Companies

KQ reinstates salary cuts as Sh20bn State bailout delays

allan-kq

Kenya Airways CEO Allan Kilavuka. PHOTO | DENNIS ONSONGO | NMG

Summary

  • Kenya Airways CEO Allan Kilavuka says that the money has not hit its account a month since it was allocated in the supplementary budget by the Treasury for the financial year 2021/22.
  • Besides salaries, the national carrier needs the money to settle utility bills like security, maintenance of grounded planes, electricity and parking.
  • The carrier had resumed full payment of workers’ salaries in December 2021 after a long protracted battle with the pilots union.

A delay by the government to disburse the Sh20 billion bailout package to Kenya Airways (KQ) #ticker:KQ has forced the national carrier back to pay cuts.

Kenya Airways CEO Allan Kilavuka says that the money has not hit its account a month since it was allocated in the supplementary budget by the Treasury for the financial year 2021/22.

This has forced the airline to slice the workers’ pay in cash preservation efforts with the promise of settling the deducted pay once the Treasury wires the bailout billions.

KQ had resumed full payment of workers’ salaries in December 2021 after a protracted battle with the pilots’ union.

The union has been demanding the reinstatement of their salaries to 100 per cent, saying that the airline had started recovering from the Covid-19 disruptions.

Besides salaries, the national carrier needs the money to settle utility bills such as security, maintenance of grounded planes, electricity and parking as well ease the effects of the virus that has obliterated global travel.

Mr Kilavuka says the carrier will revert to reducing workers’ pay at rates effected in November 2021.

“We are still constrained financially and in the interest of prioritising staff salaries, the February 2022 salaries will be paid in percentages similar to the percentage paid in November 2021. We will owe the percentage not paid which the company will pay when we receive the funding from the government," said Mr Kilavuka in a recent memo to KQ staff.

"As I advised, we are yet to receive the disbursement of funds intended to support the company to strengthen its cash flow, support operations and speed up the reforms in the airline."

Without State aid, the airline risked running out of money in the near future against the background of unease among banks about lending to African carriers.

The bailout comes as the State dropped the nationalisation plan, which was approved by lawmakers in July 2019 and would have led to the delisting of the airline from the Nairobi Securities Exchange (NSE) #ticker:NSE .

Kenya wanted to emulate countries like Ethiopia which run air transport assets under a single company, using funds from the more profitable parts to support others.

Now, the State is keen on pushing for the restructuring of the national carrier on the back of the multi-billion shilling bailout.

KQ will be required to reduce its network, operate a smaller fleet, and possibly lay off more staff under the bailout terms.

Its full net loss for the financial year ended December 2020 nearly tripled to Sh36.2 billion, the worst ever in the history of the airline, on account of Covid-19 disruptions that led to a sharp decline in passenger numbers.

But the carrier has continued to record improved business since it resumed international flights in August last year.

Demand for air travel has slightly improved, which has seen the carrier increase its frequencies on routes like London.

[email protected]