Kenya Airways makes staff cutbacks

Kenya AirwaysKenya Airways has recently completed a rights issue to mobilise around US$250mn to help facilitate an expansion project costing US$3.6bn over the next four years. (Image source: Adrian Pingston)Kenya Airways has retrenched 599 workers, 52 of which are in managerial positions, in a move company officials said would save the company US$11.9mn annually

The airline has set aside US$9.5mn as severance fees for workers who have faced the sack following accusations from the Aviation and Allied Workers Union (AAWU) that it had sacked local staff while employing foreigners.

While justifying the redundancies, the airline argued that its wage bill rose from US$71mn in 2007 to US$15.6mn in 2012.

“The industry is itself undergoing turmoil and we are not the only ones cutting down on costs. If we do not do it today, tomorrow we will not have an airline”, observed Dr Titus Naikuni, CEO of Kenya Airways.

The union, however, argued that the airline could not sack workers on the basis of financial difficulties citing the all-time high turnover of US$1.3bn the airline posted for the year ending 31 March 2012.

It had also raised concerns that Kenya Airways was using the opportunity to trim workers’ power to shield itself against future labour unrest as the airline implements its aggressive plan.

Dr Niakuni noted that the retrenchment would not slow down its expansion strategy saying that only workers whose roles could be replaced by technology and outsourcing have been targeted.

“We are not cutting down on the operational areas such as crew. We are looking at support surfaces”, he said. 

With the airline’s expansion plans have come new challenges. The airline reported that its network growth went up by 24 per cent between the years 2010/11 and 2011/12 while revenue rose by 26 per cent.

Kenya Airways recently completed a rights issue to mobilise an estimated US$250mn to partly facilitate the expansion project costing US$3.6 bn over the next four years.

The airline has opened up more routes within the African continent as well as expanding on its existing Indian and Chinese markets.

“We are raising our passenger fleet from the current 34 to 107 so as to facilitate our expansion plans. There are indications that the African market is headed for a better future”, said Alex Mbugua, the airline’s financial director.

The airline has been strategising to benefit from expected growth in the African and Asian economies in the next decade.

Kenya Airways recently signed a deal with the Brazilian aircraft maker Embraer to acquire 20 aircrafts in the next five years.

The company has also ordered nine Boeing 787 dreamliners which are due for delivery between late 2013 and early 2014. Three Boeing 777-300 ERs are also expected for delivery from October 2013 to May 2014.

A lack of pilots has become a major challenge for the airline even as it expands, according to Dr Naikuni.

“We are currently running at about 89 per cent of our targeted network plan largely due to crew shortages. The airline has started a process of training pilots in South Africa who will eventually join the airline,” noted Dr Naikuni in a full page advert in a Kenyan newspaper, as he attempted to explain why foreigners are being employed by the airline, while some locals are losing jobs.

So far, 161 young Kenyans are undergoing training in South Africa as they aim to become qualified aircraft captains in the next five years.

Officials also defended the airlines policy of employing local staff in foreign mini-hubs in other global cities such as Bangkok and Accra.

“We have employed foreign crews in these markets to ensure that we reduce the use of expensive hotels for crew. It is also very expensive to send Kenyans to these countries due to high expatriate costs and in some instances difficulties in getting work permits”, Dr Naikuni added.

The airline has employed 480 workers from different countries working as local staff in the mini-hubs KQ operates. At the same time, the airline has 46 Kenyans working abroad, with only seven expatriates working in Nairobi. On this principle, the airline is in tune with global trends, according to officials.

Carriers in the Middle East have employees from around the world including Kenyans who were formerly Kenya Airways staff.

Mwangi Mumero

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