Dutch airline KLM and its pilots have settled a long-running dispute over pension arrangements.

The airline agreed not to cancel a previous agreement on the guaranteed indexation of pilots’ pensions, as it had announced this summer.

The decision came after new figures suggested the cost of the arrangement would be far less than KLM initially estimated.

The arrangement will remain place for 2016, but, next year, KLM and the VNV, the trade union for pilots, will begin negotiations on the future de-risking of the pension arrangements.

KLM announced in August that it planned to cancel its contract with the €8bn Vliegend Personeel KLM pension fund over concerns that its obligation to guarantee full indexation for the pilots’ pension would require the airline to pay €600m by year-end.

This figure was based on new national regulation concerning the coverage ratio that is required before pension funds can compensate fully for inflation.

The sum of €600m was contested by the trade union from the outset.

In a court hearing in September, the union argued that, employing a different interpretation of the regulation, only €115m would be require.

KLM and the union, with help of the fund’s experts, have now agreed on a common method for interpreting the regulation and calculating the cost.

In a newsletter to pilots, KLM estimated the cost for this year at €94m.

KLM and the union have subsequently agreed to drop the ongoing court cases between them.

The pension fund is also expected to drop its own lawsuit against KLM.

With the agreement, KLM avoids a possible strike by its pilots.

The VNV had warned in November that it might take such action if the company failed to change course on the pensions issue.

From 2017 onwards, KLM and the union will discuss de-risking pension arrangements, with the union acknowledging that it understood the company’s desire to do so.

KLM said it was aiming for a collective defined contribution arrangement.

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