NAIROBI, Kenya, Aug 2 – National Carrier Kenya Airways (KQ) has begun a retrenchment exercise that will cover both unionisable and non-unionisable staff, during the month of August.
According to a staff notice circulated on Wednesday, KQ said it would first offer a Voluntary Early Retirement Package to staff willing to leave the organization as part of its on-going structuring that ends August 31, 2012.
“We will initially begin with a voluntary early retirement initiative, but in the event that we do not get the required numbers then we will move to the next step of identifying individuals to be retrenched,” the notice stated.
Employees willing to take on the voluntary early retirement deal will have until August 10 to submit their applications.
The package, however, is not open to staff who are within 12 months of normal retirement, but will apply to unionisable staff above the age of 50 years.
The terms of the severance package for affected staff include a three months salary in lieu of notice, 20 days salary for every completed year of service and accrued leave days at the rate of 20.5 working days per month.
The airline’s Managing Director Titus Naikuni said several factors have contributed to the decision to lay off staff, including poor performance of KQ’s European routes and high employee and fuel costs.
“Employee costs make up 13 percent of our revenue. In 2005 our cost of employment was Sh1.5 million that is now at Sh2.8 million, with pilot fares taking up the largest portion,” he said in a phone interview with Capital FM News.
He added that the airline’s wage bill has hit Sh13.5 billion, with fuel expenses running the company into Sh40 billion a year that has resulted in the withdrawal of non-performing routes in recent months.
High fuel costs hit KQ profits for the financial year ending March 31 2012, dropping by a whopping 57 percent, with net profit dropping from Sh3.5 billion in the last financial year to Sh1.6 billion this year.
“We hope to save up to Sh1.5 billion for the year as a result of the restructuring,” Naikuni said.
Despite various attempts to cut operational costs, such as increasing fares to counter challenges the airline says it’s cost base still remains extremely high.
“Owing to the larger headcount in 2011/2012, significant staff annual salary increments and costly decisions by tough Collective Bargaining Agreement negotiations, our employee costs have risen to unsustainable levels,” the notice explained.
KQ has commissioned Career Directions Limited to hire and manage outsourced personnel to fill contract cabin crew positions.
“The new staff will be paid at a lower rate and be paid by the hour,” Naikuni said.
He added that the airline would be willing to reinstate laid off staff, if things improve however they would be subject to normal recruitment procedures.