Mitigating action(s): For KLM it is important to monitor that at certain airports. The fulfilment of the commitments obligation. additional cash payments.
the implementation of laws and regulations does not lead to should not have a material impact on the activities of Under IAS 19 the KLM Group is exposed to changes in
a distortion of the level playing field in the airline industry, KLM and Air France. In addition, the implementation of the Any long-term obstacle to KLM’s ability to raise capital could external financial parameters (e.g. discount rate, future inflation
and does not disproportionately burden our industry, e.g. aforementioned measures to strengthen the Group’s liquidity reduce the borrowing capability and any difficulty in securing rate), which could lead to annual fluctuations in the statement
through excessive taxation. (revolving credit facility of EUR 2.4 billion guaranteed by financing under acceptable conditions could have a negative of profit or loss and KLM’s equity with no impact on cash.
KLM, in close coordination with Air France, actively clarifies the Dutch Government and an EUR 1 billion loan from the impact on the AIR FRANCE KLM and KLM’s activities and The changes in pension obligations together with the level
its position towards the European institutions and the Dutch Dutch Government) has been submitted for prior approval financial results. of plan assets linked to changes in actuarial assumptions
Government, both directly and through industry bodies of the European Commission in accordance with state aid will be recognised in KLM’s equity and will never be taken

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 In Control Statement

In Control Statement
against profit and loss. The current calculations lead to the (reference is made to note 14 Other financial liabilities). KLM Control Governance Structure
KLM ground staff pension plan figuring as an asset in the Reference is made to the going concern paragraph in the
balance sheet, the assets in the funds being higher than the Notes to the consolidated financial statements, note 10
Control
value of the defined benefit obligations. In the consolidated Share Capital and note 11 Other reserves in the consolidated Environment

financial statements, the potential volatility is explained in the financial statements.

“Accounting policies for the balance sheet - Provisions for

COSO Framework
employee benefits” and in note 18 Provisions for employee Mitigating action(s): KLM needs to strengthen its balance Risk
Assessment
benefits of the consolidated financial statements. sheet and equity, certainly given the negative equity
The sensitivity of the defined benefit cost recognised in profit position at December 31, 2020.
and loss and the defined benefit obligation to variation to the The non-cash changes in remeasurements of defined
Control
change in discount rate, salary increase and pension rate are benefit plans (reference is made to the risks linked to Activities
presented in note 18 of the consolidated financial statements. pensions plan and related mitigating action(s) in this Risk
and Risk management section) and changes in fair value of
Mitigating action(s): The KLM ground staff pension plan cash flow hedges will, however, remain volatile. In addition Info &
Communication
does create an accounting volatility in KLM’s equity. The reference is made to the assessment of ‘going concern’ in
cash risk on recovery premiums for the ground staff pension this Risks and risk management section.
plan is limited based on the funding agreement between
the pension fund and KLM. The regular premium level is Insurance Monitoring
Activities
fixed. Given the longer allowed recovery time and recovery KLM and Air France have pooled their airline risks in the
strength of the fund itself, this clearly also limits cash risks. insurance market in order to capitalise on their combined
scale. Internal Control Over Compliance Management
Risk Management Safety management
In December 2020, KLM and the unions for ground staff Financial Reporting and fraud control cycle

agreed to a defined contribution scheme from 2021 onwards. Insurance coverage

It will require before implementation, amongst others, the KLM has purchased and maintains an airline insurance policy
approval of the Board of the pension fund and should for its operational risks on behalf of itself and its subsidiaries, Domains
qualify as a defined contribution scheme under IFRS. It is which provides cover for aircraft loss or damage, liability
expected that in the course of 2021 these conditions will be with regard to passengers and general aviation third-party KLM applies the COSO (Committee of Sponsoring Safety management
met and subsequent derecognition of the related pension liability in connection with its activities. It covers KLM’s Organisation of the Treadway Commission) 2013 standards The Safety and Security Organisation assures compliance
asset. This would further reduce the risks linked to pension legal liability to insured amounts that are consistent with for internal control. According to these standards, internal with the rules, regulations and principle of secure, safe and
plans significantly. industry standards, and also includes liability for damage to control is a process, defined and implemented by the effective operations.
third parties caused by terrorism or acts of war. In addition, executives, businesses and employees to provide a
Risks linked to the impact of external economic KLM participates in the payment of claims for damage to its reasonable level of comfort regarding: Safety governance is accomplished by the Safety Review
factors on equity aircraft through a Protected Cell Company (PCC) that enables » Reliability of accounting and financial information; Board (SRB), the ISMS Board and the Safety Action Groups.
KLM’s equity has become volatile, following the improved risk management, control and premium settings. In » Compliance with the applicable laws and regulations; and
implementation of the revised IAS 19 for pensions, as addition to aircrafts, other business risks are also controlled » Performance and optimisation of operations. Safety review board
of January 1, 2013. Besides the results for the year and in the PCC. KLM has organised its operations in such a manner to The SRB is a strategic meeting chaired by the Accountable
potential dividend distributions, which can have an impact Lastly, within the framework of its risk management and anticipate on these aforementioned risks and minimise Manager (Chief Operating Officer) that deals with high-level
on equity, the non-cash impact of “Other Comprehensive financing policy, KLM maintains a number of policies to exposure. To that end KLM has dedicated departments or issues. Its objective is continuous improvement of KLM’s
Income” coming from the defined pension plans or the protect its industrial sites and activities ancillary to air functions to help the operation to manage and control the safety and compliance.
changes in the fair value of cash flow hedges (predominantly transportation. risks in daily activities, in line with the risk groups, as defined
related to fuel hedges) can have a significant impact on in the chapter on Risks and Risk Management. The SRB sets strategic safety objectives, establishes the
equity. Assessment of going concern In addition, to the control organisation, additional comfort safety policies, decides on KLM wide safety improving
Following the unprecedented impact of COVID-19 in 2020, Reference is made to the going concern paragraph in the and/or assurance is given by the department of Internal initiatives and provides the platform to:
KLM’s equity has become negative at December 31, 2020. Notes to the consolidated statements. Audit. As with any control system, it is not possible to provide » Monitors the integrated safety and compliance
The Company foresees no immediate issues given that an absolute guarantee that risks will be eliminated. performance against safety policies and objectives; and
this negative equity position has no consequences on the Control and monitoring » Ensure appropriate resources are allocated to achieve the
Company’s currently lower level of operations (as a result of The foundations of KLM’s Internal Control System are the Risk management desired safety and compliance performance.
COVID-19), its operational cash flow is expected to improve ongoing performed processes throughout the year in the The Risk Management process is described in the chapter
again when operations can be increased again and the areas of Risk Management, Safety Management, Internal Risks and Risk Management.
obtained EUR 3.4 billion financing package consisting of a Control Over Financial Reporting, Compliance and Fraud and
90% State guaranteed revolving credit facility of EUR 2.4 the Management Control cycle.
billion and a direct Dutch Government loan of EUR 1 billion

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 Legal & business ethics compliance Internal control over financial reporting
organisation kLM has a system of internal control in order to provide
Legal & Business Ethics Compliance Framework, which reasonable comfort regarding reliability of accounting and
is adopted by the Board of Managing Directors and the financial information and to comply with the applicable laws
Supervisory Board, ensures staff are capable of adhering and regulations.
rules of conduct, internal procedures and relevant laws and The Corporate Control AO/IC Team supports and guides all
regulations. Several expert functions, including the Legal & activities in relation to the annual assessment of control
Business Ethics Compliance Director, the Corporate Privacy activities. Principles are laid down in the Internal Control
Officer, the Corporate Legal Counsels and the Customs & Charter.
Export controls Compliance Manager, manage (parts of) the Within the businesses and at corporate level Internal
Legal & Business Ethics Compliance Framework. This is done Control Coordinators monitor the internal control activities.
under the supervision of the Board of Managing Directors, An important part of the Internal Control Coordinator’s
who delegated the day-to-day monitoring to the Compliance activities is to oversee the annual testing of the entity
Committee. level controls, testing of the operational effectiveness of
The Compliance Committee’s primary role is to support KLM’s the transaction level controls in the financial disclosure
Board of Managing Directors and the Executive Team on processes and testing of the IT general controls that are
compliance matters under the scope of the Legal & Business relevant for the financial disclosure processes. The results of
Ethics Compliance Framework, excluding all operational the testing are the cornerstones for signing the Document
safety, occupational safety, environmental safety and of Representation (DoR) by the business executives and
operational security compliance matters. The Compliance business controllers.
Committee will (i) specifically monitor the adherence to the The Corporate Control AO/IC Team has the oversight role for
KLM Code of Conduct and related codes and regulations the governance and principles of internal control, support
and (ii) assist the KLM Board of Managing Directors and and provide guidance to the Internal Control Coordinators.
Executive Team in fulfilling their responsibilities relating to The Corporate Control AO/IC Team reports on the result of
compliance with laws and regulations. the internal control testing throughout the year to Financial
Management and performs quality reviews to monitor the
The KLM Compliance Charter is released by the Board of application of internal control principles by the business.
Integrated safety management system board The Integrated Safety Services Organisation assures that Managing Directors and subsequently adopted by the Based on received information from the businesses in the
The Integrated Safety Management System Board the measures applied by all the company's entities are Supervisory Board. Its target audience is all employees and DoR and the Internal Control reporting during the year, at
(ISMS Board) is a strategic meeting and is chaired by the consistent. regular temporary employees. Its purpose is to inform them year end an Internal Control memo is prepared which is
Accountable Manager (Chief Operating Officer). The ISMS of the principles, roles, tasks and responsibilities of the shared with the Board of Managing Directors and the Audit
Board sets policies, procedures and methods with respect Safety & compliance execution compliance function within the company. The Corporate Committee. This memo contains Corporate AO/IC view on the
to the Integrated Safety Management System (ISMS). Its It is the responsibility of the divisions and business units compliance monitor provides an overview of the compliance effectiveness of the internal control over financial reporting
objective is the continuous development of the ISMS for within KLM to work safely and in accordance with legislation status of KLM. The compliance monitor is discussed with the process.
KLM, KLM E&M and KLM Cityhopper and to ensure the and agreements (KLM policy). Supervisory Board.
effectiveness of KLM’s ISMS processes, procedures and Advice and support regarding this responsibility is organised Even under complex COVID-19 circumstances, the quality of
methods with respect to safety and compliance monitoring. both decentral and central. The Integrated Safety & KLM anti-fraud policy the Internal Control activities improved. This gives confidence
The ISMS Board allocates the appropriate resources to ensure Compliance Manager (ISCM) within the (decentral) line In 2018 the revised Anti-Fraud Policy was implemented to for the overall KLM Finance goal to further increase quality
the proper execution of safety and compliance monitoring. organisation is responsible for the implementation of KLM’s achieve a more vigilant, proactive and consistent approach towards a more robust Internal Control over Financial
safety policy and related culture. Each ISCM has a direct against fraud. Security Services and Internal Audit took the Reporting.
Safety action group line and access to the highest responsible manager in the lead, in cooperation with all relevant internal stakeholders
The responsibility for integrated safety and compliance, division or business unit. of the (also revised) Fraud Management Table. The Policy Management control cycle
including the implementation of mitigations, resides with and its accompanying documents were endorsed by the KLM’s organisation is based on the network business, in
the Nominated Person or Head of Division and ultimately, Safety & compliance monitoring KLM Compliance Committee and approved by the Board of which both passenger and cargo activities are combined,
the Accountable Manager. Safety Action Groups (SAGs) are The Integrated Safety Services Organisation (ISSO) is a Managing Directors. New elements in this Policy include the E&M business, leisure business and central staff functions
established on Corporate, Divisional, Departmental and if centralised independent department, which is responsible introduction of a Fraud Risk Management Framework and and the subsidiaries controlled by KLM.
appropriate Sub-departmental level. The Management Team for monitoring, measuring, policy and advice regarding Fraud Risk Assessments, a zero-tolerance stance against The KLM budget and five-year plan process is fully aligned
Operations is the corporate SAG. The tasks of each SAG is Operational, Occupational and Environmental Safety & fraud, an Anti-Fraud Policy Statement and a Fraud Response with AIR FRANCE KLM on common key assumptions and
to determine and decide on mitigating measures and monitor Compliance and Operational Security. Protocol. By means of the KLM Anti-Fraud policy, KLM timing and review meetings. KLM’s Corporate Control
safety within their area of responsibility. Its objective is mitigates the risk of intentional acts designed to deceive or Department manages this process for the three core
continuous improvement of safety and compliance in the mislead others mainly to obtain unjust or illegal advantage to business units and ten of KLM’s most significant subsidiaries,
execution of KLM’s operation. the detriment of KLM. covering the entire business of KLM.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
A management report is prepared every month by each
of the businesses analysing the monthly development of
Management reporting process
The Corporate Control Department coordinates the
the Boards and Executive Committees and approved by the
Audit Committees. Reference
standards
the financial results in relation to the forecast, budget and company's reporting process. At the beginning of the The IAF performs operational audits, information and
previous year. Furthermore, these management reports month, an estimate is prepared in a bottom-up process communication technologies or electronic data processing
analyse the operational performance of the company. by the businesses and most significant subsidiaries based audits, compliance audits, post audits, fraud investigations &
The management reports are discussed with responsible on the planned network activity information available of fraud risk assessments and consulting engagements.
managers of the businesses and the Board of Managing the previous month. Once the accounting result is known, Engagements carried out are summarised in a report
Directors in Monthly Review Meetings (MRMs). the Corporate Control Department produces a monthly presenting the conclusions and highlighting findings, Charters and manuals
KLM’s most significant subsidiaries are monitored through management report listing the main activity data, staff risks and related recommendations. For audits, a four
KLM’s Corporate Strategy Department and Corporate Control numbers and accounting and financial data. Also each points grading scale is used to express the impact of the Integrated safety management manual
Department on a monthly basis. KLM Board members are month, the Corporate Control Department examines and findings and the level of action required from either local The Integrated Safety Management Manual (ISMM) describes
represented in the management of the most significant analyses with the businesses and main subsidiaries the management or the Board of Managing Directors. The follow- the Integrated Safety Management System (ISMS). The
subsidiaries. economic performances for the month and evaluates the up by business management is required and monitored ISMS is an integrated system that is used in the following
results for the coming months up to the end of the current within a desired timeframe depending on risk impact and KLM domains: operational safety, occupational safety,
Planning & control process financial year. reasonable corrective action period. environmental safety and operational security. The ISMS
This process is based on the following three structural The Corporate Controller reports monthly to the KLM Board The KLM Internal Audit department reports the outcome of assures the safe performance of all processes within these
procedures: of Managing Directors and KLM Executive Team and on the audits to the Board of Managing Directors and to the domains through effective management of safety risk.
» Group Strategic Framework which was updated in July in a bi-annual basis to the Audit Committee, focusing on Audit Committee of the KLM Supervisory Board twice a year. The ISMS complies with relevant national and international
close cooperation with Air France and AIR FRANCE KLM; the variances between actual year and budget/forecast, legislation. The ISMS is also based on the requirements
» Corporate three-year plan which translates this vision in explaining incidental results recorded during the month and As activities of the airline reduced drastically, risks and audit of other regulatory systems: IOSA, ISAGO, ISO 14001, etc.
terms of growth and investment. The corporate budget for the variances in the full year forecast. activities changed due to COVID-19. This meant some audits The ISMS encompasses all safety management system
the next financial year is fully embedded in the first year planned for 2020 were not as relevant as foreseen in the components and elements as given in ICAO Doc 9859.

Support
of the corporate three-year plan. The budget is drawn audit Plan 2020, but also new emerging risks called for new By means of the ISMS risks are predictively indicated and
up on an entity level and consolidated at company level. audits. An extensive analysis was done on existing and proactively eliminated or mitigated before accidents and
As mentioned before, this process is fully aligned in AIR new emerging risks due to COVID-19. All (potential) have incidents occur. The ISMS is also used to continuously
FRANCE KLM. The corporate three-year plan, including
budget 2021, has been prepared and approved before the functions been matched with the multi-year Airline Risk Universe and
Business Process for sufficient coverage of all risks. This
improve safety by collecting and analysing data, identifying
hazards, threats and safety issues, and assessing safety risks
start of the financial year 2021 (January 2021); and resulted in a revised audit plan 2020, which was approved by to ensure the optimal allocation of company resources.
» Tactical Planning Meetings (TPMs) held quarterly on a Internal audit the Board of Managing Directors and KLM Audit Committee.
business level, where the performance of the businesses KLM has an independent Internal Audit Function (IAF) to KLM’s ISMS is based on the following main internal and
is evaluated (and updated) in the context of the budget. strengthen the internal controls. The presence and activities Insurance department external frames of reference:
of an IAF provides a powerful element to assure proper risk The KLM business activities and related processes involve
Accounting process and establishment management, governance and internal control. a myriad of major and minor risks. Many of these risks are External frames of reference:
of accounts The IAF has been subject to a regular external quality mitigated by measures, such as contingency plans, hedging » Statutory: European and Dutch regulations (including
The Corporate Control Department prepares monthly group assessment by the Dutch and French affiliates of the and back-up facilities or mandatory insurance. The remaining European and Dutch regulations for operational security)
financial information based on the information submitted worldwide Institute of Internal Auditors. The overall opinion is risks can be either accepted or insured against, the latter if and general implementing regulations;
by the businesses and subsidiaries. The AIR FRANCE KLM positive. risks are perceived unacceptable, for instance because they » Industry: IATA Operational Safety Audit (IOSA), a standard
accounting manual meets the compliance objectives for The IAF aims to add value to the KLM Group and improve its may threaten the continuity of KLM. KLM has insured risks that ensures a transparent level of operational safety
accounting records. The accounting information feedback operations by bringing a systematic, disciplined approach to such as damage to its owned and leased aircraft and liability to enable codeshare operations without further audits
from the subsidiaries is required to follow the Group's evaluating and strengthening the effectiveness of decision to its customers and others in case of an aircraft incident, on KLM and ICAO doc 9859, for the Safety Management
accounting rules, methods and frames of reference are making, risk management, internal control and governance war risks, damage to property and business interruption. If Manual; and
laid down by the company and presentation of financial processes. The IAF objectively reviews the accuracy and ever such a risk materialises, the damage can be claimed » Environment: ISO 14001; an international standard for
statements must be in the format circulated by the Group. reliability of the KLM Group’s internal controls in general and on the insurance company up to the insured amount taking monitoring environmental control and impact.
related processes in particular. Management will be pro- deductibles and standard market exclusions into account.
The consolidated and company financial statements are actively advised on required improvements. Internal frames of reference:
submitted twice a year (half-year and year-end) for review The IAF conducts audits at KLM and AIR FRANCE KLM level at Legal department These are variations of external frames of reference adjusted
by the Vice President Reporting & Control to the external request of the AIR FRANCE KLM and KLM Audit Committees, The Legal Department is responsible for legal practices within to the company's own processes:
auditors prior to their closure at a summary meeting, and are the AIR FRANCE KLM Group Executive Committee and KLM KLM and monitors the legal integrity of activities performed » Statutory: statutory manuals (operating manuals,
then forwarded for discussion to the Audit Committee. Executive Team, and the KLM Board of Managing Directors. by KLM. The Legal Department supports both KLM’s Board maintenance manuals, quality manual) and associated
These audits are conducted by the internal auditors from of Managing Directors and the businesses. The department general procedures, which are usually formally validated
KLM, who are also operating jointly with the Air France is centralised, is staffed with qualified legal professionals and by the supervisory authorities that issue approval
internal audit team. An annual audit plan is presented to functions as a single point of contact for external lawyers. certificates (CAA-NL, FAA, etc.);

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Report of the Board of Managing Directors Report of the Board of Managing Directors
» Quality manuals for environmental control; and Manual to prevent the risks of corruption
» Management system: the company's Integrated Safety This manual affirms KLM’s commitment to exercising its
Management Manual (ISMM) and associated general activities fairly, equitably, honestly and with integrity, and
procedures. in the strict respect of anti-corruption laws wherever
its companies or subsidiaries exercise their activities. It
Social rights and ethics charter establishes the guidelines for preventing corruption, and for
The KLM Group has published a Social Rights & Ethics Charter identifying and handling at-risk situations with regard to the
to enshrine individual commitment to Corporate Social anti-corruption legislation.
Responsibility by orienting its corporate and ethical policy
towards respect for individuals at the professional, social and The AIR FRANCE KLM Bribery Manual and the AIR FRANCE
citizenship levels. KLM Gift & Hospitality Policy were updated, amongst others,
to abide by the French Sapin II law. The e-learning module
Code of conduct ‘competition law compliance’ and ‘anti-bribery and corruption’
The KLM Group has published a Code of Conduct addressing have been available online to all employees since 2014. An
the following principal matters: compliance with laws updated e-learning training on Anti-Bribery & Corruption has
and regulations, conflicts of interest, confidentiality, the been made available to all KLM management and executive
safeguarding of assets, environmental protection, Corporate functions.
Social Responsibility and intellectual property. KLM has
also implemented a code of ethics intended principally for Internal control charter
employees in finance positions. The AIR FRANCE KLM Internal Control Charter outlines the
methodology used to assess its effective implementation
Legal & business ethics compliance framework and functioning of financial internal controls. It also reaffirms
The KLM Legal & Business Ethics Compliance Framework the involvement in the prevention and control of the risks
ensures staff is capable of adhering to rules of conduct, associated with the KLM Group’s activities.
internal procedures and relevant laws and regulations. The
KLM Compliance Charter applies to all employees and regular Internal audit charter
temporary workforce. The charter informs them on the To provide the internal auditors with an adequate base, a
principles, roles, tasks and responsibilities of the compliance KLM Group Internal Audit Charter is in place. The charter
function within the company. The Corporate Compliance is revised and tailored to changing needs and is signed in
Monitor provides an overview of the compliance status of December 2019 by the President and Chief Executive Officer
KLM. of KLM, the Chairman of the KLM Audit Committee and the
Vice President Internal Audit. It is in line with the Dutch
Anti-fraud policy Corporate Governance Code.
In 2019 the revised KLM’s Anti-Fraud Policy and its The KLM Group Internal Audit Charter establishes the
accompanying documents were endorsed by the KLM framework of the Internal Audit Function and contains the
Compliance Committee and approved by the KLM Board guidelines to which it adheres regarding:
of Managing Directors. Elements in this policy include the » Internal Audit mission and objective, scope of work and
introduction of a Fraud Risk Management Framework and types of work;
Fraud Risk Assessments, a zero tolerance stance on fraud, an » Accountability, independence and relationship to other
Anti-Fraud Policy Statement and a Fraud Response Protocol. assurance functions;
By means of the KLM Anti-Fraud Policy, KLM mitigates the » Authority and ethics; and
risk of intentional acts designed to deceive or mislead others » Applicable standards.
mainly to obtain unjust or illegal advantage to the detriment The KLM Group Internal Audit Charter is in line with the
of KLM. governance structure regarding the Internal Control Function,
and the AIR FRANCE KLM Group Internal Audit Charter.

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Report of the Board of Managing Directors Report of the Board of Managing Directors
 Corporate
Governance
KLM 2020 Annual Report KLM 2020 Annual Report
82 83
Corporate Governance Corporate Governance
Board and
Koninklijke Luchtvaart Maatschappij N.V. As part of an international concern, being the AIR FRANCE
KLM Group, KLM has been subjected to the mitigated
(“KLM”) is a non-listed, limited liability
structure regime (as per Dutch company law, Book 2 Dutch
company incorporated under Dutch law. Civil Code).
Supervision and management of KLM are

governance
KLM’s corporate governance is based on the applicable
structured in accordance with the two-
statutory requirements and on the company’s Articles of
tier model, meaning a Board of Managing Association. Although the Dutch Corporate Governance
Directors supervised by a Supervisory Board. Code doesn’t formally apply to KLM, KLM has voluntarily
brought its corporate governance as far as possible in line
with generally accepted principles of good governance,
as laid down in the Code. Furthermore, KLM closely follows
developments in legislation on corporate governance in
order to further improve its governance.

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Corporate Governance Corporate Governance
There have been no material changes in the company’s For this purpose, a shareholder may contact the company. As stated earlier in this chapter, the Dutch Government Further information on the members’ terms and conditions of
governance in comparison with financial year 2019, except appointed a State Agent who is responsible for monitoring service as well as remuneration is presented in the section
for one: the Dutch Government appointed a State Agent as AIR FRANCE KLM the execution of KLM’s restructuring plan. Although the State Remuneration Policy and Report.
a condition to the EUR 3.4 billion financial support package. KLM and Air France share the same holding company, Agent has a standing invitation to attend the Supervisory
The State Agent monitors the execution of the restructuring AIR FRANCE KLM S.A. The holding company’s Board of Board and the Audit Committee meetings, he is not a member General Meeting of Shareholders
plan drafted by KLM. In that context, the State Agent has Directors (Conseil d’Administration) has 19 members. The of the Supervisory Board and does not participate in the The shareholders of KLM in principle exercise their rights via
a standing invitation to attend the Supervisory Board and Board has five Dutch members, of which one is appointed deliberations and the voting by the Supervisory Board. the annual or extraordinary General Meetings of Shareholders.
Audit Committee meetings. upon nomination by the Dutch Government and two upon The date, agenda and location of the annual General Meeting
nomination by the KLM Supervisory Board. The fourth Dutch KLM’s Company Secretary & General Counsel acts as is announced through a national newspaper and registered
Shareholding structure member is the Chairman of the KLM Supervisory Board. The Secretary of the Supervisory Board. The Secretary ensures shareholders are notified by letter.
KLM’s shareholding structure is outlined below. Depositary fifth Dutch member joined the AIR FRANCE KLM Board as that the Supervisory Board acts in accordance with the
receipts of shares carry beneficial (economic) ownership, but Director representing employees. The KLM CEO attends the law, KLM’s articles of association and its own regulations. The main powers of the General Meeting of Shareholders
no voting rights on the underlying KLM shares. Board meetings as permanent guest/observer. In addition, the Secretary ensures timely and adequate consist of appointing, suspending and dismissing members
provision of information to the Supervisory Board and assists of the Board of Managing Directors and Supervisory Board,
AIR FRANCE KLM holds: Supervisory Board the Chairman of the Supervisory Board in the organisation of determining the remuneration (policy) of the Board of
» All KLM priority shares; The Supervisory Board supervises the management the Supervisory Board meetings. Managing Directors and the Supervisory Board, adopting
» A proportion of the common shares, together with the conducted by the Board of Managing Directors and the the financial statements, discharging the Board of Managing
priority shares representing 49% of the voting rights in general performance of the company. It also provides the Committees Directors and the Supervisory Board from liability and the
KLM; Board of Managing Directors with advice. The Supervisory Three committees are active within the Supervisory Board: appointment of external auditors. Furthermore, resolutions of
» The depositary receipts issued by Stichting Board discusses KLM Group’s strategy and approves major an Audit Committee, a Remuneration Committee and a the Board of Managing Directors entailing a significant change
Administratiekantoor KLM (SAK I) on common KLM shares management decisions. For certain major resolutions by the Nomination Committee. All these committees have their own in the identity or character of the company are subject to the
and on the cumulative preference shares A; and Board of Managing Directors, approval of the Supervisory regulations, which lay down, among others, their composition, approval of the General Meeting of Shareholders. Resolutions
» The depositary receipts issued by Stichting Board is required. The members of the Supervisory Board role and responsibilities. amending the Articles of Association may only be adopted by
Administratiekantoor Cumulatief Preferente Aandelen C fulfil their duties in the interests of the company, its the General Meeting of Shareholders. A resolution to dissolve
(SAK II) on the cumulative preference shares C. stakeholders and its affiliates. Further information on the composition and functioning of the company may only be adopted if at least three-quarters
the Supervisory Board and its committees can be found in of the issued shares are represented at the General Meeting
On December 31, 2020, SAK I held 33.59% of the voting Pursuant to the Articles of Association, KLM’s Supervisory the section Report of the Supervisory Board. of Shareholders and at least two-third of the votes are cast
rights in KLM on the basis of common shares and cumulative Board shall consist of at least nine and at most eleven in favour of the resolution. The aforementioned powers are
preference shares A. SAK II holds 11.25% of the voting rights members. On December 31, 2020, KLM’s Supervisory Board Board of Managing Directors not limitative and the exact procedures are explained in KLM’s
in KLM on the basis of cumulative preference shares C. The consisted of nine members. Supervisory Board members Pursuant to the Articles of Association, the Board of Articles of Association.
Dutch Government directly holds cumulative preference are appointed and reappointed by the General Meeting of Managing Directors shall consist of at least three Managing
shares A, which represent 5.92% of the voting rights. Shareholders. The General Meeting of Shareholders may Directors. On December 31, 2020, KLM’s Board of Managing KLM’s Annual General Meeting of Shareholders will be held
recommend candidates to the Supervisory Board, whereby Directors consisted of three members. The Managing on May 4, 2021. In addition to the Annual General Meeting
Physical bearer share certificates issued the KLM Works Council has the legal right to recommend one Directors are appointed and dismissed by the General of Shareholders, a General Meeting of Shareholders may be
by KLM third of the Supervisory Board members. Five members are Meeting of Shareholders, upon a proposal submitted by the convened by the Board of Managing Directors, President
On July 21, 2005 all bearer shares in KLM’s issued share appointed upon recommendation of AIR FRANCE KLM. The Supervisory Board. The members of the Board of Managing & Chief Executive Officer, the Supervisory Board, three
capital were converted into registered shares pursuant to General Meeting of Shareholders can reject the nomination Directors are appointed for a fixed term of four years. A Supervisory Board members or the Meeting of Priority
an amendment of the Articles of Association made at the by an absolute majority of the votes cast, representing at member of the Board of Managing Directors may, whether or Shareholders, each of which has equal power to do so.
time. In order to exercise the rights vested in the shares, least one third of the issued capital. not on a proposal by the Supervisory Board, be dismissed by
holders of former bearer shares were required to hand in the General Meeting of Shareholders. The Supervisory Board Staff participation
their bearer share certificates. Pursuant to an amendment of A Supervisory Board member is appointed for a term of four appoints one of the members of the Board of Managing The Board of Managing Directors, represented by the
Section 2:82 of the Dutch Civil Code (DCC) in 2019, a bearer years and can be reappointed for another term of maximum Directors as President & Chief Executive Officer and may in President & Chief Executive Officer, meets with the company’s
share certificate which has not been handed in with KLM four years. In case of a reappointment after eight years of addition appoint one or more Managing Directors as Deputy Works Council on a regular basis. During these meetings, a
on or before December 31, 2020, has become void and the service, the Supervisory Board states the reasons for such CEO. number of topics is discussed, such as the developments
share represented by the bearer share certificate has been reappointment. The candidates are selected in accordance within AIR FRANCE KLM and the company’s strategy and
acquired by KLM for no consideration. A shareholder who with the Supervisory Board’s profile, which also includes its Regardless of the allocation of tasks among its members, financial results. Also the topic of conduct and culture within
hands in a bearer share certificate with KLM no later than diversity policy. the Board of Managing Directors acts as a single organ with KLM is addressed. The KLM Works Council has 25 members.
5 years after December 31, 2020 is entitled to receive from collective responsibility. The Board of Managing Directors Given the COVID-19 crisis, the KLM Works Council met
KLM a replacement registered share. KLM shareholders who has final responsibility for the overall management of the representatives of the Board of Managing Directors more
still have not handed in their bearer share certificates on company and monitors all corporate governance activities. frequently than usual in financial year 2020. This to discuss
January 1, 2026, will lose any entitlement to exchange their a wide variety of crisis related topics, including the State
bearer share certificates for a registered replacement share. financial support package and the restructuring plan.

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Corporate Governance Corporate Governance
 Dutch Corporate Governance Code
Apart from the deviations listed below, KLM’s Corporate
Governance is in line with generally accepted principles of
good governance, such as laid down in the Dutch Corporate
Governance Code. Although KLM, as a non-listed company,
is not formally obliged to comply with the Dutch Corporate
Governance Code, it has committed itself to follow the Dutch
Corporate Governance Code voluntarily where possible. On
several occasions the Board of Managing Directors together
with the Supervisory Board discussed the impact of the
Dutch Corporate Governance Code on KLM’s corporate
governance.

KLM deviates from the best practices described in the Code

in a limited number of areas. In accordance with the ‘comply
or explain’ principle, these deviations are:
» Regulations and other documents are not made
available on the company website. Regulations and other
documents are available upon written request;
» The composition of the Supervisory Board does not meet
the Best Practice Provision 2.1.7 sub i that relates to the
Independence of the Supervisory Board; and
» The severance pay of newly appointed members of the
Board of Managing Directors, from within KLM, in the event
of dismissal is set at a maximum of two years base salary,
and consequently does not comply with Best Practice
Provision 3.2.3.
At AIR FRANCE KLM level a European Works Council has Currently, all members of the Board of Managing Directors AIR FRANCE KLM Bribery Manual, the AIR FRANCE KLM Gift
been installed to jointly represent KLM and Air France. This are male. In KLM’s leadership team (the Executive team) 3 & Hospitality Policy, the AIR FRANCE KLM Competition Law Conflict of interest
council focuses on issues that pertain to both Air France and out of 13 members are female. KLM recognises that, despite Compliance Manual and the KLM Whistleblower policy. The handling of conflicts of interest between the company
KLM. In 2020, the European Works Council convened more the progress made in recent years, there is still room for and members of the Board of Managing Directors or the
frequently than their planned meetings for 2020, due to the improvement. KLM therefore developed a robust diversity Designated individuals are required to complete training on Supervisory Board is governed by Dutch law, the relevant
COVID-19 crisis. policy with explicit targets for the number of women in antitrust and competition laws, anti-bribery and corruption provisions of the Dutch Corporate Governance Code and the
executive positions. law, trade compliance and data protection. KLM has Regulations of the respective Board. With the amendment
Diversity published relevant codes and regulations on its intranet. in 2018, the Articles of Association have been aligned with
KLM recognises the importance and added value of a Compliance & Business ethics Dutch law, hence now explicitly stating that a Managing
diverse and balanced composition of the Board of Managing The KLM Compliance & Business Ethics Framework supports On behalf of the Board of Managing Directors, KLM’s Director or member of the Supervisory Board may not
Directors and Supervisory Board and believes that their leadership and staff to do business with loyalty, fairness, Compliance Committee monitors the effectiveness of the participate in any discussion or decision-making on a subject
diversity policy should set an example to the rest of the transparency, honesty and integrity. It requires KLM staff KLM Compliance & Business Ethics Framework. The KLM in which he or she has a direct or indirect personal interest
company. To this end, both the Board of Managing Directors to reach out, take ownership and leadership and to be Compliance Committee meets at least quarterly and in that conflicts with the interests of KLM and the business
and Supervisory Board profiles deal with the aspects competent, to connect, to guide, to challenge and to inspire principle submits the Corporate Compliance Monitor to the connected with it. A member of the Board of Managing
of diversity such as age, nationality, gender, education their teams in a joint effort to secure the integrity of the KLM KLM Board of Managing Directors and the Supervisory Directors or the Supervisory Board is required to report
and working background. When searching, selecting and organisation internally and vis-à-vis third parties that KLM Board bi-annually. Due to the COVID-19 crisis the Corporate any conflict of interest or potential conflict of interest that
evaluating the candidates for new appointments to the deals with in its day-to-day business. Compliance Monitor was only submitted once in 2020 to the is of material significance to the company and/or to the
Board of Managing Directors, the Supervisory Board will duly KLM Board of Managing Directors and the Supervisory Board. member concerned, to the Chairman of the Supervisory
consider the relevant diversity requirements. The KLM Code of Conduct serves as a framework that Board. Decisions to enter into transactions in which there
reflects the basic principles of business integrity and shall KLM had deployed an organisation dedicated to compliance are conflicts of interest with members of either Board that
On December 31, 2020, one third of the members of the be taken into account by KLM staff, management and and business ethics. The Director Compliance & Business are of material significance to the company or such member
Supervisory Board was female. The Supervisory Board contracted third parties. The Code of Conduct clarifies rules Ethics and designated expert functions are tasked with requires the approval of the Supervisory Board.
consists of five French board members and four Dutch board and standards that are to be complied with and sets out pursuing the implementation of the compliance programs
members. expected behaviours. The KLM Code of Conduct serves as within KLM.
an umbrella for all available compliance codes, such as the

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Corporate Governance Corporate Governance
During the financial year 2020, no conflicts of interest were if circumstances require, extra measures will be taken. The
reported. recent start of vaccination programs gives perspective for a
recovery as of the second half of 2021.
Internal regulations
The regulations adopted in respect of the Supervisory Board, Ongoing attention will be given to internal control processes,
the Audit Committee, the Remuneration Committee, the IT security and compliance. Especially in the upcoming period
Nomination Committee and the Board of Managing Directors of change, where the organisation is in transition and people
are reviewed on a regular basis. The Supervisory Board are leaving, extra attention is needed for control during the
Regulations, the profile of the Supervisory Board, the Board transformation.
of Managing Directors Regulations, the Terms of Reference
of the Audit Committee, the Nomination Committee and the In accordance with previous paragraphs on Risk
Remuneration Committee, and the rotation schedule, in so Management, Safety Management, Compliance and on
far not published in this annual report, may all be viewed at Internal Control and Monitoring, in addition to the Going
the company’s head office. Copies shall be made available Concern statement in the Management Control paragraph,
to shareholders upon written request to the company all currently known circumstances taken into consideration,
secretary. the Board of Managing Directors states to the best of its
knowledge that:
In control statement » The Annual Report 2020 provides sufficient insights into
The COVID-19 crisis affected the airline industry (and so potential material failings in the effectiveness of the
KLM) in 2020 in an unprecedented way. KLM’s financial ratios internal risk management and control systems;
and results had improved considerably over the last couple » The internal risk management and control systems of the
of years, a trend that continued until early 2020. Hence, company provide reasonable assurance that the financial
at the start of the crisis KLM was fortunately in a strong reporting does not contain any material inaccuracies;
financial position and well equipped to weather the crisis. » The Annual Report 2020 states those material risks and
However, this position came quickly under pressure due to uncertainties that are relevant to the expectation of the
the unfolding of the crisis. Immediate attention was paid company’s continuity for the period of twelve months
to the impact of the crisis, ensuring the continuity of KLM: after the preparation of the report; and
strict cost and cash saving measures were implemented » As disclosed in the Going concern paragraph in the Note
and investments were downsized. Next to that, the to the financial statements, material uncertainty exists that
company engaged in discussions with the government may cast significant doubt on KLM’s ability to continue as
and a consortium of banks, which led to the State financial a going concern. Notwithstanding this material uncertainty
support package of in total EUR 3.4 billion (EUR 2.4 billion in caused by the current COVID-19 pandemic, management
a 90% State-guaranteed RCF and EUR 1.0 billion in a direct believes, based on the near cash position of EUR 1 billion
loan provided by the State). Less than EUR 1 billion was and the available credit lines facilities of EUR 2.5 Billion
drawn per December 31, 2020. Also during the crisis, extra (in total EUR 3.5 billion) and the expected continued
activities have been executed on risk management, safety willingness of the Dutch State and bank syndicate to
management, internal control and corporate compliance. On support KLM, that KLM will be able to continue to fulfill
the other hand, KLM Group staff reductions due to voluntary its financial obligations for at least twelve months and as
leave and restructuring plans and the reduction of working such continue on a going concern basis. Therefore, the
hours (activité partielle) at Air France affected the joint financial statements have been prepared on the going
Finance, Internal Audit and IT domains to a certain extent. concern assumption.

The duration of the COVID-19 crisis is uncertain, as is the

post-COVID competitive situation in the airline industry
including, with today’s limited visibility on impact on
customers’ travel behaviour, corporate demand and supply
chains. To be able to act on these challenges, KLM provided
for this by an extensive restructuring plan, focussing on
cost efficiencies, reduction of labour conditions and fulfilling
the (other) governmental requirements in amongst others
the area of sustainability and liveability. Progress on the
implementation of this plan will be monitored closely, and

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Report of
Duties and powers As from early February, the agendas of the regular meetings
The Supervisory Board is entrusted with supervising and were adjusted, whereby the financial position as well as
advising the Board of Managing Directors, and overseeing KLM’s five-year plan (budget, investment plan and financial
KLM’s strategy and the general course of its businesses. plan) were discussed in light of the COVID-19 crisis.
The Supervisory Board performs its tasks in accordance

the Supervisory
with the law, the Dutch Corporate Governance Code, The extraordinary meetings were required to ensure that
KLM’s Articles of Association and its own regulations. Each the Supervisory Board was closely involved in the Board
individual Supervisory Board member is expected to act of Managing Directors’ immediate response and approach
in the best interests of KLM, its businesses and all of its to the COVID-19 crisis. In the earlier months of the crisis,
internal and external stakeholders. much attention was paid to the process with the Dutch

Board
Government and the banks to secure the EUR 3.4 billion
Supervisory Board meetings State financial support package for the company. During
During 2020, the Supervisory Board held five regular the course of 2020, the focus of the meetings gradually
meetings according to its predetermined schedule and 14 extended from immediate crisis management to recovery
extraordinary meetings. Except for the February meeting, and to adapting KLM’s strategy to the new reality.
all Supervisory Board meetings were held by means of
video call due to the COVID-19 related international travel
restrictions.

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 The Supervisory Board is well engaged in the Board of reductions to be realised in return to the financial support. As
Managing Director’s process of development of KLM’s strategy additional financing became a prerequisite for KLM’s future,
for realizing long-term value creation. In addition to the the Supervisory Board fully supported the conclusion of
regular Supervisory Board meetings, a temporary Restructuring the agreements with a syndicate of banks and the Dutch
Progress meeting has been introduced. During the monthly Government.
Restructuring Progress meetings, the Board of Managing
Directors updates the chair of the Supervisory Board, the Audit The Audit Committee had parallel meetings for in-depth
Committee and the State Agent (see paragraph highlights 2020 analysis of KLM’s financial position and the conditions
and chapter Board & Governance) on the execution of KLM’s attached to the loans. The Audit Committee reported on the
restructuring plan. outcome of these meetings to the Supervisory Board (see
paragraph Committees).
Highlights 2020
The Supervisory Board reflects on an unprecedented year As from the third quarter, the Supervisory Board was closely
in which the COVID-19 crisis dominated the agendas of its involved in the development of KLM’s restructuring plan (5-
meetings. The work of the Supervisory Board focused in year horizon), required for preparing the business for the post
particular on monitoring and advising the Board of Managing COVID-19 period. During multiple meetings, the Supervisory
Directors on how to weather this crisis. In that regard, the Board challenged the Board of Managing Director’s strategic
Supervisory Board closely reviewed, discussed and approved a choices and assumptions regarding the recovery scenarios,
number of topics. This paragraph outlines the highlights of the market developments and the size of KLM’s fleet. The Dutch
Supervisory Board meetings in 2020. Government approved the restructuring plan early November
and appointed a State Agent who will monitor the execution
Throughout the year, the Board of Managing Directors of the plan. The State Agent has a standing invitation to
informed the Supervisory Board through a so called crisis flight attend the Supervisory Board, the Audit Committee as well as
plan with four focus areas, being i) crisis management, ii) banks the Restructuring Progress meetings.
& government, iii) recovery trajectory and iv) restructuring plan.
Throughout the year, the Board of Managing Directors kept
During the first months of the year, the Supervisory Board the Supervisory Board informed on the discussions with
Long-term value creation: road map to
The Board of Managing Directors kept the Supervisory Board thoroughly observed the evolution of the COVID-19 crisis the Works Council and the unions. The Supervisory Board
recovery
also well informed on developments between the meetings. and its impact on KLM’s businesses. The rapidly deteriorating supported the difficult but necessary decision to substantially
Furthermore, the Chairman of the Supervisory Board met Since redefining its strategy in 2015, KLM has made situation required immediate measures under serious time reduce the staff numbers, and the various actions in that
frequently with the President & Chief Executive Officer on important steps to realise its purpose and ambition of being pressure. In the course of the developments, the Supervisory respect led to a reduction of the workforce by 5,000
the progress of actual topics. At the same time, the Chairman a leading European network carrier in customer centricity, Board examined the actions to minimise the cash outflow colleagues per year-end. Furthermore, the Supervisory Board
of the Audit Committee had close contact with the Chief sustainability and efficiency. The successful implementation through, among others, reducing investments, delaying paid particular attention to the discussions between the
Financial Officer regarding KLM’s financial position. of the past years was however abruptly halted by the ongoing projects and agreeing with leasing companies Board of Managing Directors and the unions regarding the
COVID-19 crisis. on postponement of lease instalments. The Supervisory employee contributions expected under the aforementioned
Despite the tight timeframe for scheduling the extraordinary Board also deliberated at length on sensitivity analysis on restructuring plan and the conditions attached to the State
meetings, all Supervisory Board members have shown In 2020, the Supervisory Board was extensively involved in cash burn. The Dutch Government swiftly implemented financial support package imposed by the government. The
maximum flexibility and availability. Except for a limited the process of reviewing and reassessing KLM’s strategy certain nation-wide support measures that amongst others Supervisory Board realises that the employee contributions
number of occasions, and for valid reasons, Supervisory against the background of the crisis. Proper analyses and in- enabled companies to maintain employment and continue are difficult to accept for employees, but nevertheless are
Board members attended all meetings in 2020. The depth discussions led to the conclusion that KLM’s business paying salaries. The NOW support helped and still helps KLM necessary for the long(er) term survival of the company.
Supervisory Board members reserved adequate time to model is still valid and valuable, but cost reductions as well significantly in facing the crisis. The Board of Managing Directors has regularly informed the
perform their tasks, which increased significantly in 2020 as resizing and reshaping of the company are necessary to Supervisory Board on its discussions with the unions. The
as the Board intensified its supervision and advice role due return to profitability. KLM’s reassessed strategy has been Despite a strong financial starting position and immediate necessity of a positive outcome to safeguard KLM’s future
to the COVID-19 reality. The average attendance of the embodied in a restructuring plan with the ambition to turn cost cutting and cost-saving measures, the severity and has been emphasised from the start, which has been fully
Supervisory Board meetings was 95.3 per cent.          KLM’s business. In that context, more substance will be given scale of the crisis made additional financing inevitable. The supported by the Board.
to customer proposition, KLM’s societal role & sustainability and Board of Managing Directors elaborated on the status of the
innovation in data & technology. KLM’s purpose, strategy and negotiations regarding a revolving credit facility of EUR 2.4
the roadmap to survive and emerge stronger from the crisis billion with a 90 per cent State guarantee and a direct loan of
come together in the restructuring agenda and plan. EUR 1 billion from the Dutch Government. During the second
quarter of 2020, the Supervisory Board conferred extensively
on the (legal) terms and conditions related to these loans.
Particular attention has been paid to the requested cost

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Within the framework of the financial support to KLM, Other topics discussed during the financial year, some of The focus of the risk management framework changed Induction program
the political and public discussion on aviation and which are recurring, were the fleet development strategy, during the financial year, making it more fit to monitor risks For each new member of the Supervisory Board a tailor-
sustainability further increased in 2020. The Supervisory hedging and the competitive landscape. associated with the new reality, resulting in adjustments made induction program is being prepared. During the
Board underscores that sustainability remains a prerequisite to the main risk categories, being, (i) cash & solvability, (ii) multiple-day induction program, new Board members visit
for KLM’s future growth. Therefore, the Supervisory Board Financial topics market demand, (iii) recovery & operations, (iv) people & KLM’s headquarters in Amstelveen as well as its locations
paid close attention to the sustainability goals included in KLM managed to improve its financial situation and operating change and (v) state loans & conditions. at Schiphol to develop deeper knowledge of KLM and
the restructuring plan. Furthermore, given KLM’s role and results over the period 2015 to 2019. Despite the solid its businesses. Meetings on general financial, social and
responsibilities towards the Dutch society, the Supervisory starting point and immediate response, the COVID-19 crisis During the updates on the topic of risk management, the legal affairs, sustainability, human resources, governance,
Board fully supported KLM’s efforts such as repatriation nullified the results achieved in previous years. During Supervisory Board reviewed and discussed the assessments relationship with the Works Council and the responsibilities
flights and transport of medical supplies. financial year 2020, the Supervisory Board discussed KLM’s of the Board of Managing Directors of the adequacy and of the Supervisory Board members are fixed components
financials in light of the COVID-19 crisis. effectiveness of the risk management and control system. of the induction program. Depending on the individual role
Throughout the year, the Supervisory Board has been Following the cyber incident of end 2020, the Supervisory and needs of the new board member, in-depth sessions
updated on the developments at AIR FRANCE KLM Group and As from the beginning of the crisis, the Supervisory Board Board discussed this incident within the context of risk with the senior management of the relevant departments
Air France level. The Supervisory Board underlined that both closely monitored the Board of Managing Directors’ efforts to management. The Supervisory Board is closely monitoring are incorporated in the induction program. Following
KLM and Air France should continue their strong cooperation safeguard KLM’s future and critically examined the response the mitigating measures to protect the company from his appointment, a virtual concise induction program for
and share their experiences in weathering the crisis. to the deteriorating financial situation. The Supervisory Board potential cybercrime. On several occasions, the Supervisory Mr. Nibourel has been prepared. As soon as the travel
fully supported the Board of Managing Directors’ immediate Board discussed with the Board of Managing Directors in restrictions have been lifted, an extensive program with
In 2020, KLM’s network and operational performance were and significant steps to protect cash outflow in order to particular the biggest risks occurred from the COVID-19 physical visits will be organised.
tremendously impacted by the spread of the COVID-19 keep a solid cash position. pandemic.
crisis. KLM continuously adapted its network and capacity Composition of the Supervisory Board
in response to the travel restrictions imposed worldwide. In Parallel to actual crisis management, the Supervisory Board Compliance & Business ethics Effective as of the end of the Annual General Meeting
that context, the Supervisory Board welcomed the European deliberated at length on KLM’s financial plans and targets for Within the company’s Legal & Business Ethics Compliance of Shareholders of 2020, Mr. Calavia stepped down as
Commission’s decision to waive its slot regulation until March the upcoming years. In the context of the restructuring plan, Framework and the Compliance Charter, the Supervisory Supervisory Board member of KLM. Upon recommendation
2021 in order to address the industry’s need for certainty the Supervisory Board examined the Board of Managing Board monitored KLM’s compliance with rules and of AIR FRANCE KLM and filling the vacancy of Mr. Calavia, Mr.
and flexibility. This provided KLM with the necessary room Directors’ sensitivity analysis and underlying assumptions regulations. During the October meeting, the Supervisory Nibourel was appointed as Supervisory Board member for
and clarity in its efforts to recover its network. regarding the recovery of KLM’s businesses. In that regard, Board was updated on the main compliance activities. The a first term of four years. During the same meeting, Messrs.
the Supervisory Board underscores that to recover the Supervisory Board was informed that despite the COVID-19 Enaud and Riolacci have been appointed for a second term
The operational constraints have inevitably affected the 2020 losses and be resilient to future risk, strong financial situation, training & communication activities have been of four years, in accordance with the proposal of AIR FRANCE
customer’s experience. The Supervisory Board encouraged performance is required in the years to come. Given the continued. However, investments in the e-learning training KLM.
the Board of Managing Directors to take steps to mitigate significant increase of KLM’s debt, the Supervisory Board platform have been put on hold in 2020. In addition, the  
the consequences for KLM’s customers. In that regard, the agrees that investment levels need to be adjusted in the Supervisory Board monitored the improvements regarding The KLM Supervisory Board expresses its gratitude to Mr.
Supervisory Board intensively monitored KLM’s approach upcoming years. the speak up and whistle blower policies. Calavia for his valuable and excellent contributions during his
towards the policies as regards the vouchers and refunds, many years of service at both AIR FRANCE KLM and KLM.
and emphasised the importance of proactive and clear The Supervisory Board acknowledges that the forecasts and KLM has committed itself to follow the principles and best  
communications towards KLM’s customers. analysis are subjected to various uncertainties regarding practice provisions of the Corporate Governance Code. As per the Annual General Meeting of Shareholders in May
the evolution of the crisis and agrees that the speed of 2021, Mrs. De Gaay Fortman is due to retire by rotation. The
In 2020, the Supervisory Board discussed the optimisation recovery mainly depends on the availability and distribution Evaluation Works Council has the right to nominate a candidate for this
of KLM’s cabin product against the background of industry of a vaccine. Therefore, the financial plans and assumptions The COVID-19 crisis required the Supervisory Board members position.
trends. In order to maintain KLM’s competitive position in are continuously reviewed and reassessed in light of new to decide on important matters under great time pressure.  
the post COVID-19 era, the Supervisory Board approved (market) developments. To maintain the constructive cooperation within the Mrs. De Gaay Fortman notified the company that she is
investments in Premium Economy, Direct Aisle for Business Supervisory Board and with the Board of Managing Directors, not available for reappointment, after careful consideration
Class and the cabin layout optimisation. Risk management the members regularly discussed the performance of the of the desired profile for this position going forward, also
The Supervisory Board paid close attention to the topic of Supervisory Board during various meetings. in view of the challenges the company is facing, and
End 2020, the Supervisory Board discussed the budget for risk management. KLM’s Audit Committee takes responsibility discussions with the Works Council on this.
financial year 2021. Following in-depth discussions on the for monitoring the adequacy of KLM’s risk control system and However, due to the focus on crisis management, the  
various recovery scenarios, the Supervisory Board approved prepares discussions in the Supervisory Board. KLM’s internal regular self-assessment for 2020 was executed early 2021. Hence, the Works Council will propose a candidate for the
the final budget for 2021. Next to that, the Supervisory audit function is firmly positioned within the organisation and The results of the interviews between the chairman of the vacancy that arises from the resignation of Mrs. De Gaay
Board has also been regularly informed on the anticipated creates conditions for an effective interaction between the Supervisory Board and individual members will be discussed Fortman. The KLM Supervisory Board wishes to express its
recapitalisation scenarios. Board of Managing Directors, the Supervisory Board and the during the Supervisory Board meeting in the second quarter gratitude for her valuable contributions to the company, the
Audit Committee. of 2021. Board and Works Council.

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Independence financial resilience. In addition, the external KPMG/Deloitte Committee consists of Mr. Enaud, Mrs. De Gaay Fortman and Apart from the above-mentioned, the Dutch Government
The Supervisory Board considers all but two of its members audit report and the performance of the external auditors Mr. ‘t Hart. Mrs. De Gaay Fortman chairs the Remuneration imposed conditions regarding the distribution of dividend
to be independent in the sense of the Dutch Corporate were discussed. Furthermore, the 2019 management letter of Committee. to KLM’s shareholders in light of the State financial support
Governance Code. Mr. Riolacci in his capacity of former the external auditors was discussed. During the extraordinary The Remuneration Committee met on one occasion during package of EUR 3.4 billion. Even if KLM’s financial situation
Chief Financial Officer of AIR FRANCE KLM is not considered meeting in May, the Audit Committee dealt intensively with the financial year. All members attended the meeting. In would allow a distribution in a certain financial year, no
independent. Mr. Riolacci resigned as Chief Financial Officer of KLM’s measures in response to the COVID-19 crisis. In that order to align with the AIR FRANCE KLM policy and relevant dividend may be distributed to the shareholders during the
AIR FRANCE KLM as per July 2016. Furthermore, Mr. Smith, in regard, the committee discussed the required staff reduction benchmarks, the Remuneration Committee prepared term of the State support and also not following the NOW
his capacity as Chief Executive Officer of AIR FRANCE KLM, is and further decrease of investments to protect KLM’s amendments to KLM’s Remuneration Policy. However, payroll support scheme regulations..
not considered as independent. liquidity position. Particular attention has been paid to KLM’s given the COVID-19 reality, the implementation of these
committed and uncommitted fleet orders. Furthermore, the amendments have been postponed. The Committee Financial statements 2020
Committees committee assessed the recovery scenarios and their impact evaluated the performance of the members of the Board The Supervisory Board hereby presents the annual report
The Supervisory Board has three committees: the Audit on capacity development. The Audit Committee reported to of Managing Directors against the collective and individual and the financial statements for financial year 2020. KPMG
Committee, the Remuneration Committee and the Nomination the Supervisory Board on its analysis of the situation. targets set for the financial year. Further information can be Accountants N.V. and Deloitte Accountants B.V. have
Committee. All committees prepare policy and decision- found in the Remuneration Policy and Report section of this audited the financial statements. The Supervisory Board has
making and report on their activities to the full Supervisory In June, an extraordinary meeting was organised to pre- annual report. discussed the financial statements and the annual report
Board. Committee meetings are open to all members of discuss the details of the Revolving Credit Facility to be with the external auditors and the Board of Managing
the Supervisory Board regardless of membership of the provided by the banks. During this meeting, the Audit Nomination Committee Directors. The unqualified auditors’ report , with a going
Committees. Committee reviewed and assessed the conditions linked to The Nomination Committee is charged with the responsibility concern emphasis of matter paragraph, as issued by KPMG
the loan and the drawing mechanism. The Audit Committee to draft selection criteria and appointment procedures and Deloitte can be found in the Other Information section
Audit Committee advised the Supervisory Board on its conclusions regarding for Supervisory Board members and Board of Managing of the financial statements.
The Audit Committee is charged with the responsibility to the loan documentation. Directors members. Furthermore, the committee is The Supervisory Board is satisfied that the annual report
monitor KLM’s financial-accounting process, the efficiency of responsible for assessing the size and composition of the and the financial statements comply with all relevant
the internal control over financial reporting, internal audit and During the July meeting, the Audit Committee discussed Boards and the functioning of individual board members, requirements and proposes that the shareholders adopt
risk management systems. In addition, the Audit Committee KLM’s first half-year results. Particular attention was paid drafting a plan for succession and making proposals for (re) the financial statements and endorse the Board of
prepares the selection of the external auditors and advises to several future scenarios, the voluntary departure plan appointments and preparing the decision-making process for Managing Directors’ conduct of KLM Group’s affairs and the
the Supervisory Board regarding the external auditors’ and the hedge contracts. The audit plan, revised in light of the Supervisory Board. The Nomination Committee consists Supervisory Board’s supervision thereof in the financial year
nomination for appointment, reappointment or dismissal. COVID-19, was also discussed. The external auditors KPMG of Mr. Enaud, Mrs. De Gaay Fortman and Mr. ‘t Hart. Mr. ‘t Hart 2020.
The Audit Committee consists of Mr. De Jager, Mrs. Pellerin and Deloitte presented the external audit plan. chairs the Nomination Committee.
and Mr. Riolacci. Mr. Riolacci chairs the Audit Committee. Closing remarks
The meeting held in December, was dedicated to discussing The Nomination Committee met on one occasion during the The Supervisory Board reflects on a year in which KLM has
In 2020, the Audit Committee held three regular meetings. In the financing & financial risk plan for 2021. Given the impact financial year and all members attended. During the meeting, navigated through a crisis of unprecedented scale. Despite
addition to the regular meetings, the Audit Committee held of COVID-19, the Audit Committee also conducted in-depth the composition of the Supervisory Board and the Board the emerging challenges and uncertainties, the entire KLM
two extraordinary meetings with the Chief Financial Officer to reviews in the field of audits, fraud risks, hedging policies. of Managing Directors, including succession planning, was organisation delivered an unparalleled performance.
discuss KLM’s measures on cost reduction, various scenarios Also, the internal audit plan for 2021 as presented by the discussed.
and required financing. internal auditor, was discussed. Furthermore, the 2020 The Board is proud of all employees at KLM who keep
management letter of the external auditors was discussed. Distribution to shareholders showing their unlimited commitment to our customers,
Except for the February meeting, all meetings were held via Article 32 of KLM’s Articles of Association provides for the regardless of the faced difficulties. Furthermore, the
video call. All but one Audit Committee member attended all of During the February 2021 meeting, KLM’s financial results appropriation of profit. Paragraph 1 of that article gives the Supervisory Board is grateful for the Dutch Government’s
the meetings. Furthermore, the Chief Financial Officer attended for 2020 were discussed. Furthermore, the summary of the Meeting of Priority Shareholders (AIR FRANCE KLM) the right support provided throughout the year.
all meetings of the Audit Committee. The external auditors, internal audit activity report for the period July-December to set aside an amount of the disclosed profit to establish
the Vice President Internal Audit and the Senior Vice President 2020 as well as the KLM Group operational risk report or increase reserves. The Meeting of Priority Shareholders On behalf of the Board, I hereby would like to thank the
Corporate Controller, also attended the three regular meetings. were discussed during this meeting. During the March may do so only after consultation of the Board of Managing Board of Managing Directors, the Executive Team and
Senior managers and other experts within KLM were invited to 2021 meeting, the external KPMG/Deloitte audit report was Directors and the Supervisory Board. all colleagues for their continuous efforts, resilience and
the Audit Committee’s December meeting. discussed. flexibility towards KLM and its customers around the world.
Since no net profit was made during the financial year 2020,
During the February 2020 meeting, the Audit Committee Remuneration Committee no distribution of dividends to any class of share shall be
discussed the first implications of the COVID-19 outbreak, The Remuneration Committee is charged with the made. Cees ‘t Hart
which was, at that point in time, mainly limited to KLM’s China responsibility to prepare a clear and understandable Chairman
market. This meeting focused primarily on KLM’s financial proposal for the remuneration policy, the remuneration of
results for 2019. Also, the Audit Committee discussed the KLM the individual members of the Board of Managing Directors
Group operational risk report, fraud risk report, internal audit and to make proposals for the remuneration of the individual
activity report for the period July-December 2019 and KLM’s members of the Supervisory Board. The Remuneration

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Corporate Governance Corporate Governance
Remuneration Remuneration
In light of the extraordinary circumstances
in 2020 caused by COVID-19 and the
conditions attached to the State financial
support package for the duration of the
2020

report and policy

support the execution of the KLM’s regular
Due to COVID-19 and its significant impact on the company,
existing remuneration policy will not apply. KLM’s Board of Managing Directors had already decided
Therefore, the order of this chapter is and communicated in April 2020 to refrain from their variable
income over the year 2020. In addition, Mr. Elbers (CEO)
different from previous years and will first
voluntarily reduced his base salary by 20% as from June for
deal with the explanation of the actual the remainder of the year.
remuneration in 2020.

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In the context of the obtained State financial support
package, the government imposed certain conditions
2. Base salary
Mr. Elbers’ base salary in 2020 has not been increased and Remuneration Objective of the policy
The main objective of the remuneration policy is to create

policy for
(amongst others) relating to remuneration of the Board of stands at EUR 600,000. In response to the difficult financial a clear and understandable remuneration structure that
Managing Directors as from mid-2020: “total remuneration situation caused by the COVID-19 crisis, Mr. Elbers has enables KLM to attract and retain qualified Managing
shall be reduced by at least twenty per cent and shall decided to voluntarily cut his fixed salary by 20 percent for Directors and to offer them a stimulating reward. Furthermore,
remain at this reduced level for as long as the State financial
support package has not been fully repaid. Part of the
the remainder of 2020 (June – December 2020).
the Board the remuneration policy aims to encourage Managing
Directors to improve the performance of KLM and to achieve
reduction is that there shall be no variable income”. The base salaries of Messrs. Swelheim and De Groot have
also not been increased in 2020 and stand at EUR 390,000 of Managing KLM’s long-term objectives within the context of AIR FRANCE
KLM.

Directors
The effect on the total Board of Managing Directors’ (2019: EUR 390,000).
remuneration for 2020 is as follows: Structure of the policy
As a general remark, the base salaries of the Board of The remuneration package for the members of KLM’s Board
CEO COO/CFO Managing Directors remain significantly below the median of of Managing Directors consists of three basic components:
Overall reduction/pay cut the applicable market benchmark as well as below that of The execution of the remuneration policy is affected by the 1. Base salary;
-45% -34~38%
(Actual 2020 versus 2019) previous KLM CEOs in the case of Mr. Elbers. conditions imposed by the State in connection with the 2. Short-term incentive in cash related to performance in the
-20% in no financial support package. Therefore, the below existing past financial year; and
Base salary 3. Short-term incentive plan KLM remuneration policy has not been applied in 2020 3. Long-term incentive in the form of phantom shares, and,
2nd half change
The Board of Managing Directors voluntarily decided in April with respect to the variable income (both Short Term - and in addition for the CEO, partially also in AIR FRANCE KLM
Short-term incentive 2020 NO NO
to refrain from their short-term incentive for 2020, in light of Long Term Incentive). For completeness sake though, a shares, based on a percentage of the base salary, related
NIL NIL
Long-term incentive 2020 (PPS) company’s financial situation due to the COVID-19 crisis. summarised explanation of the policy, as is common practice, to certain pre-determined financial and non-financial
granting granting
has been included in this annual report. targets.
NIL
Long-term specific AF/KL shares 2020 n.a. 4. Long-term incentive plan
granting
As per the conditions attached to the State financial support Process Other
package, no phantom shares have been granted for the year The Supervisory Board’s Remuneration Committee is Managing Directors may retain payments they receive from
1. Total remuneration (Base salary + Pension + 2020 under KLM’s long-term incentive plan. responsible for formulating, implementing and evaluating the other remunerated positions (such as membership of a
Short-term Incentive + Long-term Incentive) remuneration policy of KLM with regard to the terms and supervisory board or similar body) with the maximum number
For the KLM CEO, also an AIR FRANCE KLM specific LTI (SLTI) conditions of service and remuneration of the members of of remunerated positions set at two per Managing Director.
With the above adjustments, the total remuneration for the plan applies. Under this plan, also no granting took place for the Board of Managing Directors and the remuneration of Acceptance of such position requires the prior approval
Board of Managing Directors in 2020 is as below. The actual the year 2020. the members of the Supervisory Board. The remuneration of the Supervisory Board. Any payment in connection with
reduction / pay cut of 45% for CEO and 34/38% for COO/CFO policy is thereafter proposed by the Supervisory Board and, Supervisory Board memberships with KLM Group companies or
are well matching the “at least 20% reduction” condition as Internal pay ratios in accordance with the Articles of Association, adopted by with other airline companies remains due to KLM. Members of
set out by the Dutch Government. In line with the Dutch Corporate Governance Code, the General Meeting of Shareholders. the Board of Managing Directors are furthermore entitled to
internal pay ratios are an important input for assessing the make use of travel facilities comparable to the travel facilities
(amounts in EUR) 2020 2019 % Remuneration policy for the Board of Managing Directors. In accordance with the Articles of Association and the as described in the travel regulations for KLM employees.
P.J.Th. Elbers 722,818 1,322,953 -45% The ratio between the annual total compensation for the remuneration policy, and subject to prior approval of the
R.M. de Groot 494,829 754,217 -34%
CEO and the average annual total compensation for an Meeting of Priority Shareholders (AIR FRANCE KLM), the Claw back clause
employee of KLM was 7.6 for the 2020 financial year, which is Supervisory Board sets the remuneration and further terms The Supervisory Board has the authority to reclaim payments
E.R. Swelheim 474,870 764,753 -38%
significantly lower than the KLM pay ratio for 2019 (11.7) and and conditions of service of the individual members of the on the basis of article 2:135 sub 8 of the Dutch Civil Code.
Total 1,692,517 2.841,923 -40%
well below the ratios at peer companies in the Netherlands. Board of Managing Directors. These decisions are prepared
The Annual total compensation include base salary, variable by the Supervisory Board’s Remuneration Committee. Any Pensions
Further details of the remuneration received by the individual income if applicable, in any year and pension benefits. The changes in individual remuneration resulting from the In accordance with KLM’s pension policy the Pension Plan for
members of the Board of Managing Directors is provided in development of this ratio will be monitored and disclosed evaluation are proposed by the Remuneration Committee to members of KLM’s Board of Managing Directors is a career
note 33 of the financial statements going forward. the Supervisory Board. The Supervisory Board in turn adopts average salary scheme. The short-term incentive (up to a
the remuneration, subject to approval of the Meeting of maximum of 30 per cent) is part of pensionable income.
Loans and advances Priority Shareholders.
No loans or advances have been granted to members of the In line with the fiscal regime, pensionable income is capped
Board of Managing Directors. at EUR 110,111 (2020). In addition, Managing Directors are
entitled to an allowance, comparable to the premium available
for pension accrual for the part of base salary above EUR
110,111, which can be used as a premium (deposit) for a net
pension scheme that is offered by KLM’s pension fund.

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Corporate Governance Corporate Governance
Employment contracts with members of the Board of
Managing Directors
Members of the Board of Managing Directors have a contract
Remuneration
of employment with KLM. In case of newly appointed external
members of the Board of Managing Directors, the term of the
employment contract is set at a maximum of four years. When
policy and
Board members are appointed from within KLM, the years of
service are respected in their new employment contract, and
the appointment as a board member has a fixed term of four
report for the
years. With regard to the current members of the Board of
Managing Directors: Supervisory Board
» Mr. Elbers’ employment contract of indefinite duration
contains a fixed-term appointment clause as a board Remuneration 2020
member for a period of four years until the Annual General In response to the COVID-19 crisis, for the second half of
Meeting of 2023; 2020 the Supervisory Board members voluntarily agreed to
» Mr. Swelheim’s employment contract of indefinite duration reduce their remuneration by 20 percent. As a consequence,
contains a fixed-term appointment clause as a board the fixed fee for the Chairman amounted to EUR 37,452 and
member for a period of four years until the Annual General for the other members to EUR 23,408.
Meeting of 2022;
» Mr. De Groot’s employment contract of indefinite duration Details on the remuneration received by individual members
contains a fixed term appointment clause as a board of the Supervisory Board are presented in note 32 of the
member for a period of four years until the Annual General financial statements.
Meeting of 2023.
Remuneration policy
Severance pay The remuneration policy for members of the Supervisory
In case of newly appointed members of the Board of Board has not changed since 2008. The remuneration
Managing Directors from outside KLM, the maximum severance consists of a fixed annual fee and a fee for each committee
pay in the event of dismissal is established at one year’s base meeting that is attended. Members of the Supervisory Board
salary. In case of newly appointed members of the Board of do not receive a performance-related reward or shares
Managing Directors from within KLM, the severance pay in or rights to shares by way of remuneration, nor are they
the event of dismissal has been set at a maximum of two granted loans, advances or guarantees. The remuneration
years’ base salary, whereby in establishing the amount due of the members of the Supervisory Board is fixed by the
consideration will be given to the years of service with KLM. General Meeting of Shareholders.

The remuneration for the Supervisory Board is as follows:

Supervisory Board
The fixed fee payable for services amounts to EUR 42,500
for the Chairman and EUR 26,500 for the other members of
the Supervisory Board. The fee per meeting of the Audit
Committee attended amounts to EUR 2,000 for the Chairman
of the committee and EUR 1,000 for the other members.

and Board of
The fee per meeting of the Remuneration Committee and
the Nomination Committee amounts to EUR 1,500 for the
Chairman of the committee and EUR 1,000 for the other
members. Members of the Supervisory Board are furthermore
entitled to make use of travel facilities described in the travel

Managing Directors
regulations for KLM employees.

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Corporate Governance Corporate Governance
Supervisory Board (situation as at December 31, 2020)

Year of First appointment/ Current function / Supervisory Board

Name birth Nationality Current term memberships and former functions*
Cees ’t Hart (Chairman) 1958 Dutch 2014/(second) CEO Carlsberg Group
2018 - 2022 Former CEO of Royal Friesland Campina
Former SVP Marketing Operations Unilever Europe
François Enaud *** 1959 French 2016 (second) President FE Development / board member of
2020 - 2024 Linkbynet, ABMI, Ayesa and Visiativ and Talan,
Chairman of Shadline and DejaMobile, Managing
Partner of Towerbrook and Omnes Capital, President
of ANSA,
Former Group CEO Sopra Steria Group
Marry de Gaay Fortman ** 1965 Dutch 2017 / (first) 2017-2021 Partner at Houthoff/ Member Supervisory Board
De Nederlandsche Bank, Chair Topvrouwen.nl, various
board memberships in the cultural sector
Jan-Kees de Jager 1969 Dutch 2019/(first) President and investor at Easygenerator, investor and
2019-2023 strategic advisor at Sana Commerce /
Former CFO and member of Board of Managing
Directors of Royal KPN N.V., former managing partner
and CEO of ISM eCompany
Christian Nibourel *** 1958 French 2020 (first) President OneUp / President of Greater Paris
2020 - 2024 Investment Agency, Member of CESE, French
National Council of Industry, Global Apprenticeship
Network France, chairman of INSA-Lyon, President
de Association de Garantie des Salaries, Former CEO
Accenture France Benelux Board of Managing Directors (situation as at December 31, 2020)
Fleur Pellerin *** 1973 French 2018 / (first) CEO of Korelya Consulting and Korelya Capital/
2018-2022 Board member of Schneider Electric, board member
of Devialet, board member of Talan, board member
of Ledger, President of Canneseries Festival, Board Name Year of birth Nationality First appointment Function
member of Stanhope
1970 Dutch 2012 President and Chief Executive Officer KLM
Pierre François Riolacci *** 1966 French 2016 (second) CEO Europe of ISS World Services A/S / Pieter J.Th. Elbers
2020 - 2024 Former Group CFO of ISS World Services A/S, Former Managing Director and Chief Operating
René M. de Groot 1969 Dutch 2015
CFO of AIR FRANCE KLM, Former CFO of Veolia Officer KLM
Environnement, former Director of Finance at Veolia Erik R. Swelheim Managing Director and Chief Financial
Environnement 1965 Dutch 2014
Officer KLM
Benjamin Smith *** 1971 Canadian 2019 (first) CEO of AIR FRANCE KLM/ Member of AIR FRANCE KLM
2019 - 2023 Board of Directors, Director of Société Air France
Former president airlines and COO of Air Canada Company Secretary & General Counsel
Janine Vos ** 1972 Dutch 2019 (first) Member of the Managing Board and CHRO of
2019 – 2023 Rabobank/
Member of the Advisory Board Topvrouwen.nl and Name Year of birth Nationality
member of the Advisory Board Social Capital Barbara C.P. van Koppen
1966 Dutch
Former CHRO of Royal KPN N.V.

* Only memberships of Supervisory Boards and functions with large companies on December 31, 2020 are shown here
** Appointed upon recommendation of KLM’s Works Council
*** Appointed upon recommendation of AIR FRANCE KLM

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Corporate Governance Corporate Governance
 2020
Financial
Statements

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108 109
Financial Statements 2020 Financial Statements 2020
KLM Royal Dutch Airlines Consolidated balance sheet KLM Royal Dutch Airlines Consolidated statement of profit or loss

In millions of Euros December 31, 2020 December 31, 2019 In millions of Euros Note 2020 2019
Before proposed appropriation of the result for the year Note
Revenues 23 5,120 11,075
ASSETS
Non-current assets Expenses
Property, plant and equipment 1 5,398 5,361 External expenses 24 (3,455) (6,116)
Right-of-use assets 2 1,745 2,028 Employee compensation and benefit expenses * 25/28 (2,079) (3,187)
Intangible assets 3 475 509 Other income and expenses 26 127 173
Investments accounted for using the equity method 4 18 16 Total expenses (5,407) (9,130)
Other non-current assets 5 175 223
Other financial assets 6 411 617 EBITDA* 28 (287) 1,945
Deferred tax assets 17 77 21 Amortisation, depreciation, impairment and movements in provisions * 27/28 (1,058) (1,070)
Pension assets 18 211 420
8,510 9,195 Income from operating activities* 28 (1,345) 875
Current assets
Other current assets 5 78 151 Cost of financial debt 29 (164) (172)
Other financial assets 6 295 161 Income from cash and cash equivalents 29 16 24
Inventories 7 180 298
Trade and other receivables 8 902 1,269 Net cost of financial debt (148) (148)
Cash and cash equivalents 9 482 697 Other financial income and expenses 29 (192) (127)
1,937 2,576
Income before tax (1,685) 600
TOTAL ASSETS 10,447 11,771
Income tax income/(expense) 30 136 (162)
EQUITY
Capital and reserves Net income after tax (1,549) 438
Share capital 10 94 94
Share premium 474 474 Share of results of equity shareholdings 3 11
Reserves 11 (441) (315)
Retained earnings 1,303 858 (Loss)/Profit for the year (1,546) 449
Result for the year (1,547) 448
Total attributable to Company's equity holders (117) 1,559 Attributable to:
Non-controlling interests 2 1 Equity holders of the Company (1,547) 448
Total equity (115) 1,560 Non-controlling interests 1 1
(1,546) 449
LIABILITIES
Non-current liabilities
Financial debt 12 1,129 1,130 Net (loss)/profit attributable to equity holders of the Company (1,547) 448
Lease debt 13 872 1,173 Dividend on priority shares - -
Other non-current liabilities 5 931 148 Net (loss)/profit available for holders of ordinary shares (1,547) 448
Other financial liabilities 14 1,924 1,005
Deferred income 16 258 229 Average number of ordinary shares outstanding 46,809,699 46,809,699
Deferred tax liabilities 17 - 84 Average number of ordinary shares outstanding (fully diluted) 46,809,699 46,809,699
Provisions for employee benefits 18 429 398
Return obligation liability and other provisions 19 1,219 1,343 (Loss)/Profit per share (in EUR) (33.05) 9.57
6,762 5,510 Diluted (loss)/profit per share (in EUR) (33.05) 9.57
Current liabilities
Trade and other payables 20 1,485 2,145 *S
 ee note 28 Alternative performance measures (APM) for the reconciliation
Financial debt 12 226 181 to adjusted EBITDA of EUR 75 million negative (2019: EUR 1,943 million
positive) and adjusted income from operating activities of EUR 1,154
Lease debt 13 334 404
million negative (2019: EUR 853 million positive). Also see the Alternative
Other current liabilities 5 174 85
performance measures section in the Notes to the consolidated financial
Other financial liabilities 14 193 77
statements
Deferred income 16 998 1,382
Current tax liabilities 17 - 82
Income from operating activities* 28 (1,345) 875
Provisions for employee benefits 18 23 22
Total APM adjustments income from operating activities 28 (191) 22
Return obligation liability and other provisions 19 367 323
Adjusted income from operating activities 28
3,800 4,701
(as per AIR FRANCE KLM Group reporting) (1,154) 853

Total liabilities 10,562 10,211 The accompanying notes are an integral part of these consolidated financial statements

TOTAL EQUITY AND LIABILITIES 10,447 11,771

The accompanying notes are an integral part of these consolidated financial statements

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Financial Statements 2020 Financial Statements 2020
KLM Royal Dutch Airlines Consolidated statement of profit or loss and other comprehensive income KLM Royal Dutch Airlines Consolidated statement of changes in equity

In millions of Euros 2020 2019 Attributable to Company’s equity holders

(Loss)/Profit for the year (1,546) 449 Share Share Reserves Retained Result for Total Non- Total
capital premium earnings the year controlling equity
Cash flow hedges In millions of Euros interests
Effective portion of changes in fair value of cash flow hedges recognised directly in equity 375 (27) As at January 1, 2020 94 474 (315) 858 448 1,559 1 1,560
Change in fair value transferred to profit or loss (391) 182
Transfer to retained earnings - - - 448 (448) - - -
Exchange differences on translation foreign operations 1 (2)
Net gain/(loss) from cash flow hedges - - (16) - - (16) - (16)
Tax on items of comprehensive income that will be reclassified to profit or loss 11 (41)
Fair value of equity instruments revalued through OCI - - 8 - - 8 - 8

Total of comprehensive income that will be reclassified to profit or loss (4) 112
Exchange differences on translation foreign
operations - - 1 - - 1 - 1
Remeasurement of defined benefit pension plans (182) 142

Remeasurement of defined benefit pension plans - - (182) - - (182) - (182)

Fair value of equity instruments revalued through OCI 8 (24)

Transfer from retained earnings - - (12) 12 - - - -

Tax on items of comprehensive income that will not be reclassified to profit or loss 73 (65) Deferred tax on items taken directly to or transferred
from equity - - 75 9 - 84 - 84
Total of comprehensive income that will not be reclassified to profit or loss (101) 53
Net income/(expense) recognised directly in - - (126) 469 (448) (105) - (105)
Total of other comprehensive income after tax (105) 165 equity

Recognised income and expenses (1,651) 614 (Loss) for the year - - - - (1,547) (1,547) 1 (1,546)
- Equity holders of the company (1,652) 613
- Non-controlling interests 1 1 Total recognised income/(expenses) - - (126) 469 (1,995) (1,652) 1 (1,651)

The accompanying notes are an integral part of these consolidated financial statements
Dividends paid - - - (19) - (19) - (19)

Other movements - - - (5) - (5) - (5)

As at December 31, 2020 94 474 (441) 1,303 (1,547) (117) 2 (115)

Attributable to Company’s equity holders

Share Share Reserves Retained Result for Total Non- Total
capital premium earnings the year controlling equity
In millions of Euros interests
As at January 1, 2019 94 474 (651) 478 565 960 1 961

Transfer to retained earnings - - - 565 (565) - - -

Net gain/(loss) from cash flow hedges - - 155 - - 155 - 155

Fair value of equity instruments revalued through OCI - - (24) - - (24) - (24)

Exchange differences on translation foreign

operations - - (2) - - (2) - (2)

Remeasurement of defined benefit pension plans - - 142 - - 142 - 142

Transfer from retained earnings - - 162 (162) - - - -

Deferred tax on items taken directly to or transferred
from equity - - (97) (9) - (106) - (106)

Net income/(expense) recognised directly in - - 336 394 (565) 165 - 165

equity

Profit for the year - - - - 448 448 1 449

Total recognised income/(expenses) - - 336 394 (117) 613 1 614

Dividends paid - - - (18) - (18) (1) (19)

Other movements - - - 4 - 4 - 4

As at December 31, 2019 94 474 (315) 858 448 1,559 1 1,560

The accompanying notes are an integral part of these consolidated financial statements
KLM 2020 Annual Report KLM 2020 Annual Report
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Financial Statements 2020 Financial Statements 2020
 Financial
KLM Royal Dutch Airlines Consolidated cash flow statement

In millions of Euros Note 2020 2019

(Loss)/Profit for the year (1,546) 449
Adjustments for:

Statements
Depreciation, amortisation and impairment 27 1,049 1,076
Changes in provisions 27 30 14
Results of equity shareholdings (3) (11)
Results on sale of equity accounted investments (16) -
Changes in pension assets 54 81

financial
Changes in deferred tax 30 (54) 80
Other changes (27) 109
Net cash flow from operating activities before changes in working (513) 1,798
capital

Changes in:

year 2020
(Increase) / decrease in inventories 103 (18)
(Increase) / decrease in trade receivables 333 57
Increase / (decrease) in trade payables (306) (96)
(Increase) / decrease in other receivables and other payables 89 94
Change in working capital requirement 219 37

Net cash flow from operating activities (294) 1,835

Purchase of intangible fixed assets 3 (111) (156)

Purchase of aircraft 1 (557) (1,091) Notes to the consolidated financial statements
Proceeds on disposal of aircraft 31 46
Purchase of other tangible fixed assets 1 (98) (135)
Proceeds on disposal of other (in-)tangible fixed assets 54 13
Investments in equity shareholdings - (1)
Proceeds on sale of equity shareholdings 17 10

General Going concern

Dividends received - 8
Proceeds on short-term deposits and commercial paper (6) (37)
Net cash flow used in investing activities (670) (1,343)

Proceeds from long-term debt 2,092 491

Repayment on long-term debt (986) (717)
Koninklijke Luchtvaart Maatschappij N.V. (the “Company” or Since the beginning of 2020, the worldwide spread of
Payments on lease debt (379) (380) “the Group”) is a public limited liability company incorporated COVID-19 has had and continues to have a major impact on
Proceeds from long-term receivables (16) (62) and domiciled in the Netherlands. The Company’s registered air traffic around the world and consequently also on KLM.
Repayment on long-term receivables 64 16 office is located in Amstelveen. After the significant drop in traffic in the second quarter due
Dividend paid (19) (19)
to very stringent constraints on the movements of travelers
Net cash flow used in financing activities 756 (671)
The Company is a subsidiary of AIR FRANCE KLM S.A. (“AIR worldwide, the expected recovery in the second half of
Effect of exchange rates on cash and cash equivalents (6) 1 FRANCE KLM”), a company incorporated in France. The 2020 has been delayed with the resurgence of COVID-19
Company financial statements are included in the financial end of summer. At the date of the 2020 authorisation
Change in cash and cash equivalents (214) (178) statements of AIR FRANCE KLM which can be obtained from of the financial statements in March 2021, the Dutch
the AIR FRANCE KLM Financial communication department. Government imposed travel restrictions from South Africa,
Cash and cash equivalents at beginning of period 696 874
Cash and cash equivalents at end of period * 9 482 696
AIR FRANCE KLM’s shares are quoted on the Paris and Central and South America and introduced testing protocols
Amsterdam stock exchanges. for passengers and crew. Moreover the Dutch State
Change in cash and cash equivalents (214) (178) communicated to Dutch citizens an advice to limit travel
These financial statements have been authorised for issue abroad to necessary only up to half May 2021.
Interest paid (flow included in operating activities) (136) (182)
by the Board of Managing Directors on March 31, 2021 and
Interest received (flow included in operating activities) 4 13
will be submitted for approval to the Annual General Meeting Our measures and State Aid
The accompanying notes are an integral part of these consolidated financial statements (AGM) of shareholders on May 4, 2021. From the start of the COVID-19 crisis, KLM has taken a
* Including unrestricted Triple A bonds, deposits and commercial paper the overall cash position and other highly liquid investments amounts to EUR 1,031 million as number of strong measures to limit the effect of COVID-19 on
at December 31, 2020 (December 31, 2019 EUR 1,390 million)
its business to manage the short and long term viability and
continues to monitor and evaluate further developments.
In millions of Euros 2020 2019
These measures include, amongst others, a reduction of
Net cash flow from operating activities (294) 1,835 the capacity offered by the network, the phase out of the
Net cash flow used in investing activities (excluding investments in and proceeds on sale passenger and combi Boeing 747, limiting leased aircraft
of equity shareholdings, dividends received and purchase of short-term deposits and (681) (1,323)
extension options, other cost savings measures, reassessing
commercial paper)
Free cash flow (975) 512
of capital expenditures and cash preservation measures.
Payments on lease debt (379) (380) By October 2020, KLM prepared its restructuring plan that
Adjusted free cash flow* (1,354) 132 was imposed by the Dutch State in order to ensure the EUR
* See the alternative performance measures section in the Notes to the Consolidated financial statements 3.4 billion State financing support package consisting of a

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114 115
Financial Statements 2020 Financial Statements 2020
EUR 1.0 billion State loan and EUR 2.4 billion Revolving Credit assessment of the financial forecasts of KLM in the context In this scenario, thanks to the high level of variable costs
Facility (RCF) with a bank syndicate. The Dutch State has of the current COVID-19 pandemic. These scenarios are and the subsidies supporting the staff costs, KLM would
guaranteed 90% of the EUR 2.4 billion RCF. The restructuring based on the materialisation of the assumptions as set out have enough cash to continue over this 12 months period.
plan includes conditions, notably at least 15% reduction of below. Further actions can be:
manageable costs, reduction of labour conditions for all staff The budget for 2021 assumes a progressively ramp up of Subsequent events
and to meet certain sustainability goals. The restructuring capacity towards summer 2021 and expects recovery in » further optimisation and reduction of the network and
plan was approved by the Dutch State on November 3, 2020, the second and third quarter 2021 thanks to the vaccine the capacity; Additional restructuring
ensuring the EUR 3.4 billion financing package. deployment. Also during the period between budget » deferral of capital expenditure; On January 21, 2021, the Group announced that given the
preparation and budget approval, additional (travel) » further significant restructuring; and ongoing COVID-19 crisis and related reduced workload,
As per December 31, 2020, KLM has drawn EUR 0.9 billion of restrictions and testing protocols were imposed by the Dutch » additional costs reductions. between 800 to 1,000 additional jobs will need to be
the State Loan / RCF and EUR 2.5 billion is available for future Government. Although not part of the budget, amongst reduced. It concerns approximately 500 jobs within cabin,
liquidity requirements. Together with the near cash position others, this led to additional measures of further reduction of Nevertheless, in the event that this scenario transpires, a 100 at cockpit and between 200 and 400 within the ground
of EUR 1.0 billion (reference is made to the footnote in the 800 to 1,000 jobs. breach of covenants is likely to occur. As a consequence the domain.
Consolidated cash flow statement), the available liquidity by Based on the 2021 budget, and recent developments and State Loan/RCF will be payable on demand. In this event KLM
December 31, 2020, is close to EUR 3.5 billion. forecasts it is expected that KLM has sufficient liquidity, will be required to negotiate with its syndicate banks and Basis of presentation
In addition, during 2020 KLM was granted around EUR 1 mainly driven by the following factors: the Dutch State for a waiver on the bank covenants. The consolidated financial statements have been prepared
billion support from the “Temporary Emergency Bridging » the continuing NOW subsidies from the Dutch Government in conformity with International Financial Reporting Standards
Measure for sustained employment” (NOW) and used to support the staff costs; Uncertainty and going concern assumption adopted by the European Union (EU-IFRS) and effective at
amongst others the possibility to delay the payment of » a high level of production related costs, such as fuel and The worldwide COVID-19 pandemic and potential future the reporting date December 31, 2020. The consolidated
wages tax and social securities of EUR 764 million the latter flight related costs; waves create severe uncertainties requiring further financial statements have also been prepared in accordance
being repaid over 36 months as from October 2021. » the adjustment of the capacity to the expected demand scenario’s to be assessed. In the event that covenants will with Section 362(9) of Book 2 of the Dutch Civil Code. As
Moreover, KLM reassessed capital expenditures and in order to operate only incrementally flights providing be breached, KLM will have to negotiate with the syndicate permitted by Section 402 of Book 2 of the Dutch Civil Code
internal projects, deferred or reversed entitlements of the positive operating cash flow; banks and the Dutch State for a waiver or to lower the the Company statement of profit or loss has been presented
employee’s profit sharing scheme and made arrangements » the limitation of capex investment plan; covenant target. The Dutch State has already shown its in condensed form.
with suppliers about improved payment terms. By the end of » the additional new financing of aircraft delivered from support by next to the guarantee for the EUR 1.0 billion
2020, over 5,100 staff left the Company through voluntary manufacturers; and State Loan, also guarantying 90% of the EUR 2.4 billion All amounts (unless specified otherwise) are stated in millions
departure plans and discontinuation of temporary contracts. » other measures available to management, e.g. FTE RCF. On the short term, for KLM the uncertainties impacting of Euros (EUR million).
Despite these measures, KLM’s financial performance for the reductions. future cash flows mainly relate to the timing and extent of
coming period will continue to be severely affected by the recovery of passenger demand in addition to the possible Significant accounting policies
impact of COVID-19 and the related loss of revenue, sales Liquidity change in travel behavior and uncertainties around the The consolidated financial statements are prepared on
of tickets and negative cash flows to an extent and for a Despite the high level of liquidity by the end of 2020, special lack of alternative sources for financing for a sustainable historical cost basis unless stated otherwise. The principal
duration that is currently uncertain. attention is given in the 2021 budget and forecast to the solvency, both for the long and short term and the timing accounting policies applied in the preparation of the
risk for the long- and short term liquidity. This in relation to and achievement of the assumption incorporated in the consolidated financial statements are set out below. These
Scenario modelling the applicable conditions and covenants in the State Loan/ current liquidity and cash flow forecasts as explained in the policies have been consistently applied to all the years
Throughout 2020, KLM has continuously prepared financial RCF and due to the fact that there is an increased working preceding paragraph on Sensitivity test. presented in these financial statements, unless stated
scenarios that were updated with the assessed financial capital requirement. otherwise.
impact of information about customer demand, travel On the long term, KLM probably needs further support to
restrictions imposed by governments and development of The long term liquidity risks consist of not being able to obtain a sustainable solvency position. Currently the Dutch IFRS standards which are applicable on
the COVID-19 virus worldwide. These scenarios were shared finance future fleet investments due to the negative equity State is in discussion with the European Commission about a mandatory basis to the 2020 financial
with the KLM Supervisory Board and the Dutch State and position as per December 31, 2020. potential support for KLM. Reflecting on the short term, in statements
its advisors. These scenarios included the general available order to bridge the period during the COVID-19 pandemic » Amendments to IAS 1“Presentation of financial
support from the Dutch State. To date the Dutch State has The short term liquidity risk is related to the covenants there is uncertainty that the covenants could be in breach statements” and IAS 8 “Accounting policies, changes in
continued its support to KLM by extending measures like included in the State Loan/RCF that will be first measured resulting that the State loan/RCF are due and payable. This accounting estimates and errors”. These amendments,
NOW when “lockdown” measures and travel restrictions are by the end of September 2021 and subsequently by end of event would require mitigation actions. which define the term materiality, give guidance on the
extended. December 2021 and March 2022. The budget 2021 projects Based on the above, material uncertainty exists that may information to be disclosed in the financial statements,
that no covenants will be breached and with a maximum 10% cast significant doubt on KLM’s ability to continue as a going based on its importance;
By January 2021, KLM presented its budget for 2021 and downward sensitivity analysis on activity levels and additional concern. Notwithstanding this material uncertainty caused » Amendments to IFRS 9 “Financial instruments”, IAS 39
forecasts for the years 2022-2025 to the KLM Supervisory measures considered the covenants will stand the test. by the current COVID-19 pandemic, management believes, “Financial Instruments: Recognition and Measurement” and
Board. In determining the appropriate basis of preparation of based on the near cash position of EUR 1 billion and the IFRS 7 “Financial instruments: Disclosures”. Since January 1,
the financial statements for the year ended December 31, Sensitivity test available credit lines facilities of EUR 2.5 Billion (in total EUR 2020, the Group has applied Phase 1 amendments to IFRS
2020, KLM’s Board of Managing Directors and Supervisory As the timing of resumption of flying is uncertain, KLM also 3.5 billion) and the expected continued willingness of the 9, IAS 39 and IFRS 7 released by the IASB in September 2019
Board are required to consider whether the Group can modelled a further, but plausible, scenario assuming an Dutch State and bank syndicate to support KLM, that KLM as part of the interest-rate benchmarks reform (IBORs).
continue its operations for the coming 12 month period additional decrease of 10% of activity in 2021 compared to will be able to continue to fulfill its financial obligations for These amendments allow the Group not to consider
after the date of these financial statements. Based on the the 2021 budget, to assess the liquidity position over the at least twelve months and as such continue on a going the uncertainties over the future of the interest-rate
modelled scenario’s KLM has concluded that it is appropriate entire going concern period of at least 12 months from the concern basis. Therefore, these financial statements have benchmarks in the assessment of hedging relationships
to adopt the going concern basis, having undertaken an date of signing of these financial statements. been prepared on the going concern assumption. and/or in the appraisal of the highly probable hedged

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 flows, enabling to maintain the existing and future hedging Other texts potentially applicable to the » Amendments to IFRS 3 “Business combinations” (effective and liabilities and the disclosures of contingent assets and
relationships until the effective set up of these new Group, published by the IASB but not yet for accounting periods as of January 1, 2022). These liabilities at the date of the financial statements and the
interest-rate benchmarks. adopted by the European Union amendments update the standard IFRS 3 following the reported amounts of revenues and expenses during the
The application of this amendment has no impact on the » Amendments to IFRS 9 “Financial instruments”, IAS 39 publication of the new Conceptual Framework in March reported period. Although these estimates are based on
Group’s financial statements and allows to continue with “Financial Instruments: Recognition and Measurement”, 2018. management’s best knowledge of current events and actions,
the hedge accounting of instruments indexed notably to IFRS 7 “Financial instruments: Disclosures” and IFRS 16 actual results ultimately may differ from the estimates.
Euribor and Libor US; “Leases” (effective for accounting periods as of January This new conceptual framework effectively modified the The preparation of these financial statements also requires
1, 2021). These amendments relate to the phase 2 of the definition of assets and liabilities which could have led to management to exercise its judgment in the process of
» Amendments to IFRS 3 “Business Combinations”. The interest rate benchmark reform (IBORs) and are applicable derecognition of some types of liabilities immediately after applying the Company’s accounting policies.
amendment provides changes in the definitions of the retrospectively. an acquisition. Reference to IAS 37 “Provisions, Contingent
separate components of a business. Hence, an acquired Liabilities and Contingent Assets” or IFRIC 21 “Levies” must The areas involving a higher degree of judgment or
set of activities must be substantive and, like the They mainly address issues regarding the accounting be made to identify the liabilities assumed in a business complexity, or areas where assumptions and estimates
operating staff, able to create outputs; treatment to apply if the basis for determining the combination for transactions or other events falling within are significant to the consolidated financial statements are
contractual cash flows of financial assets or financial the scope of these texts. The contingent assets acquired disclosed further in the note Accounting policies for the
» IFRS IC interpretations of the lease term (IFRS 16) and liabilities changes and the effects of these changes on in a business combination shall not be accounted for. consolidated balance sheet.
useful life of leasehold improvements (IAS 16). This the hedging relationships included in the scope of the
interpretation gives some clarification concerning the IBORs reform. They also indicate the financial information » Amendments to IAS 37 “Provisions, Contingent liabilities Alternative performance measures (APMs)
enforceable duration of indefinite lease contracts to disclose relating to this reform and its accounting and Contingent Assets” (effective for accounting periods
cancellable by either party, subject to prior notice, or impacts as well as the accounting treatment of these as of January 1, 2022). These amendments standardize Adjusted EBITDA and adjusted income from
concluded for an initial contractual term, and renewable changes applicable to the standards different from those, the identification and assessment practices related to operating activities
by tacit agreement, unless terminated by either party. This which are specific to financial instruments such as the the provisions for onerous contracts, especially regarding The Group considers it relevant to the understanding of its
interpretation also gives clarification on the link between standard for leases. Amendments to IFRS 9 and IAS 39 losses upon termination arising from contracts concluded financial performance to use certain alternative performance
the enforceable lease term and useful life of leasehold mainly suggest to: with customers within the scope of IFRS 15 “Revenue from measures (APMs) not defined by IFRS. These APMs should
improvements; and » manage changes linked to the IBOR reform by modifying Contracts with Customers”; not be viewed in isolation as alternatives to the equivalent
the effective interest rate of the concerned financial IFRS measures and should be used as supplementary
» Amendments to IFRS 16 “Leases”. This amendment permits assets and liabilities on a prospective basis, without These amendments indicate that the costs, including information in conjunction with the most directly comparable
to lessees not to assess whether a rent concession impact on the net result; and in the assessment of the “cost of fulfilling a contract”, IFRS measures. APMs do not have standardised meaning
occurring as a direct consequence of the COVID-19 » introduce some flexibilities in terms of the eligibility are the costs that relate directly to the contract. These under IFRS and therefore may not be comparable to similar
pandemic is a lease modification. criteria for the fair value hedge or the cash flow hedge amendments will apply to the contracts for which the measures presented by other companies.
accounting in order to be able to maintain the relations entity has not yet fulfilled all its obligations as from
This practical expedient allows the lessee to account for in the scope of this reform. the commencement date of the year of the first-time In addition APMs are also important for the Group given
those rent concessions related to the COVID-19 pandemic adoption; and that these provide alignment with the understanding of the
as if they were not lease modifications and to recognize These amendments apply to financial assets and liabilities financial performance and external reporting of its ultimate
the impact of the rent concession in the result of the for which contractual changes are a direct consequence » Amendment to IFRS 9 “Financial instruments” (effective for parent company, AIR FRANCE KLM S.A.
period. This practical expedient applies to rent concessions of the interest rate reform, and insofar as the new basis accounting periods as of January 1, 2022). The amendment
related to COVID-19 fulfilling the following conditions: for determining the contractual cash flows is economically to IFRS 9 is included in the annual improvements to IFRS To provide clear reporting on the development of the
» the modification leads to a revision of the lease debt that similar to the previous one. standards 2018 – 2020. business, APM adjustments are made that impact EBITDA and
is substantially the same or inferior to the initial lease debt income from operating activities. A reconciliation of these
immediately prior to the modification; » Amendments to IAS 1 “Presentation of financial The amendment indicates that the fees included in the APMs to the most directly comparable IFRS measures can be
» the rents are initially owed by June 30, 2021 latest; and statements” (effective for the accounting periods as 10 per cent test for assessing whether a financial liability found in Note 28 Alternative performance measures.
» there is no other substantial modification in the contract. of January 1, 2022). These amendments clarify the must be derecognised are only the costs paid or fees
classification of current or non-current liabilities and aim received between the borrower and the lender, including Adjusted EBITDA (Adjusted Earnings Before Interests, Taxes,
These amendments and interpretations did not have a to promote a consistent approach to this classification. those which are paid or received on the behalf of the Depreciation, Amortisation and movements in provision): by
material impact on the Group’s financial statement as of Reference is made to note 14 Other financial liabilities; other party. extracting the main line of the statement of profit or loss
December 31, 2020. Concerning the first adoption, the amendment to IFRS which does not involve cash disbursement (“Amortisation,
» Amendments to IAS 16 “Property, Plant and Equipment” 9 will apply to financial liabilities that are modified depreciation, impairments and movements in provision”)
(effective for accounting periods as of January 1, 2022). or exchanged as from the commencement date of from income from operating activities, adjusted EBITDA
These amendments aim at standardizing the accounting the earliest comparative period presented in the provides a simple indicator of the Group’s cash generation
method for the proceeds and costs while an item of financial statements of the first adoption of the annual on operational activities. Elements that have less predictive
property, plant or equipment is in the testing phase; improvements to IFRS standards 2018 – 2020. value due to their nature, frequency and/or materiality to
arrive at adjusted EBITDA are:
Use of estimates and the exercise of » Restructuring costs;
judgments » Infrequent elements such as derecognition of a pension
The preparation of financial statements in conformity plan and recognition of provisions for litigation.
with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets

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Elements that have less predictive value due to their nature, activities of the entity need to be taken. of acquisition is accounted for as goodwill and included in losses resulting from the settlement of such transactions and
frequency and/or materiality to arrive at adjusted income The financial statements of subsidiaries are included in the the book value of the investment accounted for using the from the translation at year-end exchange rates of monetary
from operating activities are: consolidated financial statements from the date that control equity method. assets and liabilities denominated in foreign currencies are
» Result on sales of aircraft, other flight equipment and begins until the date this control ceases. Investments in which the Group has ceased to exercise recognised in the statement of profit or loss, except when
disposals of other assets; significant influence or joint control are no longer accounted deferred in equity as qualifying cash flow hedges and
» Impairment of assets; Non-controlling interests are presented within equity and for by the equity method and are accounted at their qualifying net investment hedges.
» Income from the disposal of subsidiaries and affiliates; on the statement of profit or loss separately from Company’s fair value as other financial asset on the date of loss of
» Infrequent elements such as the recognition of badwill in equity holders and the Group’s net result, under the line significant influence or joint control. Group companies
the statement of profit or loss. “non-controlling interests”. The financial statements of Group entities (none of which
Intra-group operations has the currency of a hyperinflationary economy) that
Adjusted free cash flow The effects of a buyout of non-controlling interests in a All intra-group balances and transactions, including income, have a functional currency different from the presentation
In addition to provide clear reporting on the development subsidiary already controlled by the Group and divestment of expenses and dividends are fully eliminated. Profits or losses currency are translated into the presentation currency as
of the business, APM adjustments are also made that impact a percentage interest without loss of control are recognised resulting from intra-group transactions are also eliminated. follows:
the adjusted free cash flow. A reconciliation of this APM to in equity. In a partial disposal resulting in loss of control, the Gains and losses realised on internal sales with associates » Assets and liabilities are translated at the closing rate;
the most directly comparable IFRS measures can be found in retained equity interest is remeasured at fair value at the and jointly-controlled entities are eliminated, to the extent » The statement of profit or loss and the cash flow
the Consolidated cash flow statement. date of loss of control. The gain or loss on the disposal will of the Group’s interest in the entity, providing there is no statement are translated at average exchange rates
include the effect of this remeasurement and the gain or impairment. (unless this average is not a reasonable approximation
Free cash flow corresponds to the net cash flow from loss on the sale of the equity interest, including all the items of the cumulative effect of the rates prevailing on the
operating activities net of purchase of (prepayments in) initially recognised in equity and reclassified to profit or loss. Scope of consolidation transaction dates, in which case income and expenses are
aircraft, property plant and equipment and intangible assets A list of the significant subsidiaries is included in note 37 of translated at the dates of the transactions); and
less the proceeds on the disposal of aircraft, property plant Interest in associates and jointly controlled the consolidated financial statements. » All resulting translation differences are recognised as a
and equipment and intangible assets. It does not include the entities separate component of equity.
other cash flows linked to investment operations, particularly In accordance with IFRS 11 “Joint arrangements”, the Group
investments in subsidiaries and other financial assets and applies the equity method to partnership over which it Foreign currency On consolidation, exchange differences arising from the
net cash flow from the operating activities of discontinued exercises control jointly with one or more partners (jointly translation of the net investment in foreign entities, and of
operations. controlled entities). Control is considered to be joint when Functional and presentation currency borrowings and other currency instruments designated as
decisions about the relevant activities of the partnership Items included in the financial statements of each of the hedges of such investments, are taken to equity.
Adjusted free cash flow: this corresponds to operating free require the unanimous consent of the Group and the other Group’s entities are measured using the currency of the
cash flow net of the repayment of lease debts. parties sharing the control. In cases of a joint activity (joint primary economic environment in which the entity operates When control is given up, such exchange differences are
operation), the Group recognises assets and liabilities in (“the functional currency”). The consolidated financial recognised in the statement of profit or loss as part of the
Near cash proportion to its rights and obligations regarding the entity. statements are presented in Euro, which is the Company’s gain or loss on sale.
Also near cash is mentioned in the Consolidated cash flow functional and presentation currency. Non-monetary items
statement. Near cash: corresponds to financial assets that In accordance with IAS 28 “Investments in Associates and that are measured in terms of historical cost in a foreign Goodwill and fair value adjustments arising on the acquisition
can be transferred to cash on short notice. This includes Joint Ventures”, companies in which the Group has the currency are not retranslated. of a foreign entity are treated as assets and liabilities of the
cash and cash equivalent, highly liquid investments and ability to exercise significant influence on financial and foreign entity and translated at the closing rate.
other assets with an original maturity between 3 and 12 operating policy decisions are also accounted for using the Transactions and balances
months, such as bonds, long-term deposits and commercial equity method. The ability to exercise significant influence is Foreign currency transactions are translated into the
paper. presumed to exist when the Group holds more than 20% of functional currency using the exchange rates prevailing at
the voting rights. the dates of the transactions or at the exchange rate of
Consolidation principles the related hedge, if applicable. Foreign exchange gains and
The consolidated financial statements include the Group’s
Subsidiaries share of the net result of associates and jointly controlled
In conformity with IFRS 10 “Consolidated Financial entities from the date the ability to exercise significant
Statements”, the Group’s consolidated financial statements influence begins to the date it ceases, adjusted for any
comprise the financial statements for all entities that are impairment loss.
controlled directly or indirectly by the Group, irrespective of
its level of participation in the equity of these entities. The The Group’s share of losses of an associate that exceeds The exchange rates used for the most significant currencies were as follows:
companies over which the Group exercises control are fully the value of the Group’s interest and net investment (long-
consolidated. term receivables for which no reimbursement is scheduled or Average in Statement
An entity is controlled when the Group has power over likely) in this entity is not accounted for, unless the Group: Balance Sheet December 31, of profit or loss Balance Sheet December 31,
2020 2020 2019
it, is exposed or has rights to variable returns from its » Has incurred contractual obligations; or EUR EUR EUR
involvement in this entity, and has the ability to use its » Has made payments on behalf of the associate. 1 US dollar (USD) 0.81 0.89 0.89
power to influence the amounts of these returns. The 1 Pound sterling (GBP) 1.11 1.13 1.18
determination of control takes into account the existence of Any surplus of the investment cost over the Group’s share 1 Swiss franc (CHF) 0.93 0.93 0.92
potential voting rights if they are substantive, meaning they in the fair value of the identifiable assets, liabilities and 100 Japanese yen (JPY) 0.79 0.82 0.82

can be exercised in time when decisions about the relevant contingent liabilities of the associate company on the date 100 Kenya shilling (KES) 0.71 0.81 0.86

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Business combinations » Leisure Depreciation leased asset according to the terms of the contract. At
Business combinations are accounted for using the This segment covers primarily the provision of charter flights Property, plant and equipment are depreciated to estimated the date of the initial recognition of the right-of-use
purchase method in accordance with IFRS 3 revised standard and (low-cost) scheduled flights operated by transavia.com. residual values using the straight-line method over average asset, the lessee adds to its costs, the discounted amount
“Business combinations”. The cost of a business combination » Other estimated useful lives. of the restoration and dismantling costs through a return
is measured at the fair values, at the date of exchange, This segment covers primarily catering and handling services obligation liability as described in the paragraph on
of assets given, liabilities incurred or assumed and equity to third-party airlines and clients around the world. During the annual operational planning cycle, the Group “Return obligation liability on leased aircraft”. These costs
instruments issued in exchange for control of the acquirer. reviews the depreciation methods, useful lives and residual also include restoration obligations with regard to engines,
Any other costs directly attributable to the business Geographical segments values and, if necessary amends these. airframe and life limited parts.
combination are recorded in the statement of profit or loss. Revenues are allocated to geographical segments on the
basis of destination as follows: The useful lives of property, plant and equipment are as Following the initial recognition, the right-of-use asset must
When a business combination agreement provides for an » Direct flights: Revenue is allocated to the geographical follows: be depreciated over the useful life of the underlying assets.
adjustment to the cost contingent on future events, then segment in which the destination falls; and This is the lease term for the rental component, flight hours
the adjustment is taken into account when determining the » Flights with stopovers: Revenue is allocated to the Category Useful life (years) or expected period until engine removal for the component
cost if the adjustment is probable and can be measured geographical segments in which the various sections of Aircraft 20 to 25 relating to engine maintenance or on a straight-line basis
Aircraft fixtures and fittings, major
reliably. the route fall in accordance with IATA guidelines (based for the component relating to the airframe until the date
maintenance components and
on weighted Passenger-kilometers). spare parts 3 to 25
of the next major overhaul, for life limited parts over the
Where goodwill has been initially determined on a Land Not depreciated lease term for wide body aircraft and over the time until the
provisional basis, adjustments arising within twelve months of The greater part of the Group’s assets comprises aircraft Buildings 10 to 40 maintenance event in which they are replaced for narrow
the acquisition date are recognised on a retrospective basis. and other assets that are located in the Netherlands. Inter- Equipment and fittings 3 to 15 body aircraft.
Goodwill acquired in a business combination is no longer segment revenues are determined using the prices actually Other property and equipment 5 to 20

amortised, but instead is subject to annual impairment test used for invoicing. These prices have been determined on a Measurement of the lease liability
or more frequently if events or changes in circumstances consistent basis. Lease contracts At the commencement date, the lease liability is recognised
indicate that goodwill might be impaired. Lease contracts as defined by IFRS 16 “Leases”, are for an amount equal to the present value of the lease
recorded in the balance sheet, which leads to the payments over the lease term.

Accounting
Segment reporting recognition of:
The Company defines its primary segments on the basis of » An asset representing a right-of-use of the asset leased Amounts involved in the measurement of the lease liability
the Group’s internal organisation, main revenue generating during the lease term of the contract; and are:
activities and the manner in which the Board of Managing
Directors manages operations. policies for the » A liability related to the payment obligation. » Fixed payments (including in-substance fixed payments;
meaning that even if they are variable in form, they are

The Group has as its principal businesses: network

activities, which include air transport of passengers and
balance sheet Arrangements with the following financing features are not
eligible to an accounting treatment according to IFRS 16:
» The lessor has legal ownership retention as security
in-substance unavoidable);
» Variable lease payments that depend on an index or a
rate, initially measured using the index or the rate in force
cargo activities, aircraft maintenance, leisure and any other against repayment and interest obligations; at the lease commencement date;
activities linked to air transport. Property, plant and equipment » The airline initially acquired the aircraft or took a major » Amounts expected to be payable by the lessee under
Property, plant and equipment are stated initially at historical share in the acquisition process from the Original residual value guarantees;
Business segments acquisition or manufacturing cost, less accumulated Equipment Manufacturers; and » The exercise price of a purchase option if the lessee is
The activities of each segment are as follows: depreciation and any accumulated impairment loss. Flight » In view of the contractual conditions, it is (virtually) certain reasonably certain to exercise this option; and
equipment acquired in foreign currency is translated at the that the aircraft will be purchased at the end of the lease » Payments of penalties for terminating the lease, if the
» Network exchange rate applicable at the date of acquisition or the term. lease term reflects the lessee exercising an option to
Includes air transport of passengers and cargo activities: hedged rate where a hedging instrument has been used. Since these financing arrangements are “in substance terminate the lease.
» Passenger main activity is the transportation of Manufacturers’ discounts are deducted from the acquisition purchases” and not leases, the related liability is considered
passengers on scheduled flights that have the Company’s cost. as a financial debt under IFRS 9 and the asset, as an owned The lease liability is subsequently measured based on a
airline code. Passenger revenues include receipts from asset, according to IAS 16 Property Plant and equipment. process similar to the amortised cost method using the
passengers for excess baggage. Other passenger Aircraft fixtures and fittings and initial potentials to be discount rate:
revenues are derived from commissions from SkyTeam restored on aircraft by major maintenance operations, which Measurement of the right-of-use asset » The liability is increased by the accrued interests resulting
alliance partnership arrangements and revenues from include life limited parts (which are defined as a major engine At the commencement date, the right-of-use asset is from the discounting of the lease liability, at the beginning
block-seat sales; and part whose failure would jeopardise the engine’s operation), measured at cost and comprises: of the lease period; and
» Cargo activities relate to the transportation of freight on are classified as separate components from the airframe and » The amount of the initial measurement of the lease » Less payments made.
flights under the Company’s code and the sale of cargo depreciated separately. liability, to which is added, if applicable, any lease
capacity to third parties. payments made at or before the commencement date, The interest cost for the period as well as variable payments,
The cost of major maintenance operations (such as less any lease incentives received; not taken into account in the initial measurement of the
» Maintenance airframes, engines and life limited parts) which are carried » Where relevant, any initial direct costs incurred by the lease liability and incurred over the relevant period are
Maintenance revenues are generated through maintenance out in accordance with specifications and schedules defined lessee for the conclusion of the contract. These are recognised as costs. In addition, the lease liability may be
services (engine services, component services and airframe by manufacturers and regulating authorities are capitalised incremental costs which would not have been incurred if remeasured in the following situations:
maintenance) provided to other airlines and clients around when incurred. Other maintenance costs are expensed as the contract had not been concluded; and » Change in the lease term;
the world. incurred. » Estimated costs for restoration and dismantling of the » Modification related to the assessment of the reasonably

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 certain nature (or not) of the exercise of an option; similar term, with a similar security and in a similar economic » Sale not according to IFRS 15 circumstances indicate that the carrying amount may not
» Remeasurement linked to the residual value guarantees; environment. This rate is achieved by the addition of the If the sale by the vendor-lessee is not qualified as a sale be recoverable. Goodwill, software with indefinite lives and
and interest rate on government bonds and the credit spread. according to IFRS 15, the vendor-lessee keeps the goods intangible assets not yet available for use are tested for
» Adjustment to the rates and indices according to which The coupon on government bonds is specific to the location, transferred on its balance sheet and recognises a financial impairment annually and whenever there is an indication
the rents are calculated when rent adjustments occur. currency, period and maturity. The definition of the spread liability equal to the disposal price (received from the buyer- that the asset may be impaired. Goodwill is allocated to
curve is based upon reference points, each point consisting lessor). the relevant CGU and software to the CGU which uses the
Types of capitalised lease contracts of asset financing on assets other than aircraft. software.
Intangible assets
» Aircraft lease contracts » Other assets lease contracts An impairment loss is recognised in the statement of profit
For the aircraft lease contracts fulfilling the capitalisation The other lease contracts identified correspond to company Goodwill or loss for the amount by which the asset’s carrying amount
criteria defined by IFRS 16, the lease term corresponds to cars, pools of spare parts and aircraft engines. The lease Goodwill is stated at cost less accumulated impairment exceeds its recoverable amount.
the duration of the contracts signed except in cases where term corresponds to the non-terminable period. The losses. Goodwill represents the excess of the cost of an
the Group is reasonably certain of exercising the renewal discount rate used to calculate the lease debt is determined, acquisition over the fair value of the Group’s share of the For the purpose of assessing impairment, assets are
options contractually foreseen. The accounting treatment for each asset, according to the incremental borrowing rate net identifiable assets, liabilities and contingent liabilities grouped at the lowest levels for which there are separately
of the maintenance obligations related to leased aircraft at the signature debt. The incremental borrowing rate is of the acquired subsidiaries and associates. Goodwill on identifiable cash flows (CGUs), which correspond to the
is outlined in the paragraph “Return obligation liability on the rate that the lessee would pay to borrow the required acquisition of subsidiaries is included in intangible assets. Group’s Business segments.
leased aircraft”. funds to purchase the asset over a similar term, with a similar If the cost of acquisition is less than the fair value of the
security and in a similar economic environment (refer to the net identifiable assets, liabilities and contingent liabilities Impairment losses recognised in respect of CGUs are
Aircraft lease contracts concluded by the Group do not paragraph above “Real estate lease contracts” regarding the at the level of the (groups of) cash-generating units allocated first to reduce the carrying amount of any goodwill
include guaranteed value clauses for leased assts. method to determine the incremental borrowing rate). (CGU’s) it relates to, the difference is recognised directly allocated to CGUs (or groups of CGUs) and then, to reduce
in the statement of profit or loss. Goodwill on acquisition the carrying amount of the other assets in the CGU (or
The discount rate used to calculate the lease debt Types of non-capitalised lease contracts of associates is included in investments in associates. On group of CGUs) on a pro-rata basis.
corresponds, for each aircraft, to the implicit rate determined The Group uses the two exemptions foreseen by the disposal of a subsidiary the attributable amount of goodwill
by the contractual elements and residual market values. This standard allowing for non-recognition in the balance sheet: is included in the determination of profit or loss on disposal. The recoverable amount of an asset is the higher of its fair
rate is based on the readily availability of current and future short-term lease contracts and lease contracts for which the The useful life of goodwill is indefinite. value less cost to sell and its value in use. To determine the
data concerning the value of aircraft. The implied rate of underlying assets have a low value. value in use, estimated future cash flows are discounted
the contract is the discount rate that gives the aggregated Computer software to their present value using a pre-tax discount rate that
present value of the minimum lease payments and the » Short duration lease contracts Computer software is stated at historical cost less reflects current market assessments of the time value of
unguaranteed residual value. This present value should be There are contracts whose duration is equal to or less than accumulated amortisation and accumulated impairment money and the risks specific to the asset. For an asset that
equal to the sum of the fair value of the leased asset and 12 months. Within the Group, they mainly relate to leases of: losses. Only the costs incurred in the software development does not generate largely independent cash inflows, the
any initial direct costs of the lessor. » Surface areas in our hubs with a reciprocal notice-period phase are capitalised. Cost incurred in respect of feasibility recoverable amount is determined for the CGU to which the
equal to or less than 12 months; studies and research etc. and post-implementation and asset belongs.
Most of the aircraft lease contracts are denominated in » Accommodations for expatriates with a notice period evaluation phases are charged to the statement of profit
US dollars. The Group put in place a cash flow from these equal to or less than 12 months; and or loss as incurred. The costs comprise the cost of KLM An impairment loss is reversed only to the extent that the
lease contracts as hedging instruments in cash flow hedges » Spare engines for a duration equal to or less than 12 personnel as well as external IT consultants. asset’s increased carrying amount does not exceed the
with its US dollars revenues as hedged items. The effective months. carrying amount that would have been determined, net of
portion of the foreign exchange revaluation of the lease Amortisation takes place over the estimated useful lives depreciation or amortisation, if no impairment loss had been
debt in US dollars at the closing date is recorded in “other » Low-value lease contracts (mainly 5 years and with a maximum of 20 years) of the recognised. An impairment loss in respect of goodwill is not
comprehensive income”. This amount is recycled in revenues Low-value lease contracts concern assets with a value software using the straight-line method. The useful life reversed.
when the hedged item is recognised. For the COVID-19 equal to or less than USD 5,000. Within the Group, these of each software application is determined separately.
related impact reference is made to note 11. include, notably, lease contracts on printers, tablets, laptops Amortisation commences when the software is taken into Financial instruments: Recognition and
and mobile phones. use. Prior to this moment the cost are capitalised as prepaid measurement of financial assets and liabilities
» Real-estate lease contracts intangible assets.
Based on its analysis, the Group has identified lease Sale and leaseback transactions The estimated useful life and amortisation method are Valuation of trade receivables and non-current
contracts according to the standard concerning surface The Group qualifies as sale and leaseback transactions, reviewed during the annual operational planning cycle, financial assets
areas rented in its hubs, lease contracts on building operations which lead to a sale according to IFRS 15 including the effect of any changes in estimates being Trade receivables, loans and other non-current financial
dedicated to the maintenance business, customised lounges “Revenue from Contracts with Customers”. More specifically, recognised prospectively if the change relates to future assets are considered to be assets issued by the Group and
in airports other than hubs and lease contracts on office a sale is considered as such if there is no repurchase option periods. are initially recorded at fair value. They are subsequently
buildings, including leasehold land when applicable. on the goods at the end of the lease term. valued using the amortised cost method less impairment
Impairment of assets losses, if any. Regarding the impairment of trade receivables,
The lease term corresponds to the non-terminable period. » Sale according to IFRS 15 In accordance with IAS 36 “Impairment of Assets”, the the Group has chosen the simplified method approach.
The discount rate used to calculate the lease debt is If the sale by the vendor-lessee is qualified as a sale Group’s assets, other than inventories, deferred tax assets, Considering its business and risks, trade receivables have
determined, for each asset, according to the incremental according to IFRS 15, the vendor-lessee must: assets arising from construction contracts, assets arising already been depreciated to the same level equal to the
borrowing rate at the signature debt. The incremental (i) de-recognise the underlying asset; and from employee benefits, financial assets that are within the expected loss.
borrowing rate is the rate that the lessee would pay to (ii) 
recognise a right-of-use asset equal to the retained scope of IFRS 9 and non-current assets held for sale are
borrow the required funds to purchase the asset over a portion of the net carrying amount of the asset. reviewed for impairment whenever events or changes in

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The Group considers that the change in credit risk on the through the statement profit or loss or in fair value through Most of these derivatives are classified as hedging Hedge effectiveness testing
non-current financial assets since their initial recognition is other comprehensive income: instruments if the derivative is eligible as a hedging At inception of the hedge and on an on-going basis at each
limited due to the criteria defined (e.g. type of instrument, » When the instrument is deemed to be a cash investment, instrument and if the hedging relationships are documented reporting date or on a significant change in circumstances
counterparty rating, and maturity). The impairment recorded i.e. it is held for the purposes of monetary transactions, its as required by IFRS 9 “Financial Instruments”. (whichever comes first), the following elements will be
by the Group consists of the expect credit loss over the 12 revaluations are recorded in “Other financial income and assessed:
months following the closing date. expenses”; and These derivative instruments are recorded on the Group’s » Economic relationship: hedge ratio should be aligned with
Purchases and sales of financial assets are booked for as of » When the instrument is deemed to be a business consolidated balance sheet at their fair value adjusted Group guidelines.
the transaction date. investment, i.e. it is held for strategic reasons (as it mainly for the market value of the Group’s credit risk (DVA) and In case of a significant change in circumstances the following
consists of investments in companies whose activity the credit risk of the counterparty (CVA). The calculation elements will be assessed:
Investments accounted for using the equity is very close to that of the Group) its revaluations of the credit risk follows a common model based on » Credit risk: change in credit risk of the hedging instrument
method are recorded in “Other comprehensive income” non- default probabilities from CDS counterparties. The method or the hedge item must not be of such magnitude that
Associates are all entities over which the Group has recyclable. Dividends are recorded in the statement profit of accounting for changes in fair value depends on the it dominates the value change that results from the
significant influence but not control or joint control, which or loss. classification of the derivative instruments. economic hedge relationship; and
is presumed to exist when the Group holds more than 20% » Need for rebalancing.
of the voting rights. Jointly controlled entities are entities Derivative financial instruments and hedge Hedging transactions fall into two categories:
whereby the Group together with one or more parties accounting 1. Fair value hedges; and The documentation at inception of each hedging relationship
undertakes activities related to the Group’s business that are Derivative financial instruments are recognised initially (trade 2. Cash flow hedges. sets out how it is assessed whether the hedging relationship
subject to joint control. date), and are subsequently re-measured, at fair value. Fair meets the hedge effectiveness requirements.
values are obtained from quoted market prices in active 1. Fair value hedges
Investments in associates and jointly controlled entities markets or by using valuation techniques where an active Changes in the fair value of derivatives that are designated If the hedge relationship no longer meets the criteria
are accounted for by the equity method and are initially market does not exist. and qualify as fair value hedges are recorded in the for hedge accounting, is sold, is terminated or exercised,
recognised at cost. The Group’s investment includes Valuation techniques include discounted cash flow models statement of profit or loss, together with changes in the then hedge accounting is discontinued prospectively. The
goodwill (net of any accumulated impairment loss) identified and option pricing models as appropriate. All derivatives are fair value of the asset or liability or group thereof that are cumulative gain or loss previously recognised in equity
on acquisition. The Group’s share of post-acquisition profits presented as assets when their fair value is positive and as attributable to the hedged risk. remains there until the forecasted transaction affects
or losses is recognised in the statement of profit or loss, liabilities when their fair value is negative. profit or loss. If the forecasted transaction is no longer
and its share of post-acquisition movements in reserves is 2. Cash flow hedges expected to occur, then the balance in equity is recognised
recognised in reserves. Derivative assets and liabilities on different transactions The effective portion of changes in the fair value of immediately in profit or loss.
are only netted if the transactions are with the same derivatives that are designated and qualify as cash flow
The cumulative post-acquisition movements are adjusted counterpart, a legal right to offset exists and the cash flows hedges is recognised in equity. Any gain or loss relating to an Fair value hierarchy
against the carrying amount of the investment, taking into are intended to be settled on a net basis. ineffective portion is recognised immediately in the statement Based on the requirements of IFRS 7, the fair values of
account other than temporary losses (impairment). When of profit or loss. financial assets and liabilities are classified following a scale
the Group’s share of losses in an associate/jointly controlled Recognition of fair value gains and losses that reflects the nature of the market data used to make the
entity equals or exceeds its interest in the associate/jointly The method of recognising fair value gains and losses on Amounts accumulated in equity are recycled to the statement valuations. This scale has three levels of fair value:
controlled entity, including unsecured receivables, the Group derivative financial instruments depends on whether the of profit or loss in the periods in which the hedged item will » Level 1: Fair value calculated from the exchange rate/price
does not recognise further losses, unless it has incurred derivative is held for trading, or is designated as a hedging affect profit or loss. However, when a forecast transaction that quoted on the active market for identical instruments;
obligations or made payments on behalf of the associate/ instrument, and if so, the nature of the risk being hedged. is hedged results in the recognition of a non-financial asset » Level 2: Fair value calculated from valuation techniques
jointly controlled entity. or a non-financial liability, the gains and losses previously based on observable data such as active prices or similar
All derivative financial instruments are held for hedging deferred in equity are transferred from equity and included in liabilities or scopes quoted on the active market; or
Unrealised gains on transactions between the Group and purposes. It is KLM’s policy not to hold derivative financial the initial measurement of the cost of the asset or liability. » Level 3: Fair value from valuation techniques which rely
its associates/jointly controlled entities are eliminated to instruments for trading purposes. The derivatives, which do completely or in part on non-observable data such as
the extent of the Group’s interest in the associates/jointly not qualify for hedge accounting, are described as items For options, only the intrinsic risk can be hedged. The time prices on an inactive market or the valuation on a multiple
controlled entities. Unrealised losses are also eliminated not qualifying for hedge accounting in these notes to the value is excluded as it is considered as a cost of hedging. The basis for non-quoted securities.
unless the transaction provides evidence of an impairment financial statements. change in fair value of the option time value is recognised
of the asset transferred. Accounting policies of associates/ in other comprehensive income insofar as it relates to the
jointly controlled entities have been changed where Categories of hedging transactions hedged item. When the latter occurs (if the hedged item is
necessary to ensure consistency with the policies adopted Derivatives are used to hedge the risks associated with transaction-related), the change in fair value is then recycled
by the Group. changes in interest rates, foreign currency rates, fuel prices and charged and impacts the hedged item or is amortised
and ETS (Emission Trading Scheme). over the hedging period (if the hedged item is time-related).
Investments in equity securities
Investments in equity securities qualifying as equity Forward currency contracts and options are used to hedge Regarding forward contracts, only the spot component
instruments are recorded at fair value in the Group’s exposure to exchange rate movements. The Group also uses is considered as a hedging instrument, since the forward
balance sheet. For publicly-traded securities, the fair value interest rate swaps to manage its exposure to interest rate element is considered as a hedging cost and accounted for
is considered to be the market price at the closing date. For risk. Finally, the exposure to fuel price risks is covered by similarly to the option time value.
non-quoted securities, the valuation is made on the basis of swaps or options on jet fuel and fuel related indices such The currency swap basis spread is also excluded from the
the financial statements of the entity. as Gasoil and Brent. The risk related to ETS is hedged by hedging instrument and considered as a hedging cost.
The valuation of capital instruments is either in fair value forwards.

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Financial assets Financial liabilities The Group also sells miles to partner companies participating The amount recognised as a liability or an asset for post-
The Group initially measures a financial asset at its fair value Financial liabilities are initially recognised at fair value. in current loyalty programs, such as credit card companies, employment benefits at the balance sheet date is the net
plus, in the case of a financial asset not at fair value through Transaction costs are included in this initial measurement. hotel chains and car rental firms. The Group defers a portion total of:
profit or loss, transaction costs. Debt financial instruments Subsequent to initial recognition, liabilities are, with the of the miles sold representing the value of the subsequent » The present value of the defined benefit obligations at
are subsequently measured at amortised cost, fair value exception of derivative financial instruments, carried at travel award to be provided, in a manner consistent with the balance sheet date; and
through profit or loss (FVPL) or fair value through other amortised cost and calculated using the effective interest the determination of the liability for earned flight awards » Minus the fair value of the plan assets at the balance
comprehensive income (FVOCI). The classification is based rate for the other financial debt. Under this principle, any discussed above. The remainder is recognised as revenue sheet date.
on two criteria: the Group’s business model for managing the redemption and issue costs, are recorded as debt in the immediately.
assets and whether the instruments’ contractual cash flows balance sheet and amortised as financial income or expense The actuarial gain and losses are recognised immediately in
represent ‘solely payments of principal and interest’ on the over the life of the loans using the effective interest method. Deferred income taxes other comprehensive income.
principal amount outstanding (the ‘SPPI criterion’): Deferred tax assets and liabilities arising from the tax losses
» Debt instruments at amortised cost for financial assets Financial liabilities are derecognised when the Group’s carried forward and temporary differences between the The present values of the defined benefit obligations are
that are held within a business model with the objective obligations specified in the contract expire or are discharged carrying amounts of assets and liabilities for financial reporting calculated using the projected unit credit method. The
to hold the financial assets in order to collect contractual or cancelled. Any costs that were attributable to financial purposes and for tax purposes are determined using the calculations of the obligations have been performed by
cash flows that meet the SPPI criterion; liabilities are expensed through the statement of profit or balance sheet liability method and calculated on the basis independent qualified actuaries. This benefit/years-of-
» Debt instruments at FVOCI, with gains or losses recycled loss. of the tax rates that have been enacted or substantively service method not only takes into account the benefits and
to profit or loss on derecognition. enacted at the balance sheet date and that are expected benefit entitlements known at the balance sheet date, but
Inventories to apply to the period when the asset is realised or the also increases in salaries and benefits to be expected in the
For financial assets at amortised cost, the Group applies the Inventories consist primarily of expendable aircraft spare liability is settled. Except for goodwill arising from a business future. When a plan is curtailed or settled, gains or losses
effective interest rate method and amortises the transaction parts, fuel stock and other supplies and are stated at the combination, deferred tax assets are recognised to the extent arising are recognised immediately in the profit or loss.
cost, discounts or other premiums included in the calculation lower of cost and net realisable value. Cost, representing the that is probable that taxable profit will be available against
of the effective interest rate over the expected life of acquisition cost, is determined using the weighted average which the tax losses carried forward and the temporary The determination of the liability or asset to be recognised
the instrument. Other financial assets are classified and method. Net realisable value is the estimated selling price difference can be utilised. as described above is carried out for each plan separately.
subsequently measured, as follows: in the ordinary course of business, less applicable selling In situations where the fair value of plan assets exceeds
» Equity instruments at fair value through other expenses. Deferred tax assets and deferred tax liabilities are set off the present value of a fund’s defined benefit obligations
comprehensive income, with no recycling of gains or only when the Group has a legally enforceable right to offset an asset is recognised if available. The service cost and
losses to profit or loss on derecognition. This category Deferred income current tax assets against current tax liabilities and the the interest accretion to the provisions are included in the
only includes equity instruments, which the Group deferred tax assets and deferred tax liabilities relate to income statement of profit or loss under “Employee compensation
intends to hold for the foreseeable future and which the Advance ticket sales taxes levied by the same authority. and benefit expense”.
Group has irrevocably elected to so classify upon initial Upon issuance, both Passenger and Cargo sales, including
recognition or transition. The Group classified its unquoted fuel and security surcharges, are recorded as deferred A deferred tax asset is recognised for all deductible temporary Other long-term employment benefits
equity instruments as equity instruments at FVOCI. Equity income under Advance ticket sales. differences associated with investments in subsidiaries, The provision for other long-term employment benefits
instruments at FVOCI are not subject to an impairment associates and interests in joint ventures, except to the relates to benefits (other than pensions and other post-
assessment under IFRS 9; Deferred gains on sale and leaseback extent that is not probable that the temporary difference will employment benefits and termination benefits) which do not
» Financial assets at FVPL comprise derivative instruments transactions reverse in the foreseeable future and taxable profit will not fall within twelve months after the end of the period in which
and quoted equity instruments which the Group had not This item relates to amounts deferred arising from sale and be available against which the temporary difference can be the employees render the related service. The provision
irrevocably elected, at initial recognition or transition, to leaseback transactions. realised. covers jubilee benefits. The benefits are unfunded.
classify at FVOCI. This category would also include debt
instruments whose cash flow characteristics fail the SPPI Flying Blue frequent flyer program A deferred tax liability is recognised for all taxable temporary The amount recognised as a liability for other long-term
criterion or are not held within a business model whose KLM and Air France have a common frequent flyer program differences associated with investments in subsidiaries, employment benefits at the balance sheet date is the
objective is either to collect contractual cash flows, or to “Flying Blue”. This program allows members to acquire associates and interests in joint ventures, except to the extent present value of the defined benefit obligations. Appropriate
both collect contractual cash flows and sell. “miles” as they fly on KLM, Air France or with other partner that the Group is able to control the timing of the reversal of assumptions are made about factors such as salary
companies. These miles entitle members to a variety of the temporary difference and it is probable that the temporary increases, employee turnover and similar factors impacting
Cash and cash equivalents benefits such as free flights with the two companies. difference will not reverse in the foreseeable future. the measurement of the obligations.
Cash and cash equivalents cover all highly liquid instruments The probability of air miles being converted into award
with original maturities of three months or less and include tickets is estimated using a statistical method. The value Provisions for employee benefits The service cost, the interest accretion to the provisions
cash in hand, deposits held at call and on short-term with of air miles is estimated based on the deferred income and the remeasurement of the net defined liability are
banks and bank overdrafts. Bank overdrafts are shown under approach, based on its fair value. This estimate takes into Pensions and other post-employment benefits included in the statement of profit or loss under “Employee
“Financial liabilities” in “Current liabilities” in the balance consideration the conditions of the use of free tickets and Pensions and other post-employment benefits relate to compensation and benefit expense”.
sheet. other awards. provisions for benefits (other than termination benefits) which
Where the Company has a practice and legally enforceable are payable to employees on retirement. The provisions cover Termination benefits
right to offset bank balances, the net balance is included The estimated value of air miles is recorded as a deduction defined benefit pension plans, early-retirement schemes and Termination benefits are employee benefits payable as
under cash and cash equivalents or bank overdrafts as from revenues and recorded under the caption “Deferred post-employment medical benefits available to employees. The a result of either the Group’s decision to terminate an
applicable. Cash and cash equivalents are stated in the income” as liability on the balance sheet at the same Group has various defined benefit and defined contribution employee’s employment before the normal retirement date or
balance sheet at fair value. time the qualifying flight for which air miles are awarded is pension plans, which are generally funded through payments an employee’s decision to accept voluntary redundancy.
recognised. to separately administered funds or to insurance companies.

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The provision is recognised when, and only when, a formal
employee termination plan has been drawn up and approved
This liability is valued on commencement date at the
discounted value of the expected cost of reinstatement Accounting Group recognises as revenue the amount invoiced to the
customer in its entirety and recognises as chartering costs

policies for the

and there is no realistic possibility of it being withdrawn. or compensation of the used productive potentials (both the amounts invoiced by the other carrier for the service
Where the benefits fall due in more than 12 months after the related to expected cost of the maintenance event required provision.
balance sheet date the provision is the present value of the to reinstate the used potentials).
expenditures expected to settle the obligation.
Other provisions statement of Maintenance contracts

Return obligation liability on leased aircraft

The Group recognises return obligation liabilities in respect
of the required restoration or reinstalment obligations
Provisions are recognised when:
» There is a present legal or constructive obligation as a
result of past events;
profit or loss The main types of contracts with customers identified within
the Group are:

within the framework of the lease of aircraft to lessors. The » It is probable that an outflow of economic benefits will be » Sales of maintenance and support contracts
constitution of these return obligation liabilities depends on required to settle the obligation; and Revenues Some maintenance and support contracts cover the
the type of restoration or reinstalment obligations to fulfil » A reliable estimate of the amount of the obligation can be airworthiness of engines, equipment or airframes, an
before returning these aircraft to the lessors: overhaul and made. Network airframe being an aircraft without engines and equipment.
restoration work as well as airframe and engine potential Revenues from air transport transactions, which consist of The invoicing of these contracts is based on the number of
reconstitution. These return obligation liabilities also consist The provisions are carried at face value unless the effect passenger and freight transportation, are recognised when flight hours or landings of the goods concerned by these
of compensation paid to lessors in respect of wear or tear of the time value of money is material, in which case the transportation service is provided. The transport service contracts. The different services included within each of
of the life limited parts in the engines for wide body aircraft. the amount of the provision is the present value of the is also the trigger for the recognition of external expenses these contracts consist of a unique performance obligation
If during the lease term life limited parts need to be replaced expenditures expected to settle the obligation. The effect such as commissions paid to agents, certain taxes and due to the existing interdependence between the services
for wide body aircraft these will be recorded as expense of the time value of money is presented as a component of volume discounts. The revenues however include (fuel) within the execution of these contracts. The revenue is
when incurred, as such replacements do not take place financial income. surcharges paid by passengers. recognised: (i) if the level of completion can be measured
within planned major engine overhaul within the lease term. reliably; (ii) if costs incurred and costs to achieve the
Emission Trading Scheme Both passenger tickets and freight airway bills are contract can be measured reliably. As there is a continuous
Overhaul and restoration works European airlines are subject to the Emission Trading consequently recorded as “advance ticket sales”. The transfer of the control of these services, the revenue from
Costs resulting from work required to be performed just Scheme (ETS). In the absence of an IFRS standard or booking of this revenue known as “ticket breakage” is these contracts is recognised as the costs are incurred.
before returning aircraft to the lessors, such as painting interpretation regarding ETS accounting, the Group chose deferred until the transportation date initially foreseen. This
of the shell or aircraft overhaul are recognised as return the following scheme known as the “netting approach”. revenue is calculated by applying a statistical rate on tickets As long as the margin on the contract cannot be measured
obligation liabilities as of the inception of the contract. The issued and unused. This rate is regularly updated. in a reliable manner, the revenue will only be recognised
counterpart of this return obligation liability is booked as a According to this approach, the quotas are recognised as at the level of the costs incurred. Forecast margins on
complement through the initial book value of the aircraft intangible assets: The Group applies the exemption provided by IFRS 15 which the contracts are assessed through the forecast future
right-of-use assets. This complement to the right-of-use » Free quotas allocated by the State are valued at nil; and allows the balance of the outstanding transactions to remain cash flows that take into account the obligations and
asset is depreciated over the lease term. » Quotas purchased on the market are accounted at the unspecified as well as their planned recognition date for the factors inherent to the contracts as well as other internal
acquisition cost. performance obligations related to contracts with an initial parameters to the contract selected using historical and/or
This liability is valued on commencement date at the These intangible assets are not amortised. term set at one year or less. If the tickets are not used, the forecast data. These forecast margins are regularly reviewed.
discounted value of the expected cost of restoration. At performance obligations related to passenger and freight If necessary, provisions are recorded as soon as any losses
the same time and for the same value, an additional asset If the difference between recognised quotas and real transportation effectively expire within one year. on completion of contracts are identified. Amounts invoiced
component is recognised in the right-of-use asset for the emissions is negative, then the Group recognises a provision. to customers, and therefore mostly collected, which are
aircraft lease on commencement date, which is amortised This provision is assessed at acquisition cost for acquired Legally enforced compensations to passenger after not yet recognised as revenue, are recorded as liabilities
over the lease term. rights and, for the non-hedged part, with reference to the irregularities in the fulfilment of the revenue generating on contracts (deferred revenue) on the balance sheet.
market price as of each closing date. At the date of the performance obligations under IFRS 15, including those from Inversely, any revenue that has been recognised but not yet
Airframe and engine potentials reconstitution restitution of the quotas corresponding to real emissions, EU261 regulations, are recorded as revenue deducting. The invoiced is recorded under assets on the balance sheet.
The airframe and the engine potentials are recognised as the provision is written-off and the intangible assets are Group recognises a corresponding amount in liabilities for
a complement to the right-of-use assets since they are returned. future refunds to passengers. » Sales of spare parts repair and labour - Time & Material
considered as full-fledged components, as distinct from contracts
the physical components which are the engine and the Passenger ticket taxes calculated on ticket sales are These services which relate to engines, equipment or
airframe. These components are the counterparts of the collected by the Group and paid to the airport authorities. airframes, an airframe being an aircraft without engines
return obligation liability, recognised at the inception of the Taxes are recorded as a liability until such time as they and equipment, are generally short-term. They consist of a
contract. When maintenance events aimed at reconstituting are paid to the relevant airport authority as a function unique performance obligation. The revenue is recognised as
these potentials take place, the costs incurred are of the chargeability conditions (on ticket issuance or costs are incurred.
capitalised. These potentials are depreciated over the period transportation).
of use of the underlying assets, which is flight hours for the The Group considers that the company that issues the External expenses
engine potentials component or straight-line for the airframe airway bill acts as principal since the latter has control over External expenses are recognised in the statement of profit
potentials component and for life limited parts over the time the achievement of the performance obligation. When the or loss using the matching principle which is based on a
until the maintenance event in which they are replaced for Group issues freight airway bills for its goods carried by direct relationship between cost incurred and obtaining
narrow body aircraft. another carrier (airline company or road carrier), the Group income related to the operation. Any deferral of cost in view
acts as principal. Therefore, at the time of transportation the of applying the matching principle is subject to these costs

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meeting the criteria for recognising them as an asset on
the balance sheet. In order to minimise the financial risks
Share-based
Cash flow use also takes into account possible adverse developments,
which may lead to impairment. It is possible that the Group

statement
involved with such transactions the Company makes use of Phantom shares may have to recognise additional impairment charges in the
financial derivatives such as fuel forward contracts, foreign The Group has cash-settled long-term incentive plans in future as a result of changes in (market) conditions that may
currency options and swaps. The gains and losses arising which it grants to its employees phantom shares. The phan- take place in future periods.
from the use of the derivatives are included in these costs. tom shares are shares, generating an amount of cash, which
is equal to the AIR FRANCE KLM share price at the moment The cash flow statement is prepared using the indirect The COVID-19 crisis resulted in a significant 2020 loss in
NOW subsidy of selling of shares. Phantom shares are accounted for as a method. Changes in balance sheet items that have not income from operations and consequently an impairment
Following the COVID-19 crisis, the Group applied for the liability at the fair value at each reporting date. The liability will resulted in cash flows such as translation differences, trigger was identified. The recoverable value of the CGU
“Temporary Emergency Bridging Measure for Sustained be built up monthly during a three-year vesting period. financial debts and fair value changes have been eliminated assets has been determined by reference to their value in
Employment” (NOW) as installed by the Dutch Government. for the purpose of preparing this statement. Assets and use as of December 31, 2020.
The Group applied for the NOW compensations, being NOW The fair value of the phantom shares is measured at the AIR liabilities acquired as part of a business combination are
1, 2 and 3.1 in 2020, and recognised the subsidy as there FRANCE KLM share closing price at the end of the month. included in investing activities (net cash acquired). Dividends Revenues (network, leisure and maintenance), costs and
is reasonable assurance that KLM will comply with the Changes in the fair value of the liability are recognised as paid to ordinary shareholders, if any, are included in financing investments forecasts are based on reasonable hypothesis
relevant conditions of the NOW schemes and thereupon employee benefit expense in profit or loss. activities. Dividends received, if any, are classified as and are management’s best estimates. They are subject to
the compensation will be received (IAS 20.7). The required investing activities. Interest paid and received are included in the uncertainties related to the current situation, specifically
separate NOW audits for 1, 2 and 3.1 are not finalised yet. operating activities. the WACC and the extrapolated cash flows after the five-
The compensation is recognised as cost deducting over the year period due to the timing, extent and degree of the
period necessary to match them with the related cost, for recovery on the operations after the COVID-19 pandemic.

Accounting
which they are intended to compensate, being wages and The forecasts reflect the increased risks arising from
salaries, on a systematic basis (IAS 20.12). COVID-19 and take into account a gradual return from the
second quarter 2021 onwards to the level of 2019 activity in
Other financial income and expense
estimates and 2024 as supported by internal and external industry data as
also described in our going concern paragraph and savings

judgments
Cost of financial debt related to currently initiated restructuring plans set up by the
Cost of financial debt includes interest on loans of third Group that have been approved by the Board of Managing
parties, financial debt and on lease debt using the effective Directors and which can be executed by management under
interest rate method. existing agreements.
Estimates and judgments are continually evaluated and are
Income from cash and cash equivalents based on historical experience and other factors, including The discount rate used for the test corresponds to the
Interest income includes interest on loans, interest-bearing expectations of future events that are believed to be Group’s average weighted average cost of capital (WACC)
marketable securities, short-term bank deposits and money reasonable under the circumstances. after tax. This stood at 6.5 per cent as at December 31, 2020.
at call. Interest income is recognised on an accrual basis. Moreover, cash flow projections used in the impairment
Key sources of estimation uncertainty tests are based on the 2021 Budget and five-year Group
Foreign currency exchange gains and losses The Group makes estimates and assumptions concerning plan, presented by the Board of Managing Directors to the
Foreign exchange gains and losses resulting from the the future. The resulting accounting estimates will, by Supervisory Board in January 2021. Cash flows extrapolated
translation of transactions in foreign currencies and from definition, seldom equal the corresponding actual results. beyond the five-year period are projected to increase based
the translation at year-end exchange rates of monetary The estimates and assumptions that have a significant risk on a long-term growth rate of 1%.
assets and liabilities denominated in foreign currencies are of causing material adjustment to the carrying amounts
recognised in the statement of profit or loss, except when of assets and liabilities within the next financial year are At December 31, 2020 the Board of Managing Directors
deferred in equity as qualifying cash flow hedges and discussed below. reviewed the recoverable amount of each of the CGUs and
qualifying net investment hedges. concluded the recoverable amounts exceeded the carrying
Impairment of assets values.
Fair value gains and losses Factors may exist which require the recognition of an
Fair value gains/losses represent the increases/decreases impairment of certain assets and/or CGUs. For the purposes Reasonable possible changes in key assumptions, both
during the year in the fair values of assets and liabilities, of assessing impairment, assets are grouped at the lowest individually and in combination, have been considered for
excluding derivative financial instruments designated as cash levels for which there are separately identifiable cash flows each CGU which include reducing the operating margin
flow hedges. (cash-generating units (CGUs)), which correspond to the by 1% and long-term growth rates in the terminal value
Group’s business segments. Such impairment is based calculation to zero and increasing the WACC with 1%. For the
on estimates of the fair value less cost to sell and the reasonable possible changes in key assumptions applied to
value in use. The fair value less cost to sell is derived from the remaining CGUs, no impairment arises.
assumptions in relation to the possible selling price of a
certain asset. The value in use is based on the discounted Useful lives of property, plant and equipment
value of the cash flows that the asset/CGU is expected to The carrying amount of flight equipment and other
generate in the future. These future cash flows are based property and equipment is determined by using estimates
on the business plans for the coming years. The value in of the depreciation periods, which are derived from the

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expected technical and economic useful life of the assets
involved. Due to advancing technology, evolving market
It should be noted that when discount rates decline or rates
of compensation increase pension and post-employment Financial Risk as market commentary. Furthermore, a weekly AIR FRANCE
KLM report consolidates the figures from the two companies

Management
circumstances and changes in the use of the assets benefit obligations will increase. Defined benefit cost relating to fuel hedging and to physical cost. The instruments
involved, the expected technical and economic life of the recognised in profit or loss and post-employment cost also used are swaps and options.
asset may be subject to alteration. increase, when discount rates decline, since this rate is also
used for the expected return on fund assets. Financial Risk Management
Valuation of inventories Risk management organisation and fuel The Group is exposed to the following financial risks:
The Group records its inventories at cost and provides for Return obligation liability and other provisions hedging policy 1. Market risk;
the risk of obsolescence using the lower of cost or market A return obligation liability and/or a provision will be Market risk coordination and management is the 2. Credit risk; and
principle. The expected future use of inventory is based on recognised in the balance sheet when the Group has a responsibility of the Risk Management Committee (RMC), 3. Liquidity and solvency risk.
estimates about future demand and past experience with present legal or constructive obligation to a third party as a which is composed of the Chief Financial Officer and Senior
similar inventories and their usage. result of a past event and it is probable that an outflow of Vice President Financial Operations of Air France-KLM and 1. Market risk
economic benefits will require settling the obligation. the Chief Financial Officers and Senior Vice Presidents The Group is exposed to market risks in the following areas:
Valuation of accounts receivable and the Corporate Finance & Treasury of Air France and of KLM and a. Currency risk;
allowance for bad or doubtful debts Management must make estimates and assumptions as at the airline directors fuel purchasing. The RMC meets each b. Interest rate risk; and
The Group periodically assesses the value of its accounts the balance sheet date concerning the probability that quarter to review AIR FRANCE KLM reporting of the risks c. Fuel price risk.
receivable based on specific developments in its customer a certain obligation will materialise as well as the amount relating to the fuel price, the principal currency exchange
base, taking into account the expected credit loss. The that is likely to be paid. Future developments, such as rates and interest rates, and to decide on the hedging to be a. Currency risk
allowance for bad or doubtful debts is formed on the changes in market circumstances, or changes in legislation implemented: targets for hedging ratios, the time periods for Most of AIR FRANCE KLM revenues are generated in euros.
grounds of this assessment. The actual outcome may diverge and judicial decisions may cause the actual obligation to the respect of these targets and, potentially, the preferred However, because of its international activities, AIR FRANCE
from the assumptions made in determining the allowances. diverge from the provision. The Group is involved in legal types of hedging instrument. KLM incurs a foreign exchange risk. The principal exposure is
disputes and proceedings. Management decides on a case- to the US dollar, and then, to a lesser extent, to British pound
by-case basis whether a provision is necessary based on The aim is to reduce the exposure of AIR FRANCE KLM and, sterling and the Japanese yen. Thus, any changes in the
Accounting for pensions and other actual circumstances. This assessment comprises both a thus, to preserve budgeted margins. The RMC also defines exchange rates for these currencies relative to the euro may
post-employment benefits determination of the probability of a successful outcome of the counterparty-risk policy. have an impact on AIR FRANCE KLM’s financial results.
Post-employment benefits represent obligations that will the legal action and the expected amount payable.
be settled in the future and require assumptions to project The decisions made by the RMC are implemented by the With regard to the US dollar, since expenditures such as fuel,
benefit obligations and fair values of plan assets. Post- treasury and fuel purchasing departments within each right-of-use leases or component cost exceed the level of
employment benefit accounting is intended to reflect the Determination of fair value company, in compliance with the procedures governing revenue, AIR FRANCE KLM is a net buyer. This means that
recognition of future benefit cost over the employee’s The Group uses available market information and appropriate the delegation of powers. In-house procedures governing any significant appreciation in the US dollar against the euro
approximate service period, based on the terms of the plans valuation techniques to determine the fair values of financial risk management prohibit speculation. Regular meetings are could result in a negative impact on the Group’s activity and
and the investment and funding decisions made by the Group. instruments. However, judgment is required to interpret held between the fuel purchasing, treasury departments financial results. Conversely, AIR FRANCE KLM is a net seller
market data and to determine fair value. Management and Chief Financial Officers of both companies in order to of the Japanese yen and of British pound sterling, the level
The accounting standards require management to make believes that the carrying value of financial assets and exchange information concerning matters such as hedging of revenues in these currencies exceeding expenditure. As
assumptions regarding variables such as discount rate, rate of financial liabilities with a maturity of less than one year instruments used, strategies planned and counterparties. a result, any significant decline in these currencies relative
compensation increase, mortality rates, and future healthcare approximates their fair value. These financial assets and to the euro could have a negative effect on the Group’s
cost. Periodically, management consults with external liabilities include cash and cash equivalents, trade accounts The treasury departments of each company circulate activity and financial results. In order to reduce its currency
actuaries regarding these assumptions. Changes in these key receivable and trade accounts payable. Details of the information on the level of cash and cash equivalents to exposure, AIR FRANCE KLM has adopted hedging strategies.
assumptions and in financing agreements between pension assumptions used and the results of sensitivity analyses their respective executive managements on a daily basis. Both KLM and Air France hedge progressively their net
funds and the Company can have a significant impact on the recognising these assumptions are provided in note 5. Every month, a detailed report including, amongst other exposure over a rolling 24-month period.
recoverability of the net pension assets (IFRIC 14), projected information, interest rate and currency positions, the
benefit obligations, funding requirements and defined benefit portfolio of hedging instruments, a summary of investments Aircraft are purchased in US dollars, meaning that AIR FRANCE
cost recognised in profit or loss incurred. For details on key and financing by currency and the monitoring of risk by KLM is highly exposed to a rise in the dollar against the euro
assumptions and policies see note 18. counterparty is transmitted to the executive managements. for its aeronautics investments. The hedging policy plans
The instruments used are forwards, swaps and options. the progressive and systematic implementation of hedging
between the date of the aircraft order and their delivery date.
The policy on fuel hedging is the responsibility of the
fuel purchasing departments, which are also in charge Despite this active hedging policy, not all exchange rate risks
of purchasing fuel for physical delivery. A weekly report, are covered. AIR FRANCE KLM might then encounter difficulties
enabling the evaluation of the net-hedged fuel cost of the in managing currency risks, which could have a negative
current financial year and the two following ones, is supplied impact on AIR FRANCE KLM business and financial results.
to the executive managements. This mainly covers the
transactions carried out during the week, the valuation of all b. Interest rate risk
positions, the hedge percentages as well as the breakdown At both KLM and Air France, most financial debt is contracted
of instruments and the underlying used, average hedge in floating-rate instruments in line with market practice.
levels, the resulting net prices and stress scenarios, as well However, given the historically low level of interest rates,

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Financial Statements 2020 Financial Statements 2020
KLM and Air France have used swap strategies to convert As of December 31, 2020, KLM identified the following
a significant proportion of their floating-rate debt into fixed exposure to counterparty risk:
rates. At the end of December 2020, KLM’s net exposure to
changes in market interest rates is neutral. LT Rating (Standard & Poor’s) Total exposure in EUR millions

AAA 257
c. Fuel price risk
AA+ 97
Risks linked to the jet fuel price are hedged within the frame­
AA- 43
work of a hedging strategy for the whole of AIR FRANCE KLM.
A+ 247
A 436
Following IFRS 9 the hedging strategy of the Group involves
components of non-financial items (crude oil and gasoil Total 1,080
are specified as components of jet fuel prices). These
components are considered as separately identifiable and At December 31, 2020, the exposure consists of the fair
reliably measurable as required by IFRS 9. market value of marketable securities, deposits and bonds.

Main characteristics of the hedge strategy: 3. Liquidity and solvency risk

» Hedge horizon: a maximum of two years rolling Liquidity and solvency risk is related to the risk that the
» Maximum hedge percentage, to reach at the end of the Group might be unable to obtain the financial resources it
current quarter: requires to meet its short- and long-term obligations on
Quarter underway: 60% of the volumes consumed; time. All anticipated and potential cash flows are reviewed
Quarter 1 to quarter 3: 60% of the volumes consumed; regularly. These include, amongst others, operational cash
Quarter 4: 50% of the volumes consumed; flows, dividends, debt and interest payments and capital
Quarter 5: 40% of the volumes consumed; expenditure. The objective is to have sufficient liquidity,
Quarter 6: 30% of the volumes consumed; including committed credit facilities, available that are
Quarter 7: 20% of the volumes consumed; adequate for the liquidity requirements for the short- and
Quarter 8: 10% of the volumes consumed. long-term. Reference is made to ‘Going concern’ paragraph in
» Increment of maximum coverage ratios: 10% by quarter; the Notes to the consolidated financial statements section
» Underlyings: Brent, Gas Oil and Jet Fuel;
» Hedging instruments: Swap, call, call spread, three ways, The Group aims to maintain the level of its cash and cash
four ways and collar. These hedging instruments must be equivalents and other highly marketable debt investments at
eligible hedging instruments in accordance with IFRS 9. an amount in excess of expected cash outflows on financial
liabilities (other than trade payables) over the next 60 days.
Due to the significant reduction in fuel consumption of 2020, The Group also monitors the level of expected cash inflows
the AIR FRANCE KLM Group was overhedged. Following this, on trade and other receivables together with expected
KLM had to terminate a large portion of the fuel hedge rela- cash outflows on trade and other payables.
tionships leading to a loss of EUR 240 million accounted for in
note 29 “Cost of financial debt” as of December 31, 2020. As
a response to this, the fuel hedging strategy will be adjusted.
The key objective of the adjustment in hedging strategy is to
reduce risk, especially in case of declining fuel prices.

2. Credit risk
Credit risks arise from various activities including investing
and operational activities as well as hedging activities with
regard to financial instruments. The risk is the loss that could
arise if a counterpart were to default in the performance
of its contractual obligations. The Group has established
credit limits, based on geographical and counterparty risk,
for its external parties, in order to mitigate the credit risk.
These limits are determined on the basis of ratings from
organisations such as Standard & Poor’s and Moody’s
Investors Service.

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Financial Statements 2020 Financial Statements 2020
1. Property, plant and equipment Property, plant and equipment include assets which are held as security for mortgages and loans as follows:

Flight equipment Other property and equipment As at December 31, 2020 2019
Owned Other flight Total Land and Equipment and Other property Total Pre- Total Aircraft 130 35
aircraft equipment buildings fittings and equipment payments Land and buildings 129 116
Historical cost Other property and equipment 41 15
As at Jan. 1, 2020 4,717 2,607 7,325 693 413 199 1,305 653 9,283 Carrying amount 300 166

Additions 241 133 374 59 15 52 126 188 688

Disposals (58) (255) (313) (1) (3) (26) (30) - (343)
Borrowing cost capitalised during the year amounts to EUR 10 million (2019 EUR 13 million). The interest rate used to
Other movements (27) 68 40 - (116) 115 (1) (106) (67)
determine the amount of borrowing cost to be capitalised was 2.6% (2019 2.7%).
As at Dec. 31, 2020 4,873 2,553 7,426 751 309 340 1,400 735 9,561

Land and buildings include buildings located on land which has been leased on a long-term basis. The book value of these
Accumulated depreciation
As at Jan 1, 2020 2,102 1,030 3,131 362 295 133 791 - 3,922
buildings at December 31, 2020 amounts to EUR 227 million (December 31, 2019 EUR 198 million).
Depreciation 216 204 420 32 12 25 69 - 489
Disposals (44) (246) (290) (1) (3) (25) (29) - (319)
2. Right-of-use assets
Land & Real
Other movements (4) 73 70 1 (82) 82 1 - 71
Aircraft Maintenance Estate Others Total
Net value
As at Dec. 31, 2020 2,270 1,061 3,331 394 222 215 832 - 4,163
As at January 1, 2020 1,151 643 111 123 2,028
New contracts - - 20 10 30
Net carrying amount Renewal or extension options 60 (10) 8 7 65
As at Jan. 1, 2020 2,615 1,577 4,194 331 118 66 514 653 5,361 Disposals - (8) - - (8)
As at Dec. 31, 2020 2,603 1,492 4,095 357 87 125 568 735 5,398 Reclassifications - 99 1 11 111
Amortisation (318) (110) (19) (34) (481)
Other movements - (1) 1 - -
As at December 31, 2020 893 613 122 117 1,745
As a consequence of management’s decision to take measures limiting the effects of the COVID-19 crisis, it was decided to
early phase-out the passenger and combi Boeing 747 aircraft as per April 2020. Thereupon an impairment of EUR 19 million
Land & Real
was recorded, which is reflected in the other movements. The asset is related to passenger activities within the network Aircraft Maintenance Estate Others Total
business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision and Net value
note 28 Alternative performance measures. As at January 1, 2019 1,350 587 117 127 2,181
New contracts 85 - 6 39 130

Flight equipment Other property and equipment Renewal or extension options 63 - 2 - 65

Disposals - - - - -
Owned Other flight Land and Equipment and Other property Total Pre- Total
aircraft equipment Total buildings fittings and equipment payments Reclassifications (20) 186 4 (10) 160
Amortisation (327) (130) (19) (33) (509)
Historical cost
Other movements - - 1 - 1
As at Jan. 1, 2019 4,284 2,468 6,753 676 458 197 1,331 518 8,602
As at December 31, 2019 1,151 643 111 123 2,028
Additions 589 401 990 47 26 29 102 143 1,235
Disposals (81) (337) (418) (31) (67) (27) (125) 1 (542)
Information related to lease debt is available in note 13.
Other movements (75) 75 - 1 (4) - (3) (9) (12)
As at Dec. 31, 2019 4,717 2,607 7,325 693 413 199 1,305 653 9,283
As a consequence of management’s decision to take measure limiting the effects of the COVID-19 crisis, it was decided to
take out 2 leased Airbus A330-200 earlier out of the operation, notably in the fourth quarter of 2020. Thereupon a write-
Accumulated depreciation
off of EUR 9 million was recognised in the right-of-use asset aircraft. The asset is related to passenger activities within the
As at Jan 1, 2019 1,950 995 2,945 361 340 145 846 - 3,791
network business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision
Depreciation 204 235 439 32 27 9 69 - 508
Disposals
and note 28 Alternative performance measures.
(53) (332) (385) (31) (66) (27) (124) - (509)
Other movements 1 132 132 - (6) 6 - - 132
The table below indicates the rents resulting from lease and service contracts which are not capitalised:
As at Dec. 31, 2019 2,102 1,030 3,131 362 295 133 791 - 3,922
As at December 31, 2020 2019
Variable rents 1 7
Net carrying amount
Short-term rents 43 87
As at Jan. 1, 2019 2,334 1,474 3,808 315 118 52 485 518 4,811
Low value rents 3 3
As at Dec. 31, 2019 2,615 1,577 4,194 331 118 66 514 653 5,361
Carrying amount 47 97

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Financial Statements 2020 Financial Statements 2020
3. Intangible assets 4. Investments accounted for using the equity method

Software under As at December 31, 2020 2019

Goodwill Software development Total Associates 9 8
Historical cost Jointly controlled entities 9 8
As at January 1, 2020 40 511 240 791 Carrying amount 18 16
Additions - 87 25 112
Disposals - (13) (56) (69)
Other movements - 1 (2) (1)
As at December 31, 2020 40 586 207 833 Investments in associates

Accumulated amortisation and impairment 2020 2019

As at January 1, 2020 30 252 - 282 Carrying amount as at January 1 8 5
Amortisation - 81 - 81
Disposals - (12) - (12) Movements
Other movements - 7 - 7 Investments - 1
As at December 31, 2020 30 328 - 358 Share of profit after taxation 3 2
Other movements (2) -
Net carrying amount
Net movement 1 3
As at January 1, 2020 10 259 240 509
Carrying amount as at December 31 9 8
As at December 31, 2020 10 258 207 475

The share of profit/(loss) after taxation as at December 31 has been adjusted to reflect the estimated share of result of the
Historical cost
associate for the year then ended.
As at January 1, 2019 40 490 177 707
Additions - - 153 153
Disposals - (33) (16) (49) On December 23, 2020, the Group sold its equity interest of 4.49% (December 31, 2019 4.49% interest, with a carrying amount
Other movements - 54 (74) (20) of EUR 3 million) in Transavia France S.A.S. to Air France Finance S.A.S., for an amount of EUR 17 million. This price was based
As at December 31, 2019 40 511 240 791 on a put option whereby Transavia C.V. was granted the right to sell to Air France S.A. its 4.49% equity interest in Transavia
France S.A.S. in 2020 at a fixed price depending on the average normalised net results over 2018 and 2019 of Transavia
Accumulated amortisation and impairment
France S.A.S. A gain of EUR 17 million has been recorded as result on disposal of an associate. Reference is made to note 27
As at January 1, 2019 30 245 - 275
Amortisation, depreciation, impairments and movements in provision and note 28 Alternative performance measures.
Amortisation - 61 - 61
Disposals - (33) - (33)
Other movements - (21) - (21) Jointly controlled entities
As at December 31, 2019 30 252 - 282
The Group’s interest in its principal jointly controlled entity, Schiphol Logistics Park C.V., which is an unlisted company, can be
Net carrying amount summarised as follows:
As at January 1, 2019 10 245 177 432
As at December 31, 2019 10 259 240 509
As at December 31, 2020 2019
Country of incorporation The Netherlands The Netherlands

Main part of the software and software under development relates to internally developed software. As at December 31,
Percentage of interest held 53% 53%
2020, software additions mainly relate to commercial, operational and aircraft maintenance systems.
Percentage of voting right 45% 45%

Following the COVID-19 crisis, the Company assessed the recoverable amount of intangible assets that may not be Non-current assets 4 3
recoverable. Related to software and software under development an impairment of EUR 8 million was recorded. The asset Current assets 13 22
is related to passenger activities within the network business segment. In the table above this amount is included in other Profit after taxation - 17
movements and reference is made to note 27 Amortisation, depreciation, impairments and movements in provision and note Share of profit after taxation - 9
28 Alternative performance measures.
The Group did not receive dividend in 2020 (2019 EUR 8 million) from Schiphol Logistics Park C.V.

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5. Other (non-current) assets and liabilities Exposure to exchange rate risk
In the frame of cash flow hedges, maturities relate to realisation dates of hedged items. Therefore, amounts of fair value
Assets Liabilities presented in equity are recycled in the statement of profit or loss at realisation dates of hedged items.
2020 Current Non-current Current Non-current
Exchange rate risk As at December 31, 2020 the types of derivatives used, their nominal amounts and fair values are as follows:
Fair value hedges 13 19 (30) (23)
Cash flow hedges 39 - (52) (17)
Items not qualifying for hedge accounting 2 - (4) (1)
>1 year >2 years >3 years >4 Years
Nominal and and and and Fair
Total exchange rate risk hedges 54 19 (86) (41) In millions of Euros amount <1 year <2 years <3 years <4 years <5 years >5 years Value
Exchange rate risk hedges
Interest rate risk Fair value hedges
Fair value hedges - - - -
Cash flow hedges 1 - (7) (12) Forward purchases
Items not qualifying for hedge accounting - 2 - (5) USD 1,349 773 448 - 128 - - (30)

Total interest rate risk hedges 1 2 (7) (17) Forward sales

USD 534 300 234 - - - - 9
Commodity risk hedges
Cash flow hedges 23 - (60) (2) Total fair value hedges 1,883 1,073 682 - 128 - - (21)
Items not qualifying for hedge accounting - - (2) -
Cash flow hedges
Total commodity risk hedges 23 - (62) (2)

Total derivative financial instruments 78 21 (155) (60) Options

CHF - - - - - - - -
Others - 154 (19) (871) GBP 32 32 - - - - - -

Total as at December 31, 2020 78 175 (174) (931) Forward purchases

USD 922 719 203 - - - - (66)
GBP 92 92 - - - - - -
Assets Liabilities
2019 Current Non-current Current Non-current Forward sales
CAD - - - - - - - -

Exchange rate risk GBP 165 115 50 - - - - (1)

Fair value hedges 52 74 (28) (25) JPY - - - - - - - -

Cash flow hedges SGD - - - - - - - -

59 13 (16) (9)
USD 441 439 2 - - - - 37
Items not qualifying for hedge accounting 12 3 - -
Other - - - - - - - -

Total exchange rate risk hedges 123 90 (44) (34)

Total cash flow hedges 1,652 1,397 255 - - - - (30)

Interest rate risk

Items not qualifying for hedge accounting
Fair value hedges - - - -
Cash flow hedges - - (3) (18)
Forward purchases
Items not qualifying for hedge accounting - 9 - -
GBP 45 45 - - - - - -
JPY 25 25 - - - - - -
Total interest rate risk hedges - 9 (3) (18)
USD 491 471 20 - - - - (4)

Commodity risk hedges

Forward sales
Cash flow hedges 28 8 (38) (6)
USD 179 179 - - - - - 1

Total commodity risk hedges 28 8 (38) (6)

Other - - - - - - - -
Total derivative financial instruments 151 107 (85) (58)
Total items not qualifying for hedge accounting 740 720 20 - - - - (3)
Others - 116 - (90)
The total fair value hedges of EUR 21 million negative relates to exchange rate hedging on future fleet purchases
Total as at December 31, 2019 151 223 (85) (148) denominated in USD. Fair value adjustments included on the carrying amount of the hedge items amount to EUR 63 million
and are recognised in the balance sheet in the line item property, plant and equipment. The related costs of hedging amount
to EUR 31 million negative and are recorded in other comprehensive Income.

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Financial Statements 2020 Financial Statements 2020
The total cash flow hedges of EUR 30 million negative relates to exchange rate hedging on operational exposures. The cash The total cash flow hedges of EUR 39 million negative relates to commodity price risk hedging on fuel and carbon certificate
flow hedge reserve relating to the outstanding hedges amounts to EUR 30 million. An amount of EUR 18 million is included in purchases. The cash flow hedge reserve relating to the outstanding hedges amounts to EUR 32 million. The related costs of
the cash flow hedge reserve relating to hedges that are unwound in 2020. hedging amount to EUR 8 million positive and are recorded in other comprehensive income.

Exposure to interest rate risk Valuation methods for financial assets and liabilities at their fair value
In the frame of cash flow hedges, maturities relate to realisation dates of hedged items. Therefore, amounts of fair value As at December 31, 2020, the breakdown of the Group’s financial assets and derivative instruments, based on the three
presented in equity are recycled in the statement of profit or loss at realisation dates of hedged items. classification levels, is as follows:

In millions
In local currency millions of Euros Level 1 Level 2 Level 3 Total
>1 year >2 years >3 years >4 Years Financial assets available for sale
Nominal and and and and Fair
Shares 12 17 - 29
As at December 31, 2020 amount <1 year <2 years <3 years <4 years <5 years >5 years Value
Fair value hedges
Assets at fair value through profit or loss
Marketable securities - 447 - 447
Swaps - - - - - - - -
Deposits and marketable securities - 115 - 115
Total fair value hedges - - - - - - - -

Derivatives instruments (asset and liability)

Cash flow hedges
Currency exchange derivatives - (54) - (54)
Interest rate derivatives - (21) - (21)
Swaps 587 68 67 35 28 58 331 (18)
Commodity derivatives - (59) - (59)
Total cash flow hedges 587 68 67 35 28 58 331 (18)

Items not qualifying for hedge accounting No significant changes in levels of hierarchy, or transfers between levels, have occurred in the reporting period.

Swaps 99 21 18 12 10 11 27 (3)
For the explanation of the three classification levels, reference is made to “fair value hierarchy” paragraph in the accounting
Total items not qualifying for hedge accounting 99 21 18 12 10 11 27 (3)
policies for the balance sheet section.
Total interest rate risk derivatives 686 89 85 47 38 69 358 (21)

The total cash flow hedges of EUR 18 million negative relates to interest rate hedging on borrowings. The cash flow hedge Sensitivity analysis
reserve relating to the outstanding hedges amounts to EUR 11 million. The sensitivity is calculated solely on the valuation of derivatives at the closing date of the period presented. The
hypotheses used are coherent with those applied in the financial year ended as at December 31, 2020.
Exposure to commodity risk
In the frame of cash flow hedges, maturities relate to realisation dates of hedged items. Therefore, amounts of fair value The impact on “reserves” corresponds to the sensitivity of effective fair value variations for instruments and is documented
presented in equity are recycled in the statement of profit or loss at realisation dates of hedged items. in the hedged cash flow (options intrinsic value, fair value of closed instruments). The impact on the “income for tax”
corresponds to the sensitivity of ineffective fair value variations of hedged instruments (principally time value of options)
In the normal course of its business, the Group conducts transactions on petroleum product markets in order to effectively and fair value variations of transactions instruments. For fuel, the downward and upward sensitivity are not symmetrical when
manage the price risks related to its purchases of fuel. taken into account the utilisation, in respect of the policy of optional hedged instruments in which the risk profile is not linear.

The nominal amounts of the Group’s commitments on the crude and refined oil markets as at December 31, 2020 are shown For further information reference is made to the Financial Risk Management paragraph in the text to the notes to the
below: consolidated financial statements.
In millions
In USD millions of Euros Fuel price sensitivity
Nominal <1 year >1 year >2 years >3 years >4 Years >5 years Fair
The impact on “income before tax” and “reserves” of the variation of +/- USD 10 on a barrel of Brent is presented below:
amount and and and and Value
<2 years <3 years <4 years <5 years
Commodity risk hedges December 31, 2020 December 31, 2019
Cash flow hedges Increase of 10 USD Decrease of 10 USD Increase of 10 USD Decrease of 10 USD

Swaps 161 161 - - - - - 7 Income before tax 3 (4) - -

Options 533 518 15 - - - - (46) Reserves 87 (92) 207 (208)
Total cash flow hedges 694 679 15 - - - - (39)

The fuel price sensitivity is only calculated on the valuation of derivatives at the closing date of each period presented.
Items not qualifying for hedge accounting
Swaps 8 8 - - - - - (2)
Options - - - - - - - -
Total items not qualifying for hedge 8 8 - - - - - (2)
accounting

Total commodity risk derivatives 702 687 15 - - - - (41)

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Financial Statements 2020 Financial Statements 2020
Currency sensitivity 6. Other financial assets
Values as of the closing date of all monetary assets and liabilities in other currencies are as follows:
Monetary Assets Monetary Liabilities Debt investments At fair value through At fair value
Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2019 at amortised cost profit or loss through OCI Total

USD 467 649 414 445 2020 2019 2020 2019 2020 2019 2020 2019

JPY 25 - 188 164 Carrying amount as at January 1 604 540 152 108 22 46 778 694
CHF - - 347 345
GBP - 43 - - Movements
Additions and loans granted 15 66 1 43 - - 16 109
Loans and interest repaid (59) (16) (7) - - - (66) (16)
The amounts of monetary assets and liabilities disclosed above do not include the effect of derivatives. Interest accretion 12 - - - - - 12 -
Foreign currency translation differences (39) 7 - 1 - - (39) 8
The impact on “change in value of financial instruments” and on “reserves” of the variation of a 10% weakening in exchange Other movements (1) 7 (1) - 7 (24) 5 (17)
rates in absolute value relative to the Euro is presented below:
Net movement (72) 64 (7) 44 7 (24) (72) 84

USD JPY GBP Carrying amount as at December 31 532 604 145 152 29 22 706 778

Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2019
Change in value of financial instruments (5) (19) 15 15 - (4) December 31, 2020 December 31, 2019
Reserves (41) (80) - 1 8 40 Current Non-current Current Non-current
Debt investments at amortised cost

The impact on “change in value of financial instruments on financial income and expenses” consists of: Bonds, long-term deposits, other loans and receivables 181 351 53 551

» Change in value of monetary assets and liabilities (in accordance with IAS 21, including the effect of fair value and cash
At fair value through profit or loss
flow hedges);
Deposits and commercial paper with original maturity 3-12 months 114 - 108 -
» Changes in time value of currency exchange options (recognised in financial income); Other restricted deposits - - - -
» The changes in fair value of derivatives for which fair value hedges accounting is applied or no hedging accounting is Deposits on operating leased aircraft - 25 - 33
applied. Air France KLM S.A. shares - 6 - 11
The impact on “reserves” is explained by the change in exchange rates on changes in fair value of currency derivatives 114 31 108 44

qualified for cash flow hedging, recognised in “reserves”. At fair value through OCI
Kenya Airways Ltd. shares - 12 - 8
Other non-consolidated entities - 17 - 14
Interest rate sensitivity
- 29 - 22
The Group is exposed to the risk of changes in market interest rates. The variation of 100 basis points of interest rates would Carrying amount as at December 31 295 411 161 617
have an impact on income before tax of EUR nil million for 2020 (EUR nil million for 2019).
The Group’s stake in Kenya Airways Ltd. is 7.76% as at December 31, 2020 (December 31, 2019 7.76%). The Group has no
Others significant influence on Kenya Airways and due to its intention it is regarded as a financial asset at fair value through other
The increase in the other non-current liabilities in 2020 mainly relates to deferred payments for wage tax and social securities. comprehensive income under IFRS 9.
Following the COVID-19 crisis, the Dutch Government issued a number of measures to support Dutch companies, such as
deferral of wage tax and social securities payments for the period between March 2020 and February 2021. As from April
1, 2021, the Group will pay the regular monthly wage tax and social securities and as from July 1, 2021 the related deferred
payments over a period of 36 months. As per December 31, 2020 the related non-current deferred payments amount to EUR
764 million (December 31, 2019 nil million). This non-cash transaction is in line with IAS 7.43 included as an increase in other
payables as part of the movement in working capital in the cash flow statement.

After December 31, 2020, the Dutch Government extended the payment terms from April 1, 2021 to July 1, 2021 for the
regular monthly wage tax and social securities payments and from July 1, 2021 to as from October 1, 2021 for the related
deferred payments.

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Financial Statements 2020 Financial Statements 2020
The carrying amounts of financial assets denominated in currencies other than the Euro are as follows: The fair values of the financial assets are as follows:

As at December 31, 2020 2019 As at December 31, 2020 2019

USD 368 324 Debt investments at amortised cost
Kenyan shilling 12 8 Bonds, long-term deposits, loans and receivables 535 602
Total 380 332
At fair value through profit or loss
Restricted deposit EU Cargo claim 50 50
The interest-bearing financial assets have fixed interest rates. The weighted average effective interest rates at the balance
Restricted deposits 64 58
sheet date are as follows: Deposits on operating leased aircraft 25 33
AIR FRANCE KLM S.A. shares 6 11
December 31, 2020 December 31, 2019 145 152
in % EUR USD EUR USD
Debt investments at amortised cost 0.2 2.6 0.1 2.0 At fair value through OCI
At fair value through profit or loss 0.1 - 0.1 - Kenya Airways Ltd. shares 12 8
Other non-consolidated entities 17 14
29 22
The triple A bonds and long-term deposits are held as a natural accounting hedge to mitigate the effect of foreign exchange
movements relating to financial debt. Except as described below these securities are at the free disposal of the Company.
Access to triple A bonds and long-term deposits, loans and receivables amounting to EUR 323 million (December 31, 2019 EUR Total fair value 709 776
236 million) is restricted.
The fair values listed above have been determined as follows:
The maturities of debt investments are as follows: » Triple A bonds and long-term deposits: The fair values are based on the net present value of the anticipated future cash
As at December 31, 2020 2019 flows associated with these instruments;
Debt investments at amortised cost » Deposits and commercial paper: The carrying amounts approximate fair value because of the short maturity of these
Less than 1 year 178 52 deposits and commercial paper;
Between 1 and 2 years 31 183
» Kenya Airways Ltd. shares: Quoted price as at close of business on December 31, 2020 and December 31, 2019;
Between 2 and 3 years 55 29
» AIR FRANCE KLM S.A. shares: Quoted price as at close of business on December 31, 2020 and December 31, 2019;
Between 3 and 4 years 20 58
Between 4 and 5 years 29 21
» Other assets: The carrying amounts approximate fair value because of the short maturity of these instruments or, in the
Over 5 years 221 261 case of equity instruments that do not have a quoted price in an active market, the assets are carried at cost.
Total 534 604
The contractual re-pricing dates of the Group’s interest bearing assets are as follows:

As at December 31, 2020 2019

Less than 1 year 292 160
Between 1 and 2 years 31 183
Between 2 and 3 years 55 29
Between 3 and 4 years 20 58
Between 4 and 5 years 29 21
Over 5 years 221 257
Total interest bearing financial assets 648 708

7. Inventories

As at December 31, 2020 2019

Carrying amount
Maintenance inventories 219 299
Allowance for obsolete inventories (71) (71)
Maintenance inventories - net 148 228

Other sundry inventories 32 70

Total 180 298

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8. Trade and other receivables 10. Share capital

As at December 31, 2020 2019 Authorised share capital

Trade receivables 430 696 No movements have occurred in the authorised share capital since April 1, 2004. The authorised share capital of the
Expected credit loss (54) (31)
Company is summarised in the following table:
Trade receivables - net 376 665
Authorised
Par value per share Number of Amount in
Amounts due from:
(in EUR) shares EUR 1,000
- AIR FRANCE KLM group companies 56 85
Priority shares 2.00 1,875 4
- associates and jointly controlled entities 1 17
Ordinary shares 2.00 149,998,125 299,996
- maintenance contract customers 69 136
A Cumulative preference shares 2.00 37,500,000 75,000
Taxes and social security premiums 19 47
B Preference shares 2.00 75,000,000 150,000
Other receivables 246 114
C Cumulative preference shares 2.00 18,750,000 37,500
Prepaid expenses 135 205
Total authorised share capital 562,500

Total 902 1,269

Issued share capital
No movements have occurred in the issued share capital since April 1, 2004. No shares are issued but not fully paid.
December 31, 2020 December 31, 2019
< 90 days 320 615 Issued and fully paid
90-180 days 13 20 December 31, 2020 December 31, 2019
180-360 days 28 9 Number of shares Amount in Number of shares Amount in
> 360 days 15 21 EUR 1,000 EUR 1,000
Total trade receivables 376 665 Included in equity
Priority shares 1,312 3 1,312 3
In the financial year EUR 25 million (December 31, 2019 EUR 3 million increase) increase of provision trade receivables has Ordinary shares 46,809,699 93,619 46,809,699 93,619
been recorded in other financial income and expenses in the consolidated statement of profit or loss. Main part of the 93,622 93,622
increase of provision trade receivables relates to airline debtors in the maintenance business segment, which were, like KLM,
severely impacted by COVID-19. Included in financial liabilities
A Cumulative preference shares 8,812,500 17,625 8,812,500 17,625
C Cumulative preference shares 7,050,000 14,100 7,050,000 14,100
Maintenance contract cost incurred to date for contracts in progress at December 31, 2020 amounted to EUR 160 million
31,725 31,725
(December 31, 2019 EUR 302 million).
Total issued share capital 125,347 125,347

Advances received for maintenance contracts in progress at December 31, 2020 amounted to EUR 72 million (December 31,
2019 EUR 102 million). The rights, preferences and restrictions attaching to each class of shares are as follows:

9. Cash and cash equivalents Priority shares

All priority shares are held by AIR FRANCE KLM S.A. Independent rights attached to the priority shares include the power to
As at December 31, 2020 2019 determine or approve:
Cash at bank and in hand 35 48 a. To set aside an amount of the profit established in order to establish or increase reserves (art. 32.1 Articles of Association
Short-term deposits 447 649
(AoA));
Total 482 697
b. Distribution of interim dividends, subject to the approval of the Supervisory Board (art. 32.4 AoA);
c. Distribution to holders of common shares out of one or more of the freely distributable reserves, subject to the approval
The effective interest rates on short-term deposits are in the range from -0.34% to 3.35% (2019 range -0.33% to 3.35%). The of the Supervisory Board (art. 32.5 AoA);
short-term deposits are invested in money market instruments or in liquid funds with daily access to cash. d. Transfer of priority shares (art. 14.2 AoA).

The part of the cash and cash equivalents held in currencies other than the Euro is as follows: Before submission to the General Meeting of Shareholders prior approval of the holder of the priority shares is required for:
a. Issuance of shares (art. 5.4 AoA);
As at December 31, 2020 2019 b. Limitation of or exclusion from pre-emptive rights of the holders of other classes of shares (art. 5.4 AoA);
USD 7 14 c. Repurchase of own shares (art. 10.2 AoA);
GBP 2 2
d. Alienation of own priority shares and C cumulative preference shares (art. 11.2 AoA);
Other currencies 12 12
e. Reduction of the issued share capital (art. 11.3 AoA);
Total 21 28
f. Remuneration and conditions of employment of the Managing Directors (art. 17.4 AoA);
g. Amendments of the Articles of Association and/or dissolution of the Company (art. 41.1 AoA).
The fair value of cash and cash equivalents does not differ materially from the book value.

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A Cumulative preference shares, B Preference shares, C Cumulative preference shares and The legal reserves consist of the following items:
Ordinary shares
Holders of preference and ordinary shares are entitled to attend and vote at shareholders meetings. Each share entitles the Hedging reserve
holder to one vote. The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
As at December 31, 2020 the State of the Netherlands held 3,708,615 A cumulative preference shares to which a voting right
attaches of 5.9%. This has not changed since financial year 2006/07. For details of the right to dividend distributions attaching Fuel hedges
to each class of share see the section Other information. Following the COVID-19 impact the Group’s fuel consumption became far less than the volume of fuel hedges outstanding
as from the end of first quarter 2020. In accordance with IFRS the Group discontinued the fuel hedge relationship of these
overhedges and released the market to market value of those hedges from other comprehensive income to the Consolidated
11. Reserves statement of profit or loss. Reference is made to note 29 Cost of financial debt.
Remeasurement
Hedging of defined benefit Translation Currency hedges
reserve pension reserve Other reserve Total
Most of the aircraft lease contracts are denominated in US dollars. The Group designates the cash flows from these lease
As at January 1, 2020 (31) (781) 12 485 (315)
contracts as hedging instruments in cash flow hedges with its US dollars revenues as hedged items. This limits the volatility
Gains/(losses) from cash-flow hedges (8) - - - (8)
of the foreign exchange variation resulting from the currency related revaluation of its lease debt. The effective portion of the
Exchange differences on translating foreign operations - - 1 - 1 foreign exchange revaluation of the lease debt in US dollars at the closing date is recorded in “other comprehensive income”.
Remeasurement of defined benefit pension plans - (182) - - (182) This amount is recycled in revenues when the hedged item is recognised. This also included the fair value changes in equity
Transfer from retained earnings - - - (12) (12) investments which are deemed to be business investments.
Tax on items taken directly to or transferred from equity 2 73 - - 75
As at December 31, 2020 (37) (890) 13 473 (441)
Because of COVID-19 US dollar revenues sharply decreased as from March 2020. As a consequence the Company
temporarily stopped to record the foreign exchange revaluation of the lease debt on US dollars at the closing date in “other
As at January 1, 2019 (130) (956) 13 422 (651)
comprehensive income” but records those in foreign currency exchange gains/(losses) in the Consolidated statement of
profit or loss. When the US dollar revenues will become sufficient again, the Company will start using the US dollar revenues
Gains/(losses) from cash-flow hedges 131 - - - 131 as hedging instruments again.
Exchange differences on translating foreign operations - - (1) - (1)
Remeasurement of defined benefit pension plans - 141 - - 141 Translation reserve
Transfer from retained earnings - 99 - 63 162
The translation reserve comprises all foreign currency differences arising from the translation of the consolidated figures of
Tax on items taken directly to or transferred from equity (32) (65) - - (97)
non-Euro foreign subsidiaries, as well as from the translation of the Company’s net investment in foreign associates and jointly
As at December 31, 2019 (31) (781) 12 485 (315)
controlled entities.

The volatility from the KLM pension plans has reduced significantly after the transfer of the cockpit crew and cabin crew to Other reserve
a collective defined contribution pension schemes in 2017. However, the volatility in the value of fuel derivatives and the The other reserve relates to the amount in investments accounted for using the equity method and development cost
remeasurement of the current defined benefit pension plans remains for the ground staff pension plan and other smaller incurred on computer software and prepayments thereon at the balance sheet date, as required by Article 365.2 of Book 2 of
defined benefit pension plans. The non-cash changes in pension obligations together with the level of plan assets linked the Dutch Civil Code.
to the changes in actuarial assumptions (such as the current very low discount rate) that need to be recognised in the
Company’s equity do not directly affect the statement of profit or loss. 12. Financial debt

Following the significant impact of COVID-19 the Company’s equity became negative during 2020. Reference is made to the December 31, 2020 December 31, 2019
Going concern paragraph in the Notes to the consolidated financial statements section. Future minimum Future finance Total financial Future minimum Future finance Total financial
lease payment charges lease liabilities lease payment charges lease liabilities
Lease obligations
For an elucidation on the remaining volatility of defined pension plans and equity, reference is made to the paragraph
Risks linked to the impact of external economic factors on equity and Risks linked to pension plans in the Risks and risk
Within 1 year 237 11 226 194 13 181
management section.
Total current 237 11 226 194 13 181

Remeasurement of defined benefit plans Between 1 and 2 years 122 12 110 219 11 208
Comprises all actuarial gains and losses related to the remeasurement of defined benefit plans. Between 2 and 3 years 181 11 170 127 9 118
Between 3 and 4 years 124 11 113 157 7 150
Between 4 and 5 years 164 9 155 91 5 86
Over 5 years 605 24 581 577 9 568
Total non-current 1,196 67 1,129 1,171 41 1,130
Total 1,433 78 1,355 1,365 54 1,311

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The financial debt relates exclusively to aircraft leasing, for which KLM has the option to purchase the aircraft at the amount 14. Other financial liabilities
specified in each contract once the lease expires. The lease agreements provide for either fixed or floating interest payments.
Where the agreements are subject to a floating interest rate, this is normally the 3 or 6 month EURIBOR or the USD LIBOR rate. 2020 2019
The average interest rate, without taking into account the impact of hedging (and the deferred benefits arising from sale and Carrying amount as at January 1 1,082 1,199

leaseback transactions) is 1.16% (average fixed rate 0.95%, average floating rate 1.47%). Taking into account the impact of
Additions and loans received 1,838 230
hedging the average interest rate is 1.81% (average fixed rate 1.72%, average floating rate 2.17%). After hedging 77% of the
Loans repaid (792) (416)
outstanding lease liabilities have a fixed interest rate.
Foreign currency translation differences (12) 21
Other changes 1 48
Net movement 1,035 (117)
The carrying amount for the financial debt approximates the fair value as at December 31, 2020. The fair value of the financial Carrying amount as at December 31 2,117 1,082
liabilities is based on the net present value of the anticipated future cash flows associated with these instruments. For the
lease liabilities restricted deposits are used as collateral. Reference is made to note 6 Other financial assets for the restricted The other financial liabilities comprise:
deposits.
December 31, 2020 December 31, 2019
13. Lease debt Current Non-current Current Non-current

December 31, 2020 December 31, 2019 A Cumulative preference shares - 18 - 18

Current Non-current Current Non-current C Cumulative preference shares - 14 - 14

Lease Debt - Aircraft 285 662 350 952 Revolving credit facility - 663 - -

Lease Debt - Real estate 17 137 17 125 Direct State loan - 278 - -
Lease Debt - Others 28 73 31 96 Subordinated perpetual loans - 505 - 509
Accrued interest 4 - 6 - Other loans (secured/unsecured) 193 446 77 464
Total 193 1,924 77 1,005
Total 334 872 404 1,173

Change in lease debt: Revolving credit facility and direct State loan
From the start of the COVID-19 crisis, the Group was aware it needed additional financing in the coming period to ensure that
New contracts Currency the Group can continue its activities and that its position is strengthened towards the future. This has been the subject of
As at January 1, and renewals Payment of translation As at December intensive discussions with the Dutch Government and banks.
2020 of contracts lease debt adjustment Other 31, 2020
Lease Debt - Aircraft 1,302 69 (324) (100) - 947
Lease Debt - Real estate 142 29 (19) - 2 154
After careful discussions with both the Dutch Government and banks, KLM has secured a financing package to ensure
Lease Debt - Others 128 16 (36) (7) - 101 liquidity. This has been announced by the Dutch Government and KLM on June 26, 2020. The financing package and the
Accrued interest 5 - - (1) - 4 conditions imposed by the Dutch Government in connection therewith have been approved by Dutch parliament and by the
European Commission on July 13, 2020.
Total 1,577 114 (379) (108) 2 1,206

The financing package consists of:

New contracts Currency » A 90% State guaranteed revolving credit facility of EUR 2.4 billion with a maturity of 5 years. The facility is granted by 11
As at January 1, and renewals Payment of translation As at December banks, of which three Dutch banks and eight foreign banks. The EUR 665 million drawn under the previous revolving credit
2019 of contracts lease debt adjustment Other 31, 2019
facility on March 19, 2020 has been redeemed on August 26, 2020 and on that date the same amount was drawn under
Lease Debt - Aircraft 1,497 127 (335) 7 6 1,302
Lease Debt - Real estate 152 12 (22) - - 142
the 90% State guaranteed revolving credit facility. The facility has an interest of EURIBOR (floored at zero) plus a margin
Lease Debt - Others 120 40 (23) - (9) 128 of 1.35%. The cost of the associated Dutch Government guarantee equals to 0.50% in year 1, 1.00% in year 2 and 3 and
Accrued interest 6 (1) - - - 5 2.00% after year 3; and
» A direct State loan of EUR 1 billion with a maturity of 5.5 years and an interest of EURIBOR 12 months (floored at zero)
Total 1,775 178 (380) 7 (3) 1,577 plus a margin of 6.25% for year 1, 6.75% for year 2 and 3, and 7.75% for year 4 and 5. The loan, provided by the Dutch
Government, will be subordinated to the revolving credit facility. On August 26, 2020, KLM received EUR 277 million of this
The lease debt maturity breaks down as follows: loan.

2020 2019 Both the revolving credit facility and the direct loan will be drawn simultaneously on a pro rata basis.
Less than 1 year 407 488
Between 1 and 2 years 322 420
On October 1, 2020, KLM submitted its restructuring plan to the Dutch Ministry of Finance. The presentation of this
Between 2 and 3 years 246 333
restructuring plan was a key condition in obtaining the aforementioned direct State loan and guarantees to the value of EUR
Between 3 and 4 years 165 231
3.4 billion. The plan outlines how KLM intends to fulfil the conditions imposed by the Dutch Government.
Between 4 and 5 years 110 130
Over 5 years 202 261 Substantively, the plan includes elements such as the reassessment of strategy, becoming more sustainable, the restored
Total 1,452 1,863 performance and competitiveness of the entire KLM Group, including a comprehensive restructuring plan, manageable cost
Including: improvements, financial considerations and how KLM staff will contribute by way of reduced employment conditions. In
- Principal 1,206 1,577 addition KLM has undertaken to suspend dividend payments to its shareholders until these two loans have been repaid in full.
- Interest 246 286

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Financial Statements 2020 Financial Statements 2020
On November 3, 2020 the Dutch Ministry of Finance approved the plan and KLM has the possibility to draw additional The fair values of financial liabilities are as follows:
amounts under the financial support package in full. As per that date KLM can draw an additional amount of EUR 2,458 million
under the financing package. As at December 31, 2020 2019
A Cumulative preference shares 18 18
C Cumulative preference shares 14 14
As per December 31, 2020 KLM has drawn in total EUR 942 million (the aforementioned EUR 665 million under the revolving
Revolving credit facility 665 -
credit facility and the aforementioned EUR 277 million under the direct State loan). The loans have been recorded at
Direct State loan 277 -
amortized cost based on a 5 and 5.5 year drawn down assumptions with the Effective Interest Rate method (3.95 per cent for
Subordinated perpetual loans 413 457
the revolving credit facility and 7.05 per cent for the direct State loan). Other loans (secured/unsecured) 642 506
Fair value 2,029 995
Both the revolving credit facility and the direct State loan are presented as non-current liabilities based on IAS 1
(presentation of financial statements). The revolving credit facility has a contractual maturity of 5 years and the direct State The fair value of the financial liabilities is based on the net present value of the anticipated future cash flows associated with
loan has a contractual maturity of 5.5 years. With that, the loans are not due for settlement in the coming these instruments.
12 months after balance sheet date. Furthermore, covenant testing is not required per balance sheet date, and therefore it is
not relevant to the assessment. The exposure of the Group’s borrowing interest rate changes and the contractual re-pricing dates are as follows:

The classification of loans as current or non-current as described IAS 1 is amended, with an effective date in 2022. Future <1 year >1 and < 5 years > 5 years Total
conditions need to be incorporated in a hypothetical test at reporting date. For the revolving credit facility and the direct As at December 31, 2020
Total borrowings 1,544 40 537 2,121
state loan this would entail a covenant test per balance sheet date, while the covenant test is contractually required as of
1,544 40 537 2,121
September. In the hypothetical test per balance sheet date, KLM is meeting the covenant requirements in September 2021
and December 2021 for both the revolving credit facility and the direct state loan. Following that, there is a right to defer the
As at December 31, 2019
settlement for at least 12 months after balance sheet date, and both the revolving credit facility and the direct State loan Total borrowings 424 110 548 1,082
would also required to be classified as non-current if the amended version of IAS 1 would have been applied. 424 110 548 1,082

Subordinated perpetual loans The effective interest rates at the balance sheet date, excluding the effect of derivatives, are as follows:
The subordinated perpetual loans are subordinated to all other existing and future KLM debts. The subordinations are equal
in rank. Under certain circumstances, KLM has the right to redeem the subordinated perpetual loans, with or without payment December 31, 2020 December 31, 2019
of a premium. in % EUR Other EUR Other
Cumulative preference shares 3.70 - 3.70 -
Revolving credit facility 3.95 - 3.95 -
As per August 28, 2019 KLM has reduced the principal amount of the Japanese Yen subordinated perpetual loan to JPY 20
Direct State loan 7.05 - 7.05 -
billion (EUR 164 million) by repaying JPY 10 billion to the lender. As from this date a fixed JPY interest of 4.0% is applicable.
Subordinated perpetual loans - 4.24 - 4.24
Other loans 2.75 - 1.35 -
The Swiss Franc subordinated perpetual loans amounting to CHF 375 million, being EUR 347 million as at December 31, 2020
(December 31, 2019 EUR 345 million) are listed on the SWX Swiss Exchange, Zurich. The interest rates of the revolving credit facility, direct State loan, subordinated perpetual loans and other loans,
taking into account the effect of derivatives, are as follows:
The remaining maturity of financial liabilities is as follows:
Variable Fixed interest Average variable Average fixed
As at December 31, 2020 2019 interest loans loans %-rate %-rate Average %-rate
Less than 1 year 193 77 Revolving credit facility 663 - 3.95% - 3.95%
Between 1 and 2 years 117 36 Direct State loan 278 - 7.05% - 7.05%
Between 2 and 3 years 50 160 Subordinated perpetual loans - 505 - 4.24% 4.24%
Between 3 and 4 years 193 79 Other loans 458 183 3.55% 0.69% 3.99%
Between 4 and 5 years 744 154
Over 5 years 820 576 The variable interest rates are based on EURIBOR or the USD LIBOR rate.
Total 2,117 1,082

The carrying amounts of financial liabilities denominated in currencies other than the Euro are as follows:

As at December 31, 2020 2019

CHF 347 345
JPY 158 164
Total 505 509

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Financial Statements 2020 Financial Statements 2020
The total financial liabilities are as follows: 15. Net debt
As at December 31,
Note 2020 2019 As at December 31, 2020 2019
Finance lease obligations 12 226 181 Current and non-current financial debt 4,673 3,965
Lease debt 13 334 404 Financial debt 4,673 3,965
Other financial liabilities 14 193 77
Total current 753 662 Cash and cash equivalents 482 697
Restricted deposits 119 117
Finance lease obligations 12 1,129 1,130 Cross currency element of CCIR swaps (8) 8
Lease debt 13 872 1,173 Near cash 544 618
Other financial liabilities 14 446 464 Financial assets 1,137 1,440
Revolving credit facility 14 663 - Total net debt 3,536 2,525
Direct State loan 14 278 -
Perpetual subordinated loan stock in YEN 14 158 164 2020 2019
Perpetual subordinated loan stock in Swiss francs 14 347 345 Carrying amount as at January 1 2,525 2,825
Cumulative preference shares 14 32 32
Total non-current 3,925 3,308 Adjusted free cash flow 1,354 (132)
Total 4,678 3,970
Repayment lease debt (379) (380)
New lease debt 114 178
The total movements in financial liabilities are as follows: Other (including currency translation adjustment) (78) 34
Net movement 1,011 (300)
As at New ­­Reimburs- Currency As at Carrying amount as at December 31 3,536 2,525
January 1, financial ment of translation December 31,
Note 2020 debt financial debt differences Other 2020
16. Deferred income
Finance lease obligations 12 1,311 264 (194) (42) 16 1,355
Lease debt 13 1,577 29 (379) (107) 86 1,206
Other financial liabilities 14 541 230 (127) (9) 4 639 December 31, 2020 December 31, 2019

Revolving credit facility 14 - 1,330 (665) - (2) 663 Current Non-current Current Non-current

Direct State loan 14 - 277 - - 1 278 Advance ticket sales 922 - 1,293 -
Perpetual subordinated loan stock 14 509 - - (4) - 505 Sale and leaseback transactions 1 4 1 7
Cumulative preference shares 14 32 - - - - 32 Flying Blue frequent flyer program 69 247 79 214
Others 6 7 9 8
Total 3,970 2,130 (1,365) (162) 105 4,678 Total 998 258 1,382 229

Advance ticket sales corresponds to sold passenger tickets and freight airway bills which will be recognised in revenues at
the date of transportation. The COVID-19 crisis and the lockdown of borders caused the Group to reduce capacity and cancel
an important number of passenger flights. In that case, customers can either ask for a refund of the ticket or the issuance of
a voucher. As per December 31, 2020, the advance ticket sales includes EUR 285 million of passenger tickets (fare and carried
imposed charges) for which the date of transportation has passed and which are eligible to refund and
EUR 351 million of vouchers that can be used for future flights.

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17. Deferred/Current tax The deferred tax liability/(asset) of the Dutch tax fiscal unity is built up as follows:
The split between current income tax liabilities, deferred tax assets and net (offset) deferred tax liabilities and is as follows:
As at December 31, 2020 2019
As at December 31, 2020 2019 Deferred tax assets
Carrying amount as at January 1 145 (122) Deferred tax assets to be recovered in 12 months or less - -
Deferred tax assets to be recovered after more than 12 months 58 15
Income statement expense (136) 162 58 15
Tax (credited)/charged to equity (75) 69
Reduction due to tax rate - 29 Deferred tax liabilities

Other movements (11) 7 Deferred tax liabilities to be settled in 12 months or less - -

Deferred tax liabilities to be settled over more than 12 months 8 99
Net movement (222) 267 8 99
Carrying amount as at December 31 (77) 145 Net Deferred tax asset KLM income tax fiscal unity (offset) (50) 84

The gross movement in the deferred/current tax liabilities is as follows: The movements in deferred tax assets and liabilities, without taking into consideration the offsetting of balances within the
same tax jurisdiction, are as follows:
As at December 31, 2020 2019
Current income tax liabilities Dutch tax fiscal unity - 82 Carrying amount Income statement Tax (charged)/ Carrying amount as
as at January 1 (charge)/ credit credited to equity Other at December 31
Deferred tax asset other tax jurisdictions (27) (21) Deferred tax assets
Deferred tax liability/(asset) Dutch tax fiscal unity (50) 84
(77) 63 2020
Total (77) 145 Deductible interest expenses carried
forward - 10 - - 10
During 2019 the Group used all its remaining tax losses carry forwards in the Netherlands (December 31, 2018: EUR 0.2 billion). Provisions for employee benefits 21 - 7 (1) 27
Consequently the Group had a current income tax payable position as per December 31, 2019. In 2020 no current income tax Other tangible fixed assets 18 11 - - 29
has been paid following a relief from the Dutch tax authorities, related to the COVID-19 impact as from March 2020. Companies Derivative financial instruments (4) - 21 - 17
Other 1 8 (19) 12 2
which expected 2020 tax losses did not have to pay the 2019 current income tax payable, but could offset them with the
Total 36 29 9 11 85
expected 2020 tax losses.
Restated carrying Restated carrying
Given the COVID-19 crisis the Group made significant taxable losses in 2020 and subsequently has significant tax losses carry amount as at Income statement Tax (charged)/ amount as at
forwards amounting to EUR 1,075 million as per December 31, 2020. Due to the high degree of uncertainty about the timing January 1 (charge)/ credit credited to equity Other December 31
and degree of recovery and in line with IAS 12, no deferred tax asset for unused operating losses has been recognised as Deferred tax assets

per December 31, 2020. KLM has an amount of EUR 270 million for unused operating losses not recognised as per December
2019
31, 2020.
Tax losses 75 (75) - - -
Fleet assets 1 (1) - - -
The amounts of deferred tax assets recognised in the KLM income tax fiscal unity in the Netherlands are included in the Provisions for employee benefits 25 - (4) - 21
deferred tax asset line within non-current assets on the balance sheet. Deferred income tax assets and liabilities are offset Other tangible fixed assets - - - 18 18
when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred Derivative financial instruments 43 - (47) - (4)
income taxes relate to the same fiscal authority. Other 8 (14) 14 (7) 1
Total 152 (90) (37) 11 36

Under income tax law in the Netherlands, the maximum future period for utilising tax losses carried forward is six years. As
from January 1, 2022, this period is likely to become indefinite for tax losses. However, utilising tax losses carried forward is Carrying amount Income statement Tax (charged)/ Carrying amount as
limited to 50% of taxable profits per year. Current income tax has to be paid over the other 50% of taxable profits per year. as at January 1 (charge)/ credit credited to equity Other at December 31
Deferred tax liabilities
These changes are not substantially enacted as per December 31, 2020. In the United Kingdom, this period is indefinite.

2020
The Group includes a fully consolidated Cell in Harlequin Insurance PCC Limited – Cell K16, St. Peter Port (Guernsey). Other tangible fixed assets - - - - -
Respective income from the Cell is also included in the taxable basis of KLM fiscal unity in the Netherlands. Pensions and benefits (asset) 99 (25) (66) - 8
Total 99 (25) (66) - 8
End 2019 it was announced that the Dutch income tax would be lowered to 21.7% in 2021. The impact of this change was
taken into account in the 2019 financial statements. Given the COVID-19 impact the Dutch tax authorities announced end Carrying amount Income statement Tax (charged) / Other Carrying amount as
as at January 1 charge/ (credit) credited to equity at December 31
2020 that the Dutch income tax will remain at 25% in 2021. This has been taken into account in the 2020 financial statements.
Deferred tax liabilities

2019
Other tangible fixed assets (13) (5) - 18 -
Pensions and benefits (asset) 43 (5) 61 - 99
Total 30 (10) 61 18 99

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Financial Statements 2020 Financial Statements 2020
The amounts of deferred tax assets recognised in the other tax jurisdictions (i.e. in the United Kingdom) and in Dutch To satisfy the requirements of the Dutch regulations and rules set between the employer and the board of the pension fund,
subsidiaries not included in KLM income tax fiscal unity in the Netherlands are included in the deferred tax asset line within the plan imposes a mandatory funding level of approximately 125% of the projected long-term commitment. The projection of
non-current assets on the balance sheet. Of the total amount involved, being EUR 27 million, EUR nil million is expected to be these commitments is calculated according to local funding rules. The mandatory funding ratio is based on the new Financial
recovered in 12 months or less and EUR 3 million is expected to be recovered after more than 12 months. An amount of EUR Assessment Framework (nFTK) applicable as per January 1, 2015. The impact of the nFTK among other things resulted in
24 million related to taxes on remeasurement via other comprehensive income of defined benefit pension plans and will not higher minimum required solvency levels. On the other hand, pension funds have more time to recover from immediate and
be recycled through the statement of profit or loss. material shortages through a rolling 10 year recovery plan that also includes projected future return on investment.

The Group has tax loss carry forwards in the United Kingdom in the amount of EUR 8 million (December 31, 2019 EUR 9 million) If the coverage ratio is under the funding rules detailed above, the pension fund is required to implement a recovery plan
as well as deductible temporary differences for which no deferred tax asset has been recognised, due to the uncertainty that aims for compliance with the threshold of 125% within 10 years and includes projected future return on investment. As a
whether there are sufficient future tax profits against which such temporary differences and tax losses can be utilised. The consequence, the existing recovery plan for the ground staff plan has been updated as per April 1, 2020.
unrecognised deferred tax assets relating to temporary differences amount to EUR 26 million (December 31, 2019 EUR 24
million). If the threshold cannot be realised within 10 years additional contributions are payable by the Company and the employees.
The amount of regular and additional employer contributions is not limited. The amount of possible additional employee
18. Provisions for employee benefits contributions is limited to 2% of the pensionable contribution basis. A reduction of contribution is possible if the indexation
of pensions is fully funded. Besides Dutch pension law, this reduction is not limited and can be performed either by a
As at December 31, 2020 2019 reimbursement of contributions, or by a reduction in future contributions. Given the Dutch fiscal rules, among other things, a
Pension and early-retirement obligations 313 273 maximum pensionable salary of EUR 100,000 (as a result of indexation EUR 110,111 as per January 1, 2020) and lower future
Post-employment medical benefits 24 25 accrual rate are applicable since 2015.
Other long-term employment benefits 105 112
Termination benefits 10 10
The return on plan assets, the discount rate used to value the commitments, the longevity and the characteristics of the
Total Liabilities 452 420
active population are the main factors that impact both the coverage ratio and the level of the regular contribution for future
Less: Non-current portion pension accrual. The regular contributions for the yearly pension accrual are limited to 22% of the pensionable base. The
Pension and early-retirement obligations 299 259 funds, fully dedicated to the Company, are mainly invested in bonds, equities and real estate.
Post-employment medical benefits 23 24 The required funding of this pension plan also includes buffer against the following risks: interest rate mismatch, equity risk,
Other long-term employment benefits 98 106 currency risk, credit risk, actuarial risk and real estate risk. For example, to reduce the sensitivity to a decline of the interest
Termination benefits 9 9
rate, a substantial part of the sensitivity to an interest rate shock on all maturities is covered by an interest hedge.
Non-current portion 429 398
Current portion 23 22
Investment strategy
The board of the aforementioned ground staff plan, consults independent advisors as necessary to assist them with
As at December 31, 2020 2019 determining investment strategies consistent with the objectives of the fund. These strategies relate to the allocation of
Assets assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term
Pension assets non-current portion 211 420 returns. The fund uses asset and liability management studies that generate future scenarios to determine their optimal asset
Total assets 211 420
mix and expected rates of return on assets.

Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall
Pension plans level of assets. The plan invests a large proportion of its assets in equities which is believed to offer the best returns over the
The Company sponsors a number of pension plans for employees world-wide. As per December 31, 2020, the major defined long-term commensurate with an acceptable level of risk. Also a proportion of assets is invested in property, bonds and cash.
benefit plans include KLM ground staff based in the Netherlands, the United Kingdom, Germany, Hong Kong, and Japan. These The management of most assets is outsourced to a private institution, Blue Sky Group, under a service contract.
plans are funded through separate pension funds which are governed by independent boards and are subject to supervision
of the local regulatory authorities. Developments 2020
In addition to these major plans there are various relatively insignificant defined benefit and defined contribution plans for In 2020 the financial markets firstly showed a significant decrease following the COVID-19 crisis, but strongly increased in
employees located in- and outside the Netherlands. the second half of 2020, which overall resulted in increased plan assets with EUR 502 million. This was more than offset by a
considerable decrease of the discount rate used to calculate the pension obligations from 1.15% to 0.75%, which results in a
In December 2020, KLM and KLM ground unions agreed on a protocol to arrive at a future proof pension agreement. This marked higher defined benefit obligations of EUR 750 million.
pension agreement is expected to have the characteristics of a collective defined contribution scheme. It will require before
implementation, amongst others, the approval of the Board of the KLM Ground pension fund and should qualify as a defined The funding ratio (based on the average 12 months rolling policy coverage), as set by the Dutch Central Bank, for the Ground
contribution scheme under IFRS. It is expected that in the course of 2021 these conditions will be met and subsequent staff pension fund is 97.9% at December 31, 2020 (December 31, 2019 108.2%).
derecognition of the related pension asset will take place.
As per year-end 2020 the ground staff pension fund is below the required coverage ratio and therefore has to issue an
Characteristics of ground staff plan updated recovery plan before April 1, 2021. As a result of the 10 year rolling recovery plan no additional recovery payments
The pension plan relating to ground staff of the Company is a defined benefit plan based on the average salary with reversion are needed for 2020 nor for 2021.
to the spouse in case of death of the beneficiary. The retirement age as defined in the plan is 68 years. The average duration
of the pension plan is 20 years.
The board of the pension fund is composed of members appointed by the employer, employees, pensioners and an external
expert since September 1, 2018. The board is fully responsible for the execution of the plan. The Company can only control
the financing agreement between the Company and the pension fund.

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Financial Statements 2020 Financial Statements 2020
Recognition of pension assets and liabilities in the balance sheet The movements in the present value of wholly or partly funded obligations in the year are as follows:
The funds have together a liability totalling EUR 101 million as at December 31, 2020 (December 31, 2019 surplus
EUR 147 million). Pension and early-retirement obligations
2020 2019
No limit (i.e. after the impact of IAS 19 and IFRIC 14 “The limit on a defined benefit asset, minimum funding requirements Carrying amount as at January 1 10,069 8,816

and their interaction” on IAS 19) on the net assets recognised in the balance sheet is applied since, based on the current
Current service cost 229 191
financing agreement between the ground staff pension fund and the Company, future economic benefits are available in the
Interest expense 118 165
form of a reduction in future contributions. These net assets recognised are not readily available for the Company.
Past service cost (curtailment) (16) -
Actuarial losses/(gains) demographic assumptions (141) (12)
The accounting standards require management to make assumptions regarding variables such as discount rate, rate of Actuarial losses/(gains) financial assumptions 725 1,068
compensation increase and mortality rates. Periodically, management consults with external actuaries regarding these Actuarial losses/(gains) experience adjustments 86 20
assumptions. Changes in these key assumptions and in financing agreements between the ground staff pension fund and the Benefits paid from plan/company (218) (207)
Company can have a significant impact on the recoverability of the net pension assets (IFRIC 14). Exchange rate changes (33) 28
Net movement 750 1,253
Carrying amount as at December 31 10,819 10,069
Assumptions used for provisions for employee benefits
The provisions were calculated using actuarial methods based on the following assumptions (weighted averages for all plans):
Following the KLM voluntary leave plan the number of active KLM Ground staff participants decreased by some 1,450
Pension and early-retirement obligations employees. Since this is a substantial change a curtailment, resulting in lower funded obligations, of EUR 16 million has been
As at December 31, recorded and released to the profit or loss account. Reference is made to note 25 Employee compensation and benefit
in % 2020 2019 expenses and note 28 Alternative performance measures.
Weighted average assumptions used to determine benefit obligations
Discount rate for year-ended 0.79 1.18
The movements in the fair value of assets of the wholly or partially funded pension plans in the year can be summarised as
Rate of compensation increase 1.03 1.30
follows:
Rate of price inflation 1.46 1.51

Weighted average assumptions used to determine net cost 2020 2019

Discount rate for year-ended 1.18 1.89 Fair value as at January 1 10,216 8,865
Rate of compensation increase 1.30 1.16
Rate of price compensation 1.51 1.85 Interest income 120 168
Return on plan assets excluding interest income 490 1,218
Employer contributions 104 112
For the main ground staff pension plan, the 2020 Generation mortality tables (with certain plan specific adjustments) of the Member contributions 23 32
Dutch Actuarial Association were used. Benefits paid from plan / company (210) (200)
Exchange rate changes (25) 21
The Company refines its calculations, by retaining the adequate flows, on the discount rate used for the service-cost Net movement 502 1,351
calculation. In the Euro zone, this leads to the use of a discount rate of 0.10% higher for the service-cost calculation Fair value as at December 31 10,718 10,216

compared to the one used for the discount of the benefit obligation.
The experience adjustments are as follows:
Pension and early-retirement obligations
As at December 31, 2020 2019 2020 2019
Present value of wholly or partly funded obligations 10,819 10,069 Benefit obligation 86 20
Fair value of plan assets (10,718) (10,216) Plan asset 490 1,218
Net liability/(asset) relating pension and other post-retirement obligations 101 (147)

Pension and early-retirement obligations

As at December 31, 2020 2019
Amounts in the balance sheet
Liabilities 313 273
Assets (211) (420)

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Financial Statements 2020 Financial Statements 2020
The sensitivity of the defined benefit cost recognised in profit or loss and the defined benefit obligation to variation in the Post-employment medical benefits
discount rate is: This provision relates to the obligation the Company has to contribute to the cost of employees’ medical insurance after
Sensitivity of the assumptions retirement in the United States of America and Canada.
for the year ended December 31, Post-employment medical benefits
In millions of Euros 2020 2019 As at December 31, 2020 2019
0.25% increase in the discount rate Present value of unfunded obligations 24 25
Impact on service cost (16) (16) Net liability/(asset) relating pension and other post-retirement obligations 24 25
Impact on defined benefit obligation (533) (496)

0.25% decrease in the discount rate The movements in the present value of wholly or partly funded obligations in the year are as follows:
Impact on service cost 19 18
Impact on defined benefit obligation 612 569 Post-employment medical benefits
2020 2019

The sensitivity of the defined benefit cost recognised in profit or loss and the defined benefit obligation to variation in the Carrying amount as at January 1 25 27

salary increase is:

Interest expense 1 1
Sensitivity of the assumptions
Actuarial losses/(gains) demographic assumptions - (1)
for the year ended December 31,
Actuarial losses/(gains) financial assumptions 2 2
In millions of Euros 2020 2019
Actuarial losses/(gains) experience adjustments - (2)
0.25% increase in the salary increase
Past service cost - (1)
Impact on service cost 3 3
Benefits paid from plan/company (2) (2)
Impact on defined benefit obligation 36 30
Exchange rate changes (2) 1
Net movement (1) (2)
0.25% decrease in the salary increase
Carrying amount as at December 31 24 25
Impact on service cost (3) (3)
Impact on defined benefit obligation (32) (28)
The provisions were calculated using actuarial methods based on the following assumptions (weighted averages for all plans):

The sensitivity of the defined benefit cost recognised in profit or loss and the defined benefit obligation to variation in the Post-employment medical benefits
pension increase rate is: As at December 31,
in % 2020 2019
Weighted average assumptions used to determine benefit obligations
Sensitivity of the assumptions
for the year ended December 31, Discount rate for year 2.75 3.10

In millions of Euros 2020 2019

0.25% increase in the pension increase rate Weighted average assumptions used to determine net cost

Impact on service cost 16 15 Discount rate for year 3.10 4.45

Impact on defined benefit obligation 548 513
Medical cost trend rate assumptions used to determine net cost *
0.25% decrease in the pension increase rate Immediate trend rate Pre 65 6.50 2.70
Impact on service cost (14) (15) Immediate trend rate Post 65 6.50 2.70
Impact on defined benefit obligation (512) (514) Ultimate trend rate 3.70 3.90
Year that the rate reaches ultimate trend rate 2074 2099
* The rates shown are the weighted averages for the United States of America and Canada

The major categories of assets as a percentage of the total pension plan assets are as follows:

As at December 31,
in % 2020 2019
Debt securities 50 48
Real estate 9 9
Equity securities 40 42

Debt securities are primarily composed of listed government bonds, equally split between inflation linked and fixed interest, at
least rated BBB, and invested in Europe, the United States of America and emerging countries. Real estate is primarily invested
in Europe and the United States of America and equally split between listed and unlisted. Equity securities are mainly listed
and invested in Europe, the United States of America and emerging countries.

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 Other provisions
Other long-term employee benefits
Return obligation Maintenance Legal and civil Restructuring and
liability on leased liability on leased litigations voluntary leave
2020 2019 aircraft aircraft Other Total
Jubilee benefits 68 76
As at January 1, 2019 273 1,018 148 - 39 1,478
Other benefits 37 36
Total carrying amount 105 112
Additions and increases 8 (4) 5 - 31 40
Unused amounts reversed - - - - - -
Less: Non-current portion
Used during year - - - - (29) (29)
Jubilee benefits 63 71
New / Changes in lease contracts 58 20 1 - (1) 78
Other benefits 35 35
Foreign currency translation differences 7 14 - - - 21
Non-current portion 98 106
Accretion impact 20 57 - - - 77
Current portion 7 6
Other changes - 1 - - - 1
As at December 31, 2019 366 1,106 154 - 40 1,666
The provision for jubilee benefits covers bonuses payable to employees when they attain 25 and 40 years of service. The
provision for other benefits relates to existing retirement entitlements. Current/non-current portion
Non-current portion 297 1,043 1 - 2 1,343
Current portion 69 63 153 - 38 323
Termination benefits
Carrying amount as at December 31, 2019 366 1,106 154 - 40 1,666

2020 2019
Redundancy benefits Return obligation and maintenance liabilities on leased aircraft
Non-current portion 9 9 The movements in return obligation and maintenance liabilities (escalation costs and change in discount rate) are booked in
Current portion 1 1 the components corresponding to the potential and restoration work performed on leased aircraft and recorded in right-of-
Total carrying amount 10 10
use assets. Effects of accretion and foreign exchange translation of return obligation liabilities recorded in local currencies are
recognised in “Other financial income and expenses” (see note 26).
Termination benefits relate to a provision for projected dismissal benefits (also called severance or termination indemnities) to
current employees in case they voluntary choose to leave the Company. The discount rate used to calculate these restitution liabilities relating to leased aircraft, determined on the basis of a short-
term risk-free rate increased by a spread on risky debt (used for companies with high financial leverage), is 3.4 per cent as of
19. Return obligation liability and other provisions December 31, 2020 versus 4.5 per cent as of December 31, 2019.

Other provisions Other provisions

Return obligation Maintenance Legal and civil Restructuring and
liability on leased liability on leased litigations voluntary leave
Legal and civil litigations
aircraft aircraft Other Total
The provision as at December 31, 2020 mainly relates to the Cargo anti-trust investigations in Europe for KLM and Martinair,
As at January 1, 2020 366 1,106 154 - 40 1,666
anti-trust investigations in Switzerland and other Cargo related claims. For more details, reference is made to note 22
Additions and increases 13 (4) 2 229 22 262 Contingent assets and liabilities.
Unused amounts reversed (6) - (1) (1) - (8)
Used during year - - - (174) (28) (202) Restructuring and voluntary leave
New / Changes in lease contracts (4) (20) - - 15 (9) Following the COVID-19 crisis, the Group entered into a number of voluntary leave plans and restructuring plans in the
Foreign currency translation differences (25) (77) - - (1) (103) Netherlands and abroad. All plans have been discussed and agreed with the respective Works Councils and/or unions.
Accretion impact 16 48 - - (1) 63
The provision as at December 31, 2020 relates to voluntary leave plans and restructuring plans for which a constructive
Other changes (15) (79) (1) 12 - (83)
obligation exists and will lead to a cash out in 2021. For the 2020 cost of these plans reference is made to note 25 Employee
As at December 31, 2020 345 974 154 66 47 1,586
compensation and benefit expenses and note 28 Alternative performance measures.
Current/non-current portion
Non-current portion 232 820 152 - 15 1,219 Other
Current portion 113 154 2 66 32 367 Other provisions include provisions for onerous contracts (third party maintenance contracts in which the unavoidable costs
Carrying amount as at December 31, 2020 345 974 154 66 47 1,586 of meeting the obligations under the contract exceed the economic benefits expected to be received under it), onerous
leases of aircraft and site restoration cost for land and buildings under long-term lease agreements.

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Financial Statements 2020 Financial Statements 2020
20. Trade and other payables The new fine for KLM and Martinair, as announced on March Information Demand from the DOJ has been received seeking
17, 2017, amounts to EUR 142.6 million and is slightly lower certain information relating to these contracts. The DOJ has
As at December 31, 2020 2019 than the initial fine imposed in 2010. On 29 May 2017, KLM indicated it is investigating potential violations of the False
Trade payables 577 934 submitted its appeal to the General Court of the EU. The Claims Act. KLM and Air France are cooperating with the DOJ
Amounts due to AIR FRANCE KLM Group companies 66 117 appeal is still pending. While the decision is under appeal, investigation.
Taxes and social security premiums 224 333 there is no obligation to pay the imposed fines, but accrued
Other payables 538 638
interest is added as from June 2017. Case brought against KLM by (former) Martinair
Accrued liabilities 80 123
pilots
Total 1,485 2,145
In Switzerland, Air France and KLM are challenging a decision A case was brought against KLM by 152 (former) Martinair
imposing a EUR 3.2 million fine before the relevant court. airline pilots on the basis that the cargo department of
Other payables include an amount of EUR 91 million per December 31, 2020, which relates to the 2019 profit share for Taking into account the part thereof that external counsel Martinair was transferred to KLM and that all former cockpit
employees. Given COVID-19 and the related agreed reduced employment conditions with all unions, this amount has not been assesses to be for the account of KLM, a provision of EUR crew are entitled to remuneration from KLM, taking into
paid out in 2020. Part of this profit share, EUR 37 million, is expected to be paid out in 2021 or upon departure of employees 0.8 million was recorded. account the Martinair seniority. The lower court in 2016
from the Group. As of December 31, 2020, the total amount of provisions in and the court of appeal in 2018 rejected all claims made
connection with antitrust cases amounts to EUR 150.9 million against KLM. The Martinair airline pilots appealed the 2018
An amount of EUR 54 million, of this profit share is interpreted as a negative short-term employee benefit. Management (including accrued interest). judgment. In November 2019, the supreme court ruled
concluded that the aforementioned approach best reflects the economic substance of the agreement with the unions. that the judgment of the court of appeal lacked sufficient
The amount should remain on the balance sheet as per December 31, 2020, and will be released, to the 2021 consolidated b. Related civil lawsuits motivation and referred the case to another court of appeal.
statement of profit or loss. Following the initiation of various investigations by Proceedings at this court - that will have to reconsider
competition authorities in 2006 and the EU Commission certain arguments that were brought forward by the airline
21. Commitments decision in 2010, several collective and individual actions pilots - are pending.
As at December 31, 2020, KLM has commitments for previously placed orders amounting to EUR 1,474 million (December 31, were brought by forwarders and airfreight shippers in civil
2019 EUR 1,311 million). EUR 1,379 million of this amount (December 31, 2019 EUR 1,189 million) relates to future owned and courts against KLM, Air France and Martinair, and the other Other
new right-of-use aircraft of which EUR 436 million is due in 2021. In the amount for new right-of-use aircraft EUR 92 million airlines in several jurisdictions. The Company and certain of its subsidiaries are involved
relates to future interest. as defendant in litigation relating to competition issues,
The only civil lawsuits still pending are in the Netherlands commercial transactions and labour relations. Although the
The balance of the commitments as at December 31, 2020 amounting to EUR 95 million (December 31, 2019 EUR 122 million) and Norway and the latter procedure is stayed. The ultimate disposition of asserted claims and proceedings
is related to property, plant and equipment. claimants, shippers and freight forwarders, are claiming from cannot be predicted with certainty, it is the opinion of the
the defendants Air France, KLM and/or Martinair and other Company’s management that, with the exception of the
As at December 31, 2020 prepayments on aircraft orders have been made, amounting to EUR 541 million (December 31, 2019 airlines, damages to compensate alleged higher prices as a matters discussed before, the outcome of any such claims,
EUR 506 million). consequence of the alleged anticompetitive behaviour from either individually or on a combined basis, will not have
the defendants. Air France, KLM and/or Martinair as main a material adverse effect on the Company’s consolidated
22. Contingent assets and liabilities defendants have initiated contribution proceedings against financial position, but could be material to the consolidated
other airlines. results of operations of the Company for a particular period.
Contingent liabilities
c. Civil actions relating to the Passenger activity Site cleaning up cost
An assessment of litigation risks with third parties has been carried out with the Group’s attorneys and provisions have been The Group owns a number of Cargo and Maintenance
recorded whenever circumstances require. Litigations concerning anti-trust laws buildings situated on various parcels of land which are the
subject of long lease agreements.
Antitrust investigations and civil litigation Canada
A civil class action was reinitiated in 2013 by claimants At the expiry of each of these agreements the Company has
a. Actions instigated by the EU Commission and several competition authorities in other jurisdictions in Ontario against seven airlines including KLM and Air the following options:
for alleged cartel activity in air cargo transport. France. The plaintiffs allege the defendants participated in 1. To demolish the buildings and clean up the land prior to
a conspiracy in the passenger air transport service from/ return to the lessor;
Air France, KLM and Martinair have been involved, since February 2006, with up to twenty-five other airlines in investigations to Canada on the cross-Atlantic routes, for which they are 2. To transfer ownership of the building to the lessor; or
initiated by the antitrust authorities in several countries with respect to allegations of anti-competitive agreements or claiming damages. KLM and Air France strongly deny any 3. To extend the lease of the land.
concerted actions in the airfreight industry. participation in such a conspiracy.
No decision has been taken regarding the future of any of
As of December 31, 2016, most of these investigations and related public proceedings have been concluded, with the d. Other the buildings standing on leased land. Therefore, it cannot
following exceptions: be determined whether it is probable that site cleaning up
On March 17, 2017, the European Commission announced that it would fine eleven airlines, including KLM, Martinair and Air US Department of Justice investigation related to cost will be incurred and to what extent. Accordingly, no
France, for practices in the air cargo sector that are considered anti-competitive and relate mainly to the period between United States Postal Services provision for such cost has been established.
December 1999 and February 2006. This new decision follows the initial decision of the Commission of November 9, 2010. This In March 2016, the US Department of Justice (DOJ) informed
decision, issued to the same airlines for the same alleged practices, was annulled on formal grounds by the General Court of KLM and Air France of a civil inquiry regarding contracts
the European Commission in December 2015. with the United States Postal Service for the international
transportation of mail by air. In September 2016, a Civil

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Financial Statements 2020 Financial Statements 2020
Guarantees 25. Employee compensation and benefit expenses
Bank guarantees and corporate guarantees given by the Company on behalf of the Company, subsidiaries, unconsolidated
companies and third parties, amount to EUR 49 million as at December 31, 2020 (December 31, 2019 EUR 85 million). 2020 2019
Wages and salaries 2,245 2,418

Section 403 guarantees NOW subsidy (1,049) -

Social security premiums other than for state pension plans 264 263
General guarantees as defined in Book 2, Section 403 of the Dutch Civil Code have been issued by the Company on behalf
Voluntary leave and restructuring plans 228 (2)
of several subsidiaries in the Netherlands. The liabilities of these companies to third parties and unconsolidated companies
Share-based remuneration 1 (1)
amount to EUR 589 million as at December 31, 2020 (December 31, 2019 EUR 662 million). Hired personnel 73 216
Pension and early-retirement plan costs 332 271
Contingent assets Curtailment pension plans (16) -
Post-employment medical benefit costs 1 2
Other Litigation Other long-term employee benefit costs - 20
Total employee compensation and benefit expenses 2,079 3,187
The Company and certain of its subsidiaries are involved as plaintiff in litigation relating to commercial transactions and tax
disputes. Although the ultimate disposition of asserted claims and proceedings cannot be predicted with certainty, it is the
opinion of the Company’s management that the outcome of any such claims, either individually or on a combined basis, Following the COVID-19 crisis, the Group applied for the “Temporary Emergency Bridging Measure for Sustained Employment”
will not have a material favourable effect on the Company’s consolidated financial position, but could be material to the (NOW) as installed by the Dutch Government. The 2020 NOW compensation amounts to EUR 1,049 million for the period March
consolidated results of operations of the Company for a particular period. until December 2020. Given the ongoing COVID-19 crisis, NOW compensation is, under specific conditions, also applicable for
the first half year 2021. Depending on result developments in the first half year 2021, the Group will apply for the prolonged
23. Revenues NOW compensation.

2020 2019 For the voluntary leave and restructuring plans and curtailment pension plans, reference is made to note 28 Alternative
Services rendered performance measures.
Passenger transport 2,518 7,952
Cargo transport 1,535 1,171
Pension and early-retirement plan cost comprises:
Network 4,053 9,123
Maintenance contracts 712 941
2020 2019
Leisure 335 986
Defined benefit plans 203 161
Other services 20 25
Defined contribution plans 129 110
Total revenues 5,120 11,075
Total 332 271

Defined benefit plans and early-retirement plan cost comprises:

24. External expenses
2020 2019
2020 2019 Current service cost 198 155
Aircraft fuel 1,072 2,286 Interest expense 118 166
Chartering costs 164 185 Interest income (120) (169)
Landing fees and route charges 432 783 Administration cost 7 9
Catering 73 215 Total 203 161
Handling charges and other operating costs 292 576
Aircraft maintenance costs 738 882
Commercial and distribution costs 172 463
In the financial year 2020 the defined benefit cost recognised in profit or loss for the major defined benefit plans recognised
Insurance 24 24 in the statement of profit or loss amounted to EUR 203 million (2019 EUR 161 million) and the total contributions paid by
Rentals and maintenance of housing 129 130 the Group amounted to EUR 69 million (2019 EUR 148 million). The contributions paid in the financial year 2020 include
Sub-contracting 140 212 additional deficit funding for the Dutch KLM plans amounting to EUR nil million (2019 EUR nil million) and in the United Kingdom
Other external expenses 219 360 amounting to EUR 11 million (2019 EUR 10 million).
Total external expenses 3,455 6,116

The Group’s projected defined benefit plans and early retirement plan cost for 2021 amount to EUR 201 million. The Group’s
In aircraft fuel expenses an amount of EUR 173 million negative (2019 EUR 19 million positive) is included which was expected cash contributions for these plans amount to EUR 152 million.
transferred from OCI to the consolidated statement of profit or loss. Following the COVID-19 impact the Group’s fuel
consumption became far less than the volume of fuel hedges outstanding as from the end of first quarter 2020. In Post-employment medical benefits cost comprises:
accordance with IFRS the Group discontinued the fuel hedge relationship of these overhedges and released the market to
market value of those hedges from other comprehensive income in equity to the Consolidated statement of profit or loss. 2020 2019
Reference is made to note 29 Cost of financial debt. Interest cost 1 -
Losses/(gains) arising from plan amendments - (1)
Total 1 (1)

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Financial Statements 2020 Financial Statements 2020
Other long-term employee benefits comprise: 28. Alternative performance measures (APMs)

2020 2019 As at December 31, Note 2020 2019

Current service cost 6 5 Income from operating activities (1,345) 875
Interest cost - 1 Amortisation, depreciation, impairment and movement in provisions 27 1,058 1,070
Immediate recognition of (gains)/losses (6) 14 EBITDA (287) 1,945
Other - -
Total - 20 APM adjustments to EBITDA:
Voluntary leave and restructuring plans 25 (228) 2
Curtailment pension plans 25 16 -
Number of full-time equivalent employees: Total APM adjustments to EBITDA (212) 2
Adjusted EBITDA (75) 1,943
2020 2019
Average for year Income from operating activities (1,345) 875

Flight deck crew 3,573 3,492

Cabin crew 8,188 8,497 APM adjustments to income from operating activities:

Ground staff 18,207 18,583 Total APM adjustments to EBITDA (212) 2

Total 29,968 30,572 Result of sale of assets 27 46 20

Impairment of fixed assets 27 (25) -

2020 2019 Total APM adjustments (191) 22

Average for year Adjusted income from operating activities (1,154) 853

The Netherlands 26,866 27,293

Outside the Netherlands 3,102 3,279 For a description of APMs reference is made to the Alternative performance measures section in the Notes to the
Total 29,968 30,572
consolidated financial statements.

As at December 31, 2020 2019

The 2020 APM adjustments show an overall negative amount of EUR 191 million (2019: EUR 22 million positive). As a result of
Flight deck crew 3,476 3,614
Cabin crew 7,164 8,214 the COVID-19 crisis a number of measures and actions have been taken. The definition of APM was not adjusted due to the
Ground staff 16,650 18,888 impact of COVID-19.
Total 27,290 30,716
The 2020 APM adjustments to EBITDA relate to voluntary leave plans in the Netherlands and abroad amounting to EUR 203
million, restructuring provisions in the Netherlands and abroad amounting to EUR 25 million and a curtailment related to the
26. Other income and expenses Ground staff plan in the Netherlands amounting to a release of EUR 16 million.

2020 2019 The 2020 APM adjustments to income from operating activities relate to result on sale of assets (mainly Boeing 747 passenger
Capitalised production 129 224 and combi aircraft/engines, results on purchase of former right-of-use Boeing 737 aircraft and sale of emission trade rights)
Operating currency hedging recycling 49 33 amounting to EUR 38 million, the disposal of the associate Transavia France S.A.S. amounting to EUR 17 million and right-of-
Other expenses (51) (84) use assets write-off of 2 Airbus 330-200 aircraft, which were taken out of operation, amounting to EUR 9 million. Impairments
Other income and expenses 127 173
relate to passenger and combi Boeing 747 aircraft in April amounting to EUR 19 million, impairment of intangible assets in use
or under development amounting to EUR 8 million and a reversal of an impairment of engines of EUR 2 million.

27. Amortisation, depreciation, impairments and movements in provision The 2019 APM adjustments show a positive amount of EUR 22 million. This mainly relates a release of a voluntary leave plan
in the Netherlands amounting to EUR 2 million and the sale of Boeing 747 engines and 2 Boeing 737-700’s amounting to
2020 2019 EUR 20 million.
Intangible assets 81 61
Flight equipment 420 440
Other property and equipment 69 69
Right-of-use assets 479 506
Sale of assets (46) (20)
Impairment of fixed assets 25 -
Movements in provision 30 14
Total amortisation, depreciation and movements in provision 1,058 1,070

For sale of assets and impairment of fixed assets, reference is made to note 28 Alternative performance measures.

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Financial Statements 2020 Financial Statements 2020
29. Cost of financial debt The average effective tax rate is reconciled to the applicable tax rate in the Netherlands as follows:
in % 2020 2019
2020 2019 Applicable average tax rate in The Netherlands 25.0 25.0
Cost of financial debt Impact of:
Loans from third parties 53 41 Non-deductible expenses (1.1) 3.2
Interest on financial debt 14 32 Reduction tax rate (0.3) (1.1)
Interest on lease debt 92 110 Differences in foreign tax rate changes - (0.1)
Other interest expenses 5 (11) Provision deferred tax asset (15.4) -
Effective tax rate 8.2 27.0
Total gross cost of financial debt 164 172

Income from cash and cash equivalents

Finance income 16 24 31. Share-based payments
Total income from cash and cash equivalents 16 24
Net cost of financial debt 148 148
Phantom shares
The movement in the number of phantom performance shares granted is as follows:
2020 2019
Foreign currency exchange gains/(losses) (13) 5 2020 2019
Fair value gains/(losses) (110) (52) As at January 1 513,202 548,468
Other Financial income and expenses (69) (80) Granted 215,422 97,348
Total other financial income and expenses (192) (127) Forfeited (4,532) 8,068
Exercised (43,398) (140,682)
The fair value results recorded in the financial year mainly consist of the unrealised revaluation of other balance sheet items
As at December 31 680,694 513,202
amounting to EUR 124 million positive (2019: EUR 49 million negative), the ineffective/time value portion of fuel, interest rate
and foreign currency exchange derivatives for EUR 6 million positive (2019: EUR 3 million negative), revaluation of Air France
KLM S.A. shares for 5 million negative (2019: EUR nil million) and the COVID-19 related fuel overhedge amounting to EUR 240 The date of expiry of the phantom shares is as follows:
million negative (2019: nil million).
2020 2019
The latter relates to the COVID-19 impact on the Group’s fuel consumption that became far less than the volume of fuel Phantom shares expiry date

hedges outstanding as from the end of first quarter 2020. In accordance with IFRS the Group discontinued the fuel hedge
April 1, 2020 - 40,743
relationship of these overhedges and released the market to market value of those hedges from other comprehensive
April 1, 2021 81,678 83,328
income in equity to cost of financial debt. Reference is made to note 11 Reserves.
April 1, 2022 118,578 121,878
April 1, 2023 116,975 120,067
Other financial income and expenses includes additions of EUR 65 million (2019: EUR 77 million) to (maintenance) provisions April 1, 2024 148,045 147,186
resulting from the discounting effect in provision calculations. April 1, 2025 215,418 -
Carrying number 680,694 513,202
30. Income tax expense/benefit
The phantom shares generate an amount of cash, which is equal to the AIR FRANCE KLM share price at the moment of selling
2020 2019 of the shares. The number of vested phantom shares depends on the following criteria: AIR FRANCE KLM total shareholders
Deferred tax (income)/expense relating to the origination and reversal of temporary return (30%), KLM Group Return on Capital Employed (40%) and AIR FRANCE KLM position in the Dow Jones Sustainability
differences and tax losses (54) 80 Index (30%). The maximum number of phantom shares that may be granted to an individual employee in any year is related to
Current tax (income)/expense (82) 82
their job grade.
Total tax (income)/expenses (136) 162

Subject to restrictions relating to the prevention of insider-trading, phantom shares may be exercised at any time between
The applicable average tax rate in the Netherlands for the financial year 2020 is 25% (2019: 25%). the third and the fifth anniversary of the day of grant. Phantom shares are forfeited when employees leave the Company’s
employment.
End 2019 it was announced that the Dutch income tax will be lowered to 21.7% in 2021.
Given the COVID-19 impact the Dutch tax authorities announced end 2020 that the Dutch income tax will remain at 25% in Under the Long-Term Incentive plan 2015, executive employees of KLM have received (conditional and unconditional)
2021. The impact of these changes related to the specific years are presented in the line “Reduction tax rate” in below table. phantom shares per April 1, 2016. The first tranche has vested for 108.6% per April 2016. The second tranche has vested for
116.0% per April 2017. The third tranche has vested for 114.0% in April 2018. It is noted that the total number of Phantom
Performance shares vested over the three years cannot exceed the amount of Phantom Performance Shares granted
(maximum 100%). The 2015 plan has an intrinsic value of EUR 0.4 million as at December 31, 2020.

Under the Long-Term Incentive plan 2016, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2017. The first tranche has vested for 116.0% per April 2017. The second tranche has vested
for 114.0% per April 2018. The third tranche has vested for 74.8% in April 2019. It is noted that the total number of Phantom
Performance shares vested over the three years cannot exceed the amount of Phantom Performance Shares granted
(maximum 100%). The 2016 plan has an intrinsic value of EUR 0.6 million as at December 31, 2020.

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176 177
Financial Statements 2020 Financial Statements 2020
Under the Long-Term Incentive plan 2017, executive employees of KLM have received (conditional and unconditional) 33. Board of Managing Directors remuneration
phantom shares per April 1, 2018. The first tranche has vested for 114.0% per April 2018. The second tranche has vested for
74.8% per April 2019. The third tranche has vested for 102.1% in April 2020. The 2017 plan has an intrinsic value of EUR 0.6 The execution of the remuneration policy is affected by the conditions imposed by the State in connection with the financial
million as at December 31, 2020. support package. Therefore, the existing KLM remuneration policy has not been applied in 2020 with respect to the variable
income (both short-term and long-term incentive).
Under the Long-Term Incentive plan 2018, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2019. The first tranche has vested for 74.8% per April 2019. The second tranche has vested for Due to COVID-19 and its significant impact on the Company, the Board of Managing Directors had already decided and
102.1% in April 2020. The third tranche is still conditionally awarded. communicated in April 2020 to refrain from their variable income over 2020. In July, in the context of the State supported aid
package, conditions were set on no granting of variable income as long as the loan has not been repaid.
Under the Long-Term Incentive plan 2019, executive employees of KLM have received (conditional and unconditional)
phantom shares per April 1, 2020. The first tranche has vested for 102.1% per April 2020. The second and third tranche are The effects for 2020 are as follows:
still conditionally awarded. CEO COO/CFO
Overall reduction/pay cut (actual 2020 vs 2019) -45% -34~-38%

Under the Long-Term Incentive plan 2020, no grantings have taken place for the year 2020.
Base salary -20% in 2nd half year no change
Short-term incentive 2020 No No
32. Supervisory Board remuneration Long-term incentive 2020 (PPS) NIL granting NIL granting
Long term specific AF/KL shares NIL granting Not applicable
2020 2019
As Super-visory As Committee As Super-visory As Committee Total
(Amounts in EUR) Board member member Total Board member member
C.C. 't Hart 37,542 1,000 38,542 37,433 2,000 39,433
Total remuneration (base salary, short- and long-term incentive plan and pensions)
P.C. Calavia (until April 23, 2020) 8,244 - 8,244 26,500 - 26,500
F. Enaud 23,408 1,000 24,408 26,500 2,000 28,500
(amounts in EUR) 2020 2019 %
M.T.H. de Gaay Fortman 23,408 1,500 24,908 26,500 4,000 30,500
J.C. de Jager (as from April 25, 2019) 23,408 2,600 26,008 18,991 2,000 20,991 P.J.Th. Elbers 722,818 1,322,953 -45%

C. Nibourel (as from April 23, 2020) 15,164 - 15,164 - - - R.M. de Groot 494,829 754,217 -34%
F. Pellerin 23,408 2,600 26,008 26,500 2,000 28,500 E.R. Swelheim 474,870 764,753 -38%
J. Peyrelevade (until April 25, 2019) - - - 8,465 2,000 10,465 Total 1,692,517 2,841,923 -40%

P.F. Riolacci 23,408 5,200 28,608 26,500 4,000 30,500

A.J.M. Roobeek (until April 25, 2019) - - - 8,465 1,000 9,465
B. Smith (as from April 25, 2019) - - - - - -
H.N.J. Smits (until April 25, 2019) - - - 13,576 1,000 14,576
Base salary
B.J. Vos (as from April 25, 2019) 23,408 - 23,408 18,991 - 18,991 Mr. Elbers voluntarily reduced his base salary of EUR 600,000 by 20% as from June 2020 until and including December 2020.
Total 201,398 13,900 215,298 238,421 20,000 258,421 The base salaries of the Board of Managing Directors have not been increased.

As a general remark, the base salaries of the Board of Managing Directors remain significantly below the median of the
Mr. C.C. ’t Hart is KLM Supervisory Board Chairman since the Annual General Meeting (AGM) in April 2019. applicable market benchmark as well as below that of previous KLM CEOs in the case of Mr. Elbers.

Due to COVID-19 and its significant impact on the Company, the Supervisory Board voluntarily reduced its base remuneration
by 20% as from June 2020 until and including December 2020. (amounts in EUR) 2020 2019
For further information on the remuneration policy relating to Supervisory Board members, see the Remuneration Policy and P.J.Th. Elbers 535,185 585,000
R.M. de Groot 390,000 390,000
Report in the Board and Governance section. The remuneration paid to the Supervisory Board is not linked to the Company’s
E.R. Swelheim 390,000 390,000
results.
Total 1,315,185 1,365,000

Other transactions with Supervisory Board members

Apart from the transactions described above there were no other transactions such as loans or advances to or from or
guarantees given on behalf of members of the Supervisory Board. Short-term incentive plan
Due to the unfolding COVID-19 crisis, the Board of Managing Directors voluntarily waived any short-term incentive for 2020.

2020 2019
(amounts in EUR) Short-term incentive plan Short-term incentive plan
P.J.Th. Elbers 0 342,000
R.M. de Groot 0 159,120
E.R. Swelheim 0 154,050
Total 0 655,170

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178 179
Financial Statements 2020 Financial Statements 2020
Other allowances and benefits in kind As part of past and pre-COVID-19 obligations, members of the Board of Managing Directors still have the following existing
In addition to the base salary, the members of the Board of Managing Directors were entitled to other allowances and positions with respect to the phantom shares granted over the years 2015-2019 under the KLM LTI plan (as mentioned, no
benefits including a company car and customary plans such as disability insurance, telephone cost and a fixed monthly granting took place for 2020).
allowance of EUR 440 for business expenses not otherwise reimbursed.
Possible payment to the Board of Managing directors related to the exercise of pre-COVID vested phantom shares has been
Pensions suspended.
As per the remuneration policy the total pension benefits for the Board of Managing Directors, like for other KLM employees
with a salary above the fiscal regime of EUR 110,111 (2020), consists of two parts: 1) pension cost and 2) pension allowance. The members of the Board of Managing Directors have the following positions with respect to the phantom shares granted
under the KLM long-term incentive plan at December 31, 2020:
Annual variations based on the pension calculations provided for by the KLM Ground pension fund.
Number of Number of Number of Number of Number of
Pension cost (post-employment benefit) phantom phantom phantom Average phantom phantom Total outstanding
shares shares shares share price shares shares as at December
(amounts in EUR) 2020 2019
(Amounts in EUR) granted Expiry date forfeited exercised at exercise conditional vested 31, 2020
P.J.Th. Elbers 20,417 25,593
R.M. de Groot 22,404 23,261 P.J.Th. Elbers
E.R. Swelheim 16,247 15,117 2015 10,000 April 1, 2021 - - - - 10,000 10,000
Total 59,068 63,971 2016 10,000 April 1, 2022 - - - - 10,000 10,000
2017 10,000 April 1, 2023 303 - - - 9,697 9,697
2018 21,354 April 1, 2024 1,645 - - 7,118 12,591 19,709
2019 46,875 April 1, 2025 - - - 30,922 15,953 46,875
Pension allowance (short-term benefit) 2020 nil - - - - - -

Given the Dutch fiscal rules the members of the Board of Managing Directors receive a pension allowance for the 98,229 1,948 - 38,040 58,241 96,281
R.M. de Groot
pensionable salary above EUR 110,111 (2020). This gross pension allowance can, after wage tax, either be used to participate
2015 6,000 April 1, 2021 - - - - 6,000 6,000
in the KLM net pension savings scheme (defined contribution plan) or paid out as net allowance. This is a similar allowance
2016 6,000 April 1, 2022 - - - - 6,000 6,000
scheme as applies for all other employees at KLM with a salary above the mentioned fiscal rule pensionable salary threshold. 2017 6,000 April 1, 2023 182 - - - 5,818 5,818
2018 11,688 April 1, 2024 900 - - 3,896 6,892 10,788
(amounts in EUR) 2020 2019 2019 24,375 April 1, 2025 - - - 16,079 8,296 24,375
P.J.Th. Elbers 162,841 149,381 2020 nil - - - - - -
R.M. de Groot 100,134 97,676 54,063 1,082 - 19,975 33,006 52,981
E.R. Swelheim 113,866 111,061 E.R. Swelheim
Total 376,841 358,118 2014 6,000 April 1, 2020 104 5,896 5.25 - - -
2015 6,000 April 1, 2021 - - - - 6,000 6,000
External Supervisory Board memberships 2016 6,000 April 1, 2022 - - - - 6,000 6,000
According to the remuneration policy the Board of Managing Directors may retain payments they receive from other 2017 6,000 April 1, 2023 182 - - - 5,818 5,818
remunerated positions with a maximum number of 2 positions per Managing Director. The amount ceded to the Company 2018 11,688 April 1, 2024 900 - - 3,896 6,892 10,788
amounts to EUR 13,500 (December 31, 2019 EUR 15,000) and includes a remunerated position in connection with Supervisory 2019 24,375 April 1, 2025 - - - 16,079 8,296 24,375

Board membership in Transavia. 2020 nil - - - - - -

60,063 1,186 5,896 19,975 33,006 52,981

Other transactions with members of the Board of Managing Directors Total 212,355 4,216 5,896 77,990 124,253 202,243
Apart from the transactions described above there were no other transactions such as loans or advances to or from or
guarantees given on behalf of members of the Board of Managing Directors. Cost of phantom shares is based on IFRS accounting standards and does not reflect the value of the phantom shares at the
vesting date.
Long-term incentive plan
No grantings have taken place for the year 2020 for both the KLM LTI scheme (all three board members) and the AFKL SLTI Granted and vested phantom shares are recorded in April following the year it relates to and as such added to the total out­
scheme (CEO). standing of the following year. The addition of phantom shares compared to last year relates to the achievements of 2019 targets.

In general, as an incentive to make a longer-term commitment to the Company, phantom shares are granted to members of Cost in 2020 of the committed 2019 phantom shares and AIR FRANCE KLM SLTI plan, for Mr. Elbers are EUR 905 negative
the Board of Managing Directors on the basis of their reaching agreed personal performance targets. Subject to restrictions (2019: EUR 215,699), relate to achievement of 2019 targets and an annual technical revaluation, at December 31, 2020 of the
relating to the prevention of insider-trading, (phantom) shares may be exercised at any time between the third and the fifth phantom shares portfolio and AIR FRANCE KLM shares following the 2020 decrease of the AIR FRANCE KLM share price.
anniversary of the day of grant. After five years the outstanding (phantom) shares are forfeited.
Cost in 2020 of the 2019 committed phantom shares, for Mr. de Groot are EUR 22,989 negative (2019: EUR 78,880) and for
Under the AIR FRANCE KLM specific long-term incentive (SLTI) plan, the KLM CEO is entitled to a number of AIR FRANCE KLM Mr. Swelheim EUR 50,523 negative (2019: EUR 89,245), relate to achievement of 2019 targets and a technical revaluation of
shares. The shares granted in 2018 and 2019 under this SLTI will vest after three years if the predetermined SLTI plan criteria the phantom shares portfolio following the 2020 decrease of the AIR FRANCE KLM share price.
are met. The evaluation and subsequent vesting will only take place after three years, hence in 2022.
As at December 31, 2020 Mr. Elbers, Mr. de Groot, and Mr. Swelheim had no interest in AIR FRANCE KLM S.A.

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Financial Statements 2020 Financial Statements 2020
34. Related party transactions 35. Primary segment reporting
The Group has interests in various associates in which it has either significant influence in but not control or joint control over
operating and financial policy. 2020 Network Maintenance Leisure Other Eliminations Total
Revenues

In February 2019 the State of the Netherlands acquired a 14.0% stake in the Group’s ultimate parent company, AIR FRANCE Revenues External 4,053 712 335 20 - 5,120
Revenues Internal 240 554 - 127 (921) -
KLM S.A. As a result the State of the Netherlands and Royal Schiphol Group, being a State-owned entity, are regarded as
Total revenue 4,293 1,266 335 147 (921) 5,120
related parties as from 2019.
EBITDA (184) 107 (35) 37 - (75)
APM adjustments to EBITDA* (178) (39) (4) 9 - (212)
As part of its business operations, The Group enters into transactions with related parties which are negotiated at commercial Income from current activities (1,005) (38) (124) 13 - (1,154)
conditions and prices and are not more favourable than those which would have been negotiated with third parties on an APM adjustments to income from operating activities* (174) (37) 11 9 - (191)
arm’s length basis.
Financial Income and expenses (340)
Income tax expense 136
Transactions conducted with the Dutch State are limited to normal economic transactions, taxation and other administrative
Share of results of equity shareholdings 3
relationships, with the exception of items specifically disclosed in this note. Normal economic transactions mainly relate to air
(Loss) for the year (1,546)
transport and are entered into under the same commercial and market terms that apply to non-related parties. The Dutch
Government is a shareholder in KLM N.V. (reference is made to Note 10). Amortisation, depreciation and movements in provision (821) (145) (89) (24) - (1,079)
In addition, in financial year 2020 the Group applied for the “Temporary Emergency Bridging Measure for Sustained Other financial income and expenses (146) 16 (43) (19) - (192)
Employment” (NOW) as installed by the Dutch Government (reference is made to Note 25), made use of the possibility to
delay payment of labor taxes (reference is made to Note 5) and received a financing package in 2020 (reference is made to Assets

Note 14 Other financial liabilities). Intangible assets 213 246 16 - - 475

Flight equipment 3,741 588 389 - - 4,718
Other property, plant and equipment 364 313 3 - - 680
The transactions with Royal Schiphol Group relate to land and property rental agreements and airport and passenger related
Right-of-use assets 1,321 109 315 - - 1,745
fees. In addition Royal Schiphol Group collects airport fees on their behalf. Trade receivables 295 (21) 6 (11) - 269
Other assets 503 412 100 1,545 - 2,560
The following transactions were carried out with related parties: Total assets 6,437 1,647 829 1,534 - 10,447

2020 2019 Liabilities

Sales of goods and services Deferred revenues on sales 1,185 72 71 - - 1,328

Other liabilities 5,450 245 715 2,824 - 9,234
AIR FRANCE KLM Group companies 204 197
Total liabilities 6,437 317 786 2,824 - 10,562
Associates - -
Other related parties 25 67

Purchases of goods and services

AIR FRANCE KLM Group companies 277 349
Associates - -
Other related parties 96 242

For details of the year-end balances of amounts due to and from related parties see notes 8 and 20.
In 2020 no dividends have been received from jointly controlled entities interests (see note 4).
In 2020 the Group sold its equity interest in Transavia France S.A.S. to related party Air France Finance S.A.S. Reference is made
to note 4 Investments accounted for using the equity method.

In 2019 KLM and Air France concluded a swap of part of their outstanding wide body fleet orders with the aim to simplify the
management of their own fleet (creation of synergies and costs reductions). In the 2021-2023 timeframe six Boeing 787’s,
previously allocated to Air France, will enter the KLM fleet and seven Airbus A350’s, previously allocated to KLM, will enter the
Air France fleet.

For information relating to transactions with members of the Supervisory Board and Board of Managing Directors, see note 31
to 33. For information relating to transactions with pension funds for the Group’s employees see note 18.

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Financial Statements 2020 Financial Statements 2020
 36. Secondary segment reporting
2019 Network Maintenance Leisure Other Eliminations Total
Revenues Europe, North Caribbean, Africa, Middle Americas Asia, New
Revenues External 9,123 941 986 25 - 11,075 Revenues by destination 2020 Africa Indian Ocean East Polynesia Caledonia Total
Revenues Internal 131 749 2 216 (1,098) - Scheduled passenger 788 171 305 704 428 2,396
Total revenue 9,254 1,690 988 241 (1,098) 11,075 Other passenger revenues 40 6 15 37 24 122
EBITDA 1,545 165 204 29 1,943 Total passenger revenues 828 177 320 741 452 2,518
APM adjustments to EBITDA* 2 - - - - 2 Scheduled cargo 11 21 242 671 383 1,328
Income from current activities 683 80 84 6 - 853 Other cargo revenues 2 3 38 104 60 207
APM adjustments to income from operating activities* 20 - - - - 20 Total cargo revenues 13 24 280 775 443 1,535
Total network revenues 841 201 600 1,516 895 4,053
Financial Income and expenses (275) Maintenance 712 - - - - 712
Income tax expense (162) Other revenues 355 - - - - 355
Share of results of equity shareholdings 11 Total maintenance and other 1,067 - - - - 1,067
Profit for the year 449
Total revenues by destination 1,908 201 600 1,516 895 5,120

Amortisation, depreciation and movements in provision (862) (85) (120) (23) - (1,090)
Other financial income and expenses (87) 2 (18) (24) - (127) Europe, North Caribbean, Africa, Middle Americas Asia, New
Revenues by destination 2019 Africa Indian Ocean East Polynesia Caledonia Total
Assets Scheduled passenger 2,547 393 918 2,338 1,534 7,730
Intangible assets 183 74 17 235 - 509 Other passenger revenues 72 11 27 68 43 221
Flight equipment 3,640 642 430 (5) - 4,707 Total passenger revenues 2,619 404 945 2,406 1,577 7,951
Other property, plant and equipment 158 99 3 394 - 654 Scheduled cargo 9 21 196 473 285 984
Right-of-use assets 1,499 98 324 107 - 2,028 Other cargo revenues 2 4 37 90 54 187
Trade receivables 473 (11) 26 (4) - 484 Total cargo revenues 11 25 233 563 339 1,171
Other assets 572 687 333 1,797 - 3,389 Total network revenues 2,630 429 1,178 2,969 1,916 9,122
Total assets 6,525 1,589 1,133 2,524 - 11,771 Maintenance 941 - - - - 941
Other revenues 1,012 - - - - 1,012
Liabilities Total maintenance and other 1,953 - - - - 1,953
Deferred revenues on sales 1,469 114 142 - - 1,725 Total revenues by destination 4,583 429 1,178 2,969 1,916 11,075
Other liabilities 5,244 302 837 2,103 - 8,486
Total liabilities 6,713 416 979 2,103 - 10,211
Geographical analysis of assets: the major revenue-earning asset of the Group is the fleet, the majority of which are
* See note 28 Alternative performance measures (APM) for the reconciliation to adjusted EBITDA and adjusted income from operating activities. Also see the registered in the Netherlands. Since the Group’s fleet is employed flexibly across its worldwide route network, there is no
Alternative performance measures section in the Notes to the Consolidated financial statements suitable basis of allocating such assets and related liabilities to geographical segments.

The intangible assets, flight equipment, other property, plant and equipment, right-of-use assets and allocated working capital 37. Subsidiaries
have been tested for impairment as disclosed in the Impairment of assets section in the Accounting policies for the balance
sheet in the Notes to the consolidated financial statements. The following is a list of the Company’s significant subsidiaries as at December 31, 2020:

Country of Ownership interest Proportion of voting

Name incorporation in % power held in %
Transavia Airlines C.V. the Netherlands 100 100
Martinair Holland N.V. the Netherlands 100 100
KLM Cityhopper B.V. the Netherlands 100 100
KLM Cityhopper UK Ltd. United Kingdom 100 100
KLM UK Engineering Ltd. United Kingdom 100 100
European Pneumatic Component Overhaul & Repair B.V. the Netherlands 100 100
KLM Catering Services Schiphol B.V. the Netherlands 100 100
KLM Flight Academy B.V. the Netherlands 100 100
KLM Health Services B.V. the Netherlands 100 100
KLM Equipment Services B.V. the Netherlands 100 100
Cygnific B.V. the Netherlands 100 100

The full list of the Company’s subsidiaries, associates, jointly controlled entities and non-controlling interests has been, in line
with Section 379 and Section 414 of Book 2 of the Dutch Civil Code, filed at the Chamber of Commerce together with this
Annual Report.

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Financial Statements 2020 Financial Statements 2020
KLM Royal Dutch Airlines Company balance sheet KLM Royal Dutch Airlines Company statement of profit or loss

In millions of Euros Note December 31, 2020 December 31, 2019 In millions of Euros 2020 2019
Before proposed appropriation of the result for the year (Loss)/Profit from investments accounted for using equity method after taxation (80) 98
(Loss)/Profit of KLM N.V. after taxation (1,467) 350
ASSETS
(Loss)/Profit for the year after taxation (1,547) 448
Non-current assets
Property, plant and equipment 38 4,443 4,328 The accompanying notes are an integral part of these Company financial statements

Right-of-use assets 39 1,310 1,561

Intangible assets 454 486
Investments accounted for using the equity method 40 422 560 Notes to the Company financial statements
Other non-current assets 5 180 231
Other financial assets 41 281 429 General
Deferred tax assets 50 20 - The Company financial statements are part of the 2020 financial statements of KLM Royal Dutch Airlines (the “Company”).
Pension assets 18 211 420
7,321 8,015
Going concern
Current assets
Regarding going concern as at the date of this Annual Report reference is made to the Going concern paragraph in the Notes
Other current assets 5 100 158
Other financial assets 41
to the consolidated financial statements.
163 100
Inventories 127 243
Trade and other receivables 42 1,244 1,686 Subsequent events
Cash and cash equivalents 43 120 186 Regarding subsequent events as at the date of this Annual Report reference is made to the Subsequent events paragraph in
1,754 2,373 the Notes to the consolidated financial statements.

Total assets 9,075 10,388

Significant accounting policies
EQUITY The principal accounting policies applied in the preparation of the Company financial statements are set out below. These
Capital and reserves
policies have been consistently applied to all the years presented, unless otherwise stated.
Share capital 44 94 94
Share premium 474 474
Principles for the measurement of assets and liabilities and the determination of the result
Reserves 44 (441) (315)
In determining the principles to be used for the recognition and measurement of assets and liabilities and the determination
Retained earnings 1,303 858
of the result for its separate financial statements, the Company makes use of the option provided in Section 362 (8) of Book 2
Result for the year (1,547) 448
Total attributable to Company's equity holders (117) 1,559 of the Dutch Civil Code. This section permits companies to apply the same principles for the recognition and measurement of
assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of
LIABILITIES
the Company financial statements as those applied for the consolidated EU-IFRS financial statements.
Non-current liabilities
Financial debt 46 764 648
The Company makes use of the option provided in Section 402 of Book 2 of the Dutch Civil Code. This section permits
Lease debt 47 706 946
companies to present a condensed company statement of profit or loss given that the Company’s financial information is
Other non-current liabilities 5 839 150
Other financial liabilities 48 1,911 918
consolidated in the Consolidated financial statements of the ultimate parent company AIR FRANCE KLM S.A.
Deferred income 49 258 228
Deferred tax liabilities 50 - 92 Subsidiaries are accounted for using the equity method and investments accounted for using the equity method, over which
Return obligation liability and other provisions 51 1,109 1,176 significant influence is exercised, are stated on that basis. The share in the result of these investments comprises the share of
5,587 4,158 the Company in the result of these investments. Results on transactions, where the transfer of assets and liabilities between
Current liabilities the Company and its investments and mutually between these investments themselves, are not incorporated insofar as they
Trade and other payables 52 1,737 2,480 can be deemed to be unrealised.
Loans from subsidiaries 45 - 32
Financial debt 46 123 96 All amounts (unless specified otherwise) are stated in millions of Euros (EUR million).
Lease debt 47 255 321 For notes and/or details, which are not explained in the notes to the Company financial statements reference is made to the
Other current liabilities 5 178 113 notes and/or details of the Consolidated financial statements.
Other financial liabilities 48 119 73
Deferred income 49 926 1,240
Current tax liabilities 50 - 59
Return obligation liability and other provisions 51 267 257
3,605 4,671
Total liabilities 9,192 8,829

Total equity and liabilities 9,075 10,388

The accompanying notes are an integral part of these Company financial statements

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Financial Statements 2020 Financial Statements 2020
38. Property, plant and equipment Borrowing cost capitalised during the year amounted to EUR 10 million (2019 EUR 13 million). The interest rate used to
determine the amount of borrowing cost to be capitalised was 2.6 % (2019: 2.7%).
Flight equipment Other property and equipment
Owned Other flight Land and Equipment Other property Pre- Land and buildings include buildings located on land which has been leased on a long-term basis. The book value of these
aircraft equipment Total buildings and fittings and equipment Total payments Total
buildings as at December 31, 2020 was EUR 227 (December 31, 2019 EUR 198 million).
Historical cost
As at Jan. 1, 2020 3,827 2,099 5,926 636 321 155 1,112 649 7,687
39. Right-of-use assets
Additions 241 131 372 58 10 49 117 147 636
Disposals (33) (247) (280) (1) (3) (26) (30) - (310)
Aircraft Maintenance Land & Real Estate Others Total
Other movements (28) 70 42 - (114) 115 1 (72) (29)
As at Dec. 31, 2020 4,007 2,053 6,060 693 214 293 1,200 724 7,984 Net value
As at January 1, 2020 908 431 102 120 1,561
New contracts - - 19 9 28
Accumulated depreciation and impairment
Renewal or extension options 37 (1) (1) 7 42
As at Jan. 1, 2020 1,857 850 2,707 326 225 101 652 - 3,359
Reclassifications - 54 1 11 66
Depreciation 171 166 337 30 8 22 60 - 397
Amortisation (245) (93) (15) (33) (386)
Disposals (24) (240) (264) (1) (3) (25) (29) - (293)
Other movements - (1) - - (1)
Other movements (3) 78 75 - (79) 82 3 - 78
As at December 31, 2020 700 390 106 114 1,310
As at Dec. 31, 2020 2,001 854 2,855 355 151 180 686 - 3,541

Net value
Net carrying amount
As at January 1, 2019 1,051 412 107 123 1,693
As at Jan. 1, 2020 1,970 1,249 3,219 310 96 54 460 649 4,328
New contracts 85 - 4 38 127
As at Dec. 31, 2020 2,006 1,199 3,205 338 63 113 514 724 4,443
Renewal or extension options 47 - 2 - 49
Disposals - - - - -
Reclassifications (21) 122 3 - 104
As a consequence of management’s decision to take measures limiting the effects of the COVID-19 crisis, it was decided to
Amortisation (254) (103) (14) (32) (403)
early phase-out the passenger and combi Boeing 747 aircraft as per April 2020. Thereupon an impairment of EUR 19 million
Other movements - - - (9) (9)
was recorded, which is reflected in the other movements. The asset is related to passenger activities within the network As at December 31, 2019 908 431 102 120 1,561
business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision and
note 28 Alternative performance measures. Information related to lease debt is available in note 47.

Flight equipment Other property and equipment As a consequence of management’s decision to take measure limiting the effects of the COVID-19 crisis, it was decided to
Owned Other flight Land and Equipment Other property Pre- Total take out 2 leased Airbus A330-200 earlier out of the operation, notably in the fourth quarter of 2020. Thereupon a write-
aircraft equipment Total buildings and fittings and equipment Total payments Restated
off of EUR 9 million was recognised in the right-of-use asset aircraft. The asset is related to passenger activities within the
Historical cost
network business segment. Reference is made to note 27 Amortisation, depreciation, impairments and movements in provision
As at Jan. 1, 2019 3,442 1,989 5,431 624 363 164 1,151 522 7,104
and note 28 Alternative performance measures.
Additions 541 366 907 43 24 17 84 61 1,052
Disposals (79) (333) (412) (31) (66) (26) (123) - (535)
Other movements
The table below indicates the rents resulting from lease and service contracts which are not capitalised:
(77) 77 - - - - - 66 66
As at Dec. 31, 2019 3,827 2,099 5,926 636 321 155 1,112 649 7,687
As at December 31, 2020 2019
Variable rents 3 10
Accumulated depreciation and impairment
As at Jan. 1, 2019 Short-term rents 43 87
1,750 857 2,607 327 270 120 717 - 3,324
Depreciation Low value rents 2 3
159 189 348 30 23 7 60 - 408
Disposals Carrying amount 48 100
(51) (329) (380) (31) (66) (26) (123) - (503)
Other movements (1) 133 132 - (2) - (2) - 130
As at Dec. 31, 2019 1,857 850 2,707 326 225 101 652 - 3,359

Net carrying amount

As at Jan. 1, 2019 1,692 1,132 2,824 297 93 44 434 522 3,780
As at Dec. 31, 2019 1,970 1,249 3,219 310 96 54 460 649 4,328

The assets include assets which are held as security for mortgages and loans as follows:

As at December 31, 2020 2019

Aircraft 130 31
Land and buildings 129 116
Other property and equipment 41 15
Carrying amount 300 162

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Financial Statements 2020 Financial Statements 2020
40. Investments accounted for using the equity method 42. Trade and other receivables

As at December 31, 2020 2019 As at December 31, 2020 2019

Subsidiaries 404 544 Trade receivables 406 638
Associates 9 8 Expected credit loss (51) (28)
Jointly controlled entities 9 8 Trade receivables - net 355 610
Carrying amount 422 560
Amounts due from:
- subsidiaries 483 584
2020 2019
- AIR FRANCE KLM group companies 50 84
Subsidiaries
- associates and jointly controlled entities 2 5
- maintenance contract customers 63 131
Carrying amount as at January 1 544 439
Taxes and social security premiums 14 41
Other receivables 213 102
Movements
Prepaid expenses 64 129
Investments - -
Total 1,244 1,686
Share of profit/(loss) after taxation (79) 90
OCI movement (55) 25
Dividends received - (6)
Maintenance contract cost incurred to date for contracts in progress at December 31, 2020 amounted to EUR 147 million
Foreign currency translation differences 1 (1) (December 31, 2019 EUR 276 million). Advances received for maintenance contracts in progress at December 31, 2020
Other movements (7) (3) amounted to EUR 50 million (December 31, 2019 EUR 81 million). The maturity of trade and other receivables is within one
Net movement (140) 105 year.
Carrying amount as at December 31 404 544
43. Cash and cash equivalents
For details of the Group’s investments in subsidiaries see note 37 to the consolidated financial statements. For details of the
Group’s investments in associates and jointly controlled entities see note 4 to the consolidated financial statements. As at December 31, 2020 2019
Cash at bank and in hand 20 30
41. Other financial assets Short-term deposits 100 156
Total 120 186

December 31, 2020 December 31, 2019

Current Non-current Current Non-current The effective interest rates on short-term deposits are in the range from -0.34% to 3.35% (2019 range -0.33% to 3.35%). The
Debt investments at amortised cost short-term deposits are invested in money market instruments or in liquid funds with daily access to cash.
Bonds, long-term deposits, other loans and receivables 113 233 50 378

44. Share capital and other reserves

At fair value through profit or loss
Deposits and commercial paper with original maturity 3-12 months 50 - 50 -
For details of the Company’s share capital and movements in other reserves see note 10 and 11 to the consolidated financial
Deposits on operating leased aircraft - 15 - 18
statements. For details of the Company’s equity see the consolidated statement of changes in equity.
AIR FRANCE KLM S.A. shares - 6 - 11

50 21 50 29
The Company has other reserves relating to hedging, remeasurement of defined benefit plans, translation and other legal
At fair value through OCI reserves. Reference is made to note 11.
Kenya Airways Ltd. Shares - 12 - 8
Other non-consolidated entities - 15 - 14 45. Loans from subsidiaries
- 27 - 22
Carrying amount 163 281 100 429 As at December 31, 2020 2019
Non-current portion - -
For details about the Company’s stake in Kenya Airways see note 6. Current portion - 32
Carrying amount - 32

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Financial Statements 2020 Financial Statements 2020
46. Financial debt 48. Other financial liabilities
December 31, 2020 December 31, 2019
As at December 31, 2020 2019 Current Non-current Current Non-current
Non-current portion 764 648 A Cumulative preference shares - 18 - 18
Current portion 123 96 B Cumulative preference shares - 14 - 14
Carrying amount 887 744 Revolving credit facility - 663 - -
Direct State loan - 278 - -
Subordinated perpetual loans - 505 - 509
Other loans (secured/unsecured) 119 433 73 377
47. Lease debt Total 119 1,911 73 918

December 31, 2020 December 31, 2019 For details about the other financial liabilities see note 14.
Current Non-current Current Non-current
Lease Debt - Aircraft 211 514 273 735 49. Deferred income
Lease Debt - Real estate 14 121 14 117
Lease Debt - Others 26 71 29 94
December 31, 2020 December 31, 2019
Accrued Interest 4 - 5 -
Current Non-current Current Non-current
Total 255 706 321 946
Advance ticket sales 850 - 1,151 -
Sale and leaseback transactions 1 4 1 5

Change in lease debt: Flying Blue frequent flyer program 69 247 79 214
Others 6 7 9 9
As at New contracts Payment Currency As at
January 1, and renewals of translation December 31, Total 926 258 1,240 228
2020 of contracts lease debt adjustment Other 2020
Lease Debt - Aircraft 1,008 43 (248) (78) - 725
Advance ticket sales corresponds to sold passenger tickets and freight airway bills which will be recognised in revenues at
Lease Debt - Real estate 131 19 (15) - - 135
the date of transportation. The COVID-19 crisis and the lockdown of borders caused the KLM to reduce capacity and cancel
Lease Debt - Others 123 16 (35) (7) - 97
Accrued interest 5 - - - (1) 4
an important number of passenger flights. In that case, customers can either ask for a refund of the ticket or the issuance of
Total 1,267 78 (298) (85) (1) 961 a voucher. As per December 31, 2020, the advance ticket sales includes EUR 243 million of passenger tickets (fare and carried
imposed charges) for which the date of transportation has passed and which are eligible to refund and EUR 322 million of
vouchers that can be used for future flights.
As at New contracts Payment Currency As at
January 1, and renewals of translation December 31, 50. Deferred/Current tax
2019 of contracts lease debt adjustment Other 2019
Lease Debt - Aircraft 1,147 111 (255) - 5 1,008
The gross movement in the deferred income tax account is as follows:
Lease Debt - Real estate 138 9 (16) - - 131
Lease Debt - Others 115 38 (21) - (9) 123
2020 2019
Accrued interest 5 - - - - 5
Carrying amount as at January 1 92 (9)
Total 1,405 158 (292) - (4) 1,267

Movements:

The lease debt maturity breaks down as follows: Income statement expense (49) 74
Tax (credited)/charged to equity (67) 65
Reduction due to tax rate - 29
2020 2019
Other movements 4 (67)
Less than 1 year 316 394
Net movement (112) 101
Between 1 and 2 years 259 350
Carrying amount as at December 31 (20) 92
Between 2 and 3 years 201 280
Between 3 and 4 years 129 190
Current income tax liabilities - 59
Between 4 and 5 years 86 94
Tax (assets) / liabilities as at December 31 (20) 151
Over 5 years 184 218
Total 1,175 1,526
Including:
- Principal 961 1,267
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
- Interest 214 259 current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

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Financial Statements 2020 Financial Statements 2020
The offset amounts are as follows: Tax fiscal unity
The Company, together with other subsidiaries in the Netherlands, has entered into a fiscal unity for the purpose of filing
As at December 31, 2020 2019 consolidated corporation tax and VAT returns. As a result, every legal entity in this tax group is jointly and severally liable for
Deferred tax assets: the tax debts of all the legal entities forming the group.
Deferred tax assets to be settled in 12 months or less - -
Deferred tax assets to be settled after 12 months 56 14 51. Return obligation liability and other provisions
56 14
Other Provisions
Return
Deferred tax liabilities:
obligation Maintenance Restructuring
Deferred tax liabilities to be settled in 12 months or less - - liability liability and
Deferred tax liabilities to be settled after 12 months 36 106 on leased on leased Employee voluntary
36 106 aircraft aircraft Benefit Legal Issues leave Other Total
Carrying amount (20) 92 As at January 1, 2020 59 1,012 191 137 - 34 1,433

The movements in deferred tax assets and liabilities, without taking into consideration the offsetting of balances within the Additional provisions and increases in existing
same tax jurisdiction, are as follows: provisions 11 (4) 3 2 219 21 252
Unused amounts reversed - - - (1) - - (1)
Carrying amount Income statement Tax charged/ Other Carrying amount as Used during year - - (13) - (174) (22) (209)
as at January 1 (charge) /credit (credited) to equity movements at December 31 New / Changes in lease contracts (9) (16) - - - - (25)
Deferred tax assets Foreign currency translation differences (2) (69) (5) - - - (76)
2020 Accretion impact 2 44 - - - - 46
Other changes (5) (80) 17 - 10 14 (44)

Tax losses - - - - -
As at December 31, 2020 56 887 193 138 55 47 1,376
Non-deductable interest - 10 - - 10
Other tangible fixed assets 18 11 - - 29
Current/non-current portion
Derivative financial instruments (4) - 21 - 17
Non-current portion 45 744 169 136 - 15 1,109
Other - 19 (19) - -
Current portion 11 143 24 2 55 32 267
Total 14 40 2 - 56
As at December 31, 2020 56 887 193 138 55 47 1,376
Carrying amount Income statement Tax charged/ Other Carrying amount as
as at January 1 (charge) /credit (credited) to equity movements at December 31
Deferred tax assets Other Provisions
2019 Return
obligation Maintenance Restructuring
Tax losses 52 (83) - 31 - liability liability and
on leased on leased Employee voluntary
Provisions for employee benefits 14 - - (14) -
aircraft aircraft Benefit Legal Issues leave Other Total
Financial lease obligations 1 - - (1) -
As at January 1, 2019 (38) 976 178 131 - 35 1,282
Other tangible fixed assets - 6 - 12 18
Derivative financial instruments 41 - (47) 2 (4)
Other 40 7 14 (61) - Additional provisions and increases in existing
provisions 6 (4) 26 4 - 25 57
Total 148 (70) (33) (31) 14
Unused amounts reversed - - - - - - -
Carrying amount Income statement Tax charged/ Other Carrying amount as Used during year - - (14) - - (26) (40)
as at January 1 (charge)/credit (credited) to equity movements at December 31 New / Changes in lease contracts 87 (26) - - - - 61
Deferred tax liabilities Foreign currency translation differences 3 13 3 - - - 19
2020 Accretion impact 2 53 - - - - 55
Other changes (1) - (2) 2 - - (1)
Pensions & benefits (asset) 106 (25) (65) 20 36
Other - 16 - (16) - As at December 31, 2019 59 1,012 191 137 - 34 1,433
Total 106 (9) (65) 4 36
Current/non-current portion
Carrying amount Income statement Tax charged/ Other Carrying amount as Non-current portion 55 949 169 1 - 2 1,176
as at January 1 (charge)/credit (credited) to equity movements at December 31
Current portion 4 63 22 136 - 32 257
Deferred tax liabilities
As at December 31, 2019 59 1,012 191 137 - 34 1,433
2019

Other tangible fixed assets (12) - - 12 - For details about the Return obligation liability and other provisions see note 19.
Pensions & benefits (asset) 114 4 61 (73) 106
Other 37 - - (37) -
Total 139 4 61 (98) 106

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Financial Statements 2020 Financial Statements 2020
52. Trade and other payables

As at December 31, 2020 2019

Trade payables 508 865
Amounts due to subsidiaries 461 606
Amounts due to AIR FRANCE KLM Group companies 65 110
Taxes and social security premiums 200 288
Employee related liabilities 322 401
Accrued liabilities 127 160
Other payables 54 50
Total 1,737 2,480

Other notes
For information relating to contingency assets and liabilities, including guarantees, see note 22.

For information relating to share-based payments, Supervisory Board and Board of Managing Directors remuneration
see note 31 to 33.

Amstelveen, March 31, 2021

The Board of Managing Directors The Supervisory Board

Pieter J.Th. Elbers Cees C. ‘t Hart

René M. de Groot François Enaud
Erik R. Swelheim Marry de Gaay Fortman
Jan Kees de Jager
Christian Nibourel
Fleur Pellerin
Pierre-François Riolacci
Benjamin Smith
Janine Vos

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Financial Statements 2020 Financial Statements 2020
Other information
» obtaining an understanding how management’s Materiality
assessment, including the forecast information, was Based on our professional judgement we determined the
compiled and compare previous periods’ forecasts to materiality for the financial statements as a whole at EUR 45
actual results and assess whether management has a million (2019: EUR 60 million). The materiality is determined
record of preparing accurate predictions; with reference to revenue. We consider revenue as the
» assessing the cash flow projections with the budget 2021 most appropriate benchmark because of the volatility of
Independent Auditors’ Report and forecast 5-year plan and evaluating the scenarios the profit before tax. Materiality significantly decreased
and challenge the underlying data and assumptions, compared to last year due to the impact of the COVID-19
among others by comparing it to external industry data, crisis on the revenue of KLM. We have also taken into
To: the General Meeting of Shareholders and the Basis for our opinion such as from IATA, used in the forecast information; account misstatements and/or possible misstatements that
Supervisory Board of KLM Royal Dutch Airlines (‘Koninklijke We conducted our audit in accordance with Dutch » discussion with management to evaluate its plans for in our opinion are material for the users of the financial
Luchtvaart Maatschappij N.V.’) law, including the Dutch Standards on Auditing. Our future actions to assess whether management’s plans statements for qualitative reasons.
responsibilities under those standards are further described are feasible given the circumstances and inspect the
Report on the audit of the financial statements in the ‘Our responsibilities for the audit of the financial supporting documentation to substantiate management’s We agreed with the Supervisory Board that misstatements
2020 included in the annual report statements’ section of our report. future actions; in excess of EUR 2.25 million (2019: EUR 3 million) which
» confirming the existence and validity of the financing are identified during the audit, and are not adjusted in the
Our opinion We are independent of KLM in accordance with the facility in order to obtain or maintain financial support financial statements, would be reported to them, as well as
In our opinion: Wet toezicht accountantsorganisaties (Wta, Audit from the bank consortium and Dutch State, including the smaller misstatements that in our view must be reported on
» the accompanying consolidated financial statements give firms supervision act), the ‘Verordening inzake de assessment of the relevant covenants included in the qualitative grounds.
a true and fair view of the financial position of KLM Royal onafhankelijkheid van accountants bij assurance- financing facility;
Dutch Airlines as at December 31, 2020 and of its result opdrachten’ (ViO, Code of Ethics for Professional » obtaining and inspecting reports of regulatory bodies Scope of the group audit
and its cash flows for the year then ended, in accordance Accountants, a regulation with respect to independence) relating to restricting air traffic; KLM heads a group of components and has as its principal
with International Financial Reporting Standards as and other relevant independence regulations in the » analysing and assessing KLM’s latest available interim business segments: network activities, which include air
adopted by the European Union (EU-IFRS) and with Part 9 Netherlands. Furthermore, we have complied with the financial information and identify subsequent events transport of passengers and cargo, aircraft maintenance,
of Book 2 of the Dutch Civil Code. ‘Verordening gedrags- en beroepsregels accountants’ which may impact on the accuracy of the forecast. leisure, and other activities linked to air transport. The
» the accompanying company financial statements give a (VGBA, Dutch Code of Ethics). financial information of this group is included in the financial
true and fair view of the financial position of KLM Royal We believe the audit evidence we have obtained is Furthermore, we have evaluated the situation and statements of KLM.
Dutch Airlines as at December 31, 2020 and of its result for sufficient and appropriate to provide a basis for our opinion. uncertainties as described in the aforementioned disclosure
the year then ended in accordance with Part 9 of Book 2 and consider the disclosure to be adequate. However, an In establishing the overall group audit strategy and plan, we
of the Dutch Civil Code. Material uncertainty related to going concern audit cannot predict the unknowable factors or all possible determined the type of work that needed to be performed
We draw attention to the going concern paragraphs in future implications for a company and this is particularly the at the components by the component auditors working
What we have audited the notes to the consolidated and company financial case in relation to the impact of the COVID-19 crisis. under our instruction. Where the work was performed
We have audited the financial statements 2020 of KLM statements, which indicate that KLM is severely impacted by component auditors, we determined the level of
Royal Dutch Airlines (‘KLM’ or ‘the Company’) based by the COVID-19 crisis and the stringent measures taken Audit approach involvement we needed to have in the audit work at those
in Amstelveen. The financial statements include the by many countries which have a major impact on air traffic components.
consolidated financial statements and the company financial around the world. The main uncertainties relate to the Summary
statements. timing and extent of the recovery of the operations as In view of measurements taken due to the COVID-19 crisis
a result of the COVID-19 crisis and the willingness of the Materiality by the Dutch government, KLM and the audit firms, the audit
The consolidated financial statements comprise: Dutch state and bank consortium to continue to fund — Materiality of EUR 45 million was primarily performed remotely. We considered changes
1. the consolidated balance sheet as at December 31, 2020; the operations, both in the short and longer term. These - Revenue as benchmark to the planned audit approach to evaluate audit evidence
2. the following consolidated statements for December conditions indicate the existence of a material uncertainty Group audit
and the component auditors’ communications and the
31, 2020: profit or loss, profit or loss and other which may cast significant doubt about the Company’s - 85% of revenue
adequacy of their work. Due to limited ability to arrange
comprehensive income and changes in equity and ability to continue as a going concern. Our opinion is not in-person meetings with management and the component
- 91% of total assets
the consolidated cash flow statement; and modified in respect of this matter. auditors, we have increased the use of alternative methods
Key audit matters
3. the notes comprising a summary of the significant of communication with them, including through virtual
accounting policies and other explanatory information. The appropriateness of the going concern assumption — Valuation of non-current assets meetings, exchange of emails and additional written
depends on management’s assessment of the future — Recognition of deferred tax asset for unused tax losses instructions to components. In addition, we have requested
The company financial statements comprise: economic environment and KLM’s prospects and — Improperly shifting of revenue from passenger activity the component auditors to provide us with access to audit
1. the company balance sheet as December 31, 2020; performance. Our procedures to assess the appropriateness — Provision for litigation and contingent liabilities workpapers to perform evaluations of selected component
2. the company profit or loss account of management’s assessment primarily consisted of: —R
 ecognition and measurement of government grants from the auditors’ documentation.
for December 31, 2020; and » challenging and evaluating the aforementioned Temporary Emergency Bridging Measures for Sustained Employment
(‘NOW’) program
3. the notes comprising a summary of the accounting management’s assessment of the Company’s ability Our group audit mainly focused on significant components
Opinion
policies and other explanatory information. to continue as a going concern and to continue its that are (i) of individual financial significance to the group,
operations for at least the next 12 months from when - Unqualified or (ii) that, due to their specific nature or circumstances, are
the financial statements where authorised for issue - Material uncertainty related to going concern likely to include significant risks of material misstatement of
and inquire management on the longer term funding
requirements thereafter;

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198 199
Other Information Other Information
the group financial statements. We have considered in this By performing the procedures mentioned above at group The primary responsibility for the prevention and detection Managing Directors, the Supervisory Board and others
respect, amongst others, KLM’s business volatility and its components, together with additional procedures at of fraud and non-compliance with laws and regulations within KLM as to whether the Company is in compliance
internal and external environment. group level, we have been able to obtain sufficient and lies with the Board of Managing Directors, with oversight with such laws and regulations and (ii) inspecting
appropriate audit evidence about the group’s financial by the Supervisory Board. We refer to the chapter Risk correspondence, if any, with the relevant licensing or
We have: information to provide an opinion on the consolidated management and control of the annual report where the regulatory authorities to help identify non-compliance with
» performed audit procedures ourselves in respect of areas financial statements. Board of Managing Directors included its risk assessment. those laws and regulations that may have a material effect
such as going concern, assessment of the valuation of on the financial statements.
non-current assets, the group consolidation, financial The audit coverage as stated in the section summary can Our risk assessment
statements disclosures and topics related to litigations be specified as follows: As part of our process of identifying fraud risks, we We identified the following areas as those most likely to
and claims, the group’s income tax position, intangible evaluated fraud risk factors with respect to fraudulent have such an indirect effect: Trade sanctions and export
assets, property, plant and equipment and external financial reporting, misappropriation of assets and bribery controls sanctions regulation, Anti-bribery and corruption
expenses; and corruption. We, together with a forensic specialist, we regulation, Anti-competition regulation and Data Privacy
Revenue
» selected 8 components (2019: 9 components) to perform evaluated the risk assessment of the Board of Managing regulation.
audits for group reporting purposes on a complete set
of financial information as well as 7 components (2019:
6 components) to perform audit procedures for group
75%
Audit of the complete
10%Audit of
Directors as part of our evaluation of fraud risk factors to
consider whether those factors indicated a risk of material
misstatement due to fraud.
In accordance with the auditing standard we evaluated the
following fraud and non-compliance risks that are relevant
reporting purposes on selected account balances. reporting package specific items to our audit, including the relevant presumed risks:
In addition, we performed procedures to obtain an » revenue recognition of passenger activity, in relation to
The group audit team provided detailed instructions to understanding of the legal and regulatory frameworks cut-off (a presumed fraud risk)
all component auditors who were part of the group audit, that are applicable to KLM and we inquired the Board of » management override of controls (a presumed fraud risk)
covering the significant audit areas, including the relevant Total assets Managing Directors and Supervisory Board as to whether » litigation risk due to non-compliance

75% 16%
risks of material misstatement, and set out the information the entity is in compliance with such laws and regulations
required to be reported back to the group audit team. and inspected correspondence, if any, with relevant We communicated the identified risks of fraud and non-
For all components in scope of the group audit, we held Audit of the complete Audit of
licensing and regulatory authorities. compliance with laws and regulations throughout our
both physical and virtual meetings with the auditors of the reporting package specific items team and remained alert to any indications of fraud and/
components. During these meetings the audit approach, The potential effect of the identified laws and regulations or non-compliance throughout the audit. This included
the findings and observations reported to the group audit on the financial statements varies considerably. communication from the group audit team to component
team were discussed in more detail. Also, file reviews were auditors of relevant risks of fraud and/or non-compliance
performed for most of these components; and Our focus on the risk of fraud and non-compliance KLM is subject to laws and regulations that directly affect with laws and regulations identified at group level.
» performed analytical procedures on components not in with laws and regulations the financial statements, including taxation and financial
scope for audit procedures to validate our assessment reporting. We assessed the compliance with these laws and In our audit, we addressed the risk of management override
that there are no significant risks of material misstatement Our objectives regulations to the extent material for the related financial of internal controls, including evaluating whether there
within these components. statements, as part of our procedures on the related was evidence of bias by management that may represent a
The objectives of our audit with respect to fraud and non- financial statement items and therefore no additional audit risk of material misstatement due to fraud. We refer to the
compliance with laws and regulations are: response is necessary. key audit matter related to the provision for litigation and
contingent liabilities, that is an example of our approach
With respect to fraud: In addition, KLM is subject to many other laws and related to areas of higher risk due to accounting estimates
» to identify and assess the risks of material misstatement of regulations where the consequences of non-compliance where management makes significant judgements.
the financial statements due to fraud; could have an indirect material effect on amounts
» to obtain sufficient appropriate audit evidence regarding recognised or disclosures provided in the financial We communicated our risk assessment and audit response
the assessed risks of material misstatement due to fraud, statements, or both, for instance through the imposition of to management and the Audit Committee of the Supervisory
through designing and implementing appropriate audit fines or litigation. Board. Our audit procedures differ from a specific forensic
responses; and fraud investigation, which investigation often has a more
» to respond appropriately to fraud or suspected fraud Our procedures are more limited with respect to these in-depth character.
identified during the audit. laws and regulations that do not have a direct effect on
» With respect to non-compliance with laws and regulations: the determination of the amounts and disclosures in the Our response
» to identify and assess the risk of material misstatement of financial statements. Compliance with these laws and We performed the following audit procedures (not limited)
the financial statements due to non-compliance with laws regulations may be fundamental to the operating aspects to respond to the assessed risks:
and regulations; and of the business, to the Company’s ability to continue its » We evaluated the design and the implementation of
» to obtain a high (but not absolute) level of assurance that business, or to avoid material penalties and therefore non- internal controls that mitigate fraud risks. In case of
the financial statements, taken as a whole, are free from compliance with such laws and regulations may have a internal control deficiencies, where we considered
material misstatement, whether due to fraud or error when material effect on the financial statements. Our responsibility there would be opportunity for fraud, we performed
considering the applicable legal and regulatory framework. is limited to undertaking specified audit procedures to help supplemental detailed risk-based testing.
identify non-compliance with those laws and regulations » We performed data analysis of high-risk journal entries
that may have a material effect on the financial statements. and evaluated key estimates and judgements for bias
Our procedures are limited to (i) inquiry of the Board of by KLM, including retrospective reviews of prior year’s

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200 201
Other Information Other Information
 estimates. Where we identified instances of unexpected from material misstatement, whether due to errors or fraud, In the accounting policy for impairment of assets KLM Our observation
journal entries or other risks through our data analytics, including compliance with laws and regulations. concluded that the CGUs correspond to the Group’s The primary uncertainty in the impairment assessment
we performed additional audit procedures to address each business segments - Network, Maintenance, Leisure and is related to the assumptions applied for the forecasted
identified risk. These procedures also included testing of The more distant non-compliance with indirect laws Other airline activities - which represent the smallest cashflows that are dependent on the timing and extent of
transactions back to source information. and regulations (irregularities) is from the events and independent groups of assets whose use generates the recovery of the airline industry.
» We tested the appropriateness of high-risk journal entries transactions reflected in the financial statements, the less identifiable cash inflows.
recorded in the general ledger and other adjustments likely the inherently limited procedures required by auditing Based on our procedures performed we consider
made in the preparation of the financial statements. standards would identify it. Because of the characteristics The value in use is determined based on forward-looking management’s key assumptions and estimates reasonable,
» We obtained an understanding based on inquiries and of fraud, particularly when it involves sophisticated and assumptions, including the calculation of discounted and we determined that the disclosure in the note
inspection of minutes of relevant meetings, for example carefully organised schemes to conceal it, such as forgery, cash flows, the discount rate and growth rates reflecting impairment of assets in the section accounting estimates
of the Fraud Management Table, and reports of how intentional omissions, misrepresentation and collusion, an assumptions relating to mid- and long-term business and uncertainties in the notes to the consolidated financial
those charged with governance exercise oversight of unavoidable risk remains that we may not detect all fraud development. A key assumption and uncertainty relates to statements is adequate.
management’s processes for identifying and responding to during our audit. the timing and extent of the recovery of the operations as
the risks of fraud in the Company and the internal control a result of the COVID-19 crisis. Recognition of deferred tax asset for unused tax
that management has established to mitigate these risks. Our key audit matters losses
» Assessment of matters reported on KLM’s incident register, Key audit matters are those matters that, in our professional We considered the valuation of those non-current assets
which includes whistleblowing reports, and results of judgement, were of most significance in our audit of the that are tested for impairment at the CGU level to be a Description
management’s investigation of such matters. financial statements. We have communicated the key audit key audit matter due to the high degree of judgement As a result of the COVID-19 crisis KLM recorded taxable
» With respect to the risk of fraud in revenue recognition we matters to the Supervisory Board. The key audit matters are and estimation required by Management to determine the losses amounting to EUR 1,075 million in 2020. Deferred
refer to the key audit matter improperly shifting of revenue not a comprehensive reflection of all matters discussed. recoverable amount of its non-current assets given the tax assets relating to tax losses carry forwards are only
from passenger activity. current economic uncertainty as a consequence of the recognised if the Company has deferred tax liabilities
» With respect to the risk of bribery and corruption across These matters were addressed in the context of our audit COVID-19 crisis and the anticipated timing and extent of the against which they can be offset or if their recovery is
various countries, we evaluated KLM’s controls and of the financial statements as a whole and in forming our recovery of the airline industry. probable. As disclosed in note 17 to the consolidated
procedures such as due diligence procedures on third opinion thereon, and we do not provide a separate opinion financial statements, KLM did not recognise the unused
parties. We considered the possibility of fraudulent or on these matters. Our response taxable losses due to the high degree of uncertainty about
corrupt payments made through third parties including Our procedures primarily consisted of: the timing and recovery.
agents and conducted detailed testing on third-party In comparison to prior year we identified three new key » evaluating the design and implementation of the internal
vendors in high-risk jurisdictions. audit matters closely related to the financial impact of control relating to the impairment test over the CGU; The recognition of deferred tax asset for unused tax losses
» We considered the outcome of our other audit procedures COVID-19 crisis on the operations of KLM. These are the » assessing whether the methodology used by KLM was significant to our audit considering the recognition of
and evaluated whether any findings or misstatements valuation of non-current assets, recognition of deferred tax complies with relevant accounting standards (IAS 36) and the deferred tax asset includes a significant estimate about
were indicative of fraud or non-compliance. If so, we asset for unused operating losses and the recognition of is consistently applied; the extent that it is probable that taxable profit will be
re-evaluated our assessment of relevant risks and its government grants from the Temporary Emergency Bridging » reconciling the book value of the non-current assets of available in the foreseeable future.
resulting impact on our audit procedures. Measures for Sustained Employment (‘NOW’). each CGU with the accounting records;
» We obtained audit evidence regarding compliance with » verifying the cash flow projections with the budget 2021 Our response
the provisions of those laws and regulations generally We refer to the paragraph with regard to the material and forecast 5-year plan and evaluating the scenarios Our audit approach consisted of examining the compliance
recognised to have a direct effect on the determination uncertainty related to going concern as that matter, by its and challenging the underlying data and assumptions, of KLM’s approach with IAS 12 and evaluating the
of material amounts and disclosures in the financial nature, is also considered a key audit matter. amongst others by comparing it to internal analysis and recognition threshold of the deferred tax asset for unused
statements. external industry data projecting the industry recovery; tax losses by evaluating the probability of continued further
» We considered the effect of actual, suspected or Valuation of non-current assets » assessing, with the involvement of a valuation specialist, losses based on the forecast of KLM.
identified risk of non-compliance as part of our the assumptions underlying the discount rate such as risk- We assessed the appropriateness of the methodology
procedures on the related financial statement items. Description free rate, industry gearing, financing spread and specific adopted by KLM to identify existing tax loss carry forwards
» We obtained written representations that all known As described in the going concern paragraphs in the notes risk premium; that will be utilised. To determine the recognition threshold
instances of (suspected) fraud or non-compliance with to the consolidated and company financial statements, » assessing, with the involvement of a valuation specialist, of the deferred tax asset for unused tax losses, we
laws and regulations have been disclosed to us. KLM is severely impacted by the COVID-19 crisis and the KLM’s impairment assessment by verifying arithmetic assessed the forecasting process by:
stringent measures taken by many countries which has a accuracy and re-performing sensitivity calculations based » evaluating of the design and implementation of controls
Our procedures to address identified risks of fraud and major impact on air traffic around the world and a severe on WACC, perpetual growth rate and long-term profitability; that we considered the most relevant in determining
related to non-compliance with laws and regulations impact on the operations of KLM. The adverse effects on and the recognition of the deferred tax asset for unused tax
resulted in key audit matters. We refer to the key audit the Company from this event is considered an indication » calculating the pro-forma enterprise value from the KLM losses;
matters related to revenue recognition of passenger activity that assets may be impaired. market capitalization to corroborate the impairment test » examining the procedure for preparing the last taxable
and the provision for litigation and contingent liabilities. based on value in use. income forecasts used as a basis for estimates;
In accordance with IAS 36 “Impairment of Assets”, non- » assessing the use of the appropriate substantially
We do note that our audit is not primarily designed to current assets are tested for impairment if there is an We assessed the adequacy of the disclosure in the note enacted Dutch tax law as per the end of the financial
detect fraud and non-compliance with laws and regulations indication of impairment. Assets that cannot be directly impairment of assets in the section accounting estimates year;
and that management is responsible for such internal linked to independent cash flows are grouped together into and uncertainties in the notes to the consolidated financial » comparing income forecasts for prior years with actual
control as management determines is necessary to enable Cash Generating Units (CGU) to perform the impairment test. statements. results;
the preparation of the financial statements that are free

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» comparing the assumptions used by KLM to prepare We assessed the appropriateness of disclosures in note 16 Based on these items, we assessed the estimates » performed cut-off procedures by inspection of a sample
taxable income forecasts with the ones adopted for non- and 23 to the consolidated financial statements. and positions adopted by KLM. We also assessed the of documents to verify the completeness of the revenue
current asset impairment tests; and appropriateness of the disclosures in note 22 to the in the measurement periods and considering the results of
» challenging the degree of the probability of the available Our observation consolidated financial statements including for those claims our standard audit procedures over revenue for the whole
future taxable profit taking into consideration the high The results of our procedures performed regarding improper for which a provision could not be reasonably estimated. year;
degree of uncertainty about the timing and extent of the shifting of revenue from passenger activity through manual » reconciling the wages to be included in the final NOW
recovery of KLM’s operations from the COVID-19 crisis. journal entries are satisfactory and the related disclosures Our observation applications to the payroll administration and verifying
» We assessed the adequacy of the disclosure in note 17 to (note 16 and 23) are adequate. We consider the estimates and management’s judgement the correct application of NOW reductions resulting from
the consolidated financial statements. applied for the litigation provision and contingent liabilities lowering wages or dismissals;
Provision for litigation and contingent liabilities to be reasonable and determined that the related disclosure » reconciling the received government grants from the NOW
Our observation (note 22) is in accordance with EU-IFRS. program to supporting documentation such as external
We consider the estimates and management’s judgement Description information and bank statements;
applied for the recognition of deferred tax asset for unused KLM is involved in several governmental, judicial or Recognition and measurement of government » obtaining KLM’s assessment of compliance to the key
tax losses to be reasonable and determined that the arbitration procedures and litigations, particularly concerning grants from the Temporary Emergency Bridging NOW requirements and verifying compliance with key
related disclosure (note 17) is adequate. anti-trust laws. With regard to the possible non-compliance Measures for Sustained Employment (‘NOW’) aspects such as dividend payment, bonuses and NOW
with anti-trust laws KLM recognised a provision for the program consolidation group; and
Improperly shifting of revenue from passenger Cargo anti-trust claim (Cargo claim) as disclosed in note » challenging the reasonable assurance assumption
activity 22. KLM’s positions taken are inherently based on the use Description required to recognise the government grants in the
of assumptions and judgements, specifically relating to As described in note 25 of the financial statements statement of profit or loss as defined by IAS 20.
Description the timing of the expected decision of the appeal to the KLM applied for government grants from the Temporary
Revenue from passenger activity decreased with EUR 5,434 General Court of the European Union. Emergency Bridging Measures for Sustained Employment The scope of above procedures is less than the scope
million to EUR 2,518 million in 2020 primarily as a result of (‘NOW’) program and recognised an amount of EUR 1,049 of those to be performed in connection with the audit of
the negative impact on traveling due to the COVID-19 crisis. We considered the non-current classification of the million in 2020. As disclosed in the accounting policies the outstanding NOW applications for final settlement. We
The revenue related to passenger activity is recognised litigation provision and the related disclosure to be a key these government grants are deducted from the related assessed the adequacy of the presentation and disclosures
when the transportation service is provided in accordance audit matter due to the uncertainty surrounding the timing expense in the statement of profit or loss, as the threshold in note 25 to the consolidated financial statements.
with IFRS 15. As the current financial year is already a year of the outcome of current procedures, potentially material of reasonable assurance that KLM will comply with all
with low level of operating activities and significant losses, nature of the impact of any changes and the degree of conditions attached to the government grant are met. Our observation
management may have the incentive to shift revenue to the estimates and judgement required. The results of our procedures performed regarding
next financial year in order to present better results. The recognition and measurement of the government grant recognition and measurement of the government grants
Our response was significant to our audit due to the financial impact, the from the Temporary Emergency Bridging Measures for
We considered revenue recognition from passenger activity Our audit procedures included, amongst others, one-off nature of the NOW grant program and its social Sustained Employment (‘NOW’) in the financial statements
to be a key audit matter as management may have the » obtaining and understanding of management’s process relevance. were satisfactory and we determined that the related
intention to improperly shift revenue to the next financial for the identification, evaluation and disclosure of claims, disclosure (note 25) is adequate.
year via manual journal entries in the last period of the year. proceedings and investigations; Our response
This resulted in a risk that revenue is understated. » evaluating of the design and implementation of controls We inspected the NOW regulations issued by the Dutch Report on the other information included in
that we considered the most relevant in determining the government and other underlying documents to gain an the annual report
Our response appropriate classification of the Cargo claim; understanding of the relevant terms and conditions related In addition to the financial statements and our auditors’
Our procedures primarily consisted of: » assessing of management’s use of external counsel; to the government grant program. report thereon, the annual report contains other
» evaluation of the design and implementation of controls » the recording and continuous re-assessment of the information.
that we considered the most relevant in determining the related (contingent) liabilities and provisions and Our audit procedures included, amongst others, assessment Based on the following procedures performed, we conclude
appropriate timing of revenue recognition; disclosures, in accordance with EU-IFRS; of management’s evaluation and representation over the that the other information:
» inquiring several individuals involved in the financial » inquiring with both legal and financial staff in respect of recognition of the government grants in the statement » is consistent with the financial statements and does not
reporting process whether there have been any instances claims, proceedings and investigations; of profit or loss. We assessed the appropriateness of the contain material misstatements; and
of overrides of controls through recording of journal » inspecting relevant documentation such as the overview applied definition of a NOW-group, the revenue decrease » contains the information as required by Part 9 of Book 2
entries or other adjustments; of legal proceedings, the minutes of the Audit Committee, under the NOW regulations and compliance with other terms of the Dutch Civil Code.
» analysing the completeness of manual revenue journal the Supervisory Board and the Executive Committee; and and conditions.
entries by comparing it to the nature and extent of the » obtaining legal confirmation letters from a selection of We have read the other information. Based on our
manual journal entries in last year; and external legal counsel, also to corroborate management’s With involvement of component auditors in the Netherlands knowledge and understanding obtained through our
» assessing the appropriateness of high-risk manual assessment of the legal proceedings. and France, our additional NOW related audit procedures audit of the financial statements or otherwise, we have
revenue journal entries in December 2020 and January over the revenue, including its decrease, and employee considered whether the other information contains material
2021, primarily focusing on the possibility of improper Furthermore, we challenged the estimates and assumptions expenses included, amongst others: misstatements.
shifting of revenue from December to January. applied by KLM in determining the need to recognise a » reconciling and evaluating the revenue in the NOW
provision, the amount and classification. We specifically reference and measurement periods;
obtained a representation from management on the long-
term classification of the Cargo claim.

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By performing these procedures, we comply with the As part of the preparation of the financial statements, the Appendix We are solely responsible for the opinion and therefore
requirements of Part 9 of Book 2 of the Dutch Civil Code Board of Managing Directors is responsible for assessing responsible to obtain sufficient appropriate audit evidence
and the Dutch Standard 720. The scope of the procedures the Company’s ability to continue as a going concern. Description of our responsibilities for the audit of regarding the financial information of the entities or
performed is less than the scope of those performed in our Based on the financial reporting frameworks mentioned, the the financial statements business activities within the group to express an opinion
audit of the financial statements. Board of Managing Directors should prepare the financial on the financial statements. In this respect we are also
statements using the going concern basis of accounting We have exercised professional judgement and have responsible for directing, supervising and performing the
The Board of Managing Directors is responsible for unless the Board of Managing Directors either intends to maintained professional scepticism throughout the audit, group audit.
the preparation of the other information, including the liquidate the Company or to cease operations, or has no in accordance with Dutch Standards on Auditing, ethical
information as required by Part 9 of Book 2 of the Dutch realistic alternative but to do so. The Board of Managing requirements and independence requirements. Our audit We communicate with the Supervisory Board regarding,
Civil Code. Directors should disclose events and circumstances that included among others: among other matters, the planned scope and timing of the
may cast significant doubt on the Company’s ability to audit and significant audit findings, including any significant
Report on other legal and regulatory continue as a going concern in the financial statements. » identifying and assessing the risks of material findings in internal control that we identify during our audit.
requirements misstatement of the financial statements, whether due to We provide the Supervisory Board with a statement that
The Supervisory Board is responsible for overseeing the fraud or error, designing and performing audit procedures we have complied with relevant ethical requirements
Engagement Company’s financial reporting process. responsive to those risks, and obtaining audit evidence regarding independence, and to communicate with them
KLM engaged us, Deloitte Accountants B.V. and KPMG that is sufficient and appropriate to provide a basis for our all relationships and other matters that may reasonably
Accountants N.V., to perform a joint audit. We were re- Our responsibilities for the audit of the financial opinion. The risk of not detecting a material misstatement be thought to bear on our independence, and where
engaged by the General Meeting of Shareholders as statements resulting from fraud is higher than the risk resulting from applicable, related safeguards.
auditors of KLM on April 23, 2020 for the audit of the year Our objective is to plan and perform the audit engagement error, as fraud may involve collusion, forgery, intentional
2020. We have operated as statutory auditors since the in a manner that allows us to obtain sufficient and omissions, misrepresentations, or the override of internal From the matters communicated with the Supervisory
financial year 2005 / 2006. appropriate audit evidence for our opinion. control; Board, we determine the key audit matters: those matters
» obtaining an understanding of internal control relevant that were of most significance in the audit of the financial
Description of responsibilities regarding the Our audit has been performed with a high, but not absolute, to the audit in order to design audit procedures that are statements. We describe these matters in our auditor’s
financial statements level of assurance, which means we may not detect all appropriate in the circumstances, but not for the purpose report unless law or regulation precludes public disclosure
material errors and fraud during our audit. of expressing an opinion on the effectiveness of the about the matter or when, in extremely rare circumstances,
Responsibilities of the Board of Managing Directors Company’s internal control; not communicating the matter is in the public interest.
and the Supervisory Board for the financial Misstatements can arise from fraud or error and are » evaluating the appropriateness of accounting policies
statements considered material if, individually or in the aggregate, they used and the reasonableness of accounting estimates
The Board of Managing Directors is responsible for could reasonably be expected to influence the economic and related disclosures made by the Board of Managing
the preparation and fair presentation of the financial decisions of users taken on the basis of these financial Directors;
statements in accordance with EU-IFRS and Part 9 of statements. The materiality affects the nature, timing and » concluding on the appropriateness of the Board of
Book 2 of the Dutch Civil Code. Furthermore, the Board of extent of our audit procedures and the evaluation of the Managing Directors’ use of the going concern basis of
Managing Directors is responsible for such internal control effect of identified misstatements on our opinion. accounting, and based on the audit evidence obtained,
as management determines is necessary to enable the whether a material uncertainty exists related to events or
preparation of the financial statements that are free from A further description of our responsibilities for the audit of conditions that may cast significant doubt on Company’s
material misstatement, whether due to fraud or error. the financial statements is included in the appendix of this ability to continue as a going concern. If we conclude
auditor’s report. This description forms part of our auditor’s that a material uncertainty exists, we are required to draw
report. attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions
may cause a company to cease to continue as a going
Amstelveen / Amsterdam, March 31, 2021 concern;
» evaluating the overall presentation, structure and content
of the financial statements, including the disclosures; and
KPMG Accountants N.V. Deloitte Accountants B.V. » evaluating whether the financial statements represent
the underlying transactions and events in a manner that
achieves fair presentation.

E.H.W. Weusten RA M.J. van der Vegte RA

Appendix: Description of our responsibilities for the audit of the financial statements

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Provisions of the articles of association on the C of a series a dividend shall be paid which is equal and as from that day, the adjusted percentage; l. the remainder will be received by the holders of
distribution of profit to a percentage of the amount which has been paid h. if and to the extent that profits are not sufficient to common shares in proportion to the par value of
up on the share, calculated by taking the arithmetic make full payment of the dividend on the cumulative their common shares to the extent the general
Unofficial translation of article 32 of the articles average of the effective yield on the government loans preference shares C referred to in this paragraph, the meeting of shareholders does not make further
of association of klm royal dutch airlines to be described below under letter (f), as published shortfall will be paid and charged to the reserves, appropriations for reserves in addition to any reserves
in the Officiële Prijscourant of Euronext Amsterdam to the extent that such action is not contrary to established pursuant to paragraph 1 of this Article.
1. Out of the profit established in the adopted financial N.V. for the last five (5) stock exchange days prior to the provisions of Article 105, paragraph 2 of Book
statements, an amount may first be set aside by the the day on which a cumulative preference share C of 2 of the Dutch Civil Code. If and to the extent that 3. On the recommendation of the Board of Managing
meeting of Priority Shareholders in order to establish or the series in question was issued for the first time, the payment referred to in this paragraph cannot Directors and after approval of such recommendation
increase reserves. The meeting of Priority Shareholders possibly increased by a supplement established by be charged to the reserves, then a payment will be by the Supervisory Board and the meeting of Priority
shall only do so after consultation of the Board of the Board of Managing Directors and approved by made from the profits to the holders of cumulative Shareholders, the general meeting of shareholders
Managing Directors and the Supervisory Board. the Supervisory Board and the meeting of Priority preference shares C such that the shortfall is fully paid may decide that payments to shareholders shall be
Shareholders in the amount of a maximum of one up before the provisions stated in the following letters wholly or partly effected by issuing shares of the
2. So far as possible and permitted by applicable statute, hundred and thirty-five (135) basic points, depending of the paragraph are applied. For the application of same type of capital stock of the company as the
the remainder of the profit shall be distributed as follows: on the market circumstances which shall prevail at that the provisions stated under this present letter (h), the type of the shares to which these payments relate. .
a. the holders of priority shares shall receive first the time, which supplement may be different for each series; holders of the various series of cumulative preference
statutory interest percentage prevailing on the last f. government loans mentioned under the letter (e) of this shares C shall receive equal treatment. No further 4. As far as possible and subject to the approval of the
day of financial year concerned, with a maximum paragraph shall be deemed to mean the government payment shall be made on the cumulative preference Supervisory Board, the meeting of Priority Shareholders
of 5% of the paid up amount per priority share; if loans to the debit of the State of the Netherlands shares C than those determined in this Article, in Article may resolve to distribute one or more interim dividends
and to the extent that the profit is not sufficient to with a (remaining) life of seven to eight years. If the 11 paragraph 6 and in Article 42; interim payments against the expected dividend, provided that an interim
make the full aforementioned distribution on the effective yield on these government loans has not made in accordance with the provisions of paragraph statement of assets and liabilities demonstrates that the
priority shares, in subsequent years a distribution been published in the Officiële Prijscourant of Euronext 4 of this Article for a financial year will be deducted company meets the requirements of Article 105, paragraph
to the holders of priority shares shall first be Amsterdam N.V., as the time of the calculation of the from the payments made pursuant to this paragraph; 2 Book 2 of the Dutch Civil Code. This interim statement
made to recompense this shortfall entirely before dividend percentage, then the government loans i. if, in the financial year for which the payment of assets and liabilities shall be drawn up, signed and
the following paragraph may be given effect; referred to under the letter (e) shall be deemed to referred to above takes place, the amount paid in made public according to the specifications contained in
b. next the holders of cumulative preference shares A be the government loans to the debit of the State on the cumulative preference shares C of a certain paragraph 4 of the statutory provision mentioned above.
shall receive 6% of the par value of their cumulative of the Netherlands with a (remaining) life which is series has been reduced, the payment will be
preference shares A or - in the case of not fully as close as possible to a (remaining) life of seven to reduced by an amount equal to the aforementioned 5. Subject to the approval of the Supervisory Board, the
paid-up shares - of the obligatory amount paid eight years, the effective yield of which has been percentage of the amount of the reduction meeting of Priority Shareholders may, to the extent
thereon; in the event and to the extent the profit published in the Officiële Prijscourant of Euronext calculated from the time of the reduction; possible and permitted by law, resolve to make a
is not sufficient to fully make the aforementioned Amsterdam N.V. at the time of the calculation of the j. if the profits over a financial year have been distribution to the holders of common shares out of
distribution on the cumulative preference shares dividend percentage as stated above, on the proviso established and in that financial year one or more one or more of the freely distributable reserves with the
A, the deficiency shall, to the extent possible and that the maximum (remaining) life is eight years; cumulative preference shares C have been withdrawn exception of the share premium reserves.
permitted by applicable statute, be distributed out of g. on the date on which the cumulative preference shares with repayment, then those who were listed in the
the freely distributable reserves with the exception C of the series in question have been outstanding registry referred to in Article 9 as holders of those 6. Subject to the approval of the Supervisory Board,
of the share premium reserves; in the event and to for eight years, for the first time, and thereafter every cumulative preference shares C at the time of such the meeting of Priority Shareholders may, to the
the extent that the aforementioned distribution on subsequent eight years, the dividend percentage withdrawal shall have an inalienable right to payment of extent possible and permitted by applicable statute,
the cumulative preference shares A can also not be of cumulative preference shares C of the series in profits as described hereinafter. The profits which are decide to make, as an advance payment on the
made out of such reserves, there shall in the following question will be adjusted to the effective yield of to be paid (if possible) to such a holder of cumulative distribution referred to in paragraph 2 of this Article,
years first be made a distribution to the holders of the government loans referred to in the preceding preference shares-C shall be equal to the amount of distributions out of the freely distributable reserves,
cumulative preference shares A to the effect that subparagraphs which is valid at that time, calculated the payment to which such a holder would be entitled with the exception of the share premium reserves.
such shortfall is fully recovered before effect is given in the manner as described in the foregoing, but on to the grounds of the provisions of this paragraph
to what is provided hereinafter in this paragraph 2; the proviso that the average referred to shall be if, at the time at which profits were determined, he 7. No other distributions than the distributions provided
c. next the holders of preference shares B shall calculated over the last five (5) exchange days prior were still a holder of the aforementioned cumulative for in this Article and in Article 42 are made on
receive 5% of the par value of their preference to the day as of which the dividend percentage shall preference shares C calculated in proportion to the priority shares and preference shares.
shares B or - in the case of not fully paid-up be adjusted, possibly increased by a supplement the duration of the period during which he was a
shares - of the amount obligatorily paid thereon; established by the Board of Managing Directors holder of those cumulative preference shares C Appropriation of profit and distribution to
d. next the holders of preference shares B shall receive and approved by the Supervisory Board and the in said financial year, from which payment shall be shareholders
½% of the par value of their shares or - in the case meeting of Priority Shareholders in the amount of a deducted the amount of the payment which was
of not fully paid-up shares - of the amount obligatorily maximum of one hundred and thirty-five (135) basic made pursuant to the provisions of Article 32; In the absence of a net profit 2020, no distribution of
paid thereon for each per cent of the ratio (expressed points, depending on the market circumstances which k. if, in the course of a given financial year, issuance of dividends to any class of share shall be made. The net loss
as a percentage) of the profit to the operating shall prevail at that time, which supplement may be cumulative preference shares C has taken place, then for 2020 amounting to EUR 1,547,324,000 will be transferred
revenues mentioned in the adopted consolidated different for each series. If the dividend percentage for that financial year the dividend on the shares to retained earnings.
profit and loss account, with the understanding that is adjusted in the course of a financial year, then for in questions will be decreased in proportion to the
this dividend percentage shall not be in excess of 5% the calculation of the dividend over that financial time passed until the first day of issuance; and
of the nominal amount of the issued common shares; year, the percentage which applied before the
e. subsequently, on each cumulative preference share adjustment shall apply up to the day of adjustment,

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Miscellaneous
2018 2017
(in millions of EUR, unless stated otherwise) 2020 2019 Restated* Restated** 2016
Key financial figures (KLM Group)
Result for the year as percentage of revenues (30.2) 4.1 5.2 (4.8) 5.3
Earnings per ordinary share (EUR) (33.05) 9.57 12.07 (10.64) 11.03
Result for the year plus depreciation 1,034
Capital expenditures (net) (681) (1,323) (1,320) (1,012) (755)
Adjusted net debt/ adjusted EBITDAR ratio 2.9
Five-year review
Net debt/adjusted EBITDA ratio 47.4 1.3 1.3 1.6
2018 2017 Dividend per ordinary share (EUR) - 0.415 0.395 - 0.36
(in millions of EUR, unless stated otherwise) 2020 2019 Restated* Restated** 2016
Consolidated statement of profit or loss
Average number of staff (KLM Group)
Passenger 2,518 7,952 7,766 7,496 7,114
(in FTE)
Cargo 1,535 1,171 1,284 1,211 1,123
The Netherlands 26,866 27,293 26,601 26,179 26,073
Other revenues 1,067 1,952 1,839 1,723 1,563
Outside the Netherlands 3,102 3,279 3,219 3,219 3,929
Employed by KLM 29,968 30,572 29,820 29,398 30,002
Revenues 5,120 11,075 10,889 10,430 9,800
Total agency staff 772 2,454 2,592 2,274 1,874
Expenses *** (5,195) (9,132) (8,769) (8,366) (8,197)
Total KLM Group 30,740 33,026 32,412 31,672 31,876
Aircraft operating lease costs (414)

Traffic (KLM Company)

Adjusted EBITDA *** (75) 1,943 2,120 2,064 1,189
Passenger kilometers *** 33,873 109,476 107,676 103,487 97,737
Amortisation, depreciation, impairment and
Revenue ton freight kilometers *** 3,020 3,583 3,696 3,727 3,722
movement in provisions (1,079) (1,090) (1,029) (985) (508)
Passenger load factor (%) 52.2 89.4 89.1 88.4 87.2
Cargo load factor (%) 77.7 61.9 64.4 63.3 64.5
Adjusted income from current activities *** (1,154) 853 1,091 1,079 681
Number of passengers (x 1,000) 11,231 35,092 34,170 32,689 30,399
Total APM adjustments *** (191) 22 (13) (1,849) 3
Weight of cargo carried (kilograms) *** 371 453 466 471 479
Income from operating activities (1,345) 875 1,078 (770) 684
Average distance flown per passenger (in kilometers) 3,016 3,120 3,151 3,166 3,215
Financial income and expenses (340) (275) (315) 91 (99)
Pre-tax income (1,685) 600 763 (679) 585
Capacity (KLM Company)
Income tax expenses 136 (162) (201) 171 (69)
Available seat kilometers *** 64,842 122,452 120,815 117,066 112,065
Net result after taxation of consolidated companies (1,549) 438 562 (508) 516
Available ton freight kilometers *** 3,882 5,811 5,758 5,883 5,772
Share of results of equity shareholdings 3 11 4 11 3
Kilometers flown *** 271 471 462 451 433
Profit/(loss) for the year (1,546) 449 566 (497) 519
Blockhours (x 1,000) 390 706 689 674 644

Consolidated balance sheet

Yield (KLM Company)
Current assets 1,937 2,576 2,599 2,861 2,617
Yield (in cents):
Non-current assets 8,510 9,195 8,737 8,304 6,411
Passenger (per RPK) 7.1 7.1 7.0 7.0 7.0
Total assets 10,447 11,771 11,336 11,165 9,028
Cargo (per RTK) 31.8 21.0 22.5 21.7 21.6

Current liabilities 3,800 4,701 4,636 4,350 3,737

Average number of staff (KLM Company)
Non-current liabilities 6,762 5,510 5,739 5,994 4,303
(in FTE)
Group equity (115) 1,560 961 821 988
The Netherlands 20,787 21,146 20,670 20,409 20,476
Total equity and liabilities 10,447 11,771 11,336 11,165 9,028
Outside the Netherlands 2,277 2,421 2,431 2,397 2,444
* 2018 restated following implementation of Customer compensation and Component approach for Life Limited Parts in 2019 Employed by KLM 23,064 23,567 23,101 22,806 22,920
** 2017 restated following implementation of IFRS 9, 15 and 16 in 2018
*** See note 28 Alternative performance measures (APM) for the reconciliation to adjusted EBITDA and adjusted income from operating activities for the * 2018 restated following implementation of Customer compensation and Component approach for Life Limited Parts in 2019
financial years 2020 and 2019. Also see the Alternative performance measures section in the Notes to the Consolidated financial statements ** 2017 restated following implementation of IFRS 9, 15 and 16 in 2018
*** in millions

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Miscellaneous Miscellaneous
Glossary of terms aircraft under operating leases (based on seven times the
amount of operating leases for the year).
WARNING ABOUT FORWARD-LOOKING
STATEMENTS
» Developments in any of these areas, as well as other
risks and uncertainties detailed from time to time in the
documents we file with or furnish to relevant agencies,

and definitions Codesharing

Service offered by KLM and another airline using the KL
code and the code of the other airline.
This annual report contains, and KLM and its representatives
may make, forward-looking statements, either orally or
in writing, about KLM and its business. Forward-looking
could cause actual outcomes and results to differ
materially from those that have been or may be projected
by or on behalf of us. We caution that the foregoing
statements generally can be identified by the use of terms list of important factors is not exhaustive. Additional
Adjusted EBITDA Earnings per ordinary share such as ‘ambition’, ‘may’, ‘will’, ‘expect’, ‘intend’, ‘estimate’, information regarding the factors and events that could
EBITDA adjusted for alternative performance measures The profit or loss attributable to ordinary equity holders ‘anticipate’, ‘believe’, ‘plan’, ‘seek’, ‘continue’ or similar terms. cause differences between forward-looking statements
(APMs) not defined by IFRS. divided by the weighted average number of ordinary shares These forward-looking statements are based on current and actual results in the future is contained our filings. We
outstanding. expectations, estimates, forecasts, and projections about do not undertake any obligation to update or revise any
Adjusted free cash flow the industries in which we operate management’s beliefs, forward-looking statement, whether as a result of new
Free cash flow minus redemption payments on lease debt. EBITDA and assumptions made by management about future information, future events or otherwise.
The earnings before interests, taxes, depreciation, events. Any such statement is qualified by reference to the
Adjusted income from operating activities amortisation, impairment and movements in provisions. following cautionary statements. These forward-looking
Income from operating activities adjusted for alternative EBITDA provides a simple indicator of the cash generation statements involve known and unknown risks, uncertainties
performance measures (APMs) not defined by IFRS. during the year. and other factors, many of which are outside of our control
and are difficult to predict, that may cause actual results to
Alternative performance measures (APMs) Free cash flow differ materially from any future results expressed or implied
The Group considers it relevant to the understanding of its This corresponds to the cash available after investments from the forward-looking statements. These statements are
financial performance to use certain alternative performance in (prepayments in) aircraft, other tangible fixed assets and not guarantees of future performance and involve risks and
measures (APMs) not defined by IFRS. These APMs should intangible fixed assets less the proceeds of disposals. uncertainties including:
not be viewed in isolation as alternatives to the equivalent » The airline pricing environment;
IFRS measures and should be used as supplementary Net debt » Competitive pressure among companies in our industry;
information in conjunction with the most directly The sum of current and non-current financial liabilities, » An economic downturn;
comparable IFRS measures. APMs do not have standardised current and non-current loans from parent company, current » Political unrest throughout the world;
meaning under IFRS and therefore may not be comparable and non-current finance lease obligations, current and non- » Changes in the cost of fuel or the exchange rate of the
to similar measures presented by other companies. See current lease debt, less cash and cash equivalents, short- euro to the US dollar and other currencies;
the Alternative performance measures section in the term deposits and commercial paper and held-to-maturity » Governmental and regulatory actions and political
Notes to the Consolidated financial statements and note financial assets. conditions, including actions or decisions by courts and
28 Alternative performance measures in the Consolidated regulators or changes in applicable laws or regulations
financial statements. Passenger load factor (or their interpretations), including laws and regulations
Total Revenue Passenger Kilometers (RPK) expressed as a governing the structure of the combination, the right
Available Ton Freight Kilometer (ATFK) percentage of the total Available Seat Kilometers (ASK). to service current and future markets and laws and
One metric ton (1,000 kilograms) cargo capacity flown a regulations pertaining to the formation and operation of
distance of one kilometer. Revenue Ton Freight Kilometer (RTFK) airline alliances;
One metric ton (1,000 kilograms) of cargo flown a distance » Developments affecting labour relations;
Available Seat Kilometer (ASK) of one kilometer. » The outcome of any material litigation;
One aircraft seat flown a distance of one kilometer. » Future demand for air travel;
Revenue Passenger Kilometer (RPK) » Future load factors and yields;
Cargo load factor One passenger flown a distance of one kilometer. » Industrial actions or strikes by KLM employees, Air France
Total Revenue Ton Freight Kilometers (RTFK) expressed as employees or employees of our suppliers or airports;
a percentage of the total Available Ton Freight Kilometers Return on capital employed » Developments affecting our airline partners;
(ATFK). The sum of income from current operations minus dividends » The effects of terrorist attacks, the possibility or fear of
received, the share of results in equity shareholdings and such attacks and the threat or outbreak of epidemics
Average capital employed after taxation divided by the average capital employed. (such as the current COVID-19 crisis), hostilities or war,
The sum of property, plant and equipment, right-of-use Before implementation of IFRS 16 (financial years up to and including the adverse impact on general economic
assets, intangible assets, investments accounted for using including 2016) the sum of income from current operations conditions, demand for travel, the cost of security and the
the equity method, other financial assets (excluding shares, was also adjusted for the portion corresponding to financial cost and availability of aviation insurance coverage and
marketable securities and financial deposits), minus related charges in operating leases (34%). war risk coverage;
provisions (excluding for pensions, cargo litigation and » The effects of natural disasters and extreme weather
restructuring) and working capital (excluding market value of conditions;
derivatives). The capital employed for the year is obtained » Changing relationships with customers, suppliers and
by taking the quarterly average of the capital employed. strategic partners; and
Before implementation of IFRS 16 (financial years up to and
including 2016) the average capital employed included the

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