National carrier Kenya Airways (KQ) is set to lay off 38 employees in the second phase of redundancies intended to help the loss-making airline cut operating costs.
The management is planning to let go up to 600 employees with a target to trim the company’s payroll by an estimated Sh2 billion annually.
The first phase of layoffs took place in July 2016, during which 80 workers were sent home. Many other staff have since then either retired voluntarily or quit to join rival airlines.
“After implementation of Phase 1 of the restructuring process, we continued looking for opportunities for productivity and efficiency gains as well as upskilling within the business. After a lot of consultation the next phase of the process is now ready to be rolled out. There is never a perfect timing for such actions, and we will ensure that the process is handled within the values of our airline,” said Group CEO Mbuvi Ngunze.
Mr Ngunze is also set to leave Kenya Airways by March.
The turnaround strategy dubbed Operation Pride focuses on three aspects; returning to profitability, reorganising the carrier’s business model and rearranging the capital structure of the company.
Mr Ngunze declined to reveal the savings achieved so far from the ongoing redundancies.
In both cycles, the employees sent home were determined by the company. In the first phase KQ did not offer its staff the option of voluntary early retirement (VER) in an effort to put a lid on the severance costs and block potential exits by key employees.
KQ’s workforce stood at 3,870 as at March last year. Staff costs had grown by 40.1 per cent in the past six years to Sh15.7 billion compared to Sh11.2 billion in 2011.
The airline also suffered a mass exodus by its pilots who were heading out to other airlines including Middle East carrier Emirates. By October, over 60 pilots had left as well as engineers and non-technical staff.
The carrier made the biggest loss in the country’s corporate history at Sh26.2 billion in the year ended March 2015.
In the half year to September, it reported Sh8.5 billion in losses after tax.
The airline is restructuring its balance sheet to improve liquidity and lower its debt level in preparation for a capital injection later in the year.
As at September 2016, KQ had Sh116.7 billion in long-term borrowings and another Sh29 billion in short-term debt, credit which continues to strain its operation.
Last month, technical staff went on strike, which was called off following an agreement by Mr Ngunze to review their pay and allowances, with effect from this month.