We spoke to KLM Royal Dutch Airlines CEO Pieter Elbers to find out how his company has responded to the rise of low-cost carriers like Ryanair and EasyJet.

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Following is a transcript of the video.

Pieter Elbers: Well, low-cost in Europe started about 20 years ago. And the big low-cost leaders in Europe, Ryanair and EasyJet, they were founded back then. My personal view is that for especially the first decade of their existence, network carriers like ourselves sort of underestimated, ignored — almost arrogantly ignored — the rise of low-cost carriers.

With that, we can see that their share in the European landscape has steadily increased and is now anywhere between 42% and 45% of all flights in Europe are with low-cost carriers. And a percentage which is significantly larger than in the US where it’s about a third.

With that, we have embarked on a program in KLM a few years ago whereby we sort of said, we’re going to defend our European network and we're going to make sure that we do the right thing for our customers on the European network. So we have lowered our cost, we have increased our fleet utilization, we have changed our commercial offers on probably 60% of all our European destinations, which are about 80 destinations. We do have levels which are matching the low-cost carriers. So this combination of cost-cutting on the one-hand side, investing in our product and our service.

You know we have coffee for free, we have beer for free. And if it’s beer, it should be Dutch beer. So we have all that stuff for our customers, and yet at very competitive prices. And with that, we have been able to change our European network from a loss-making situation into a profitable situation.

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