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Retrenchment to save airline Sh1.2b annually in labour cost

By - James Anyanzwa | October 9th 2012 at 00:00:00 GMT +0300

By James Anyanzwa

The national carrier Kenya Airways is in the limelight again.

But this time round not for acquiring a new aircraft or launching a new route or destination but on a controversial staff retrenchment programme which has provoked the wrath of the public, parliamentarians and some senior government officials.

The airline shed 578 jobs in a bid to cut its wage bill that has doubled in the past five years from Sh6 billion in 2007 to Sh13.4 billion in 2012, with profit dropping 51.4 per cent to Sh1.7 billion. But questions are being raised on the status of the airline’s revenue streams, which has often caused the management to cut costs to remain profitable.

In addition, the airport is too congested and needs a revamp if the Government is serious about JKIA becoming the main commercial hub in Africa.

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Surprisingly, KQ is reducing staff in the wake of a 10-year growth and expansion plan, which will see the airline fly to all major cities in Africa, launch six new destinations every year in the first five (5) years and increase frequencies thereafter.

The airline also expects to operate daily frequencies on all long haul routes, improve efficiency and enhance the freighter business.

After falling out of ranks with the Government — its biggest shareholder — Kenya Airways also lost the support of Kenya Airline Pilots Association (KALPA) on the modalities of staff lay offs.

KALPA accused KQ of retrenching local staff while continuing to employ foreign workers.

The organisation called for the firing of the current management and executives, including chief executive officer Titus Naikuni.

KALPA said that KQ is currently at a loss on how do defend itself from increased competition in the aviation industry “after years of misadvised decision-making and is relying on knee-jerk reactions to situations as they develop.”

“This shortsighted thinking has put the airline in the position it is now, and it is clear that the chickens have come home to roost,” said KALPA. KQ said those leaving the business will have an estimated average payout of up to Sh2 million.

The airline will also spend Sh800 million in severance pay for those affected and that the retrenchment will see it save Sh1.2 billion annually in labour costs, as it embarks on its ambitious expansion.

Naikuni said having considered the business environment, the board approved a voluntary early retirement, and a staff rationalisation to address ‘internal inefficiencies’ and reduce the employee cost base of Sh13.4 billion by 10-15 per cent.

“Over the last few months, the firm has revisited cost structures, reviewed processes, improved efficiencies to mitigate decline in profitability, while maintaining customer growth,” he said.

 


Kenya Airways labour cost Kenya Airline Pilots Association KQ
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