Kenya Airways pushes to pay pilots per flight

Kenya Airways #ticker:KQ is pushing to have its pilots paid per trip as the national carrier seeks a lower wage bill to weather the coronavirus storm that has crushed air travel demand.

KQ chief executive officer Allan Kilavuka said the airline would pursue talks with the pilots over the radical pay plan.

With no quick recovery in sight, KQ is seeking to cuts costs in a plan that will see it lay off an unspecified number of workers, get rid of some assets and review aircraft leasing terms.

“We are looking at an arrangement where we pay pilots as they fly,” Mr Kilavuka told the Business Daily in an interview. “Where do we get cash to pay pilots if planes are grounded?”

The carrier, which was struggling long before the Covid-19 outbreak, has deployed 26 percent of its airplane capacity on reduced air travel, especially on European routes. The airline earlier said it preferred to lay off half of its pilots to withstand the cash flow crisis deepened by the Covid-19 pandemic.

The national carrier intends to cut up to 207 of its 414 pilot jobs, which account for nearly half of its payroll costs, over the next three years.

It expects to save nearly Sh3.24 billion if it meets the desired target of having between 207 and 248 pilots on its books.

Pilots account for 10 percent of the airline’s total workforce, but take home the equivalent of 45 percent of the overall payout to employees or Sh6.48 billion based on the carrier’s wage bill for the year to December.

This means that on average a KQ pilot costs the company Sh1.3 million, a payout that matches the salaries and allowances of top chief executives of State-owned firms such as KenGen, Kenya-Re and Kenya Power.

Employees in the Kenya Aviation Workers Union (KAWU) account for the majority of workforce at 65 percent but take home an estimated 30.5 percent of KQ’s payroll.

Managers at the airline are 22 percent of the workforce and draw compensation equivalent of 22 per cent of the payroll costs.The Kenya Airline Pilots Association (KALPA) said it would provide the merits and demerits of pay per trip once the scheme is put forward for negotiations.

"I am not aware of that proposal as we have not had that negotiation with Kenya Airways," said KALPA secretary-general Muriithi Nyaga.

KQ has been forced to commit full pay to its pilots despite reduced work for the flyers and other staff taking pay cuts of up to 80 percent.

But a share of the pilots’ pay has been deferred to a period when the airline’s cash flow would have improved.

The airline has been involved in protracted court fights with its pilots and has also suffered from poaching of talent by wealthy Middle East carriers that can afford to pay higher wages, triggering a talent war that has made pilots among Kenya’s best paid workers.

The number of KQ pilots has dropped by 91 or 18 percent since 2014 when it dipped into losses after making costly aircraft purchases, which coincided with a slump in tourist and business travel to Kenya blamed on a spate of attacks by Al-Shabaab militants.

The airline’s fleet increased from 27 in 2010 to 45 in 2015 while pilots’ hiring rose in tandem from 240 in 2006 to a peak of 523 in 2015 on the back of an aggressive expansion plan.

This left KQ with mounting debts and heavier payroll costs as it struggled to return to profitability.

KQ was struggling long before the coronavirus outbreak, posting 2019 losses of almost Sh13 billion, from a loss of Sh7.5 billion in 2018.

It cut salaries by as much as 80 percent when the crisis started, and sought a government bailout to help it take care of running costs after it grounded its planes when Kenya stopped commercial passenger flights to curb the spread of the virus.

The government declined to bail it out, opting to press ahead with a pre-pandemic plan to nationalise the carrier, part of wider reforms in Kenya’s aviation sector.