Kenya Airways enters second phase of cost reduction


(Posted 31st March 2016)

First it was the change in senior management figures, thought to bear significant responsibility for decisions taken in the past which led Kenya Airways close to the financial abyss.
Then came the progressive disposal of surplus aircraft, by selling and leasing out the airline’s Boeing B777-200’s and B777-300’s.
Third came the rationalisation of schedules, especially for the flights from Nairobi to London, avoiding the costly all day layover of a state of the art Boeing B787 Dreamliner aircraft on the ground, as the new schedule ensures an immediate turnaround.
While flights for instance to the increasingly profitable route to Antananarivo have been doubled, were other destinations with lesser traffic volumes seeing either the deployment of smaller aircraft or a reduction of frequencies to match actual demand.
A host of additional measures vis a vis contract revisions and re-negotiations of existing deals also yielded substantial financial results, as the Board of Kenya Airways went along to implement, step by step, the measures proposed by global management consulting giant McKinsey in a report presented to the Board in the last quarter of 2015.
Dubbed ‘Operation Pride‘ is the airline looking at overall savings in the amount of 200 million US Dollars, to be achieved by both cost reductions and a rise in revenues.
Advances made in the areas described above however will not be enough and it is understood from usually reliable sources close to the airline that the Board of Directors has sanctioned a staff reduction programme which will see either re-deployment, where practicable and contractually allowed, or redundancies, with all required financial ‘golden handshakes‘ of course being part of such measures.
As many as six hundred staff will be affected by these measures which will begin to take root in May this year and which, it is understood from another source, already have the backing of the company’s largest shareholders, the Government of Kenya and KLM Royal Dutch Airlines.
Kenya Airways’ Group CEO Mr. Mbuvi Ngunze, went on record earlier in the afternoon when he said: ‘The decision is not made lightly, and I want to thank all employees for their tremendous resilience and commitment in serving our guests in challenging times for the company. I am confident that with the support of all staff, unions, shareholders, creditors, financiers and all other stakeholders, Operation Pride will bring back airline’s term and reconfirm our position as the Pride of Africa‘.
It is expected that there will be hard talks ahead between the management of the company and in particular the unions, which will have to come to terms with a make or break scenario this time. Failing to address cost issues may drive the airline to the brink of financial failure should concessions not be made and compromise not be reached and, in this correspondent’s humble opinion, East Africa’s skies without Kenya Airways is simply unthinkable.
Were mistakes made in the past? The answer to that is a resounding yes but the current management, after replacing several top managers in recent months, is well on the way to put things right again and pave the way for a much improved future performance.
Happy Landings!