KENYA AIRWAYS COMPLETES STAFF RATIONILIZATION PROGRAMME
Though waves went high when Kenya Airways announced their plans a few weeks ago to offer early retirement while embarking in the outsourcing of staff duties predictably did the radical Transport and Allied Workers Union rush to court, besides threatening strike action again, and got the countrys Prime Minister enlisted to attempt fire off a government directive without legal foundation the airline announced today that they completed the exercise on time. According to information just received have over 20 percent of those affected signed up for the voluntary retirement package, which will see the staff concerned walk away with in average 2 million Kenya Shillings. In addition is a special training programme available to them to learn entrepreneurial and business skills, again at the cost of the company, to prepare them for a post aviation career in a chosen field.
The airline, hard hit by last years extortionate union dictates, to which it only succumbed to prevent more damage to the airlines reputation and financial viability, is facing huge staff cost bills as a result and combined with continuously high fuel prices for Jet A1 had to seek cost cutting measures, inspite of having otherwise strong positive indicators in both the short and medium term. The airline as a result also dropped flights to Rome and Muscat to reallocate capacity to better performing markets, cutting marginal or loss making routes in favour of other, higher yield and higher demand destinations. Faced on domestic routes with strong competition on selected routes like to Kisumu, Eldoret, Malindi and Mombasa, the airline is on continental level competing with the likes of Ethiopian and South African, both Star Alliance partners, while on their most profitable routes, from across Africa via Nairobi to the Middle and Far East the likes of Emirates, Qatar Airways, Turkish and of late even Etihad are eating into the airlines market shares.
Said a regular aviation source on hearing the breaking news: It is a tough business environment for airlines and specially for KQ. We all suffer congestion at JKIA but for KQ with their expansion plans it is even worse. Be sure to understand that they are in a big fight with Ethiopian for instance which has a very similar business model like KQ but some route advantages and also beat us in Kenya to get the B787 first. KQ has understood that they have to fly to the entire continent, every country, to capture the premium and higher yield traffic and not let it to the Gulf airlines alone. Those expansions cost money for more aircraft and all but the unions as usual have no clue about how fragile the aviation business is again this year and probably for the next two years, so good for KQ to have completed this project.
Dr. Titus Naikuni, CEO and Group Managing Director of Kenya Airways, was quoted in the media release sent to this correspondent as having said: The Company recognizes the need to rationalize the current business in order to create a platform for the planned growth of network and fleet. Over the last few months the company has revisited cost structures, reviewed processes, increasing efficiencies in order to mitigate decline in profitability, whilst maintaining and growing customer satisfaction. It is in this context that Kenya Airways cost base has grown disproportionately to our revenue generation. Our employee cost/person has doubled in five years due to salary increases linked to union awards and job evaluation. The company wishes to assure the travelling public that all these changes are aimed at improving the customer experience and consistency of customer promise, and ultimate growth of our national carrier.
Dr. Naikuni added that by considering the current business environment, the Board of Directors formally approved a Voluntary Early Retirement Programme, and a staff rationalization exercise to address internal inefficiencies, and reduce the employee cost base of Sh13.4 billion by 10-15 per cent.Though the airline industry enjoyed a better than expected performance in the immediate aftermath of the Global Financial Crisis in 2008 and 2009, the last two years were particularly tough as the effects of the Eurozone debt crisis and recession reduced travel demand globally. The high level of political risk in the Middle East last year pushed fuel costs to unsustainable levels. Local interest rates have also risen dramatically during this period adding to a near lethal mixture of rising labour, energy and finance costs which has reduced the earnings outlook for the global airline industry. Employment costs, according to information provided by the airline on this and previous occasions, has doubled over the last 5 years, rising from $71.5 million in the year 2007 to $160 million in 2012. Watch this space for breaking news from East Africas aviation sector.