Kenya Airways (KQ) said Tuesday it had embarked on an ambitious job-cut plan to reduce its annual wage bill by close to US$ 15 million, after an initial 126 of its 600 staff members, earmarked for retrenchment, voluntarily left.
“The National carrier announced the completion of its staff rationalization programme that will see the airline save close to US$15 million annually in labour costs as it embarks on its ambitious expansion programme,” the airline said in a statement.
The airline proceeded to implement the staff reduction plan after a Kenyan court lifted orders baring the implementation of the retrenchment plan.
Earlier, Prime Minister Raila Odinga told the airline to halt the planned job cuts until negotiations were complete with its staff members.
KQ Chief Executive Officer Titus Naikuni said “We are following the labour laws to the letter. We looked around what is happening in the market place in Kenya and Africa and packaged the best and most fair deal for our employees.”
The airline cited a difficult operating environment, including the 2009 financial crisis and the rising interest rates in Kenya over the past year, for the job-cut plans.
“Our programme is generous to those affected,” Naikuni said.
“Those leaving the business will have an estimated average payout of up to US$ 24,000,” Naikuni said.
The airline, which is one of the most successful carriers in Africa, plans to more than triple the number of its aircraft from the current 35 in the next 10 years.
The company said it would also take bank loans to finance the 10- year expansion plan that will cost US$ 3.6 billion in the first five years.
“The Company also recognizes the need to rationalize the current business in order to create a platform for the planned growth of network and fleet,” said Naikuni.
The job-cuts plan seeks to deal with what the airline calls “internal inefficiencies” with the main aim of reducing the employee average costs of 13.4 billion by 10-15 percent.
“Over the last few months, the company has revisited cost structures, reviewed processes, increasing efficiencies in order to mitigate decline in profitability, whilst maintaining and growing customer satisfaction,” Naikuni stated.
KQ said it had been through a more profitable year immediately after the global financial crisis in 2008 and 2009.
“The last two years have been particularly tough as the effects of the Eurozone debt crisis and recession have reduced travel demand globally,” the airline statement added.
Airline executives also blame the effects of the Arab Spring on the high fuel costs.
Apart from a more challenging business environment, the potent mix of rising labour, energy and finance costs have reduced the earnings for the global airline industry.
“It is in this context that Kenya Airways’ cost base has grown disproportionately to our revenue generation,” Naikuni noted.
The airline says its average employee cost per person has doubled in five years due to salary increases linked to union awards and job evaluation.
Sources said an imminent strike is being planned to oppose the job cuts.
The cost of employing airline staff has risen from US$ 71.5 million in the 2007 to US$ 160 million in 2012.
KQ’s staff strength has risen from 3,729 to 4,170 with 46 of them working abroad.
The number of KQ’s foreign employees – mainly nationals of their respective countries, rose from 425 to 664, bringing the total number of employees at the airline at 4,834.