Kenya Airways has delayed the payment of staff bonuses for the year ended December 2023, with the decision at a time when the airline has suffered widespread flight cancellations and delays that will hurt its sales in the short term.
The carrier, known as KQ by its international code, has blamed the flight disruption on a shortage of cabin crew and aircraft engine parts as well sabotage by some of its employees.
“As you are all aware, we draw all of our funding from our operations. Despite our best efforts, our revenue and cash flow are 15 percent below our projections. We are behind on our targets due to a mixture of lower passenger numbers and disruptions in our flight schedules,” KQ’s chief executive Allan Kilavuka wrote to staff on May 15.
“Regrettably, due to these cash constraints, we have been forced to delay the payment of the 2023 incentive pay … originally planned for the May 2024 payroll. This delay affects all of us.”
Mr Kilavuka added that the company will provide an update on the payment schedule by June 20 if the airline will not have disbursed the bonuses by then.
The company says that several Boeing 787 Dreamliner engines required to power its full fleet are in the shop awaiting parts needed to repair them.
“This requires a significant payment to the suppliers; otherwise we will not be able to maximise fleet availability and, therefore, make a constrained cash situation even worse,” Mr Kilavuka said.
The company does not disclose how much it pays in bonuses to staff but employee remuneration is one of its largest operating costs.
KQ saw its total staff costs surge 39 percent to Sh17.5 billion last year when it hired an additional 598 employees, expanding its workforce to 4,828.
Salaries were the largest item in the remuneration expenses in 2023, followed by “other staff costs” at Sh2.3 billion and retirement benefits (Sh609 million).
Despite the expanded workforce, the airline says it has continued to suffer cabin crew shortages and indicated that some of its flight disruptions are also due to sabotage.
“Avoid disruptions: I would like to urge all those deliberately disrupting flights to stop because of the impact they are having on revenue and cash generation,” Mr Kilavuka wrote of the actions the airline has identified to survive the cash crunch.
Mr Kilavuka said that besides postponing the bonus payout, the airline has also identified other cash conservation measures including suspension of all discretionary spending and capital projects.
The company also plans to sell non-core assets.
KQ’s flight disruption had been building up and intensified over the weekend, exposing it to a surge in refund claims.
The airline has a policy that allows customers to seek refunds for cancelled flights or those delayed by more than eight hours.
Customers who don't want to travel after missing their original departure time can apply for a refund through their original form of payment.
KQ declined to respond to questions on the extent of the disruption of its flights.
However, this publication independently established that scores of flights had either been delayed or cancelled since Sunday.
The flights that were cancelled include flight KQ404 from Nairobi to Addis Ababa on May 19, KQ262 from Nairobi to Antananarivo on May 16, KQ 418 on May 20th from Nairobi to Entebbe and a flight which was initially scheduled to depart Nairobi to Paris on May 19 at 23:50 was cancelled too.
The airline also cancelled KQ514 on May 19 from Nairobi to Accra and KQ 726 on May 19 from Nairobi to Lusaka.
KQ narrowed its net loss by 40.6 percent to Sh22.6 billion in the year ended December 2023, helped by a surge in revenues.
The company had made a net loss of Sh38.2 billion the year before. KQ grew its sales 52.8 percent to Sh178.4 billion as it rebuilt its route network and capacity from the depths of the Covid-19 pandemic that hit the global aviation sector.
The flight disruption risks slowing down the momentum recorded in 2023 for the company that has been battling for years to get out of the loss-making zone.
