Why Kenya Airways has to send 578 staff home
Posted Thursday, September 6 2012 at 22:13
- The airline has in the past five years seen its costs rise sharply, driven by increasing cost of fuel and the wage bill.
- The total is 578. Of these, 125 took the voluntary retirement package.
- KQ decided to outsource in some of the areas targeting savings of about Sh1 billion a year.
- The total cost of the retrenchment is Sh800 million.
Kenya Airways has been in the news in the past two weeks on the twin issues of the planned expansion of the Jomo Kenyatta International Airport (JKIA) and the decision to retrench more than 500 workers.
The airline has in the past five years seen its costs rise sharply, driven by increasing cost of fuel and the wage bill.
The Business Daily’s Wangui Maina interviewed the airline’s managing director, Mr Titus Naikuni, on two different occasions on the two issues. Below are the excerpts.
We could start with a clarification of the exact number of people being laid off?
The total is 578. Of these, 125 took the voluntary retirement package.
Why now? And how much will the airline save?
Our labour costs have gone up tremendously, doubling since 2009. During this time, our revenue has not grown as fast as we had anticipated.
We need to look at our costs, especially fuel prices, which have continued to impact us. We looked at some of our labour and realised that in some areas we are more inefficient than some of the organisations working around the airport. So, we decided to outsource in some of the areas targeting savings of about Sh1 billion a year.
How much is KQ going to spend on this staff downsizing plan?
The total cost of the retrenchment is Sh800 million. No one is going home with less than Sh1.4 million, for some it is even higher.
The issue of rising wage bill has been part of KQ for the past five years. How did you get into this situation or did the airline go on a thoughtless recruitment spree?
We had issues with our union a few years ago. We at the time were forced into effecting major increases in salaries and allowances. We warned that this was not sustainable in the long-term but no one listened and the chickens have now come home to roost.
After this exercise, we should be able to deliver a sound business going forward.
You are cutting down on numbers and yet expanding the business, won’t this affect growth?
We are not cutting down on operational areas, significantly, in this I mean crew. We are looking at the support services and seeing how we can do things differently — say through outsourcing — this is common in any business. We have also invested a lot in technology over the years.