Pestel Analysis Klm

Pestel analysis KLM

Political

Tax policy

Due to the implementation of a new tax policy presented by the Dutch parliament on March 5th 2015 it is most likely that between 500 and 1000 jobs at KLM will disappear. According to this policy KLM as well as the employer have to pay the state 52% of their earnings. When KLM’s employees leave the company voluntarily they will not receive any money. So the employees are almost obliged to stay within the company for less salary.

Obviously this a major threat for KLM due to the fact that the company has to pay more payroll taxes which decreases revenue. Another threat is the job security for employees which will decrease heavily due to the uncertainty of a job.

Labor law

A new trend has been discovered in the airline industry, namely the fact that a rising percentage of pilots in Europe work as independent pilots. This results in less social security and no help with administrative and fiscal issues for the pilots.

For airline companies such as KLM who have a very high payroll expense this development could be seen as an opportunity. Due to the fact that KLM can now hire freelance pilots who they do not have to give the expensive incentives that the fixed KLM crew receives payroll expenses can be brought down.

Economic

Economic growth

KLM is the first European aircraft carrier that offers direct flies to Xiamen international airport. Xiamen is the second largest city in the province Fujian and inhabits three million people.

The city Xiamen is undergoing rapid economic growth and is really interesting for KLM as business partner due to its geographical location, cultural and historical highlights and it is attracting a numerous of big international companies.

This development can be the steppingstone for KLM to conquer a substantial part of the market share that involves flying between China and Europe.

Fuel prices, interest rates and exchange rates

These three kinds of factors can have both a positive or negative effect on the net profit of KLM. To exterminate the threat of a negative effect KLM has made hedging agreements with the fuel supplier and banks. Due to these agreements the prices and costs are fixed which results in a net profit that will be not influenced by sudden fluctuations in interest rates, currency rates and oil prices.

Social factors

In BRIC countries such as China and Brazil the gross domestic product is growing fast. This results in a bigger middle-class civilization that has sufficient funds to fly, however sometimes the barriers to buy tickets in this kind of countries are high. In brazil the airline TAM has adapted to this rise in demand by selling their airplane tickets at kiosks and subway stations and provide first time flyers with a ‘how to fly’ advice. As well as Brazil, Chines airlines have adapted to this rise in first time flyers too. They have printed fruit signs on airplane tickets so passengers can find the right gate and plain more easily. This is threat to KLM who also provides flights in these countries. KLM should terminate this threat by implementing their own policy to attract more first time flyers from the BRIC countries.