Kenya Airways to sack 300 staff in cost-cutting bid
Posted Sunday, August 5 2012 at 16:48
Reduced global passenger numbers and revenues have pushed Kenya Airways to cut costs by shedding off staff.
The harsh operating environment marked by low passenger numbers and high costs of operations has seen the airline’s yields decrease even as it looks to roll out an aggressive expansion plan.
Last week, the airline rolled out its staff rationalisation programme that will see about 300 workers sent home as it seeks to streamline costs.
“Despite various initiatives that we have put in place, our cost base continues to be extremely high,” said KQ’s Chief Executive Titus Naikuni.
“This coupled with other direct operating costs, have put pressure on our contribution margin, reducing our overall ability to operate profitably,” he said.
The economic downturn in Europe and high cost of fuel have hit the airline’s performance hard.
Last month, KQ released a report that showed its first quarter passenger traffic remained unchanged from the previous quarter.
Data for the three months showed passenger numbers remained at 841,238 with poor performance in the European, Asian and domestic routes.
When announcing its full-year financials for the year ending March 2012, KQ indicated it would reduce its costs that had risen by 44 per cent to Sh77 billion, mainly due to expensive labour and oil.
In a statement last week, the airline said its labour costs have more than doubled in the last six years from Sh6 billion in 2007 to Sh13.4 in the last financial year.
As of March 2012, the airlines employee headcount stood at 4,834. Of these, at least 14 per cent are overseas employees.
However, the Aviation and Allied Workers Union has said it will oppose the move and will go to court to challenge the decision.
“We think Kenya Airways wants to streamline its cost structure to ensure its long term competitiveness on the back of lower traffic, volatile oil prices and new competitors. We think the airline will still be recruiting since it is due to purchase over 20 aircrafts over the next three years,” noted a research by the Standard Investment Bank.
It expects the eurocrisis and terrorism in Somalia to affect the airline’s margins in the short-term.
“Currently, traffic and tourism are being negatively affected by recession in Europe, Kenya’s largest source of tourism, as well as perceptions of violence and coastal piracy and terrorism in Somalia extending into Kenya,” said the research note.
Eutychus Waithaka, the chief executive of Kenya Association of Air Operators, said the operating environment has seen airlines look at cost-cutting measures and efficient ways of doing business, adding that economic issues in Europe have affected passenger numbers in the country.