Top executives of Kenya Airways have seen their pay rise by 24 per cent in a year that also saw the airline report drops in profit and share prices.
Details in the national carrier’s annual report show that the annual pay of executive directors rose from Sh66 million to Sh82 million in the year ended March 2012.
KQ’s annual report lists its executive directors as Titus Naikuni (CEO) and Alex Mbugua (group finance director)—and this means they shared a monthly package of Sh6.83 million, up from last year’s Sh5.5 million.
The executive pay increase comes in a year when Kenya Airways profit dropped 51.4 per cent to Sh1.7 billion as its costs raced ahead of its revenues, which saw the carrier cut dividends by 46.7 per cent.
Its share at the Nairobi Securities Exchange (NSE) has shed 58.7 per cent in the past year to the current price of Sh13, making it the worst performing stock on the bourse over the 12 months.
The Business Daily failed to get a comment from KQ as Mr Mbugua’s mobile phone went unanswered. He also failed to respond to a text message on the matter. Analysts link the rise in executive pay to the airline’s bid to reward and retain its top talent and the fact that the raise came at the start of the financial year when the airline had just reported stellar results.
The airline’s net profit rose to Sh3.5 billion in the year to March 2011 from Sh2 billion, reflecting a 75 per cent increase.
“The double-digit raise for KQ executives is a reflection of the stellar performance it reported the previous year,” said an analyst at Kestrel Capital, adding that competition for executive talent could also be a factor.
This year has seen KQ battle a host of internal and external challenges that played a hand in the halving of its profits.
Expensive labour and oil prices saw its direct costs jump 44 per cent to Sh77 billion with total expenses rising 32.5 per cent to Sh106.5 billion, which climbed faster compared to sales. Its revenues increased 25.6 per cent to Sh107.8 billion.
The national carrier has placed cost cutting on top of its agenda in light of the flat passenger numbers in a bid to return to growth in a turbulent aviation market.
Its employees had moved to court to stop a planned layoff of about 650 workers, but on Thursday, the Industrial Court lifted an injunction that had stopped the carrier from sending them home.
The airline’s wage bill has doubled in the past five years from Sh6 billion in 2007 to Sh13.4 billion in 2012.
Collectively, its management wage bill increased to Sh236 million in 2012 from last year’s Sh204 million.
Currently, top companies are developing good business ideas that are being copied with speed, forcing employers to constantly be on the lookout for innovators.
This type of thinking is making human capital the most sought-after resource in the production system and an arsenal for companies that seek to grow.
In high demand are people who are technologically literate, globally astute and capable of not only developing, but also executing strategy.
As a result, blue chip companies are keen to retain star talent and this is forcing the employers to increase fixed salaries and widen the scope of performance-related compensation to include bonuses and shares.