KLM, which has agreed to be taken over by Air France, said today it would not give its top executives bonuses linked to cutting costs after the merger, a plan that had been sharply criticized.
A spokesman for the company said KLM's board had decided not to pay the bonuses, which angered trade unions and were described as "excessive" by Dutch Finance Minister Mr Gerrit Zalm.
"Yes it is true that the board has decided to withdraw from the synergy bonuses," said KLM spokesman Mr Bart Koster. He declined to say what had motivated the decision.
Under the bonus scheme, top KLM managers would have received as much as 50 per cent of their annual salaries in the years after merging with Air France to create the world's top airline by revenue.
Unions were concerned that the bonuses would give managers an incentive to make job cuts on top of the 4,500 redundancies that KLM has already announced.
Mr Zalm, who said the bonuses were too generous, had intended to send a representative to raise his concerns at a KLM shareholders meeting on Monday, called to discuss the takeover deal due for completion in May.
The Dutch government holds a 14 per cent stake in KLM.
Dutch trade unions, which had threatened to stop wage talks and even to consider lightning strikes if the bonus plan were not dropped, had asked the minister to intervene in the dispute.