Kenya Airways chief executive Titus Naikuni. The airline has finalised its Sh800million retrenchment programme that has seen 578 employees leave the company September 6, 2012
What you need to know:
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.
So, who is going home, exactly?
People behind the scene like loaders. We are looking at areas where we can outsource.
What are your comments to Parliament and the PM’s office for seeking to block the layoffs?
We don’t foresee another layoff round coming soon.
You have spoken on the on-going controversy over the planned construction of a new terminal at JKIA. What, in your view, are the issues here?
The issue, according to me, is one — the growing demand for space at the airport. At KQ, we have been talking about expansion for some time and things have come to a crunch now. The things we have been talking about are now happening.
The first aircraft in our expansion programme is coming next week and from then on you can’t stop. They will keep coming, we have already finalised our funding arrangement for the aircraft.
We don’t agree with the passenger numbers forecast. We may be wrong, that’s why I say we sit down and agree, clarify.
Our position for now is we are right. The numbers that are being used now were derived earlier, yes we were spoken to but what we gave was ignored and we never got feedback. All we are saying is that we put out some numbers, we may have been wrong but don’t ignore us.
KQ went out and got its own consultant, why? And what is their competence?
The consultant is a partner of General Electric. Yes, we went and got our own consultants (Avia Solution) we did not do it behind anyone’s back. When we were given the numbers, we got an expert, with the knowledge of the Kenya Airports Authority (KAA) and the Ministry. This report is ours.
What are your passenger numbers right now and what are your projections as KQ?
We are headed towards 4.5 million. There is suppressed demand. When we start building an airport, it will create demand. Even the 20 million KAA is talking about is not wrong, we are just thinking timing wisely, that they may have ideas that we don’t have.
What, in KQ’s view, is wrong with the design?
The design is not finalised; it is still at the cooking stage. With this design, we will be uncompetitive. The X design does not allow us to expand, and, with this, we are building a very huge capacity that you don’t need now. When you get to expansion, you will have to go build another.
The modular design concept works best for us, especially for expansion because then we can do it in stages. We can borrow from other airports, copy and paste to suit us.
What advantages do neighbouring airports have over JKIA ?
Addis has an altitude penalty against us, but they can land the aircraft and are also expanding.
Kigali is almost identical to us, but we are congested and they have the capacity.
We need to take advantage of our position, as Kenya.
There is a perception that you could be leaning on one of the sides that are fighting in this war? Do you have a personal interest?
Since you are sitting on the fence let me come out and say it, I stand here for the sake of KQ. I have no personal interest, at all.
Our position is, we are expanding, are buying aeroplanes and they are arriving. Don’t tell me I’m sitting on the fence supporting one person or another, our position is, we are expanding, buying planes and we need room to accommodate and make good economic use of them.
