Troubled national carrier Kenya Airways is set to send home up to 600 employees beginning next month as part of wide cost-cutting measures expected to reduce its payroll by about Sh2 billion annually.
The airline, popularly known as KQ, said the staff downsizing was agreed upon by the board, running parallel to asset sales or leasing to free up cash for operations in its turnaround bid.
The expected Sh2 billion in savings from the staff cut accounts for 10 per cent of the targeted Sh20 billion the carrier seeks to save in the turnaround plan dubbed Operation Pride.
“The Board has, after re-evaluating the various options, come to the painful decision that part of the required overhead savings will be derived from a decrease in staff headcount,” KQ chief executive Mbuvi Ngunze said in a statement.
The airline added that a part of the identified staff could be “redeployed elsewhere, should their terms of service allow it.”
The impending layoff of the 600 staff who represent 15 per cent of its total workforce, follows another staff reduction exercise in 2012 that affected 599 workers.
KQ’s workforce stood at 3,973 as at March last year. Staff cost has grown by 51 per cent in the past five years to Sh16.96 billion for the year ended March 2015 compared to Sh11.2 billion in 2011.
The airline in July last year hired American consultancy McKinsey to help restructure its operations, including staff review in the wake of a massive financial bleeding that pushed it into the red.
KQ made biggest net loss in the country’s corporate history at Sh25.7 billion in the year ended March 2015 on its past ambitious fleet expansion strategy.
The loss is partly attributable to KQ’s ambitious fleet modernisation programme dubbed Project Mawingu which was largely funded through debt, piling a heavy finance costs on the carrier.
Previous staff cuts have sparked legal battles, with workers’ union filing suits in courts.
“The redundancy process will be in full compliance with labour laws, Collective Bargaining Agreements (CBAs) and individual staff members’ contracts as appropriate,” the airline says of the upcoming downsizing of its unionisable and non-unionised staff.
Mr Ngunze had earlier said that Kenya Airways had put on the table two options –cutting staff salaries or sacking some workers.
It is illegal under the International Labour Organisation laws to cut workers’ salaries but companies ordinarily negotiate with their staff to either take pay cuts or go home with redundancy packages.
The long-running standoff between the Kenya Aviation Workers Union and KQ is seen as a hurdle for the carrier in its restructuring plans.
The McKinsey’s recommendation of the turnaround strategy is to be implemented over one-and-a-half years.
The plan includes review of prices, revenue management, sales, cost reduction and cash and financial optimisation.
The cash-strapped carrier was last year forced to turn to debt to pay its staff due to its current liquidity crisis.