Corporate News
By NEVILLE OTUKI, notuki@ke.nationmedia.com
In Summary
- KQ said the staff downsizing was agreed upon by the board, running parallel to asset sales or leasing to free up cash for operations in its turnaround bid.
- The expected Sh2 billion in savings from the staff cut accounts for 10 per cent of the targeted Sh20 billion the carrier seeks to save in the turnaround plan dubbed Operation Pride.
Troubled national carrier Kenya Airways
is set to send home up to 600 employees beginning next month as part of
wide cost-cutting measures expected to reduce its payroll by about Sh2
billion annually.
The airline, popularly known as KQ, said the staff
downsizing was agreed upon by the board, running parallel to asset sales
or leasing to free up cash for operations in its turnaround bid.
The expected Sh2 billion in savings from the staff
cut accounts for 10 per cent of the targeted Sh20 billion the carrier
seeks to save in the turnaround plan dubbed Operation Pride.
“The Board has, after re-evaluating the various
options, come to the painful decision that part of the required overhead
savings will be derived from a decrease in staff headcount,” KQ chief
executive Mbuvi Ngunze said in a statement.
The airline added that a part of the identified staff could be “redeployed elsewhere, should their terms of service allow it.”
The impending layoff of the 600 staff who represent
15 per cent of its total workforce, follows another staff reduction
exercise in 2012 that affected 599 workers.
KQ’s workforce stood at 3,973 as at March last
year. Staff cost has grown by 51 per cent in the past five years to
Sh16.96 billion for the year ended March 2015 compared to Sh11.2 billion
in 2011.
The airline in July last year hired American
consultancy McKinsey to help restructure its operations, including staff
review in the wake of a massive financial bleeding that pushed it into
the red.
KQ made biggest net loss in the country’s corporate
history at Sh25.7 billion in the year ended March 2015 on its past
ambitious fleet expansion strategy.
The loss is partly attributable to KQ’s ambitious
fleet modernisation programme dubbed Project Mawingu which was largely
funded through debt, piling a heavy finance costs on the carrier.
Previous staff cuts have sparked legal battles, with workers’ union filing suits in courts.
“The redundancy process will be in full compliance
with labour laws, Collective Bargaining Agreements (CBAs) and individual
staff members’ contracts as appropriate,” the airline says of the
upcoming downsizing of its unionisable and non-unionised staff.
Mr Ngunze had earlier said that Kenya Airways had put on the table two options –cutting staff salaries or sacking some workers.
It is illegal under the International Labour
Organisation laws to cut workers’ salaries but companies ordinarily
negotiate with their staff to either take pay cuts or go home with
redundancy packages
The long-running standoff between the Kenya Aviation
Workers Union and KQ is seen as a hurdle for the carrier in its
restructuring plans.
The McKinsey’s recommendation of the turnaround strategy is to be implemented over one-and-a-half years.
The plan includes review of prices, revenue management, sales, cost reduction and cash and financial optimisation.
The cash-strapped carrier was last year forced to turn to debt to pay its staff due to its current liquidity crisis.
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