KLM’s three pension funds in the Netherlands have incurred significant and portfolio-wide losses over the second quarter, largely cancelling out returns generated over the first three months of the year.
Pensioenfonds KLM Cabinepersoneel, the €2.6bn scheme for cabin staff, reported a loss of 6.4%, which lowered its year-to-date result to 2.7%.
The scheme lost 3.6% on fixed income and 3.7% on real estate, while equities generated a loss of 1.7%.
It also lost 3.9% on its 50% interest hedge, due to rising interest rates.
The Algemeen Pensioenfonds, KLM’s €7.5bn pension fund for ground staff, reported a 5.5% loss over the period and a 2.8% return for the first half of 2015.
The scheme reported negative returns on all asset classes, with fixed income losing 4.7%, real estate 3.2% and equities 1.7%.
It also lost 2.4% on its 50% interest hedge.
The scheme for ground crew said it offloaded some of its interest swaps over the second quarter, pointing out that falling interest rates would have a decreasing impact on its financial position, while rate increases posed a growing risk.
“Moreover,” it added, “swaps have a significant impact on liquidity.”
The €8.1bn scheme for pilots, meanwhile, lost 2.4% over the first quarter, bringing its overall first-half return to 4.5%.
Funding at all three KLM schemes, due to rising interest rates and falling liabilities, increased by at least 9 percentage points over Q2.
However, their ‘policy funding’ – based on the 12-month average of daily coverage – fell by a couple of percentage points on average, to 114.2% for the cabin crew scheme, 115.2% for the ground staff scheme and 125.2% for the pilots’ scheme.
Separately, KLM is seeking to cut costs by replacing its defined benefit plans with collective defined contribution arrangements.
The company is now negotiating a new scheme with unions.
According to Zakaria Boufangacha of union umbrella group FNV, KLM wants a “sustainable” pension plan, with a fixed contribution, freeing the company from having to resolve any future funding gaps.
Although KLM could not be contacted for comment, its pension fund for ground staff said it expected the social partners to agree on a “new and sustainable” pension scheme some time this year.