Treasury’s Sh10bn bailout loan delay stalls KQ layoffs

The anticipated staff layoffs by national carrier Kenya Airways have stalled following a delay in release of a Sh10 billion government-backed bridge loan.

The retrenchment of up to 600 Kenya Airways staff was planned to kick off early last month but has not started yet.

The airline, known as KQ by its international code, has indicated it will lay off or redeploy the staff as part of cost-cutting measures it is implementing to get back to profitability.

The delayed retrenchment has seen the airline defer the job cuts even as it continues consulting with its staff’s unions.

The African Export-Import (Afrexim) Bank last year agreed to lend KQ $200 million (Sh20 billion) as a bridging loan to ease its cash-flow constraints but the airline has only managed to draw half the amount. The second tranche, which was to be guaranteed by the Treasury, has not yet been disbursed.

“We expect (release of) the money loaned by Afrexim bank soon,” KQ said in response to queries by the Business Daily. “We are aware that was going through the approval channels and we are gratified by the support shown by Government for Kenya Airways.”

The national carrier in March announced that it intends to declare about 15 per cent of its staff redundant in a bid to cut its payroll by about Sh2 billion annually. KQ’s workforce stood at 3,973 as at March last year.

READ: Blocked Sh2.5bn in Africa worsens cash flow at KQ

Their 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 did not offer its staff the option of applying for voluntary early retirement.

“Termination of employment contracts on account of redundancy will commence from the beginning of May 2016, and will cover both unionisable and non-unionisable staff,” KQ’s managing director Mbuvi Ngunze told staff in March.

Negotiations triggered by the pilots’ strike last month have further complicated the matter.

KQ’s pilots went on strike late April demanding a management overhaul, while also declining to sign letters redeploying some of them to serve at Ethiopian Airlines for several years.